In Reference To Real Estate Investing, You Need Know Nothing More Than You’ll Find Here

Real estate is big business, so it’s understandable that many people wish to invest in it. If you are considering a career buying and selling properties, knowing the market and understanding some investment strategies is essential. The following article will show you some helpful information to make it easier for you to get started as a real estate investor.

Prior to making a real estate investment, know what kind of investment you’re interested in. Some like to flip properties and that may be ideal for you as well. Or, you might prefer to build from scratch. Each specialty requires a different skill set, so focus on what you really like and what you’re good at.

Check out the value of other area properties. Mortgages and rent figures are great for providing insight into home values. Once you’ve got the ground level knowledge, your decisions will be all the wiser.

Prior to making a real estate investment, know what kind of investment you’re interested in. You may like flipping real estate. Or, maybe you prefer rehab projects. Look at your interests and skill set when making a determination.

When making a financial plan, you need to make certain you have thought of all of the related expenses. There are closing costs, legal fees, staging costs, and other items that can greatly affect your profits. When figuring out your margins, remember to include these costs as line items.

Make sure you check out the neighborhood before buying a property. Desirable neighborhoods will always hold their value, whereas depressed neighborhoods may not give you as good a return. Often, the location is worth more than the property.

Understand that time is money. Rehabilitating properties might be something you are good at, but it might not be worth it due to all the labor that is involved. Would your time be better spent scoping out additional opportunities? If there is a chance to outsource the labor, do it. This will let you free up time and concentrate on more important details.

Factor in the ability to rent out the home that you buy when you are projecting what a home is worth. You can make a tidy sum each year if you rent your place out. After that, you can then sell the home for the profit you desire.

Learn about any neighborhood you are interested in investing in. Location is everything in terms of prices and zoning laws. Talk with neighbors before putting in an offer.

If you want to make money with real estate, invest immediately. One of the biggest mistakes is not getting into the market as soon as possible and learning about the business. There are many other people who are jumping into this lucrative type of investment, and you will lose out if you let them beat you to the punch.

Broaden your horizons and consider investing in properties for businesses, instead of only homes. They have more potential for being long-term rentals, along with the fact that they may be quite lucrative. You could look into an office building or a strip mall. Both choices will give you a lot of different options when it comes to profiting off your investments.

Be cooperative with others. Rather than seeing other real estate buyers and investors as your competition, work with them. When you do this, you can start sharing resources and your client lists while pooling the collection of properties you all have to offer. You’ll keep your customers satisfied and build up a larger clientele by cooperating with one another. This can better your reputation.

Remember to factor in the cost of the repairs that an inspection is likely to reveal. To sell real estate, you must make repairs before selling. If leasing the property, you will need to budget for maintenance. Regardless, you must have a little discretionary income to put towards these things.

Do your homework about municipal governments of any real estate market you plan on investing in. There should an official website created for the city. Look for information with regard to city planning that may affect future real estate prices. If the city is growing, it’s a good place to invest.

Sign up for services that tell you when foreclosures are happening to get good deals. You will save time by not having to call the courthouses, real estate agents, or lenders to get the same information. These are likely to be current so that you can get accurate information.

When negotiating a real estate deal, it is best to leave your emotions at the door. This property is an investment, not your home. Avoid making emotional decisions about properties and you will avoid overpaying. Follow the advice presented here to make better profits.

Look at the economy in the area before buying a home. The scarcity of jobs and high unemployment rates drive down property values. Such things tend to make for a small return, if they make one at all. Robust cities have higher property values.

Be prepared to find that fixer-uppers always have more problems than you expect. Purchasing homes that need minimal improvements can be good. If it needs a lot of work, you could spend more than you make. See how much upgrades will really cost before you make a purchase.

If a rental property is part of your portfolio, make sure to carefully vet all tenants. Those you can’t trust are likely sources of damage to your investment. Background checks are no guarantee that all issues will be avoided, but they can reduce the chances of a major incident.

Thoroughly investigate all potential tenants when you are investing in rental properties. Sketchy individuals can damage the home, reducing your value. A background check won’t totally protect you; however, it can reduce the chances of getting a bad tenant in your property.

Think about the value that is found in non-recourse loans if you plan to partner with someone. This can help protect you if the relationship goes bad or if they’re irresponsible. There is potential for a nice income, and the freedom with real estate investing also comes with less risk than partnerships and regular loans.

Many people you know, whether loved ones or coworkers, will try to convince you not to invest in real estate. Rather than listen to others, you can research the subject and make your own informed decision. With the possible exception of those who have amassed real wealth and know how to maintain it.

Investing wisely should be much easier now that you have read this piece. Take your time when making investments to reap the most favorable results. Start now if you are ready so you can experience the great results.…

This Article Contains A Plethora Of Data Related To Real Estate Investing

You can make a lot ton of money investing into real estate, but you can lose a ton, too. Follow these tips to be successful. So keep reading to learn how to invest wisely.

Once you know that you will be investing in real estate, set up an LLC or something similar. This protects you and your future investments. Additionally, you may be able to get tax benefits for your business because of your dealings.

You should know that reputation is of the utmost importance when it comes to real estate. Abide by what you say, and do not lie to possible clients. This gives you credibility and will help people to be loyal to you.

Try to invest in real estate in locations that are in-demand. This is vital since it increases the resale value of the property. Try finding property that can easily be maintained.

If you want to start investing in real estate, think about the amount of time you have available for managing properties. Tenant problems can be extremely time consuming. If you feel as if you don’t have the time needed, consider hiring a property management company.

Don’t automatically assume that the value of a property is going to go up. Danger awaits those who take that approach. To be safe, invest in a home that can quickly be flipped. You can boost your income with any property value that is appreciated.

Spend more of your negotiating time listening than talking. You might be surprised to know that people sometimes don’t do themselves any favors when they negotiate. On top of that, with good listening, you’re more likely to discern the appropriate positioning you can use to score a good deal.

Be very patient when beginning. Your first real estate investment deal may be more time consuming than you expected. Or maybe there’s nothing great currently available, or you’ve not been able to agree on terms. Don’t be overly anxious to close a deal when everything isn’t just right. That’s not smart investing. Stay patient as the right deal will eventually come.

You must know what to spend your time doing. You may enjoy renovating properties, but is the time you’re spending on it time well spent? Would your time be better used searching for new properties? Whenever it is possible to delegate tasks, do not hesitate. It’s worth freeing up your time for the more important aspects of your business.

Think about using a management company to help with your properties. They do cost money, but they are often worth it in the end. Property managers can screen prospective tenants and manage repair projects. This will allow you to focus on other potential money makers.

Stick with a single property. If you’re just getting started with real estate investing, it can be a tempting mistake to purchase several properties at once. Instead, begin with a single property and allow yourself to learn an investment strategy over time. You will be much better for it over the long haul.

It is vital that you properly screen all tenants. You will want to have a reliable tenant to be in the best possible position. You want to check credit and references as well as criminal history prior to accepting any tenants. This will help you make sure your tenants are dependable.

A foreclosure listing service will keep you up to date on foreclosures in your area. This can save you time since you won’t need to contact lenders, real estate agents, and county courthouses. This usually has current information that can help you search accurately.

There will be both bad and good times when working in real estate. Don’t let the lows get you down and make you want to quit. Just keep at it and things will soon pay off. Keep on learning and doing until you get to where you want to be.

Don’t be emotional when negotiating. There’s no need to get emotional about your investments. Emotional buying can cause you to overpay on an investment property. So keep your emotions in check and you will make financially sound decisions.

Look at local regulations and laws before investing. Local regulations can vary from place to place, so it is important to know these rules ahead of time. Consult with local authorities in advance of definitive contract commitments so you stay compliant with relevant regulations.

Look at local regulations and laws before investing. These laws will have an effect on your purchase, so you should know them ahead of time. Make sure to be in touch with the appropriate officials so that you know you are in compliance with local laws before putting money into anything.

Identify rental properties that will be easy to maintain. Real estate investing is more than buying property. You need to consider just how you are going to keep the place up so that you can resell it in the future. For example, a single story home is easier to take care of than a huge multi-family property. Don’t bite off more than you can chew.

It’s a big responsibility to invest in real estate. You probably want to get going as young as you can to maximize your potential, but you need to be on stable ground first, too. Start building a solid foundation in the local community, save up money and make new connections with people. Do this to lay a solid foundation for success in real estate investing.

Be wary of fixer uppers. It may be wiser to look for properties that simply need minor renovations. All too often, houses that require work turn into bad investments that will take up all of your time and money. Make sure you research the property and do the math involved.

Be aware of whether your purchase is short or long term. This is important to know because it will determine how much money is needed for the property. If you are going to purchase a house that is called a “fixer-upper”, you need to be able to afford repairs in order to make money on the renovated home. If you plan to buy but not sell soon, you can up the amount you spend on the home.

Negotiation skills are essential to real estate investing success. You will make much more money this way. Read books, take classes, and do what you have to do to learn how to barter with the best of them.

It pays to keep the above information handy and reference it when needed. As tempting as it may be never purchased a house on a whim. Always do your research because in the end that is what helps you succeed.…

Interested In Investing In Real Estate? Try These Tips And Tricks

Have you thought about real estate investments but didn’t know how to get started? Perhaps you have been exposed to the possibility through various media. If you want to make more money without having to work more at a typical job, this can be the thing for you. Here are some excellent tips to help you.

It is a good idea to incorporate yourself when you are going to be a real estate investor. This will make sure that you and your investments are protected as you move forward. As an added bonus, you should be able to get certain tax benefits because of your business transactions.

When looking at your business strategy, understand your sunk costs that go beyond the general price of the home. You will also need to pay staging costs, closing costs, and legal fees. Understand all of your expenses when you are figuring out your net profit.

Try to invest in real estate in locations that are in-demand. This is vital since it increases the resale value of the property. Try finding property that can easily be maintained.

When looking for potential investment properties, look for ones that are likely to go up in value. Purchasing a home near a body of water, for example, is generally a good idea. Figure out how much the price is likely to rise in a given amount of time.

Select places that you know well, and in area that will interest lots of possible clients. This is critical, since it is going to give you the highest possible resale return. You should also seek low-maintenance properties.

When you want to invest in a property, ensure that the rental income will take care of any mortgage. This will start you off right. You don’t want to have to pay anything extra for the mortgage because the rent isn’t sufficient.

Don’t buy just to add to your owned properties. Many new investors try this and end up failing. Do plenty of research on anything you’re considering, and prioritize the quality of the investment over making a high quantity of investments. In this way, you will make wise, profitable investments.

Think of how quickly the property can be rented when projecting the home’s value. In the right area, you can earn thousands of dollars a year in rental income. You can still sell the home when you’re ready and make a nice profit.

You want to make sure you can recover your investment, plus some profit. If you are only able to sell your property for as much as you spent on it, you have put in a lot of effort for no profit. Do not list a property for less than you paid, especially after renovations.

Look at what the economy is doing for the county your property is in. High unemployment rates and lack of good jobs on the horizon will keep down property prices. Such things tend to make for a small return, if they make one at all. An area that is thriving will have high property values.

Register with a reputable foreclosure listing service so that you can know about potential deals when they surface. You can let the service keep you informed instead of constantly checking with agents, lenders, and courts. These lists are a great source that can save you a lot of time, so you won’t have to track down foreclosures at the courthouse.

Examine that country’s economic forecast when looking to buy some real estate. Property prices tend to be depressed by lack of high paying jobs or elevated unemployment levels. You will most likely get a small return if you get any at all. Robust cities have higher property values.

Always research any city, it’s government and growth potential before investing in the area’s real estate. The city should have a website. You can see city planning details that can affect future real estate prices. A growing city would be a good investment.

You should always remember the cost of expenses, such as property inspections and repairs, when projecting your profits. If you hope to sell a property you buy, then you need to factor in any remodeling or upgrades and repairs you make. Budget money to cover maintenance and repairs on your rental property. Either way, allow yourself extra room for a “padding” when formulating this plan to have realistic profit expectations.

When calculating profits, always factor in the costs of repairs that the inspection dictated as necessary. You will have to make most general repairs before selling a property. If you want to rent the property to someone, you have to think about how much maintenance will be. Just make sure to give yourself a cushion when calculating potential profits.

Decide on the type of property you wish to invest in. It’s one thing to make a property purchase, but there’s more to it than that. You must consider the maintenance that the property will require before you sell it later. A one-story home is not as difficult to maintain as a multi-family building, for example. Don’t get more than you are able to handle.

Avoid properties that carry really high or low price tags. You won’t make much if you spend too much at first. If you want to buy cheap property, you’ll probably spend a lot on renovations. Look for properties that are moderate in price; they are usually your best bet.

Before buying a property you plan on renting, familiarize yourself with the rents in the area. The last thing you want is to overprice your real estate rent wise in comparison to others. Your property is not going to appeal to renters, and you’ll carry costs longer than you want.

If your investment property has vacancies, have some funds on the side for the monthly mortgage costs until you can get them rented. You will feel better until the next tenant comes around when you have the extra money.

Be aware of whether your purchase is short or long term. This is important to know because it will determine how much money is needed for the property. If you are going to purchase a house that is called a “fixer-upper”, you need to be able to afford repairs in order to make money on the renovated home. If you plan to buy but not sell soon, you can up the amount you spend on the home.

Negotiation skills are essential to real estate investing success. You will make much more money this way. Read books, take classes, and do what you have to do to learn how to barter with the best of them.

Once you begin, you will learn what to avoid when investing. If you know about the pitfalls from the start, you’ll be in better shape. Use these tips to ensure you are able to make a profit every time.…

Getting The Most Out Of Your Real Estate Investments

Making money in real estate might seem easy to most individuals, but they eventually learn the hard way when they find out they do not have the right tools to succeed. With anything in life, you must know how to go about it if you’re going to be successful. While the market is always unpredictable, your strategy doesn’t have to be.

Before investing in any form of real estate, make sure you analyze the market and go out and do some research. Look at between 50 and 100 properties in a location you desire, and create a spreadsheet with each one. Individual facets you need to note are market prices, rent expectations and renovation costs. This helps you figure out what deals are good.

You should know that reputation is of the utmost importance when it comes to real estate. Abide by what you say, and do not lie to possible clients. Your credibility will ensure people will trust you and be loyal to you.

Go with an area you’re familiar with. It is easier to get into a successful flow with your investing if you are focused on your market segment. No matter if you are a flipper or purchasing properties that require little money down, stick with the things you already understand.

Look for a property that is going to increase in value. Purchasing anything near water or close to other businesses will be beneficial to you later on. Consider the long-term costs and think about the possibilities.

Consider joining an online investment group or following investment blogs. You can learn a lot this way about how to do business. You never know, you might be able to make contact with successful individuals as well.

Be certain the amount of rent you can collect on a rental property will make your mortgage payments. This is a great way for you to break even. Nothing is worse than having to come up with money out of your pocket for the monthly rent because your renter’s monthly payment doesn’t cover it.

If you buy a rental property, be wary of the person you allow to rent it. The person should have first and last month’s rent ahead of time, as well as a deposit. If the renter is struggling with coming up with these things, it’s a good bet that they will struggle with paying for their monthly rent, too. This should be a sign that someone else would be a much more reliable renter.

Listening rather than talking is the key to negotiation. You might be surprised to know that people sometimes don’t do themselves any favors when they negotiate. Also, when you listen carefully, you will be able to pinpoint the time when you can grab the exact price you are looking for.

Avoid real estate properties where the price is in the tank. You may be attracted to the numbers, but the house might have difficulty selling. Take your time to find excellent properties reasonably priced.

Look at what the economy is doing for the county your property is in. High unemployment rates and lack of good jobs on the horizon will keep down property prices. Such things tend to make for a small return, if they make one at all. An area that is thriving will have high property values.

It is vital that you properly screen all tenants. You will want to have a reliable tenant to be in the best possible position. You want to check credit and references as well as criminal history prior to accepting any tenants. This will help you make sure your tenants are dependable.

If you wish to purchase real estate, try hiring a great property manager that can screen and qualify tenants that are dependable. This will help you find qualified renters. If not, you’ll risk losing money on what you invested in.

If you want to purchase several properties close together in time, try to find ones that are near each other. By doing so, you’ll control gas costs and save a lot of time when having to visit the properties. Plus, you’ll become a local expert on the property in your favorite market.

Try to invest in several properties in a similar area. This will cut down on the amount of time and gas money you have to spend. You will also enhance your expertise in that region.

Your ventures in real estate will not pay off immediately. Keep some money in your bank. You’re also going to want to have separate income from dependable employment when you first get started. There are a lot of expenses that you may have to deal with. If you have only this source of income, your risks of going under are pretty great.

Look at local regulations and laws before investing. These laws will have an effect on your purchase, so you should know them ahead of time. Make sure to be in touch with the appropriate officials so that you know you are in compliance with local laws before putting money into anything.

Don’t let emotions creep into negotiations. When investing in a home, you will most likely not live in it. Make sure you don’t make emotional decisions; being emotional often causes you to overpay. If you follow this advice, you will get better returns.

You might encounter some of the people you know trying to tell you that you should stay away from investing in real estate. You probably should not pay them much mind and instead, do your research on the subject. However, you may want to listen to those with successful experience in the market.

A good way to assess the quality of a potential neighborhood is to research current vacancy rates. Do not invest in areas that show signs of economic decline, such as vacant properties or closed businesses, as they are likely to offer a poor return on investments.

Be aware of whether your purchase is short or long term. This is important to know because it will determine how much money is needed for the property. If you are going to purchase a house that is called a “fixer-upper”, you need to be able to afford repairs in order to make money on the renovated home. If you plan to buy but not sell soon, you can up the amount you spend on the home.

Negotiation skills are essential to real estate investing success. You will make much more money this way. Read books, take classes, and do what you have to do to learn how to barter with the best of them.

When you being to make real estate investments, you’ll notice there are a lot of things you must look out for. The more aware you are of these pitfalls prior to starting, the more successful you’ll be. Keep this information in mind as you enjoy your successful real estate career.…

Tips And Tricks For Real Estate Investment Success

It can be very profitable to invest in real estate, and the folks who do their homework tend to fare the best. Learning all that you can about the property and process beforehand can help you to really be successful. Keep reading for some good advice on getting underway.

Before investing in any type of real estate, it pays to be thoroughly educated on the subject. The important part is to gather all the advice and tips that work well in the business. Buy educational DVDs, check out books from the library, and learn everything you can so your are in a great place before you begin.

If you are looking to invest in real estate, you should think about how much time you can devote to managing your property. Tenant issues can eat up a great deal of time. Get a management company to do the dirty work for you.

When investing in real estate, be realistic about the amount of time you will be able to spend on property management. Dealing with your tenants can be very time consuming. If you are getting swamped with trying to manage it all, it can be wise to hire a company to manage your properties for you.

Know what the property’s value in the neighborhood is. Mortgages and rent figures are great for providing insight into home values. When you can see how things are going from the street, you can be smarter about your choices.

Anytime you analyze your overall business plan, do keep in mind that some sunk costs are more than just buying a property. You have to pay lawyers, closing costs, costs of home staging and a host of other expenses. Understand all of your expenses when you are figuring out your net profit.

Rising property values are not always a given. It’s dangerous to think this for the market or for a single piece of property. Your best bet is to invest in things that give you a positive cash flow right away. Any appreciation in property value is just going to be a benefit to your income.

Take a good hard look at the neighborhood before investing in property there. Good neighborhoods will get you a better return than rundown ones. Location is a top factor when it comes to property value, even more than the actual property itself.

Property management company’s can save you time, money and reduce stress. It costs money to do so, but the investment can be worth it. The company that does the property management will screen potential renters and deal with costly repairs. This will help save you quite a bit of time so that you can work on other avenues for investment.

Be sure that you’re able to get the money back that you invest in the property, plus a little extra. If you’re only breaking even, you’re wasting valuable time. Do the renovations you desire, and make sure to list the property for a price higher than you paid.

Stick with a single property. If you’re just getting started with real estate investing, it can be a tempting mistake to purchase several properties at once. Instead, begin with a single property and allow yourself to learn an investment strategy over time. You will be much better for it over the long haul.

Don’t invest more than you can afford. If you are investing in rental property, you should be able to pay the mortgage even if there are empty units. It’s not smart to expect your rental income to pay your mortgage payment.

Begin with investing in one property. You might be tempted to buy multiple properties right off the bat, but that can have drastic consequences when you’re a beginner. Focus on quality at first with only one property. This will be of great benefit to you and your success.

Be sure that you get advice from experts. Before bidding on a property, talk to someone experienced in real estate. Speak to appraisers or agents, for instance. The more knowledge you have, the better choices you can make.

Are home values increasing where you live? Is there a demand for rental properties? Depending on your plans for the property, you will have to think about these questions. If you are flipping, you should buy low, and don’t buy a rental property high if you won’t be able to have steady tenants.

Begin with a single parcel of property. Though you may have the urge to grab several properties, you can make big mistakes early in the game. Instead, you should begin by getting a single property and then give yourself time to figure out how to invest well. This will help you to learn the game without many distractions.

Remember to factor in the cost of the repairs that an inspection is likely to reveal. If you hope to sell a property you buy, then you need to factor in any remodeling or upgrades and repairs you make. Budget money to cover maintenance and repairs on your rental property. Regardless of the situation, be sure to leave yourself a comfortable financial margin for error.

If you have the income to keep properties for awhile, invest in areas that have a large number of foreclosures. Such areas are sure to experience a resurgence, and anyone who bought low will make large profits. Keep in mind that it might be some time before you can cash in and get your money back, however.

Don’t purchase a fixer upper home. This will hurt you in the long run. Try finding properties to rent that just need some minor cosmetic fixes. Even better, search for the places that already have happy renters who are planning to stay for a while.

If your investment property has vacancies, have some funds on the side for the monthly mortgage costs until you can get them rented. You will feel better until the next tenant comes around when you have the extra money.

Be prepared to give up things you want in order to stay under budget. You might have renovation dreams you cannot reach. In order to meet financial goals, sacrifices will be made. Make sure you can do that and be willing to give some items up.

Negotiation skills are essential to real estate investing success. You will make much more money this way. Read books, take classes, and do what you have to do to learn how to barter with the best of them.

Use the information above to succeed and for future reference. Don’t let a gut instinct decide whether or not to buy a property. Continue to do your homework to discover how wise real estate investing is.…

How to Get a Mortgage With Only 3% Down

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real estate agent gives house keys to his client
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By

There’s potentially some good news for millions of Americans who have had trouble trying to get into a new home. Bank of America plans to offer a 3% down conforming loan aimed at giving low- and moderate-income homebuyers more access to mortgages, including counseling before and after the loan process.

Called the Affordable Loan Solution, the new mortgage product is available through a partnership with Self-Help Ventures Fund and Freddie Mac, and will let borrowers avoid private mortgage insurance (PMI), a product usually required for low-down-payment loans that can add significantly to monthly mortgage repayments.

“There is a need in today’s marketplace for more responsible mortgage products that enable creditworthy homebuyers, who meet certain income limits and other requirements, to become homeowners at an affordable entry point with comprehensive counseling,” D. Steve Boland, consumer lending executive at Bank of America, said in a statement.

While the lower down payment can be attractive to buyers without ample savings, it’s important to remember that you’ll typically pay more for the home through interest on a larger loan amount than you would with more cash down. (You can go here to figure out what your down payment should be.)

Here’s what you need to qualify for Bank of America’s new loan.

  • The 3% down payment.
  • You must purchase a primary, single-family residence, with no reserve funds required in most situations.
  • Borrowers may use secondary financing, such as an affordable second loan, grants, or even cash they have on hand. The program will also consider non-traditional forms of credit to demonstrate credit history.
  • Loan amounts will be within conforming loan limits (up to $417,000), and applicants’ income cannot exceed 100% of the HUD area median income.
  • Applicants must occupy the property, and first-time buyers will need to participate in homebuyer education through Bank of America counselors.

Bank of America said the loans will be available through all of Bank of America mortgage sales channels. According to The Wall Street Journal, the bank plans to ensure that applicants’ debt-to-income ratio of is no more than 43%.

The bank is partnering with Self-Help, which will provide post-closing counseling to any borrowers who might be experiencing payment difficulties. Loan servicing will be immediately transferred after origination to Self-Help’s designated specialty servicer, who will handle all loans regardless of future performance. Freddie Mac will purchase all of the eligible affordable mortgages originated via the Self-Help and Bank of America partnership.

Getting a Mortgage With a Low Down Payment

Lenders typically require prospective homebuyers to contribute a down payment equal to 3-20% of the sales price of the home. Loans below the 20% mark, including the 3.5% down payment mortgages offered by the Federal Housing Administration, generally require you to pay for PMI, though there are some federal programs in place that let qualified borrowers secure 100% financing. Veterans and current military members, for instance, may be able to utilize the VA loan program, which comes with no down payment or private mortgage insurance requirement.

Keep in mind, even with their relaxed or different credit standards, low down payment loans can be tricky to obtain – and, as previously mentioned, could prove expensive when it comes to fees and interest. Consumers should look into all options, including conventional financing, when buying a home. You should also check their credit scores, since a good one will generally entitle you to better terms and conditions on all home loan types. (You can do so by pulling your credit reports for free each year at AnnualCreditReport.com and viewing your two free credit scores each month on Credit.com.) Tips for improving your credit include paying down high credit card balances, addressing unpaid collection accounts and disputing any errors with the major credit reporting agencies.

 

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Could Your Car Lease Prevent You From Buying a Home?

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Outline of house and car in grass
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By Scott Sheldon

Getting a mortgage can be difficult. Sometimes, to increase the odds of being approved or to qualify for a larger loan, prospective borrowers will pay down debts or eliminate existing loan obligations. Often, the process for doing so is simple, but there’s one type of financing that could trip up your efforts: a car lease. Here’s a breakdown of why — and what you can do to so avoid any snags.

What’s Your Debt-to-Income Ratio?

When you apply for a mortgage, a broker is going to tally up all of the monthly payments you make on existing obligations, including credit cards, student loans, personal loans, car debts and other mortgages. That number gets measured against your income. This debt-to-income ratio helps determine your monthly mortgage payment. (So does your credit score. You can see where yours currently stands by getting your free credit scores, updated each month, on Credit.com.) Sounds easy and simple enough, right?

Well, the concept is, but if more than 25 percent of your income is already going towards debts, you may not be able buy as much home as you think. When you have other existing obligations, your ability to borrow can be reduced tremendously. That $300 per month car lease, for example, can be severely hampering your buying power.

Mortgage Tip: Remember, lenders will use only what you’re obligated to pay on existing loans in calculating your debt-to-income ratio. Choosing to pay more on your debts can be a good financial move, but mortgage lenders generally don’t give you any benefit for choosing to do so.

Why a Car Lease Can Trip You Up

Unlike an auto loan, a car lease can be trickier to workaround if you’re trying to pay off debt to qualify for a mortgage. Let’s say your credit report shows a car lease payment at $300 per month. There is a balance on the credit report of $6,000 due, which is the remainder of the lease. If you had a car loan with these exact terms, you could write a check to pay off the $6,000 obligation. Case closed.

Unfortunately, that option doesn’t apply to a car lease. You can give the car back and pay the $6,000 balance that is due. However, to qualify for a bigger mortgage, the lender will need to verify there is no obligation due for a car. If you give the car back, the mortgage company may ask what you’re going to drive instead — especially if there is a commute time from where you work to where you plan on residing.

Should you find yourself in this predicament, here are some options to consider.

  • Call your car dealer. You can ask if they have any specific options for getting out of the lease. You’ll need to make it crystal clear that you must be out of the lease obligation completely.
  • Transfer the lease to someone else. Your mortgage company should be OK with this option as long as you can verify the obligation is completely out of your name and that there is no obligation associated with it. You can search online for options if your car dealer doesn’t have any transfer suggestions.
  • Pay out. Give the car back, pay the balance due and either buy a new vehicle in cash, removing any debt-to-income ratio predicament, or finance a car that has a lower monthly payment. The key here is that the payments need to be reduced or totally removed if you want to maximize your buying power.
  • Consider your priorities. A great deal on your car lease may not matter if you are serious about buying a home, plain and simple. Ask yourself: Is the car more important than the house?

Paying Off Debt for a Mortgage

Paying off debt to qualify for a mortgage usually needs to be documented in the following ways.

  • Money used to pay off the obligation cannot come from the reserve requirement your lender almost certainly has. Lenders usually want you to have at least three to four mortgage payments in the bank, called reserves, as a cushion when granting your loan request.
  • You’ll need to produce a paper trail showing money leaving your bank account and going to the creditor to pay off debt or provide a copy of the canceled check to show you no longer owe the obligation.

All of these steps may seem unnecessary and overly repetitive, but they are a byproduct of the current mortgage lending world. Remember, stringent underwriting requirements help to ensure lenders are making good loans and, more importantly, that you can actually afford the house you are looking to buy.

 

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How to Avoid Being Turned Down for a Mortgage

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Rejected stamp imprint on a denied real estate lender home mortgage loan document (fictitious document with authentic legal lang
Olivier Le Queinec/Shutterstock

By Teresa Mears

If you’re trying to buy a house, there is nothing worse than finding your dream home only to be turned down for a mortgage.

But that won’t happen if you do your mortgage shopping the right way.

“You should be working with somebody who picks up the phone and says, ‘We have this problem, and let’s see what the solutions are,'” says Sylvia Gutierrez, a mortgage professional in Miami and the author of “Mortgage Matters: Demystifying the Loan Approval Maze.”

The right mortgage professional, whether it is a bank loan officer or a mortgage broker, will evaluate your credit profile before you ever reach the application process, help you solve problems and steer you to appropriate loan products. You could qualify for one mortgage program but fail to meet the requirements for another.

That’s important, because if you apply for a mortgage and are declined, it may hurt your credit score. Plus, the form you receive from the lender declining your application won’t tell you why your application was rejected.

“The form we send out to a borrower who’s turned down tells you nothing,” says Casey Fleming, author of “The Loan Guide: How to Get the Best Possible Mortgage” and a mortgage professional in the San Francisco Bay Area. That makes it important to work with an actual human loan officer who can answer questions. “There isn’t anybody else who can tell you why you’re been declined,” Fleming says. “The underwriter’s not going to talk to you. Nobody’s going to talk to you.”

When you apply for a loan, lenders look at three major issues: your credit, income and assets. Any one of those factors could hurt your chances, though Fleming says credit issues, including having too much debt, are the most common roadblock.

Since the mortgage crisis, lenders have become much more careful about verifying income sources. That makes it especially important for freelancers and contract workers to deal with a loan professional who knows how to make their applications attractive to lenders by providing the correct documentation.

If you’ve decided to buy a home, you should find a good loan officer and get pre-qualified for a mortgage before you ever look at houses. If there are any problems such as errors on your credit reports, collections issues or any income that won’t be counted, you want to be aware of that before you find your dream house.

“Fixes are very rarely quick,” Fleming says. “They’re usually something you have to do over months.”

Here are seven things to do to avoid being turned down for a mortgage:

1. Get your credit reports early.

You want to look at your reports from all three major credit bureaus (Equifax, TransUnion and Experian) to make sure there are no errors. If you’ve got collection accounts or a few late payments, ask the creditor to remove those, Fleming suggests. If your credit score is low, meet with a mortgage broker or credit counselor and ask for suggestions to improve it.

2. Know what income a lender will count.

Lenders like to see a two-year track record in your job, though a new job in the same field probably won’t be counted against you. A lender may be happy to work with you even if you’re in a first job in a field you studied in college. But if you’ve just switched from dentistry to business management, a lender may not be willing to count your income until you show two years of earnings.

3. If you’re a freelancer, plan way ahead.

If you’re self-employed or own a business, a lender will want to see two or three years of tax returns, to start. If you take a lot of deductions to cut your taxable income, know that a lender will consider only your net income, not your gross income. If you work on contract, you may need to provide verification from the employer that the contract is going to continue. “Freelancers are tough,” Fleming says. If you’re independent, “you’d better have income on your tax returns, or you’re not going to get anywhere.”

4. Pay off any debt you can before you apply.

When deciding whether to grant a loan, a lender will consider all your debt, including student loan debt, credit card debt and car loans. If the debt-to-income ratio is too high, you won’t get a loan. For most mortgages, the debt-to-income ratio for all debt can’t be higher than 43 percent.

5. Be able to source any funds you play to use.

The lender will want to know where you got your down payment. If it’s a gift or a loan from family, you will need to specify which and document that the family member has the money and can afford to give it to you. If your parents give you money, for example, they will need to show bank statements and provide a gift letter.

6. Find a good mortgage broker or loan officer.

All brokers and loan officers are not alike. Get recommendations from real estate agents, friends, colleagues and professional contacts. Ideally, you’ll interview several loan officers and then choose the best. A good mortgage broker is going to shop your loan among multiple lenders to find the best deal for you. The expertise comes in when the broker evaluates your situation and then puts the package together to submit to lenders. “It’s very important for the borrower to have these conversations with the lender,” Gutierrez says. “There are a lot of technicalities that could mess it up along the way.”

7. Do not apply for a loan until you talk to an actual person.

Many of the online sites that say they offer loans really are lead generation sites that sell your information to mortgage brokers. Your best option is to find a local mortgage broker with strong recommendations. But if you choose to work with an online lender, make sure you have a specific loan officer you can talk to by phone assigned to your case for the duration of the process. This is not something that can be automated.

 

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When Prepaying Your Mortgage Is Not the Best Idea

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Writing a check for the mortgage payment
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By Karin Price Mueller

Q: I have paid almost $6,000 extra toward my mortgage principal. Isn’t my new payment supposed to go more toward principal and less for interest for the next payment? — Paying it down

A: Here’s how it works.

When you took out your mortgage, assuming it was a fixed-rate loan, there was an amortization schedule set by the lender. That schedule doesn’t change during the life of the mortgage, said Jim McCarthy, a certified financial planner with Directional Wealth Management in NewJersey.

“Your interest payments are based on your outstanding loan balance, not on your monthly principal payment,” McCarthy said. “If you pay next month’s principal payment, you will save a little interest, but not that much because your overall balance hasn’t been reduced by that much.”

For example, if the mortgage interest rate is fixed at 4.5 percent, a month’s worth of interest on a $100 prepayment of principal is 37.5 cents, McCarthy said.

But, he said, if you keep making additional principal payments every month, you can significantly reduce your interest payments over time.

“The benefit in prepaying your mortgage isn’t in reducing intra-month interest expense,” McCarthy said. “It comes from paying down your outstanding loan balance with additional principal payments, thereby paying off your mortgage in less time and reducing your total interest expense over the life of the mortgage.”

While you may want to pay down your mortgage faster, it may not be the best overall strategy for your finances.

Keeping extra cash on the side — having liquidity — may be more beneficial in the long run, said Jerry Lynch, a certified financial planner with JFL Total Wealth Management in New Jersey.

“Problems always happen, and you always need a Plan B,” Lynch said. “If you lose your job or get hurt, the bank does not care that you paid them an extra $6,000 last year, and you can’t get it back.”

The lender wants your monthly payment when it’s due, so you need to make sure you have savings to cover you in an emergency.

Lynch said rather than prepay the mortgage, he’d prefer to see you invest that extra cash monthly in a taxable account that takes on only moderate risk.

“With a 4 percent mortgage and a 30 percent tax bracket, we only need to beat 2.8 percent on an after-tax basis to have more gain in that side account,” he said. “If you have a problem, you have access to the funds, and at the end, after you have this fund for a while, you can always liquidate the account and pay off the mortgage.”

If you already have that kind of liquidity, then Lynch said paying down the mortgage is a fine strategy. Just make sure you have access to cash first.

 

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Maximizing Your Profit When You Sell Your Home

In all likelihood, your home is your biggest asset. Hence, if you want to sell this asset, you have some important decisions to make. Take your time to learn about the process of selling a home first. Thankfully, all you need to do is look online and you will find any information you need. It is important you do so, as it will help you reduce the stress you may experience, have a degree of control over the process itself and ensure you get the best price. Let’s review a number of things that you have to be aware of before you start making that sale, helping you to get the best possible price.

Start by working on the exterior of your property. You only get one chance to make a first impression and this is what the outside of your property will do. So, start by cleaning up your garden and give your bushes and trees a good pruning. Try to look at the outside of your home through the eyes of a potential buyer and determine whether or not it has curb appeal. In most cases, increasing your curb appeal is simply down to tidying and cleaning a bit.

Your motivation is yours and yours alone, so don’t go around telling potential buyers. If you tell what your motivation is, buyers could use it against you, particularly if they are working with a good realtor. Try to be as obtuse as possible when asked why you want to sell. A good excuse is saying that your needs have changed. This could mean absolutely anything. It has been shown psychologically that people will interpret these answers in a positive light that works for them. For instance, they might think you are able to afford something bigger and better now. They may also believe that you are ready to find a smaller property because your kids have moved out. The important thing is that your buyer won’t think that you are simply selling for the money.

Last but not least, get ready to clean up. Your home has to be absolutely sparkling. You are going to get filthy yourself, but it needs to be done and you can also start to get rid of all the clutter, which you have to do before you move anyway. You want your home to look like a show home by the time you’re done. Hence, you have to check the outside of the home, too. You have to make sure that your yard is clean and tidy, that your lawn is mowed and free from weeds and that your trees and bushes are pruned properly. The exterior of your property creates a first impression. Only one opportunity is ever given to create a first impression. Hopefully, this information will have helped you make a quick sale at a good profit.…