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 Is a Home Equity Loan an Option?

Here's the scenario: you have a project and need to borrow some money, but you want to do it in the most economical manner.  You've got a low rate on your existing first mortgage and don't want to do a cash-out refinance and pay a higher rate.  Is a home equity loan an option?

Prior to 2018, homeowners could have up to $100,000 of home equity debt and deduct the interest on their personal tax return.  The Tax Cuts and Jobs Act of 2017 eliminated the home equity deduction unless the money is used for capital improvements.

Regardless of the deductibility, lenders will still loan money to owners who have equity in their home and good credit.  The most common reasons people borrow against their home equity are:

  • Consolidate debt with higher interest rates
  • Make improvements on their home
  • Refinance an existing home equity line of credit
  • Down payment for another home or rental investment
  • Creating reserves or available access for potential needs

One available loan is a fixed-rate home equity loan, commonly referred to as a second mortgage.  It is usually funded at one time, with amortized payments for terms that could range from five to fifteen years.

Another option is a home equity line of credit or HELOC, where a homeowner is approved for up to a certain amount at a floating-rate over a ten-year period.  The borrower can draw against the amount as needed and would pay interest every month and eventually, pay down the principal.

The amount of money that can be borrowed is determined by the equity.  Lenders generally will not exceed 80% of the value of the home.  If a home was worth $400,000, the 80% ceiling would be $320,000.  If the homeowner had an unpaid balance on their first loan of $240,000, an amount up to $80,000 would be possible.

The next variable is the borrowers' credit score which will determine the rate of interest that will be charged.  The higher the score, the lower the rate the borrower will pay.  And the converse is true, the lower the score, the higher the rate.

Another common variable considered is the borrowers' total debt to income ratio.  Ideally, the combination of regular monthly debt payments should not exceed 43% of their monthly gross income.

If you have good credit and an adequate amount of equity, your home could be the source of the funds you need.  There is a lot of competition among lenders and shopping around can make a difference.

Call us at (970) 573-5791 for a recommendation of a trusted mortgage professional.  If you have questions about whether the interest on the loan will be deductible, talk to your tax professional.

 

Eliminate FHA Mortgage Insurance

Mortgage insurance premium can add almost $200 to the payment on a $265,000 FHA mortgage.  The decision to get an FHA loan may have been the lower down payment requirement or the lower credit score levels, but now that you have the loan, is it possible to eliminate it?

Mortgage Insurance Premium protects lenders in case of a borrower's default and is required on FHA loans.  The Up-Front MIP is currently 1.75% of the base loan amount and paid at the time of closing.  Annual MIP for loans with greater than 95% loan-to-value is .85% per year. 

For loans with FHA case numbers assigned before June 3, 2013, when the loan is paid down to 78% of the original loan amount, the MIP can be canceled.  The borrower may need to contact the current servicer.

However, for loans greater than 90% with FHA case numbers assigned on or after that date, the MIP is required for the term of the loan.

Most homeowners with FHA mortgages are not eligible to cancel the MIP because they either originated their loan after June 3, 2013, put less than 10% down payment and/or got a 30-year loan.  If they have at least 20% equity in the home, they can refinance the home with an 80% conventional loan which in most cases, does not require mortgage insurance.

With normal amortization on a 30-year loan, it takes approximately 11-years to reduce the original loan to the 78-80% requirement based on normal amortization.  There is another dynamic involved which is the appreciation of the home.  As the home goes up in value and the unpaid balance goes down the equity increases.

If the homeowners believe that they have enough equity that would eliminate the need for mortgage insurance, they can investigate refinancing with a conventional loan.  Borrowers refinancing will incur expenses in starting a new mortgage and the interest rate may be higher than the existing rate.  Analysis will determine how long it will take to recapture the cost of refinancing.

Call me as (970) 388-3692 for a recommendation of a trusted mortgage professional.

Year-End Tax Newsletter

One of the first steps in a good outcome is knowing a little bit about what you're about to undertake.  By being aware of some of the areas regarding homes that may not come up every year in a tax return, you'll be able to point them out to your tax professional or seek more information from IRS.gov.

Look through this list of items for things that could affect your tax return.  Even if you have relied on the same tax professional for years to look out for your best interests, they need to be aware that there could be something different in this year's return.

If you bought a home for a principal residence last year, check your closing statement and identify any points or pre-paid interest that you or the seller paid based on the mortgage you received.  These can be deducted on your Schedule A as qualified home interest if you itemize your deductions.  See Home Mortgage Interest Deduction | IRS Publication 936 (2018 version not released as of this newsletter).

Keep track of all the money you spend on your home that might be considered a capital improvement.  Get in the habit of putting receipts for money spent on your home that is not the house payment or utility bills.  Repairs are not tax deductible but improvements, even small ones, can be added to the basis of your home which can lower the gain when the home is sold.  Years from now, your tax preparer can sift through them and determine whether they're capital improvements or maintenance. See Increases to Basis | IRS Publication 523 Selling Your Home (2018 version not released as of this newsletter).

By making additional principal contributions with your mortgage payment, you'll save interest, build equity and shorten the term of a fixed-rate mortgage.  See Equity Accelerator.

If you sold a home last year, the payoff on your old mortgage included interest from the last payment you made to the date of the payoff.  That interest is tax deductible.  You may need a breakdown of the payoff to the mortgage company; you should be able to get that from your closing officer.

If you refinanced your home, unlike a home purchase, points paid to refinance are not deductible as interest in the year paid; they must spread ratably over the life of the mortgage.  See Home Mortgage Interest Deduction | IRS Publication 936 (2018 version not released as of this newsletter).

For homeowners who have lost a spouse, there is an exception regarding the exclusion on the sale of a principal residence.  If the surviving spouse concludes a sale of the home within two years of the death of their spouse, they may exclude up to $500,000, instead of $250,000 for single taxpayers, of gain, provided ownership and use tests are met prior to death.

The two-year period begins on the date of death and ends two years after that date.  See Sale of Main Home by Surviving Spouse | IRS Publication 523 Selling Your Home (2018 version not released as of this newsletter).

There could be significant tax consequences to a person selling a home that was received as a gift as compared to receiving the home through inheritance.  With a gift, the basis of the donor becomes the basis of the donee.  With inheritance, the heir usually gets a stepped-up basis and avoids potential unrecognized gain.  See Home Received as Inheritance | IRS Publication 523 Selling Your Home (2018 version not released as of this newsletter).

Click here to download a Homeowners Tax Guide.  This is meant for information purposes only and advice from a qualified tax professional should be sought to find out about your individual situation.

 

Your Real Estate Resource

Being a better homeowner is a full-time job.  It's not just about making better decisions when you buy and sell; it's making better decisions throughout the time you own the home.

It takes good information to make good decisions.  Think of times when you need advice on financing, taxes, insurance, maintenance, finding reasonable and reliable contractors and lots of other things.  Imagine how nice it would be to have a real estate information line you could call whenever you have a question.

During the purchase or sale, the obvious place to get real estate answers is your agent but where do you go the rest of the time? Since homeowners are now staying in their homes for ten to twelve years or more, they need a reliable resource for good information and advice.

Our objective is to move from a single purchase or sale to customers for life; a select group of our friends and past customers who consider us their lifelong real estate professional.   We believe that if we help you and your friends with all their real estate needs not just when they buy or sell but for all the years in between, we can earn the privilege to be your real estate professional.

Throughout the year, we'll send reminders and suggestions by email and social media that enhance your homeowner experience.  When we find good articles to help you be a better homeowner, we'll pass them along.  You'll discover new ways to maintain your property, minimize expenses and manage debt and risk.

We want to be your "Go-To" person for everything to do with real estate.  If you have a question, please call us at (970) 388-3692.  If we don't have the answer, we'll find it for you or at least, point you in the right direction.

We're here for you and your friends...now and in the future.  Please let us know how we can help you.

 

 

More Comfortable, Convenient and Secure

Smart home technology promises to make your home more comfortable, convenient and secure.  It may not be the home from the Jetson's but artificial intelligence is the hope to make it the home of the future which is available now and controlled from anywhere you have an Internet connection.

When Alexa appeared at Christmas-time two years ago, most people thought it was a novelty to ask what the weather will be or to play a song.  Few people understood the vision of Amazon would be verbally purchasing everything imaginable and that your calendar, contacts, lights, and appliances would all be connected.

There are plenty of players in the market including Amazon Alexa, Google Assistant, Samsung Smart Things, Apple, and others.  It starts with a hub that acts as a brain for your system to connect the different home automation devices.  You'll establish an online account with the hub manufacturer so that you can adjust settings and controls.

You could start simple with switch and plug receptacles that would allow you to control lights either vocally through your hub or from your Smartphone or tablet anywhere in the world where you have an Internet connection.

Programmable thermostats can lower your monthly utility costs while conveniently regulating your comfort by adjusting temperatures on your heating and cooling systems.  These can be particularly effective in homes with zoned systems where you might live in one area during the day but sleep in a different zone.

Doorbells might be one of the next additions to your automation.  Not only can you communicate with the person at your door, but you also don't have to go to the door to do it.  The device cameras are motion activated so you'll see who is there regardless of whether they rang the doorbell or not.

Door locks can be convenient because instead of giving someone a key, you can issue a temporary code to let them enter.  You can give them permanent access and rescind it any time you want without having to change the locks.  You'll know when they enter and leave your home.

Other security options can include door and window sensors, motion detectors and cameras for outside or inside the home.  The homeowner will be able to monitor from inside or anywhere else they have an Internet connection.

Smoke and carbon monoxide detectors, as well as water sensors to determine leaking water around water heaters or in basements, give homeowners peace of mind.

Most of these devices are available in wireless models so you won't have to string wire throughout the home.  The Wi-Fi can introduce a potential problem of hackers who could illegally access your system.  This is true with any home that has a Wi-Fi router and precautions should be taken.

The big box stores like LowesHome Depot, and Amazon offer a wide variety of brands and modules.  Many people prefer it as a do-it-yourself project and others would rather have a professional do it for them.  YouTube has a lot of videos that can probably show you exactly how to install the ones you select.

 

 

Another Type of Financing Concession

Price, condition, and terms are factors that any owner must consider when marketing their home.  Price is usually the easiest to adjust to compensate for shortcomings in location or condition of the home.  Improving the condition of the property is more time consuming but updates to kitchens, baths, and other things can appeal to a buyer.

One of the most overlooked marketing factors are terms which are also referred to as financing concessions.

Paying part or all a buyer's closing costs is the most common financing concession.  By doing so, the buyer doesn't need as much cash to get into the home which can be attractive to more buyers.

There is another financing concession that is not used very often in today's market but it is still allowed and can increase the marketability of a home. A temporary buy-down of the interest rate makes a lower payment for an initial period.

It is still a fixed-rate mortgage that the buyer must qualify for at the note rate and there is no negative amortization.  The seller pre-pays the interest in advance at closing so the buyer has lower payments in the initial period.

Instead of lowering the price of the home, let's say the seller has decided to offer $6,875 worth of financing concessions that the buyer can apply any way they want.  One way might be to get a 2/1 buy-down which means that the first year, the payment would be based on 2% less than the note rate of the mortgage and the second year, it would be 1% less than the note rate.  The third through thirtieth years, the payment would be the actual note rate.

On a $275,000 home with a 3.5% down payment at 5% for 30 years, the first year's mortgage payment would be figured at 3% which would be $305.76 less than normal.  The second year's payment would be figured at 4% and would be $157.65 less than normal.  The third through thirtieth years, the payment would be the normal payment of $1,424.59.

Financing Concessions.png

It would save the buyer $5,560.90 in interest in the first two years and there would still be $1,314 of the financing concession to apply toward the buyer's closing costs.

The financing concessions paid by the seller give the buyer lower payments for the first two years and less money needed for the closing cost.  An added bonus for the buyer is that the buyer can deduct the pre-paid interest the seller paid as qualified mortgage interest.

Some lenders may tell you that temporary buydowns cannot be done.  They've been around for over thirty years and can still be done today on FHA, VA, and conventional loans.  Call (970) 388-3692 if you need a recommendation of a trusted mortgage professional or check out a 2/1 Buydown with your own numbers.

 

 

44 Times More Than a Renter

The Federal Reserve Board's Triennial Survey of Consumer Finances recently revealed the net worth of a homeowner was $231,400 compared to $5,200 for a renter.  The net worth of homeowners increased 15% from 2013 to 2016 while renters' decreased by 5%.

Appreciation and principal reduction are the two dynamics that affect a homeowner's equity.  Each payment is applied to the interest for the previous month and the principal reduction to retire the mortgage.

A $300,000 home purchased with a $294,566 FHA mortgage at 5% for 30 years has an average monthly principal reduction $362 in the first year. Two percent appreciation would benefit the buyer by $500 a month.  In this example, the equity grows by $860 a month for the homeowner.  A tenant would have to invest $660 a month over and above the rent, they're paying.

Based on the assumptions listed above, the $10,500 down payment would become approximately $85,000 of equity in seven years. Leverage and forced savings contribute to the difference in addition to the appreciation and principal reduction.

The rent paid by tenants help the landlord recoup their investment in the home and a return on their investment.  Some people say, regardless if a person rents or buys, they pay for the house they occupy.  The choice is whether to buy it for themselves or their landlord.

Check out some of the benefits using your own numbers with this fill-in-the-blank Rent vs. Own.

 

 

Gift of Equity

There is a little-known mortgage program that could provide the vehicle for the right person to get into a home.  If a person sells their home to another for less than the fair market value, the difference in the appraised value and the sales price is considered a gift of equity for the buyer.

FHA requires that borrowers receive gifts of equity only from family members transferring title to the borrower. 

An appraisal is required to determine the value of the home.  The sales price is subtracted from the appraised value to determine the equity to be gifted.  If a home appraises for $300,000 when the owner will sell it for $250,000, the gift is $50,000.

The gift is applied to the down payment.  In this example, the borrower would have to qualify for a $250,000 mortgage which would require private mortgage insurance because a 20% down payment on a $300,000 home would be $60,000.  If the buyer had an additional $10,000 in cash to put down, the PMI would not be required, and the monthly payments would be lower.

The seller would need to provide a gift letter stating the amount of the gift, the date the gift, and that no repayment is expected or required.  It also needs to have the donor's name, address, phone, email and relationship to the buyer.  In addition, the settlement statement will need to show the gift being credited from the seller to the buyer.  The lender may require additional documentation.

Beginning in 2018, the annual gift tax exemption is increased to $15,000 per person per year and lifetime exemption to $5.6 million.  The fact that the $50,000 exceeds the individual amount doesn't mean there will necessarily be any gift tax due now.  The seller should consult their tax professional.

 

 

Do You Know the Way?

It may be natural for first-time buyers to be unsure of the process of buying a home because they haven't been through it before but even repeat buyers need to know changes that have taken place since the financial housing crisis.

The steps in the home buying process are predictable and generally, follow the same pattern.  It certainly makes the move stay on schedule when you know all the different things that must be done to get to the closing.

  • In the initial interview with your real estate professional, you share the things you want and need in a home, discuss available financing and learn how your agent can represent you in the transaction.
  • The pre-approval step is essential for anyone using a mortgage to purchase a home to assure that they're looking at the right price of homes and so they'll know what they can qualify for and what the interest will be.
  • Even with lower than normal inventory, it is difficult to stay up-to-date with the homes currently for sale and the new one just coming on the market.  Technology has simplified this process, but the buyer needs to implement them.
  • Showings can be accommodated online through virtual tours, drive-bys and finally, a personal tour through the home.  Your real estate professional can work with you to see all the homes in the market through REALTORS? builders or for sale by owners.
  • When a home has been identified, an offer is written and negotiation over price, condition, and terms takes place.
  • A contract is a fully negotiated, written agreement.
  • Escrow is opened to deposit the earnest money from the buyer as a sign they're acting in good faith.  The title search is also started so that clear title can be conveyed from the seller to the buyer and that the lender will have a valid lien on the property.
  • 88% of home sales involve a mortgage.  The lender will require an appraisal to be sure that the home can serve as partial collateral for the loan.  If the buyer has been pre-approved, the verifications will be updated to be certain that they're still valid.  The entire loan package when completed is sent to underwriting for final approval.
  • When the contract is completed, at the same time the title search and mortgage approval is being worked on, the buyer will arrange for any inspections that were called for in the contract.
  • After all, contingencies have been completed, the transaction goes to a settlement where all of the necessary papers are signed, and the balance of the buyer's money is paid.  This is where title transfers from the seller to the buyer.
  • Possession occurs according to the sales contract.

One of the responsibilities of your real estate professional is to make sure that things are done in a timely manner so that the transaction will close according to the agreement on time and without unforeseen or unnecessary problems.

Even if you're not ready to buy or start looking yet, you need to be assembling your team of professionals.  Let us know and we'll send you our recommendations, so you can read about them on their websites.

If you have any questions, call us at (970) 388-3692; we're happy to help.  Informed buyers lead to satisfied homeowners and that is better for everyone involved.

 

 

Roll the Repairs into the Mortgage

It's been said that if you can find a home that has most of what you want, you should go ahead and purchase it.  Many first-time buyers are using everything they have for a down payment and closing costs and would have to "live" with the less than perfect home until they can save the money to make the changes.

 

The FHA 203(k) mortgage allows a borrower to purchase a home and provides additional funds for improvements to be made.  These types of renovations can include kitchen and bathroom remodels, flooring, plumbing, heating, and air conditioning systems, additions and other things.

 

The benefit to the buyer is that they have the opportunity to consider a home that needs repairs and might have been unacceptable without a program like this.  Being an FHA loan, a minimal down payment is required, fair interest rates and generous qualifying requirements.

 

The 203(k) Streamline can be used for cosmetic improvements, appliances and minor remodeling up to $35,000 in cost.

 

As you can imagine, this is a specialized program and not all lenders choose to make 203(k) loans.  They usually take longer to process and getting firm bids on the work to be done will be required.  It is important to find out how much experience a lender has with this particular type of loan.    

 

It will also be required that you work with a 203(k) consultant in addition to the mortgage officer.

 

For more information, go to Hud.gov.  FNMA has a similar conventional loan program called HomeStyle Mortgage.  Your real estate professional will be able to help with recommendations.  Call me at (970) 388-3692.

 

 

Fast Track Rental Property

 

FHA allows owner-occupants to purchase up to a four-unit property with a minimum 3.5% down payment.  The rent collected on three units could be used to make the payment and the owners' pro-rata share would be less than ¼ of the payment itself.

 

The owner-occupied unit would be considered their principal residence.  The other three units are treated as rental property and eligible for cost recovery, a non-cash deduction plus all the normal business expenses.  The rental income of the three remaining units is calculated as income and assists the buyer in qualifying.

 

A homeowner could buy a four-unit, live in one for two years, buy another four-unit with a minimum down payment, move into one unit, rent the other three as well as the previous unit in the first property.  Then, after another two years, repeat the same process over again.

 

The fifth year, the homeowner/investor would have a total of 11 rental units plus the one that they are occupying.  An acquisition strategy like this might be difficult for a family with children and a single person or couple might find it easier to move more frequently.

 

As the equity increases in these properties, due to appreciation and amortization, the money could be pulled out through refinancing to purchase additional income properties.  Another objective might be to pay the mortgage off as soon as possible and any cash flow after tax could be applied directly to the principal.

 

FHA has a nationwide mortgage limit for a four-unit of $521,250 but some high-cost areas have been designated with increased limits.  There are also loan programs for two and three-unit properties with limits of $347,000 and $419,425 with similar exceptions for high-cost areas.

 

The low mortgage rate and minimal down payments for owner-occupied FHA mortgages make this strategy attractive because it gives investors an opportunity to highly leverage their investment.  Most non-owner-occupied (investor) mortgages would require 20-25% down payment and have a slightly higher interest rate than for an owner-occupant.

 

To learn more about this opportunity, call (970) 388-3692 and we can give you information on specifics in a variety of areas.

 

Mortgage Free

It may be an all too common belief that a person will have a house payment and a car payment for the rest of their lives.  However, with a plan and some determination, you can be mortgage free.

Planning for retirement is obviously important and many times, an activity plagued by procrastination.  Some homeowners' goal is to have their home paid for by retirement, so they won't have payments.  It makes sense to eliminate a sizable recurring expense before they quit working.

By making regular principal contributions in addition to the payments, the debt can be eliminated by the target retirement date.

Assume a homeowner refinanced their $300,000 mortgage at 4% last year for 30 years with the first payment due on May 1, 2017.  With normal amortization, the home will be paid for at the end of the term. 

Additional principal contributions with each payment will save interest, build equity and of course, accelerate the payoff on the home.  An extra $250.00 a month would pay off the mortgage 7.5 years sooner. $786.81 extra with each payment would pay off the loan in 15 years.

Having a home paid for at retirement has the apparent benefit of no house payment.  A debt-free home is also a substantial asset that could be borrowed against or sold if unanticipated events should occur. 

To make some projections to pay off your own mortgage, use this use the Equity Accelerator calculator.

 

How to Clean Gutters

The gutters and downspouts on your home are intended to channel rainwater away from your home and its foundation.  When they're blocked and not functioning properly they can lead to the gutters coming loose, wood rot and mildew, staining of painted surfaces, and even worse, foundation issues or water penetration into the interior of the home.

Most experts recommend cleaning the gutters at least once a year.  More often might be necessary depending on the proximity of leaves and other debris that could collect.

If this is a task that you feel comfortable about tackling yourself, there are few things to consider.  If the debris is dry, it will be easier to clean the gutters.  Safety is important, and precautions should be taken such as using a sturdy ladder and possibly, having someone hold it while you're on the ladder.

Other useful tools will be a five-gallon plastic bucket to hook on the ladder to hold the debris; work gloves to protect your hands from sharp edges of the gutters; a trowel or scoop and a garden hose with a nozzle.

?         Start by placing the ladder near a downspout for the section of gutter to be cleaned.

?         Remove large debris and put it into the empty bucket. Work away from the downspout toward the other end.

?         When you're at the end of the gutter, using the water hose and nozzle, spray out the gutter so it will drain to the downspout.

?         If the water doesn't drain easily, the downspout could be blocked.  Accessing the spout from the bottom with either the hose with nozzle or a plumber's snake, try to dislodge the blockage.

?         Reattach or tighten any pieces that were removed or loosened while working on the downspout.

?         Flush the gutters a final time, working from the opposite end, as before, toward the downspout.

There are specialized tools at the home improvement stores like Lowes and Home Depot that can make this job easier.  Check out their websites and search for "gutter cleaning"

 

Consumer Protection from Irresponsible Mortgage Practices

Congress enacted the Dodd-Frank Act in 2010 in response to the mortgage crisis that led to America's Great Recession.  The two parts that apply closely to homebuyers are the Ability-to-Repay (ATR) and Qualified Mortgages (QM).

A Qualified Mortgage is a category of loans that have certain, more stable features that help make it more likely that borrowers will be able to afford their loan.  These loans do not allow certain risky features like an interest-only period when no money is applied to reduce the principal; negative amortization that would allow the mortgage balance to increase; and, "balloon payments" at the end of the loan that is larger than the normal periodic payments.

A debt-to-income ratio of less than or equal to 43% has been established to provide a limit on how much of a borrower's income can go toward total debt including the mortgage and all other monthly debt payments.  However, the Consumer Finance Protection Bureau believes these loans should be evaluated on a case-by-case basis and in some cases, can exceed 43%.

There is a limit for up-front points and fees the lender can charge.

By showing that the lender made an effort to be certain that the borrower has the ability to repay the loan, the lender, in turn, receives certain legal protections.  Underwriting factors considered by the lender include:

  1. current or reasonably expected income or assets 
  2. current employment status
  3. the monthly payment on the covered transaction 
  4. the monthly payment on any simultaneous loan 
  5. the monthly payment for mortgage-related obligations
  6. current debt obligations, alimony, and child support
  7. the monthly debt-to-income ratio or residual income
  8. credit history

For more information, see the Consumer Financial Protection Bureau fact sheet ... protecting consumers from irresponsible mortgage lending.

 

Quick Plumbing Inspection

 

No one wants to waste water or money.  For that reason, take a few minutes every other month to do the following inspections:

  1. Check to see if cutoff valves on sinks and toilets are working properly. 

    Many times, builders will put individual cutoffs on supply lines to sinks and toilets.  It is reasonable to expect them to work but after some time, they can corrode which prevents opening and closing.  It is a good idea to test them occasionally before you need them in an emergency.
  2.  Fill each sink with a few inches of water to see if they drain in what you feel is a normal time.

    A slow-draining sink can be an indication of a clog that builds up around the insides of the pipe.  Common causes are food, grease, hair and soap scum.  Plunging can take care of some slow-running sinks.  After partially filling the sink with water, seal the plunger over the drain and pump it up and down a few times.
  3.   Inspect each toilet to see if they are leaking water from the tank into the bowl.

    Toilets that continue to run after being flushed can use a large amount of water in a month's time.  Generally, the problem comes from a flapper that doesn't seat properly.  Sometimes, the chain is keeping it from closing properly or the flapper itself may need to be replaced.

    Another issue could be that the flush valve needs to be replaced.  These can be purchased at Lowe's or Home Depot for about $20.00 and are relatively easy to change out.  There are lots of instructional videos on the internet and it can save money if you give it a try.

If you need a recommendation for a good plumber to take care of something you discover, please feel free to call me at 303-573-5791

 

Act Decisively

Whether it is hesitation or procrastination due to uncertainty, it can cost buyers by having to pay more for both the house and the financing.  This is one of those markets where most of the experts expect interest rates and prices will continue to rise through 2019.

The National Association of REALTORS? reports there is currently a 4.2-month supply of homes for sale which is close to the same as last year's inventory.  Normal inventory is considered to be a 6-month supply.

If during the period you're waiting to buy, the price of the home goes up by 5% and the mortgage rate increases by 1%, the payment on a $275,000 home with a 95% mortgage could be $233.80 more each and every month.  Over a seven-year period, the delay to purchase would total close to $20,000.

To act decisively, you need good information; a confused mind will not generally make a decision.  In today's market, you need to know exactly what price home you can qualify for and you need to know what kind of home you can expect for that price. 

You'll want a housing and a mortgage professional you can trust to give you the information you need to make good decisions for yourself and your family.  We'd like to be your real estate professional and can recommend a trusted mortgage professional.

To get a better idea about what it may cost you for a home in your price range, use the Cost of Waiting to Buy calculator.  If you have any questions, call me at (970) 388-3692.

 

Reduce Refinancing Costs

There is much more than a lower rate and payment to determine whether to refinance a mortgage.  Lenders try to make refinancing as attractive as possible by rolling the closing costs into the new mortgage so there isn't any out of pocket cash required.

The closing costs associated with a new loan could add several thousand dollars to your mortgage balance.  The following suggestions may help you to reduce the expense to refinance.

1.         Tell the lender up-front that you want to have the loan quoted with minimal closing costs.

2.        Check with your existing lender to see if the rate and closing costs might be cheaper. 

3.        Shop around with other lenders and compare rate and closing costs.

4.        If you're refinancing an FHA or VA loan, consider the streamline refinance.

5.        Credit unions may have lower closing costs because they are generally loaning deposits and their cost of funds is less.

6.         Reducing the loan-to-value so mortgage insurance is not required will reduce expenses and lower the payment.

7.        Ask if the lender can use an AVM, automated valuation model, instead of an appraisal.

8.        You may not need a new survey if no changes have been made.

9.        There may be a discount on the mortgagee's title policy available on a refinance.

10.        Points on refinancing, unlike a purchase, are ratably deductible over the life of the loan ($3,000 in points on a 30-year loan would result in a $100 tax deduction each year.)

11.        Consider a 15-year loan.  If you can afford the higher payments, you can expect a lower interest rate than a 30-year loan and obviously, it will build equity faster and pay off in half the time.

A lender must provide you a list of the fees involved with making the loan within 3 days of making a loan application in the form of a Loan Estimate and a Closing Disclosure Form. Every dollar counts, and they belong to you. 

 

Moisture and Mold.

 

Moisture is mold's best friend and it thrives between 40 and 100 degrees Fahrenheit which is why it is commonly found in homes.  Mold spores float in the air and can grow on virtually any substance with moisture including tile, wood, drywall, paper, carpet, and food.

Moisture control and eliminating water problems are key to preventing mold. Common sources of moisture can be roof leaks, indoor plumbing leaks, outdoor drainage problems, damp basements or crawl spaces, steam from bathrooms or kitchen, condensation on cool surfaces, humidifiers, wet clothes drying inside, or improper ventilation of heating and cooking appliances.

  • Control the moisture problem
  • Scrub mold off hard surfaces using soap and water or other cleanser; dry completely
  • Do not paint or caulk moldy surfaces
  • Discard porous materials with extensive mold growth
  • Avoid exposing yourself or others to mold
  • Periodically, inspect the area for signs of moisture and new mold growth

The EPA suggests that if the moldy area is less than ten square feet, you can probably handle the cleanup yourself.  If the affected area is larger than that, find a contractor or professional service provider. 

Increasing ventilation in a bathroom by running a fan for at least 30 minutes or opening a window can help remove moisture and control mold growth.  After showering, squeegee the walls and doors. Wipe wet areas with dry towels.  Cleaning more frequently will also prevent mold from recurring or keep it to a minimum.

A simple solution to clean most mold is a 1:8 bleach/water mixture.  Since homes have thermostatically controlled temperatures and water is used all day long in the kitchen and bathrooms, the environment is conducive to mold. 

 

 

It's understandable; you’re excited; you've found the right home, negotiated a contract, made a loan application and inspections.  Closing is not that far away, and you are making plans to move and put personal touches on your new home.

 Even if you have an initial approval on your mortgage, little things can derail the process which isn't over until the papers are signed at settlement and funds distributed to the seller.  The verifications are usually done again just prior to the closing to determine if there have been any material changes to the borrower's credit or income that might disqualify them.

 Most lending and real estate professionals recommend NOT to:

  • Make any new major purchases that could affect your debt-to-income ratio
  • Buy things for your new home until after you close
  • Apply, co-sign or add any new credit
  • Close or consolidate credit card accounts without advice from your lender
  • Quit your job or change jobs
  • Change banks
  • Talk to the seller without your agent

 The lender and I are working together to get you into your new home.  It's understandable to be excited and feel you need to be getting ready for the move.

Planning is fine but doesn't do anything that would affect your credit or income while you're waiting to sign the final papers at settlement.

 

Rising Rates Affect the Cost Too 

Mortgage rates have risen 0.5% in 2018 on 30-year and 15-year fixed rate mortgages and experts expect them to continue to increase. Buyers paying attention to the market understand the relationship that inventory has on pricing; when the supply is low, the price usually goes up. Rising interest rates can affect the cost of homes also.

When interest rates go up, fewer people can afford homes. Lower numbers of buyers can affect the demand, which could cause prices of homes to come down. The question is how much do the interest rates have to go up to affect demand?

As the rates gradually go up, the effect may not be noticeable at all except for the fact that the payments for the buyer have increased.

A ½% change in interest is approximately equal to a 5% change in price. A $300,000 mortgage at 4.5% for a 30-year term will have a $1,520.06 principal and interest payment. If the mortgage rate goes up 0.5%, it would affect the payment the same as if the price had gone up 5%. The difference in payments for the full term of the loan would be $32,547.

There are some things beyond buyers’ control, but indecision isn’t one of them. If they haven’t found the “right” home yet, it is understandable. However, when that home does present itself, the buyer needs to be ready to make a decision. If they are preapproved and have done their due diligence in the market, they should be able to contract before significant changes occur in the mortgage rates.

 

 

Replace It Anyway

If it's not broken, why would a homeowner consider replacing something as expensive as a toilet when there may be other things in the home to replace that provide more aesthetic appeal. Don't be too quick to ignore the functionality and the reliability of this basic convenience.

 

The first rationalization might take place at the economic level. A water-saving model could easily pay for itself in a few years and then, there is the good feeling of participating in the conservation of our natural resources.

Having to plunge a toilet more than once a week could motivate a homeowner to spend money on a replacement especially if having made repairs to the flapper and fill valve didn't solve the issue.

Maybe your existing toilet has ugly scratches that make it difficult to clean. Maybe there are cracks in the tank or bowl that you're concerned will develop into a leak at the worst possible time.

The average cost to replace a toilet is around $400 with models ranging more and less based on the features and brands. Round toilet bowls tend to take up less room, are less expensive and better suited for children. Elongated bowls generally take more room, have more powerful flushing action, more comfortable, more stylish and cost more.

Replacing the shut-off valve for the toilet could be a good thing to do while you're replacing the toilet. Generally, it is as old as the toilet and having a reliable valve that works could be very convenient in future repair or emergency.

There are a variety of videos on YouTube that could give you the confidence to do it yourself or simply, to have a better understanding of the scope of the project

                                                                                                    toilet.jpg

 
Along with all the planning of what you're going to do and where you're going to stay, consider this checklist to make you feel more comfortable while you're away from home.
  • Ask a trusted friend to pick up your mail, newspaper and keep yard picked up to avoid an appearance of not being at home.
  • Stop your mail (USPS Hold Mail Service) and your newspaper.29938746-250.jpg
  • Don't post about your trip on Facebook and other social media until you return; some burglars look for this type of announcement to schedule their activities.
  • Do notify police or neighborhood watch - especially if you're going to be gone for more than just a few days. Let your monitoring service know when you'll be gone and if someone will be checking on your home for you.
  • Light timers make it look like someone is home. Set multiple timers for various times to better simulate someone at home. There are plug-in modules for lights and appliances that would allow you to control them from your phone while you're out of town.
  • Do unplug certain appliances - TV, computers, toaster ovens that use electricity even when they're off and to protect them from power surges.
  • Don't hide a key; burglars know exactly where to look for your key and it only takes them a moment to check under the mat, above the door, in the flower pot or in a fake rock.

These easy-to-handle suggestions may protect your belongings while you're gone while adding a level of serenity to your trip.