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5 Speedy Ways to Come Up With a Down Payment

by Phillip Warren
Sally Elford/Getty Images

The best way for first-time home buyers to come up with a down payment for a home: save for one, of course! But sometimes you’re in a hurry. Maybe your dream house just popped up on the market, or you’ve simply had it with being a renter. Whatever the reason, you’re ready to buy a house, now. But while your credit is good and your career is stable, you still need to come up with that big chunk of change for a down payment.

Watch: 4 Things You Can Give Up to Make a Down Payment

 

Never fear: There are plenty of ways to amass a sizable down payment fast. Check out these tactics, along with their pros and cons.

1. Dip into your 401(k)

If you’ve been socking away money in your 401(k), it is possible to borrow from that for a home loan—and get that cash in hand fast.

“Most 401(k) plans allow you to borrow up to 50% of the vested balance, or up to $50,000, and it takes about a week,” says Todd Huettner, owner of Huettner Capital, a residential and commercial real estate lender in Denver.

But it will cost you: If you take funds out of your 401(k) early—that is, before you’re 59½ years old—you’re going to take a 10% penalty on that withdrawn money. And it counts as gross income, which can bump you into a higher tax bracket.

Check out this Wells Fargo calculator to see what your penalties would be. In addition to penalties, most companies require you to repay that vested money over five years—or sooner if you quit or get axed. So be sure your career is stable.

2. Crack your IRA

Digging into your IRA usually carries the same 10% penalty of breaking open your 401(k) piggy bank, with one major difference: The penalty doesn’t apply to first-time home buyers. And unlike a 401(k), you don’t have to repay what you take out of an IRA. However, the withdrawal is still taxable. Plus there’s the matter of not repaying yourself, which can hurt your long-term retirement. So if you take out a sizable chunk, restoring this nest egg to its former level will take you many years.

3. Hit up your boss

Let’s get real: You don’t want to stroll into your boss’ office and demand help buying your house. But you can ask if your company has an employer-assisted housing program. Think about it: Companies hate employee turnover, so what better way to keep you around than pitching in to help you buy a home? It’s a win-win: Home loans are often low- or zero-interest and are usually structured to be forgivable over a period of time, often five years, which further encourages employees to stay put. The downside? Not all employers offer it. Hospitals and universities most often do, so be sure to ask to avoid overlooking this ready source of financial assistance.

4. Explore state and city programs

Local assistance programs abound to help you scratch up cash for a down payment. Offered by either your state, your city, or nonprofits, these programs often partner with banks, who hope to gain clientele they might pass over otherwise: Bank of America, for instance, recently launched a searchable database of local programs. Wells Fargo’s partnership with NeighborhoodLIFT offers down payment assistance up to $15,000.

The catch? You’ll need to qualify. For NeighborhoodLIFT, for instance, your household income has to be no more than 120% of the median in your area.

5. Get a gift from family or friends

Understandably, many home buyers turn to their family for help buying a home, and for good reason: There are no limits on how much a family member can “gift” another family member, although only a specific portion can be excluded from taxes ($14,000 per parent).

But it’s not just as easy as that. Gifters, even family, will need to provide paperwork in the form of a gift letter. And if the gifter is a friend, it gets even more complicated. For example, you’ll have to wait about 90 to 120 days before you can use any of those funds.

The post 5 Speedy Ways to Come Up With a Down Payment appeared first on Real Estate News & Insights | realtor.com®.


Source: realtor.com

A Guide To Everything You Need To Know About Home Ownership Costs [Free Download]

by Phillip Warren

Along with the excitement of purchasing a new home, comes the additional costs that you will be expected to pay as a homeowner. Apart from covering the mortgage of your home, you’ll have additional expenses – such as home insurance – that you will be expected to cover. If you’re looking to budget for a home purchase, it’s important that you consider these costs as they can add up to thousands of dollars each year.

To help you make educated decisions when budgeting, we’ve compiled a list of the major home ownership costs in one free, downloadable guide. Get the Home Ownership Costs to Consider guide here.

Home Insurance

Home insurance policies help protect against serious damage and destruction, like fires, leaks, floods, or break-ins. It also protects a homeowner from personal liability. Some banks may offer home insurance products, although you can typically purchase a home insurance policy through a home insurance agent or broker. 

Tip: You may get better rates if you use a broker or agent. It’s also important to keep in mind that policies typically renew on an annual basis.

Condo Fees

The cost of maintenance fees should be taken into account when you’re buying a condo. This recurring cost is in addition to your mortgage and impacts how much home you can afford. 

Your mandatory monthly fee will vary by your building and square footage. It typically covers:

  • Utilities (such as water and garbage collection)
  • Building insurance
  • Maintenance of common areas (such as the gym, pool, front desk, hallways, landscaping)
  • Building reserve fund (covers emergencies and long-term maintenance projects such as a new roof or elevators repairs)

What Are Status Certificates?

If you’re looking to purchase a condo, you’ll want to look into obtaining a status certificate so that you have as much information about the building and your unit as possible before buying. A status certificate provides valuable information about the condo corporation and its financial

situation. It includes details on the budget, legal issues, the reserve fund, maintenance fees, and any fee increases expected in the future. 

Tip: You’ll want to carefully review your status certificate with your lawyer before making a purchase.

Property Tax

Property taxes are paid annually by homeowners to their municipality. These taxes are ongoing and are separate from your mortgage. Your annual property tax can often be paid in installments.

Tip: It’s important to remember that this cost is not due at closing, but is a recurring cost.

How Are Property Taxes Calculated?

Your property tax rate will vary depending on the value of your property as assessed by your provincial assessment authority. This is then multiplied by a rate that falls between 0.5% to 2.5%.

How Do You Pay Property Taxes?

You can pay your property taxes either through your mortgage provider or directly to your municipality. 

Your Utility Bills

When you purchase a home, you’ll have to set up or transfer your utility bills to your new home. If you live in a condo, these costs may be included in your monthly maintenance fee. Your utility bill will include:

  • Hydro (electricity)
  • Heat
  • Water and Garbage
  • Internet, Phone, Cable

For the full details on the home buyer’s journey including examples, advice, pictures and sample calculations, download a copy of our free Home Ownership Costs to Consider Guide here.

The post A Guide To Everything You Need To Know About Home Ownership Costs [Free Download] appeared first on Zoocasa Blog.


Source: zoocasa.com

Mortgage Deferment and Mortgage Forbearance—Is There a Difference?

by Phillip Warren
Mortgage Deferment and Mortgage Forbearance—Is There a Difference? PickStock/Getty Images

With finances in peril due to COVID-19, many homeowners are in search of mortgage relief. Two strategies that many borrowers are anxious to invoke right now are mortgage deferment and mortgage forbearance.

Both tactics allow a borrower to skip monthly payments for a set period. Depending on the lender, there can be subtle differences between the two terms.

“We are seeing the terms being used interchangeably,” says Sara Singhas, the director of loan administration for the Mortgage Bankers Association.

She adds that both tactics allow a temporary period during which a borrower need not make contractual monthly payments. The differences between the two strategies come at the end of that period.

“What happens at the end of the forbearance period is the amount of payments that you missed during that forbearance will be due in a lump sum,” says Singhas.

Sometimes, lenders will work with borrowers to structure a payment plan, instead of demanding a lump sum.

Deferment—especially special programs that lenders have introduced during the pandemic—often allow customers to repay the money over time or to add it to the end of the loan period.

Clearing up confusion about mortgage forbearance

“In the mortgage world, it’s very fluid … [but] what we hear more is the term forbearance,” says Mary Bell Carlson, a certified financial planner professionally known as Chief Financial Mom. “Overall, forbearance is saying, ‘Hey, something has happened, I cannot pay.’”

A book Carlson has dubbed her Bible of the financial world, “Surviving Debt,” by the National Consumer Law Center, makes no distinction between forbearance and deferment.

“They do not even use the word deferment in terms of a mortgage, everything is called a forbearance in this book,” she says.

If a lender does differentiate between the terms deferment and forbearance, the difference will be at the end of the loan period, according to Singhas.

Some borrowers will be able to add extra payments to the end of the loan or make other arrangements to spread out repayment, while others will not. Sometimes, payment terms involve a new loan or a rewriting the existing loan.

Mortgage loan originator Krista Allred says one differentiation can center on foreclosure proceedings and timing.

“Technically, a mortgage forbearance agreement is when you’ve possibly been late, and the lender agrees not to foreclose during that forbearance period,” says Allred. In this scenario, a borrower already has a history of nonpayment before entering into a forbearance agreement.

But with the pandemic only revealing its enormous scope within the past 30 days, many borrowers haven’t been late—yet.

However, because of sudden job loss or because of the quarantine, borrowers have besieged the phone lines of their lenders, to get out in front of the financial iceberg.

Contact your lender for mortgage relief

No matter what you call it, if borrowers ask for help during this crisis, many lenders are allowing them to miss payments and not charge them late fees or penalties.

“The definition really doesn’t matter. The moral of the story right now is to call your lender. Don’t just assume you can skip a payment. Call them, let them know, and make arrangements,” Allred advises.

Carlson struck the same chord and told us that borrowers shouldn’t get caught in the weeds about the semantics of forbearance versus deferment.

She says, “They just need to pick up the phone and say, ‘Hey look, I’m in a bad situation, I’ve lost my job, and I think it’s going to be rough for the next three months.’ From there the lender can come back and say, ‘Here [are the] options.’”

Due to the current financial situation, the mortgage world is shifting. Options that weren’t on the table for borrowers a few months ago might be available now.

Singhas says the length of time that the forbearance could be extended and the options at the end of the term might be different. She adds that borrowers in good standing prior to the current crisis may able to do a modification wherein any monthly payments missed now are simply tacked on to the end of the loan.

Pressing pause on your mortgage

Whatever terminology your lender uses, it’s important for you to understand what is really happening with your loan. Nothing is free. You can’t expect to stop paying your mortgage forever.

“It’s not free mortgage payment, it’s not free money. [Forbearance] is temporarily hitting the pause button on your mortgage, and not having to make the payment,” Carlson warns.

“It does not necessarily pause the interest that is accruing, and it does mean that you’re going to have to make that principal and interest payment at a later date.”

Key questions to ask before seeking mortgage forbearance

When calling your lender, Carlson recommends asking:

  • What relief options are available?
  • Will interest continue being calculated during the length of time I am not paying?
  • Will there be any fees?
  • How will it be reported to the credit bureaus?
  • Do I still need to pay for my escrow to cover taxes, insurance, and mortgage insurance?

 

Singhas says some lenders have decided to allow certain loan modifications. In some cases, they will allow the monthly payment to be changed later in the life of the loan, to include the amount missed during the forbearance.

She adds that the main confusion for consumers right now is the fact that most lenders will not necessarily require a lump sum payment after the forbearance period ends.

“I think some people are panicked that if they get a forbearance, they have to pay it all back immediately,” she notes.

“That’s one option, or they can enter into a payment plan if they can’t make the lump sum, and if they can’t make a repayment plan work, there are other options available to them.”

If you work out a forbearance or deferment plan with your lender and don’t just skip payments, it can protect your credit.

“It doesn’t show a positive or a negative, but it doesn’t show like a missed payment,” Carlson explains.

“So if you were to ignore it and just not pay anything and pretend it will go away, that’s absolutely going to affect your credit report in the long run. But the forbearance or deferment is a neutral. It’s not positive or negative on the credit report, but it’s a lot better than having missed payments on your mortgage.”

One caveat to keep in mind is that if you can pay your mortgage, pay it, and don’t ask for relief.

“It’s always better to make your monthly payment if you can,” Singhas says.

The post Mortgage Deferment and Mortgage Forbearance—Is There a Difference? appeared first on Real Estate News & Insights | realtor.com®.


Source: realtor.com

Home Buyer’s Guide: How to Purchase a Property, From Start to Finish [Free Download]

by Phillip Warren

Purchasing a home is both exciting and a major milestone in your life, so you’ll want to be prepared for what to expect to avoid a stressful process. Having an in-depth look at the buyer’s journey can help you make informed and confident decisions.

From finding a real estate agent, negotiating offers to getting your keys on closing day, we’ve outlined all the steps of a home buyer’s journey in our free Buyer’s Guide, which you can download here.

The Buyer’s Guide will cover the buyer’s timeline from meeting an agent to preparing for closing day. We’ve outlined the 8 steps in a home buyer’s journey below.

1. Working With An Agent

Every city is filled with thousands of agents, but not all are equal. We believe it is important to choose an agent that you feel confident with. Before you commit to working with an agent, make sure you have a good understanding of the knowledge and experience they offer. It’s important that you ask your questions before making the decision to work with them.

2. Financing Your Purchase

Before you set a budget and start looking for a home, you’ll have to understand what costs to expect when purchasing a home. Here are some of the major costs involved:

  • Deposits
  • Down payments
  • Mortgage insurance
  • Closing costs

You’ll also want to calculate a rough estimate of the down payment that you will be expected to pay. Depending on the price of your home, your minimum down payment can range from 5% to 20%. If you’re interested in learning more about how to finance your home, you can get our free Financing Your Purchase guide here.

3. Searching For A Home

An important part of searching for a home is understanding how the home will fit with your needs and your lifestyle. You’ll want to consider home ownership as well as different types of properties and features. 

Types of Home Ownership

  • Freehold Ownership
    • You purchase the home and directly own the lot of land it sits on
  • Condominium Ownership
    • For condos, you own specific parts of one building: titled ownership of your unit, along with shared ownership in the condo corporation that owns the common spaces and amenities
  • Co-Op Ownership
    • You own an exact portion of the building as a whole and also have exclusive use of your unit

Types of Properties

  • Detached houses
  • Semi-detached houses
  • Attached houses
  • Condos and apartments
  • Multi-unit

Tip: Depending on your budget and desired location, you may need to be flexible to find a home that meets your needs. By being willing to trade some features for others, you’ll have more options to choose from.

4. Negotiating An Offer

When you are making an offer to purchase a home, the purchase agreement should include the essential components listed below. Your agent can help put together an offer that is compelling, while safeguarding your interests and puts you in a competitive position to secure your new home.

You’ll also have the opportunity to choose the conditions that you’ll want in your offer. Some of these may include a home inspection or a status certificate review.

5. Financial Due Diligence

Whenever you make an offer on a house, you need to provide a deposit to secure the offer. The deposit is in the form of a certified cheque, bank draft, or wire transfer; it’s held in trust by the selling brokerage and is applied towards your down payment if your offer is successful.

There are two types of deposits:

  • Upon acceptance
    • The deposit is provided within 24 hours of the seller choosing your offer
  • Herewith
    • The deposit is provided when the offer is made

6. Property Due Diligence

To firm up a deal or educate yourself more on the state of the property, you’ll likely want to have a home inspection if you’re purchasing a house. If you’re purchasing a condo, then your lawyer will review the building’s status certificate.

Home Inspection

A home inspector will assess elements of the home such as the walls, windows, plumbing, heating and roof to judge the condition of the home. This process is non-invasive and is essential to help provide buyers with a good idea of the home’s current condition and the confidence of putting in an offer. 

Tip: The home inspector will provide a summary of suggested work along with a minimum budget estimate for the repairs needed. 

Status Certificates

If you’re purchasing a condominium, you’ll need to obtain a status certificate from the condo board or management for your lawyer’s review. This document will include valuable information about the condo’s budget, legal issues, reserve fund, maintenance fees and future fees increases – and the lawyer can help identify potential red flags

7. Preparing For Closing

Before the big day, you’ll want to keep a checklist of what to do ahead of time. Some of these include:

  • Review your contract
  • Complete a final walkthrough of the home
  • Purchase home insurance
  • Meet with your lawyer
  • Know how much cash you’ll need
  • Secure cash required for closing

8. Closing Day

Closing Day is when you’ll finally get the keys to your new home! In addition to bringing the cash required for closing, you’ll have to sign a few more documents which will include:

  • Mortgage loan
  • Title transfer
  • Statement of adjustments
  • Tax certificates

For the full details on the home buyer’s journey including examples, advice, pictures and sample calculations, download a copy of our free Buyer’s Guide here.

The post Home Buyer’s Guide: How to Purchase a Property, From Start to Finish [Free Download] appeared first on Zoocasa Blog.


Source: zoocasa.com