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AOL Real Estate - Blog
AOL Real Estate - Blog

Comparing Loan Types on a $200,000 Mortgage

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loan application form  business ...
Shutterstock
By Chris Birk

Mortgages aren't one-size-fits-all products. Loan types and lenders all have different requirements, benefits and drawbacks. Some require sterling credit and sizable down payments. Others have looser standards but limit where you can purchase, or come with higher fees. Heck, one loan program is open to only about 1% of the population - the veterans and military members who proudly serve our country.

The type of mortgage can affect everything from your purchasing power to your monthly payment. The key is finding the mortgage program that makes the most sense given your particular financial situation, your homebuying goals and how you fit into the qualifying scheme.

To be sure, context and caveats are important when thinking about home financing. But sometimes just taking a cold, hard look at the numbers can also help provide clarity.

Running the Numbers

Let's look at the four main mortgage options: conventional loans and the trio of government-backed mortgages (FHA, USDA and VA). Credit score requirements will be highest for conventional loans, typically followed by FHA and then VA and USDA.

Conventional borrowers will typically need to make a down payment of at least 5 percent, while FHA borrowers have a 3.5 percent minimum. Borrowers who can't muster at least 20 percent down on either loan type will also pay mortgage insurance each month. Neither VA nor USDA loans require a down payment.

But all three government-backed loans have an upfront mortgage insurance premium or a funding fee. Most borrowers choose to roll these costs into the loan, which increases the monthly payment.

For our example, let's assume you're looking for a $200,000 mortgage at a 4.75 percent interest rate. We'll use a consistent estimate for monthly property taxes and insurance.

loan types chart

At a glance, VA borrowers have the lowest monthly payment given the parameters. Conventional and USDA borrowers have similar payments, with FHA loans far and away the most expensive.

Parsing the Products

There are pros and cons to each loan type, however.

VA loans: Having no down payment is a significant advantage, although it also means you're starting with no equity in the property. The funding fee varies based on service history and usage of the program. We used the highest possible fee (3.3 percent) for this example. First-time VA homebuyers would pay 2.15% and save even more money each month (and borrowers with a service-connected disability don't pay it at all). As with the other government-backed options, the fee in this example is financed into the loan.

Conventional loans: These require the highest down payment, but you establish equity at the outset. The rate for private mortgage insurance can vary based on credit score, down payment and other factors (for this example, it's 0.72 percent). There's no funding fee on conventional loans, and borrowers can seek to cancel their mortgage insurance once their loan-to-value ratio is around 80%.

USDA loans: These feature no down payment and lower mortgage insurance costs, but the latter is payable for the life of the loan. These loans are also the most restrictive. Consumers must buy in a "qualified rural area" and have an income at or below 115% of the area median income.

FHA loans: This is often the loan of last resort. FHA loans have the highest monthly mortgage insurance costs, which borrowers will also pay for the duration of their mortgage. Credit requirements are looser, but borrowers who can work to improve their score and muster an additional 1.5% in down payment savings will benefit from pursuing conventional financing.

Weigh Your Options

Deciding which loan is right for you is a conversation that should include a good loan officer. Have them run the hard numbers and give you a clear breakdown of the benefits and disadvantages.

For example, VA loans aren't automatically the best fit for every eligible veteran. Qualified VA borrowers with excellent credit and enough cash for a 20% down payment might get better rates and terms going conventional.

But that rosy profile is more exception than rule for VA-eligible borrowers, which is what makes this program so powerful for service members, veterans and military families.

Here's the bottom line: Get a clear understanding of your options and the opportunities they present before pushing forward on a home purchase.

[Editor's note: Checking your credit before you start looking for a home can help you determine whether you're ready to buy. Giving yourself plenty of time to build your credit and get a higher credit score can help you qualify for better loan terms, and can save you money over time. Check your credit scores, which you can do using a free tool through Credit.com, to see where you stand. Then check your credit reports for errors that you'll need to dispute, or problem areas that you need to work on in order to get your credit on track.]

More from Credit.com:
Why You Should Check Your Credit Before Buying a Home
How to Search for Your Next Home
The Ultimate Mortgage Glossary

 

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Home Finance: Exploring Alternatives to the 30-Year Mortgage

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piggy bank beside graph and...
Shutterstock"Over one-third of U.S. home sales in 2013 were all-cash deals."
By Geoff Williams

If you're buying a house, chances are you'll take out a 30-year fixed-rate mortgage. It's the most popular home financing option, according to Freddie Mac, the government-sponsored entity that works to help homeowners get mortgages. In the last couple of years, those who took out home loans overwhelmingly chose the 30-year fixed-rate mortgage: It accounted for 85 percent of the home-purchase loan market in 2012, according to Freddie Mac, and 90 percent in the first half of 2013.

Even if you're planning to go this traditional route, it's nice to know what you could do instead. Here are some alternatives to the 30-year fixed-rate mortgage.

Paying in cash. Most homeowners can't afford to do this, so don't feel bad if the cash option isn't for you. But it seems remiss not to mention it. In Las Vegas, where there's been upheaval in the housing market with many foreclosed homes, cash buyers accounted for 43 percent of the home

"Fifteen-year mortgages commonly come with an interest rate that's 1 to 1.5 percent lower than a comparable 30-year loan, saving [you] tens of thousands of dollars over the life of the loan."

sales in March, according to the Greater Las Vegas Association of Realtors.

"In fact, over one-third of U.S. home sales in 2013 were all-cash deals," says Spencer Llewellyn, founder and executive director of Loans101 Interactive Media LLC. Its website, Loans101.com, offers educational mortgage information.

While you mull that statistic over and wonder where you went wrong since you aren't sitting on a few hundred thousand dollars, Llewellyn adds: "The lion's share of all-cash deals are completed by investors because of the view that home values have reached a bottom and have tremendous upside potential."

While paying for a house in cash is an alluring option, it's important to make sure you have plenty of excess money to draw upon if there's an emergency.

15-year fixed-rate mortgage. If you aren't going to get a 30-year fixed-rate mortgage, this is the next best alternative, according to many mortgage experts. The downside is that you'll have higher monthly payments than with a 30-year mortgage, but the upside is that you'll pay off the house faster.

That, and "you are building equity at a much faster rate, and if need be, you can take out another loan on the equity you have already invested in your property," says Pej Barlavi, CEO of Barlavi Realty LLC in New York City.

The best type of homeowner for this mortgage is a "borrower who plans on keeping their home for a long time and wants to save a large amount of interest they pay to their lender," Llewellyn says. "Fifteen-year mortgages commonly come with an interest rate that's 1 to 1.5 percent lower than a comparable 30-year loan, saving [you] tens of thousands of dollars over the life of the loan," Llewellyn says.

20-year fixed-rate mortgage. If you worry that the monthly payments for a 15-year mortgage are a bit too high, but you could afford to pay considerably more than with 30-year mortgage, many lenders offer 20-year mortgages. Some lenders will even go a more unconventional route and customize a mortgage for you, with terms of, say, 23 years -- or perhaps 11.

5/1 adjustable-rate mortgage. You'll save more money on your monthly payments with this option, Llewellyn says, but he only recommends it if you aren't planning to stay in your house for long.
That's a gamble, of course. As older homeowners know, life doesn't always work out as you plan, and that starter home could turn out to be the house you always live in.

With a 5/1 ARM, you'll have a low fixed interest rate for five years, and then for the next 25 years, the rate adjust every year according to the fully indexed interest rate. That would be an interest rate (often the prime rate, the interest rate banks charge their most creditworthy customers) plus a margin, which is a fixed percent rate. So you could have a prime rate of 4 percent with a margin of 5 percent, and suddenly the interest rate on your mortgage is 9 percent.

Bottom line: After those first five years are up, your monthly payment will change, and while it may not change all that much, it could be quite worse.

"I would not recommend the adjustable-rate mortgages, as I believe that the interest rates will rise in the next year or two," Barlavi says. "People that have this type of mortgage will see a big increase in their payments, which can put a stress on their household income. Many people before the 2006-2007 crisis had an ARM mortgage. Those are the people who took the biggest hits and lost their homes in foreclosure."

There are other ARMs. For instance, you could get a 10/1 adjustable-rate mortgage, where your interest rate is set for 10 years, then changes for 20. If you were positive you would move within 10 years, that might make financial sense -- but again, there's always the risk that you can't move and get locked into an unpleasantly high monthly mortgage payment.

50-year fixed-rate mortgage. Most experts advise steering clear of this option. You don't need a house that badly. "New finance rules that were implemented in January left fewer alternatives available to 30-year mortgages," Llewellyn says, referring to restrictions put in place by the Consumer Financial Protection Bureau.

Llewellyn says lenders can offer loans with longer terms than 30 years, but many of the best banks avoid them because they aren't considered a good deal for the consumer -- or the bank. "They're more risky to the lender if the borrower defaults," Llewellyn says.

But don't worry about the lender. Worry about you. Having a 50-year mortgage is similar to paying rent, according to Dean Johnson, division president of Primary Residential Mortgage.

Sure, you'll have more affordable monthly payments than with a 30-year mortgage, and you'll live in a house. But when you sell it, unless you've been living there for decades, you aren't likely to have much equity or see much profit. That may not matter to you much now, but your future self might wish you had found a better deal.

More from U.S. News:
A Step-by-Step Guide to Homebuying
What New Mortgage Rules Mean for Homebuyers
Alternatives to Putting 20 Percent Down on a Home

More on AOL Real Estate:
Find out how to
calculate mortgage payments.
Find
homes for sale in your area.
Find
foreclosures in your area.
Find homes for rent in your area.

Follow us on Twitter at @AOLRealEstate or connect with AOL Real Estate on Facebook.

 

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Are There Best Times to Buy, Sell or List a Home?

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Months and dates shown on a calendar whilst turning the pages
ShutterstockReal estate inventory tends to fluctuate by season.

By Brendon DiSimone

A common question from a buyer or seller is: What is the best time to buy or sell a home? In the clothing world, it makes sense to get the best "deal" on winter clothes at the end of winter and that you will likely will pay top dollar for a swimsuit in April. Does the same trend hold true for real estate purchases and sales? Not really. But there are some considerations a buyer or seller should make as they enter the market that could have an impact on the transaction.

Spring and fall are better times for buyers: Let's be clear. You can't ever time a home purchase. Buying a home isn't like buying a car or an iPad. The home buying process is a journey, one that happens on your own time and only after you've done enough research, seen enough homes and

The Sunday open house, particularly the first Sunday, is the holy grail of real estate.

have your financial house in order.

At any one time there is a brand-new buyer entering the market and then another who has done enough research and becomes a very serious buyer. Nobody can control the evolution. But something for a buyer to consider is that real estate inventory tends to fluctuate by season. Each spring and fall we tend to see an increase in home inventory due to the seasons. More inventory means more options for buyers.

Holidays and winter are best times for sellers: It's not conventional for a seller to list their home before the holidays or in the dead of winter for obvious reasons. But serious, eager buyers don't care about the season or timing. At any one point of the year, there will be a very motivated, experienced buyer ready to make an offer, no matter the season. I've written contracts on Thanksgiving, closed escrow on New Year's Eve and even had a serious buyer make an offer using DocuSign from a beach in Hawaii. Sellers believe that it's more conventional to list for the spring "selling" season and then again after the summer. If you go the conventional route, you will see more competition. If you can sell "off season" you might fare better because there are still serious buyers, but less homes for sale.

Best time of day to list a home: The Sunday open house, particularly the first Sunday, is the holy grail of real estate. For decades, agents and sellers worked hard on a listing with a deadline being the first open house. The "for sale" sign, which made the listing official a generation ago, would go in front of the house the days leading up the first open house. In the digital age, the listing goes "live" online. Sellers and agents work hard to clean, paint or prep the home in time for the photo shoot. Agents and sellers tend to rush to the finish and you will see many listings hit the market late Thursday afternoon or Friday morning, with Sunday being the first showing. Instead, try listing on Monday or Tuesday and don't do any showings until the open house on Sunday. You can build momentum and have a very strong first open house.

As much as buyers and sellers try to strategize the timing of a real estate purchase or sale, its never that easy. Unlike Macy's or Target, who control inventory and monitory competitive activity, there isn't one seller in real estate. Sellers are unrelated and disconnected and the types of homes are different making it nearly impossible to "time" a purchase or sale.

More from Zillow about the housing market:
How to Get Multiple Offers on Your Home
Tips for Sellers in a Buyer's Market
Are Open Houses Still Necessary?

More on AOL Real Estate:
Find out how to
calculate mortgage payments.
Find
homes for sale in your area.
Find
foreclosures in your area.
Find homes for rent in your area.

Follow us on Twitter at @AOLRealEstate or connect with AOL Real Estate on Facebook.

Brendon's practical real estate advice has appeared on FOX News, CNBC, USA Today, Bloomberg, FOX Business and Forbes. A licensed Realtor and an active investor himself, Brendon owns real estate around the U.S. and abroad and is licensed to sell in California and New York.

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow or AOL.

 

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'American Dream Builders' Episode 6: Before & After

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This week on American Dream Builders, the teams faced yet another set of smaller spaces to redesign. Team Red and Team Blue headed to Glendora, CA, where two Craftsman-style homes sat awaiting their improvements.

Craftsman homes are a particular style found in older neighborhoods of many American cities. Constructed at the turn of the 20th century and through the 1930s, Craftsman homes are classified by low-pitched roof lines, front porches and decorative exteriors, similar to what what would be found in a Frank Lloyd Wright home. Inside, the homes tend to be smaller, with built-ins and architectural details.

The designers' tactics to expand storage space and creative useful work spaces can be replicated in any home - Craftsman or modern.

Look No. 1

Team Red tackled a home measuring just 910 square feet with one bathroom. Dann took the responsibility for rehabbing the small bath to make it more modern and functional.
"This was a small bath in an older home, so I wanted to stay true to the architectural spirit of the home," he explained. "Knowing that, I didn't want products that were too rich; we weren't building Versailles."

Bathroom: Before

View More: http://americandreambuilders.pass.us/adb
The bathroom before seemed cluttered and dark.

Bathroom: After

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Dann's touches brightened the space considerably. What he did, says Dann, was simple but impressive. "Anybody can do it."


How you can get the look:

1. Stick with white. When considering which colors to use in a small space, white can help make a tight space feel bigger. Dann used basic ceramic tile in the shower and a "sparkly, white wallpaper" to add interest to the walls.

All white and simple tile create a soothing master bath.
All white and simple tile create a soothing master bath.


2. Create a custom vanity. Rather than installing a larger, store-bought vanity that could crowd the space, Dann had a counter and shaped backsplash custom made for the sink.

A custom vanity can significantly cut down on the space used.
A custom vanity can significantly cut down on the space used.


3. Don't be afraid of hardwood in the bathroom. "Today's wood floors have finishes that are so tough, they work great in a bath," he said.

Dark hardwood contrast well with white walls and fixtures.
Dark hardwood contrasts well with white walls and fixtures.


Look No. 2

Team Blue was feeling the blues with their living room design. Designer Elaine injected some big style into the small space.

Living room

A palette of blues makes this living room pop.
A palette of blues makes this living room pop.


How you can get the look:
1. Decorate the ceiling. Ceilings don't always have to stay white! Add architectural detail with molding and color with wallpaper or paint.

Designer John Wiley's eclectic living room includes gold wallpaper on the ceiling.
Designer John Wiley's eclectic living room includes gold wallpaper on the ceiling.


2. Paint the walls a deep bold hue. Blues, greens or even plums, make for great living room wall colors.

Blue pops against the white molding on the walls.
Blue pops against the white molding on the walls.


3. Add molding. Don't have a Craftsman? Imitate the style with crown molding on top of doors, on ceilings and along windows.

Wainscotting and crown molding make this room feel luxe.
Wainscotting and crown molding make this room feel luxe.


Get more design inspiration from "American Dream Builders" contestants on Zillow Digs!



Related: Erika Riggs, the Zillow Digs manager, covers home design and trends. Read more of her work here.

 

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How Renting Out Your Home Can Help You Buy Another

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left facing red for rent real...
ShutterstockUse projected rents for your property to show additional income.
By

One of the biggest obstacles homebuyers will face is being able to show enough income to offset their debts -- in addition to a proposed housing payment. If you don't show enough income to offset your debts according to the bank's requirements, you may have trouble getting the loan. With that in mind, there is a little-known lending guideline that allows you to show more income, which can help you seal the deal.

In order to take advantage of this guideline, however, you have to turn either your new home or your current home into an income property. Essentially, by doing this, you can use the projected fair market rents for your property in order to show additional income, but you need to meet one of the following financial requirements in order to qualify.

The Equity Requirements

When we're talking about equity, we're talking about cash in the form of a down payment to buy a home, or equity in an existing residence defined as the difference between any loan amounts owed

Most lenders will allow projected fair market rents to qualify you for the loan.

on the property against the value.

20 Percent Down on the Home You're Buying -- If you are purchasing a home, you can use the projected fair market rents to offset the mortgage payment, but you'll need to have a 20 percent down payment in order to use this strategy.

Let's say your mortgage payment on your new property is going to be $2,400 per month. Fair market projected rents on your current residence are $2,200 per month. Lenders will use a 25 percent vacancy computation to hedge against default. Using the 75 percent vacancy factor, you'll get the additional benefit of $1,650 per month more income, so in other words, your take-home income only has to offset a liability of $750 per month versus $2,400 per month. A $750 per month differential is equivalent to as much as $175,000 in purchasing power.

30 Percent Equity in the Home You Currently Own -- Don't have enough income to purchase the new home and debt service the other? If you have 30 percent equity in your primary home and you plan to keep the home as a rental, the same rule applies here -- a lender will use up to 75 percent of projected fair market rents to offset the loan payment.

Much like the acquisition of a new investment property, the reversal works similarly when converting a primary home to an investment property. Assuming your mortgage payment on your current home is $1,700 per month, for example (including taxes, insurance, homeowner association fees, private mortgage insurance if applicable), assuming the mortgage payment on the new property is $3,000 per month. Projected fair market rents indicates a gross rent of $1,600 per month, using the 75 percent vacancy factor, $1,200 per month helps offset the liability, meaning now you have a $3,500 per month liability to account for rather than $4,700 (carrying both homes) as you are effectively leveraging buying power by the use of fair market rents.

Rates & Fees More Costly

There's a caveat to this approach, as taking out a mortgage to purchase an income property costs more. Lenders price income property loans higher than they do if the property is a primary residence. Rightfully so, as in a foreclosure situation, most banks consider which property a consumer would be more likely to fight for: the roof over their head, or a property they don't live in? As such, expect an income property loan to be approximately a quarter of a percentage point higher in interest rate than a primary home.

As a consumer, you agree to pay for the additional risk in the form of higher interest rates and higher low-level pricing adjustments -- which are incremental pricing adjustments due to things such as occupancy, loan-to-value and credit score. But most lenders will allow projected fair market rents to qualify you for the loan. A word of caution, however: your scenario must pass the lender's litmus test, which we'll look at below.

Documenting the Rental Property

If purchasing an income property, expect the transaction to bear a higher appraisal fee. A traditional lending appraisal is typically around $400 to $500. However, it is not unreasonable to expect upwards of $650 to $700 for an income property appraisal (the same goes for an additional unit on the home).

You'll also need to provide a fair market rent survey and operating income statement as a component of the income property appraisals. So be prepared to shell out a few more bucks.

Loan Tip 1: When buying a new house for investment purposes, the new house does not need to be rented in order for you to be approved.

On the other hand, if you're converting a primary home to an investment property, expect to jump through more hoops in providing concise documentation, an extra home appraisal fee, an executed lease agreement, along with evidence of a security deposit being deposited into your bank account. Yep, the lender will request all of this paperwork.

Loan Tip 2: Most lenders have a valuation algorithm that uses the data from closed sales in the vicinity of the subject property, and this is something that can be done in lieu of paying for an appraisal when converting a primary home to an investment property.

[Editor's note: Your credit score is an important factor in determining how much interest you'll pay on your mortgage. That's why it can be helpful to know your credit score before you start shopping for a home. By checking your credit scores ahead of time, you can determine whether you're ready to buy, or whether you need more time to build your credit before you buy in order to get better rates on your loan. Credit.com allows you to monitor two of your credit scores, and also gives you a plan to help you build your credit if you need -- all for free.]

More from Credit.com about buying real estate:
How to Finance Your First Investment Property

More on AOL Real Estate:
Find out how to
calculate mortgage payments.
Find
homes for sale in your area.
Find
foreclosures in your area.
Find homes for rent in your area.

Follow us on Twitter at @AOLRealEstate or connect with AOL Real Estate on Facebook.

 

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Alternatives to Putting 20 Percent Down on a Home

person putting money in a piggy ...
ShutterstockRaising a 20 percent down payment isn't an easy thing to do.
By Geoff Williams

It's a mantra often repeated in the real estate industry: If you want to buy a house, you need a 20 percent down payment. But with the average house in the U.S. costing $311,400 as of December 2013, according to the Census Bureau, all one has to do is the math to get a coronary. Raising a 20 percent down payment isn't an easy thing to do.

Fortunately, you don't have to. "It's a myth that all homebuyers must have a 20 percent down payment to buy a home," says Nancy Herrera-Siples, a Riverside, Calif., branch manager at Primary Residential Mortgage.

"Putting less than 20 percent is OK with most banks," agrees Christopher Pepe, president of Pepe Real Estate in Brooklyn, N.Y. So why do you constantly hear that you need to put 20 percent

"Don't pick a property and then work backward toward financing. You'll only frustrate yourself."

down? Because if you don't, it usually means you'll have to shell out money for either private mortgage insurance or government insurance, which is usually financed by the Federal Housing Administration. Mortgage insurance protects the lender in case you can't make your payments and the house is foreclosed on. But PMI payments don't last forever. When your loan-to-value ratio is 80 percent, you can ask the lender if you can stop paying PMI; at 78 percent, the lender is required to cancel it.

Still, PMI can easily cost a couple hundred dollars a month, assuming your house is valued in the neighborhood of $200,000. Pepe says the average he sees is $700 a month just for PMI. But keep in mind that he's based in New York City, which boasts one of the highest costs of living in the country.
So if you really want a house and you're looking for alternatives to putting 20 percent down, here's what you need to know.

Figure out financing before looking for a house. There are numerous programs that will help you buy a home without 20 percent down, says Dan Smith, president of Private Mortgage Solutions, a mortgage bank in Atlanta. But, Smith adds, "All of these programs have various lender, property and borrower qualify requirements and restrictions. A knowledgeable mortgage banker or mortgage originator should be able to provide assistance and details."

You'll have to hook up with a lender eventually, and Smith suggests doing it early. "Don't pick a property and then work backward toward financing," he advises. "You'll only frustrate yourself."

Another reason to have a mortgage banker in your corner: "Lenders can layer programs to help each borrower overcome dilemmas," Herrera-Siples says, citing common problems like not having a down payment or needing lower monthly payments.

Try your own bank first. This is advisable especially if you have a good relationship with the bank, says Amanda Monette, a real estate lending officer with Rockford Bank & Trust in Rockford, Ill. "You may have a better shot of getting a loan, even if you don't have the money for a down payment."

If you do all of your banking at your local bank, including investments and a savings account, Monette says this will work your favor. "Extra points," she says, "if your parents, grandparents and other relatives bank with the same institution as you do. A banker may be more willing to go the extra mile because he or she knows you and your family and knows that you will be a good risk."

Some common but unconventional routes you might take. "There are a variety of options available to consumers," Smith says, citing the FHA, which offers mortgages in which the homeowner can put as little as 3.5 percent down. "The [U.S. Department of Agriculture] offers a program that allows buyers to purchase a qualified property with zero down. And many conventional leaders will allow subordinate financing to bridge the gap between the down payment and first mortgage loan amount."

But, of course, there's no free lunch, and some of these unconventional roads lead to an expensive toll booth. For instance, FHA loans, which were once considered great loans for first-time, low-income homebuyers, are much more expensive than they used to be because of mortgage insurance. With subordinate financing, you're taking out another loan to make up for not having the 20 percent down payment, and the second loan often has a higher interest rate than the first. Make sure the math works out so that you're not paying more in the long run than if you paid the PMI.

USDA loans, available for people who want to purchase a home in an area considered rural, are generally still well-regarded and coveted by many homeowners with incomes considered low to moderate. There are a range of limits depending on the type of USDA loan you're eligible for and state you live in, as well as a lot of criteria to meet. For example, if you are part of a Colorado family with one to four people and a household income of around $70,000 or less, you'd probably qualify.

Check with your state. While you're figuring out how to finance your home, don't forget that your state may have loan programs to help homeowners - especially first-time buyers.

For instance, Illinois recently announced its "Welcome Home Illinois" program, in which first-time buyers or people who haven't owned a house in Illinois within three years can get $7,500 in down payment assistance with an interest rate as low as 3.99 percent for a 30-year fixed rate mortgage. It's aimed at working class families -- a family of three in Chicago can earn as much as $106,000 in annual household income and qualify. In other parts of the state where the cost of living is lower, the same family of three can earn no more than $82,915 to qualify. And the homebuyer must have a credit score of at least 640.

Whatever you do, don't get too cute. If you don't have the 20 percent, it may be best to keep saving until you reach that amount, or at least get closer to it. Just because you find a way to finance your move-in doesn't mean you should take it. You want have enough left over in your budget to enjoy your house, not worry every month about how you're going to pay the mortgage. In other words, you can live under a roof without 20 percent down -- but is the alternative something you can live with?

More from U.S. News:
How Much Will That Low Down Payment Cost You?
A Step-by-Step Guide to Homebuying
What New Mortgage Rules Mean for Homebuyers

More on AOL Real Estate:
Find out how to
calculate mortgage payments.
Find
homes for sale in your area.
Find
foreclosures in your area.
Find homes for rent in your area.

Follow us on Twitter at @AOLRealEstate or connect with AOL Real Estate on Facebook.

 

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Home Equity Loans: Why They're Back, and Better

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home and stacks of money...
ShutterstockHave you gotten a pitch from your bank for a home equity loan?
By Vera Gibbons

Last year, homeowners recouped about $1.9 trillion in lost value, according to estimates from Zillow. That put more equity in our hands, and in turn led to a return in home equity lending. Granted, we're not at pre-crash levels in terms of total home equity lending, but as values continue to rise in 2014, albeit at a slower pace, lending will continue to rebound.

Have you gotten a pitch from your bank? As the home equity lending business heats up, and banks step up their outreach, here are a few things you need to know:

You need equity: To qualify, you need to own more than 20 percent of your home. Lenders are going to want you to have at least an 80 percent loan-to-value ratio, which is the remaining balance on your loan compared with the value of the property. With almost 3.9 million U.S. homeowners freed from negative equity in 2013 and the rate steadily declining across the country, more people will qualify for these home equity loans. During the housing boom, you may recall that standards were just a little "different" ... in some cases, non-existent.

Income, credit score important: Sure, banks are looking to speed up sluggish revenue growth by jumping back into the lending game, but they're being cautious about who they lend to -- and rightly so. Don't expect the loan approval process to be easy. In addition to having ample equity in your home and a strong credit score, you must also have income to make your payments. Remember: you're using your home as collateral. Fail to make your payments and you run the risk of losing your home. Banks are also making sure that you understand the repayment period.

Know what you want: Does your house need a new roof? Are you interested in consolidating high-interest debts or do you have a large, single expense you need to borrow money for? Then a home equity loan, which usually comes with a fixed monthly payment and interest rate, is best for you. If, on the other hand, you need access to money over a period of time for ongoing expenses (perhaps you have some long-term home improvement projects you'd like to work on), then a home equity line of credit, or HELOC, would make better sense. HELOCs usually have a variable rate that's tied to the prime rate, plus or minus some percentage.

Shop around: While big banks used to dominate the home equity lending market (and you should certainly discuss your objectives with banks with which you currently have relationships), credit unions, regional banks, and others have emerged as formidable competitors. These players avoided much of the fallout from the housing bubble, and have been leading the way in granting new home equity loans and lines of credit to creditworthy borrowers. Plus, they tend to charge lower rates.

Related:
Want to Save Big? Bundle Services to Save Big
Should you Buy, Rent or Share?
See What's In and What's Out Financially This Year

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Vera Gibbons is a financial journalist based in New York City and is a contributor to Zillow Blog. Connect with her at http://veragibbons.com/.

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

 

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For-Sale Craftsman Homes, Like Those on 'American Dream Builders'

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This light-filled home in Seattle is adorned with leaded-glass windows, boxed beams and a built-in dining room buffet.

Zillow This light-filled home in Seattle is adorned with leaded-glass windows, boxed beams and a built-in dining room buffet.

Craftsman homes, an early 20th-century architectural style, feature high-quality craftsmanship not always found in new constructions.

"It's elegant artistically: classic materials, bay windows, the low-hanging eaves," said host Nate Berkus this week on NBC reality show American Dream Builders. "There is nothing more iconic American than that."

During this week's episode, the designers renovated two Craftsmans in Glendora, CA. Team Red received $5,000 extra to put toward their renovations, while Team Blue got two extra carpenters to bring their designs to life.

Making critical upgrades led to a 35 and 37-percent increase in the Zestimate(R) home values for each property. While the Zestimate is not a substitute for an appraisal, it is a great starting point for determining the value you can add by updating an older home for a contemporary lifestyle.

Craving an updated Craftsman of your own? Here's a look at some Craftsmans for sale across the U.S. Click on the links below to see each home's Zestimate, square footage, interior photos and more.

Minneapolis, MN

4056 12th Ave S, Minneapolis, MN
For sale: $189,900
Minneapolis, MN
This charming, Craftsman bungalow has beautiful woodwork including dining room build-ins, hardwood floors and oak molding. Several updates have been made to the home since its 1922 construction: new windows in 2009, a new roof in 2004 and a boiler in 2003. The home sits on a 4,356-square-foot corner lot with southern exposure and lovely perennial gardens.

Tampa, FL

309 W Hanna Ave, Tampa, FL
For sale: $255,000
Tampa, FL
From tapered, square columns to a front porch and exposed roof rafters - this Tampa, FL home has several classic Craftsman features. Inside, the look and feel continues with built-in living room shelving, an ornamental fireplace and antique white kitchen cabinets.

Seattle, WA

1834 N 54th St, Seattle, WA
For sale: $699,950
Seattle, WA
A quintessential Seattle Craftsman, this light-filled home is adorned with leaded-glass windows, boxed beams and a built-in dining room buffet. French doors allow the indoor entertaining space to flow seamlessly outdoors onto a new covered deck.

Santa Barbara, CA

329 E Anapamu St, Santa Barbara, CA
For sale: $799,000
Santa Barbara, CA
Located in the heart of Santa Barbara, this 1920-built Craftsman features an inviting front yard and porch. The 1,054-square-foot interior has 2 bedrooms and 1.5 baths. The kitchen has been remodeled with stainless steel appliances and cherry cabinets.

Portland, OR

3133 NE 40th Ave, Portland, OR
For sale: $939,000
Portland, OR
This Portland home was redesigned to have an open floor plan while preserving its 1920s Craftsman roots. The 4-bedroom residence features several architectural details including a breakfast nook in the kitchen and a floating fireplace wall separating the dining and living rooms.


Related:

Catherine Sherman, a real estate writer for Zillow Blog, covers real estate news, industry trends and home design. Read more of her work here.

 

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10 Reasons Why Homeowners Have an Edge on Renters

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businesswoman holding a mini...
ShutterstockThe homeownership rate remains relatively low.
By Kimberly Palmer

Homebuying has earned a bad rap in recent years: The subprime mortgage crisis and ensuing economic meltdown left many homeowners underwater, unable to pay their mortgage and even facing foreclosure. Homeownership rates fell throughout the recession and got down to about 65 percent, compared with almost 70 percent before the recession, according to the Census Bureau. While record low interest rates helped entice homebuyers, the bureau reports that the homeownership rate remains relatively low, at 65.2 percent in the fourth quarter of 2013.

If you're among those struggling to decide whether to buy versus rent, consider these 10 reasons to take the plunge into homeownership:

1. You can ramp up energy efficiency. Energy-efficient improvements, from adding insulation to upgrading your air-conditioning unit, can reduce your monthly utility bill, says Jane Hodges, author of the book "Rent vs. Own." While renters can make plenty of green improvements on their own, from unplugging appliances to turning off lights, homeowners can make bigger changes, such as

"Lock in a low monthly payment, and you've just taken a huge step in protecting your family against inflation."

adding solar panels or installing an energy-efficient roof. (Of course, a renter living in a one-bedroom apartment likely uses far less energy than a homeowner in a three-bedroom house, so size can trump energy improvements.)

2. You can customize your space. Whether you need to knock down a wall to make a larger master bedroom or redo the bathroom to reflect your art deco tastes, owning the space you live in means you have the freedom to do so, without worrying about losing your security deposit.

3. Homeowners buy less furniture. "Often when you're renting you need custom furniture that fits the space," Hodges says, such as room dividers for a loft or miniature furniture to fit into a basement apartment. "When people move a lot, they can end up buying a lot of furniture," she says. If you buy a home and settle in for the long haul, you can likely purchase a few pieces that will stick around.

4. Owning a home forces you to save. The so-called "forced savings" argument is a widely-held one: Since homeowners have to pay their mortgage every month, they are routinely putting money away (and into their house, which they own), instead of squandering it on new shoes or fancy meals. Then, if you eventually sell your home after the mortgage is paid off, there's a good chance that "you'll walk away with a payoff," even after subtracting the costs of ownership, Hodges says. (Of course, homeowners who face foreclosure or declining home values often find themselves without such equity to show for their monthly mortgage payments.)

5. Homeownership allows you to build a second income stream. From taking in a renter in a spare bedroom to renting out driveway space to commuters, Hodges says homeowners are increasingly finding ways to monetize their homes. In cities with scant green space, some homeowners even rent out small patches of grass for people who want to grow vegetables.

6. No landlord can kick you out. Renters can face an unexpected eviction notice if their landlord suddenly decides to sell the home, rent to someone else or otherwise end the lease. That's one reason Boston University economics professor Laurence Kotlikoff says that for older people with a fixed income in particular, he recommends homeownership (and a paid-off mortgage). "It's important for older people to be in a home that they own as security against a landlord," he says.

7. In fact, you don't have to speak to a landlord, ever again. Landlords can take ages to fix a broken dishwasher, let the air vents fill with dust and particles, or leave pesky messages about repairs. If you're the homeowner, then you're in charge - which means you have to be home when the plumber calls, but the plumber reports to you. (And, of course, you also have to pay the plumber.)

8. Unlike rent, a fixed mortgage can't go up (even if inflation does). Fixed mortgage rates don't go up, even if the cost of everything else does. To protect yourself, Jack Otter, author of "Worth It ... Not Worth It?" suggests making a 20 percent down payment and taking out a 30-year fixed mortgage to lock in today's low interest rates. "Mortgage rates haven't been this low since GIs were heading home from France. Lock in a low monthly payment, and you've just taken a huge step in protecting your family against inflation," he writes in his book.

9. Homeowners can take tax deductions. The chief tax benefit of homeownership is the ability to deduct mortgage interest payments, but the perks don't stop there. Homeowners can also deduct eligible expenses (certain energy-efficient improvements, for example) and in some cases can avoid federal taxes on earnings from the sale of a home.

10. You can take advantage of currently low interest rates and prices. Despite creeping back up, interest rates remain relatively low from a historical perspective, and at the same time, home prices in many areas remain soft. That can make for an appealing buyer's market. Of course, buying isn't for everyone. If you might move soon or you want the flexibility to upgrade your digs with just a month's notice or your job outlook is uncertain, then renting can be ideal. Hodges says potential buyers should first consider the transaction costs of homeownership, which can add up quickly, especially if a buyer doesn't plan to stay put for very long.

"During the bubble, people were looking at homes as a tool to make money," Hodges says. Now, they just see them as a place to live.

More from U.S. News:
8 Home Remodeling Projects That Are Worth the Money
10 Saving Strategies That Can Backfire
A Step-by-Step Guide to Homebuying

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Knowing Air Conditioning Jargon Can Save You Thousands

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Air Conditioners - Abstract
zeevveez/FlickrTraditional air conditioners use a refrigerant cooling system that takes a ton of energy.
By Abby Hayes

If you're like most Americans, you probably just ignore your air conditioner -- at least, until it breaks. Then, you just want it fixed -- like, yesterday. But taking the time to understand certain air conditioning terms before you fix your air conditioner can make all the difference in your long-term electricity bills. Knowing (and using) these four terms could also save you thousands of dollars next time you replace your unit.

Seasonal Energy Efficiency Ratio: SEER is a measure of a system's efficiency. The more efficient the system, the cheaper it is to operate. (And more energy-efficient systems are also better for the environment, so it's a win-win.) The U.S. Department of Energy states that 13 is the minimum SEER rating for systems produced today (some older ones have ratings of six or less). According to Ed Purvis, vice president of the heating, ventilation and air conditioning company Emerson Climate Technologies, a unit with a SEER rating of 16 or more could save you about $415

The ideal balance for your home will depend on where you live and how often you use air conditioning.

a year (compared with an older, low-efficiency model).

As you might guess, higher-SEER models are also more expensive. The ideal balance for your home will depend on where you live and how often you use air conditioning. "For example, having a 25 SEER system for a home in Minneapolis, where you would turn on your unit just a few days of the year, doesn't make much sense," Purvis writes in an email, "but a high-SEER system makes perfect sense if you live in Dallas."

Modulation: Modulated, or variable-speed, air conditioners are less expensive to run. Basically, they vary the amount of energy used to power the air conditioner. So instead of feeling like your house is freezing when the air conditioning is on, and feeling too warm when it kicks off, you'll get an even temperature.

Modulated systems also help control humidity, which is one of the main factors in how hot you feel. When humidity is better controlled, you may get away with setting the A/C at a higher temperature. Because of this, a modulated system could save more than $870 per year, according to Purvis.

Humidity: Again, indoor humidity can make you feel warmer, even if you're constantly running the air conditioner. So choosing a unit with humidity control -- even if it isn't modulated -- will make your home more comfortable and save you up to $300 per year, Purvis notes.

Heat Pump: A traditional air conditioner uses a refrigerant cooling system. The coolant in the coils cools down the air, which is then forced into your home. As you might imagine, this takes a ton of energy. A heat pump, on the other hand, actually pulls heat out of the air inside your home and dumps it outside. (It can also be used for heating by gathering warmth from outside and funneling it into your house.) This is a much more efficient way to transfer heat and can save you up to $750 a year, according to Purvis.

Heat pumps are efficient enough for both cooling and heating in milder climates. If you live in an area with colder winters, you may need a duel-fuel system, which uses the heat pump in spring, summer and fall, but runs a gas furnace backup in the winter.

If you do choose a heat pump, do your research, as there are different types. A geothermal heat pump, for instance, uses the relatively stable temperature underground to provide heating and cooling, but these systems are quite pricey and are more difficult to retrofit.

"In general, retrofitting an air-conditioning system or heat pump shouldn't be complicated in a building with a forced-air gas furnace," Purvis writes. Still, you'll want to talk with a local heating, ventilation and air conditioning professional to determine the cost of retrofitting your home with a heat pump. "For some," Purvis points out, "a high-efficiency, conventional air system could be a more practical, cost-effective solution."

Repair, don't replace: What if your existing air conditioner is relatively new? Can you make it more efficient? Yes! "Up to a third of systems installed today are running well below their rate of performance because of duct leakage, improper charging and other maintenance issues," Purvis explains. "Ensuring your system is running right can sometimes be more beneficial than investing in an air conditioner with a higher SEER."

So as summer approaches, call your local HVAC company for an air-conditioning tuneup or replacement. Ask about having your whole system -- duct work included -- checked to ensure it's running as efficiently as possible.

More from U.S. News about saving money:
8 Home Remodeling Projects That Are Worth the Money
8 Energy-Efficient Home Improvements That Save Money
10 Saving Strategies That Can Backfire

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Is Your Home Ready for Your Retirement?

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hand open door against white...
ShutterstockConsider replacing doorknobs with handles.
By Dave Bernard

You may be more than ready to retire, but what about your home? If you hope to age in your current home it makes sense to prepare for the challenges that aging is likely to bring. The environment in which you live will be an essential ingredient to your retirement safety and happiness. Here are a few areas you may want to consider as you prepare:

How's the temperature? As I get older I notice I am increasingly sensitive to temperature changes. It seems that the cold is a bit colder than it used to be. And on hot days the air conditioner comes on more frequently. As we spend more time inside, a little thing like too much cold or heat can quickly become annoying.

Why suffer when today's modern conveniences can make your home much more inviting with options like heated floors and remote-controlled fireplaces that warm the room to a perfect

We all spend a lot of time in the kitchen, and this is an essential place to get things right.

temperature with the flick of a button. Attention to details like quality insulation, weather stripping and double-pane windows help you maintain the environment you want. You don't have to go the expensive route either.

I am quite happy with a small electric heater that I use as needed to heat just me rather than the entire house. And during hot months, we distribute fans to all bedrooms to keep our cool. In retirement, why shouldn't you be warm when you want or cool as you wish?

Is your bedroom where it should be? Having your master bedroom upstairs may be fine when your knees are young. But as you move deeper into your retirement years, stairs are no longer your friend. Having to negotiate a flight at the end of the day when you may be tired or distracted can be risky. Our 88-year-old neighbor recently resituated his bedroom downstairs because negotiating the stairs became too much. Now he heads to bed without having to face an unnecessary challenge. It makes sense to save the upstairs suite for younger visitors.

As we age we tend to sleep less as well as less deeply. Noise can interrupt an already tenuous situation. Rather than put up with it, move your bedroom away from the most common source of noise, putting a few walls between you and the offender. A good night of sleep is a luxury we all appreciate. I am a light sleeper, but cope with nearby freeway noise with a sound machine next to our bed that plays a recording of waves breaking or a peaceful stream burbling. These peaceful sounds of nature nicely drown out annoying traffic.

Is your home secure? Security is important when it comes to peace of mind. A well-publicized alarm system with generously distributed signs and stickers lets potential criminals know ahead of time the area is protected. Additional security is available with systems that include a panic button which alerts the appropriate people when there is an emergency. It is a good investment to put deadbolts and strong locks on all doors with access to the outside. And make sure locks on windows click securely into place when closed.

No matter where you live, it is important to have a clear plan of action in case of emergencies. Depending on where your home is located you are subject to your own natural threats. As residents of the Bay Area we are most concerned with earthquakes. To prepare for the worst, we

Even though you may have lived in a house for decades, it is easy to misjudge a distance in dim lighting and injure yourself.

have our exit routes planed, a common contact out of state to phone and a week's worth of survival supplies stored in the shed out back. Don't forget to include important prescriptions. Fire is a concern no matter where you live, so plan accordingly. And I am a firm believer you can never have too many flashlights lying around, so long as you remember where they are when needed.

Are your handles and fixtures senior friendly? One of the best investments we made was replacing interior doorknobs with handles. Now it is no problem to open a door even when our hands are full. We also upgraded our lights, so instead of struggling with a tiny switch we turn on fixtures by pressing a large flat switch. Similar improvements can be made when it comes to faucets with levers being easier to work than knobs. And bigger handles on cabinets just make life that much easier.

Are you near local points of interest? The physical location of your house is not something you can change. But it is helpful to be near the places you frequent, especially as you age. A short drive or walk to the grocery store, restaurants and nearby parks can make your location ideal. Public transportation can be a big help as well. And you cannot help but feel a bit safer if you live near a police or fire station as well as a hospital.

Is your kitchen efficiently designed? We all spend a lot of time in the kitchen, and this is an essential place to get things right. Cabinets should not be so high that they require stepping on a stool to reach. Drawers should not be so deep you have to bend down to see what is in the back recesses. Counter tops should not be too high or too low. Appliances that are set up based upon how you personally cook and navigate can be a big plus. Good lighting is a must as well as ventilation. Take advantage of improvements like lazy Susan shelving that maximizes otherwise wasted corners of drawers for easy access to everything stored there.

Can you see where you are going? Good lighting makes good sense. Even though you may have lived in a house for decades, it is easy to misjudge a distance in dim lighting and injure yourself. Make sure entrances are well illuminated for you as well as visitors. We opted for motion-detecting flood lights in strategic corners outside to light the way and help us find the keyhole after dark.

A well thought out home is not only a happier place, but also a safer place. Little improvements and added efficiencies can make a big difference. If you make the right changes now, you are investing in your future retirement happiness.

More from U.S. News:
The 10 Best Places to Retire on $75 a Day
Best Places to Retire for Longevity
How to Save $1,000 on Your 2013 Tax Bill

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Secrets to Getting Multiple Offers on a Home

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stacks of coins  green and red...
ShutterstockDon't assume your home will get multiple offers.
By Brendon DiSimone

Homeowners hear that the real estate market has finally turned a corner and assume that means multiple offers and bidding wars are back. Even if your town is buzzing with real estate activity and sales are picking up, it doesn't mean that you're guaranteed multiple offers, or even one offer for that matter. For a seller to get lots of activity on their listing, there are three must-haves: location, price and presentation.

Must have a good location: One thing is common among all properties that receive multiple offers these days: the home is in a good location. Location is nearly always what drives homebuyers in their search. Before considering price, number of bedrooms or size of

Pricing isn't an exact science, and it's nearly impossible to pin a precise number to a home until buyer and seller sign a contract and close.

home, a buyer looks for location.

If your home is on a busy street, not in the best school district or near a freeway on/off ramp, chances are you won't receive the kind of activity that a well-located home would. In that case, work closely with your agent to price the home correctly.

Must be priced right: Buyers in any market look for perceived value. Homes priced 10 percent (or more) over their market value won't get noticed. Pricing isn't an exact science, and it's nearly impossible to pin a precise number to a home until buyer and seller sign a contract and close. Then, the price officially becomes the home's market value. Until that time, agents can provide sellers with a value range. Have a good location? Does your home show well? Are you in a strong sellers' market? Price your home on the bottom of that price range and you'll be sure to attract buyers -- and possibly multiple offers.

Must show well: A generation ago, sellers simply did some deep cleaning and maybe some de-cluttering before their first open house. Presentation wasn't as important then as it is today, given online listings. More buyers today develop an emotional connection to a home. They want to imagine themselves in your home and not feel like they're a guest. What does that mean? Appeal to the masses. If you have a good location and you plan to price your home realistically, then you need to make sure you give buyers what they want. If you can afford it, make cosmetic upgrades;

If you're not in a strong sellers' market or you spend a fortune on last-minute upgrades, you could be in for a giant surprise.

invest in some staging and work to turn your home into a "product." Emotionally disconnect from your home and try to see it more objectively.

Plan on having the home in perfect condition for the photo shoot. A buyer's first impression of your home likely will be via the Internet or an email from their agent. Make them want to step inside. The more buyers you attract to your home, the more activity.

Know your market: Don't assume that national trends apply to your region, city or neighborhood. If you're not in a strong sellers' market or you spend a fortune on last-minute upgrades, you could be in for a giant surprise. Just because you hear about bidding wars and multiple offers on the national news doesn't mean that applies to your market. For example, while properties in San Francisco may receive multiple offers, a town like Port Chester, NY, still sees short sales and homes often spend many days on the market.

Work with a good local agent. A local agent has likely toured all the nearby homes for sale as well as ones that have sold over the past six months to a year. Knowing those homes, having walked inside and personally knowing the agents who have sold them matters. This is market data that an outsider just doesn't have access to. This knowledge empowers good local agents to educate their sellers.

More from Zillow about home selling:
Tips for Sellers in a Buyer's Market
5 Types of People Who Attend Open Houses
Are Open Houses Still Necessary?

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Brendon's practical real estate advice has appeared on FOX News, CNBC, USA Today, Bloomberg, FOX Business and Forbes. A licensed Realtor and an active investor himself, Brendon owns real estate around the U.S. and abroad and is licensed to sell in California and New York.

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow or AOL.

 

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For Sale: Affordable Homes in the Most Affordable Markets

minneapolis home for sale exterior
ZillowWhat's affordable in Minneapolis? This charming and updated three-bedroom, two-bathroom bungalow.
By Sharona Ott

Some metros are known for their sky-high home prices. However, metros with affordable homes for sale do exist! We define a market as affordable if a buyer who makes the area's median income can afford the area's median-priced home by spending less than what they have spent historically. These seven metro areas have the highest percentage of affordable homes currently on the market among the nation's 35 largest metros.

No. 1: Cincinnati

187 Wedgewood Ave.
For sale: $92,000
Cincinnati, OH
Built in 1922, this 1,714-square-foot home is bright, spacious and charming. Considering Cincinnati's median home value of $94,400, this four-bedroom three-bathroom home is a bargain.

No. 2: Columbus, Ohio

2228 Aqua Park Ave.
For sale: $95,000
Columbus, OH
This 1,656-square-foot, three-bedroom, 2.5-bathroom home offers ample entertainment space, including a roomy backyard with a large deck. This home's price sits just under the area's median home value of $96,700.

No. 3: Cleveland

3053 W. 116th St,
For sale: $49,900
Cleveland, OH
Built in 1921, this quaint 984-square-foot home has been updated throughout. The two-bedroom, one-bathroom home comes with all appliances and is even more affordable than Cleveland's median home value of $51,700.

No. 4: Kansas City, Mo.

7360 N. Mulberry St.
For sale: $110,000
Kansas City, MO
Located on a quiet street, this 1,028-square-foot, three-bedroom, two-bathroom home has been newly painted and carpeted and comes with all appliances included. Considering Kansas City's median home value of $112,900, this home is a great buy.

No. 5: St. Louis

4865 Fountain Ave.
For sale: $95,000
Saint Louis, MO
Built in 1894, this 2,500-square-foot home has been well-maintained and offers abundant natural light. With an impressive five bedrooms and two bathrooms, this home is well worth its asking price -- St. Louis' median home value is $98,200.

No.6: Chicago

9051 S. May St.
For sale: $184,900
Chicago, IL
This 1,400-square-foot brick home has received many new furnishings throughout, including a kitchen with stainless steel appliances and granite countertops. Chicago's median home value is $187,200, making this three-bedroom, three-bathroom home a great deal.

No. 7: Minneapolis

3722 Oakland Ave., Minneapolis
For sale: $184,900
Minneapolis, MN
This adorable three-bedroom, two-bathroom, circa-1916 bungalow has both original woodwork and modern updates. With Minneapolis' median home value of $187,600, this 1,392-square-foot home is an affordable buy.

More from Zillow about homes for sale:
Homes for Sale in Top Buyers' Markets
For Sale: Town Houses With 3 or More Bedrooms
Houses Under 500 Square Feet for Rent

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How to Know If You Should Keep Renting Instead of Buying

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borrower commitment concept
ShutterstockHomebuyers have to be ready to commit their time and money.
By AJ Smith

One question I heard frequently throughout my 20s was, "When are you going to buy a house?" Some believed I was already missing out on the benefits of homeownership while others thought with my career constantly taking me to new cities, I was better off renting forever.

Many people grapple with the decision of whether to buy or rent a home. While there are pros and cons to each and the decision is ultimately personal, here are some signs you should keep renting.

1. No Savings: Sometimes it's tempting when you hear of low down payment options for buying a home. But if you don't have an emergency fund yet or if purchasing a home would drain all of your savings, you probably aren't ready. Homeownership comes with expenses -- you never know when a hot water heater will need replacing -- so you want to make sure you have money set aside for

If the thought of buying a home makes you so nervous that you are making yourself sick or having trouble sleeping, you need to explore the reasons before you move forward.

home repairs on top of the usual living expenses.

2. Uncertain Future: Signing a mortgage means you are agreeing to pay money every month to own that home. If you have a stable job that you love, this can be great. But if you are unsure whether you will have your job for the next few years, you may want to wait. Even if you've just gotten a new job and you are very excited, it may be wise to get a feel for the company before you jump into homeownership. You'll want to know whether the company is hiring or laying people off and what its financial outlook is to determine your own job security.

I kept renting throughout my 20s because I wasn't sure where I was going to be living. My career had me moving around the country with very little notice. I stayed in one state for nine months and another for only six months. I wanted to be able to accept new assignments and opportunities that came my way without worrying about selling a home. If you aren't certain where you will be in a few years, or perhaps even months, you might want to keep renting for now.

3. No Research: Buying a home is a big decision. You'll want to learn what you can about the local housing market, including the pricing trends, the school district and the property taxes. Another thing to consider is how well you know the home itself. Sure, that roof looks good, but an expert may tell you it needs to be replaced soon. That's not the kind of surprise you want after you've spent a lot on a down payment.

Don't rush into homeownership without doing your research. Think about how much you regret that impulse buy at the mall and multiply it by ... a lot!

4. Fear: Yes, you have to face your fears. But if the thought of buying a home makes you so nervous that you are making yourself sick or having trouble sleeping, you need to explore the reasons before you move forward. Perhaps you aren't sure this is the right time or the right house. Maybe you don't want to take on a long-term loan like a mortgage or you worry about being tied to one location. Before you take on a mortgage, it might be best to determine what is truly bothering you.

More about renting and homeowning from Credit.com:
How to Get Pre-Approved for a Mortgage

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Sellers, the Real FSBO Deal Demands Preparation

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Economy Home Sales
The Associated PressIt's common home sellers to wonder if they can go at it alone.
By Brendon DiSimone

Many sellers entertain the idea of selling their home without an agent. They always have. Particularly today, with so much information online, many believe that the Internet weakened the role of the agent; that the agent's value is not what it used to be. However, when it comes time to sell a home, it's common for many people to wonder if they can go at it alone and save the 6 percent commission. Going the FSBO route, as in "For Sale By Owner," seems easy enough.

By researching online, you can check out comparable sales, learn your local market, and determine a good price for your home. Take some photos with your smartphone camera, write compelling marketing copy, and make a few cosmetic enhancements if needed. When you're ready, list your home online for buyers to find and explore. In some cases, it truly can be easy,

If you go it alone, you aren't necessarily saving 6 percent of the home's sales price by not hiring an agent.

but not for everyone. There are a few considerations and some reasons why many sellers end up going down the traditional path of being represented by a licensed real estate agent.

When the Stakes Are High, Doubt Creeps In: Selling your home isn't like selling a used car or a flat-screen TV online. It's just not that cut-and-dried. It's likely a place where you've made memories and have some serious emotional attachments. The sale of a home generally comes at a time of life change; a new job, new baby, retirement, death or divorce. Emotionally detaching means that you may not be as objective as possible. And as a result, there could be negative financial ramifications. Putting a a third party in between you and the sale can be comforting. There are practical considerations as well. Prices can vary by block and there are a variety of elements for a homeowner to consider: the local market, pricing, disclosures and property access, among other things. When it comes time to go FSBO, a little bit of doubt may creep in. Is my timing right? Is my pricing right? Is there something I'm missing? Am I ready to sell? Sellers don't know what they don't know. When it comes time to go live, and expose themselves to the market, they sometimes get cold feet.

You'll Probably Still Pay an Agent's Commission: If you go it alone, you aren't necessarily saving 6 percent of the home's sales price by not hiring an agent. Most likely, you're only saving 3 percent. When a home is sold, the seller ordinarily pays the 6 percent commission. The seller's agent then splits the commission with the buyer's agent. If you want to get traffic to your listing, you need to offer that commission to the buyer's agent to incentivize them to show your home. Additionally, few buyers feel comfortable negotiating directly with an unrepresented seller. Buyers want guidance from their agent and appreciate their feedback. If you don't offer that buyer's side commission you risk losing eyeballs and therefore market share. If you lose a chunk of the market, you risk not getting top dollar.

It Becomes a Part-Time Job: Selling a home takes an immense amount of preparation time, not to mention the time and energy to show the home once it's listed for sale. You'll have to field

Search and research as much as possible, not only local listings but how to best present your home to the market.

calls, emails and questions from buyers and agents. Plus you'll need to be prepared to show it at a moment's notice. It could easily begin to feel as if you've taken on a part-time job. And, not everyone is cut out for the additional workload and stress. In many cases, you'll be doing all this while also focusing on where you're moving. Are you selling in order to move to another city or town, or because of a change in your career or life? Any of those situations can be stressful enough on their own. When you add selling your own home to your plate, it can quickly be overwhelming.

There are certain people that can absolutely do it. It's been done successfully over and over through the years. If you're convinced that you can overcome the doubts and fears associated with being unrepresented, have the time and energy to make it happen, then give it a shot. Start by doing your homework, going to open houses and learning as much as you can about how your market works. Be prepared to set aside a good chunk of time for the months before and during the sale. Search and research as much as possible, not only local listings but how to best present your home to the market. Because you don't sell homes for a living, you could be caught off-guard or overlook something important.

Once you go "live," the days on market -- the DOM -- starts to tick. That number of days is the buyer's way of knowing how your home fares in the market. If the DOM approaches 90 and you are still active, buyers will see it and know it. If you are unsuccessful and end up listing it the traditional way, that buyer will know about the previous attempt to sell FSBO. They may use it against you when making their offer. So put your best foot forward. If you're not there yet, don't go FSBO. Take the time you need to and reevaluate your plans. The last thing you want to do is rush into the market when you're not ready.

More from Zillow about selling a home:
How to Get Multiple Offers on Your Home
Are Open Houses Still Necessary?
Tips for Sellers in a Buyer's Market

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For more insights into the important changes happening in real estate, read DiSimone's new book "Next Generation Real Estate." Brendon's practical real estate advice has appeared on FOX News, CNBC, USA Today, Bloomberg, FOX Business and Forbes. A licensed Realtor and an active investor himself, Brendon owns real estate around the U.S. and abroad and is licensed to sell in California and New York.

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow or AOL.

 

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For Sale: Jack Osbourne's Spanish-Style LA Home

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jack osbourne home library
ZillowJack Osbourne's newly renovated, 1926 gated home has high ceilings with Spanish-style beams.
Assassin's Creed IV Black Flag Launch Party
APJack Osbourne
By Emily Heffter

Perhaps inspired by his sister's quick sale of her Hollywood Hills starter home, Jack Osbourne has listed his Spanish-style four-bedroom, four-bath home in the Los Feliz neighborhood for $2.998 million. Osbourne, whose struggles with addiction and coming-of-age were documented on MTV's reality series "The Osbournes," has married and had a daughter since he bought the newly renovated, 1926 gated home for $2.8 million in 2011.

The 4,810-square-foot home at 2220 N. Berendo St. in Los Angeles has a sunny courtyard with a pool and fountains. Inside, the home has high ceilings with Spanish-style beams and a kitchen at the center.

Upstairs is a spacious master suite and 2 bedrooms. A separate guesthouse includes a a full kitchen.



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14 Ways to Reclaim Lost Counter Space
Jack Reacher Author Buys Expedia CEO's Co-op
Southern Star Trisha Yearwood Selling Country House Near Nashville

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