Tag: buyhouse

Investing in rental property is a way for many to take advantage of monthly cash flow while seeing the asset increase in value over time. There really isn’t any type of investment that provides both benefits as rental property can. That’s why many diversify their portfolios to include real estate. However, sometimes it can be a bit expensive to come up with the necessary down payment and closing costs as well as identify a property that will cash flow each month. With rates still flirting with record lows, now might be as good a time as ever to make the leap and purchase your very first property. Some real estate investors like to partner with others to spread the risk around a bit while at the same time being able to afford a property that might just be out of reach. Think of a fourplex or an apartment building. If you’re thinking of investing in real estate with others, there are some things you need to know.

When just two people buy a rental property, such as a husband and wife, lenders review the income and credit of each. Income and debts are added together to arrive at a proper debt ratio. As it relates to credit, lenders use the lower middle score of the two. Lenders will look at a credit report and scores from each of the three main repositories, Equifax, Experian and TransUnion. Of the three reported scores, the lender will use the lowest middle score of the applicants. When multiple parties are buying, a different approach is taken.

Each buyer will complete his or her own application. The lender then documents all parties in the same fashion. The buyers will provide copies of their most recent paycheck stubs covering a 30 day period. The last two years of W2s will be provided along with copies of bank and investment statements providing verification of sufficient cash to close the transaction. If there are five couples buying a rental property, you can already tell that’s going to be no small amount of paperwork. Each and every buyer must submit the proper paperwork.

However, the lender cannot proceed until all parties have submitted the necessary documentation. If there are 10 buyers and 9 have properly completed an application, nothing can go forward until that final person complies with the lender’s documentation request. You’re going to have to rely on everyone to get their paperwork in on time. Just one person can throw a monkey wrench in the plan.

Second, and this is just as important if not more so, credit reports and scores will be reviewed for each of the 10 applicants. Just like lenders underwrite a couple and using the lowest middle score of the two, lenders will identify the lowest middle score of the 10 applicants. If 9 people have scores above 740 and 1 has a score of 600, the lender will want to scrutinize the transaction a little further. In such an instance, that one remaining investor might want to pull out of the transaction allowing the purchase to go through. To avoid this possibility, all parties should pull an individual credit score on their own at www.annualcreditreport.com. This website is sponsored by all three credit repositories and allows consumers to get a free credit report each year.

Finally, there should be a person or two to monitor the application and facilitate the process as it moves along. If there is someone that is slow getting documentation in, that individual should be responsible for contacting the others letting that person know they’re slowing things down as well as keep all applicants up to date on the status of the loan.

It can be a good way to expand your portfolio by investing in real estate with others, just a bit more due diligence is required.

Message me if your thinking about buying a Fort Collins or Loveland home at m.me/EdPowersRealEstate

Ed Powers Real Estate 970-690-3113 [email protected] www.EdPowersRealEstate.com

The American dream has long been to become a homeowner, but as with anything of a financial nature, requirements can vary between institutions, lenders, and brokers. While one bank may ask for 20 percent down, a mortgage broker may only require 10 percent. Since loans vary in requirements, stipulations, and types of homes available as family dwellings, it is good to know what you may face before you begin the hunt for the perfect house. Here are six things you should know before purchasing a home.

1. Purchasing Expenses

The percentage the lender requires is not the only cost associated with purchasing a home, so it is wise tounderstand all relevant fees – including closing costs. Also, check out monthly insurance rates, property taxes, and association fees before you put every penny you have saved into a mortgage. You must also consider expenditures you will need in the first few months, such as appliances, furniture, and maintenance.

2. Knowing Credit

Although it is not a widely broadcast fact, your credit score can be one of the most critical factors in what will determine the terms of your home loan. Most people with a score of 750 or over can usually find good terms and low interest rates that can save them up to 10 percent of the loan costs over the loan’s life. However, if you have a score of less than 700, it is important to find a way to raise the score quickly, so find a credit repair company and work with them to raise your credit score.

3. Knowing Requirements

It is easy to get lost in the search for a home and fall in love with a house that doesn’t fulfill your needs unless you are firm and set the requirements with your realtor. To make sure you don’t wander into something you really don’t want or can’t afford, know what type of home you require, where it needs to be located, and what restrictions must be included. For example, you may want a condo with a garage that is located in an area near a park. If you tell yourself what you want, repeating it out loud several times, the chances you will get lost in a property search will diminish.

4. Getting Pre-Approval

Most first-time home buyers don’t know they have an option to get a pre-approval before searching for a house.A pre-approval is a letter or notice from your lender that states the institution will back you for a certain amount of money. That letter lets the homeowners know you can afford to purchase the home and won’t get turned down during the process. This is not the same as a pre-qualification, rather your lender will verify your income, credit score, and employment history before issuing the pre-approval letter.

5. Understanding HOAs

More than ever before, homes are being built in neighborhoods that are an inclusive unit covered by a homeowner’s association. Condos are almost always a part of an HOA, too. These associations often take care of property maintenance, pools, and parking areas using the dues you will be required to pay. If you areconsidering an area with an HOA, ask neighbors about how the neighborhood is run and what that person thinks about the HOA requirements.

6. Inspecting Importance

One of the most critical things you can do before purchasing a home is have an inspector check the property. The problem is that not all inspectors are created equally, and some are terrible at what they do. Make sure you have a certified and qualified inspector that is bonded and licensed in your area, and a professional that works for you – not the seller. If you are uncomfortable with the report you receive, ask for a second inspection by someone you hire and feel you can trust. There is nothing wrong with obtaining a second opinion.

Buying a home is a huge decision and may be the largest and most expensive purchase you will make in your lifetime. That is why it is important to take your time and make sure you know what you are getting into before you sign on the dotted line and commit yourself to 30 years of monthly payments. Knowing what you are committing to can help you make a wise financial investment in your future. 

Message me if your thinking about buying a Fort Collins or Loveland home at m.me/EdPowersRealEstate

Ed Powers Real Estate 970-690-3113 [email protected] www.EdPowersRealEstate.com

Home buyers intent on purchasing a Fort Collins or Loveland home now can benefit from three significant advantages:

1. Less Competition: The pandemic continues to keep people home and job loss is at record highs. For these and other reasons, the 2020 spring real estate market is not the mass buying frenzy of past years. Home sales are down significantly in most markets.
2. Low Interest Rates: Interest rates are at historic lows which means buyer purchasing power is strong. Mortgage pre-approval will assure each buyer—and the respective seller—of exactly how much the buyer has to spend.
3. Homebuyer Education Courses: Established to prevent a repetition of the 2008-9 housing disaster, most courses are available online. The wide range of topics is designed to help buyers achieve short- and long-term real estate goals and plans.

Our key question remains: “Is now the right time?”

Whether you must or want to buy now or you’re determined to be ready when the time is right, there’s less room for error in these uncertain times. The more you learn about the buying process and homeownership in advance, the better prepared you’ll be to improve your current situation through a real estate purchase.

To avoid second guessing yourself about the decision to buy now, commit, in advance, to  making a confident decision that you can live with during this economic upheaval and beyond. That does not mean making a quick buying decision nor over-researching your choices. What works here is improving your real estate confidence, so that you understand exactly how to buy and how to protect yourself and your home at the same time.

Make FIVE confident decisions from the start, so you end up with confident decision making you can live with:

#1. Set practical expectations

• Rarely, if ever, are home buyers 100% certain about their selected property or it’s price, except in hindsight. When asked to sign an offer to purchase, you’ll be excited and nervous, but aim to be more sure—much more sure—than unsure. 

Spending all that money on a property you have only visited for an hour or two is bound to make you nervous. Worry if it doesn’t. What you want is confidence that the property meets your criteria and budget and that it is as presented (a clause in the offer calling for a home inspection will determine the home’s condition).

• Let go of searching for a “dream home” or “forever home”

Attempting to decide today what you’ll want or need two, three, or more decades in the future puts undue pressure on you. The pandemic has taught us how unpredictable tomorrow is. Search in the very best location you can afford for what you need now and in the foreseeable future.

#2. Plan the work and work the plan

Focus your search instead of trying to view a huge number of homes.

(1) Who is the buyer?

Who is or are making decisions?

• If you’re buying solo, who will act as a sounding board, problem-solver, and property “detective”—along with your real estate professional—to help you take a long hard look at each potential home?
• Too often couples view properties before they decide what they are looking for. Squabbling, fighting, or competing during the buying process distracts both buyers from assessing the true value of each property.

If you love modern and your partner loves traditional, investigate the two styles so you both understand the compromises involved before viewing property. Often design differences are cosmetic, not structural. Decor issues can unnecessarily distract buyers from expensive-to-fix problems, like a worn-out roof, a cracked foundation, or signs of water leaks. Remember, you’re both on the same side!

(2) Where is your best location?

Location is what you are really buying. Oh, there may be a lovely house or condominium unit included, but it’s location that cannot be changed and that will determine future value. Buy the best location you can afford, even if the property needs some TLC or cosmetic changes, since a great location will usually translate into steadily-increasing value.

Saying “no” to a great location because of someone else’s bad decor is a rookie or a pretentious mistake. Your real estate professional can help with your search by explaining the location-based value of each property. That is, within your budget, value is tied to which end of which street, proximity to what, which school etc.?

(3) How secure is purchasing power?

At the top of the list of your strengths is your purchasing power. What’s the source of the money to purchase, maintain the home, and pay off the mortgage? Many buyers are hesitant to take on a home purchase now when employment, income, and savings circumstances are very unsettled and becoming more so. Why are you confident you can provide the down payment, qualify for financing, make monthly mortgage payments, and meet closing and moving costs without compromises? “Hope” and “wish” are not realistic real estate strategies.

(4) What will be improved by the move?

If you must move now, this will be an easy question to answer. Just be sure you haven’t overlooked other solutions or new housing issues in the chaos that passes for everyday life right now. If you aim at improvements to your quality of living, that should also improve your standard of living. The reverse is not equally true.

#3. Build your confidence with real real estate knowledge

Explore what’s important in your next home: Research substance, not merely cosmetic items like stainless steel appliances and a kitchen island. 

Investigate the costs of homeownership and maintenance. Learn about cutting costs to prevent becoming “house rich and cash poor.” Get the facts! For instance:

• Heating and cooling costs can take a big chunk out of your paycheck, so consider an energy efficient, cost-effective home. You’ll find information galore online. Take care you are not reading marketing pitches, but scientific information like A Consumer’s Guide to Energy-Efficient and Healthy Homes 

• If lifestyle alternatives intrigue you, explore a few before you buy. Do you pass the test for tiny home living 

#4. Discover what you don’t know you don’t know

If you pay attention, you can learn a lot from real estate professionals, but their job is not to teach you what to buy. They answer questions and follow your instructions. It’s up to you to decide which property to buy. Your professional will help you make the purchase successfully.

The last real estate crisis led to Homebuyer Education Courses and Counseling Services designed to help prospective homebuyers “think critically about the benefits and risks of homeownership, understand how to choose affordable homes and appropriate mortgage products, and build the financial knowledge, resources, and behaviors needed for sustainable homeownership and long-term financial health.”

Homebuying Courses are intended to provide assistance navigating the homebuying process and to help owners keep their homes over the long run. The directory of HUD-approved housing counseling agencies at US Department of Housing and Urban Development (HUD, hud.org) will introduce you to local housing counselors and to specialty counselors like those for reverse mortgages or for foreclosure avoidance.

Since each Homebuyer Education Course is different, determine the sponsoring organization and what each covers before you sign up. Most programs are available online, like these popular versions:

(1) Framework Online Homebuyer Course is provided by Framework Homeownership LLC, a partnership of two housing nonprofits.

(2) e Home America Online Homebuyer Education is provided by nonprofit Community Ventures.

(3) HomeTrek Online Homebuyer Education is a service of nonprofit InCharge Debt Solutions Inc.

#5. Interview Real Estate Professionals

Once you have a clear idea of your needs and wants, interview local experienced real estate professionals to match your criteria against available listings. Professionals are not limited to selling off MLS. They can contact suitable unlisted property owners to discover who is ready to sell now. 

If what you want is not currently available, don’t abandon your plans or goals without re-examination. If you have to change direction or priorities to achieve what you decided on, stop and verify that now is still the right time.

COVID & Housing UPDATE: To provide the most up-to-date and accurate housing assistance information during the COVID-19 national emergency, the Consumer Financial Protection Bureau (CFPB, consumerfinance.gov), Federal Housing Finance Agency (FHFA, fhfa.gov), and HUD recently launched the new mortgage and housing assistance website: cfpb.gov/housing. The site consolidates the CARES Act mortgage relief, protections for renters, warnings about COVID-19-related scams, details on student loan payment suspension, and much more.

Message me if your thinking about buying a Fort Collins or Loveland home at m.me/EdPowersRealEstate

Ed Powers Real Estate 970-690-3113 [email protected] www.EdPowersRealEstate.com