Author: Ryan DeRoode

From financial experts to real estate agents, many people have expressed concern about the affordability of houses for first-time home buyers. In the past, so-called “starter homes” were plentiful, the result of smart urban planning, innovative government programs and the collective wisdom of individual builders. But in recent decades starter homes have become much less common, leaving many younger buyers out in the cold.

The fact that starter homes have become an endangered species in many parts of the country is certainly cause for concern, but first-time buyers should not despair. They may be harder to find these days, but starter homes still exist in most real estate markets. Here are six smart strategies first-time buyers can use to find them.

Location, Location, Location

Seek out up-and-coming neighborhoods. There are unique gems in our Apple Valley and Lakeville area. Some older neighborhoods contain “diamonds in the rough”, if you know what to look for. As neighborhoods turn over to new generations, some of these areas even become fashionable again. We can help you find those hidden starter homes.

Pre-Approval Helps You Get Ahead of the Competition

Get pre-approved for financing before you shop. Competition can be fierce for starter homes, so it pays to be prepared. Getting pre-approved for a mortgage, before you shop, can give you a leg up on the competition, and send your offer to the top of the pile. When looking at starter homes, it can be highly advantageous to come to a showing ready to make an offer, if all of your conditions are met. Not having a pre-approval can cause delays, that can easily take you out of the running.

The Importance of Flexibility and Compromising

Be flexible. Starter homes are often older properties, and they may not have the latest amenities. If you want an affordable home, you may need to compromise a bit, so build some flexibility into your home buying process. Strange paint colors on the wall? Shag carpet? Outdated cabinetry? Look beyond the “warts” and have a vision for making a space your own.

Hire a Knowledgeable Real Estate Agent

Work with an experienced agent. Not all real estate agents are well-versed in the starter home market, so choose your representative with care. Let the agent know you are specifically targeting starter homes – it will save you both a lot of time and frustration. Be honest and upfront with your agent so that together you can discover a great home to fit your needs.

Be Mindful that Real Estate is Financial Before Emotional

Keep your emotions in check. Buying a home is a financial transaction, but it is also an emotional experience. Even so, it pays to keep your emotions in check, especially when you are shopping for the first time. Falling in love with a home beyond your financial means will only lead to frustration and heartbreak. Similarly, biting off more than you can chew, as far as renovations, can quickly turn a starter home into a money pit. A quality real estate agent will be experienced in being able to guide you to knowing the difference between a minor repair or cosmetic changes versus complete home demolition and renovation.

Prioritize Your Needs and Wants

Prioritize location as much as price. The three most important things in real estate are location, location and location (see our first tip!). Where your starter home is located can matter as much as how many bedrooms it has or what kind of tile is in the bathroom. Making location a priority can help you drive the best bargain, but the right location can also positively influence future appreciation. Are you willing to sacrifice a shorter commute for a nicer living space where you can get more for your money? Or would you prefer a smaller space with quick travel times to where you work each day?

Finding the perfect starter home is no easy task, especially in a hot and competitive real estate market. If you want to get a great home at an even better price, you need to set a strategy and stick to it. The six tips listed above can help you find those hidden starter homes, so you can get your home owning experience off to a profitable start.

If this feels like an overwhelming task, and you aren’t sure where to begin, please don’t hesitate to call Ryan at (651) 503-4158.

 

 

Image credit: Getty Images/monkeybusinessimages

So, you’ve just bought this brand new home and you want to keep it looking as new as possible for as long as possible. Although it can seem daunting, this is the easy part! Whether you live in Lakeville, Apple Valley, Burnsville, or anywhere in between, a few simple things can keep your home looking brand new with very little time and effort from you.

#1 Create a New Home Maintenance Checklist

Life is going to get busy and you’re bound to forget about which tasks need to be completed throughout the year. Make yourself a checklist to remind you which projects need to be completed and how frequently. Consider putting both exterior and interior tasks on your list. Check out these links for a starting point:

Better Homes & Gardens
New York Times
Prudent Reviews
The Family Handyman

These are just a starting point – but it’s good to start with a basic list, and you can develop it into a reasonable list for you. Don’t be afraid to hire out tasks that are beyond your time availability, or do-it-yourself skill set, which leads to #2 below!

#2 Make a List of Home Maintenance Professionals

Some of your home maintenance will need to be conducted by professionals. Create a list of plumbers, electricians, lawn care, and roofing experts, so you have this information handy when the time comes. Ask your friends and neighbors for recommendations to add to this list. Make sure to do your homework, including checking out Google and Facebook reviews on contractors that you may be hiring – the last thing you want is a botched project that ends up costing you more time and money.

#3 Set Boundaries with Kids and Pets

Your family is bound to show the house some tough love, but by instilling a sense of responsibility and firm guidelines, you can minimize the destruction caused while increasing the amount of pride and enjoyment you all feel.

For pets:

– Maintain designated elimination areas to help reduce odors and stains.
Establish a reasonable crating routine for when you are away. Consult your veterinarian if you are unsure of the proper amount of time your pet can be crated.

– If you work long hours, consider hiring an extra set of hands to take your favorite canine for a walk midday. The exercise will be good for your dog mentally, as well as physically, and help with behavior issues.

– If your pet is experiencing destructive tendencies, consult a pet behavioral expert to find ways to enrich your pet’s mind and reduce anxious or stressful behaviors.

– Attend to mishaps immediately to help reduce repeat offenses.

– Don’t forget the treats! Pets are usually very motivated by food and this is a fast way to help your pet learn.

For children:

– Establish reasonable chore routines based on your child’s age and abilities

– Communicate clearly the positive impact of having your children contribute to home cleanup and chores

#4 Change Filters Regularly

A clean and healthy home is a reflection of the residents inside and will greatly mirror your quality of life. Change your air and water filters regularly to keep your family happy and healthy. Don’t forget about dryer vents!

By following these simple steps, you are taking responsibility and displaying pride in your home. Regular maintenance keeps your new home looking brand new for much longer, and you’ll be able to enjoy it for years to come!

Photo credit: Getty images/Demaerre

Mortgage lenders require a lot of documentation to complete a mortgage application. Forgetting something or getting the wrong information can cause lengthy delays. It could even cause borrowers to miss a deadline and lose the house they have their eyes on. Therefore, applicants should make sure they have all the documentation they need organized and ready to go, prior to getting your home mortgage loan.

Documents Needed for a Mortgage Application

Each lender has a different set of needs, so it’s important to ask before you begin. However, there are a series of documents most mortgage lenders will need. In general, there are fourteen document categories lenders will use to examine four main areas of an applicant’s life.

Credit Reports and Past History

First, the mortgage lender will want to verify that all applicants have good credit. To avoid any surprises and save time, have the lender pull credit reports from Equifax, Experian, and TransUnion ahead of time. These documents will also give the lender a preliminary look. If there is something significant on them, he or she can say something without having to do a hard credit check. Learn more about how you can manage your credit score to help reduce your loan’s interest rate here.

Bankruptcies and foreclosures will also need to be addressed. Therefore, gather documents for any that have occurred in the last seven years. The goal is to show the lender that they have been satisfied and any associated financial demands associated with them have ceased.

Liability Verification

Next, the lender will want to examine an applicant’s expenses and liabilities. Start by compiling a list of debts. Include proof of the balances for each one or the monthly expense incurred. Canceled rent or mortgage checks or some other type of proof that these have been paid on time will help here as well. Lastly, if an applicant has been divorced, include copies of the divorce decree as well as any court orders for child support, alimony, or additional expenses they pay. Paperwork showing these have been paid on time can be helpful as well. Once again, pulling an early credit report will help with many of these items.

Asset Assessment

With all the expense portions out of the way, it’s time to address assets. Start by creating a list of assets and providing proof of their value. These could include cars, art, investments, or anything of significant value. Lenders will also want at least two months of bank statements for each bank account to show the amount of cash on hand.

If friends or family will be helping an applicant with the down payment, the lender will want proof of this as well. Generally, a letter from each person will be enough. In these letters, the individual should include the amount and expressly state that the money is a gift and not a loan. This will prove to the lender that the money will not have to be repaid. Your lender will have the appropriate verbiage to help you out.

Income Verification

Just saying the household brings in a specific amount of money each month isn’t enough. Mortgage lenders will want proof. In most instances, one month of pay stubs will prove the applicant is still employed and how much income they bring in each pay period. Applicants will also need W-2 forms for the last two years as well as at least two years of tax returns.

The lender will also want to see proof of any other income. Individuals who are self-employed will need to provide year-to-date profit and loss statements to show the business is financially stable. Child support payments and alimony coming into the household can help. Other types of income could include SSI, commission, bonuses, tips, or a Schedule E form for rental income.

As a general rule, it’s better to have extra paperwork on hand than not enough. Applicants can bring in two or three months worth of pay stubs, for example. This can help avoid delays by having the information, if there are additional questions.

Once all the documents have been collected together, organize them to make them easy to find. Accordion files with large envelopes work perfectly for this. By having everything gathered together and organized, it also shows the mortgage applicants attention to detail. Quick books or some other form of electronic filing make this quick and easy as well.

As your Realtor, I’m here to answer questions you may have as you move through the process. My goal is to help you feel comfortable and confident through the entire home buying process.

Photo credit: Getty images/Marchmeena29

Choosing the type of home loan mortgage is one of the most important decisions a home buyer can make. But with so many different types and requirements, it can be tough to decide which is the right one or even which ones to ask about. It’s important to work out the details with the mortgage lender, but it helps to understand mortgage basics before the first appointment.

How Interest Rates Are Determined

How a mortgage’s interest rate works depends on the type chosen. All loans will have either a fixed rate, an adjustable rate, or a hybrid system. Each of these interest rate structures has a unique set of advantages and disadvantages that potential buyers will need to consider.

Fixed-Rate Mortgage Loans

Fixed-rate mortgages have a consistent interest rate throughout the life of the loan, which can last for 20 years or more. The payment versus interest ratio will fluctuate between payments, but the payment amount will stay the same for the duration of the term. It’s this consistency and dependability that make fixed mortgages a favorite for first-time home buyers and people who plan to live in the home for a long time.

Adjustable-Rate Mortgage Loans

As its name suggests, an adjustable-rate loan has an interest rate that fluctuates over a term. This feature makes it the preferred mortgage type for home buyers who want to save money. However, the savings depend on interest rate trends and how long the owner plans to stay. While they are somewhat unpredictable, the risk is limited to some degree. Pre-set limits dictate how much a loan can change each month and throughout a mortgage term.

Hybrid Mortgages

Some mortgage lenders offer home loans with a combination of fixed and adjustable rates. Called hybrid mortgages, they have a period of fixed rates with interest that’s often lower than traditional fixed-rate mortgages. Once the fixed period ends, the interest fluctuates every year afterward. For those who plan to resell the home before the initial fixed period ends, this could mean significant savings.

How the Funds Are Backed

Mortgages need to be insured or backed to protect lenders from financial losses. There are two systems in place to accomplish this goal. Conventional mortgages depend on the financial system. Government-insured mortgages, however, are structured and backed by the federal government.

Conventional Home Loan Mortgages

Unlike FHA, VA, and USDA home mortgages, conventional loans aren’t backed by the government. Instead, they’re often included in mortgage-backed securities. Previously, this mortgage type was common because they were frequently available with no verification or down payment. In fact, this loan type makes up more than half of all current mortgages in the United States. Today, however, it’s a different story.

Conventional mortgages include a full range of checks and applications. To qualify, buyers need to pass background checks, asset and liability verifications, credit history checks, and typically have a credit score of at least 650. These mortgage types will often have higher interest rates, which are determined by the markets and the applicant’s financial profile. To offset the higher rates, home buyers can buy discounts through lender fees called points. The more points a home buyer buys, the lower the interest rate will be.

FHA Home Loans

FHA loans are one type of government-insured mortgages. Available to anyone, these loans are an excellent choice for first-time home buyers. The low down payment associated with FHA mortgages, makes it possible for low-income households to purchase a home. However, these loans require mortgage insurance, which does increase monthly payments.

VA Home Mortgage Loans

VA home loans are fully government-insured mortgages through the U.S. Department of Veterans Affairs. Because they are guaranteed by the federal government, these mortgages require no down payment. There is an upfront funding fee, that can be rolled into the loan, but there is no mortgage insurance tacked on to the monthly payment. This makes them the ideal choice for former veterans who qualify.

USDA (RHS) Home Loan Mortgages

USDA mortgages are made through the United States Department of Agriculture’s Rural Housing Service (RHS) and are 90 percent government insured. They’re designed to make home ownership available for low-income households in rural areas, who fail to secure other financing options. And they are often chosen for their low down payment requirements and flexibility. These home loans can be used for refurbishing existing homes, buying a house, or new home construction. They also cover fees, disability equipment, energy efficient upgrades, and major household items.

203(K) Rehab Mortgages

Available as a fixed or adjustable rate mortgage, the 203(K) mortgage is available through the FHA. They’re designed specifically to help home buyers purchase properties that require renovations of at least $5,000. This includes properties that will be converted into a home or separate units. However, once the renovations are complete, the property will need to meet structural and energy efficiency standards. There are also requirements for how repairs are completed.

The Mortgage Size

The size of a mortgage will determine which category it falls under. Conforming mortgage limits and criteria are defined by Fannie Mae and Freddie Mac. Jumbo home loans, however, are for amounts above the limit defined by the government corporations.

Conforming Mortgage Loans

When a mortgage has been described as a conforming loan, it means the loan falls under the criteria set by Fannie Mae and Freddie Mac. These corporations purchase loans from mortgage lenders. Then, they buy and sell them using a financial tool known as mortgage-backed securities.

Jumbo Home Mortgage Loans

Mortgages that exceed Fannie and Freddie limits are referred to as jumbo mortgage loans. Due to the high dollar amounts and equally high risks, these loans often have high interest rates and require large down payments. Also, they can be difficult to get. These mortgages can only be secured by home buyers with superior financial profiles.

The type of mortgage a home buyer gets will determine how affordable the payments will be. Therefore, it’s important to consider the many options carefully. My goal as a real estate agent is to provide you with comfort and reliability, while helping you discover a great home that fits your needs. My team and I can help you navigate questions you may have on mortgages and which may be the best options for you. Get in touch today!

Photo credit: Getty images/Witthaya Prasongsin