January 28th, 2008 categories: Finances, Home Buying, Investments, Mortgages
No one knows what the future holds for you, your family, your job or your finances. But Bankrate.com can help you understand what you’re going to encounter when you embark on the sometimes-difficult journey toward the American Dream of owning a home.
When you get that urge to buy a house, the first thing to do is step back and ask whether it makes more sense to keep renting for a while. If you still want to buy, you need to figure out how much house you can afford. Here’s what they have to say…
Economic differences between renting and owning
If you’re looking for the best return on your money, historically you’re better off investing in the stock market than buying a house. Primary homes generally don’t earn the investment return of financial instruments such as mutual funds. While the stock market’s long-term average rate of return is in the range of 8 percent to 10 percent, housing historically has appreciated on average in the low- to mid-single digits. Don’t buy solely for investment gain.
On the other hand, Uncle Sam helps out by letting taxpayers deduct part of the mortgage interest and real estate taxes each year. Borrowers get the benefit only if they pay enough in one year to exceed the standard deduction. But that usually happens, especially during the first few years of a mortgage when most of each payment goes toward interest rather than principal.
Sunny side of homeownership
Owners enjoy other benefits, too. They build equity over time as home values rise and their mortgage balances shrink. They also don’t have to worry about their housing costs shooting through the roof because lenders can’t boost borrowers’ rates and payments, unless those borrowers have adjustable-rate mortgages.
Cloudy side of homeownership
When something breaks at an apartment, it’s the landlord’s problem. When it’s your name on the deed, the problem is yours. If you throw every penny into a down payment, you’re taking a big risk because you may not have enough money left to fix leaky pipes or buy a new air conditioner.
Potential buyers might want to hold off for other reasons. If there’s a good chance that you will be laid off soon, you might want to wait. The same goes for people who plan to leave a job soon. The monthly payment isn’t the only obstacle for this kind of customer. Closing costs and other home-buying fees, as well as the commission that most owners end up paying to real estate agents when they sell their homes, add up. People who have to sell after living in one place for only a short time can end up in the hole on their investments.
Explore all the options
Some middle-ground approaches to homeownership blend elements of buying and renting. Some of the more popular loan types are seller financing, “lease with an option to buy” and “contract for a deed” plans
Seller financing
With seller financing, the seller actually assists the buyer in purchasing the home, by “lending” the buyer either a portion of the amount to be financed or the entire amount.
Let’s say the buyer and seller agree on a price of $150,000 for the house. In many cases a lending institution would require a 20-percent down payment — $30,000 — and give the buyer a mortgage for $120,000. But if the buyer has only $15,000 cash, the seller could “take back” a second mortgage for the $15,000 the buyer is short. The buyer makes payments on the first loan to the bank and the second loan to the seller.
Another example of seller financing: If the sale price of the home is $150,000 and the buyer has only $15,000 for a down payment, the buyer gives the $15,000 down payment directly to the seller who agrees to carry the entire mortgage amount of $135,000. The buyer would make all payments directly to the seller.
Pro: Seller financing reduces the cash needed to get into a home and could dramatically reduce closing costs. Often the seller will be more flexible in accepting an underqualified buyer.
Con: The seller determines the interest rate for that portion of the mortgage being carried, and it usually comes with a higher rate and a shorter term. Perhaps most importantly, it very often comes with a balloon payment. This means that monthly payments would be computed as though the mortgage was to continue for, say, 30 years, but at the end of five or 10 years the entire remaining balance has to be paid in one lump sum. That normally requires refinancing at that point, when rates could either be lower, higher or about the same, or selling the house to meet that balloon payment. Story
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January 25th, 2008 categories: Finances, Home Buying, Investments, Mortgages
So you want to buy a place of your own but can’t figure out how to pull together the necessary cash and financing? If you’re willing to think creatively, MSNMoney offers us seven offbeat options for buying your first home:
Read the full story for examples, pros, and cons of each of these offbeat options 
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January 24th, 2008 categories: Finances, Home Buying, Home Ownership, Investments, Mortgages
Adjustable or floating rate, 15-year or 30? How much mortgage can you afford? These are just a few of the many questions home buyers will find information on in Yahoo! Real Estate’s How-to Guide of Mortgage Basics.
So before you start mining for the perfect mortgage, make sure you have an understanding of the options available to you and check out their report. Some highlights include the following:
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January 15th, 2008 categories: Design, Finances, Home Selling, Investments
We’ve all seen those fashion faux pas: muscle shirts that only accentuate middle-age spread, or tight, low-cut jeans that turn soccer moms into muffin-top casualties.
According to MSN Real Estate and bankrate.com, you can make a home unfashionable in the same way by choosing the wrong pre-sale improvements.
Few real-estate agents will object to any upgrades made to your house prior to putting it on the market. But rushing ahead with improvements you think will elevate the asking price can seriously deplete financial reserves that should be used to fix more fundamental flaws.
Making targeted improvements
There are age-appropriate makeovers based on the vintage of your home that may yield a faster sale at a better price. Such targeted improvements also save you money when compared to full-monty, state-of-the-art renovations throughout the home.
A great starting point, says Sid Davis, a Salt Lake City real-estate broker and author of “Home Makeovers That Sell,” is to spring for a pre-sale home inspection. At an average cost of $300 to $350, you can find your home’s flaws, have a handyman fix them and document the work in a pre-sale buyer’s folder.
And to uncover the top age-appropriate home improvements and repairs, Bankrate asked Combs, LeForce, Davis and Wendy Patton (co-author of “Making Hard Cash in a Soft Real Estate Market“) to share their suggestions for houses by era: pre-1960s, 1960s, 1970s, 1980s and 1990s. Here’s a quick list of upgrades for the ages and what you should look for first to avoid a home-makeover misstep:
Read on for the full story and further explainations.
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