Preparing To Buy A Home

Preparing to buy a home is a bit like preparing to go on a very long journey. You have to have your finances in order, know where you're going, what you're hoping to accomplish and how much time and how much money you can afford to spend. Financial matters. When it comes to owning real estate nothing is more important, for obvious reasons. As we've seen, if you get locked into a mortgage you can't afford, the result can be devastating. But even if you can afford the mortgage, you might not want to be "house rich and cash poor". You have to consider other things that are important to you such as travel and your spending habits. If for instance, you like to travel for months at a time, it might be wise to consider a smaller house with a less expensive mortgage instead of a large home with a big mortgage, which could cause you more work and less financial ability to spend on other things you like. Another consideration is the length of time you want to have the mortgage. Many young people choose a 30-year fixed mortgage but if you're a senior citizen you might want to opt for a 15-year loan. The best thing you can do is make a list of your financial matters and the questions you have about buying a home and then consult with a highly experienced loan officer. A knowledgeable loan officer can be like having a tour guide with you all the time in a foreign country where you don't speak the language. The jargon used in the mortgage industry documents can be confusing. Having someone who can clearly explain the documents, what to expect, the time frame, and the process is priceless. Debt-to-income. The ratio of your debt-to-income is vital when purchasing a home. These guidelines have become more strict since the housing crisis so it's critical to consult with experts about your personal financial situation. Generally speaking, you should have a debt-to-income ratio of no more that 36 percent–meaning all you owe (including your mortgage, taxes, and insurance) should not equal more than 36 percent of your income. Remember there are still monthly expenses of your home on top of your debt. And, of course, the less you owe and the more you make, the better position you're in for buying a home and creating your own financial freedom. These days, along with keeping your expenses and debt manageable, a key factor to buying a home is having a healthy downpayment. Most lenders would consider 20 percent a good downpayment. The more you bring in, the less you have to borrow. Remember the collapse of the housing market was brought on by small or no downpayment loans and many buyers who simply didn't understand the risks. Know how long you'll stay. This is really important because the cost of buying and selling a home is expensive and very time-consuming. If you're not planning on staying in your home more than seven to ten years, think about renting. You may still decide to buy, but you need to understand the cost of purchasing and maintaining a home. Investigate the economic difference between buying and renting. Be realistic about how frequently you've moved in the past and whether you're now ready to settle in for several years. You can always rent your home out but this assumes that you'll be a landlord (willing to take on all those duties) and then also have to find another place to live and either rent or buy. After considering all of these factors and making certain that you're ready to buy, then take the next step and find the best agent in your real estate market. Your agent will help you further prepare to buy the home of your dreams.

Written by Phoebe Chongchua
January 25, 2013

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Rental Increases Should Prompt More Home Buying Moves

Rents are still going through the roof, just not as quickly. Rents were up for the third consecutive year in 2012, when they rose a bit slower than in 2011, but forecasts call for rent increases in 2013 to match 2012's increases, according to MPF Research. That puts more pressure on housing consumers to buy and lock in housing costs to beat both the rising cost of rent and the growing costs of owning a home. Buyers who move now can still enjoy record low interest rates, distressed property bargains and relatively affordable home prices. However, most renter movement in the apartment sector consists of households opting for one apartment over another. Loss of renters to the owner-occupied housing market sector is having only a very small impact on apartment sector fundamentals, according to MPF Research. "While the number of apartment renters opting to buy is rising a little, it remains far below the levels apartment operators were accustomed to prior to the recession," said Greg Willett, MPF Research vice president. "Families that have been renting single-family homes, rather than apartments, comprise a big portion of the first wave of homebuyers seen in the cycle. By far the biggest component of the apartment resident base, particularly within large urban areas, consists of young singles living alone or young-couple households. Single-family homes just aren’t the right housing option for many of them, regardless of shifts in the pricing relationship," Willett added. MPF Research said apartment rents climbed 3.0 percent in 2012, down from 4.8 percent in 2011, but a bit above the long-term norm of 2.5 percent recorded during the past two decades. An increase of 3.0 percent is similar to the average results posted during shorter past periods when occupancy was sustained at strong and generally stable levels, according to MPF Research. Those shorter periods of annual price increases of 3.0 percent came in 2005 through the middle of 2008, and earlier in the middle to late 1990s. Among large individual metros, top markets include three San Francisco Bay Area markets - San Francisco, San Jose and Oakland - where rents rose 8 percent, 7.7 percent and 7.1 percent, respectively. Other top rent increases were in the Denver-Boulder area where rents rose 5.9 percent in 2012; 5.1 percent in Nashville and New York; 4.8 percent in Houston; 4.6 percent in Charlotte; 4.4 percent in Portland and 4.3 percent in the Seattle-Tacoma area. MPF also said property owners and operators didn't push as hard for higher rents in 2012 as they did a year or more ago. They'd rather hold onto existing tenants. "Many on the operations side of the apartment industry have focused on sustaining their very tight occupancy levels during a period when job growth and new household formation have been fairly sluggish at the same time that renter movement has begun to inch up from the unusually low levels experienced in the previous few years," Willet said. The average apartment occupancy rate of 94.9 percent at the end of 2012, was up a tiny bit from 94.7 percent at the end of 2011. The rate was 92 percent in 2009, when the nation's apartment occupancy rate bottomed, MPF reported. MPF says look for 2013's rental market performance to be similar to the strong 2012 marlet. "Most places are starved for new product right now, so properties that will complete over the coming year appear likely to do incredibly well, generally without hurting the results for the existing stock," Willett said.


Written by Broderick Perkins
January 24, 2013
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What Are The Financial Implications of Transferring Home Ownership?

Q: "Hi Robert. My parents would like to transfer ownership of their home to either me or one of my siblings. They’ve asked me to look into this. I’m not sure where to start. The home has been paid in full. Can you point me in the right direction?"

- Ricardo, San Jose, CA.

A: Sounds like a wonderful gift! Ricardo, transferring ownership of your parents’ home to adult children is a relatively simple process that requires documents from a title company.The transfer may also require you or you parents to pay property transfer taxes, depending on the city or county.
Tax consequences of a transfer are a primary consideration.
For example, if your parents bought the home for $100,000 and then remodeled and upgraded the property at another cost of $50,000, the "cost basis" would be $150,000.
Let’s say that the property transferred to you is worth $300,000. Later, you sell the home for $300,000. You could be taxed on the difference between your cost basis and the sales price – $150,000. At a capital gains rate of 15 percent, you could be looking at a $22,500 tax bill.
However, if you were to inherit the property at your parent’s passing, then the current value of the home would be based on a "stepped-up basis" of the property. Under that scenario, if you sold the home for its inherited value, you would not have to pay any capital gains taxes.
In another approach, if you moved into the home now or when you inherit the home, if you live in the property for at least two out of five years before you sell, you would avoid the capital gains tax.
If you are married and you and your wife lived in the home and filed a joint tax return, you would have a $500,000 capital gains tax exemption. There’s a $250,000 exemption for individuals or couples filing separately - per qualifying individual.
The transfer itself is a relatively simple process, but only after you’ve ironed out the details with certified public accountant or real estate attorney and the title company to determine how you want to accept transfer the property.
An accountant can examine financial and tax issues, an attorney considers legal matters and the title company will handle title insurance and determine if there are any liens or other claims against the property.
Even if the home’s mortgage is paid off, the title could have encumbrances filed against it.One good hour of solid advice will be better that tens of thousands of dollars that you could end up owing to the IRS if you make the wrong move.

Written by Robert Aldana, Published by Realty Times
January 21, 2013 

Thinking about Buying or Selling? Call Alvin's Team Today! 877-651-7810 Or visit our website: www.LivingLakeTahoe.com

What A Real Estate Expert Can Do For You

Decades ago. you had to go to a real estate agent in order to get information on property listings. Huge books filled with all the local real estate listings were distributed to real estate offices. The agents would review the books and find homes that matched their clients' needs. Then the address was given to the clients so they could do a "drive by" to see, at least, the outside of the home. This information was not readily available to the public. The times have drastically changed. Today, much of the once-private information is now public. So does that mean you can handle the entire real estate transaction on your own? Not likely... especially if you want a highly successful outcome. Understanding the value of an agent: Expert real estate agents are trained to help streamline your real estate transaction. Good agents are highly knowledgeable about the industry. They bring to the table more than just good listings for you to view. They help you understand the information that you're getting. They help you sort through comparable properties and decipher information listed in the Multiple Listing Service. They can help you spot potential issues and make you aware of important documents. Having an agent guide you through the process of buying your home can help save you time and money. Pricing experience: One of the biggest values an experienced agent can offer has to do with pricing. Whether you're buying or selling your home, having an agent help you understand the current market conditions is vital. Agents can craft negotiation strategies to help ensure that your interest is protected. The negotiation skills of a highly knowledgeable agent can be critical to your transaction. When you hire agents to work on your transaction. they have a vested interest in the sale. However, their commission is far less than the amount of interest you have in the property. Therefore, experienced agents can leave emotional interest out of the negotiations and work for the best outcome by presenting their client's situation in the most appealing way possible. They also must keep their client information confidential. Coordinating the process: Another very useful function of real estate agents is the assistance they provide with coordinating the complex home-buying and home-selling process. Real estate transactions require an enormous amount of paperwork. Real estate agents can't provide legal advice about the documents, but they can point out important papers and disclosures, and alert you to the filing time-frame for when these materials must be signed. They typically also have a good network to direct you to other experts for more specific answers to your questions. Agents also are very used to coordinating and keeping on schedule things like hiring inspectors, staying in touch with the other party's agent, explaining how repairs will be fixed and who should pay for them, and directing you to resources for financial matters. In today's market, there isn't any industry that I say you should rely 100 percent on the experts. For example, if your health is compromised, it's my belief that you should do your homework and learn more about what is causing the suffering. The same is true for buying or selling a home. Get educated. Read articles and watch videos from as many sources as possible. Study the market and prepare questions to ask the experts when you meet with them. This will make you more prepared to interview and hire an expert. Ultimately, you'll find having an expert to help guide you through the real estate transaction will be a good investment.


Written by Phoebe Chongchua
January 18, 2013
 
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Buying A Fixer-Upper Home For Your First Home

For many people who have been sitting on the fence waiting and wondering if the housing market is rebounding, the signs are showing an improved chance to get into real estate while prices and loan rates are still low.
However, many of the homes on the market need some work and some need a lot of care. How do you know what to look for in a fixer-upper? If you're a first-time home buyer, purchasing a fixer-upper can be a good option because the price will be lower. But fixer-upper homes come with flaws and some can be huge.
Why a fixer-upper? In some areas, the housing market is very low on inventory, especially new and/or homes in top shape. Foreclosures and short sales, though, can offer better prices if you can deal with the home's maintenance needs.
Many first-time home buyers don't take into consideration the extra expenses needed to maintain a home. They carefully calculate the mortgage, downpayment, homeowners' association dues, property taxes, and other hard costs but they neglect to factor in the everyday repairs and maintenance for the property. Things like a new water heater, stove, microwave, central heating/air conditioning systems, washer/dryer and dishwasher repairs and even plumbing and roof repairs. These items might be new or relatively new when you move in but, in the not-too-distant future, they'll need repairing or replacing. When they do, the added costs can put a strain on homeowners' monthly budget.
With this in mind, buying a fixer-upper for your first home can be a great way to get into the real estate market at a good price. However, it's essential that you completely understand the home's necessary repairs before you buy. Things to consider include how much you'll save by buying a fixer-upper versus what you'll need to spend to make it livable, how old the home is, who will do the repairs, and how much patience you have for this project.
Real estate is also always about location for obvious reasons. You can have a fabulous home in a horrible location and then later nobody wants it. Or you can have an okay or fixer-upper home in an ideal location, and suddenly it's worth millions - easier to fix up a home than it is to change the entire surrounding location. So, when shopping for a fixer-upper, be very careful to survey the neighborhood and make sure it's in a location that is worth spending your time and money to fix it up.
You need to carefully study the cost and savings by buying a fixer-upper. People buy these types of home to save money but if you end up under-estimating the home's cost to renovate it, you'll be either short on cash or very upset. Get a home inspection to ensure you understand the basic repairs and maintenance needs. If there are problems with the home, make sure you consult with experts to give you an idea about how much the repairs will likely cost. Also, be sure to consider the age of the home. If a home is very old, it can certainly have some charm t but it also can have a lot of nightmare issues that aren't always easy to spot. This can be things like plumbing or electric wiring issues, lack of insulation, structural or foundation problems... the list goes on. You don't have to steer clear of an older home but do your homework before you buy.
Part of doing your homework is finding an expert team to help with the repairs. If you're a handyman, that's fine, but there will likely be times when you'll need to turn to other experts for help and advice. Start gathering these resource contacts now before you buy so that you can have them available to look at the fixer-upper homes you're considering buying.
Finally, be short on expecting super fast progress and long on patience. Remodeling and even just making minor repairs can take longer than you think. Don't get impatient. Remember you chose a fixer-upper to save money. Taking the time to properly care for it will ensure that you have a comfortable home.

Written by Phoebe Chongchua
January 4, 2013 

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Is Home Buying a Safe 2013 Investment?

Q: I was wondering what your thoughts were in regards to buying a home today. What is your outlook for the housing market? We have seen prices jump recently and I was wondering if you think this will be a trend in 2013. Do you really think it is safe to buy a home as a good investment? - Ana, Morgan Hill, CA A: Ana, no one knows exactly what will happen in the future, but with some solid research, you can make a fairly sound prediction. For several years, after the housing crisis began, I announced numerous times, in my radio programs and articles, that buying a home was not a sound investment. At the time, there was no end in sight for declining property values. However, I also predicted that in late 2011 and 2012 the market would settle down and possibly hit bottom and become a good time to consider buying again. What we have at this moment is the “basketball effect.” Take a basketball and hold it up high, then drop it. That first bounce is the basketball's fastest upward bounce. During that first bounce, it begins to travel slower the higher it rises. The real estate market has reached the bottom and you are seeing the initial bounce in property values. I see this upward trend in values continuing, but the market cannot sustain such rapid appreciation acceleration. Just as the basketball begins to slow after that initial bounce, so will appreciation. Right now, there should be a rapid push upward in prices through late spring and maybe even into mid- to late summer of 2013. Once the ball's bounce begins to slow, expect a healthy 2 percent to 3 percent annual home value appreciation rate over the next few years in most areas. Real estate is local. Some areas will do better than others, some not so much. Also, housing markets in some areas have yet to hit bottom. To determine how your market will fare, you need to consider what your area offers in terms of jobs, rents and other economic factors. Rent vs. buy If you buy a $400,000 home with a Federal Housing Administration (FHA), 30-year, fixed rate mortgage (FRM) with a 3.5 percent interest rate and put $14,000 down, it will cost you approximately $1,733 a month in principal and interest. In California, add about $416 a month in property taxes, $90 for homeowner's insurance and $402 for plus FHA mortgage insurance for a total payment of about $2,640 per month. Your monthly homeownership payment would be about $150 to $200 more than the cost of renting. For the purpose of this analysis, let's assume that you could rent the property for $2,400, which would mean renting the same property would be about $240 less than your monthly mortgage. However, homeownership also comes with a tax deduction for the mortgage interest and property tax. Tax shelter On this property, you would be able to deduct about $5,000 for property taxes and another $13,500 or so for interest for a total of $18,500 in tax deductions. Tax deductions reduce the income against which your tax is figured, not the tax owed. Depending on your tax bracket, the tax deductions could save about $300 every month, which makes the buy-vs-rent cost a wash with both being nearly equal. A certified public accountant, enrolled agent or other tax professional can pinpoint your tax savings to the dollar. However, you must also consider that your fixed mortgage payment for the next 30 years will actually drop once your home equity reaches a point where you can drop the mortgage insurance. That's a $400-a-month savings. If you rent, unless you are renting from your parents or some other benevolent landlord, your rent will rise virtually every year and before long you'll be paying much more to rent than you'll pay to own your home. If property values rise by 2.5 percent a year, you'll gain about $10,000 each year in home equity. Consider your equity growth a nest egg for retirement, your kids' education or as a piggy bank of savings to offset your mortgage payment. Your expected equity growth will offset your mortgage payment to the tune of about $800 a month. Do the math So let's take your mortgage payment of $2,640, minus the tax break of approximately $300, minus the $800 in monthly appreciation and you have an effective payment that's little more than about $1,500. Just try to rent the same house for that amount. Now skip ahead 10 years. At a conservative 2.5 percent annual rate of appreciation, the home you purchased for $400,000 will be worth more than $512,000. If you've made all your mortgage payments on time, your loan balance will be about $298,000 and you will have $213,000 in equity. Rent the same home at $2,400 per month with a conservative annual 5 percent increase in rent and you'll be paying more than $3,700 by year 10. Understand that you should consider real estate a long-term investment. Go to Las Vegas if you want to gamble by the minute. Buying a home comes with closing costs. Selling a home comes with selling costs. If you buy a home now that you plan to sell in two to five years, those costs can offset your gains. Unless you are a speculator, a Young Turk planning frequent career moves or someone who, for some reason, prefers to gamble don't buy real estate for the short term. Give the goose 10 to 15 years or more to lay the golden egg.


Written by Robert AldanaDecember 31, 2012

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