Getting Home Insurance Right

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HOMEOWNERS INSURANCE FEELS LIKE A “NECESSARY EVIL.” BUT IT DOES SERVE A SAINTTLY PURPOSE—TO PROTECT YOU. SINCE YOU HAVE TO PAY IT EVERY MONTH, THE TRICK IS TO PAY AS LITTLE AS POSSIBLE FOR AS MUCH COVERAGE AS POSSIBLE. HERE’S WHAT TO LOOK FOR.

If you own a home free and clear, you are not required to have homeowners insurance (also called hazard insurance). But if you have a mortgage on the property, your lender will require you to carry it. Here’s how to get quotes to compare prices and coverage.

What is a homeowners insurance quote?

A quote is an estimate of the price you’ll pay for a policy. It’ll be given to you either as a yearly, 6-month, or monthly amount. Make sure you’re comparing apples to apples when looking at different quotes. 

A quote will be based on the size of home, location and likely replacement value of the home, condition you want to replace it to, how far it is from a fire house, etc. 

Each company uses its own formula to calculate house insurance quotes, so prices can vary widely. You boost your chances of finding the best rate when you compare homeowners insurance rates from several companies. Get at least three quotes! The rate and amount of coverage can vary by hundreds of dollars.

A quote is only an estimate at the time it’s given. The actual amount you’ll end up paying will not be determined until the policy is issued. It’s usually close to the quoted amount, though.

Who gives homeowners insurance? 

Many companies, including the companies that you might already be insuring your car with. Examples include USAA, Farmer’s, State Farm, Travelers, Wawanesa, Desjardins, Allstate, and many others. 

What do you get from having homeowners insurance? 

Protection in case of damage or loss. These amounts can vary! These are broad averages only. If you get three different quotes, you’ll begin to see what kind of coverages are available for your property and can compare. For instance, if two quotes are similar, but one offers $8,000 of additional living expenses in case of a claim, and the other offers only $6,000, then the first might be a better policy for you (if all other factors equal).

How your price can change…

In addition to the standard coverages shown above, you’ll also need to make choices when you compare home insurance quotes. These choices will affect your price, so make sure you use the same choices when comparing different policy quotes. 

Your deductible. This is the amount you pay out of pocket, before the insurer will pay anything per claim. It’s typically $500 to $2,000 per instance. Choosing a higher deductible will lower your monthly premium payment. If you choose a higher deductible, make sure you can afford to pay that deductible.

Earthquake, flood or windstorm coverage. Standard insurance doesn’t cover earthquake or flood damage, and windstorm coverage is limited in some hurricane-prone regions. If you live in an area affected by these risks, you may want to ask about optional coverage. Flood insurance is required for some properties in high-risk zones.

Replacement cost coverage for your belongings. Most standard homeowners insurance policies won’t pay to replace old items with new ones unless you choose this upgrade. You can ask for more coverage for your belongings (like computers, clothes, art pieces, dishes, etc.). 

Extended or guaranteed replacement cost coverage for your home. Standard policies won’t pay more than your dwelling coverage limit to fix your house. Extended replacement cost coverage will pay out more if repairs require it, up to a specified limit, and guaranteed replacement cost coverage will pay the full cost.

How to get a homeowners insurance quote

You can call a local insurance agent or broker who can give you a quote. It’s often nice to talk to someone who specializes in insurance in your area. 

You can also contact insurance companies online and fill out their online quote request form. 

I prefer talking to an agent, because many of the items in the online forms are not applicable, and you’ll end up having questions. The live agent can help you faster, and often make suggestions you won’t get online. However, it might be wise to get at least one online quote, once you know what you want to be comparing.

KNOW SOMEONE WITH QUESTIONS ABOUT BUYING A HOME? PUT THEM IN TOUCH WITH US FOR HELP. Kevin and Jennifer Hanley, REALTORS The Hanley Home Team of Keller Williams Realty Atlantic Partners Southside http://www.HanleyHomeTeam.com

Thinking About Buying a New-Construction Home? These Are The Things To Look Out For

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There are a lot of buyers that prefer new-construction homes, thinking that they’ll be in better condition (and be a better long-term investment) than existing homes.

And while that certainly can be true, there are also things buyers need to be aware of when shopping new builds.

A recent article from realtor.com outlined the essential elements that should be on your radar when shopping for a new-construction home, including:

• Build quality. Not all new-construction homes are created equal—and some are higher quality than others. Before you purchase new construction, make sure you ask to review the home’s architectural plans to check for any issues and get insights on the materials used to build the home.
• Builder reputation. Before you buy a home, you want to make sure you’re buying from a reputable builder—so do your research and find out everything you can about the builder and their reputation in your area.
• Upgrade and design options. Many builders offer buyers the option to customize different features in the house (like countertops, flooring, and fixtures). Before you commit to building a new build, make sure you understand the features that come standard with the home, the different design and customization options, and how much it will cost to upgrade.

The Takeaway:

Bottom line? Buying a new-construction home can be a great choice for your next home purchase—as long as you know what to look for during the home buying process.

Most Tax Friendly States of 2020

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Best places to live, Lowest taxes, real estate, real estate advice, real estate florida, real estate investing, real estate jacksonville fl, Real Estate Team, relocating, relocation, retire and relocate, Tax friendly states, The best real estate agent in Jacksonville, tips on relocating

Retirees are often the main group we imagine moving from higher-tax states to states considered tax-friendly. The coronavirus pandemic, however, has led younger people, many of whom are in their prime career years, to also look for low-cost places to relocate. Telecommuting has made it possible to leave big (often expensive) urban areas and work from anywhere, which is one factor behind the shift. 

The following are some of the country’s most tax-friendly states right now, regardless of why you might be relocating. 

Wyoming
There’s no state income tax in Wyoming, and the average state and local sales tax is just over 5.3%. The average property taxes are $635 per $100,000 in home value. Wyoming has a strong mineral and energy extraction industry, and that’s one of the reasons the state can keep taxes low for residents. 

Nevada
There is no state income tax in Nevada, and the average property tax in the state is $693 per $100,000 in home value. The tax-friendly nature of Nevada may be one reason there’s an influx of Californians moving to the state and the scenic Lake Tahoe area in particular. Nevada receives over a billion dollars each year from the casino and tourism industry, which helps them avoid imposing a state income tax. 

Florida
Florida has no state income tax, but property taxes tend to hover around the national average. The state and local sales tax rate is also somewhere around average for the country at 7.05% combined. 

Alaska
Alaska may not provide you with sunshine and beaches, but it could be an economically sound decision. Alaska residents pay neither state income taxes nor state sales tax. Certain municipalities in Alaska might impose local sales taxes that are as high as 7.5%, but even so, the average local sales tax hovers around 1.76%. There’s also the Permanent Fund Dividend ($992 for 2020), which is paid to every Alaska resident who’s lived there for a full year. 

Tennessee
Prior to 2016, Tennessee did not tax wages, but still taxed income from investments and other “unearned income.” Legislation was passed in 2016 to gradually eliminate taxes on investments by 2021. The state currently carries the third lowest tax-burden in the United States.

We can help you buy or sell a home ANYWHERE! Kevin and Jennifer Hanley, REALTORS The Hanley Home Team of Keller Williams Realty Atlantic Partners http://www.HanleyHomeTeam.com 904-515-2479

How to Buy a Home Sight Unseen

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If you’re thinking about buying a house right now, you’re probably wondering how best to go about it. The truth is, you can still do in-person tours in some places, depending on the local regulations, but many people are buying homes right now without stepping foot inside until the deal is done.  

Sight unseen deals are nothing new, but up until recently they were used mostly for foreign buyers, investors, or long-distance home shoppers. These types of remote deals have become more mainstream in the wake of the COVID-19 pandemic, and there’s evidence to suggest they’re more than a passing trend. 

A survey from 2018 showed that about 20% of homebuyers had made an offer on a home without seeing it first. A more recent, COVID-19-influenced survey, found that 45% of homebuyers in the last year had made an offer without seeing the property in person. In April of this year, Realtor.com found that “24% of 1,300 consumers surveyed said they’d be willing to buy a home without first seeing it in person.” 

If you’re considering purchasing a home sight unseen, keep these tips in mind: 

Work with the right agent
If you’re buying a house without touring it first, you have to depend on your agent to be your eyes and ears. It’s crucial that you go with a local expert, especially if you aren’t super familiar with the area. 

Take advantage of technology
Online listings with 3D home tours are up by more than 600% since the pandemic hit. Listings that have this functionality are likely to rise to the top because they give you a better feel for the home. Remember, whether you’re looking at a carousel of images or a 3D tour, don’t forget to ask your agent to go a step further.  

“Once you know which homes you’re most interested in, have your agent book some showings and take you along on the tour using FaceTime,” said HomeLight. Being able to view the property with someone in real-time will allow you to ask questions while getting an understanding of the “flow” of the home. 

Then, ask for a floorplan
Today, you’re more likely to find home listings that include a floorplan image. If you don’t see one, make sure to ask. While video tours offer an understanding of how a home feels, a detailed floorplan helps you ensure it measures up to your needs. 

Knowing the full layout of a home will give you some insight on what day-to-day life will be like. For example, watching a video tour might not reveal the fact that the new home office you’re excited about shares a wall with a noisy laundry room. Also, being able to quickly reference dimensions will allow you to imagine how you and your furniture will fit into the new space.  

Order an appraisal and a home inspection
Even in cases where they’re not required, you don’t want to skip these steps. Especially when you can’t or don’t want to tour a home yourself, having expert and objective documentation regarding the value and condition of the home is more important than ever.

It’s ALWAYS better to work with a team of agents with years of experience in helping buyers buy sight unseen. That’s where we come in! Kevin and Jennifer Hanley, REALTORS (with a combined 28 years of real estate awesomeness) The Hanley Home Team of Keller Williams Realty http://www.HanleyHomeTeam.com 904-515-2479

Should You Apply for an Online Mortgage?

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A mortgage is a big financial responsibility. Yet, if you’re like half of all home buyers, chances are you won’t shop around for the best mortgage. The result could be the loss of thousands of dollars…both in up front costs and in monthly payments. It pays (a lot) to shop around.

As a home buyer, you have three options for getting a mortgage: a traditional bank, a mortgage broker, and an online mortgage lender. Here’s a quick breakdown of the differences. 

1. The Traditional Bank

A traditional bank offers in-house loans. You may get better rates and closing costs from your own bank if you’ve banked there a long time. On the other hand, you will only get the rates and terms they dictate, which might be limited. You probably won’t have a lot of choices. It pays to check at other institutions to compare the rates and terms of your bank’s offer. 

2. A Mortgage Broker

A mortgage broker’s job is to act as your guide to helping you find a mortgage that fits your needs. The broker can shop around to find banks and other sources of funds that are the best rates and terms, based on your credit and income. 

Brokers are usually experienced loan specialists. Unlike big-bank loan officers, brokers will work with you to answer your questions and look for options. If you bring your big bank’s offer to a broker, he or she can compare for you. 

Brokers promote loan products that provide them with a finders’ fee. Since those fees are already built into the loan products (whether to benefit a broker or a bank’s own loan officer costs), you likely won’t see much of those fees passed on to you. 

3. An Online Mortgage Lender

The great advantage to using an online mortgage lender is that you may get great rates and fees. Online lenders don’t have to cover a lot of overhead, so they can offer discounts to their borrowers through lower rates or closing costs. Even a quarter of a percent lower interest rate can potentially save you thousands of dollars over the life of your loan.

Another advantage is that you don’t need to talk to anyone. How convenient to have a burger, watch TV, and fill out a loan application all at once! Of course, convenience is also a big drawback. 

If you have a question, no matter how small, you won’t be able to get a quick answer, if at all. With online lenders, they will assign someone to work with you (a loan officer). That person has a huge work load and is often fairly inexperienced with nuanced questions. And in my experience, the questions are always nuanced. 

For example, take the question of assets and liabilities. Do you include your child’s college savings account? Is that going to risk you using that account if needed to pay for tuition next month? Should you include the fact that you’re on your nephew’s car loan, even though he’s paid it on his own for years and it’s almost paid off? Is your secret PayPal account going to show up on your assets, even if you don’t want it to?  

So Which Should You Use?

Use at least two sources. Make sure one of them is a mortgage broker. 

The Online Lender: If your situation is relatively straight forward…you have a regular job, a regular pay check, no weird debts or assets, then an online lender can be a great option. Make sure you read about warnings in the section below.

Big Bank or Credit Union: If you have a great relationship already, see if they have special rates and terms for long-time customers. In my experience, you’ll often end up in a situation similar to working with an online lender, because the bank is going to assign a loan officer, who may or may not be able to answer your questions. 

The Mortgage Broker: I highly recommend that one of your comparison points be a mortgage broker. Brokers are usually very experienced and can answer a lot of your questions. They’ll be able to shop around to find loans that might have comparable rates and terms to the ones offered by your bank or online lender. And they’ll let you know if your bank or online lender is a better deal. 

The biggest problem with applying to multiple sources is the fees. You’ll have to fill out the loan application multiple times, and your credit will be pulled multiple times, and you’ll have to pay multiple application and credit report fees. This is the reason most people don’t apply to multiple sources. However, you may be able to do a preliminary application, especially at the online sources.  Find out before completing the application if there are fees.

Warnings about Online Lenders

Most of them are not lenders at all. They might be brokers, they might “non-bank investment companies,” or they might simply be third-party comparison sites. There’s nothing wrong with any of these, but you should know what you’re getting. 

Lendingtree or Bankrate are examples of third-party comparison sites. They won’t give you a loan and can’t tell you which loans are best for you. They’ll simply show you funding sources that they have affiliate agreements with. You may find this useful for comparing different lender rates. Google “Mortgage Comparison Websites”.

Most online lenders are non-bank investment outlets. Quicken Loans or Meridian are examples. They’ll process your application and fund the loan using large institutional investor funds. They’ll likely sell your mortgage as part of a package of loans to other investors. There’s nothing wrong with this. It’s very common in the mortgage world. Before filling out any online mortgage application, check on the site’s credentials. You don’t want to start giving financial information online without vetting them first. Google “Non-Bank Mortgage Lenders”.

A few of the online lenders are in fact mortgage brokers, such as Intellimortgage. You’re simply filling out a loan application in advance, and they’ll consult with you to find you the best mortgage. I’d personally rather meet with a mortgage broker in person or talk by phone, rather than using an online mortgage broker. It’s just easier to get answers from a live person. Google “local mortgage brokers in (your location)”. Find a live person to talk to.

And of course, big banks like HBSC and Chase are online, too, so when you get a list of options from LendingTree or you Google “online mortgage,” there’s a very good chance you’ll simply be getting a bank. Double check whether the name of the company you’re shown in any online search or list is a bank, a non-bank, or a broker. 

Will Applying Ruin My Credit? 

It’s true that applying for credit can lower your credit score. However, when applying for mortgage loans for comparison purposes 2-3 times, your credit score will likely not be affected. Even if it is, it’ll usually only drop a little and only after you’ve already applied. If your score drops, a simple explanation that you were comparing lenders will suffice and your original rate at the time of application will stand.

Ask us for some recommendations for mortgage brokers in our area! Kevin and Jennifer Hanley, REALTORS http://www.HanleyHomeTeam.com 904-515-2479 Team@HanleyHomeTeam.com

7 WAYS HOME BUYERS LOSE MONEY BEFORE THEY EVEN BUY A HOME

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buy now, buyer home hunting tips, buyer market, Buying a home, buying a home in Jacksonville, buying new construction, Buying new construction; working with a real estate agent; Buying from a builder; negotiating with a builder; having someone on your side, real estate

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A MORTGAGE IS THE BIGGEST DEBT MOST OF US WILL EVER HAVE. BECAUSE THE NUMBERS ARE SO BIG, THOUSANDS OF DOLLARS (OR POUNDS, SHEKELS, OR OTHER MONETARY SYMBOLS) CAN SLIP AWAY WITHOUT A BORROWER EVER NOTICING. HERE ARE 7 MONEY-DRAINING CRACKS THAT HOME BUYERS NEED THINK ABOUT.

1. Ignoring the true cost of home ownership

Owning a home comes with new expenses that surprise many buyers. Even experienced home owners can forget how much it costs to upgrade a home, improve outdated features, and fix hidden problems. It’s wise to take these costs into consideration before signing on the dotted line.

Before purchasing, calculate realistically what you’ll need to spend to get the home up to your standard. In some cases, you may be better off paying more for a home that’s already been upgraded than paying for a cheaper home that needs more work. 

On the other hand, if you are struggling to make a down payment on a more expensive home, then buying cheaper and putting money into it over time and using your own sweat (“sweat equity”) might offset the higher down payment you would have had to make on the more expensive home. 

A 20% down payment on a $300,000 is $60,000. If you can’t afford that, consider buying a nearby fixer-upper. That home might only cost $225,000, with a down payment of $45,000. The extra $15,000 might be enough for you to do many upgrades that would bring it close to the standard of the more expensive home, but you won’t need to come up with that extra $15,000 up front. This might be a good investment option—as long as you go into it with eyes wide open…along with a really good home inspection.

Ongoing Maintenance

The longer you own a home, the more you’ll want or need to make expensive fixes. A new roof may be in your future, as well as repairs to a cracked driveway or installation of a new fence. Some items can sneak up on you, like tree removal service, a broken water main, and termites!

As a rule of thumb, budget 1 to 2% of your home’s purchase price annually for maintenance. If your home will cost you $250,000, expect to spend $2,500 to $5,000 annually on unglamorous purchases like a new water heater or having your furnace serviced. The older your home and the larger it is, the more you’ll spend. 

Also consider a savings fund for big ticket items. If your roof has a life expectancy of 5 years, start putting aside a little each month now.

2. Becoming house poor

There are many places in your life where you’ll need to put money besides your house. Replacing a worn-out car. Saving for retirement. Building a college fund for the kids. Life-altering vacations. Even buying furniture for your home. If you’re spending too much on a mortgage, you won’t have money for these other investments.

A general rule for housing affordability is to spend no more than 28% of your gross income on a mortgage. So, if you earn $75,000 a year, you should spend no more than $1,750 a month on payments, including insurance premiums and association fees. You can use a mortgage calculator to see how much house you can buy for the amount you can afford monthly, and how much down payment money you’ll need.

3. Not shopping around for loans

While it may seem to the average consumer that all mortgage loans are alike, and a loan broker may not even offer any options, the truth is that you do have options. You may be more or less qualified for some kinds of loans that offer better rates or terms. A military veteran’s loan is a good example of this, offering a zero down payment for some people. There are also loans for teachers and other job types, and loans for buying in certain areas.

Aside from special loans, your standard loans also come with different price tags…

According to Sergei Kulaev on the website, Consumer Financial Protection Bureau, “Our research showed that a borrower taking out a 30-year fixed rate conventional loan could get rates that vary by more than half a percent. Getting an interest rate of 4.0% instead of 4.5% translates into approximately $60 savings per month. Over the first five years, you would save about $3,500 in mortgage payments. In addition, the lower interest rate means that you’d pay off an additional $1,400 in principal in the first five years, while making lower payments.”

To compare prices, you can use one of many websites that allow you to request bids from mortgage brokers. One broker may know of a special loan that another doesn’t know about, and all may have different fees. The fees and interest rate differences between these loans can be huge, especially over the life of the loan. 

You can also compare loans by calling different loan brokers personally. Be sure to include one or two bank lenders and credit unions on your list. Many of these bankers have in-house loans that might be better than another company’s loans. 

4. Ignoring the APR

Some lenders advertise low interest rates but make up for the low rates with high up-front fees. If you were to spread the cost of those fees out over the life of your loan, you might discover that your effective interest rate is actually higher than you could have gotten with another mortgage. Sometimes a lower rate loan has a higher “effective” APR…making your loan more expensive over time.

APR means Average Percentage Rate and includes all the fees as though spread over the life of the loan. For instance, imagine a $100,000 30-year fixed-rate loan with an interest rate of 3.85%. Now imagine the lender charges two points (a 2% buy-down of the interest rate), a 1% origination fee, and $1,500 in other closing costs. That brings the “real” interest rate from 3.85% to 4.215% APR.

Next, imagine a $100,000 loan at 4.05%, but with no points (no buy-down), a 1% origination fee, and just $800 in other closing costs. That loan’s “real” rate is 4.199% APR.

The first loan looks cheaper on the surface, but it’s really more expensive. The difference may only amount to $10 or $11 per year, but that’s your money, year after year. If you paid your mortgage for 30 years, you would pay an additional $3,650. That’s money you could have in your hand at the end to pay off another bill, put into your retirement account, or take a vacation!

Of course, if you plan to sell in 5 years, the extra $50 might not matter to you, in exchange for working with a broker you like, or someone more willing to give you a loan based on your credit rating.

5. Making a small down-payment

Most loan programs require a 20% down payment to get the best rates and avoid paying mortgage insurance — an extra cost that typically adds $100 or more to your monthly payments! You want to avoid paying that extra premium if possible. It goes away after the home’s value rises to more than 20% of the loan value, but until that time, you could be paying an extra $100 per month for many years, with nothing to show for it.

If you can’t afford 20% down, consider three things:

1. Maybe you should wait until you’ve saved up enough down payment.
2. Maybe you should buy a cheaper home, where you have a 20% down payment.
3. Maybe you can put 15% down…that will help.
4. If you have to buy now and pay the mortgage insurance premium, but you plan to make renovations, consider getting a reassessment of value as soon as possible. Ask the lender how soon you can do that…some loans won’t reassess under two years, leaving you stuck with $2,400 in extra payments! 

6. Not checking and fixing credit reports

Checking your credit report should be a part of your annual financial health checkup anyway, but when you are about to apply for a mortgage, it’s extra-important. Why? Because credit rating equals interest rate. 

A low or poor credit rating will result directly in higher interest rates and higher monthly payments. The worse your credit, the higher the rate. Conversely, a lower rate might mean you can buy a more expensive (nicer) house. 

But many credit reports make mistakes. Sometimes it may be a legitimate financial shortcoming on your part, but one that you “fixed” a long time ago, such as an unpaid library bill. It should have been removed from your report, but lingers. You have a right in most countries to contest that item and have it removed. Then have your credit rating rebalanced. 

Doing this can mean the difference of many thousands of dollars, and even determine whether or not you get the home of your dreams.

Also, keep an eye on your credit usage. A high credit usage will cause lenders to be concerned that you are over-extending yourself. Lower credit usage demonstrates wise or controlled spending, which they like. However, don’t pay off or close your credit lines entirely. Keeping some credit also demonstrates credit-worthiness more than keeping no credit at all.

7. Not waiting until you’re more financially stable

As alluded to earlier, sometimes a buyer just needs to wait until they have more money before buying a home. 

Down Payment—Coming up with a 20% down payment can be financially wise. It will result in less to pay off, and a lower monthly payment, and it will save on the mortgage insurance premium. It can be hard to wait, to delay gratification, but it can make a huge difference over the years to come.  

Quality of Life—Also, making sure there is enough income to afford the maintenance, and be able to enjoy life besides, are strong reasons to plan long term for a home purchase. 

Balance of Interests—However, there are legitimate reasons to buy a house, even if it stretches you financially. If it seems that house values are rising fast, or you’re able to score a great deal, or you need to purchase for another personal reason, then you may be better off jumping now, rather than waiting for the perfect financial picture.

Contact me for smart home buyer representation BEFORE YOU START HOUSE HUNTING! WE’LL HELP YOU AVOID SOME OF THE HIDDEN EXPENSES.  Simply reach out to Kevin and Jennifer Hanley, REALTORS The Hanley Home Team of Keller Williams Realty Atlantic Partners Southside 904-515-2479 http://www.HanleyHomeTeam.com Team@HanleyHomeTeam.com

When Should You Stop Renting and Buy Your 1st Home?

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This choice often comes down to a financial decision: Can you afford what you want? But that’s not the whole story. There are more things to think about when trying to decide if it’s time to take your first real estate plunge.

Cost-Benefit Analysis is the term for figuring out if something is worthwhile doing or not. When you analyze a situation and decide that the benefits are greater than the cost, then you may want to go forward. Conversely, if the cost exceeds the benefits, you may decide to wait.

Sometimes when you weigh the benefits against the cost, the benefits are higher, but not high enough. In that case, you might want to increase the benefits or lower the cost before taking action. These are exactly the thoughts you should be having as you plan to buy your first home.

To help you weigh the benefits and costs of buying vs. renting, this report offers key elements to think through, including evaluating the monthly payments correctly, estimating home ownership costs, weighing location against price, evaluating purpose and home investment strategy, and improving credit and interest rate to decrease payments. 

The most important factor when thinking about buying is to not “panic buy.” Don’t jump in just because interest rates might rise or prices might rise. Buy when you are ready and don’t let the market dictate your timing.

What are the benefits of renting? 

• One benefit is living in a property without having to spend great chunks of money to replace the roof or fix the plumbing. 
• Another benefit is that you may be able to rent a type of home or in a location that you could never afford to buy. 
• You have no stress or worry about maintenance. That’s the landlord’s job.
• You can pick up and move without wondering if you can sell your house. 
• If your income drops, you can rent somewhere less expensive. It’s a pain to move, but you won’t face a foreclosure or fire sale. 
• If you are late with a payment, you can discuss it with the landlord. 
• You probably won’t get a serious ding on your credit if you’re a month late. 
• In many places, renting is the only option because there isn’t enough housing for sale, or the prices are beyond reach for the average mortal.

What are the costs of renting? 

The landlord charges you X amount and as long as you pay that amount, you get to live in that property. The cost is X. But there are other costs:

• By renting, you lose the opportunity to build equity (the money you gain if you sell the property). So when you move, you move with no money in your pocket.
• You lose the opportunity to pay off the house and eventually own it outright.
• You lose the opportunity to put down permanent roots, do what you like to the property, and raise capital by getting a second mortgage or home equity loan.

What are the benefits of owning?

• Build equity through rising values and making payments. 
• Pay off the home and eventually have the security of owning outright. 
• Be able to increase your wealth…by selling and profiting, by renting it to someone else, or by getting a home equity line to use the money in some other way.
• Put down deep roots in the house and community.
• Do what you want to the house…paint it orange and pink if you want (as long as you don’t live in a Planned Community or Condominium).

What are the costs of owning?

• Monthly fixed and variable maintenance costs are significantly higher than renting.
• Interest on your mortgage loan (which may be a tax deduction, so that may actually be a benefit)
• Time involved in maintaining a home that would not be involved when renting.
• Possible falling values making it harder to sell when you want to. 
• Inability to work with the loan holder when you’re late with a payment.
• Possibly higher monthly payments than would be with renting.
• Possibly not being able to live in the community you want because you can’t afford to buy there.

Compare Costs and Benefits 

Here are several questions that will help you decide if it’s time to buy, or if you should keep renting.

What can you REALLY afford to pay each month?

Let’s look at an example. (This example uses US$.)

• Suppose you feel that you can afford to comfortably pay $1,500/mo. in a mortgage payment. 
• Now, imagine putting aside a little each month to pay for maintenance and improvement projects (painting, new roof, new kitchen, emergencies, etc). Let’s say 10% per month for homes in decent condition. That’s $150/month, based on your $1,500 comfort level.
• Now, instead of paying $1,500/mo, you’re really looking at paying $1,500 + $150 = $1,650. Can you afford $1,650? If not, then you need to be looking at a monthly mortgage closer to $1,350.
• That small difference in monthly payment can mean a difference of $30,000 in your purchase price, so it is important to calculate maintenance costs before buying. 

If you don’t include maintenance costs up front, then the costs will come from somewhere else after you buy—your vacation budget, your new car budget, etc. You could become what’s known as “house poor,” a term that means you have a house, but a lower quality lifestyle.

So before you buy, try to look at you monthly payments realistically, inclusive of your lifestyle goals.

What mortgage would you qualify for?

You may feel comfortable paying $1,500/mo, but the important question is ‘What loan amount will that qualify you for?’

Several factors go into determining what the lender will decide you can pay and what you can buy:

• Your loan amount is based on your income, debt, and interest rate.
• Your interest rate is determined based on your credit rating—which is based on your history of paying your debts, as well as the amount of overall debt you carry.
• The interest rate you are given may mean a $20,000  to $40,000 difference in the price of home you can buy. 

So, although you feel comfortable paying, say $1,500/mo, the mortgage lender might say that based on your income, debt, and credit score, you really are more comfortable paying $1,400/mo.

And that means, instead of getting a mortgage for $239,000, you can only get a mortgage of $219,000.

So work with your mortgage professional, and go through the entire loan application process. Fill out the loan application. Provide the documentation. Yes, it’s arduous. But it’s the only way to get accurate figures, and get the coveted “pre-approval letter” that you need when buying a home.

Why do you really want to own a home?

Here are your choices: 1. Financial reasons.  2. Pride and roots reasons. Of course, it’s both for most people. As a first time buyer, you’re aware that ownership has financial benefits. And you also want to live in a place you love and put down roots.

 Unfortunately, for many home buyers, the price of a home in their desired location is too high for them. That means that first time buyers need to focus on the first choice: buying for financial reasons. 

Look at lower cost alternatives that allow you to build equity and eventually buy up into the area you want to put down roots. Here are a few ideas for first time buyers to make their first home a smart investment:

• Buy a much smaller home or condominium near the
  area you want to live.
• Buy a fixer-upper near where you want to live.
• Buy a home in an area you don’t want to live. After a few years, decide to either keep it, and put a renter in it, perhaps using the equity to buy another home, or sell it and use the cash to move up.

Each choice has its own costs and benefits. With each choice, the goal is to increase equity so that you can sell and have a larger cash down payment on a home in your preferred location. Create a long-range plan. Then work towards that goal by increasing savings, building equity, and improving your income. And always, always work on reducing debt.

Is your rent low enough?

If you’re paying $1,000/mo in a $3,500/mo area, and you have a good landlord, maybe you’re better off investing in other things instead of buying a home. Or perhaps buying an investment home in a cheaper area. It is OK to not own the home you live in, if it makes financial and emotional sense not to. 

But be smart about it. Do the analysis. There are many factors involved in home ownership that may benefit you, such as rising values, interest rate deductions, and the potential to control an asset.

Using a Mortgage Calculator

Mortgage calculators should be used as guidelines only, as just another data point. Once you’re really serious about buying, the only truly accurate way to know what you can afford and what your payments will be is to go through a full pre-approval process with a mortgage professional. 

But until then, mortgage calculators can be a useful tool to help you see how adjustments in down payment, interest rate, and income can affect purchase power.  Just be dead sure that the estimate you get is includes Principle, Interest, Taxes, Insurance, and Extras charged on the loan, such as Private Mortgage Insurance. If you leave out any of these costs, you will be surprised when your mortgage professional shows you a figure lower than you thought.

 Calculators come in several varieties. Here are four calculator suggestions you can look up on Google. Use a calculator designed for your country.

1. House Price, Based on Payment

2. Payment, Based on House Price

3. Payment, Based on Income

4. Rent vs. Buy

Final word

As a first time buyer, you are swept up in the excitement of buying—the dream of owning. You look at homes online and imagine putting in your own garden, painting the baby’s room, and decorating the way you want. 

But you are smart. You know you’re making a financial decision, not simply an emotional one. You know the factors that go into deciding when to stop renting and buy a first home are complex.

There are no simple answers. But we’d like to leave you with this final word:

Don’t let fear of buying stop you from buying a home. There are plenty of professionals out there who can guide you through this decision and help you make a sound financial choice. If not me, then find a real estate consultant you trust to sit down with you and discuss the ideas presented in this report. Work with a mortgage professional to get accurate figures. 

We want you to know that I’m always available to you—or your friends and family—for a home buying consultation. And we want you to know that we’ll spend whatever time you need to answer your questions so you can make the right decision in your own time.

 Call to arrange a consultation appointment – Simply call 904-515-2479 OR email Team@HanleyHomeTeam.com Thank you! Kevin and Jennifer Hanley, REALTORS Keller Williams Realty Atlantic Partners Southside

The Mortgage Business Is Alive, Well, and Online

Tags

Jacksonville Real Estate, mortgage loan, Pre-approval, real estate

Photo by Ketut Subiyanto on Pexels.com

With some segments of the economy tentatively reopening, many who are buying a home or refinancing an existing mortgage may be wondering how and where to get financing. The good news is, the loan process hasn’t changed much, and it can all be done online.

While some loan officers still prefer to meet their clients in person, more and more mortgage professionals are equipped to meet virtually and communicate by phone and video conference. Loan officers know many borrowers can’t take off work during the day in order to meet, so they tend to work on-demand, around their client’s schedules.

The rest can be done remotely as well. Clients can submit loan applications online, which are then reviewed at the mortgage office. The loan is then submitted to an online automated underwriting system, or AUS. The AUS then provides a list of all the items needed for a final approval.

Loan officers get their rates online. They order third party services like credit reports and appraisals online. For years, the mortgage industry has been moving toward a remote-ready model, so for many professionals in the sector this isn’t a ‘new’ normal. Just normal.

For those currently in the market for a loan, there’s no need to wait. The mortgage industry is alive and well. And online.

Kevin and Jennifer Hanley, REALTORS Keller Williams Realty Atlantic Partners Southside 904-515-2479 http://www.HanleyHomeTeam.com

Has quarantine forced you to consider a split from your home?

Tags

home ownership, Home Sweet Home, real estate, selling your home

Has spending more time at home lately had you reconsidering your space? The quirks you lived with just a few months ago might not be so easy to dismiss when you’re stuck with them all day, every day. Here’s how to tell if your relationship with your house can recover or if it’s time to move on.

You have no appetite for a renovation
Your home might be a good candidate for a makeover, but if the thought of living in a dusty construction zone with contractors coming and going is unbearable to you, then it’s time to start over. There’s no shame in foregoing renovations for something move-in ready. After all, there will be plenty of eager DIYers happy to make you an offer.

You’re not crazy about your neighborhood
You know what they say: location, location, location. We’ll put up with a lot for our home to be in a nice spot, close to work and in a good school district. But maybe that spot doesn’t work for you anymore. Do schools still matter or are your kids older now? Are you working from home permanently and your commute is no longer a factor? When you’re no longer tied to a specific neighborhood, the possibilities are endless.

It’s just too small
If the quarantine has made your small space feel even more crowded, or you need to make space for a new home office (or two), it might be time to upgrade.

It’s too old
We all love a heritage home. The architecture! The charm! The 100-year-old… everything. You may have been ready for the sweat equity when you moved in, but when paired with everyday life, ‘this old house’ can feel more like ‘this new nightmare.’

If the emotional and financial toll of living in a home that is just too much of a project is getting to you, consider shopping for a new one. A new construction home might not give you the same character, but you will get a house that’s brand new in every way and a warranty to boot.

Kevin and Jennifer Hanley, REALTORS Keller Williams Realty Atlantic Partners Southside 904-515-2479 http://www.HanleyHomeTeam.com

National Homeownership Month Has New Meaning This Year By Kerry Smith

Tags

Buying a home, home ownership, real estate

Photo by Gustavo Fring on Pexels.com

During the June celebration, Americans honor the benefits of ownership – yet many already have a new respect for homeownership after months of self-isolation.

ORLANDO, Fla. – June is National Homeownership Month, a time to celebrate the benefits of homeownership for families, neighborhoods and communities.

This year, however, many Americans already understand the importance of home as the nation slowly emerges from two months of self-isolation. Before the pandemic, home for many people was a source of operations – the place where they slept before leaving for work, school and exercise.

Suddenly, home is the safest place in the world, and many Americans’ attitudes about ownership have changed. Some renters look around and realize that the place they call home could be bigger or better. They want to paint the walls, change the flooring and own something that continues to rise in value over time.

For many Americans, however, homeownership is at risk. Owners who lost jobs due to COVID-19 may find themselves on a forbearance plan, while some of those renters who dream of ownership have been shut out by tightened credit restrictions and stay-at-home orders.

Still, Americans generally agree that homeownership is one of the best vehicles for building wealth. In 2019, overall home prices rose 4% year-to-year. And while the coronavirus has created issues for the American economy, home prices have continued to rise with demand still outstripping supply.

National Homeownership Month has changed over time. It started as a week-long celebration in the 1920s by local real estate associations and eventually became a month-long celebration created by the U.S. Department of Housing and Urban Development.

Americans can celebrate Homeownership Month by using #CreatingHome in their social media channels. But the best way to celebrate is to actually become a homeowner.

© 2020 Florida Realtors®

Kevin and Jennifer Hanley, REALTORS Keller Williams Realty Atlantic Partners Southside 904-515-2479 http://www.HanleyHomeTeam.com