When sellers need to sell their home for less than they owe on their mortgage, they’re shooting for a short sale. Short sale homes can sometimes be bargains, but only if you do your homework, stay patient, and remain unemotional during the sometimes lengthy and difficult short sale process.
Here are six tips for protecting yourself emotionally and financially when bidding on a short sale.
1. Get help from a short sale expert
A real estate agent experienced in short sales can identify which homes are being offered as short sales, help you determine a purchase price, and advise you on what to include in your offer to make the lender view it favorably. Ask agents how many buyers they’ve represented in short sales and, of those, how many successfully closed the transaction.
2. Build a team
Ask agents to recommend real estate attorneys knowledgeable in short sales and title experts. A title officer can do a title search to identify all the liens attached to a property you’re interested in. Because each lienholder must consent to a short sale, a property with multiple liens, like first and second mortgages, mechanic’s and condominium liens, or homeowners association liens, will be harder to purchase.
A title search may cost $250 to $300 up front, but it can help weed out less desirable properties requiring multiple approvals.
3. Know the home’s fair market value
By agreeing to a short sale, lenders are consenting to lose money on the loan they made to the sellers to purchase the home. Their goal is to keep those losses as low as possible. If your offer is dramatically less than the home’s fair market value, it may be rejected. Your agent can help you identify the price that’s good for you. The lender will determine whether approval is in its best interest.
4. Expect delays
There are two stages to a short sale. First, the sellers must consent to your purchase offer. Then they must submit it to their lender, along with documentation to convince the lender to agree to the sale.
The lender approval process can take weeks or months, even longer if the lender counteroffers. Expect bigger delays if several lienholders are involved; each can make a counteroffer or reject your offer.
5. Firm up your financing
Lenders will weigh your ability to close the transaction. If you’re preapproved for a mortgage, have a large downpayment, and can close at any time, they’ll consider your offer stronger than that of a buyer whose financing is less secure.
6. Avoid contingencies
If you must sell your current home before you can close on the short-sale property, or you need to close by a firm deadline, your offer may present too many moving parts for a lender to approve it.
Also, consider ordering an inspection so you’re fully informed about the home. Keep in mind that lenders are unlikely to approve an offer seeking repairs or credits for such work. You’ll probably have to purchase the home “as is,” which means in its present condition.
Read more: http://buyandsell.houselogic.com/articles/6-tips-buying-home-short-sale/#ixzz0xTrJycPt
Monday, August 23, 2010
Friday, August 13, 2010
5 Tips to Prepare Your Home for Sale
Many buyers today want move-in-ready homes and will quickly eliminate an otherwise great home by focusing on a few visible flaws. Unless your home shines, you may endure showing after showing and open house after open house—and end up with a lower sales price. Before the first prospect walks through your door, consider some smart options for casting your home in its best light.
1. Have a home inspection
Be proactive by arranging for a pre-sale home inspection. For $250 to $400, an inspector will warn you about troubles that could make potential buyers balk. Make repairs before putting your home on the market. In some states, you may have to disclose what the inspection turns up.
2. Get replacement estimates
If your home inspection uncovers necessary repairs you can’t fund, get estimates for the work. The figures will help buyers determine if they can afford the home and the repairs. Also hunt down warranties, guarantees, and user manuals for your furnace, washer and dryer, dishwasher, and any other items you expect to remain with the house.
3. Make minor repairs
Not every repair costs a bundle. Fix as many small problems—sticky doors, torn screens, cracked caulking, dripping faucets—as you can. These may seem trivial, but they’ll give buyers the impression your house isn’t well maintained.
4. Clear the clutter
Clear your kitchen counters of just about everything. Clean your closets by packing up little-used items like out-of-season clothes and old toys. Install closet organizers to maximize space. Put at least one-third of your furniture in storage, especially large pieces, such as entertainment centers and big televisions. Pack up family photos, knickknacks, and wall hangings to depersonalize your home. Store the items you’ve packed offsite or in boxes neatly arranged in your garage or basement.
5. Do a thorough cleaning
A clean house makes a strong first impression that your home has been well cared for. If you can afford it, consider hiring a cleaning service.
If not, wash windows and leave them open to air out your rooms. Clean carpeting and drapes to eliminate cooking odors, smoke, and pet smells. Wash light fixtures and baseboards, mop and wax floors, and give your stove and refrigerator a thorough once-over.
Pay attention to details, too. Wash fingerprints from light switch plates, clean inside the cabinets, and polish doorknobs. Don’t forget to clean your garage, too.
Read more: http://buyandsell.houselogic.com/articles/5-tips-prepare-your-home-sale/#ixzz0wUA0WIYa
1. Have a home inspection
Be proactive by arranging for a pre-sale home inspection. For $250 to $400, an inspector will warn you about troubles that could make potential buyers balk. Make repairs before putting your home on the market. In some states, you may have to disclose what the inspection turns up.
2. Get replacement estimates
If your home inspection uncovers necessary repairs you can’t fund, get estimates for the work. The figures will help buyers determine if they can afford the home and the repairs. Also hunt down warranties, guarantees, and user manuals for your furnace, washer and dryer, dishwasher, and any other items you expect to remain with the house.
3. Make minor repairs
Not every repair costs a bundle. Fix as many small problems—sticky doors, torn screens, cracked caulking, dripping faucets—as you can. These may seem trivial, but they’ll give buyers the impression your house isn’t well maintained.
4. Clear the clutter
Clear your kitchen counters of just about everything. Clean your closets by packing up little-used items like out-of-season clothes and old toys. Install closet organizers to maximize space. Put at least one-third of your furniture in storage, especially large pieces, such as entertainment centers and big televisions. Pack up family photos, knickknacks, and wall hangings to depersonalize your home. Store the items you’ve packed offsite or in boxes neatly arranged in your garage or basement.
5. Do a thorough cleaning
A clean house makes a strong first impression that your home has been well cared for. If you can afford it, consider hiring a cleaning service.
If not, wash windows and leave them open to air out your rooms. Clean carpeting and drapes to eliminate cooking odors, smoke, and pet smells. Wash light fixtures and baseboards, mop and wax floors, and give your stove and refrigerator a thorough once-over.
Pay attention to details, too. Wash fingerprints from light switch plates, clean inside the cabinets, and polish doorknobs. Don’t forget to clean your garage, too.
Read more: http://buyandsell.houselogic.com/articles/5-tips-prepare-your-home-sale/#ixzz0wUA0WIYa
Friday, August 6, 2010
4 Tips to determine how much mortgage you can afford
Homeownership should make you feel safe and secure, and that includes financially. Be sure you can afford your home by calculating how much of a mortgage you can safely fit into your budget.
Instead of just taking out the biggest mortgage a lender qualifies you to borrow, consider how much you want to pay each month for housing based on your financial and personal goals.
Think ahead to major life events and consider how those might influence your budget. Do you want to return to school for an advanced degree? Will a new child add day care to your monthly expenses? Does a relative plan to eventually live with you and contribute to the mortgage?
Still not sure how much you can afford? You can use the same formulas that most lenders use, or try another of these traditional methods for estimating the amount of mortgage you can afford.
1. The general rule of mortgage affordability
As a rule of thumb, you can typically afford a home priced two to three times your gross income. If you earn $100,000, you can typically afford a home between $200,000 and $300,000.
To understand how that rule applies to your particular financial situation, prepare a family budget and list all the costs of homeownership, like property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care costs.
2. Factor in your downpayment
How much money do you have for a downpayment? The higher your downpayment, the lower your monthly payments will be. If you put down at least 20% of the home’s cost, you may not have to get private mortgage insurance, which costs hundreds each month. That leaves more money for your mortgage payment.
The lower your downpayment, the higher the loan amount you’ll need to qualify for and the higher your monthly mortgage payment.
3. Consider your overall debt
Lenders generally follow the 28/41 rule. Your monthly mortgage payments covering your home loan principal, interest, taxes, and insurance shouldn’t total more than 28% of your gross annual income. Your overall monthly payments for your mortgage plus all your other bills, like car loans, utilities, and credit cards, shouldn’t exceed 41% of your gross annual income.
Here’s how that works. If your gross annual income is $100,000, multiply by 28% and then divide by 12 months to arrive at a monthly mortgage payment of $2,333 or less. Next, check the total of all your monthly bills including your potential mortgage and make sure they don’t top 41%, or $3,416 in our example.
4. Use your rent as a mortgage guide
The tax benefits of homeownership generally allow you to afford a mortgage payment—including taxes and insurance—of about one-third more than your current rent payment without changing your lifestyle. So you can multiply your current rent by 1.33 to arrive at a rough estimate of a mortgage payment.
Here’s an example. If you currently pay $1,500 per month in rent, you should be able to comfortably afford a $2,000 monthly mortgage payment after factoring in the tax benefits of homeownership.
However, if you’re struggling to keep up with your rent, consider what amount would be comfortable and use that for the calcuation instead.
Also consider whether or not you’ll itemize your deductions. If you take the standard deduction, you can’t also deduct mortgage interest payments. Talking to a tax adviser, or using a tax software program to do a “what if” tax return, can help you see your tax situation more clearly.
Read more: http://buyandsell.houselogic.com/articles/4-tips-determine-how-much-mortgage-you-can-afford/#ixzz0vpVP3gbr
Instead of just taking out the biggest mortgage a lender qualifies you to borrow, consider how much you want to pay each month for housing based on your financial and personal goals.
Think ahead to major life events and consider how those might influence your budget. Do you want to return to school for an advanced degree? Will a new child add day care to your monthly expenses? Does a relative plan to eventually live with you and contribute to the mortgage?
Still not sure how much you can afford? You can use the same formulas that most lenders use, or try another of these traditional methods for estimating the amount of mortgage you can afford.
1. The general rule of mortgage affordability
As a rule of thumb, you can typically afford a home priced two to three times your gross income. If you earn $100,000, you can typically afford a home between $200,000 and $300,000.
To understand how that rule applies to your particular financial situation, prepare a family budget and list all the costs of homeownership, like property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care costs.
2. Factor in your downpayment
How much money do you have for a downpayment? The higher your downpayment, the lower your monthly payments will be. If you put down at least 20% of the home’s cost, you may not have to get private mortgage insurance, which costs hundreds each month. That leaves more money for your mortgage payment.
The lower your downpayment, the higher the loan amount you’ll need to qualify for and the higher your monthly mortgage payment.
3. Consider your overall debt
Lenders generally follow the 28/41 rule. Your monthly mortgage payments covering your home loan principal, interest, taxes, and insurance shouldn’t total more than 28% of your gross annual income. Your overall monthly payments for your mortgage plus all your other bills, like car loans, utilities, and credit cards, shouldn’t exceed 41% of your gross annual income.
Here’s how that works. If your gross annual income is $100,000, multiply by 28% and then divide by 12 months to arrive at a monthly mortgage payment of $2,333 or less. Next, check the total of all your monthly bills including your potential mortgage and make sure they don’t top 41%, or $3,416 in our example.
4. Use your rent as a mortgage guide
The tax benefits of homeownership generally allow you to afford a mortgage payment—including taxes and insurance—of about one-third more than your current rent payment without changing your lifestyle. So you can multiply your current rent by 1.33 to arrive at a rough estimate of a mortgage payment.
Here’s an example. If you currently pay $1,500 per month in rent, you should be able to comfortably afford a $2,000 monthly mortgage payment after factoring in the tax benefits of homeownership.
However, if you’re struggling to keep up with your rent, consider what amount would be comfortable and use that for the calcuation instead.
Also consider whether or not you’ll itemize your deductions. If you take the standard deduction, you can’t also deduct mortgage interest payments. Talking to a tax adviser, or using a tax software program to do a “what if” tax return, can help you see your tax situation more clearly.
Read more: http://buyandsell.houselogic.com/articles/4-tips-determine-how-much-mortgage-you-can-afford/#ixzz0vpVP3gbr
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