bridgetalves@remax.net

Bridget Alves                of Valencia

Blog - Full Service Real Estate Group, Inc

How do you know you're getting the best deal?

Bridget Alves - Monday, April 25, 2016


Moving is a stressful process in and of itself, to be sure. Doubts and fears regarding the price you're paying for your new home can make it far worse. One of the best things you can do for yourself when looking for your new home is to give yourself the ability to make the purchase in confidence. If you know you're getting a good deal (or, at least, the best possible deal you can get), it can take a serious load off your shoulders and free your mind to deal with everything else. The question is: how do you make a purchase with confidence? After all, a new home is likely going to be one of the biggest purchases you ever make in your life.


Be realistic
Take a look at your budget and see just how much you can spend on a mortgage without having to lower other expenses. Just because you qualify for a $300k home loan doesn't necessarily mean you can afford a $300k home. If you find yourself in a position where your monthly mortgage payments are going to lower the budget for things like food, entertainment, car-related costs, etc., then you may need to rethink things.

Get info on the area
So, you've found a home that fits comfortably within your budget – good job! Your next step will be to get information on the area the home is in. Things like the school district, crime rates, accessibility to freeways, nightlife, commercial areas, etc. Even if the info regarding the area doesn't all apply to you, knowing it is still important. Regardless of whether or not you plan to have children, a home in a good school district will often have a higher resale value than one that isn't.

Get an appraisal

Most lenders will require an appraisal anyway, but even if they don't, make sure you get one. The appraiser will be able to to tell you the home's worth and you can then compare that to the seller's asking price.

Compare similar homes' selling prices

Most neighborhoods will have homes that have been bought and sold recently, so compare the price of the home you're interested in to recently sold homes in the area. If the home you're looking at is significantly lower, there's probably a good reason for that. Ask the seller if there are any issues with it. If it's significantly higher, there's probably a reason for that, too. Make sure you find out the reason(s) if you find yourself in either of these situations.

Does downsizing really save you money?

Bridget Alves - Monday, April 18, 2016


When couples decide to start a family, they often look for homes of a size that will comfortable accommodate them and their kids. This is great while everyone is living there, but once the kids move out and it’s just the two parents again, the subject of downsizing often arises – especially when said parents have retired and are living on fixed incomes. Before deciding to move into a smaller home, there are some considerations that need to be taken into account if you really want to know whether or not it makes financial sense.

 

Moving costs money in packing materials, a truck, helpful hands, etc. All of these costs are going to have to come out of pocket if you’re living on a fixed income, and they can be considerable. Is it really worth digging into your bank account to foot the bill for moving?

 

What about storage? Over the course of a person’s life, they tend to accumulate a lot of “stuff.” If you move into a smaller home, what are you going to do with the things that aren’t going to fit? Many people choose to put these items into storage, but that’s going to cost you more money. A storage room (or, heaven forbid, two storage rooms) can easily cost 2 to 3-hundred dollars a month. And then there’s the work involved. If you’re the type of person who gets emotionally attached to a lot of things, odds are these things are all over your house; in the closets, crawlspaces, attic, etc. and de-cluttering the place is going to be a ton of work.

 

Downsizing can indeed save money in the long run, provided that you take into account all of the costs associated with moving and storage. If you have your heart set on a smaller place, odds are you’re going to get one. If you need a smaller place, but lack the energy to move yourself, there are a number of services available that can not only help you de-clutter the home, but they’ll pack and move your things without you ever having to lift a finger. Just know that the easier you want your move to be, the more it’s going to cost.

Preapproval and how to mess it up

Bridget Alves - Monday, March 21, 2016


Being preapproved for a home loan can reduce a ton of the stress associated with home buying. After all, shopping can be a blast, but trying to get all your ducks in a row financially after you’ve found your dream home can sometimes be a nightmare. Unfortunately, even if you’re preapproved, you can still mess up your finances enough to reduce the amount you’re preapproved for, or tank the deal altogether.

 

  • Do not apply for new credit or create new debt after being preapproved. Credit inquiries, like the ones that are used when applying for credit cards, can lower your credit rating. Also, buying something using lines of credit you already have will offset your debt:income ratio and can ruin your preapproval.
  • Keep most of your money where it is. If you’re the type of person who sees to their finances by shuffling around large sums of money, try to hold off for now. Mortgage lenders want to be able to track all of your finances, and the more you move things around, the harder that will be. If they have trouble acking funds, it will raise suspicion that there are funds you didn’t claim when you applied for a mortgage.
  • Pay your bills on time. Payment history is 30% of your credit score, and making late payments after being preapproved for a mortgage can alter your score and change the lender’s opinion about whether or not you can actually pay.

 

Ultimately, lenders want to see stability; stability in your income history, your payment history, where your money is, etc. If things start going haywire, or your credit rating drops too much, too quickly, the lender is likely to get skittish and either approve you for less than you originally planned on or flat-out deny the application.

Improve your chances of being approved for a mortgage

Bridget Alves - Monday, March 14, 2016


When you’re in the market for a home, the search is often the most fun. You get to attend open houses (and, hopefully, get some free refreshments), check out all sorts of interesting styles and types of architecture, and eventually settle on the home that’s right for you. Unfortunately, once you’ve decided on a home, the stressful part of home buying begins: applying for a mortgage. There’s nothing worse than having your heart set on a beautiful new home in a wonderful location only to be turned down for a mortgage. Here are a few things you can do beforehand to help improve your chances of being approved for a mortgage:

 

  • Get your credit reports early. There are 3 major credit bureaus, and you’ll want to get a report from each one to make sure there are no errors. If you have late payments or collections, ask the creditor to remove them. Additionally, if your credit score is lower than you’d like, work with a credit counselor to come up with ways to improve it.
  • Know your income. Lenders like to see at least 2-years of continuous employment in the same job in their applicants. Sometimes, if you’ve changed companies but still do the same job, lenders will still count your income from your previous employer as well as your current one. However, when an applicant has changed fields in the past 2-years, lenders are often apprehensive about approving the application.
  • Pay off as much of your debt as possible before you even apply. If you have too much debt in relation to your income, regardless of whether or not you’re making payments on time, a lender might not approve your application. Typically, they don’t like to see a debt:income ratio above 43%.
  • Make sure you can show where your funds come from. If you’ve been gifted a down payment, make sure you’ve got a paper trail showing where that money came from. Additionally, make sure that the person (or people) who gifted you the down payment can show where the money came from and that they can actually afford to gift you the payment. They’ll likely need a good deal of their financial information ready, so ask them to get it available ahead of time.

Unless you’re fabulously wealthy, or choose to live way, way below your means, there’s really no sure-fire way to ensure 100% that a lender will grant you a mortgage. However, taking these 4 tips to heart before you apply can increase your chances and help reduce some of the stress.

Gifting down payments: The nitty-gritty

Bridget Alves - Monday, January 11, 2016


Gifting the down payment of a home is a trend that’s been growing increasingly common. Because it’s a gift, it doesn’t affect a borrower’s interest rate, but it also doesn’t count as income when lenders are determining whether or not an applicant qualifies for a mortgage. That being the case, for those who are in a position to gift the down payment of a home, here are some things you’ll likely want to know before you do it.

 

For starters, lenders are usually more than happy to allow gifting the down payment to a piece of property that is occupied by the owner (i.e. a residence), but usually won’t allow it for investment properties. Also, when a down payment is gifted, additional paperwork will be required on the part of the giver to ensure that the money doesn’t come from illicit sources.

 

The next big hurdle is the gift tax. It’s possible to gift someone up to $14,000, however any higher amount will be taxed by the IRS. There are a few ways to get around the gift tax, though. For one, it’s possible to gift someone up to $56,000 by making four separate gifts of $14,000. Additionally, one parent can gift $28,000 to someone, and then when both parents file their taxes, they agree to split the gift (thereby equaling $14,000 a piece, and not triggering the gift tax).

 

Another thing that needs to be known about giving gifts: they’re permanent. Suppose you give your child $56,000 towards the down payment of their first home and they instead choose to invest that money in a business venture that fails. Tough luck. Once you gift someone money, it’s out of the control of the giver unless alternative arrangements are made in the form of legally binding contracts.

 

No matter what, before gifting any significant amounts of money, always talk to your CPA to find out exactly how it could affect your taxes and finances as a whole.

The hidden costs of home buying

Bridget Alves - Monday, January 04, 2016


When shopping for a home, many would-be buyers make the all-too-easy mistake of looking at the asking price of the home and thinking that’s all they’ll have to pay. Unfortunately, that’s not the case. Whether you give the buyer what they’re asking for the home, or luckily end up getting a lower offer accepted, there are a number of costs and fees that are going to drive up the total cost of the home.

 

The first cost you’ll likely come across is for that of a home inspection. Before a sale closes, some mortgage insurers will require that the home be inspected – a service which usually costs several hundred dollars. If an inspection isn’t required, it might just be worth it to have one done anyway. The hundreds you spend on an inspection can sometimes save you tens of thousands on repairs down the road.

 

According to Benjamin Franklin, the only certainties in life are death and taxes. Nowhere is this more true than when buying a home. Not only will you need to pay taxes on your purchase, but the government would like you to pay those up front – so be prepared to include taxes in the amount of your home loan. Actually, while you’re at it, make sure to include any survey fees and escrow costs into your loan, too, as these are usually required to be paid up front as well.

 

There are a number of fees that will need to be paid at closing, aside from the costs listed above. These fees include government recording charges, appraisal fees, credit report fees, title services, tax service fees, and lenders origination fees. If you’re starting to get worried that the closing costs and fees will price you out of the market – don’t be. Lenders are well-aware of the costs associated with buying a home and will help ensure that your mortgage covers what needs to be covered. However, paying what you can out-of-pocket isn’t always the worst idea, as you can save a significant amount of money over time via paying interest on a smaller loan.

What to do before searching for a new home

Bridget Alves - Monday, December 28, 2015


Do you know why they show so many court scenes on TV shows and in movies involving lawyers? It’s because that aspect of lawyering is the most interesting and dramatic. In reality, being a lawyer usually involves a ton of research and bookwork done in an office setting before a case ends up going to trial; and often times, cases don’t even get that far. The process of buying a home can be similar.

 

When buying a home, the looking at new places and imagining your things in all the nooks and crannies is the part that yields the most fun. But, there’s a lot of work to be done before you get to that point. This point is especially true after the Dodd-Frank Act took effect in 2014 requiring that prospective homeowners provide legitimate proof that they can actually afford the home they’re looking to buy. So, what steps do you have to take before you can start shopping for a new home?

 

File your taxes

Lenders will always want to see your most recent tax returns to verify your income. So, if you’re home shopping in the first quarter of the year, file your taxes first. If you’re planning to file extensions with the IRS, make sure you have alternative (and recent) documents that will verify your income.

 

Get your financial statements in order

W-2s, previous years’ tax returns, and 1099s are going to be needed to verify your income, and it can seriously limit stress levels if you have these things handy before you’re asked for them. If you own a joint business, you’ll need a corporate tax return for the past 2 years.

 

Check your credit!

If you have the luxury of time, check your credit and fix anything you can at least 6-months before buying a home (though a year can be even better). You don’t necessarily have to pay anything off completely, but just make sure everything is current and that there aren’t any errors on your report.

 

Look into the housing market
Once your finances are in order, you’ll want to start your search for a new home by checking out the market. Are home prices rising? Falling? Is now a good time to buy? How easy is it to get a loan? These are all questions you will want answers to before wading into the pool. If you’re not sure how to find answers to these questions, well, a good real estate agent will be more than happy to help you.

How to help your kids buy their first homes

Bridget Alves - Monday, December 21, 2015


With the holiday spirit in the air this time of year, it’s hard not to think of what you can do for people – especially when it’s your own family. Whether it’s a wedding gift or a Christmas present, parents with the funds available are often using them to assist their children with buying their first home. If you yourself have been thinking about doing so, here’s a few ways you can do it.

 

Family loans
Those who have sufficient assets can loan money to relatives for the purchase of a home in lieu of traditional mortgages. Situations like this can be profitable for the lenders because they’ll typically get a better interest rate than they would on a typical investment vehicle from the bank like a CD. On the side of the borrowers, the fact that they answer to mom and dad instead of a financial institution might help should financial difficulties arise. When someone loses a job, the mortgage is still due. If the lender is in the family, though, they might be more willing to negotiate something that will help their relatives out.

 

Though it’s coming from family, the loan will still follow the IRS’s proscribed interest rates based on the term of the loan. If the loan isn’t intended to be an investment, and the lender isn’t interested in earning interest, up to $14,000 in interest can be forgiven each year under gift tax exclusions (or up to $28,000 if gifted as a couple). Any interest earned above this must be reported to the IRS as taxable income.

 

Co-signing the mortgage

If your child or relative’s income is too low to qualify for a mortgage, co-signing can help. When co-signing, the parents’ income will be under just as much scrutiny as their kids’, and in order for a co-signing to be successful the parents must be able to show that they can take on the burden of home payments if the children are unable to. Also, the loan will show up on the credit report of the co-signers as an outstanding debt, making refinancing difficult down the road.

 

The holiday season can bring out the generosity in us all, but before assisting your children or relatives with the purchase of a home, make sure you consult a financial adviser.

Improvements that increase your home value

Bridget Alves - Monday, November 30, 2015


Sometimes, a new home is desired but moving just isn’t in the cards. Maybe you don’t have the money to buy a new house, or perhaps the market isn’t right. In situations like this, homeowners often turn to remodeling; it’s cheaper than moving and can provide that change of scenery that the homeowner desires. In situations like this, it’s important to know which improvements will increase the value of your home, enabling you to recoup some (if not all) of the cost when you decide to sell your home in the future.


The first, and most obvious change would be to repaint or replace the front door. Remodeling magazine’s 2014 Cost vs. Value report indicates that 96.6% of the cost of the door will be added to your home’s overall value. Just make sure you get a new door that actually goes with your home. If you don’t, you may end up creating an eye-sore that reduces your home’s value. 


Two of the most common remodels are to redo a home’s kitchen or the bathroom(s). Both are areas of the home where people spend a significant amount of time, and updating them can often pay off in both experience and in increased value to your home. When remodeling these areas, be very, very careful to ensure that the design fits in with the rest of the home. A rustic, “cabin in the woods” style kitchen is great, if you live in a rustic cabin in the woods. Installing a kitchen like this in a modern, suburban home would likely be weird, and turn off any potential homebuyers in the future.


No matter what additions or remodels you choose to make to your home, be aware of the cost of the remodel vs. the cost of the home. Just because you spent $50,000 remodeling your kitchen doesn’t mean it’s going to increase the value of your $150,000 house by that much. When your home doesn’t have the highest market value, making relatively minor cosmetic changes can make more sense financially. Instead of spending tens of thousands of dollars replacing your entire kitchen with high-end appliances and lavish tiles, try a smaller-scale renovation by replacing or repainting the cupboards and drawers. 


Last but not least, one of the most lucrative improvements you can make to your home is to increase the livable space without adding on extra rooms. Is the attic large enough to be a bedroom? Great! Turn it into one. What about the basement? Most basements are unfinished (they have concrete floors, ceilings with exposed pipes/wires, etc.) and finishing them will greatly increase the square footage of habitable space in the home, which will be reflected in the overall value.

Is earthquake insurance worth it?

Bridget Alves - Monday, October 12, 2015


Last year, South Napa experienced a magnitude 6.0 earthquake that caused about a billion dollars’ worth of damage and destroyed 6 homes. Prior to that, California hadn’t experienced a major earthquake in decades; which is probably why so few homeowners have been purchasing earthquake insurance. About 20-years ago, one-third of California homeowners had earthquake insurance policies. That number has dwindled over time to about 9% today. Part of the reason for the drop is likely the fact that there were so few damaging earthquakes during the period. Another part is probably the cost: earthquake insurance can be expensive, and there’s no real guarantee it will ever come in handy.


What many folks don’t realize until it’s too late is that run-of-the-mill homeowner’s insurance doesn’t cover earthquakes. A person must purchase an additional earthquake policy or add one on to their existing homeowner’s police. Depending on the location and size of the home, the average cost of earthquake insurance in California can be anywhere from $800 per year to $5,000 per year – prompting many homeowners to wonder if it’s worth the cost.


Earthquake insurance usually has a high deductible cost associated with it, meaning that the homeowner will have to pay a pretty substantial amount out of their pocket before their insurer will pay out a claim. What many people don’t know, though, is that there are 2 kinds of earthquake insurance: structural insurance and personal property insurance. Structural insurance is the one that will pay out of the home is damaged, and usually includes a high deductible. Personal property insurance, though, often has a very reasonable deductible and is the one that will replace the things you own that were destroyed as a result of the earthquake. 


Ultimately, it’s up to you whether or not you want to purchase earthquake insurance for your home. It might be wise, at the very least, to check and see what the rate would be for your home and if you can fit it into your budget. According to the experts, California is set to experience a major earthquake in the coming years. But, hey, they’ve been saying that for decades, haven’t they?


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