Relocating For A Better Quality Of Life – Part 2

Longing For Greener Pastures

Looking for more career opportunities? Dreaming about returning to your beloved hometown? Wishing you lived closer to majestic hiking trails or morning walks on pristine ocean beaches? Hungering for sidewalk cafes, fine art museums, theaters, and nightclubs?

Have you thought about Georgia?

You’re not alone. There seem to be a lot of stories these days about people who’ve decided to pack up and move to Georgia or new locale for a better lifestyle – or just a different one. Maybe it’s the telecommuting options of the digital age or the ability to use air travel to maintain relationships with friends and family. Whatever the reason, people are deciding to make changes.

If you’re longing for something your current location just can’t give you, moving may be the answer. And the great thing about a self-motivated move is that you get to decide where you’re going to live and when the move will happen. What can be more exciting and challenging than that?

Finding That Great Town

If you’re moving back to Georgia for the security of your family roots or returning to your alma mater for an advanced degree, your relocation will be much easier than if you decide to go someplace you’ve never been before. You may need to get used to some changes, like more development and new faces running familiar businesses. But odds are you’ve chosen to go back because you know the place still holds something for you. That’s a good position to be in.

If you’ve decided that your current location is limiting your job potential, you may choose the Atlanta metro area to jumpstart your career by heading for a place where business is booming. Trade magazines and Web sites are great places to find out where the “hot” locations are for any given line of work.

If you haven’t already pinpointed the area you want live in, research should be your first step. Start with your root reason for wanting to move. What exactly are you looking for? Someplace that’s far from metropolitan hustle and bustle? A great place to raise a family? Your local bookstore and library have a wide variety of books and magazines that rate cities on their desirability. Just keep in mind that any rating of cities is based on what the author of the book thinks is important, which may or may not be important to you. Be sure to look beyond the ratings to find out what parameters were used to create their rating system.

Look For What’s Important To You  

The great thing about people is that while we all share many similarities, we’re all unique. We have vastly different needs, wants, and priorities. If you don’t have a clear idea of where you’d like to live, start writing down what’s important in your life. Here are some questions to get you started:

• Am I just scraping by? Do I need an area with a lower cost of living?
• Am I looking for relief from the heat or the cold?
• Am I a city person at heart, or am I longing for a small town where the nights are quiet?
• What recreation and cultural events are important to me?
• How comfortable am I with the idea of being away from family and friends?
• How do my family and friends feel about the idea of me leaving?
• Is the type of work I do regionally centered, or can I find a job anywhere?

Once you list the things that matter most, try to rank them in order of importance. With that done, it’s much easier to find the kind of location you need.

Relocation | America On The Move – Part 1

People are really going places today. Americans are constantly looking for better opportunities, better climates, and better lifestyles. A recent government report says that during a one-year period, 16% of the American population pulled up stakes and moved.

Whatever type of move you’re considering – a career relocation or a personally motivated move, it’s going to require a lot of decision making and logistics. This series of posts is designed to help you ask the right questions and do the right kind of planning to make your relocation hassle-free.

Career Relocations

If you’ve been offered a new job in a different area, you’ve probably got some important questions on your mind. Your company does, too. Employers who ask people to relocate are interested in “win-win” results. They want the right people in the right places. And part of doing that is making sure people are happy with where they need to live. So, consider the prospect of relocation carefully and candidly.

A good way to start sorting through what it’ll take to relocate is by talking to your employer. Medium to large companies tend to have standard relocation programs they use as a guideline. In most cases, they also have a team of people who specialize in working with relocating employees. This team can answer your questions and help you navigate your relocation smoothly.

Here are some of the top questions voiced by relocating employees:

What Will This Move Mean For My Career?

Relocating for a new job can often be a springboard to new levels of career success. This is especially true if the new position helps to elevate your status in the company or prepare you for future advancement. Relocation can also involve moving to a more prestigious company whose name elevates your own prestige and marketability within your profession. Here are some questions to ask yourself about any potential new assignment:

• How will this new job prepare me for further advancement in either my company or my profession?
• What’s the job security in this new position?
• What new skills can this job give me or teach me that will make me more valuable as an employee?
• How does the potential for advancement in the new job compare to what’s available in my current situation?

What Does It Cost To Relocate And How Will I Pay For It?

Every company has its own rules about relocation benefits, that’s why the perfect place to start your relocation research is with your hiring manager or HR representative. They’ll most likely be able to get you a package of relocation materials that can help you map out the costs of moving and understand which ones the company will cover.

Finally – Buying Your Home

Making Yourself At Home

Don’t Put Your Life On Hold: The best way to adapt to a new place is to jump in with both feet. Even if you’re biding your time in temporary housing, try to make new friends and get involved in the community right away. Finding playgroups for your children, places of worship, and volunteer opportunities are all good ways of starting to connect with a new community.

Find Your Way Around: Make it your mission to become an expert on your new locality. Buy a really good map of the area. Visit community Web sites. Talk to “welcome wagon” groups. Make it a point to explore at least one new area each week. Before you know it, local may be asking you what’s going on around town.

Enjoy The Adventure: Moving is the beginning of a new chapter in life. Relocation can be a change that leads to great success and exciting discoveries. Most important – it can lead to new levels of happiness for you and your family.

Consult a tax advisor about ways the IRS may be able to help you deal with moving expenses. If you take a new job in your new location within one year of moving, chances are very good that much of your moving expenses will be deductible. Even if you move in advance, and the rest of the family follows after the first year, you should still be able to deduct the family’s moving expenses.

Getting Help From The Tax Man 

Generally, you can deduct any move if your new job is at least 50 miles further away from your old home than your old job was. In other words, if you used to live three miles from work, you would have to take a job that was at least 53 miles away from your old home to be able to deduct moving expenses.

Building A Time Line For Your Move

Establishing a time line involves striking a balancing act between when you’d like to move and how much time you need to get ready.

If your move is job-related, you’ll need to start with your job start date and work backwards. You may be able to negotiate some time for your move before you start, but if you need to begin work right away, you may want to consider moving into temporary housing in order to give yourself enough time to get to know the area and find a home.

In addition to job start dates, consider these things in timing your move.

It’s fairly typical for families to move at the end of a school year, but some experts actually recommend moving during the school session to avoid the possibility of a “friendless summer” and two months of anxiety leading up to the first day at a new school. Moving during or just before the start of the school year also means the possibility of immediate access to activities your children enjoy.

Where Will My Children Finish The School Year? 

If you are buying a newly constructed home or a home where the sellers need to find a new home, the closing date may be delayed. Also, the time line between offer acceptance and closing can vary from state to state. Check with the real estate agent to get a realistic estimate of how long it will take to close your purchase deal and take possession of the house. 

How Quickly Can We Sell Our Current House?

Real estate agents have access to very accurate figures on how long a typical house in your area takes to sell. Tell your listing agent your ideal time line for the sale. Depending on the market, there may be things you can do with your asking price and marketing strategy that can lead to a faster closing.

Should We Consider Temporary Housing?

If it becomes obvious that your moving time line isn’t going according to plan, you may need to consider looking into temporary housing in your new location. This is a good idea to look into if:

• There’s a substantial gap between the time you want to move and the time your new house
• can be ready.
• You don’t feel that you know the area well enough to choose the right neighborhood yet.
• The cost of temporary housing isn’t prohibitively expensive.
• Temporary housing is available in a size large enough for your family.
• Temporary housing is available in an area you’re willing to live in.
• There are a lot of rentals on the market – this means you can probably negotiate less than
• a one-year lease or could find a sublease from someone else.
• It’s taking a long time to sell your current house.

Selling Your Current House

Choosing A Listing Agent

Wether you are local or relocating, you’ll probably need to sell as quickly and efficiently as possible. Most people can’t afford to buy a new home until they sell their current one. A good home sale starts in the same place as a good home purchase – with a top-notch real estate agent.

I Don’t Know A Top-Notch Realtor

Start by asking your mortgage professional, friends, family, and co-workers for recommendations. Pay attention to the “For Sale” signs on homes in your area. Research the Internet, read mortgage and real estate bloggers, look through the ads in the paper to see if there are a couple of names that appear consistently.

As you get your list of prospective agents together, you’ll want to select a few to interview. You need to be comfortable with your agent. They’ll be an excellent resource for you to help you get the most out of your home sale. Make certain you have an aggressive listing agent who knows your market, can price your home well, and will work at marketing your home.

If you’ve been putting off any small cosmetic jobs around the house, now’s the time to do them. Touch up the paint and repair any minor holes or cracks. You want to show people that your home is well maintained. Pay special attention to the outside front of the house and the front entryway. Those areas have the biggest emotional impact on potential buyers. If you have a place to store little-used items, get them out of sight. Clutter and excess stuff make your home look smaller and unappealing. And finally, clean the house from top to bottom – especially bathrooms and kitchens.

Sprucing Up For Buyers

 

Preparing For Closing When Buying Your Home

This simple, five-step walk-through to loan closing will help you understand the procedure and give you an idea of what to expect.

1. Appraisal 

Your lender will find a professional appraiser to determine the value of the home you want to purchase. The appraisal will provide an estimate of the home’s value by comparing it to others that have recently sold in the area. Lenders generally require an appraisal to ensure that the property backing the loan will cover the loan amount in case of default.

2. Home Inspection 

A professional home inspection is recommended for every homebuyer. In some cases, a home inspection may be required as part of your home financing approval process. At minimum, the inspection should cover all the home’s major systems and structural elements, including the foundation, electrical system, heating and cooling systems, insulation, roofing, plumbing, and all exterior features.

3.Title Insurance 

There are two types of title insurance: one protects the lender and one protects the borrower from claims against your ownership of the property.

Such claims may be made by: undisclosed spouses, heirs of previous owners, creditors holding liens against previous owners, or other parties. Most lenders will likely require you to purchase a title policy, which will cover their interest in the property.

It’s up to you if you would like to purchase a policy to protect your interest in the home. Both your Realtor and I will be able to recommend a title insurance company who can provide you with additional information about the policies available in your area.

4. Homeowners Insurance 

Did you know that most mortgage lenders, at closing, require proof that you’ve purchased homeowners insurance?

In the event of a loss such as a fire, tornado, or burglary, homeowners insurance can pay for damages to the home, as well as for costs to repair or replace contents. If the home is damaged and becomes uninhabitable, homeowners insurance can cover additional living expenses for a period of time while your home is being repaired. Homeowners insurance can also protect you from loss if someone is injured or their personal belongings are damaged while on your property.

5. Closing

At your closing, you’ll go through all the final steps of securing your new loan. The most important thing to know is that all closing costs must be paid in full at this time. By working closely with the closing attorney, your lender will find out exactly how much you’ll have to pay at closing and make sure no last second surprises affect your closing.

Applying For Your Loan When Buying Your Home

Information And Documentation

A mortgage planning professional, walk through the application process with you. It’s a simple question-and-answer interview to complete the application. Usually, most of the information can be pulled from your credit report and just have you validate it. The amount of information you’ll actually need to provide on your own isn’t overwhelming.

The documentation you’ll be required to produce can vary, depending on the type of loan program you need, your credit, and the size of your requested loan in relation to your income and the home’s value. If you’re an excellent credit risk and your loan request is relatively small, your application for certain products may breeze through with very little documentation required.

What Happens Next 

Once pre-qualified, your lender should send you a commitment letter detailing the conditions of your loan approval and documenting any requirements you’ll need to meet prior to closing. At the same time, the team members will order an appraisal, if one is required. At this point, you’ll have the option to lock in your interest rate or float it. Discussing these options is very important.

Floating The Rate:

You’ve applied for your loan but you’ve also decided to wait before committing to an interest rate, perhaps because you think interest rates stand a chance of going down in the short-term. Your loan can stay in a float status up until five days before closing, in most cases.

Locking In:

You and your lender commit to a range of interest rates for a specified period of time, up to 360 days for new construction loans. During that period, your interest rate range has the ability to be protected. If you close on the loan during that period, you get the rate. If you go beyond the lock-in period without closing, your loan will revert to a “float” status and be priced again based on current market rates. The rate range you get may be lower, higher, or equal to your lock-in rate range.

There are also some reasons why a rate could change even during a lock-in period. For instance, a change in your credit profile could occur, you might decide to change your down payment, or you might change your mind on how many discount points you want to pay.

Whether you decide to float or lock, you’ll be taking a calculated risk. It’s a tough decision, and you’re the only one who can make it. Talk with your lender to get an idea of what interest rates have been doing recently. You should also find out if there are any economic events coming up that could affect mortgage rates in the short term.

However, ultimately the decision is yours.

Getting The Right House

 Know What You Want And Need

Before you start looking for a house, think about what’s most important to you. If you have a family, include everyone in this process and consider their priorities. While it’s unlikely you’ll find a house that satisfies every item on your dream list, it will help you and your real estate agent to know what’s most important.

In addition to your family’s basic needs and desires, you should also write down any strong preference you have about home styles, exterior finishes, and other aesthetics. If you absolutely don’t like the flow of ranch-style houses or the size of rooms in Tudors, make a note of it. Your edited wish list will make it much easier for a real estate agent to find the perfect house for you.

Depending on available housing stock and how much you have to spend, you may need to make some concessions on your wish list in order to purchase a home. Making a purchase, even if nothing on the market entirely fits your wants, is recommended. From an economic standpoint, it’s important to make some compromises and take the leap. Once in your first home, and given time, it will be easier to move up later on.

Make The Most Of House-Hunting Trips

There never seems to be enough time during house-hunting trips, so having a clear and concise idea of what you’re looking for is a great help. It’s also extremely important to clear up any areas of disagreement before you visit your new location. You don’t want to waste valuable house-hunting time working out differences of opinion.

If your time is limited, it’s a good idea to spend most of your trip looking at different areas, rather than focusing on looking at houses first. If you only have a couple of days to look, spend the first day and a half looking at areas and the last half-day looking at houses. When you find an area you’re especially interested in, try to visit the area at several different times of day. A neighborhood that looks good at noon may have a totally different feel at night.

A house-hunting trip is also a great time to test out various commuting lengths in the Atlanta area to get an idea of how far you’ll be willing to travel every day in your new location. Let your real estate agent know the location of your new office before you arrive and discuss your maximum commuting time. That way, your agent can create a search radius based on that location and your maximum preferred commute time. Remember to think in terms of minutes, not miles, when you’re establishing your commuting preference. Distances can be deceiving. A 30-mile commute in one area may actually take less time than a 10-mile commute in another area.

When you begin your search in a new area, it’s common to feel overwhelmed by the choices you find. Considering all of the different housing alternatives available to you is a good idea.

Existing Resale Homes

This is the easiest, fastest way to find a home – and they have some great advantages. These are just a few of them:

• Mature trees and landscaping.
• Established neighborhoods with devoted long-time residents.
• More likely to be closer to metropolitan areas than new homes.
• More room to negotiate price and terms than a new home.
• No waiting for building to be finished before you can move in.

As with just about anything in life, there are also some possible drawbacks to an existing resale home. For instance, if previous owners haven’t made certain upgrades over the years, you may find that the house doesn’t have a lot of the things today’s building codes require new houses to have (e.g., a good number of grounded electrical outlets).

Newly Built Homes

This is the choice that gives you the greatest amount of control over getting exactly what you want. Here are some other advantages:

• Conform to today’s building codes.
• Reflect the latest in modern architecture and layout.
• More energy efficient in design.
• Have the ability to be customized fairly easily.
• Can offer the opportunity to build friendships based on sharing the new-to the-neighborhood experience with other newcomers.

This option also presents the greatest possibility for inconvenience. Longer time lines, cost overruns, and delayed move-in dates can all be part of building a new home. Plus, you may also have a period of time where you’ll need temporary housing while waiting for the home to be completed.

Renovating An Existing Home

Renovation is an excellent choice if you find a house that “could be perfect, if only….” By adding a bedroom or remodeling a kitchen, a so-so house can become the home of your dreams. This is especially attractive from a financial standpoint if you can move into the house and live there during renovations. This path also offers a way to go if you’re handy with home repair and can’t quite afford the area you’ve chosen.

Home Financing Options When Buying Your Home

Which Option Is Right For You?

Today it seems there are as many different types of home financing as there are different types of homes.

Whether you’re all set to buy or just trying to figure out what you can afford in your new location, or moving across the country, a good mortgage professional can help you make the right choices. They can customize a mortgage to your unique needs, drawing from a selection of common mortgage products.

In addition to all the conventional loan options, they may be able to offer special programs that overcome obstacles such as credit issues, hard-to-document income, or lack of savings. Whatever your financial profile, a Professional Mortgage Planner can help you get a mortgage plan designed specifically to benefit your particular needs.

Payment Alternatives

Several decades ago, lenders required homebuyers to provide a 20% down payment as protection against the possibility of the homebuyers defaulting on their loans. The invention of mortgage insurance for home purchases made with less of a down payment means that today’s lenders can offer a variety of low and no-money-down options.

That’s useful for a range of buyers such as:

• First-time buyers who don’t have a large down-payment to invest.
• Buyers who want to keep their investment whole and use less cash upfront for their purchase.
• Buyers who need to use their cash for renovations or other move-related expenses.

Whatever your financial reasoning, there are a number of ways to finance your down payment. A professional mortgage consultant can work with you to structure a home financing package that takes into consideration your total financial outlook.

Choosing The Right Real Estate Agent

Once you are provided a Pre-Qualification Letter, any experienced mortgage professional (worth their salt), should be be able to recommend a few real estate agents who can help smooth your transition into the new neighborhood. Your real estate agent can:

• Help you establish what you want in a home.
• Search the Multiple Listing Service (MLS) and other resources for homes that match your needs.
• Show you appropriate homes.
• Provide valuable information on communities, comparable values of neighboring homes, tax rates, and building code regulations.
• Help you formulate an offer on the home you want to buy.
• Act as an intermediary between you and the seller, smoothing the negotiating process.

Interview at least two or three real estate agents over the phone. Tell them what you’re interested in and ask if they can provide some additional information about area schools, taxes or some other special interest. Then see how quickly they respond and how accurately they follow your request.

In addition to having experience in the area where you hope to buy your home, the real estate agent you choose should be easy to talk to and show that he or she understands your wants and needs.

Once you’ve selected a real estate agent, stick with that agent even when you’re looking at homes listed by others. Your real estate agent will cull through the local listings and is familiar with the homes available in your chosen area, even if they are listed by another real estate agency. Contacting a different real estate agent simply because you’re attracted to a home with a “For Sale” sign or advertisement listing their name is counterproductive when you’ve built a level of familiarity and trust with your selected agent.

Choose Your New Neighborhood

Location is an extremely important factor in determining your long-term happiness with your new home. The right real estate agent should be able to give you a lot of information in this area. Here are a few things to think about on your own, so you’ll be able to discuss them with your agent.

• Do the schools meet my needs?
• Is the commuting time acceptable?
• Are there good public recreation areas nearby?
• Will I like the nearby grocery stores or services? Am I willing to drive out of my way regularly if I don’t?

Hunting For Your New Home

 Is It Better To Rent Or To Buy?

Owning your own home is like having a savings account that you can live in. Every month, the payment you make on your mortgage increases your share in the home asset. Money paid for rent simply evaporates each month. Plus, research has shown that real estate has proven to deliver a highly reliable increase in value compared to other types of investing. If you’re renting, those reliable returns are going into your landlord’s pocket – not yours. When you add in the federal tax deductions for mortgage interest and real estate taxes, homeownership becomes an even more attractive idea.

There are, however, some advantages to renting. If you need to move frequently, if you’re not at a stage of your life where you want to commit to the responsibilities or costs of maintaining a home, or if your future income is extremely uncertain, renting may be the best option. Just don’t assume that renting is more affordable than owning. In fact, sometimes owning actually costs less.

Get An Edge – Get Pre-Approved First

If you’ve made the commitment to buy, the first step in any home purchase should be becoming preapproved. That means you know exactly how much you can afford to spend on your new home. And, you won’t waste time and energy falling in love with properties that are out of your price range.

A preapproval or commitment letter from an experienced mortgage professional is essential and also makes you a VIP Buyer in the eyes of real estate agents and sellers. You’ll have an edge over the competition because sellers will know that you’re a serious, committed buyer whose financing won’t fall apart.

It’s Time To Make The Big Move

Once you find a home, you can start concentrating more on the move itself.

Here are some of the things to think about:

• Will you hire a professional moving company to move your current household goods?
• Are you planning on moving your current household goods yourself? 
• Who will do the packing and unpacking?
• Will I need additional insurance on my household goods?
• How long will those household goods be in transit, and what will we do without them?

Choosing A Professional Mover

You need to be able to trust your mover. In a corporate relocation, your company often chooses the moving firm you’ll be using – a vendor with a vested interest in providing good service that generates repeat relocation business. But if the choice is up to you, here are some things you can do to increase the odds of hiring a reputable mover:

• Use a moving company with a long history in the moving business.
• Use a company that has a considerable supply of equipment, manpower, and facilities.
• Check them out with the Better Business Bureau.®
• Ask for 3 to 6 references of people they’ve recently helped, and call the references.
• Find out what, if anything, the company does to screen its employees.
• Find out if there is a professional association for moving companies in your state that can recommend a member company that meets their standards. If you’re moving between states, look for a household goods mover registered with the Federal Motor Carrier Safety Administration, http://www.fmcsa.dot.gov/.

Packing

If your moving company is handling your packing, they should arrive prepared with plenty of good quality materials for the job. If you choose to pack your own belongings, treat the packing job as if you were a professional.

Here are some quick tips:

• Don’t skimp on box quality or padding.
• Number your boxes and keep a good list of what’s in each one.
• When you’re deciding which things can be packed together, take a careful look at how breakable each item might be.

Moving Insurance

Don’t assume that standard moving insurance will be adequate. The basic plans only offer a few cents per pound for coverage. Get a realistic level of protection for your belongings by upgrading your moving insurance to declared value or full value protection.

A Few Moving-Day Tips

The most important thing you’ll need on moving day is a sense of humor. Things are bound to go wrong, and there’s little if anything to be gained by getting upset when they do. Just roll with the punches. This is especially important if you have young children moving with you. If you’re feeling edgy and upset, they can very easily pick up on that mood, making an already challenging day just that much tougher.

You should also pre-pack your car and bags the way you would for any long trip. Take a cell phone, plenty of snacks and beverages, a first aid kit, a blanket, and any other survival supplies you might need. If you’re moving in winter, make sure you bring along enough cold-weather gear for everybody and snow gear if there’s a chance of hitting snowy weather while you’re traveling.

You may also want to bring along anything you don’t feel comfortable entrusting to the movers, like rare antiques, jewelry, cash, expensive collectibles, or works of art. You may also want to carry some of your most cherished family photographs with you, just in case anything happens to your belongings in transit.

Finally, if you can’t ship them securely in advance, you’ll want to take along a collection of important papers such as passports and medical records.

Special Considerations For Pets

If you’re moving with pets, there are a few things you should do to prepare them for the move:

• No more than a week before the move, take your pets for a complete checkup by a veterinarian certified by the U.S. Department of Agriculture. This certified checkup is sometimes required before taking pets on an airplane or before crossing certain state lines.
• Feed your pet a very light meal before traveling.
• Keep your pet in a snug and secure carrier both for its protection and to help it have a greater sense of security.
• Be sure to always have plenty of fresh water available.
• Plan to give dogs exercise every couple of hours.
• Be wary of giving pets tranquilizers to keep them calm during the trip. Such medications can sometimes have the opposite effect and make pets excitable.

Other Ways To Make A Home More Affordable – Part 6 of Down Payment Options | Final Installment

If you’ve gone through your budget process and feel that you can’t afford what you want, there are some other things you can do to make getting a home more affordable.

Purchase A Fixer-Upper: Any time a home has obvious problems, the selling price becomes much more negotiable. If those problems are superficial things, like ugly wallpaper, worn carpeting, or hideous color schemes, you can probably get the property at an attractive price, then fix it up to suit your own tastes fairly easily. If the problems are the kind that require light construction work, like replacing drywall, the fixes become a little more challenging. If you have absolutely no free time or if you’re simply not handy when it comes to home repairs, the fixer-upper route can be more costly than it’s worth.

Look Into Multifamily Homes: Another way to make a home more affordable is by getting other people to help you pay for it. By purchasing a duplex or other multifamily home, your tenants will pay for a significant part of your house payments and could even generate a profit for you. But before you go this route, contact me for a free copy of my guide on buying an investment property. It’ll give you a good overview of the responsibilities involved with being a landlord.

Consider Condos: Condominiums are an especially attractive option if you have a very active schedule and don’t particularly like doing home maintenance. Initial purchase prices are generally less than single-family homes, but be sure to factor the monthly association fee into your budget. It could be significant, depending on the level of maintenance and amenities your association provides.

Lease To Own: This approach allows you to get into the home you want right away without putting any money down until later. By agreeing to a monthly lease rate that puts a portion of the payment toward the purchase, you can have a good deal of equity in the home by the time you close on it. You may even avoid making a down payment entirely. Meanwhile, the sellers or landlords have a guaranteed cash flow, and a guaranteed sale without having to pay a real estate agent’s fee. There are some risks with this approach, as well. For instance, you need to structure your agreement so your landlord can’t simply change gears and not sell you the house after you’ve invested months of payments in the deal. Consult your legal representative and my team when you’re writing the lease and purchase agreements. You want to be sure that the agreement you put together will work with your future financing. Mortgage underwriting guidelines say that only a portion of the rental payment over and above the customary amount can be applied toward the down payment.

Buy A Foreclosed Property: While it’s true that you can find occasional bargains among foreclosed properties, there are serious pitfalls you need to avoid. Foreclosed properties are often sold “as is” (meaning you can’t require the seller to make any fixes), and the purchase time line may not give you enough room to do a careful inspection. If you decide to go this route, just make sure you get an opportunity to check out the property thoroughly. Ask your real estate agent to help you identify foreclosure listings in your area. You can also search the Web sites for Fannie Mae, Freddie Mac, HUD, and the Department of Veterans Affairs.

Previous posts in this “Down Payment Options” series:

• Finding Money In Surprising Places – Part 5  
• Creative Ways To Save – Part 4   
• Your Mortgage Alternatives – Part 3  
• The Real Costs Of Homeownership – Part 2  
• Down Payment Options – Part 1  

Finding Money In Surprising Places – Part 5 of Down Payment Options

The most common sources for a down payment are personal savings accounts and traditional investments, but there are several other places that can supply part or all of your down payment.

• IRA Account: The federal government allows first-time homebuyers to use $10,000 in IRA funds for a down payment. For married couples who are first time buyers, this could provide up to $20,000 in down payment funds.
• 401(k): If you have money in a company retirement fund, like a 401(k), you can usually borrow against your balance for a down payment. Be sure to ask about the rules regarding paying back the money and anything you may need to do to avoid tax penalties.
• Gifts: Depending on the loan guidelines, you may be able to use monetary gifts from family or friends as part of your down payment. However, you will most likely be required to provide written proof that the funds were truly a “gift” and not a personal loan. Also, there are caps on how much gift money you can receive per year without increasing your tax obligations (consult your tax advisor for details).

Check with a financial advisor, tax accountant, and myself to learn more about how these options can impact your overall home financing plans and future goals.

Creative Ways To Save – Part 4 of Down Payment Options

While all of these low-down-payment/no-down-payment options can make homebuying more accessible, it’s still a good idea to have some savings you can bring to the table. Having some cash on hand is also helpful in covering closing costs, any work your property may need, or unforeseen expenses that may come along. Here are several suggestions to help build the size of your cash reserves.Set Up A Forced Savings Plan:

Set up a separate banking account and deposit a set amount intoit every month. This works best if you do it through an automatic deduction. If you don’t see the money, you’re less likely to spend it. Contact your banker or Credit Union officer to discuss setting up a direct deposit account.

• Skip Or Downsize Luxuries For A Year: Start small and stick with it. Things you might not necessarily think of as luxuries can really add up in terms of dollars saved. For instance, if you usually buy lunch every day try “brown bagging” a few days a week. If your family has gotten used to eating out at least once a week, try cutting back to just a couple of times a month. On the “big ticket” side, you might consider a less expensive car than you might otherwise buy or a lower-cost vacation than you might normally take.
  Pay Off Credit Cards: Big credit card balances don’t do you any favors on credit reports or when qualifying for a loan. They can make you appear overextended. They can also put a huge burden on your savings efforts. Always start by paying off the cards with the highest interest rates, even before the ones with lower balances. And you don’t have to completely get rid of your credit cards. You just need to be careful about using them. Credit cards used smartly are actually signs of a financially responsible and creditworthy borrower.
  Certificates Of Deposit (CD): Certificates of deposit are a convenient, low-risk method of saving. But when rates are low, committing to a few long-range CDs isn’t a good idea. Get several shorter-term CDs of varying ranges, instead. That way, you can adjust or “ladder” your CD choices to take quick advantage of movements in interest rates. Your financial planner, banker or credit union representative can help you learn about the choices available.
• Sell Unwanted Items: Chances are good that an in-depth search of your current home will turn up quite a few items you rarely use and/or simply don’t even want to keep. Sell all that stuff and put the proceeds straight into your down payment fund.
  Earn Some Extra Income: Look for a part-time job that you can do without interfering with regular employment. Try an evening job in retail, party-oriented sales, or a seasonal job. Some of these part-time positions may even offer dependable employees insurance options or discounts that make the job more attractive. The key here is discipline, so that your extra income goes directly into your down payment fund and not into taking advantage of your employee discount at every opportunity.

Your Mortgage Alternatives – Part 3 of Down Payment Options

Alternatives To The 20% StandardIn the early days of mortgage lending, a 20% down payment was required by most lenders as protection against the possibility of homebuyers defaulting on their loans. But as the cost of housing in American has risen, the 20% down payment has become a significant obstacle for many buyers. In order to make homeownership more affordable, a lot of lenders now offer home financing programs that require little or even no money down. These new programs include:

Conventional Loans With Private Mortgage Insurance

Many lenders will make loans with little required as a down payment, as long as the borrower has adequate credit. These programs require the borrower to make a payment for private mortgage insurance (PMI) along with their monthly mortgage payment. Talk to your home mortgage consultant about your options, and how PMI payment will affect your total monthly payment. PMI can open doors for buyers challenged by a lack of a large down payment funds. And it’s not something you have to live with forever. Once you establish a 20% equity share in your property – through appreciation and paying down your loan – you can eliminate the PMI.

VA Loans

The United States Department of Veterans Affairs (VA) has been providing no-money-down loans for veterans and their families since the inception of the GI Bill. However, few people realize that the general public also can get VA financing if they buy a property that’s been foreclosed by the Department of Veterans Affairs. Your real estate agent can help you locate these foreclosures in your area.

FHA Loans

The Federal Housing Administration (FHA) also makes loans with very little down payment required (1.5% to 2.25%). Some of these loans are known as “bond loans” – state and local programs designed to revitalize certain neighborhoods, help potential buyers in lower income brackets, or encourage homeownership among set groups like teachers and police officers.

Additionally, an FHA loan coupled with a municipal bond or qualified non-profit down-payment assistance (DPA) program, many qualified borrowers can close with little or no money down.

The Real Costs Of Homeownership – Part 2 of Down Payment Options

While homeownership can have many wonderful advantages, there is often additional costs involved that you may not incur as a renter. Make sure you consider these in your monthly budget before you decide to become a homeowner.

Homeowners Insurance: Most lenders require the purchase of a homeowners insurance policy to protect your home against loss due to legal liability, fire, flood, or natural causes.

Maintenance: It takes time and money to keep a property in top condition. You’ll find that some sellers have kept their homes in great shape, and some in not-so-great shape. This is particularly true with older homes. One way homebuyers protect themselves is with a home warranty. They cost a few hundred dollars a year, depending on the size of your mortgage and where you live, but they cover most of the major appliances and protect you from big expenses. They can be a good value in any homebuying situation, but especially if you have a fondness for older homes.

Taxes: Most communities finance a lot of their schooling and services through property taxes. The tax rate varies from town to town, so speak with your real estate agent to understand what the taxes are on each home you look at. The good news is that property tax payments should be fully deductible at income tax time.

Homeowners Association Dues: Condominiums and planned developments often have homeowners associations. The fees connected to these groups can range from a few dollars to several hundred dollars a month for upscale condos or neighborhoods with lots of amenities. As an owner, getting involved with the association can give you a voice in deciding how much those fees should be.

Closing Costs: The cost of buying a home is more than just the purchase price. Each homebuying transaction requires the services of a large number of professionals from a variety of fields. It’s common for these costs to add up to between 3% and 5% of your total mortgage. When you choose to work with a lender, you will receive a Good Faith Estimate of your closing costs shortly after you apply.

With certain loan programs or down payment assistance programs, a professional mortgage consultant can work with you to include some of your closing costs in your loan amount and/or have it gifted to reduce the amount of out-of-pocket money involved.

Note: Be sure to read the details.

Down Payment Options – Part 1

Financing Options Are Still Available To Help You Achieve Your Dream

Owning your own home…it’s one of the greatest achievements in life. But while homeownership is a dream many Americans share, a lot of us find saving for the down payment to be a major hurdle. Others have money available through things like 401(k) accounts and mutual funds, but don’t feel right dipping into those investments. If you fall into one of these two groups, I have good news for you. Today, even with all the doom and gloom real estate and mortgage news in the press, there are still many options allowing you to purchase a home with little or no money down.

A Secure And Affordable Investment

Homeownership is one of the smartest and most secure investments you can make over the long haul. It can also be one of the most affordable. You don’t really need to have a lot of money in the bank to become a homeowner.

Don’t let all the negative news scare you away from being a homeowner. There are still  of low rate, low down-payment mortgage options for individuals who can fully document their income. The only difference between now and last year is the mortgage lenders want to make sure your home ownership experience is set up for success.

Yet, it’s not just about money. Few things in life compare with the pride and satisfaction you get from owning your own home. Perhaps you come from a long line of homeowners. Or maybe you’re the first in your family to ever be one. Either way, a home can be the foundation for a lifetime of memories. It may even become a family treasure to be passed down over the years – one that preserves family history and provides your heirs with a welcome sense of financial security.

Owning Can Cost Less Than Renting

The first question you need to tackle in your quest to become a homeowner is “Why should I buy instead of rent?” Renting certainly has some advantages over owning. If you need to move frequently, if you’re not at a stage of your life where you want to commit to the responsibilities or costs of maintaining a home, or if your future income is extremely uncertain, renting may be the best option. Just don’t assume that renting is more affordable than owning.

A monthly mortgage payment is often lower than the monthly rent on a much smaller property. If you’d like to compare what you’re paying for rent against what you might make in house payments, call an experienced and ethical loan professional that can provide you with a complimentary rent versus buy analysis.

Owning your own home is like having a savings account that you can live in. Every month, the payment you make on your mortgage adds to the equity you have in your home and makes your home asset a more valuable part of your portfolio. Money paid for rent simply evaporates each month. Plus, research has shown that real estate has proven to deliver a highly reliable increase in value compared to other types of investing over the long haul. If you’re renting, those reliable returns are going into your landlord’s pocket, not yours. When you add in the federal tax deductions for mortgage interest and real estate taxes (consult your tax advisor for details), homeownership becomes an even more attractive idea.

Don’t Worry…Trust Me! — Carpe Diem

How many times do you see the term “mortgage professional” used when in fact the person using the title is NOT?

I know hundreds of loan originators across the country who truly personify the term “mortgage professional,” however I have also seen countless others who remind me of Richard on this YouTube video.

While most individuals in the mortgage profession are dedicated to conducting their business in a fair, competent, and truthful manner, their are enough Richard’s that consumers must carefully screen who they pick to represent them in a mortgage transaction.

As mortgage professionals, we acknowledge the profound impact, which our conduct has upon our clients’ welfare. Additionally, our clients should rely on the accuracy and honesty of our guidance in the disposition of their assets, which may represent a major portion of their lifetime savings.

Bottom line – It’s BOZO’s like Richard and friends that hurt our industry. Can you imagine being so proud of these sales tactics that you actually post it on YouTube?

Why Economic Principles (Common Sense) Always Prevail (Eventually)

A few months ago, I posted one of my more popular posts on another blog titled “Do You Ever Feel Like Michael Jackson’s Plastic Surgeon?” While this article was specifically directed towards consumers, the message can also be applied to the money masters on Wall Street.

Bottom line…the mortgage market is back to embracing common sense underwriting standards and thus our mortgage product mix again will most likely resemble that of 2002 instead of 2006.

X

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

xX

x

In the book, Good to Great, the author Jim Collins states people fall into three different categories:

1. The Optimist (bound to be eventually dispirited)
2. The Realist (doom-sayer)
3. The Stockdale Paradox

What Is The Stockdale Paradox

Stockdale Paradox individuals are those that retain faith they will prevail in the end, regardless of the difficulties AND at the same time “CONFRONTING” the most brutal facts of their current reality, whatever they may be.

The Stockdale Paradox is named after Admiral Jim Stockdale who was the highest ranking US military officer imprisoned in Vietnam. He was held in the “Hanoi Hilton” and repeatedly tortured over 8 years. Collins describes going to lunch with Stockdale (can you imagine?) and trying to understand how he survived 8 years as a POW while so many died after just months in captivity.

Here’s how Stockdale put it. “I never lost faith in the end of the story. I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.”

“Who didn’t make it out”?

“The optimists. They were the ones who said ‘we’re going to be out by Christmas’. And, Christmas would come and Christmas would go. Then they’d say, ‘We’re going to be out by Easter.’ And Easter would come, and Easter would go. And then Thanksgiving, and then it would be Christmas again. Then they died of a broken heart.”

So, on the one hand it was about unswerving faith that one will ultimately prevail while on the other hand it’s about banishing all false hopes? As usual, the guy who lived it says it best.

“You must never confuse faith that you will prevail in the end – which you can never afford to lose – with the discipline to confront the most brutal facts of your current reality, whatever they might be.”

Holding those two seemingly contradictory notions in his head simultaneously was the key to Stockdale surviving, even thriving, in his experience. And, I believe, it is a perfect summary of the mindset one must have to originate and live life successfully. You have to believe your vision will come to pass while simultaneously doing everything you can to make it happen. Yet, you can never let your belief and faith cloud your confrontation with reality.

The optimists are the hedge fund managers and the New Century’s while the Realist are the individuals/companies that will survive, yet will always be average.

As a consumer, etc…, it’s your choice to choose the category in which you will operate. That’s why it is so important you choose to work with a professional mortgage professional.