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Could Your House Be a Piggy Bank?

Eric Belsky is Managing Director of the Joint Center of Housing Studies at Harvard University. He also currently serves on the editorial board of the Journal of Housing Research and Housing Policy Debate. Last year, he released a paper on home ownership - The Dream Lives On: the Future of Homeownership in America. In his paper, Belsky reveals five financial reasons people should consider buying a home.

Here are the five reasons, each followed by an excerpt from the study:

1.) Housing is typically the one leveraged investment available.

“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, home ownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

2.) You're paying for housing whether you own or rent. 

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”

3.) Owning is usually a form of “forced savings”.

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

4.) There are substantial tax benefits to owning.

“Homeowners are able to deduct mortgage interest and property taxes from income...On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

5.) Owning is a hedge against inflation.

“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”

Bottom Line

We realize that home ownership makes sense for many Americans for an assortment of social and family reasons. It also makes sense financially. 

Who Needs A Real Estate Agent? YOU DO!

Whether you are buying or selling a home, it can be quite an adventurous journey. You need an experienced Real Estate Professional to lead you to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO. The 5 Reasons You NEED a Real Estate Professional in your corner haven’t changed, but have rather been strengthened in recent months due to the projections of higher mortgage interest rates & home prices as the market continues to recover.

1. What do you do with all this paperwork?

Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true Real Estate Professional is an expert in their market and can guide you through the stacks of paperwork necessary to make your dream a reality.

2. Ok, so you found your dream house, now what?

According to the Orlando Regional REALTOR Association, there are over 230 possible actions that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, who knows what these actions are to make sure that you acquire your dream?

3. Are you a good negotiator?

So maybe you’re not convinced that you need an agent to sell your home. However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a Real Estate Professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to, during the process.

4. What is the home you’re buying/selling really worth?

It is important for your home to be priced correctly from the start to attract the right buyers and shorten the time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to the National Association of REALTORS, “the typical FSBO home sold for $184,000 compared to $230,000 among agent-assisted home sales.” Get the most out of your transaction by hiring a professional.

5. Do you know what’s really going on in the market?

There is so much information out there on the news and the internet about home sales, prices, mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively price your home correctly at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a low-ball offer?

Dave Ramsey, the financial guru advises:

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”

Hiring an agent who has their finger on the pulse of the market will make your buying/selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.

Bottom Line:

You wouldn't hike up Mt. Everest without a Sherpa, or replace the engine in your car without a trusted mechanic. Why would you make one of your most important financial decisions of your life without hiring a Real Estate Professional? 

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Approved To Buy A House...Avoid the Following!

You have done the hard part in the home buying process and chosen a lender and a real estate agent to work with. You have also gone out and found the home of your dreams! Best of all, your team has done a great job of negotiating the best deal for you.

Now, as a buyer, all you have to do is sit back and wait for your loan to close … right? Wrong!!

Getting a home loan these days is a very interactive process. I am always amazed by how many clients I work with who come to me unaware of all the pitfalls they face during the loan process. To help avoid any surprises while waiting for final approval, I provide my clients with a short list of “do’s and don’ts” to follow.

Let’s start with the “do’s” …

1. Do keep the process moving by responding to your loan officers’ requests for documentation as soon as possible.
2. Do make decisions as soon as is reasonably possible.
3. Do convey questions or concerns you have as they develop.
4. Do continue to make all of your rent or mortgage payments on time.
5. Do stay current on all other existing accounts.
6. Do continue to work your normal work schedule with no unplanned time off.
7. Do continue to use your credit as normal.
8. Do be prepared to explain any large deposits in your bank accounts.
9. Do enjoy purchasing your home but remain objective throughout the process to help make decisions that are best for you.

After you have been pre-approved for your mortgage you will want to refrain from the following …

1. Do not make any major purchases (car, boat, jewelry, furniture, appliances, etc.).
2. Do not apply for any new credit (even if it says you are pre-approved or “xxx days same as cash”).
3. Do not pay off charges or collections (unless directed by your loan officer to do so).
4. Do not make any changes to your credit profile.
5. Do not change bank accounts.
6. Do not make unusual deposits into your bank accounts or move money around from one account to another.

Follow these simple rules and you will help to make your loan closing as smooth and hassle-free as possible! Good luck!

SCV's Homes Under $500K

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Receiving Gift Money To Buy Real Estate?

       

If you are receiving gift money to purchase real estate it is very important that you consult with your loan officer how to deposit that money, every penny is tracked during the loan process.

 "Show me the Gift Money!"

Underwriters track gift money as well as bank deposits and/or money transfers in bank accounts during the loan approval process. The origin of the gift money and the transfer-ability of the funds from the donor's account to the buyer's account is reviewed by an Underwriter in great detail. It is imperative that you contact your lender when depositing monies into your account during the home buying process.  Why you may ask?...well, any money that appears in a buyer's bank account that is not from an employee's pay check or pension; social security; foster care, etc., raises questions as to where the money came from. The buyer needs instructions from the Loan Officer before receiving any gift money from anyone as a specific procedure must be followed.

                             "Transferring Money!"

Sometimes a buyer transfers money numerous times creating a time-consuming cross-referencing of bank accounts showing the money leaving one account and being transferred into another. This often leaves a buyer frustrated as to the detailed involvement of what they consider non-problematic. When the buyer is asked for an on-line bank printout there can be no gap from the date on the last print-out or last bank statement. The amount of money transferred from the donor's account to the buyer's account must exactly match the amount that was transferred. Sometimes when trying to track the transferring from one bank account to another its revealed that a bank account is missing on the application - creating a revision to the application.

       "Cash Deposits!"

Occasionally buyers don't have auto-depositing of their payroll check. When a buyer deposits their payroll check "Less Cash" the amount will be less than the amount shown on their check stub - which raises a red flag. Since the amounts don't match, a letter of explanation may be required from the buyer. The best way to remedy this is to deposit the entire check and then withdraw the cash they need. Of course a buyer who receives a check shouldn't cash it and then try to deposit the cash in their bank account. A cash deposit in any bank account is not able to be documented and will not be considered as sufficient funds to close escrow. So if you have a garage sale use the cash to buy groceries etc.