Tag: investment

How to Prevent Buyer’s Remorse

Forty-four percent of homebuyers end up regretting their purchase, according to a recent study by Trulia, a residential real estate website. The biggest regret? Not buying a larger home. If you’re entering into the home-buying process, you may be tempted to settle for less, especially if your budget doesn’t allow for a larger place. But keep these considerations in mind so you can prevent buyer’s remorse:

What should I consider when buying a house?

Don’t go into the buying process without doing some research and making a wish list. On average, Americans have been staying in their homes for 13 years, according to the National Association of Home Builders.

With that in mind, think about what you might be doing over the next 13 years: Will your family grow? Will you need space for an office? Will you need a larger yard for your children to play in? Will your kids be going off to college? Will you be retiring and needing less space? Will you need a one-floor setup for easy accessibility?

Your home is a long-term investment, so don’t just think about what you need now. Buy your home with the future in mind.

How much will my home appreciate?

When you find a home you love that meets your current and future needs, the next step is to calculate its appreciation over the next decade or so. You want a home that’s going to build your net worth, not depreciate over time.

Not sure how to predict whether a home will appreciate? First, consider its location. Choose a home that’s in a growing community and has a reputable school district. Second, consider the house itself and the property it’s on. Is the land desirable and without major issues? Does the house have sound structure (roof, walls, foundation)? Fixer-uppers can actually appreciate more than newly constructed homes if you’re up for the task of renovating, providing they don’t become a money pit in the process.

Did I get the best home loan?

When you buy a home, there are several types of home loans that you can consider.  If you have a large down payment over 20%, you may have selected a Conventional Mortgage to avoid PMI. Conventional loans typically have the lowest overall payment if you have higher credit scores and a large down payment. If you purchased using FHA financing, you may want to consider refinancing in the future to drop the Mortgage Insurance. Most FHA loans do not automatically drop this extra insurance premium.

Another consideration would be to confirm that you picked the best rate and cost combination for your home ownership goals.  Many lenders allow you to pay discount points to get a lower than market interest rate. If you consider this your “forever home”, then having a lower rate may save you a significant amount of interest over the term of your loan. Conversely, if you plan on selling your home within a few years you may want to select a loan option with the lowest amount of closing costs so you save money immediately on your purchase. Selecting the wrong home loan may cost you thousands and leave you regretting the extra costs.

See our Mortgage Amortization Calculator to estimate interest paid over the life of your loan.

How much will it cost to sell my house?

In looking toward the future, consider how much it will cost to sell your house. You may need to make repairs and upgrades to make your home more desirable. You’ll also need to pay your realtor commission (unless you’re selling by owner), which is usually 5% or 6% of the home price, and closing costs if the buyer doesn’t foot the bill (especially in a buyer’s market). As long as you plan ahead with these costs in mind, you won’t be surprised when it comes time to sell. If you buy a better house at the start, you may save a lot in the end.

Learn about our Home Renovation Loans to increase the value of your home.

For more information on how you can choose the best home for your needs, contact Riverbank Finance at (800) 555-2098 to schedule a meeting with one of our mortgage professionals.

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Rental Property Quick Tips

You may be interested in rental property as a way to earn extra income, but how should you go about it?

Where to buy?

It’s an old but fitting adage that there are three rules in real estate: location, location, and location. The same is also true for renting out property. You need a good location to attract renters, but there can be pros and cons, depending on where you invest.

For example, if you buy near a university or college campus, chances are you won’t have a problem renting out the place nine months out of the year. The summer months might leave your property vacant while students are no longer in classes.

Other factors, such as how much your competition is charging for their properties, need to be considered. You could find a great deal on a duplex or a quad but find yourself unable to recoup your mortgage and upkeep costs if the area’s average rental rate is too low. You have to think both as a renter and as a prospective tenant to have success.

Crunch the Numbers

Investment properties, like rentals, require a minimum 20% down payment. The money can’t come from large gifts, you’ll need six months of payments reserved in savings, and you have to buy the property as an individual, not an LLC.

Freddie Mac and Fannie Mae also have different rules if your mortgage goes through them. Freddie requires 2 years of documented renting experience on your tax returns in order to list any projected rent as income. Fannie Mae does not.

In addition to all of this, a rental property mortgage also requires that you not have more than a 45% debt-to-income ratio.

All of these factors are reason enough to sit down with a Riverbank Finance consultant to see if you qualify. Contact one of our mortgage officers at (800) 555-2098

Property Management

Another factor that both lenders and owners need to take into account is how the property will be managed. Will it be all DIY? Will you handle finding tenants and hiring a handyman, or will you hire a management firm to do everything but pay the bills? All of these are factors you should consider before you enter a mortgage agreement. It will help you calculate what kind of return your investment will bring back and offer peace of mind to your lender as well.

Plan for bad seasons while hoping for good ones

Let’s face it, your property, at some point, will have vacancies. North Conway, New Hampshire is known for its skiing, mountain trails, and what they call “leaf peeper” season. This means their vacation rentals are full in summer, fall, and winter. Spring can be a vacant season for them for three months if a renter can’t be attracted to come for other activities.

It’s also a good idea to have a rental agreement at least started, if not finalized, to show your lender. That way, on day one of owning the property, you can get to work renting it out with the proper paperwork already done.

Lastly, every renter at some point in their career will experience a delinquent renter who refuses to make a payment. This is why it’s a wise idea to research debt collection agencies to help you recoup the losses.

 

While rental properties do require a great deal of preparation, they can pay off for countless investors who are willing to put in the work.