CHOOSING BETWEEN AN ADJUSTABLE RATE
AND FIXED-RATE MORTGAGE
Which is the better mortgage option for you: fixed or adjustable?
* The low initial cost of adjustable-rate mortgages, or ARMs, can be tempting to homebuyers, yet they carry a degree of uncertainty.
* Fixed-rate mortgages offer rate and payment security, but they can be more expensive.
Here are some pros and cons of adjustable-rate and fixed-rate mortgages:
ADJUSTABLE RATE MORTGAGES
Feature lower rates and payments early on in the loan term. Because lenders can use the lower payment when qualifying borrowers, people can buy larger homes than they otherwise could buy.
Allow borrowers to take advantage of falling rates without refinancing. Instead of having to pay a whole new set of closing costs and fees, ARM borrowers just sit back and watch the rates — and their monthly payments — fall.
Help borrowers save and invest more money. Someone who has a payment that’s $100 less with an ARM can save that money and earn more off it in a higher-yielding investment.
Offer a cheaper way for borrowers who don’t plan on living in one place for very long to buy a house.
Rates and payments can rise significantly over the life of the loan. A 4 percent ARM can end up at 9 percent in just three years if rates rise sharply.
The first adjustment can be a doozy because some annual caps don’t apply to the initial change. Someone with a lifetime cap of 6 percent could theoretically see the rate shoot from 4 percent to 10 percent a year after closing if rates in the overall economy skyrocket.
ARMs are difficult to understand. Lenders have much more flexibility when determining margins, caps, adjustment indexes and other things, so unsophisticated borrowers can easily get confused or trapped by shady mortgage companies.
On certain ARMs, called negative amortization loans, borrowers can end up owing more money than they did at closing. That’s because the payments on these loans are set so low (to make the loans even more affordable) that they cover only part of the interest due. The remainder gets rolled into the principal balance.
Rates and payments remain constant, despite what happens in the broader economy.
Stability makes budgeting easier. People can manage their money with more certainty because their housing payments don’t change.
Simple to understand, so they’re good for first-time buyers who wouldn’t know a 7/1 ARM with 2/6 caps if it hit them over the head.
To take advantage of lower rates, fixed-rate mortgage holders have to refinance. That means a few thousand dollars in closing costs, another trip to the title company’s office and several hours spent digging up tax forms, bank statements, etc.
Can be too expensive for some borrowers because there is no early-on payment and rate break.
Are virtually identical from lender to lender. While lenders keep many ARMs on their books, most financial institutions sell their fixed-rate mortgages on the secondary market. As a result, ARMs can be customized for individual borrowers, while most fixed-rate mortgages can’t.
All of these things should factor into your decision between a fixed-rate mortgage and an adjustable. But there are other important questions to answer when deciding which loan is better for you:
A FEW COMMON QUESTIONS…..
1. How long do you plan on staying in the home?
If you’re going to be living in the house only a few years, it would make sense to take the lower-rate ARM, especially if you can get a reasonably priced 3/1 or 5/1. Your payment and rate will be low, and you can build up savings for a bigger home down the road. Plus, you’ll never be exposed to huge rate adjustments because you’ll be moving before the adjustable rate period begins.
2. How frequently does the ARM adjust, and when is the adjustment made?
After the initial, fixed period, most ARMs adjust every year on the anniversary of the mortgage. The new rate is actually set about 45 days before the anniversary, based on the specified index. But some adjust as frequently as every month. If that’s too much volatility for you, go with a fixed-rate mortgage.
3. What’s the interest rate environment like?
When rates are relatively high, ARMs make sense because their lower initial rates allow borrowers to still reap the benefits of homeownership. When rates are falling, borrowers have a decent chance of getting lower payments even if they don’t refinance. When rates are relatively low, however, fixed-rate mortgages make more sense.
4. Could you still afford your monthly payment if interest rates rise significantly?
On a $150,000 one-year adjustable-rate mortgage with 2/6 caps, your 5.75 percent ARM could end up at 11.75 percent, with the monthly payment shooting up as well.
* IN AN EVER-CHANGING, AND CONSTANTLY EVOLVING REAL ESTATE MARKET……IT PAYS TO BE INFORMED.
* REACH OUT TO ME [24/7] 305.494.5546
* MARK ANTHONY DAVIS, FLORIDA LICENSED REAL ESTATE AGENT
HOME WINTERIZING CHECK-LIST FOR 2018
Can you feel that chill in the air? If not, just you wait — winter will be here before you know it, and now is the time to get your house ready for the cold. Trust us: You don’t want to discover your furnace is dead on arrival at the first snowfall. And dealing with those cold air drafts now is a lot more pleasant than waiting until the inside of your house feels like a freezer.
Here’s a list of what to do and who to hire now, so you’re not left shivering through the season.
Gutter Check: Ideally, you’ll have your gutters and downspouts cleaned in mid-fall. If you do encounter clogs or leaking in difficult to reach places, now is a good time to call in the professionals.
Seal The Deck: If you have a deck give it a fresh coat of sealer before the cold hits to protect it from the harsh winter elements.
Roof Inspection: Have a contractor look for damaged roof shingles. A professional can also assess the integrity of your roof by doing something called an infrared inspection. This process uses infrared rays to locate the parts of a roof that are at higher or lower temperatures than the rest of it. These “hot spots” can show the roof inspector exactly where heat is escaping.
Weatherproof Windows: If heat is escaping through your windows and the space around them, keeping the rest of your house warm is going to be more difficult and more expensive. You might find installing double pane windows will make a noticeable difference in your energy costs and how comfortable your living areas feel. You may not need to install new windows if heat is escaping, though. In some cases, all you need is some caulk or weather stripping to weatherproof the existing windows.
HVAC Tuning: Now is the time to replace furnace filters, and close any vents in your home that may have been opened for the warm weather. Go ahead and test that your heating system is working properly, too — it’s better to find out now if something needs to be fixed before the real cold weather hits.
Chimney Cleaning: Chimneys and wood stoves should be cleaned early in the season. If you own a fireplace, this is not optional — it’s a matter of safety. When you have your chimney cleaned, have the furnace flue cleaned at the same time. Make sure to test the flue for a tight seal when closed.
Outlet Inspection: Check electrical outlets to see if you feel a draft. Add insulation to prevent warm air from escaping these spaces.
Stock Up: Make sure you have shovels, gloves, heavy coats, sweaters, and portable heaters on hand before the first big snow hits. Plus, it’s a good idea to have plenty of water, canned food, flashlights and replacement batteries.
Whether you’re in Florida or Montana, let’s get ready for those chilly winter months!
THE 8 RULES OF HOUSE FLIPPING
- Best Condition & Best Price: It used to be that a house flipper needed to focus on having either the nicest house on the block or the lowest priced house on the block. With the number of houses on the market currently outnumbering the number of potential buyers by a very large margin, house flippers must now focus on having the house that is BOTH in the best condition AND the lowest priced among comparable homes.
I’m sure a lot of people who are considering this are thinking, “How can I offer the nicest house at the lowest price and still make money?” It’s a great question, and the answer is simple –- only consider fantastic deals when you’re buying. As the old adage goes, you make money when you buy. This is especially true in today’s market; if you can’t buy low enough to put the house in great condition and still sell below market, you shouldn’t be buying.The nice thing is, now is a great time to pick up these deals. Between the glut of foreclosures that are likely to hit the market soon, the banks willing to take a loss by doing short sales, and the sellers who missed the tax credit boat and are desperate to get out from under there properties, motivated investors should have no problems finding great deals that will work as successful rehab projects.
- Know Your Buyers: I was at a Real Estate Investment group meeting last year, when an investor who focused on rental properties asked me, “How do you expect to flip any properties? I had a friend who was buying properties worth $300K and trying to sell them for under $200K, and couldn’t sell a single one!”
I’ll tell you what I told him –- in my current local market, there are very few buyers who are looking for properties over $150K. Sure, there are some here and there, but for the most part, today’s buyers are first-time home buyers looking for move-in-ready properties in the $90-130K range. Why is that? It’s because these are the only buyers who are able to both qualify a loan and come up with a down-payment. (they are getting FHA loans that only require 3.5% down).So, it’s no surprise that this guy’s friend wasn’t able to sell his $300K houses for $200K — there just aren’t enough buyers at that price-point, regardless of how good the deals are.Knowing your buyer base will allow you to appropriately focus your rehab and resale efforts – if the available buyers are looking for move-in-ready houses in the $90-130K range, you should be offering move-in-ready houses in the $90-130K range, nothing more and nothing less. I’m not saying the buyer base in your market is the same as it is in mine, just that you need to figure out what you buyer base is, AND FOCUS ON SELLING HOUSES TO THEM.
- Multiple Exit Strategies: Wanting to flip a house is great. Finding a house that can be successfully flipped is even better. But, in today’s market, any deal you consider should have multiple possible exit strategies — not just the possibility of a flip. And not just multiple potential exit strategies, but multiple strategies that you are convinced will work, if necessary.
For example, I like to have at least 3 of the following 5 possible exit strategies before I consider a deal:
- Wholesale to Another Investor
- Minor (or No) Rehab and Rent
- Minor Rehab and Sale to Investor
- Minor Rehab and Flip to Occupant
- Major Rehab and Flip to Occupant
If you can’t find at least two different exit strategies for a property, don’t buy it. Because in this market, there’s just too much chance that your first strategy won’t pan out, and if that happens, you want to have alternatives.
- Know Your Comps: With the market changing on a daily basis, this is no time to trust something as important as comps to unreliable sources. That means you shouldn’t be using tax appraisals (those guys don’t even go inside the house to get their estimates), you shouldn’t be using websites like Trulia and Zillow (they may be right on, but they may also be very high or very low), and you shouldn’t be trusting your real estate agent unless they actually give you the data to verify for yourself.
The only real way to find comps is to pull actual MLS (or tax record) data, and sort through it yourself. You’re looking for similar properties (pretty much same style, same # of beds and baths, same lot size, same condition) that have sold in the past 3 months within the same subdivision (or .5 mile radius). Don’t go back 6 or 12 months (the market has changed since then), don’t look at properties that are nothing like your own, and don’t look even 2 miles away (market conditions can vary drastically over even short distances).Your agent should be able to pull all the comp data you need, but it’s YOUR responsibility to make sure the data used is applicable. Too many agents will give you data that supports a high ARV, just to get you to buy the property. Trust the data, but only if you sort through it yourself. And if you can’t find any data for your area, ask yourself why that is? Is it “out of the way?” Is it a bad neighborhood where buyers don’t want to buy if they have an alternative (and these days they do)? Or is it such a desirable neighborhood that nothing has even been listed for sale in the past year (this is a good thing)? Even lack of data is an important piece of data when it comes to comps.
- Location, Location, Location: While this has always been a key maxim in real estate investing, the difference between then and now is that today, you need properties that will get a lot of potential buyer traffic through them. This means buying in the front of subdivisions, buying on well-traveled (but not too busy) roads, and buying in areas near shopping and other amenities that draw crowds.
Many buyers these days are finding houses because they drive past them and see signs; they may not have even been on the market previously to buy, but they stop into yours and they fall in love. If you buy in locations that will only get foot-traffic if an agent brings them in, you’ll get a lot fewer potential buyers through the house, and today, it’s all a numbers game. You need to get lots of buyers to at least look at your property, and just listing on the MLS and waiting for agents to bring potential buyers though isn’t going to accomplish that goal.
- Staging: I’m a huge proponent of house staging. And I firmly believe that while staging may not get you a whole lot more money for your property in today’s market, it will certainly increase your likelihood of getting offers if your house is priced correctly. While buyers aren’t likely to increase their spending limit in this market (they don’t have to), they will most certainly be drawn to houses that they can imagine themselves living in.
Staging accomplishes this by allowing your buyers to make an emotional connection with your property — by allowing them to associate it with a home, not just a house. A house without any furniture is just a faceless property…a nicely decorated home provides a feeling of warmth, comfort and security. And not only does staging create an emotional connection, but it allows those buyers who aren’t very imaginative (read: MOST BUYERS) to get a better feel for how the house will look once they move in. In fact, if a house is staged well, it will give your potential buyers ideas for how to make their next home (this one!) even better than their last.
- Know The Rules: House flipping is a lot more complicated than it appears on TV. There are lots of rules, regulations and roadblocks that — if not heeded — will hinder your ability to make money in this business.
For example, many rehabbers don’t realize that once they purchase a property, while they can sell now sell their property to an FHA buyer within 90 days, it requires jumping through hoops and finding a mortgage broker who can get that kind of deal done. I can’t tell you how many people I’ve met who had a plan to buy a property, slap on some paint and carpet, and resell to a retail buyer in just a couple weeks, and then got caught by all the extra FHA regulation that surrounds a quick flip. So, instead of selling in a couple weeks, they end up having to hold onto the property for three months, increasing their holding costs (and tying up their cash) while they wait for the opportunity to sell to their FHA buyer. And in some cases, the buyer didn’t want to wait around and the deals fell through.
To be successful, you must know the rules — this includes buying rules, selling rules, lending rules, construction/permit rules, etc.
- Build A Strong Team: The difference between a successful real estate investor and an unsuccessful one is the team she surrounds herself with. A real estate investor is only as good as his CPA, attorney, real estate agent, inspectors, contractors, title company, etc. When it comes to pulling off all the other rules I listed, you need a strong team to be successful; if you don’t have that strong team, you can bet your competition does.
A weak team will cost you time, money and headaches that you can’t afford. All it takes is for your agent to negotiate poorly, your attorney to miss a contract loophole, your inspector to miss a structural problem or your contractor to screw up to turn a profitable flip into a big loser. A couple of those can quickly end an otherwise successful real estate career.
EVERYTHING YOU NEED TO KNOW ABOUT AN FHA LOAN
What is an FHA Loan?
An FHA loan is a mortgage loan that is insured by the Federal Housing Administration (FHA). Nowadays, FHA loans are very popular, especially with first-time home buyers because the requirements are less strict than conventional loans. Borrowers can qualify for an FHA loan with a down payment as little as 3.5% and a credit score of 580 or higher. The borrower’s credit score can be between 500 – 579 if a 10% down payment is made. It’s important to remember though, that the lower the credit score, the higher the interest borrowers will receive.
The FHA program was created in response to the rash of foreclosures and defaults that happened in 1930s; to provide mortgage lenders with adequate insurance; and to help stimulate the housing market by making loans accessible and affordable for people with less than stellar credit or a low down payment. Essentially, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments.
Benefits of FHA Loans: Low Down Payments and Less Strict Credit Score Requirements
Typically an FHA loan is one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. For FHA loans, down payment of 3.5 percent is required for maximum financing. Borrowers with credit scores as low as 500 can qualify for an FHA loan.
Borrowers who cannot afford a 20 percent down payment, have a lower credit score, or can’t get approved for private mortgage insurance should look into whether an FHA loan is the best option for their personal scenario.
Another advantage of an FHA loan is that it can be assumable, which means if you want to sell your home, the buyer can “assume” the loan you have. People who have low or bad credit, have undergone a bankruptcy or have been foreclosed upon may be able to still qualify for an FHA loan.
Mortgage Insurance is Required for an FHA Loan
You knew there had to be a catch, and here it is: Because an FHA loan does not have the strict standards of a conventional loan, it requires two kinds of mortgage insurance premiums: one is paid in full upfront -– or, it can be financed into the mortgage –- and the other is a monthly payment. Also, FHA loans require that the house meet certain conditions and must be appraised by an FHA-approved appraiser.
Upfront mortgage insurance premium (UFMIP) — Appropriately named, this is a one-time upfront monthly premium payment, which means borrowers will pay a premium of 1.75% of the home loan, regardless of their credit score. Example: $300,000 loan x 1.75% = $5,250. This sum can be paid upfront at closing as part of the settlement charges or can be rolled into the mortgage.
Annual MIP (charged monthly) — Called an annual premium, this is actually a monthly charge that will be figured into your mortgage payment. The amount of the mortgage insurance premium is a percentage of the loan amount, based on the borrower’s loan-to-value (LTV) ratio, loan size, and length of loan:
|Loan Term||Loan Amount||LTV Ratio||Annual Insurance Premium|
|Over 15 years||$625,000 or less||95% or less||0.80%|
|Over 15 years||$625,000 or less||Over 95%||0.85%|
|Over 15 years||Over $625,000||95% or less||1%|
|Over 15 years||Over $625,000||
|15 years or less||$625,000 or less||90% or less||0.45%|
|15 years or less||$625,000 or less||Over 90%||0.70%|
|15 years or less||Over $625,000||90% or less||0.70%|
|15 years or less||Over $625,000||Over 90%||0.95%|
For example, the annual premium on a $300,000 loan with term of 30 years and LTV less than 95 percent would be $2,400: $300,000 x 0.80% = $2,400. To figure out the monthly payment, divide $2,400 by 12 months = $200. So, the monthly insurance premium would be $200 per month.
How Long Do Borrowers Have to Pay FHA Mortgage Insurance?
The duration of your annual MIP will depend on the amortization term and LTV ratio on your loan origination date:
- For loans with FHA case numbers assigned on or after June 3, 2013:
Borrowers will have to pay mortgage insurance for the entire loan term if the LTV is greater than 90% at the time the loan was originated. If your LTV was 90% or less, the borrower will pay mortgage insurance for the mortgage term or 11 years, whichever occurs first.
|Term||Loan-to-Value (LTV) Ratio||Duration|
|15 years or less||78% or less||11 years|
|15 years or less||79-89%||11 years|
|15 years or less||90% or higher||Full loan term|
|Over 15 years||78% or less||11 years|
|Over 15 years||79-89%||11 years|
|Over 15 years||90% or higher||Full loan term|
|Term||Loan-to-Value (LTV) Ratio||Duration|
|15 years or less||78% or less||No annual MIP|
|15 years or less||79-89%||Cancelled at 78% LTV|
|15 years or less||90% or higher||Cancelled at 78% LTV|
|Over 15 years||78% or less||5 years|
|Over 15 years||79-89%||Cancelled at 78% LTV & 5 years|
|Over 15 years||90% or higher||Cancelled at 78% LTV & 5 years|
FHA Loan Requirements
The requirements for FHA loans are set by the Federal Housing Authority and include:
- Borrowers must have a steady employment history or worked for the same employer for the past two years.
- Borrowers must have a valid Social Security number, lawful residency in the U.S. and be of legal age to sign a mortgage in your state.
- Borrowers must pay a minimum down payment of 3.5 percent. The money can be gifted by a family member.
- New FHA loans are only available for primary residence occupancy.
- Borrowers must have a property appraisal from a FHA-approved appraiser.
- Borrowers’ front-end ratio (mortgage payment plus HOA fees, property taxes, mortgage insurance, homeowners insurance) needs to be less than 31 percent of their gross income, typically. You may be able to get approved with as high a percentage as 40 percent. Your lender will be required to provide justification as to why they believe the mortgage presents an acceptable risk. The lender must include any compensating factors used for loan approval.
- Borrowers’ back-end ratio (mortgage plus all your monthly debt, i.e., credit card payment, car payment, student loans, etc.) needs to be less than 43 percent of their gross income, typically. You may be able to get approved with as high a percentage as 50 percent. Your lender will be required to provide justification as to why they believe the mortgage presents an acceptable risk. The lender must include any compensating factors used for loan approval.
- Borrowers must have a minimum credit score of 580 for maximum financing with a minimum down payment of 3.5 percent.
- Borrowers must have a minimum credit score of 500-579 for maximum LTV of 90 percent with a minimum down payment of 10 percent. FHA-qualified lenders will use a case-by-case basis to determine an applicants’ credit worthiness.
- Typically borrowers must be two years out of bankruptcy and have re-established good credit. Exceptions can be made if you are out of bankruptcy for more than one year if there were extenuating circumstances beyond your control that caused the bankruptcy and you’ve managed your money in a responsible manner.
- Typically borrowers must be three years out of foreclosure and have re-established good credit. Exceptions can be made if there were extenuating circumstances and you’ve improved your credit. If you were unable to sell your home because you had to move to a new area, this does not qualify as an exception to the three-year foreclosure guideline.
- The property must meet certain minimum standards at appraisal. If the home you are purchasing does not meet these standards and a seller will not agree to the required repairs, your only option is to pay for the required repairs at closing (to be held in escrow until the repairs are complete).
FHA Loan Limits
The Federal Housing Authority sets maximum mortgage limits for FHA loans that vary by state and county. In certain counties, you may be able to get financing for a loan size up to $729,750 with a 3.5 percent down payment. Conventional financing for loans that can be bought by Fannie Mae or Freddie Mac are currently at $625,000.
How Do You Get an FHA loan?
A lender must be approved be the Federal Housing Authority in order to help you get an FHA loan. You find FHA lenders and shop for mortgage quotes for an FHA loan quickly and easily online. Just submit a loan request and you will receive custom quotes instantly from a marketplace filled with hundreds of lenders. The process is free, easy and you can do it anonymously, without providing any personal information. If you see a lender’s loan quote that you are interested, you can contact the lender directly.
THE 3 COMPONENTS OF MENTAL STRENGTH
Being mentally strong requires you to be acutely aware of your emotions. When you understand how you’re feeling, you can be aware of how those emotions might affect your decisions.
Whether you’re negotiating a big deal or giving a presentation to a committee, mental strength helps you understand how you’re feeling. Once you know which emotions are present, you can more easily put yourself in the right frame of mind.
Elite athletes, for example, know which emotional states help them perform best. One athlete might listen to loud rock music to get fired up before the big game. Another might find she performs best after a 10-minute breathing exercise to calm her nervous energy.
Your emotions can greatly affect your personal and professional decisions. When you’re excited about a new opportunity, you might underestimate the risk involved. When you’re feeling sad, you might settle for less than you deserve. Anger can cause you to do or say things you normally wouldn’t.
Understanding your emotions helps you proactively address your feelings so you can make the best choices for yourself. The goal is to be in control of your emotions so your emotions don’t control you.
Researchers estimate you have between 50,000 and 70,000 thoughts each day. That’s up to 70,000 chances to either build yourself up or tear yourself down. The conversations you have with yourself will either bolster your performance or sabotage your best efforts.
The way you think about each situation determines how you’ll perform. Telling yourself, I can’t do this or I know I’m going to mess up impairs your ability to do your best. Building mental strength will help you have productive conversations with yourself so you can perform at your best.
Developing a stronger mindset involves training your brain to think differently. Instead of trying to avoid failure, focus on trying to win. Rather than believe your self-doubt, keep your focus on doing your best. Over time, your brain will automatically start looking for the positive aspects of every situation, and you’ll find it’s easier to consistently perform better.
Choosing to be productive, no matter the circumstances, is part of being mentally strong. It’s the will to keep going when you’re tired, or to get back up after your fail. The behavioral factor of mental strength tells you to just keep going.
But that doesn’t always mean continuing at all costs. A mentally strong person also knows when to walk away. Sometimes it’s smarter to quit when doors keep closing and obstacles keep arising. Don’t keep going if you’re headed down the wrong path or when the end no longer justifies the means.
An athlete, for example, knows it’s OK to keep running when her muscles are burning because that’s a sign she’s getting stronger. But she also knows she shouldn’t push through the pain if she’s recovering from a serious injury. When you’re mentally strong, pride won’t get in your way. You won’t feel the need to prove anything to anyone but yourself.
7 MIndset Shifts to Achieve Anything You Want
1. Take time to define your vision and your passion.
There is no vision without seeing. So step outside of your comfort zone! Experience, feel and taste what you are passionate about. Get out there and discover yourself, what you stand for and what you stand against. Then ask yourself what you want in life and why it’s important to you. Find what gets you fired up.
Your vision is about you and your desires, and it has to be complete, clear and brutally honest.
2. Become clear and very precise about what you want.
People are usually vague; they have only a pale vision of what they want. Try stopping and taking a break from the day-to-day race…..choose a quiet place and time, and write down what you specifically want to achieve and how you’ll know when you’ve achieved it.
Write down everything. Your brain will do what you want, but in order to get there, you need to be SPECIFIC. So start writing your dreams in full detail.
3. Continually reinforce your Motivation.
Often you know precisely what you want, but after surfing the “go get it” wave for some time, you can start to lose momentum. That’s when you slow down and enter a slump. Sometimes you need to reach outside of yourself to pull the best out. Ask yourself: Who is impacted by my dream? Who stands to benefit from it?
4. Make a plan for achieving your dream and set a start date.
How will you get to your dream? What is the complete skills set you need? What new knowledge do you need to acquire? One of the simplest ways to create a roadmap for your journey toward your dream is to model the actions of the smart people….and think about what you wish to achieve.
Find those people. Interview them. Replicate their steps. Learn. When you start, you’ll hit the ground running.
5. Work on your beliefs.
Our beliefs are external (what we say aloud) and internal (what we feel deep in our hearts). The internal beliefs are the ones calling the shots about what you really feel about yourself, who you are and what you are capable of. Saying you’ll run a marathon when you don’t believe you’ll even be breathing after five miles is not a winning situation.
The good news is that beliefs can be rewritten through diligent internal work: meditations, daily affirmations, journaling, creative visualizations. Use whatever works for you.
Remember that beliefs drive perceptions, perceptions drive habits, and HABITS DRIVE ACTION AND SUCCESS. YOU ARE WHO YOU THINK YOU ARE!
6. Embrace Discipline.
If you want to master something, you have to work consistently and with discipline. That includes 1) consciously setting sights to reach our goals, and 2) being keenly aware of distractions.
The habits you have right now are specifically geared to help you achieve everything you’ve already achieved. If you want something new, you must change your habits….. So what new habits can you set for yourself in the pursuit of your dream?
Discipline also means developing a distraction alarm. You need to be consistent not only in maintaining habits, but also in the conscious decision to achieve the right things and stay away from the unproductive ones. Multitasking is just a modern myth. The truth is that the most successful people are focused.
7. Decide each day to take three small steps toward your dream life.
By consistently making seemingly small actions, you plant seeds of achievement into your conscience. You start feeling the progress you’re making, and in time, these feelings grow into a belief and then into an attitude.
The Importance of Using a Professional to Sell Your Home
When a homeowner decides to sell their house, they obviously want the best possible price for it with the least amount of hassles along the way. However, for the vast majority of sellers, the most important result is actually getting their homes sold.
In order to accomplish all three goals, a seller should realize the importance of using a real estate professional. We realize that technology has changed the purchaser’s behavior during the home buying process. According to the National Association of Realtors’ 2016 Profile of Home Buyers & Sellers, the percentage of buyers who used the internet in their home search increased to 94%.
However, the report also revealed that 96% of buyers who used the internet when searching for homes purchased their homes through either a real estate agent/broker or from a builder or builder’s agent. Only 2% purchased their homes directly from a seller whom the buyer didn’t know.
Buyers search for a home online but then depend on an agent to find the home they will buy (50%), to negotiate the terms of the sale (47%) & price (36%), or to help understand the process (61%).
The plethora of information now available has resulted in an increase in the percentage of buyers that reach out to real estate professionals to “connect the dots.” This is obvious, as the percentage of overall buyers who have used agents to buy their homes has steadily increased from 69% in 2001.
If you are thinking of selling your home, don’t underestimate the role a real estate professional can play in the process.
HOW MUCH ARE CLOSING COSTS?
Sample question: “We are planning to buy our first home sometime this year. I’ve been reading about closing costs lately, and I’m totally confused about them. I’ve seen averages that are all over the board. How much are closing costs when buying a home? Does it depend on the house price, or is it standardized in some way?”
Short answer: The national average is supposedly $3,800. But this only includes the lender’s fee. When you add in the third-party fees (title company, escrow company, etc.) and whatever mortgage points you pay, your closing costs might be $7,000 or more. It also depends on the size of the loan you get.
In our experience, it’s more accurate to multiply your loan amount by 3 percent. This will give you a rough idea how much your total closing costs will be. On a $250,000 mortgage loan, this would come out to around $7,500 (250,000 x .03 = 7,500). If you live in a high-cost area like New York or California, you might have to multiply by 5 – 6 percent to get a ballpark figure.
Your lender should tell you how much your closing costs are when you apply for the loan. More specifically, they’ll give you a written estimate of these costs. But your actual fees could be 5 – 10 percent more than the estimated figure. So you should plan for surprises.
We will talk numbers again later. But first, we want to bring everyone else up to speed. Some of our readers might not even know what these costs are. Here’s a definition.
What Are Closing Costs?
Closing costs are the fees, charges and taxes required to (A) originate the mortgage loan and (B) transfer the property from seller to buyer. They are also referred to as settlement charges.
When you “close” on a property, you finalize all of the paperwork and settle all of the outstanding fees and charges. This is also when ownership is transferred from the seller to the buyer. All of the fees accumulated during the mortgage process must be paid on closing day. The buyer / borrower pays for most of these fees. In some cases, the seller may contribute money toward the buyer’s closing costs.
How Much Are They?
Your costs will vary based on three factors: (1) the lender you use, (2) the state in which you reside, and (3) the size of your mortgage loan. Location has a lot to do with it. New York, Texas and California are three of the most expensive states, with closing costs well above the national average.
So how much are they? According to Bankrate.com, the national average for closing costs is around $3,800. But this number is much lower than the actual costs incurred at closing. In fact, I think it’s irresponsible to publish numbers like this without explaining what is (or isn’t) included. It gives home buyers a false sense of ease. “Wow, I can afford that. I’ve got about $3,000 in the bank already!” But in reality, your actual costs could easily be twice this amount.
Often, when journalists and publishers list these averages, they only include the lender’s fees. But they don’t always include the third-party / non-lender fees, and these can add up to another $2,000 – $4,000 at least.
Add in the mortgage points to secure a lower rate, and your closing costs could easily exceed $7,000 on a $250,000 loan.
Breakdown of Fees and Charges
Here’s a breakdown of some of the costs you might incur when buying a home. This list is not complete. You might face additional fees that are not listed below. But it does include most of the standard charges:
- Mortgage application fee — This is the price for submitting a loan application to the lender. How much does it cost? On average, borrowers pay around $550 when applying for a mortgage loan. These days, most application fees are non-refundable. That means you don’t get the money back if you change your mind later on. Consider that before you submit applications with half a dozen lenders. Ask in advance if the application fee is refundable or not. Read the fine print.
- Loan origination fee — Origination is a fancy word for the start of something. The lender charges you money just to start or create the loan. Welcome to the world of mortgage lending! How much will you pay for this closing cost? It usually comes out to one percent of the loan amount. So when buying a $300,000 home, your origination fee would likely be $3,000. The bigger the loan, the higher the origination cost.
- Processing fee — You apply for a home loan. The loan gets “originated,” and you pay a fee. Then the loan gets “processed,” and you pay another fee. Later, the loan will be “underwritten,” and … well, you get the picture. Whenever your application package moves from one desk to another (electronically or otherwise), there’s another closing cost added on. Processing fees average around $400.
- Credit report — When you apply for a home loan, the lender will check your credit reports and scores by the way. They have to pay for this information, and they’ll pass the cost along to you. This is a relatively small fee, usually $35 to $50.
- Interest points — Also referred to as discount points, this is a form of prepaid interest. One point equals one percent of the loan amount. Most borrowers pay mortgage points at closing in order to secure a lower interest rate. This can greatly increase your total closing costs. How much does it add? If you pay a point on a $300,000 mortgage, you’ve increased your closing fees by $3,000.
- Title search and insurance — The title company will examine the title (ownership) for the home you are buying. They do this to protect you from future liens or other claims of ownership. The owner’s title insurance policy gives you coverage up to the amount you paid for the property, in the event that you lose the house through a title dispute. You’ll pay anywhere from $500 – $1,500, depending on where you live.
- Home appraisal — Is the property worth the amount you’ve agreed to pay for it? This is one of the first questions the lender will ask, after you present your purchase agreement. They’ll answer this question by having a professional appraiser determine the value of the home. The appraiser’s fee gets added to your closing costs. You can expect to pay around $400 for the appraisal.
- Underwriting fee — The mortgage underwriter is responsible for verifying all of the information in your loan application. This person must ensure you meet all of the lender’s guidelines and (possibly) the guidelines established by the secondary mortgage market. This cost might be part of the “processing” fee, or it might be listed separately. How much will you pay for this closing cost? Anywhere from $300 – $600.
- Property survey — The survey shows the exact size and layout of the property and lot. Lenders use this to make sure the house is not encroaching on another property (among other things). If there’s already a current survey, the lender might not order a new one. Some lenders will request a new survey even if one has been done recently. The survey might cost you anywhere from $150 to $450.
- Gov’t. recording fees — The government records the change of ownership / deed anytime a home is sold from one person to another. As you would imagine, they charge a fee for this recording. Home buyers pay an average of $125 for these fees.
- Home insurance premium — You must have a homeowners insurance policy in place before you can close on the home. Most lenders will require you to pay the first year’s premium on or before closing day. So while it’s not a lender-related fee, it should still be counted as one of your closing costs. According to the Insurance Information Institute, the average cost for a homeowners policy is around $800 per year.
Making the Average More Realistic
At the beginning of this article, we said the widely reported “average” for closing costs is around $3,800. This is a number you’ll run into a lot, when researching this topic online. I also pointed out that this number is much lower than the total costs you’ll have to pay at closing. It doesn’t include non-lender fees, the average points paid at closing, or homeowners insurance. So the figure causes more confusion than anything.
Realistically: So how much are closing costs now, based on the list of fees presented above? If you add up all of the numbers above (shooting the middle whenever a range is presented), you would come up with $10,067. This is for a $300,000 mortgage loan with one point ($3,000) paid at closing. Without paying that one point, the total costs would still be around $7,000 — and I’d have a higher interest rate as well.
Remember the 3-percent rule of thumb I mentioned earlier? I said you can get a pretty good idea how much your closing costs will be by multiplying the loan amount by 3 percent (or 4 – 6 percent in high-cost areas). Let’s see how it holds up here. If I multiply $300,000 by .03, I would get $9,000. If I multiply by .04 (4 percent), I would get $12,000. These numbers fall on either side of the $10,067 I got from adding up the averages above. So the 3-percent technique actually holds water.
But there’s an even better way to find out how much your closing costs are going to be. It’s called the Good Faith Estimate form.
When you apply for a mortgage loan, the lender is required to give you a document known as the Good Faith Estimate (GFE).
As the title implies, this document gives you an estimate of your total borrowing costs. It includes an itemized list of fee and charges, along with the amount.
There’s a good chance you’ll pay more on closing day than the lender estimates in advance. But this document is still useful as a planning tool.
If a particular fee ends up being more than ten percent higher than originally estimated, the lender must pay the difference. So they have an incentive to be as accurate as possible with the Good Faith Estimate.
HOW TO BUY A HOME USING A
Determine if a lease option is a good option for you. Lease options can be useful home-buying tools, but they’re not for everybody. In fact, the majority of lease options do not end with the lessee (the renter or prospective buyer) purchasing the home, and while that’s sometimes for a good reason, it’s often just a waste of money. Ask yourself a few questions before you decide to pursue a lease option in general or before you sign one on a particular house..
- Can you afford the option money? The option money or option fee is required for a lease option contract to be valid. This upfront payment may be quite small (equal to one or two month’s rent, for example), or it may be 3-5% of the purchase price. All of this money should go toward the purchase price or down payment on the home if you decide to buy the house at the end of the lease term, but unlike a security deposit, you don’t get the option money back at the end of the lease if you can’t purchase the house or decide not to.
- Do you plan to stay in the area? Since a lease option typically costs more than simply renting, you should be fairly certain that you want to buy the house at the end of the term. If you don’t, you lose your upfront option money and any additional money in excess of the fair rental value that you’ve paid in your monthly payments.
- Will you be able to secure financing at the end of the lease term? In some cases the seller will finance the purchase of the home after the lease option. Most of the time, however, the buyer will need to find his or her own financing by applying for a loan. A lease option can help you get a more favorable loan than you otherwise would be able to, but it’s no guarantee, so you’ll want to be reasonably sure that you’ll be able to qualify for a loan at the end of the term. Check with a mortgage broker or loan officer to examine your situation.
- Can you afford the monthly payments on the lease. Typically (but not always) the monthly payments on a lease will include the fair rental value plus option money that will go toward the purchase of the home. Thus, the monthly payments under a lease option will usually be more than you would pay if you were renting the same house.
- Will you be able to make the monthly payments on the home and meet other expenses of ownership? Even if you’re able to get the loan, it won’t do you any good if you can’t afford to keep up with the expenses of owning the home. Be sure to factor in not only the mortgage payments, but also property taxes, insurance, and maintenance costs, all of which renters don’t have to pay.
Find a house you want to buy. Keeping the above considerations in mind, look for a house that you like and that you can afford. There are some companies that specialize in lease options, and there in some places government programs will buy a house for you and then offer you a lease option. More typically, however, you can just find a house for sale and see if the owner will consider a lease option.
Discuss the lease option with the owner. Some homeowners have never heard of a lease option, and many are suspicious of them. In addition, some sellers need a lot of cash fast, and so there’s no way they can do a lease option. Still, if you’re lucky, you or your real estate agent may be able to convince the seller to work with you.
Get a home inspection. Once you’ve found a suitable house with an agreeable seller, it’s time to get the home inspected. Get an independent professional home inspector to do a full inspection so you can become aware of any problems the house may have. In most jurisdictions the seller is also required to give you a seller’s property disclosure attesting to the condition of the home, but an independent inspection is still important. If there are problems, make sure they’re not issues that will prevent you from getting a loan, and make sure the contract specifies who is responsible for making repairs. The lessor may also offer an allowance off the purchase price to enable the lessee to make the repairs if the option to buy is exercised.
Pay an option fee and sign the contract. The option fee is the upfront “consideration” that is necessary to make the contract binding. Pay this and sign the contract only once you are sure you understand all the terms of the agreement and you agree with them. In many cases, the lease option contract will be an addendum to a regular sale contract.
Check on your insurance needs. Since you now have an interest in the home, you may require additional insurance to protect the home and cover your increased liability exposure. The laws vary from place to place, so check with your insurance agent or lawyer to find out what coverage you need.
Make monthly payments. You will make monthly payments just as you would make rent payments. In many cases, however, a portion of the monthly payment will be designated as option money. This money will go toward the purchase of the home if you decide to exercise your option to buy. It may be a small percentage of the monthly payment or it may, if you’re very lucky, be the whole payment. Again, however, the option money will generally be over and above the fair rental value, so the monthly payments will be more than they would be to rent the same house.
Make improvements on the home. If the home inspection turned up minor problems, or if the home needs a little remodeling or cosmetic care, it is probably in your best interest to try to take care of these things. By increasing the value of the home with improvements during the lease term, you earn equity (so-called “sweat equity”) in the home because the agreed-upon purchase price stays the same. This increased equity may help you get a more favorable loan if you exercise your option to buy. In essence, by increasing the value of the home you are increasing your down payment.
Apply for a loan. Don’t wait until the last minute to apply for a loan. You should begin your application process no less than 45 days in advance of the end of the lease, and to be safe you should probably start a full two months or more before you need to buy the house. A lease option will qualify you for a refinance loan with some lenders, and these are usually cheaper and quicker to process than new purchase mortgages, but in any case it’s essential to have a mortgage ready to close on the home by the date specified in the lease option contract.
- In some cases the seller will finance the home. This is typically spelled out in the lease option contract. This can make purchasing the home much easier than it would be if you had to apply for a loan, but make sure the terms of the seller financing are reasonable and that you’re getting a fair shake.
- Close on the home. If you’ve lined up your financing and decided to exercise your option to buy at the end of the lease, congratulations. You are now a homeowner.
- THIS BLOG IS PROVIDED AS A COMMUNITY SERVICE TO OUR CLIENTS AND FRIENDS IN SOUTH FLORIDA…WHO MIGHT BE IN THE MARKET FOR A NEW HOME. REACH OUT TO MARK 24/7 AT 305.494.5546
Advantages of a VA loan
Loans guaranteed by the VA can be obtained without any down payment.
Another plus: A VA loan doesn’t require mortgage insurance, as do Federal Housing Administration and conventional loans with less than a 20 percent down payment. The benefit translates into significant monthly savings for VA borrowers. For instance, a borrower who makes a 3.5 percent down payment on a $200,000 FHA-insured mortgage pays $100 a month for mortgage insurance alone.
And with a VA loan, you don’t have to save all the money you would have to save for a conventional loan.
Creativity in Business
as an Entrepreneur
For most of us, our creative side and our more logical and business sides rarely ever coincide. However, more and more has becoming a creative business professional taken on a new meaning. And that means more opportunity, more networking, and more of the bottom line for those entrepreneurs willing to delve deeply into their creative minds.
As we begin 2017, we are bombarded by all sorts of media….on television, on radio, on the big screen, and on the Internet. It’s often tiring….to listen to the advertisements, watch the commercials, sleep through the infomercials, and wade through the endless parade of online goop, gossip, news, lies, rumors, pictures, data, infographics, tweets, twits, hacks, advice, adwords, messages, emails, e-vites, and enigmas. Sounds like a lot, right? Well….there you have it. In order to survive the 21st century as an entrepreneur, you must have the backbone and mental back office to navigate this myriad of Internet mish-mash. But being able to do this….with the necessary dollip of creativity…..might just propel you and your company to business success.
I have found that carefully combining creative flair with relevant business acumen, seems to work very well…..especially online. The online super space has become the playing field for everything, including business. I’ve been in education, elite athletics, theatre, and now real estate. And I will suggest that, without question, a successful real estate agent, broker, or investor will use strategies, advertising, and thought channels that combine creativity with hard facts. To be successful in real estate in 2017 and beyond, you better be Internet savvy, book smart, a relationship builder, and a finely-tuned creative maven. I have found that Facebook ads, for example, are seen and read by more folks when they include a colorful picture. Yellow page advertisements get more traffic when they include some snazzy cartoon or graphic. Etsy, Amazon, and every single online store encourages vendors to use big, colorful ads to sell their products. And, as a new real estate agent in sunny Florida, all of my marketing includes some sort of graphic, picture, cool tagline, or silly cartoon. This stuff works….it really works. And I must reach into my creative bag of tricks everyday…..keeping my content fresh, my perspectives relevant, and my customers engaged.
Be creative. Be spontaneous. Be authentic. And most of all….be truly yourself. Because if you are reading this blog, then you are probably of the creative breed…..an artist, a purveyor of color, of contrasts, and of things we love to look at, touch, smell, and read. Don’t be afraid to break new ground, to try new things, and to use that creative right side of your brain. Better yet…connect with my friends at Tonic Artistry on social media, and then connect with me. I’m here in South Florida working to help hard-working folks buy the home of their dreams. I work in both residential and commercial real estate…and can help with buying and selling, renters and buyers, and everything in-between. I’m on all social media platforms @teamdavisfl , and my real estate landing page on FB is www.facebook.com/teamdavisflorida
Thanks for reading my blog. Let’s be our best creative and entrepreneurial selves in 2017.
Mark Anthony Davis, Licensed Realtor
6th Degree Black Belt Master Instructor, Olympic TKD
10 Tips For New Tenants
The best way to win over a prospective landlord is to be prepared. To get a competitive edge over other applicants, bring the following when you meet the landlord: a completed rental application; written references from landlords, employers, and colleagues; and a current copy of your credit report.
2. Review the lease.
Carefully review all of the conditions of the tenancy before you sign on the dotted line. Your lease or rental agreement may contain a provision that you find unacceptable — for example, restrictions on guests, pets, design alterations, or running a home business. For help reviewing your lease or rental agreement, see Signing a Lease or Rental Agreement FAQ.
3. Get everything in writing.
To avoid disputes or misunderstandings with your landlord, get everything in writing. Keep copies of any correspondence and follow up an oral agreement with a letter, setting out your understandings. For example, if you ask your landlord to make repairs, put your request in writing and keep a copy for yourself. If the landlord agrees orally, send a letter confirming this.
4. Protect your privacy rights.
Next to disputes over rent or security deposits, one of the most common and emotion-filled misunderstandings arises over the tension between a landlord’s right to enter a rental unit and a tenant’s right to be left alone. If you understand your privacy rights (for example, the amount of notice your landlord must provide before entering), it will be easier to protect them. For more information, see Tenants’ Rights to Privacy and Repairs FAQ.
5. Demand repairs.
Know your rights to live in a habitable rental unit — and don’t give them up. The vast majority of landlords are required to offer their tenants livable premises, including adequate weatherproofing; heat, water, and electricity; and clean, sanitary, and structurally safe premises. If your rental unit is not kept in good repair, you have a number of options, ranging from withholding a portion of the rent, to paying for repairs and deducting the cost from your rent, to calling the building inspector (who may order the landlord to make repairs), to moving out without liability for your future rent. For more information, see the article Renters’ Rights to Minor Repairs.
6. Talk to your landlord.
Keep communication open with your landlord. If there’s a problem — for example, if the landlord is slow to make repairs — talk it over to see if the issue can be resolved short of a nasty legal battle. Resolving Landlord-Tenant Disputes FAQ provides some advice.
7. Purchase renters’ insurance.
Your landlord’s insurance policy will not cover your losses due to theft or damage. Renters’ insurance also covers you if you’re sued by someone who claims to have been injured in your rental due to your carelessness. Renters’ insurance typically costs $350 a year for a $50,000 policy that covers loss due to theft or damage caused by other people or natural disasters; if you don’t need that much coverage, there are cheaper policies. For more information about renters’ insurance, see the article Renters: Protect Yourself From Crime.
8. Protect your security deposit.
To protect yourself and avoid any misunderstandings, make sure your lease or rental agreement is clear on the use and refund of security deposits, including allowable deductions. When you move in, do a walk-through with the landlord to record existing damage to the premises on a move-in statement or checklist. For more information, see the article Protect Your Security Deposit When You Move In.
9. Protect your safety.
Learn whether your building and neighborhood are safe, and what you can expect your landlord to do about it if they aren’t. Get copies of any state or local laws that require safety devices such as deadbolts and window locks, check out the property’s vulnerability to intrusion by a criminal, and learn whether criminal incidents have already occurred on the property or nearby. If a crime is highly likely, your landlord may be obligated to take some steps to protect you. For more information on this subject, see the article Renters: Protect Yourself From Crime.
Know when to fight an eviction notice — and when to move. If you feel the landlord is clearly is the wrong (for example, you haven’t received proper notice, the premises are uninhabitable), you may want to fight the eviction. But unless you have the law and provable facts on your side, fighting an eviction notice can be short-sighted. If you lose an eviction lawsuit, you may end up hundreds (even thousands) of dollars in debt, which will damage your credit rating and your ability to easily rent from future landlords.
KEYWORDS: rentals miami, rental miami beach, miami shores, condominium sunny isles, aventura, north miami beach, lease agreement, rental contract, #rentmiami, #homerental, #houserental, #miamirealestate, #miamirealestateagent, #realtor, #trulia, #homes.com, #floridarealestate, #floridahomerental, #eviction, #landlord, #buyandsell, #fliporflop, #flippinghouses, flipping a home, flipping houses, miami realtor, mls, #mls, #miamirealtor, #markanthonydavis, #markdavis, #miamiwaterfrontrealty, mark anthony davis, miami waterfront realty, #condosale, #realestateinvesting, real estate investing, #realestateadvice, real estate advice, tips for buys, tips for sellers, #america
How to buy a home with little or no down payment
For most first-time home buyers, coming up with funds for a down payment is the biggest obstacle to homeownership. It’s easy to see why: If you’re paying rent and have other expenses and are saving for an emergency fund, retirement and perhaps college tuition for your children, amassing thousands for a down payment can be tough.
Most financial planners recommend making a down payment of 20 percent, which comes to $39,600 on a $198,000 home, the national median price in December 2013, according to the National Association of REALTORS®. If you make a down payment of less than 20 percent, you will need to pay mortgage insurance.
However, before your lack of cash causes you to give up on your dream of homeownership, it’s important to look for options other than the standard conventional loan with a 20 percent down payment.
Prior to the housing crisis, many lenders offered mortgages without any down payment. Some even allowed consumers to borrow up to 105 percent of the home’s purchase price so they could finance their closing costs. The lack of equity in these homes became a crisis when home prices dropped and the owners owed more on their mortgage than the value of their home. Few lenders offer zero-down loans today, but there are some programs that allow consumers with good credit and a steady income to buy without making a down payment or with a minimal investment.
Government Zero-Down Programs
- VA loans: Veteran’s Affairs mortgage loans are available to veterans, current members of the military and their spouses. These loans don’t require a down payment or mortgage insurance, although there is a funding fee that can be wrapped into the loan.
- USDA Rural Development loans: Rural Development loans through the United States Department of Agriculture are available to buyers who meet credit and income requirements. You must be able to afford payments on the loan and yet have a low or moderate income. In addition, the property you are purchasing must be located within an area designated as eligible for these no-down-payment loans.
- State and local homebuyer programs: Most states have programs to encourage homeownership. Generally these programs have income limitations and require you to take a home-buyer class. Find programs in your area on the National Council of State Housing Agencies website.
Low Down Payment Loans From Banks and Credit Unions
Some banks and credit unions offer mortgage loans with no down payment requirement or a limited down payment. Typically, these loans are only available to borrowers who meet limited income requirements, such as a maximum of 80 percent of the median area income. You’ll also need good credit and to be able to demonstrate your ability to repay the loan.
Down Payment Sources
If you’re lucky enough to have family members with the means and generosity to give you money towards your home purchase, you can use some or all of their gift depending on your loan program. The Federal Housing Administration allows all of the required 3.5 percent down payment to come from gift funds. For a $198,000 purchase, you would need $6,930 for your down payment.
Conventional lenders require a minimum of 5 percent for a down payment, or $9,900 for a median-priced home. None of that 5 percent can come from gift funds, although if you make a larger down payment of 20 percent, all of it can be from a gift.
You can also borrow from your retirement funds for a down payment, but be sure you follow the rules exactly so you don’t get hit with a tax penalty.
Saving for a down payment is an important step in becoming financially prepared for homeownership, but you should also arrange a free consultation with a lender to discuss your options and opportunities for financing a home purchase with a lower down payment.
KEYWORDS: home purchase miami, home sales miami, homes for sale miami, house for rent, house for sale, real estate agent miami, real estate agent florida, condominium sales miami, townhomes, townhouse sale, warehouse space miami, low down payment miami beach, realtor, florida realtor, google search miami real esate, fort lauderdale real estate, broward county real estate, miami-dade county real estate
7 TIPS FOR BUYING A HOUSE ON A SINGLE INCOME
Blog Post by: Mark A. Davis, Licensed Realtor
Two incomes are always better than one, as far as a bank is concerned. It’s not always going to work out that way though. There are so many families that either have one income, or singles who want to purchase a house on their own.
There are a few extra things, however, you need to think about if you are purchasing your home on a solo income, but rest assured that it has been done thousands of times before, so yes, it can be done!
Here are 7 tips for buying your own home, if you’re single or on one income.
1. Get a mortgage broker
Regardless of whether you are single or not, getting an independent mortgage broker to do the ground work for you is a must. They will know the lenders who will work for your situation as well as the specific requirements that you may need to meet.
2. Reduce your credit card limit
Even if your credit card has never been used, the credit limit will go against your application for a loan. You may be keeping a $10,000 limit on your credit card ‘just in case’, but the bank will assess you as though you are $10,000 in debt. Consider reducing your credit card limit to just $2,000 or $3,000 to make you more appealing to lenders.
“You may be keeping a $10,000 limit on your credit card ‘just in case’, but the bank will assess you as though you are $10,000 in debt”
3. The bigger the better
Deposits, that is. Regardless of whether you are a 1 income family or more, the bigger the deposit, the easier it is to get credit. A 20% deposit is the ultimate aim, because it also means that you skip out on paying mortgage insurance, but it isn’t always achievable for everyone within the time frame they have set themselves. The closer you are to that golden 20% the better, so put your head down and bum up and squirrel away as much as you can.
4. Only borrow what you can comfortably pay back
Lenders will tell you the maximum amount you can borrow, it doesn’t mean you actually need to borrow that much. Give yourself a little wiggle room, and do the figures yourself. That means that you need to look at your budget, and how much you can comfortably pay off without forgoing your other necessary expenses. If you can’t afford your electricity bill with the new loan, then you have borrowed too much.
5. Protect the income that you have
One of the things that the mortgage broker/bank will ask for, is information regarding the insurance that you currently have in place. As you are reliant on one income only, it is very important to get income protection insurance to ensure that should something happen to you, you can continue to service the loan. You are able to hold this type of insurance within your superannuation fund, to ensure it is not too much of a burden on your cash flow.
“If you can’t afford your electricity bill with the new loan, then you have borrowed too much”
6. Get a guarantor
This option isn’t available to everyone, but sometimes having someone vouch for you will help you get a loan across the line. Don’t expect friends and family to be running to your aide however. Going guarantor for someone is a big deal. Understand that what you are asking has serious repercussions for your guarantor, so make sure you don’t take it for granted.
7. Longevity is the key to success
As far as lenders are concerned, the longer that you have been in your job, the better. If you have been in and out of jobs, then maybe wait until you have locked down your dream job, and have been working there for at least 6 months.
“Going guarantor for someone is a big deal. Understand that what you are asking has serious repercussions … ”
Don’t let anyone tell you that buying a home on one income can’t be done, because it can. Preparation is the key to success on this one though, so work through the above 7 tips, and you’ll put yourself in the best possible position to get you into your home sooner.
– MARK A. DAVIS
FLORIDA LICENSED REALTOR
MIAMI WATERFRONT REALTY
5 Tips for Marketing Your Rental Property
To Prospective Tenants
Tip number 1: When should you start marketing your rental?
Start marketing your rental at least a month before your tenants are vacating to give you plenty of time to find a great renter. It’s easy to add the date when your rental is becoming available on your listing so that prospective tenants are clear on the availability.
If you are showing an occupied rental, communicate with your tenant to let them know that you’ll be showing the rental. Some states have requirements on how much notice a landlord should give tenants and when a landlord can schedule showing, so be sure to check with your local laws. Give them time to prepare the place and remind them to secure their pets during that time. Be courteous to your tenants by respecting their personal belongings and making sure that you accompany prospective tenants on all showings.
Some landlords find that setting up specific times for showings, like from 1:00 p.m. to 3:00 p.m. on a Sunday, allows them to efficiently meet with multiple applicants without as much inconvenience to themselves or their current renters.
Tip number 2: Know your demographics and who will want to rent your property
Knowing who you’re marketing your listing to will allow you to advertise more efficiently. Be sure you are familiar with Fair Housing laws to avoid discriminating against federally protected classes when advertising your rental.
If your property is in a college town, then there will be an increase in student renters looking for housing in the fall. If your unit is near a university, check with the university for advertising opportunities. Most schools will have an off-campus housing department that offers a rental directory for their students.
If your rental is located near a military base, then you might want to check out listing websites that cater to military personnel. Sites like MilitarybyOwner.com and AHRN.com cater to military tenants and allow you to post listings to their site for a fee.
Tip number 3: Create an eye-catching rental listing
When marketing online, your property listing details and photos are going to attract people to your rental. The best way to make your listing stand out is to have a winning combination of appealing details and attractive photos. Here are a few things you’ll want to include in your description:
- A catchy title, like “2-Bedroom Apartment near Downtown” or “Ranch-style Home 1/2 mile from the Foothills.”
- Amenities, like how many bedrooms, baths, square footage, location, updates and garage space
- Restrictions on pets and smoking
- Rent and deposit amounts
- Lease options
Now on to pictures: they’re worth a thousand words and are one of your best marketing tools. Pictures are the first thing your renter sees and are often the only thing they compare to other properties in their initial search. Well-done photographs help your property stand out and make your web listings shine.
Professional photography can be expensive, and you likely don’t need it. Most smartphones come with decent cameras that have editing applications available. For best results, take photos when the unit is empty and clean, shoot when the natural lighting is good, take photos from multiple angles of the room, and be wise about editing so as not to give a false impression of the space.
The best part about spending a little time on making your listing is that you can save your listing as a document on your computer. The next time you need to market your vacancy, simply update the availability date and the rest is ready to go.
Tip #4: Where should you advertise your rental?
Market your listing online for maximum exposure. Traditional ways of advertising, like signs and newspaper advertisements, can still be great tools for your rental. However, many renters start their housing search online, so posting a listing online will increase your pool of applicants.
Don’t limit yourself to one site either. There are dozens of sites that will allow you to list your unit for free like Craigslist, Trulia, Zillow, Apartments.com, Rent.com, and Padmapper.com are going to increase exposure for your rental. Having your vacancy posted at multiple sites will increase your applications and give you more choices when it comes to tenants. There are even sites that will automatically post your property to dozens of listing websites, which saves you some time.
If you are marketing your rental online, chances are that quite a few of your prospective tenants are viewing your listing from their phone. Be sure that your listings can be viewed on a mobile device. The easier it is to view your listing, the more applicants you’ll have.
Tip #5: Keep your rent competitive with similar properties
Having a competitive rent amount is key to covering your expenses and finding a good renter. One of the biggest mistakes that first-time landlords make is to set their rent price too high or too low. If your rate is too high, then you won’t have many applicants. There’s also a downside to ricing your rent too low. Owning a rental is just like owning a business, and there is a minimum rent that you need to charge to cover your expenses. Plus, a lower rent will attract more applicants, which can mean more applicants that aren’t a good fit.
Set your rent amount at a rate that is competitive for the neighborhood. Check your local newspaper for information regarding vacancy rates and average rental prices. Knowing local trends will let you know if you need to adjust to fit the market. A site like Rentrange.com can be a great resource to check your rent.
The most important thing to keep in mind when filling your vacancy is to understand that marketing your rental should be as important as any other step of the rental process. It takes a little time and effort, but a solid marketing plan will help you fill your units quicker.
5 Keys to Entrepreneurial Success in 2017
If you are ready to experience entrepreneurial success in 2017, be prepared to work. There aren’t any $37 eBooks or $97/month programs that are going to magically eliminate or reduce the workload that is required to be successful.
The other day I overheard a business owner say, “Hopefully, luck will be on my side next year and business will take a turn for the better.” Sadly, that way of thinking isn’t going to help him one bit — if I were to make a bet, I would let it ride on him failing again.
If you are banking on luck, you might as well hit the casino and let it all ride on red or black at the roulette wheel. Here are five very simple, yet seemingly overlooked key points you need to address if you want to experience a successful 2017.
1. Put past failures behind you.
There are far more failures than there are success stories when it comes to startups and new businesses. Most fail, and that’s just how it is. It’s very rare that you will find a successful entrepreneur that hit a home run at his or her first at bat.
In order to eventually get your win, you need to learn from your past mistakes, but also put them behind you. Don’t dwell on them or waste time looking back. focus all your energy and momentum on what’s in front of you.
2. Show up daily ready to hustle.
The minute you start to slack or switch into cruise control mode, you immediately lose valuable momentum. Go into each day knowing you must hustle hard and take full advantage of every available minute.
My company just did a soft launch of the first of a half-dozen consumer brands we are bringing to market in 2017 and we also have a new influencer marketing agency, blerrp, launching in the new year. My plate is beyond full — it’s overflowing, and if I don’t show up every day ready to give 100 percent it’s going to be a disaster. Commit and then hold yourself accountable — your success depends on it.
3. Work on your business daily.
Work “on” your business, not “in” your business.
Once you understand there is a huge difference, you will experience the type of growth that is needed to succeed. Learning to delegate responsibilities was one of the reasons my marketing agency succeeded, while past ventures failed. I used to think that I could do it all — trust was a big factor. I would rather work 18-hour days and try to do it all rather than delegate to someone capable of handling the tasks.
Hire freelancers and virtual assistants to handle simple, yet time-sucking tasks. This allows you to focus on more important tasks, like strategy and growth. Use these tips to make your freelancer hiring process as smooth as possible.
4. Learn and improve daily.
Strive to become a better entrepreneur every single day. There are several ways to learn — industry conferences, mentors, coaches, etc. — but there is something you can do every morning that will have a huge impact on your success — reading.
Reading allows us to absorb information from some of the smartest people in the world who share their expertise and logic, helping us to become better entrepreneurs. While it can be difficult at first, try to dedicate a part of your morning ritual to reading, even if it’s just 15 minutes. Over time you will discover that this can be one of the most beneficial parts of your day.
5. Refuse to quit.
Giving up is for cowards — it’s the easy way out.
It’s going to be difficult. There are going to be times that it seems impossible. When faced with obstacles, take a step back and be grateful that you have this opportunity. There is no better time to start a business than right now. You can start with very little to no capital and you don’t even need a physical office location.
Promise yourself that you will not quit, no matter how difficult the journey becomes and the odds that you succeed improve drastically.
6 Things Everyone Should Do When Moving Into a New House
Skip potential trouble by doing these 6 things….
THIS INFORMATION IS PROVIDED AS A COMMUNITY SERVICE BY MARK DAVIS AND TEAM DAVIS FLORIDA. PLEASE FOLLOW US ON TWITTER @teamdavisfl AND ON FB AT fb.me/teamdavisflorida
1. Change the Locks
You really don’t know who else has keys to your home, so change the locks. That ensures you’re the only person who has access. Install new deadbolts yourself for as little as $10 per lock, or call a locksmith — if you supply the new locks, they typically charge about $20 to $30 per lock for labor.
2. Check for Plumbing Leaks
Your home inspector should do this for you before closing, but it never hurts to double-check. I didn’t have any plumbing leaks to fix, but when checking my kitchen sink, I did discover the sink sprayer was broken. I replaced it for under $20.
Keep an eye out for dripping faucets and running toilets, and check your water heater for signs of a leak.
Here’s a neat trick: Check your water meter at the beginning and end of a two-hour window in which no water is being used in your house. If the reading is different, you have a leak.
3. Steam Clean Carpets
Do this before you move your furniture in, and your new home life will be off to a fresh start. You can pay a professional carpet cleaning service — you’ll pay about $50 per room; most services require a minimum of about $100 before they’ll come out — or you can rent a steam cleaner for about $30 per day and do the work yourself. I was able to save some money by borrowing a steam cleaner from a friend.
4. Wipe Out Your Cabinets
Another no-brainer before you move in your dishes and bathroom supplies. Make sure to wipe inside and out, preferably with a non-toxic cleaner, and replace contact paper if necessary.
When I cleaned my kitchen cabinets, I found an unpleasant surprise: Mouse poop. Which leads me to my next tip …
5. Give Critters the Heave-Ho
That includes mice, rats, bats, termites, roaches, and any other uninvited guests. There are any number of DIY ways to get rid of pests, but if you need to bring out the big guns, an initial visit from a pest removal service will run you $100 to $300, followed by monthly or quarterly visits at about $50 each time.
For my mousy enemies, I strategically placed poison packets around the kitchen, and I haven’t found any carcasses or any more poop, so the droppings I found must have been old. I might owe a debt of gratitude to the snake that lives under my back deck, but I prefer not to think about him.
6. Introduce Yourself to Your Circuit Breaker Box and Main Water Valve
My first experience with electrical wiring was replacing a broken light fixture in a bathroom. After locating the breaker box, which is in my garage, I turned off the power to that bathroom so I wouldn’t electrocute myself.
It’s a good idea to figure out which fuses control what parts of your house and label them accordingly. This will take two people: One to stand in the room where the power is supposed to go off, the other to trip the fuses and yell, “Did that work? How about now?
You’ll want to know how to turn off your main water valve if you have a plumbing emergency, if a hurricane or tornado is headed your way, or if you’re going out of town. Just locate the valve — it could be inside or outside your house — and turn the knob until it’s off. Test it by turning on any faucet in the house; no water should come out.
How to Get a Loan on a Home
that Needs Repairs
What repairs will a lender typically not loan on?
Most lenders will use FHA guidelines to decide what condition a home needs to be in order to loan on it. That means all major systems like the plumbing, electrical and heating need to be in working order. An expert foundation repair company in Houston recommends that the roof needs to be in good condition and there cannot be any holes in the walls or floors. FHA used to require flooring to be in good condition, but that is no longer the case. All the carpet can be missing from a home and it will still go FHA. The tricky part is that not all lenders go with exactly what FHA requires.
An FHA loan is federally insured by the government and is a big reason why owner occupants can buy homes with little money down. Conventional loans are loans that are not federally insured or sponsored by any government agency. There are many types of conventional loans and many different requirements on conventional loans depending on who the lender is. Some conventional loans will require everything FHA requires, some less and some more. My lender will not require any repairs to be made on homes that are in horrible condition. If you have one conventional lender that will not loan on a home, that doesn’t mean another conventional lender will have the same guidelines.
There are other loans that are sponsored by the government like VA and USDA. Different states also have loan programs that will have varying requirements. Most government loan programs will have the same or stricter requirements than FHA.
How do you get a loan on a house that needs repairs?
There are many options to work through lender required repairs. Your choices will differ depending on if you are an owner occupant or an investor. The first strategy is to ask the seller to make repairs so the home is in livable condition. What situations allow the seller to make repairs?
- Traditional seller: If a seller is selling a home for retail value they usually expect to make repairs if the lender requires them. To get top dollar for a house you have to have it in livable condition. For those of us that want a great deal we are usually dealing with sellers that want to sell quickly without doing any repairs. The better deal you are getting, the lower the chance the seller will make any repairs.
- REO properties: REOs are foreclosures that are owned by the bank. Some REO sellers will make repairs and some will not. The decision to repair or not is usually made on a case by case situation based on how much work is needed. Many REO sellers will say a home is sold in as-is condition, which indicates they will not make repairs. However some REO sellers will still make repairs if required by the lender.
- HUD Homes: HUD will not make any repairs under any circumstance for lender required items. HUD does have a program to allow FHA buyers that I will discuss later. If you are an investor and your lender requires repairs to be made, you will have to cancel the contract or find a new lender.
- Short sales: Most short sale sellers do not have a lot of money. If you know a short sale needs work and your lender will require things to be done before closing, there is a great chance the work cannot be done. The sellers are receiving no money in most short sales and they don’t want to spend any more money on the house.
- Auctions sales: Don’t expect to have any repairs done on auction properties. Properties that are sold at auction are almost always sold in as is condition and will not be repaired.
Before you write a contract on a house know who you are dealing with
When you are shopping for a house you should have already talked to a lender and you should know what condition they will require a home to be in. If you are using a conventional loan on a HUD home and the water can’t be turned on, but your lender requires the water to be turned on, guess what will happen? The contract will fail. If a short sale needs $10,000 in work for you to get a loan, the deal will probably never go through. On a REO or a traditional sale, repairs may or may not be made by the seller. Don’t expect HUD or a REO seller to make repairs because your lender requires it.
How can an owner occupant get a loan on homes that need repairs?
If an owner occupant wants to get a loan on a house that needs repairs, but the seller won’t repair the home; the deal is not always over. HUD offers a program for FHA buyers that allows them to escrow for repairs and add the repairs into the buyer’s loan. HUD’s program is called the FHA 203b loan. It can only be used on HUD homes and the repairs are less than $5,000. This escrow cannot be used on any other type of loan like VA or conventional. For repairs over $5,000, there is a FHA 203k loan that can be used on any house. This loan can have an unlimited amount of repairs, but will take more time to close and have more fees. FHA loans are only available for owner occupants.
Here is a great article from Madison Mortgage with more information on FHA 203k rehab loans.
How can an investor get a loan on a house that needs repairs?
An FHA 203k rehab loan is not available to investors, which makes it harder for an investor to deal with homes that need repairs. That doesn’t mean investors are out of luck when buying homes that need work. I buy homes that need a lot of work all the time and I get loans on almost all of them.
I use a portfolio lender that does not have any repair requirements for homes that I buy. I can buy houses with bad roofs, bad heating and my lender does not even require the utilities to be on. Not all portfolio lenders have the same requirements with repairs, but many will work with investors much more than the big banks. My portfolio lender has saved many deals for investors and owner occupants whose original lenders would not lend on a house because it needed too much work.
It is sometimes possible to escrow repairs. In some cases you can escrow the repairs so that they are done after closing as an investor. The terms and chances of this happening all depend on the lender. Usually the lender will escrow for minor repairs, but may be hesitant to escrow for major repairs.
There is also a Homestyle Fannie Mae Renovation loan that investors can use to repair houses after they close. This loan is like the FHA 203k loan, but meant for investors.
If you are an investor and your lender will not loan on a house that needs repairs and the seller will not make repairs; don’t give up. Search for a local portfolio lender who might have different guidelines and will give you a loan.
Hard money lenders will also lend on houses that need work
Another option for investors besides portfolio lenders is hard money lenders. Hard money lenders will be much more expensive than conventional lenders and they offer short-term loans; usually less than one year terms. Hard money usually works better for fix and flips, because of the short loan term. Hard money lenders may be a decent short-term solution for rental properties, but you will have to refinance the loan very quickly.
Getting a loan on houses that need work is tough, but it is not impossible. An owner occupant has many more options to buy houses in need of repairs, but an investor should be able to work around repair issues as well. Buying houses that need repairs is one of the best ways to get a great deal on an investment property.
How does a Mortgage Work?
Houses are expensive, and most people do not have $200,000 in cash, which is about the median value of homes in the United States. There are many banks that will finance a house, and government backed programs that allow for low down payments to encourage home ownership. When you borrow money for a house, you are most likely using a mortgage. A mortgage is a loan that can be paid off over varying amounts of time. The most common mortgage has a 30 year term, meaning if a homeowner paid the minimum payments, they would pay off the loan in 30 years. There are 25, 20, 15, 10 and even 5 year terms for mortgages. The longer the term of the loan, the lower the payment will be for the borrower. For every payment made, some money goes to the principal balance, and some to interest. In the beginning of the loan, much more money goes to interest than principal, but as the loan matures more money will go to principal. The bank will base the loan amount on the value of the home, which is determined by an appraisal.
How does a mortgage work?
There are many things to consider when getting a mortgage:
- What is the down payment? Lenders will require the buyer pay a down payment when getting a loan. The down payment can vary from 3 percent (VA offers $0 down), 5 percent, 10 percent, or as much as the borrower wants to pay. When you have a lower down payment you will most likely pay mortgage insurance which can add hundreds of dollars to your payment.
- What are the closing costs? Besides the down payment, the borrower will have closing costs as well. The closing costs consist of lenders fees, appraisals, pre-paid insurance, pre-paid interest, title insurance fees, and title company fees. The closing costs can be from 2 to 6 percent of the loan. In some cases the borrower can ask the seller of a home to help pay the closing costs.
- What is the payment? The monthly payment is determined by an algorithm that takes into account the interest rate, the length of the loan, and any mortgage insurance. If you get a 15 year loan, the payments will be higher than a 30 year loan. The lower the interest rate the lower your payment will be as well.
- How much house can you qualify for? The lender will tell you how much you can qualify for. This does not mean you should try to max out that number! The lender is not concerned with how much money you can save, only if you can make the payments.
How is the payment figured on a mortgage?
Every month part of your payment is used to pay interest and part of your payment is used to pay principal (the amount of your loan). It is not easy to figure your payment, because the amount varies based on how long the loan term is and your interest rate. On a $200,000 house your payment would be $1,755 a month at 10 percent interest on a 30 year loan. If the interest rate was 5 percent, the payment would be $1,074 a month. If the interest rate was 5 percent on a 15 year loan, the payment would be $1,582 a month. The payment is much higher on a short term loan, because you have less time to pay off the balance.
On the $200,000 loan, with a 5 percent interest rate, $249 of your payment would go towards paying off your loan and $833 would go towards paying interest in the first month. The cool part about mortgages in the US, is the interest is tax deductible in most cases. The longer you have the loan, the more of your payment will go toward paying the loan, and less will go toward interest. In three years, $279 will go towards your principal and $794 will go towards interest.
Every month the amount of principal and interest being paid will change. You will pay much more interest in the beginning of mortgage, than at the end. Besides the interest and principal, most mortgage include taxes and insurance. Every property will have property taxes you have to pay to the government and the lender will require you have home owners insurance. Those costs are included in the payment, because the lender wants to protect their investments. Tax rates can vary greatly by the state you are in. In some states taxes and insurance might add $200 a month to your payment and in other states, $800 might be added to your payment.
What are the different types of mortgages?
Not every mortgage is the same. There are private mortgages and government backed mortgages. The government backed mortgages were created to help more people buy homes with less money down. In the past banks would require at least 20 percent down to buy a house. Now there are many programs that allow people to buy homes for less than 5 percent down.
- Conventional: This loan is from a bank, with no government backed down payment assistance programs.
- FHA: This loan is insured by the federal government. A regular bank will lend the money to the borrowers, but a certain amount of the loan is guaranteed by the government allowing a lower down payment.
- VA: This loan is for veterans of the military and active duty. The loan is guaranteed by the government and is available with zero money down.
- USDA: These loans are available in rural areas and allow low down payments backed by the government.
- Local and state programs: there are many state and even city programs that give grants to homeowners.
What determines the down payment when you get a mortgage?
Typically the lower the down-payment the more expensive the loan will be. Banks are comfortable loaning 80 percent of the value of a home, since the borrower would need to bring the other 20 percent as a down payment. The bank feels safe knowing the borrower has skin in the game (they are spending some of their own money), and if something goes wrong the bank has built in equity. Luckily for many borrowers who do not have 20 percent down, there are private mortgage insurance companies and government programs that will allow a lower down payment. FHA has as little as 3.5 percent down payment and some conventional loans as little as 3 percent down payment. With the lower down payment comes more costs. Both loans will have mortgage insurance which can be hundreds of dollars a month. VA has no mortgage insurance and no down payment, but can only be used by those in the military or veterans.
The best strategy depends on the borrower’s financial position. If a borrower can get a conventional loan with private mortgage insurance, it is usually better than FHA. The costs on FHA loans are higher and the mortgage insurance cannot be removed on FHA, but may be removed on conventional. The home value must exceed 80 or 75 percent of the loan for the insurance to be removed. The advantages of FHA are the borrower can qualify for more and have a lower credit score.
FHA VS CONVENTIONAL LOANS
If a borrower can put 20 percent down, that may be the best strategy to avoid the mortgage insurance.
How can you qualify for a mortgage?
The banks look at debt to income ratios when determining who can qualify for a loan and for how much. Someone who makes $100,000 a year may qualify for less than someone who makes $50,000 a year if the person making $100,000 a year has a lot of debt. The bank will look at monthly debt payments versus monthly income. High car payments, credit card payments, child support can increase debt to income ratios making it harder to qualify for a home. For those with low income and little cash, FHA coupled with a local down payment assistant program can be a great option to get into a house. FHA allows higher debt to income ratios, than conventional loans.
There are many other factors to consider when qualifying for a loan.
- You must have worked at the same job or in the same field for two years.
- You must have decent credit (usually at least 620).
- You cannot have had a short sale or bankruptcy recently.
How to qualify for an investment property…
What is the process for securing a home loan?
The first step to getting a mortgage is to talk to a lender or banker. If you are looking to buy a house, many real estate agents can recommend a good lender. There are good lenders and bad lenders, and a bad lender can cost the borrower a lot of money.
The Top Nine Ways to Make Money Investing in Real Estate
Most smart investors, invest in real estate with long-term rentals, fix and flips and REITs. I love long-term rentals because they offer great returns, which continue to pay you as long as you own the property.
A great real estate investment, provides a great return on your money without much effort. Each way to invest in real estate has a different level of risk, return and time commitment. Some investments in real estate are more of a full-time job, while some investments like REITs take almost no work. Lets take a look at the best ways to invest in real estate in no particular order.
1. How to make money investing in real estate with long-term rental properties
Long-rental properties are my favorite way to invest in real estate. It can take a lot of upfront money $$, but the returns are incredible if you buy right and are patient. I make over 15 percent cash on cash returns on my long-term rental properties, and that does not include appreciation, equity pay down or tax benefits. The return on investment is higher than 15 percent on my long-term rental properties if you consider the tax benefits and equity pay down.
When you invest in real estate with long-term rentals, you must focus on CASH FLOW. The best way to get a lot of cash flow is to buy properties at below market value, make repairs to INCREASE value, and choose homes that will give high rent to purchase price ratios. It is not easy to find properties like this; it can take me months to find the right deal for a long-term rental.
I choose to invest in single family homes, because they give me better returns than multi-family. However, in different areas of the country, multifamily properties may offer better returns. Part of the reasons I can get better returns on single family homes is there are more of them. To be honest I have never invested in commercial, and I am not an expert on investing in commercial. Rent terms are usually much longer with commercial, and it can take a very long time to find a tenant. There are many types of leases: some leases have the tenant paying everything including repairs and maintenance. Other leases have the owner paying almost everything, including converting/remodeling the property to the tenants needs. With commercial properties, loan terms are much different with shorter terms and higher interest rates. In my area, the rate of return is just not good enough for me to venture into commercial, again that may be different in different areas of the country. It is a good idea to talk to a commercial expert before you invest in real estate with commercial properties.
2. How to make money investing in real estate with fix and flips
I started to invest in real estate by investing in fix and flips. My father has been a Realtor since 1978 and he has done fix and flips since I was in high school. When I started in real estate in 2001, I loved fix and flips, but selling houses to strangers I did not love so much. I am naturally an introvert and fix and flips were perfect for me because I could focus on the house. I could find great deals, decide on a repair, and make the profit.
On one fix and flip, I repaired the home myself. I installed new cabinets, counters, appliances, windows, doors, hardwood floors and painted everything. This was one if the biggest mistakes you can make! It took me 6 months to complete the repairs because I was not a contractor. and I learned on the job. The biggest error in my judgment was the time it took to repair the home. My other business suffered greatly because I spent all my time working on the house. We barely made a profit on that deal because it took me so long to complete the job. I learned never to repair houses myself! I think many first time fix and flippers try to save money by making repairs themselves and they don’t realize they are actually costing themselves money. It can cost $50 to $100 a day to hold a property that is vacant after interest, utilities and insurance costs. It is usually much more beneficial to have a contractor do the work who will do it quickly and correctly.
Fix and flipping is a great way to invest in real estate, but it takes a lot of work. You have to find deals…manage contractors, keep track of accounting and get homes SOLD. It also takes a lot of money for down payments and repairs, although HARD MONEY can be an option to reduce the cash needed.
3. How to make money investing in real estate by wholesaling properties
Wholesaling real estate is when an investor buys a home or gets a home under contract. They immediately sell the home to another investor buyer without making any repairs and in some cases without buying the home. An investor can wholesale a house without buying it by getting the under contract and then assigning that contract to another investor. Some real estate investors wholesale full-time and make hundreds of thousands of dollars a month. The advantage to wholesaling is you don’t have to make repairs on a home and it is sold very quickly. Most properties that are wholesaled are bought through direct marketing,
4. How to make money investing in real estate with your personal residence
Your personal residence is another way to invest in real estate. Some may not consider a personal residence a way to invest in real estate because you aren’t bringing in any rent or income. I think there are definitely ways to make your personal residence a great investment.
I bought the house I owned before my current house, at the foreclosure sale in 2009. I recently sold my home for 150k more than I paid for it…because I bought it below market value. The nice thing when you invest in real estate with your personal residence is you can make a tax-free profit if you live there for two years or more!
It is also possible to buy a personal residence that you can turn into a rental property. This is a great way to buy a rental property with little money down. You can buy more than one property this way and build up a portfolio of rentals.
5. How to make money investing in real estate with REITS
REITs are Real Estate Investment Trusts and are purchased like stocks or mutual funds. I have purchased a few of them in my IRA with good results. REITs are large funds that invest in real estate and then pass on dividends and profits to the share holders. REITs will invest in large commercial projects, land, industrial buildings or even government buildings.
REITs are the easiest way to invest in real estate since the trust decides what to invest in and handles all the management. The returns may be great, but can also go up and down like the stock market. I prefer to invest in real estate with a more hands on approach because I can make more money. You can’t buy a REIT below market value like you can a house.
6. How to make money investing in real estate with long-distance properties
Many people would love to invest in real estate, but find home prices extremely high in their market. New York, San Francisco and many other areas have incredibly high prices for real estate. If the price for a starter home is $500,000, that makes it very hard to invest in real estate. It will take a lot of upfront cash with high prices and be very difficult to cash flow.
Investors are starting to invest in far away properties. There is a lot of work needed to make long-range investing work. You need to pick a market, find a great realtor…find a great property manager, and the find the right property or properties.
- Pick a location: One successful investor I know hired a firm that keeps track of detailed sales information to find the best markets for his fix and flips. He then spent 6 months there exploring the market and then decided to invest in real estate in that area. I am not saying you have to spend 6 months in an area, after all this investor makes his living flipping. It is smart to spend some time meeting people and exploring any area you want to invest in.
- FIND A SUITABLE REALTOR. A great realtor is a key to any successful investors strategy. If you want to invest in real estate long distance, you need an awesome agent. That agent will help you find deals, possibly inspect homes for you and schedule inspections. If possible I always suggest investors become agents themselves….but that is difficult with long distance investing.
- FIND A PROPERTY MANAGER. If you want to invest in long distance rental properties, you need a property manager. A good property manager can mean the difference between a profitable rentals and a disaster. A property manager will rent the house..manage the expenses, hire contractors and look over the house for you.
- Find a great contractor: It can be tricky to find a great contractor in your local area, it’s even tougher long distance. This is where you need a great Realtor and property manager to help you find a suitable contractor. The best way to find a contractor is word of mouth or referrals. You need to have people you can trust in the area you are investing in to refer contractors.
7. How to make money investing in real estate with vacation rentals
Vacation rentals are out of my comfort zone, but I know the basics. Buy a house in a great tourist location, use a great property manager to rent it out for you and collect the rent. The difficult part of a vacation rental is the extremely cyclical market. Peak season can bring top dollar while low season can bring almost nothing because demand goes down. I have stayed in many vacation rentals and the key in my opinion is to price a vacation rental low enough that the unit stays rented.
The cash flow on vacation rentals can look amazing at first, but the management fees, expenses and vacancies will almost always be much higher on a vacation rental than a long-term rental.
8. How to make money investing in real estate with short-term rentals
Short term rental properties can be planned or come about as a necessity. Many investors will invest in real estate and hope it appreciates, so they can sell the property for a profit. This is a very dangerous tactic when you invest in real estate. Most of the time, cash flow is not the primary goal and people end up losing money every month when they invest for appreciation. It is very difficult to hold a property for years when you are losing money every month. Many times the investor will be forced to sell the home in a down market and lose even more money. If you invest for cash flow as a bonus you can avoid this is mistake.
Other investors are sometimes forced to move out-of-town or they want a nicer home, but cannot sell their current home. The investor ends up renting their house and hoping the market to improves enough to sell the home in the future. This tactic is also dangerous because there is no guarantee the market will appreciate. The market could continue to decline and make things even worse.
9. How to make money investing in real estate with non performing notes.
Non performing notes are mortgages that have been taken out against a home and the homeowners stopped paying or have fallen way behind. The interesting part about investing in non performing notes is you can buy them for a huge discount. Many companies sell non performing notes to investors and I have a
When you invest in non performing notes, you are not buying the home, only the mortgage. If the owner defaults, you must foreclosure yourself, complete a Deed in Lieu, allow a short sale or come up with another solution.
There are many ways to make money investing in real estate. I prefer long-term rentals because they continue to provide cash flow month after month, year after year. Fix and flips can provide tremendous income, but you must keep a high volume of deals going and turn them quickly to make a lot money. Vacation rentals, long distance investing and non performing notes can also be great investments if you do your research, take your time and buy right.
12 Intriguing Books on Harvard Business School’s
Here at TEAM DAVIS FLORIDA, we’ve compiled twelve of the most intriguing books on Harvard Business School’s reading list (some from this year and some years previous). They speak of companies like Pixar and Procter & Gamble. They talk about amazing CEOs and the actions they did to turn their business around.
While compiling this catalog, we noticed one trend: It’s all about leadership. If you’re looking for a reading list to get your brain-operating-juices rolling, then this is it.
Whether you’re looking to start a business or want to expand an existing one, this book will be your how-to guide. Having won numerous awards, there’s a reason Scaling Up Excellence is first in our list. Authors Robert Sutton and Huggy Rao compiled years of interviews and research from various organizations into this work. Now, they reveal how the best leaders and teams develop, spread, and instill the right mindsets in their people — rather than ruining or watering down the very things that have fueled successful growth in the past. They unpack the principles that help to cascade excellence throughout an organization.
It’s 1997. The IRS (Internal Revenue Service) is known as a corrupt, much-maligned agency who is mired in scandal and crisis. Now, you’re asked to step in and take leadership as commissioner of the IRS. The story of Charles O. Rossotti and how he transforms one of the most hated organizations into a positive agency is a tale every leader should read. If he can flip an organization of millions into a productive — but customer-service focused — machine, then think about what you can do from his lessons.
This book is a tale from the CEO of Procter & Gamble — and specifically how they leveraged strategy to win the marketplace (for their many brands like Tide and Pampers). If you need a beginner’s guide on business strategy, this book will do you service. They outline clear steps you need to do in order to win your own market. And, you’ll be surprised at the ideas you generate just from reading the material. Pick up this book if you want to learn where to play and how to win.
In any real estate business, you want the best of the best (i.e. agents who can sell). Recruiting top talent is a constant struggle in any industry, and Peter Cappelli tackles this challenge with his book: Talent on Demand. Learn how to match your demand for talent with a supply of excellent team members. Peter shows you how to forecast hiring needs, develop talent as you onboard, and maximize the returns on your hiring investments.
The title says it all. If your workplace is filled with assholes, then grab a copy of this book. Written by Robert Sutton, this book will show you how a real a-hole of an employee can poison the work environment, reduce productivity, and dampen motivation. And Sutton is plain on how to deal with them: Get rid of them. But besides using common sense on the matter, Sutton provides statistical research on why you should remove the sour apples. Even if the employee is a top producer, if they don’t fit, they don’t stick.
This book is a sequel to The No Asshole Rule, written by Robert Sutton. Before, Sutton argued how to handle “sour apples” in the workplace, but he also learned that bosses can be those as well. To lead a team — to handle assholes in the workplace — Sutton shows you how to be a good boss and shows you what to learn from the worst bosses. He pulls stories from Ed Catmull, Steve Jobs, and A.G. Lafley, giving you direct access to unique wisdom. If you want to increase the impact of your team, check out this book. View the book.
This work, by David Yoffie and Mary Kwak, takes the main principles of judo martial arts and applies it to business strategy. It drives home the ultimate principle of strategy: maximize impact while minimizing effort. The book answers the question: How do you compete with opponents who have size, strength, and history on their side? Their solution: Rather than oppose strength to strength, successful businesses use their opponent’s’ size and power to bring them down. Learn how to translate the core principles of judo – a martial art that prizes skill not size — into a winning business strategy.
Have you ever wondered where all the ideas and creativity come from inside Pixar Studios? Co-founder and author, Ed Catmull, gives you a peek into the process behind stories like Toy Story and Inside Out. If you want to lead your team members to new heights, then this book is for you. Catmull goes against conventional advice and shows you how to really let teams excel.
In 2004, General McChrystal took command of the Joint Special Operations Task Force in Iraq and Afghanistan. He quickly realized conventional military tactics were failing against Al Qaeda, a decentralized network of enemies. Solving this issue meant revamping how the military organization worked and made decisions … decisions that would impact lives. After citing real-life examples, he shows you how the approach can improve business operations. If you are looking for a book to help you stay up to speed with the changing world, this is it.
You think you have a winning business model — but do you? Co-authored by the Boston Consulting Group, this book will help you assess your business environment and define a winning strategy for taking the market. It’s meant to be a practical guide to implementing different strategic approaches for your business needs. It’s especially helpful since it gives room for you to think about how it applies to your area of operation.
In this book, you’ll learn how to harness your ambition to achieve new goals. As mentioned by the authors, there is an “arc of ambition,” where everyone starts with an idea and then turns over that idea to others to execute. But how you energize and mobilize people to help you realize that goal — that’s where you need to utilize your ambition. Check this book out for real-world examples.
To cap off our reading list, I thought it’d be best to end with this book — a telling tale from Umair Haque. He makes a clear argument on how businesses have outgrown the old model of short-term growth, competition at all costs, and adversarial strategy. Following those old models only lead to “thin value” — something all real estate professionals should take note of. To create “thick value” — enduring, meaningful, and sustainable advantage — Haque shows you five keystones for doing so. To learn more, check out the book.
What is the Difference Between a Realtor
and a Real Estate Agent?
Why would a real estate agent want to be a Realtor?
Being a real estate agent involves getting licensed in the state you want to work in. There are 1,150,141 Realtors as of March 25, 2016, out of about 2,500,000 real estate agents. About half of all agents are Realtors. Being a Realtor comes with many perks besides just being able to say you are a Realtor. Many MLS boards require their members be a Realtor to gain access to the MLS or charge more for those who are not Realtors.
Being a Realtor also gives you access to many organizations.
- NAR: National Association of Realtors.
- State Board of Realtors: Most states have a state board of Realtors.
- Local Board of Realtors: Most areas have a local board of Realtors specific to your market location.
I am in Northern Colorado, and used to belong to CAR (Colorado Association of Realtors) and GARA (Greeley Area Realtor Association). When I was a member of those boards, I could attend local meetings, luncheons, classes and charity events put on by those boards. I could also run for leadership roles on those boards.
How much does it cost to become a Realtor?
One drawback to becoming a Realtor is it is more expensive as opposed to a real estate agent. Here are the breakdown of fees I pay for various boards. These will vary on the board you belong to and the state you are in.
- NAR: $120 per year
- NAR: $35 special assessment per year
- CAR: $165 per year
- GARA: $209.17 per year
- Total: $519.17
These fees are separate from any MLS dues and fees that must be paid. As you can see, it is expensive to become a Realtor, and I also pay for the agents on my team to be Realtors as well so it costs me thousands of dollars a year. This is one reason I am no longer a RealtWhy would buyers and sellers prefer to work with a Realtor?
Realtors are also supposed to be held to a higher level of ethics.
Below are the pledges a Realtor makes, that a real estate agent is not required to make:
- Pledge to put the interests of buyers and sellers ahead of their own and to treat all parties honestly.
- Shall refrain from exaggerating, misrepresenting or concealing material facts; and is obligated to investigate and disclose when situations reasonably warrant.
- Shall cooperate with other brokers / agents when it is in the best interests of the client to do so.
- Have a duty to disclose if they represent family members who own or are about to buy real estate, or if they themselves are a principal in a real estate transaction, that they are licensed to sell real estate.
- Shall not provide professional services in a transaction where the agent has a present or contemplated interest without disclosing that interest.
- Shall not collect any commissions without the seller’s knowledge nor accept fees from a third-party without the seller’s express consent.
- Shall refuse fees from more than one party without all parties’ informed consent.
- Shall not co-mingle client funds with their own.
- Shall attempt to ensure that all written documents are easy to understand and will give everybody a copy of what they sign.
- Shall not discriminate in any fashion for any reason on the basis of race, color, religion, sex, handicap, familial status, or national origin.
- Expects agents to be competent, to conform to standards of practice and to refuse to provide services for which they are unqualified.
- Must engage in truth in advertising.
- Shall not practice law unless they are a lawyer.
- Shall cooperate if charges are brought against them and present all evidence requested.
- Agree not to bad mouth competition and agree not to file unfounded ethics complaints.
- Shall not solicit another REALTOR’S client nor interfere in a contractual relationship.
- Shall submit to arbitration to settle matters and not seek legal remedies in the judicial system.
Realtors are able to market themselves as abiding by these standards, where real estate agents may not have to abide by these standards (depending on state laws). In my experience I have seen many Realtors and real estate agents not be ethical. In my experience I have not seen a difference in one or the other being more ethical. When we have had problems with Realtors being unethical the boards did not do much to help us out.
While Realtors can advertise that they are held to a higher level than just agents, I do not think it makes much difference to a buyer or seller.
Why did I stop being a Realtor?
I was a Realtor for almost 15 years, but this year (2016) I dropped my membership. Being a Realtor was costing me thousands of dollars a year, but was not giving me much benefit. Most buyers and sellers do not care if I am a Realtor and I had a few issues with how NAR handled some issues. My primary business is listing foreclosures for banks. I worked really hard to build my business. I worked for years to build relationships and do an awesome job. I built by business up to where I was selling 200 homes a year. A few years ago NAR decided that REO brokers like myself had too much business and that every agent should be able list REO homes without putting the work in. NAR lobbied to force banks and REO companies to include more agents and take business away from the existing agents. That did not sit well with me and I have thought a few other decisions they have made have been questionable.
Becoming a real estate agent is not cheap, it takes money to get your licenses, insurance, and you may have to pay . Becoming a Realtor is even more expensive, and I do not see a huge advantage in becoming a Realtor.
3 Ways Successful Entrepreneurs Think Differently
Your mindset affects what you believe is possible, and that will dictate what actions you take in your life and business. Your thoughts will either help or hurt your business. The way you think is one of your most valuable assets as an entrepreneur. Successful entrepreneurs understand this better than most.
Cultivating a strong mindset is a lifelong process, but today we have access to books, blogs, podcasts and videos that help us learn, grow and accomplish our goals. Successful entrepreneurs make learning and understanding themselves better a priority.
This year, I saw firsthand how the important it is to think differently. Having the right mindset led to explosive growth in my business. Here are three ways successful entrepreneurs think differently that helps them grow.
1. They realize excuses don’t lead to results.
Excuses stifle progress. Successful entrepreneurs understand how detrimental they can be and recognize them when they start to creep up. They do their best to control problems and issues head-on. They don’t run away and they don’t blame someone else.
When things don’t go as planned, it feels easier to avoid dealing with the issue, especially if it’s our fault. Word of mouth is one of the most powerful forms of marketing and excuses will kill your reputation. Don’t let excuses have any part of your business.
2. They accept failure as valuable life experience.
Successful entrepreneurs understand that failure teaches you invaluable life lessons, and they learn instead of giving up. They view failure as a sign that they’re continuing to grow in their life and business.
If you are not experiencing failure in your entrepreneurial journey, you aren’t taking enough action. If you hit every goal you set without much resistance; you aren’t setting big goals. You should set goals so ambitious that you don’t some. Use those to stay motivated and never complacent.
3. They value their time above all else.
Successful entrepreneurs value time above money. They realize time is the one thing you can’t get back or create more of. They maximize their time by saying “no” to things that don’t benefit where they are in their journey. They realize time is precious and avoid wasting it.
Your time is your most valuable commodity. Treat it accordingly. In business, this means saying “no” to meetings and opportunities that don’t make sense for your business. It means not allowing all the bright shiny objects out there to sidetrack you. It means you focus on what will help your next steps.
You started a business to create a life of freedom. That freedom lets you spend each day and moment on what is important to you. Your business should fit into your life, not your life into your business. The life part has to come first. That means valuing your time.
You can build a business and start a life that you love. It starts with your thoughts. Feed your mind daily with content that inspires and motivates you to the best version of yourself. Stay away from toxic people and situations that will fill your mind with doubt and fear.
Don’t try to be like a successful entrepreneur. Don’t copy. Embrace what makes you unique and study what your customers/leads respond best to. There’s nothing wrong with modeling success, but modeling isn’t copying. Don’t follow conventional wisdom, think differently. Don’t give into excuses, learn from your failures and realize how precious time is.
Create success in your life. You’ve got this!
How the Rich Get Rich
….and the Best Way for You to Get Rich, Too
Epictetus once said, “Wealth consists not in having great possessions, but in having few wants.” And he’s right… but that doesn’t keep people from wanting to be rich. Even though we all define and success differently – most of us factor wealth, at least to some degree, into our success equations.
So how can you get rich?
Here’s an unlikely but extremely telling source, a report periodically issued by the IRS. (The latest report is for 2014, which to you and me was a long time ago but to the government is pretty up to date.)
While the IRS Statistics of Income division sounds like a place where fun goes to die, it turns out there’s some interesting data buried in all the charts and tables.
For example, in 2014 it took $126.8 million in adjusted gross income to crack the top 400. That’s up significantly from the $100 million required in 2013 and up dramatically from the $77.4 million necessary to make the list in 2009.
Making a “mere” $126.8 million only got you in, though; the average earnings for the top 400 were $202.4 million.
Where it gets interesting is how the top 400 made their money:
- Wages and salaries: 4.47%
- Interest: 4.24%
- Dividends: 10.89%
- Partnerships and corporations: 16.24%
- Capital gains: 65.16%
The last bullet is key: The top 400 averaged $192.1 million in capital gains income. Well over half of their income came from the sale of capital assets. Sure, some of that could have been profits from stock investments… but the lion’s share comes from the sale, in part or in full, of business interests.
What does that mean to you?
- Working for a salary won’t make you rich.
- Neither will making safe “income” investments.
- Neither will investing in blue chip stocks.
- Owning a business or businesses, whether in part or partnership, could not only build a solid wealth foundation, but someday could…
- Generate a huge financial windfall.
The data clearly supports the last point. A total of over 4,500 taxpayers have made the top 400 between the years of 1992 and 2014, but only 29% appear more than once, and only 3% appear 10 or more times.
Clearly, getting rich — in monetary terms — is the result of investing in yourself and others, taking risks, doing a lot of small things right… and then doing one big thing really, reallyright.
And hopefully achieving other goals along the way — because then, even if you don’t get rich….you can still be wealthy.
Bottom line? If you want to be rich, in monetary terms….start a business.
This FYI page is provided as a community service to our readers.
Advantages of a VA loan
Loans guaranteed by the VA can be obtained without any down payment.