Updated: Friday, May 22, 2015
Three Ways to Invest In a Home and Not Get Hurt
Buy low, sell high. Thats the investors maxim that never fails. The trick is in knowing when to buy and when to sell. Investing in a home is never as easy or as quick to deliver returns as you may wish. We all want to ride the boom and avoid the crash. Here are three ways to buy a home safely.
Dont try to time the market
Some homebuyers believe that waiting for prices or interest rates to go lower is the way to buy a home. But there are two things wrong with that approach.
First, what is the market going to do? Unless you have a crystal ball, its hard to know. Between 2006 and 2011, home prices fell an annualized 7.7 a year, or 27, according to Fiserv Case/Shiller. Since 2011 and 2014, theyve gained back that much and more on an annual basis.
Mortgage interest rates follow the U.S. Treasury yields. A quarter point rise in interest rates will cost you roughly 25 more per month. Lock in an interest rate with your lender and dont second-guess yourself. Youll have more peace of mind as well as a stronger negotiating position with the seller.
Buy within your means
Irresponsible lending led to one of the biggest recessions in modern history. Many homeowners lost their homes. You dont want to join them by buying a home thats bigger, more luxurious or pricier than you can reasonably afford.
Lenders are facing heavy government penalties for lending to unqualified borrowers, so theyre insisting that lending standards return to historically safe and sustainable parameters.
That means you wont be able to pay half your income toward housing which was common during the housing boom. Today, youll pay approximately no more than a quarter to a third of your gross monthly income for a home.
As your income improves, your home becomes even more affordable, allowing you to meet other life goals, such as adding new members to your family or starting a business of your own.
Buy long term
The longer you own your home, the more equity you build. Equity is the percent of ownership you have in the home. Think of equity as money youll get back when its time to sell.
To protect your equity, reinvest in your home to keep it in top condition. Then when its time to sell, your home will be more appealing to buyers and sell for more money than similar homes that arent as updated or attractive.
If you buy a new home every few years, youll throw away thousands in moving and closing costs. Its far better to hold on to your first home for as long as you can. At some point, you can turn it into a rental property that produces income for you.
Choose the best home you can for the money and it will return the favor.
> Full Story
How To Know If You Should Stay Or You Should Go
Should you stay or should you go? Its the premise of the popular HGTV program "Love it or List it" and also a dilemma for countless homeowners today.
Many of us can >
WHEN TO STAY
Your mortgage is close to paid off. Youre almost done with monthly payments and about to own your home outright. Buying a new home would mean taking on a new 15- or 30-year mortgage, or coming up with a hunk of cash. Unless the house you are moving to is a far better fit for your life>
You credit stinks. If youre not going to qualify for a new loan because of bad credit or if you may qualify by the skin of your teethwhich would mean putting more money down and/or paying a higher interest rateit might not be worth it to move.
"Depending on when you last bought a home, getting a mortgage may be harder than you remember," said FrontDoor. "Lenders will closely review your income, debts, assets and liabilities, to make sure you dont exceed the maximum debt-to-income ratio. Hopefully you didnt do any damage to your credit since your last home purchase. The most competitive interest rates only go to buyers with credit scores above 700."
You have money to renovate. Your kitchen is an embarrassment, the yard you once imagined as an outdoor oasis is more like a mirage and dont even ask about that weird rippling thing that going on with your floors. Maybe you dont need a new house. You just need the house you live in to be new again.
Depending on how much savings your have or how much equity you can take out of your house, you could overhaul and reenergize your existing home. Even small changes that improve function or address important daily issues can make a big difference. Be sure to consult your Realtor for guidance on the changes you plan to make. That way you can ensure a decent return on investment so you can recoup some dollars when you are ready to sell.
You need to stay in your neighborhood and theres no inventory in your price range. The tighter your parameters, the harder it can be to find the right home. If you need to be in a certain school district and cant find a home in the right district zone perhaps it makes sense to put off the move.
WHEN TO GO
The kids are gone. Its been a great family home, but, memories aside, do you still need all that space?
"Do you find yourself walking into empty rooms wondering when the last time you vacuumed in there was? Having trouble deciding whether to convert your childrens old bedrooms into the sewing room, home office or media room? You have too much house," said REALTOR and best-selling author Michael Corbett on Huffington Post. "Once the kids have left for college, Mom and Dad are left with an empty nest. Downsizing to a smaller home could be your reason to sell now."
You can cash out, and cash in. All that equity you have in your house can be rolled into a new loan on a larger, more updated home. And the interest rate might even be lower than what you are currently paying.
It would take the operating budget of a small country and the patience of 12 saints to get your house where you need it to be. "That orange countertop that seemed so retro and modern just looks like an old countertop in a bad color. The shower needs to be re-done and the floors have gotten so bad even the dog doesnt want to come inside," said She Knows.
"So then you start to dream about remodeling. And you probably get so caught up in the end result that you start to think this is actually a viable option. Its not. Its months of living in disorganized, sheetrock-dust covered filth and eating cardboard pizzas. Just save your money, your marriage and your sanity, and move into a new house already."
The neighborhood is changing. It was perfect when you moved in. Friendly neighbors, block parties, lemonade stands. But now you find yourself looking over your shoulder on your evening walk and double-checking your door locks before bed.
"Are you up all night from the neighbors barking dogs? Are you noticing a spike in crime or even more police activity as of late? A neighborhood moving in the wrong direction can be a very compelling argument for a sell and a move," said Huffington Post.
> Full Story
Your Rights Shopping For A Mortgage Loan
When you shop for a mortgage loan, you have certain rights that are guaranteed by The Real Estate Settlement Procedures Act RESPA. RESPA is a consumer protection statute from the Department of Housing and Urban Development HUD.
RESPA is designed to help you be a better shopper during the home buying process. Knowing your rights before you enter into any loan agreement will help you get the best loan possible. You have the right to:
Shop for the best loan for you and compare the charges of different mortgage brokers and lenders.
Be informed about the total cost of your loan including the interest rate, points and other fees.
Ask for a Good Faith Estimate of all loan and settlement charges before you agree to the loan and pay any fees.
Know what fees are not refundable if you decide to cancel the loan agreement.
Ask your mortgage broker to explain exactly what the mortgage broker will do for you.
Know how much the mortgage broker is getting paid by you and the lender for your loan.
Ask questions about charges and loan terms that you do not understand.
A credit decision that is not based on your race, color, >
Know the reason if your loan was turned down.
Ask for the HUD settlement cost booklet "Shopping for Your Home Loan".
Lenders offer different mortgage products depending on your credit scores, income-to-debt ratio, payment histories, how much you want to borrow and the term of the loan.
Ask your lender to show you the advantages and disadvantages of each loan product so you can choose the best one to suit your needs. When you make your choice, be sure to compare the same product with the same product offered by at least two other lenders.
> Full Story