Guest Contributors Archives - The Happy Homeowner

Want to Avoid Becoming House Poor? Choose Your Mortgage Wisely

Posted on October 23, 2013 by Jen

If you’re in the market for a new home, it can be tempting to lay all the cards on the table and go for the most house you can afford. If you’re financially fit enough to afford this massive expense, go for it.

But if you don’t have a sizable down payment, long-term savings, and retirement wrapped up before you sign on the dotted line, that new mortgage could be your ticket to becoming house poor.

A Definition of House Poor

As described by Investopedia, house poor is a phrase commonly used to describe people that spend so much money on their housing expenses that they have little to nothing left to pay for their other needs. Essentially, if you’re house poor, you’ve purchased more home than you can afford, no matter how creative you are with your budgeting method.

Being house poor can pose significant financial problems throughout your future, but it can be avoided if you’re careful to evaluate all of your options when choosing your mortgage. Even in today’s competitive real estate market, it’s still vital to do all of your due diligence before signing on the dotted line.

Here are some considerations to make when choosing your mortgage:

Decide What Matters Most

There are tens, if not hundreds, of factors that impact the terms and conditions of your home loan. Before you even make contact with a bank or broker, you should first decide which of these factors are most important to you.

Do you care most about the APR? Are you concerned mostly with what your monthly payment will be? Perhaps you want to fully investigate all of the various fees encompassed in your closing costs.

Whatever matters to you most, decide that upfront and seek out a home loan that meets your personal requirements.

Shop Around and Conduct Interviews

Once you’ve decided which type of mortgage works best for you, you next need to determine which lender you’ll work with. This is not a time to be swayed by clever marketing tactics and sales pitches! Choosing a mortgage is a huge, potentially life-changing decision so now is the time to carefully select who will help you reach your goal of homeownership.

Don’t be afraid to be the squeaky wheel when conducting your research. And remember to pay attention to the details. If the broker is hard to get a hold of when you’re not yet a customer, do you really want to work with that person in the future?

One key consideration to ask about is the lender’s turnaround time. When you’re buying a home, your world is flush with deadlines and agreement windows. Don’t let a glitch with your mortgage broker be the deciding factor between closing or losing the house.

Additionally, ensure you understand all of the terms and conditions before you move forward to ensure you don’t find yourself in a house poor situation down the road. By working with a reputable mortgage company such as Newcastle Permanent, you’ll effectively be setting yourself up for financial success as you pay down your home loan and build equity in your investment.

What tips and tricks do you have for choosing a mortgage wisely?

Dealing with Your Car Insurance After an Accident

Posted on October 23, 2013 by Jen

Almost everyone knows someone who has been in a car accident, or they’ve been in one themselves. They are a regular occurrence on our streets. They can sometimes just be a minor nuisance, while others can be catastrophic, life altering events.

Fewer things are more frustrating than dealing with insurance companies after an accident. It’s very important to be aware of one’s rights during this difficult process. Being aware of what you are entitled by your insurance company can ensure that you are treated fairly and with little stress.

Understanding how to deal with your car insurance after an accident can make a significant difference on your driving future, from the type of car that you can afford to insure (think used Honda Civic vs. Brand New Audi A4)to the amount you have to pay up front to repair your damaged car. So here are some managing and money saving tips for dealing with your car insurance company.

Remain Confident and Calm

Insurance adjusters are looking out for their company’s bottom line. They want to pay as little as possible on every claim. It’s important to remain confident during this process. The insurance company must uphold their contractual obligations. The adjuster may try to intimidate a victim into taking a small settlement. Remain relaxed, and don’t settle for less than full compensation and coverage.

You Pick the Mechanic

Don’t get bullied into using an insurance adjuster’s preferred mechanic. This is a manipulative tactic that insurance companies use to get accident damage appraised at low rates. This is so they can offer smaller settlements to policy holders. Legally speaking, the car owner gets to pick the mechanic. Remain firm on this, and there’s nothing the adjuster can do about it.

Keep a Record or Journal

It may be helpful to keep a record or journal of the process. Don’t forget to record every call and meeting with the adjuster. This will come in handy if the insurance company isn’t acting in good faith. A journal can be used as evidence in a court of law.

Don’t Wait to File a Claim with the Other Driver’s Insurance Company

There is absolutely no need to wait for the other driver to file a claim with his or her insurance company. It’s important to get the ball rolling as quickly as possible. Contact the other person’s insurance company immediately.

Move up the Food Chain

If the desired results just aren’t happening with one’s insurance adjuster, it’s time to move up the food chain. Try calling his or her supervisor. If that doesn’t work, contact the regional office or corporate headquarters.

Home Buying for Fall of 2013: Snag Low Rates & Bargain Prices

Posted on October 10, 2013 by Jen

Please enjoy this guest post while I’m working on a few things behind the scenes….

In late August the average rates for a popular 30-year fixed rate mortgages rose again, this time hitting the highest level in more than two years. Meanwhile, home prices as tracked by the reputable S&P/Case Shiller Index continued their upward momentum. The price of a typical home spiked more than 12 percent between the spring of 2012 and 2013, for instance, marking the most dramatic rise since 2006 – back before the housing bubble burst.

That means that while homes are becoming more expensive to finance, they are also becoming more expensive to purchase, creating a double whammy for buyers hoping to purchase a home. There’s still time to buy an affordable home, however, but you’ll need to act promptly if you want to capitalize on historically low rates combined with exceptionally good home prices.

The Outlook for Housing

What’s fueling the surge in mortgage rates is an improving economic outlook, which is welcomed news. For years the recovery from the recession has sputtered along without gaining any significant traction because the real estate market was in terrible shape. An extreme overabundance of foreclosures kept downward pressure on home prices, and despite great low mortgage rates, banks were reluctant to lend. The housing market typically leads the charge for any major economic recovery, so the fact that home prices are moving upward confirms that the worst is behind us.

Current Interest Rates in Transition

As the economy recovers, however, rates are headed up. For several years, prevailing interest rates -set by the Federal Reserve- have been only a fraction above zero. The Fed cut rates to the bone in order to avoid a total financial meltdown during the worst recession in history. Dirt cheap rates allowed consumers to keep borrowing and kept the economy from falling over a cliff. If rates remain abnormally low for too long it can cause a chronic economic slowdown, so the Fed has been anxiously waiting for the economy to pick up enough steam to allow a return to higher rates.

It’s much like a doctor waiting for a patient to recover enough to get off of the pain medication, knowing that keeping them on meds for too long can be detrimental to their well being. Already the Fed has curtailed some major stimulus programs that were artificially suppressing rates, which helps explain the recent sudden rise in home loan costs. The economy is coming off of life support, in other words, but that also means that the once-in-a-lifetime bargain basement mortgage rates are about to end.

The Next Six Months are Critical

Where savvy buyers need to be focused right now is on taking full advantage of this temporary window of opportunity before it slams shut. Never in history have mortgage rates been as affordable as they have been over the past five years, and there is little chance that they will ever return to these historic lows within your lifetime. If you want to finance a home there will probably never be a better chance to do so, but by next spring, it may be too late.

Spring is the busiest season for home sales and that’s when nationwide home prices tend to readjust from the previous year. Sometimes real estate prices jump dramatically between the end of summer and the following spring, for example, especially if the economy is bouncing back. Those who procrastinate now while holding out for a slightly less expensive loan or a rare real estate bargain may be left behind. Even a slight rise in mortgage rates can increase your monthly payment enough to price you out of your dream home.

The good news is that all of these market forces are converging as the real season winds down at the end of summer. That creates a really unique chance for serious buyers to take advantage of a less crowded marketplace. As soon as cold weather arrives most buyers stop shopping, for instance, and many realtors take seasonal jobs in other professions in order to pay the bills during the sluggish off-season. With fewer buyers looking at homes, sellers are usually highly motivated to unload their properties and willing to make greater concessions.

What to Do Now

All of this spells opportunity if you’re shopping for a home. While there is still time, talk to a mortgage lender and find out how much you can afford. Then ask the lender to give you a pre-approval letter. The letter doesn’t commit you to a loan and doesn’t guarantee the loan will be approved, but it does indicate that your chances of loan approval are high. Loan pre-approval gives sellers more confidence that the transaction will be a smooth one and not fall apart due to problems with securing adequate financing. Armed with that document you’ll be in a stronger negotiating position than other buyers who have not yet been screened for mortgage eligibility.

Next, hire a Realtor who is a skilled negotiator. Narrow down your choices based on your personal preferences, and begin house hunting. Chances are you’ll find the one you’re looking for just as real estate sales drop off for the winter holidays.

writes for CompareWallet.com in addition to others. He has been an avid writer for years, even winning awards for work he’s done.

How Does Seller Financing Work When Selling Your Home?

Posted on October 7, 2013 by Jen

Please enjoy this guest post while I’m working on a few things behind the scenes….

Last year, 15 percent more seller-financed transactions were processed in the United States than in 2011. More than 100,000 properties were sold this way, the highest number recorded since 2006.

So how does this growing property trend really work for home sellers?

The Seller Becomes the Lender

Home buyers typically receive financial assistance from bank and building societies. In a seller financing arrangement, the seller takes on this lending role. The home owner extends credit to the buyer. This is equivalent to the purchase price of the home minus the buyer’s down payment. The buyer and seller sign a promissory note which outlines the loan’s terms. Depending on the state, a mortgage or deed of trust is then lodged with the local public records authority. Over time, the buyer pays back the sum of the loan along with interest incurred.

Typical Seller Financing Terms

Traditional mortgages typically run for a 30-year period, but seller financing plans are much shorter arrangements. While they are usually amortized over 30 years, they typically feature a balloon payment in around five years. At this time, it’s predicted that the home will have increased in value or that the buyers’ financial situation will have improved enough to make refinancing with a traditional lender a viable option.

This short time period is practical for sellers as they don’t need to wait 30 years to see the loan paid off. With regular repayments coming in, sellers can afford to relocate to more affordable dwellings, like apartments for rent in Houston or other competitively priced markets. The shorter time period also reduces the seller’s risks.

The Best Times to Consider Seller Financing

Seller financing arrangements are best entered into once a seller’s mortgage is paid off. A seller may also consider such a plan if the buyer’s down payment will clear the mortgage.

If the seller has a significant mortgage, the seller’s own financial institution must agree to the seller financing arrangement. In a tight credit market, lenders are often unwilling to approve such deals.

Seller financing is also appealing in a slow real estate market. Once a property has been on the market for a couple of months, home owners are typically forced to lower their asking price. Seller financing can be a good way for sellers to receive their desired asking price over time.

Buyers are willing to pay more in exchange for the agreement’s many benefits, which include reduced loan and origination fees and more negotiable terms. The seller financing arrangement is also a great way for the almost 40 percent of Americans who can’t qualify for traditional bank financing to enter the property market. Seller financing can therefore increase the pool of potential buyers. These prospective buyers may also pay as much as nine percent interest for the privilege of owning a home.

Seller financing is also a good option for sellers seeking a quick closing time. Traditionally it takes six to eight weeks to close a house. The reduced paperwork of a seller-financed transaction can see these deals closing in as little as two weeks.

Reducing the Risks for Home Owners

In seller financing arrangements, sellers are at risk of buyers defaulting on their loans. Several measures can reduce this risk.

Sellers can insist buyers complete a loan application, much as they would if they were borrowing from a financial institution. A seller is within his rights to run a credit check, and assess the buyer’s employment, assets, and references to determine the buyer’s financial security.

Remember that the buyer’s down payment also reduces the risk of the buyer defaulting on the loan. With a significant stake in the property, buyers are unlikely to walk away from the sale. Sellers should request at least 10 percent of the purchase price up front.

It’s a good idea to secure the loan with the property. This ensures the seller can foreclose if the buyer fails to make his payments. It’s smart to appraise the home before its sale to ensure it’s worth at least as much as the purchase price.

The Role of Professionals

Consulting professionals through the seller financing process is one of the best ways to minimize the risks. Attorneys and real estate agents can help draw up the contract of sale, the promissory note, and other important papers.

A loan serving company can relieve the pressure of managing the loan. Such firms will draw up the mortgage, inform buyers of the payment schedule, collect loan repayments, and perform other managerial tasks.

Reporting and paying taxes can also be difficult for sellers. A financial or tax expert can offer advice in this area to ensure sellers do not face fines.

Seller financing can be risky, but with the right terms in place it can offer real rewards for home sellers.

The Happy Homeowner

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