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How To Get Into Real Estate Investing As A Beginner

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Investing in real estate has long been a potent strategy for accumulating wealth, utilized by individuals throughout history. While it may appear overwhelming for novices, acquiring the appropriate knowledge and tactics allows anyone to embark on a successful real estate investment journey. This beginner’s guide will cover the fundamental steps and aspects for those intending to invest in their inaugural property.

Establish Your Investment Objectives

Before venturing into the realm of real estate investment, it is essential to establish your investment goals. What are your aspirations for your investments? Do you desire rental income, long-term asset growth, or a combination of the two? Comprehending your goals will aid you in making well-informed choices during this journey.

Assess Your Financial Situation

Real estate investments require capital, so it’s essential to assess your financial situation and establish a realistic budget. Determine how much you can comfortably invest without stretching your finances too thin. Consider factors like your current income, savings, and credit score, as these will influence your ability to secure financing for your investment.

Educate Yourself

Diving into the realm of real estate investment requires a period of learning and growth. Allocate time to familiarize yourself with various investment options like Residential properties in North Cyprus, including residential, commercial, and multifamily properties. Enrich your knowledge by reading books, participating in seminars, and utilizing online resources to grasp a firm understanding of the market and various investment techniques.

Choose the Right Location

Location is a fundamental factor when you want to learn real estate investing successfully. Research and identify areas with strong growth potential, low crime rates, good schools, and desirable amenities. A well-chosen location can significantly impact the rental income and property appreciation of your investment.

Secure Financing

Unless you have substantial savings, you’ll likely need financing to invest in real estate. Explore different options, including traditional mortgages, private lenders, and hard money loans. Compare interest rates, terms, and qualification requirements to find the best financing option for your investment. 

Although – this said, the best way to get financing is to save up a ton of money.  Most lenders are going to want 20% or 25% down payment – so you’ll likely need to spend some time saving.

Identify Suitable Properties

Once you’ve defined your strategy and secured financing, start searching for properties that align with your investment goals. Utilize online listings, attend open houses, and network with local real estate professionals to identify potential investment properties.

Make Informed Offers

When you’ve found a property that meets your criteria, it’s time to make an offer. Consult with your real estate agent to determine an appropriate offer price based on market analysis and property condition. Be prepared for negotiation, as the seller may counter your initial offer.   Also, leave your emotions out of the negotiating process.  You’ll make better decisions if you approach the deal rationally.

Secure the Property

Once your offer is accepted, you’ll need to complete the necessary paperwork and secure the property through a purchase agreement. This process typically involves earnest money deposits, inspections, appraisals, and finalizing the financing.

Real estate investing is a dynamic and rewarding venture that offers opportunities for financial growth and security. Though the prospect of investing in your initial property might appear overwhelming to novices, meticulous organization, learning, and commitment can lead to success. Adhering to the guidelines presented in this introductory manual will empower you to confidently embark on your real estate investment adventure and make well-informed choices that contribute to accomplishing your financial objectives.

Additional Reading, Plus Find A Community!

For some real world examples of how to build wealth in real estate, consider reading dinksfinance article on how they built their net worth to over $1,000,000 using real estate.

If you don’t like the idea of putting hundreds of thousands into a home, but you still want to make money in real estate, consider reading this article on Ark7, which a nice little app discussing fractional ownership of real estate.

Finally, if you want to get into real estate investing as a beginner – and are serious about it, consider joining the Bigger Pockets Forums (here), or the Saving Advice Forums (here), both of them will give you a community of real estate owners to work with.

Property Manager or DIY: When to Pay for Rental Issues

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When you’re a renter, you may be hesitant to reach out to your property manager when you’re experiencing some issues with your unit. However, keep in mind that up to 70% of property managers not only provide advertising and leasing services but also inspections and repairs. That said, if you are on the fence about whether you should DIY property issues or let the professionals handle things, here are some common rental issues and when to handle them yourself and when to contact your landlord.

Damaged Paint? DIY

People spend up to 90% of their time indoors, and chances are your walls are decorated to make your indoor space cozier. However, if you accidentally caused damage to the paint in your unit, you may be expected to pay out of pocket for repairs. Fortunately, paint problems are relatively easy to remedy as a DIY project. You can either contact your property manager to get the paint color used in your unit or you can take a chip of the paint and bring it to your local hardware store where they can color-match the paint for you. In some cases, your property manager may even have a spare bucket of the same paint color used to paint your unit that you can use if you ask, such as if you requested approval for an accent wall that needs to be repainted before you leave.

Water Issues? Contact the Property Manager

According to the EPA, only about 1% of the Earth’s water is potable (drinkable). Your landlord and property manager are legally required to make sure you have drinkable water and access to hot water. If you notice any issues with your unit’s water, such as plumbing issues, contaminated water, or shower problems, make sure to contact your property manager right away. Water problems are not your responsibility, and you could risk causing further damage if you try to DIY.

Electrical Problems? Contact the Property Manager

Electrical problems should immediately be reported to the property manager because they pose a fire risk. According to the National Fire Safety Council, there are 45,000 home fires in the United States each year with electrical malfunction as the source. Electric problems can be dangerous to you and to the property. Alert your landlord if you notice any sparks, humming from your outlets, smoke coming from the outlets, or flickering lights.

Driveway Issues? Contact the Property Manager

Driveways should be seal coated every few years to prevent chipping and cracking. According to Bob Vila, sealing a driveway costs between $250-$768, depending on the size of the driveway. Fortunately, unless it involves shoveling during the winter months, the driveway isn’t typically your realm of expertise and you ought to contact the property manager if there are issues such as cracks, potholes, or other issues that could potentially cause injuries or property damage.

Sidewalk Salting? DIY

Make sure to double-check your lease to determine who is responsible for salting the sidewalks, walkways, and driveways for your property. Depending on the kind of rental property you live in, you may be responsible for salting your own steps while your landlord is responsible for salting the driveway during the winter months. You may want to look into getting a battery operated snow blower instead if this makes it easier to clear the snow before applying the salt, or you can see if your landlord has one. Sidewalk salt is relatively inexpensive, so it can be easy to obtain and spread on your steps. However, if your property manager is responsible for salting, make sure to reach out to them at the first sign of snow. If they’re negligent with salting and you’re injured as a result, you could potentially file a personal injury claim for a slip and fall accident up to three years after the incident.

Ultimately, it’s important to get everything you can in writing in your lease to be clear about your responsibilities to the property and the owner’s responsibilities. The last thing you want to do is pay out of pocket for an issue that your property manager is legally required to take care of.

6 Strategies to Help You Sell a House Without a Realtor

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Selling your home without a realtor is possible. It isn’t necessarily easy (although it can be, depending on the method you pick). It will save you money on closing costs and put the control in your hands. Let’s take a look at how much you could save by selling your home realtor-free and the six best ways to do it.

Can You Actually Save Money Without Using a Realtor?

Yes, you can save money without using a realtor. After all, you won’t have to pay the listing fee, which is 2.72% (on average) of the final sale price. You may have to pay the buyer’s agent commission, which tends to be 2.65%. However, selling your home to a company that buys properties for cash gets you around that too. Below, you’ll find six strategies to use when selling your house without a realtor.

#1 Prepare Your Home

Before showing your home to potential buyers, ensure it looks as good as possible. That way, you’re more likely to get a reasonable, quick offer. Preparations should include:

  • Decluttering
  • Cleaning everything, including polishing hardwood, washing windows, and shampooing the carpets
  • Staging your home
  • Gardening and/or fixing the landscape to improve appeal
  • Repairing damage

#2 Consider Hosting a Virtual Open House

In-person open house events are fantastic if you live in a high-traffic area, but in rural regions, they don’t get a lot of foot traffic. Here is where the internet can save the day! Conduct a live, virtual open house on social media to entice interested parties. Naturally, you’ll want to share your home in the best light and prepare a walkthrough speech to ensure watchers get all the information they need.

#3 Sell to a Company That Buys Houses for Cash

This is by far the easiest way to sell your house without a realtor — use a company that purchases homes for cash. You can even sell your home as-is (yes, even without making any of the preparations listed in strategy one). Real estate investors that buy with cash make the process easy because they don’t use a mortgage for the transaction. This shaves weeks off the total transaction time and makes the deal less complex.

#4 Make Sure Your Asking Price is Realistic

You don’t want to disappoint potential buyers by asking for too much. While it’s tempting to squeeze as much value as possible out of your home, you must ensure you don’t price yourself out of the market.

Conduct thorough research before marketing your house by looking at similar properties in your area. If your property is overpriced and sits on the market for multiple months, it will cost you more money in holding costs.

#5 Promote with a Short and Sweet Video

Post a video on social media to highlight your property’s best features. As per HubSpot’s suggestions, these are the optimal video lengths for each platform:

  • Facebook — 2 minutes
  • YouTube — 2 minutes
  • Twitter — 45 seconds
  • Instagram — 30 seconds

#6 Add Value with Your Flyers

Marketing flyers are still a great advertising tool. Just make sure you add genuine value. Consider comparing “then and now” photos of your house or adding a fun word search. Anything a bit quirky will do the trick. You can post these around your town, in cafes, and at the local recreation center.

8 Hidden Costs of Buying a Home

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Declining mortgage rates have sparked interest in homeownership and property purchases, especially by young adults who can’t stand increasing rental charges. Buying a home also comes with the benefit of having equity. However, most first-time homeowners are shocked by the entire purchase process. While the monthly mortgage costs are not surprising, unexpected costs that come with homeownership can dent your bank account.

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Are Housing Prices Finally Dropping?

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Currently, inflation is running rampant, harming the budgets of most households. Plus, the Federal Reserve raised rates again, and by a higher margin than most expected. In both cases, that can make buying a home harder, which many would assume would drive down demand. While a housing market crash isn’t necessarily on the horizon, most people wouldn’t be surprised if the home prices were shifting downward. But is that actually what’s happening? If you’re wondering, “Are housing prices finally dropping?” here’s what you need to know.

Are Housing Prices Dropping?

In many parts of the country, housing prices are starting to decline. With mortgage rates rising due to increases in the Federal Reserve rates, sellers may have to take a different approach to find buyers. By reducing prices, it makes properties more enticing, which could lead to a quicker sale.

However, that doesn’t mean housing prices are universally dropping. During a four-week period that ended in late May, about one-in-five sellers dropped their asking price. While conditions have changed since, that shows that not all sellers are going to alter their listings even as the market changes.

In time, the decline in prices may become more common. However, that also depends on your location. For example, prices were still rising in the Seattle area as of early June 2022. However, the available inventory was also trending upwards, and sales were slowing, so a change is potentially on the horizon.

Generally, whether housing prices are falling near you depends on supply vs. demand. In some areas, the increasing interest rates dramatically altered demand, leading to far higher supply. In those regions, prices will typically fall faster than in hot housing markets that are only seeing slight changes in demand or have had a demand vs. supply imbalance so severe that it will take time to level out.

Is Demand for Homes Shifting?

In a broad sense, demand for homes is declining. Higher interest rates and high inflation are pulling aspiring buyers out of the market in some cases. Essentially, both of those factors made transitioning to a new house far more expensive. Plus, many potential homebuyers will hesitate to make a big financial commitment with inflation as it is currently.

Additionally, the number of active listings isn’t necessarily growing substantially in some areas. Many aspiring sellers are aware that conditions aren’t ideal for quick, high-profit home sales. As a result, those who viewed selling as optional aren’t rushing to list. Instead, listings are mainly comprised of those who feel a sense of urgency about selling their property.

Declining inventory can also shift demand. While inventory levels were low previously, it was partially because borrowing was so affordable. Buyers were quick to jump on houses with potential, largely because of concerns that they wouldn’t have options if they waited.

Now, if decline in inventory is related to hesitant would-be sellers deciding that waiting for conditions to improve is a better choice, this alters the market in a different way. It could reduce the availability of homes that buyers find enticing, which could also impact demand.

Are Housing Inventories Declining?

Whether you see a decline in housing inventory is mainly based on where you live. Among the 400 largest housing markets, inventories rose in about 332 of them as of early June. In fact, many of them are increasing by 40 to 55 percent. While that seems like good news for buyers, it isn’t entirely what it seems.

Even in areas with inventory growth in that range, many of them have levels far below what was there pre-pandemic. As a result, many regions technically have an incredibly limited supply, preventing conditions from full favoring buyers.

Additionally, not every city is seeing increases. In the top 400 markets, around 68 housing markets either have declining inventory or are approximately the same. Further, those numbers don’t account for smaller markets, which could be going either way.

Even if conditions remain the same for months, if not longer, that doesn’t guarantee that inventory levels will rise quickly. As mentioned above, some sellers have the luxury of time, so they aren’t hopping into the market. Instead, they’re waiting to see if conditions improve before listing.

However, some sellers can’t afford to wait, which will lead to new listings. In areas where sales continue to slow, that could pump up inventory levels significantly. However, it may take longer than you’d expect to reach pre-pandemic inventory, so keep that in mind.

Will Prices Drop If the Federal Reserve Raises Rates Again?

The likelihood that the Federal Reserve will raise rates again – potentially multiple times through 2022 and into 2023 – is high. Usually, rate increases are a means of limiting inflation, making borrowing less enticing and encouraging saving. As a result, it alters economic activity, which can keep prices in check.

If the Federal Reserve raises rates again, it will undoubtedly impact the housing market. When mortgages get more expensive, it reduces the number of potential buyers. In turn, it can create a buyer’s market, leading sellers to lower prices as a means of securing a sale.

However, every housing market is different. Additionally, price reductions depend on the action of sellers and available market inventory. Whether a seller can afford to wait to list until conditions improve may influence inventory levels, potentially keeping them below pre-pandemic levels for far longer than most would hope. Plus, the supply vs. demand equation may favor sellers in some markets regardless of raising rates, which could keep prices either steady or may leave them generally trending upward in specific areas.

Ultimately, prices will potentially decline on average, or growth will stagnate in many markets if the Federal Reserve raises rates again. Whether that works out well for a potential buyer mainly depends on their location, as that ultimately plays a big role in the prices they’ll see and whether they’ll benefit from a decline.

Are you hoping that housing prices will finally start dropping, or would inflation and higher interest rates prevent you from buying a house at this time? Do you think a housing crash is on the horizon and want to see if you can capitalize on that? Share your thoughts in the comments below.

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Is Paying Points A Good Way to Reduce Your Mortgage Rate?

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For many people, buying a house is the most expensive purchase they’ll make during their lives. Since that’s the case, it isn’t uncommon to look for ways to reduce the monthly payments and overall cost. While negotiating is undoubtedly a great option, paying for points is another viable approach. If you’re wondering what mortgage points are, how they work, and whether they’re a good way to reduce your mortgage rate, here’s what you need to know.

What Are Mortgage Points?

Technically, mortgage points are a fee borrowers can pay as they set up a mortgage for a purchase or refinance. Homeowners can choose to pay the cost in exchange for securing a lower interest rate, though the fee is actually optional. There’s no requirement to buy points, so homeowners can choose to forgo the expense and keep the original interest rate offered.

How Mortgage Points Work

In some ways, mortgage points are a way to prepay interest. In exchange for a fee, the lender agrees to give you a better rate. Essentially, you’re compensating the lender for lost income, as the lower rate means they’ll earn less off of your loan over its life.

Mortgage points reduce an interest rate associated with a home loan by a set amount. In most cases, one point shrinks the interest rate by about 0.25 percent. For example, one point would turn a 5 percent interest rate into a 4.75 percent rate.

It’s important to note that each lender can set the value of their points. As a result, some may offer 0.25 percent per point, while others may reduce the rate by 0.125 percent, 0.2 percent, 0.3 percent, 0.35 percent, or any other amount they choose. However, the reduction must be disclosed to borrowers in advance, ensuring they know precisely what they’re getting in return for the fee.

If a borrower decides to buy points, they pay the cost at closing. The points are listed in the mortgage documentation, ensuring the new rate is officially part of the loan structure. Once the homebuyer closes, the rate after the deductions for any points purchased remains in place for the life of the loan.

The Cost of Mortgage Points

As with mortgage point values, each lender can determine its own cost for purchasing points. However, most lenders charge a fee of 1 percent of the loan total per point. For example, if you were financing $300,000, you’d pay $3,000 per point. If you wanted two points, that would cost $6,000.

While it may seem like 1 percent is the minimum amount you can pay, that isn’t always the case. Some lenders do allow borrowers to purchase fractional mortgage points. Using the example above, a homebuyer may be able to spend $1,500 to get a half-point on a $300,000 loan.

If they do, they secure an interest rate reduction that’s half the full point amount. For instance, if a whole point reduces the interest rate by 0.25 percent, a half-point would be worth 0.125 percent. For an initial interest rate of 5 percent, that half-point leads to a 4.875 percent interest rate instead.

Pros and Cons of Mortgage Points

Mortgage points do come with pros and cons. When it comes to the benefits, the biggest is that paying points can save you money over the life of your loan, particularly if you plan on staying in place long-term. If you want to confirm the savings, you’ll need to compare the total interest paid based on the two possible interest rates. That way, you can see the overall savings and compare that to the cost of the points.

If you don’t intend to stay in the home forever or may refinance in the future, you’ll want to find out if you’ll save enough to offset the price of any points. Usually, that involves calculating the breakeven point, which is the month that your interest savings covers the amount you spent on points. Precisely when that occurs varies depending on your loan terms, though you can use an online calculator to make determining when that happens easier.

Paying points may also help you qualify for a home loan if the monthly mortgage payment is higher than a lender finds comfortable. When you reduce the interest rate, the monthly payment goes down, potentially to the point where you become eligible for your preferred loan.

Tax Deductible

In some cases, the cost of your mortgage points is also tax-deductible. Since it’s considered prepaid interest, it can lead to deductions similar to traditional home loan interest payments. Precisely what that’s worth depends on your tax situation, so you’ll want to speak with a tax professional to see if this provides suitable value.

When it comes to drawbacks, the biggest is the higher upfront cost. While you might be able to convince the seller to cover the cost in exchange for a higher offer, paying out-of-pocket is far more common. That means paying potentially thousands of dollars in addition to your down payment, which may not be easy.

It’s also that paying points will cause you to pay more for your mortgage than you would without them. If you unexpectedly need to move or decide to do a cash-out refinance to consolidate debt or tackle some upgrades before the breakeven point, paying points costs you extra money instead of saving it.

If you’re looking at an adjustable-rate mortgage (ARM), reaching the breakeven may be impossible. Usually, the points only count during an initial fixed-rate period. If the breakeven point doesn’t occur during that window, then the points could also cost you more.

Is the Cost of Mortgage Points Negotiable?

Generally speaking, the cost for mortgage points isn’t negotiable. However, if you have exceptional credit and a solid down payment, you may be able to negotiate to lower the cost of certain other expenses, like origination fees or certain closing costs. By doing so, mortgage points may feel more affordable, even if the price of each point remains the same.

Is Paying Points a Good Idea?

Whether paying points is a good way to reduce the cost of buying a home depends on your unique situation. If you know with a reasonable amount of certainty that you’ll remain in the house and with your current lender until at least the breakeven point, it’s worth considering. Anything after the breakeven point is pure savings, giving you a clear financial benefit.

Similarly, if you can afford your dream home, but the lender is hesitant to fund a mortgage with a particular monthly payment because of your income level, paying points could be worthwhile. It could let you reduce the monthly amount to the point that leaves your preferred lender comfortable, allowing you to qualify when you otherwise wouldn’t.

Otherwise, it may be best to skip mortgage points. Those who plan to leave before the breakeven point won’t secure a savings. In fact, anyone who makes extra payments may struggle to recoup the cost if they ever move.

Similarly, refinancing before the breakeven point results in a loss, making points an awful idea. Finally, if paying points means not having enough for a down payment to avoid PMI, get the most favorable initial interest rate, or secure a lower homeowner’s insurance rate, then it may be better to go without paying for points.

Look at your overall financial picture and the plan for your home. That way, you can determine whether points are genuinely right for you.

Do you think that paying points to reduce your mortgage rate is a smart approach when you’re getting a mortgage? Do you believe that other techniques are more effective when it comes to securing a great rate or keeping costs down? Share your thoughts in the comments below.

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Is This The Right Time to Do A Cash-Out Refi?

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refi vs. home equity loan
 

With mortgage rates starting to rise, those who didn’t refinance their mortgage in the last few years may worry they’ve missed the boat. However, there are situations where doing a cash-out refi now may not be the worst choice. If you’re trying to decide whether moving forward is wise, here’s what you need to know.

Is This the Right Time to Do a Cash-Out Refi?

The Benefits of Doing a Cash-Out Refi Now

In many cases, the main goal of a cash-out refi is to secure funds for another purpose. For example, you might want to tackle some home improvements, consolidate debt, or handle a large purchase without needing to turn to personal loans.

By doing a cash-out refine now, you’re able to achieve your broader goals. That alone could make now a decent time to move forward.

Additionally, while interest rates are rising, many homeowners have rates above what they could secure today. If you’ve got a rate above 6 percent and your credit is far stronger than it was when you first secured a mortgage, you might be able to capture a lower rate when you refi.

In some cases, a cash-out refi now could lead to a lower monthly payment. If you secure a lower interest rate and reset your repayment term to 30 years, you may find yourself paying less each month than you otherwise would. If your budget is tight, that could be beneficial.

The Drawbacks of Doing a Cash-Out Refi Now

By moving forward with a cash-out refi now, you’re not necessarily getting the best rate. If your current mortgage is below 5 percent, securing a rate below that might be challenging, if not impossible, in the current market. Since that’s the case, you may be better off looking at alternatives if your rate is below what you could get today.

When you move forward with a cash-out refinance, you typically have to pay a range of fees, too. Along with loan origination fees, you may encounter appraisal fees, closing costs, and more. In some cases, those fees over set or exceed any potential interest savings. Plus, for those you can’t roll into the loan, you may need to come up with a decent amount of cash to cover them, which may not be easy.

A cash-out refinance also comes with a few other drawbacks. Any hard pull on your credit report could lead to a short-term score dip. Additionally, a refi will reduce the average age of your accounts, as you’re replacing an existing loan with a fresh one. However, depending on your credit history, the impact may only be minor.

How to Decide Whether a Cash-Out Refi Is Right for You

Whether doing a cash-out refi now is the right choice depends on your situation. If your interest rate is above 6 percent and your credit score has improved, you may still get a reduced rate now, even with interest rates increasing. In fact, by not waiting, you could hop in before rates go up further, giving you the best chance to save.

A cash-out refi may allow you to avoid higher-cost financing, too, like personal loans or credit card debt. In that case, it’s certainly worth considering as long as your interest rate on your mortgage won’t rise.

However, if your interest rate is below 5 percent currently, you’re likely better off leaving your current mortgage in place. That way, you can maintain a low rate on what can be an expensive loan. Plus, alternatives like a home equity loan or line of credit could still allow you to tap equity and get a competitive rate, all without a full-blown refinance.

Do you think now is the right time to do a cash-out refi ? When it comes to refinance vs. home equity loan, which do you think is the best move today? Share your thoughts in the comments below.

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Applying for a Mortgage

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There’s always talk about home-buying and mortgages, but with interest rates being at all-time lows over the past few years, I feel like the talk about those things have picked up. Not only that, interest rates are likely going up this year so people are trying to get in before it’s too late. In this post, I want to talk about mortgages, how they work, and what happens when applying for a mortgage.

What’s a mortgage?

A mortgage is a loan you get from the bank or another lender to buy a house. When you submit an offer to buy a house, you’ll apply for a mortgage, and it’s a very involved process. More on that later.

In a mortgage, you’ll have options for what your term is. Your typical options are 15-year, 20-year, and 30-year.

You’ll also have to make a down payment. Current trends show that a lower down payment is pretty common. Depending on the type of loan, you can put down 3+%. And how much you put down matters. If you put down less than 20%, you’ll have to pay Primary Mortgage Insurance (PMI).

Here are the pieces of your typical mortgage payment – principal, interest, taxes and insurance, and PMI (if applicable). Taxes and insurance are commonly put in an escrow account and paid when they’re due by the lender.

Mortgage application process

From application to closing, it’s about 45-60 days. During that period, you’ll go through underwriting. In underwriting, they’ll have you submit documentation to confirm your credit report, annual income, current assets and liabilities, employment information, prior tax returns, among other things.

After you’ve cleared underwriting and they’ve confirmed everything, you’ll head to closing. At closing, you’ll sign a lot of papers. You’ll likely need to bring your checkbook with you as well.

There are closing costs associated with your mortgage. Some of these can be added to your total mortgage and some of them need to be paid. Closing costs are normally 3%-6% of the total mortgage and can include real estate commissions, taxes, insurance premiums, title fees, and record filing fees.

And if you’re buying, you’ll also need to write a check for the down payment.

Who gets a mortgage?

There is a slough of factors you need to meet when applying for a mortgage. Credit score matters. Usually, you’ll need at least a 620 credit score (all else being equal) to get a mortgage. Though the better the credit score, the better interest rate you’ll get.

The debt to income ratio needs to be under 50%. The lower the debt to income ratio (all else being equal) the more you can afford. If you have a 45% debt to income ratio and can afford a $250,000 mortgage, you’d probably be able to afford a $300,000 if your debt to income ratio is 25% (this is just an example, I didn’t do the math on this).

Condition of the home. With an FHA mortgage, they are a little pickier on the condition of your home. Usually, it’s just the outside of the home they’re picky with. Chipped paint is a typical thing they take issue with, so just be aware of that.

Applying for a mortgage is necessary for most people so it’s important you understand how they work.

Related reading:

Understanding 15-Year vs. 30-Year Mortgages in the USA

What to do when you’re one month behind on your mortgage

Why Financial Literacy is Important

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

How Can I Get Rid of Wells Fargo PMI on My Home Loan?

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how can i get rid of wells fargo pmi

If you purchased a home with a down payment of less than 20 percent, there’s a good chance you have private mortgage insurance (PMI) wrapped into your Wells Fargo mortgage payment. While it’s easy to assume that you have to pay that extra amount until you pay off your loan, that isn’t the case. Instead, you can get rid of it if you meet certain criteria. So, if you want to know how to get rid of Wells Fargo PMI on your home loan, here’s how to go about it.

Getting Your PMI Canceled on Your Wells Fargo Home Loan

Removing the PMI from your Wells Fargo mortgage is incredibly straightforward. Once you achieve an 80 percent loan-to-value based on the original value of the property at the time of purchase, you can initiate the removal process.

First, you need to make sure that you haven’t had any 30-day late payments within the past 12 months, as well as no 60-day late payments within the past 24 months. Both of those are firm eligibility criteria, so you’ll want to make sure you qualify on both of those points. If so, you can request the removal of your PMI to initiate the cancelation process.

After requesting the cancelation of the PMI, you’ll coordinate with Wells Fargo to get your home appraised. This ensures that the value of your house hasn’t declined since the original loan was issued.

The cost of the appraisal is your responsibility, and it usually runs a few hundred dollars. As a result, you’ll want to make sure you have those funds available before you begin the process. If the appraisal comes through in your favor, the PMI removal will move forward.

It’s important to note that Wells Fargo will automatically cancel your PMI if you achieve a loan-to-value ratio of 78 percent as long as you remain current on your mortgage. If paying for an appraisal isn’t an option at an 80 percent loan-to-value ratio, this could allow you to get rid of PMI without that out-of-pocket expense.

Additionally, if your home value increases enough, you may be able to remove PMI before you reach an 80 percent loan-to-value figure with a new appraisal. However, that option isn’t universally available. As a result, you’ll need to contact Wells Fargo to see if you can go that route.

Alternatives to Canceling Your Wells Fargo PMI on Your Mortgage

While you can use the Wells Fargo PMI cancelation process above, that isn’t your only option for removing your PMI. If your mortgage balance is 80 percent or less than the current value of your home, refinancing could also work.

When you refinance, you’re initiating a new loan. As a result, the original value that’s used for the loan-to-value ratio would change, usually based on a fresh appraisal.

With this approach, you could potentially stay with Wells Fargo as a lender. However, you could also explore other companies if they may be able to offer you better terms.

If you go this route, the process is more involved. While removing PMI using the method above doesn’t require income verification or credit checks, a refinance does. As a result, your financial situation and credit score will impact your eligibility and interest rate.

Additionally, by applying, you may see a temporary decline in your credit score. Similarly, if you move forward with the refinance, your credit score may also change.

A Higher Credit Score May Help

However, if your credit score is higher than when you originally secured your mortgage, this approach may work in your favor. You might be able to get rid of PMI and get a lower interest rate, resulting in a lower payment than your current one. Additionally, if you choose a longer repayment term, that could shrink your monthly payment even more.

Just keep in mind that extending your repayment term could mean paying more interest over the life of your loan than you would have previously. As a result, you may want to use a mortgage calculator to compare your various options, allowing you to select a path that works best for you in both the short and long term.

Have you ever had PMI on a Wells Fargo home loan? Were you able to get it removed? If so, what approach did you use? Share your thoughts in the comments below.

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This Is NOT The Time to Purchase a New Home

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purchase a new home

When mortgage interest rates are low, many people assume that makes it a great time to buy a new house. While lower interest rates are certainly a positive, other factors lean in the other direction, often outweighing any benefit a person may get from snagging a favorable interest rate. If you are wondering why now is not the time to purchase a house, here’s what you need to know.

Skyrocketing Home Prices

One of the most significant factors regarding why now isn’t a great time to buy a house involves home prices. The average home value in the United States is $298,933 (as of August 2021), representing a year-over-year increase of 16.7 percent. Plus, the prices in some cities rose much faster, and many are continuing their skyward trajectory.

While the rising prices may make it seem like buying sooner rather than later is a wise way to stay as far ahead of the curve as possible, that may not be true. It isn’t clear whether these growth rates will continue. Ultimately, there is a chance that once the current buying spree calms, the market will correct, bring home prices back down a bit.

Low Inventory Numbers

In many parts of the country, the inventory of homes is near record lows. Partially, this is because of the wide-scale buying activity spurred by the pandemic and reduced interest rates. However, some of it is also related to the time of year. Often, summer is a major buying season, putting additional stress on an already tight market.

When all of those factors come together, buyers simply don’t have as many options available. As a result, you may feel like you have little choice but to settle for a property that doesn’t meet all of your needs because that’s what is on the market.

With a purchase as significant as a home, settling isn’t necessarily smart. You may discover quickly that what the home lacks is actually problematic, leaving you dissatisfied with the house.

No Leverage to Purchase a New Home

When inventory is low, and prices are moving up, buyers lose a lot of leverage. Sellers don’t necessarily need to negotiate, as they know that they have a good chance of finding a different buyer who is willing to pay more or ask them for less.

For example, even if a home inspection reveals an issue, getting the seller to reduce their price or pay for the repair may be challenging. If the seller believes another buyer would go forward with the purchase at their preferred price anyway, they might refuse, leaving you in a tough position.

Today, it’s far more common for a home purchase to go through with a price above the initial asking. Additionally, fewer contingencies is a tactic some buyers use to make them more attractive to sellers. If you’re looking to purchase a home in a “hot” area, you need to decide if you’re willing to go to similar lengths. If not, waiting may be your best bet.

Rushing the Decision

Rising home prices and low inventories mean buyers have to act quickly. Otherwise, another prospective buyer might snatch up the property before you have a chance to make an offer. This creates a sense of urgency, one that may cloud a buyer’s judgment.

The issue with this scenario is that rushing could lead to poor decisions. You may extend an offer because you’re afraid you’ll miss out on a house, not because you feel strongly about having it.

Plus, the current state of the market adds an extra level of pressure to the situation. Often, buying a home is stressful when conditions favor buyers, let alone when it’s a seller’s market. The additional pressure could also lead to rushed decisions, increasing the odds you’ll overlook a problem or make another kind of misstep.

Are There Any Reasons to Purchase a Home Now?

A home purchase is a big decision, one that’s highly personal. For some people, buying now is going to be a necessity. If that’s the case, then make sure you understand the local market and what it means to go forward with a purchase in the current climate.

However, if you have the ability to wait, doing so could be smart. Market conditions are favoring sellers now, but that may not be the case long-term. You want to make sure that you factor that into your decision-making process. That way, you can make the choice that’s best for you.

Are there any other reasons that lead you to believe that now is not the time to purchase a house? Do you disagree with the points above and think that buying now is a good idea? Share your thoughts in the comments below.

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