People who experience a property loss are usually asked by their insurance company for proof of purchase which can come in the form of a receipt or current inventory of their personal belongings.
Even the most organized people might find it challenging to find receipts for all the valuables in their home. If the inventory isn’t up-to-date, a homeowner might forget to add some items to the claim and may not recognize the omission for long after the claim is settled.
The inventory can serve as a guide to make sure a homeowner gets compensated for all the loss.
Photographs and videos can be adequate proof that the items belonged to the insured. A series of pictures of the different rooms, closets, cabinets and drawers are helpful. When video is used, consider commenting as it is shot and be sure to go slow enough and close enough to things becoming recorded.
For your convenience, download a Home Inventory, complete it, and save a copy off premise. Good places for your inventory could be a safety deposit box or digitally, in the cloud if you have server-based storage available like Dropbox.
Fannie Mae’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 76% of Americans either don’t know (40%) or are misinformed (36%) about the minimum down payment required. Many believe that they need at least 20% down to buy their dream home, but many programs actually let buyers put down as little as 3%. Below are the results of a Digital Risk survey of Millennials who recently purchased a home.As you can see, 64.2% were able to purchase their home by putting down less than 20%, with 43.8% putting down less than 10%!
Myth #2: “I need a 780 FICO Score or Higher to Buy”
The survey revealed that 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO score is necessary to qualify. Many Americans believe a ‘good’ credit score is 780 or higher. To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans. As you can see below, 54.7% of approved mortgages had a credit score of 600-749.
Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach.
It’s surprising to realize that most people spend more time planning their next vacation or cell phone purchase than they do on their own retirement. Let’s look at a hypothetical situation where you have $35,000 to invest for your retirement in 15 years. Have you compared where you might have the best opportunity?
The safest place to put it might be a certificate of deposit because it’s insured but unfortunately, rates would be less than 2%. The value would grow to $47,233.26 at the end of the 15 year holding period.
Investing in a mutual fund has more risk but also a greater opportunity to earn a higher rate of return. An estimated 7% return would project an accumulated value of $99,713.14.
Using the $35,000 for a 20% down payment and closing costs on a $150,000 rental home could realize much higher proceeds. Using a familiar investment analysis spreadsheet, the $35,000 could grow to a future wealth position of $153,302. This analysis considers leverage, 3% appreciation, re-investing cash flows, 7% sales expenses and paying applicable taxes which the previous examples do not.
The rate of return on these three examples are 2% for the CD, 7% for the mutual fund and a comparable 14.19% return on the rental. As the rate of return increases on investments, additional risk is reasonable.
Most people are much more familiar with homes than they are with mutual funds, bonds and other similar investments. The same REALTOR® who helped you with your home can help you invest in a rental home.
Mortgage approval isn’t final until it’s funded. Things can change prior to the loan being closed that can affect a pre-approval such as changes in the borrowers’ financial situation or possibly, factors beyond their control like interest rate changes.
Good advice to buyers is to do nothing that can affect your credit report until the loan closes. Opening new credit cards, taking on new debt for a car or furniture or changing jobs could affect the lender’s decision if they believe you may no longer be able to repay the loan.
The benefits of buyer’s pre-approval are definitive: it saves time, money and removes the uncertainty of knowing whether the buyer is qualified. The direct benefits include:
Amount the buyer can borrow - decreases as interest rates rise
Looking at “Right” homes - price, size, amenities, location
Find the best loan - rate, term, type
Uncover credit issues early - time to cure possible problems
Bargaining power - price, terms, & timing
Close quicker - verifications have been made
It is a very common practice for mortgage lenders to require income and bank verifications and to re-run the borrowers’ credit one final time just prior to closing. Mortgage approval isn’t final until it’s funded.
Gift or Inheritance - Does It Matter? - 11/21/2016
A person called into a radio talk program with a situation that was troubling to the caller and disturbing based on the potential tax liability that may have been avoided.
The caller’s elderly father had deeded his home to his daughter a few years earlier because in his mind, his daughter was going to get the home eventually and this would be one less thing to be taken care of after his death. The daughter didn’t really care because the father was going to continue to live in the home and take care of it so that it would be no expense to her.
Obviously, unknown to either the father or the daughter, transferring the title of a home from one person to another could have significant tax implications. In this case, when the father “gave” the home to his daughter, he also gave her the basis in the home which is basically what he paid for it. If she sells the home in the future, the gain will be the difference in the net sales price and her father’s basis which could be considerably higher than had she inherited it.
If the home was purchased for $75,000 and worth $250,000 at the time of transfer, there is a possible gain of $175,000. However, when a person inherits property, the basis is "stepped-up" to fair market value at the time of the decedent's death. If the adult child had inherited the property, at the time of the parent's death, their new basis would be $250,000 or the fair market value at the time of death and the possible gain would be zero.
In most cases, there are less tax consequences with inheritance than with a gift. There are other factors that may come into play but being aware that there is a difference between a gift and inheritance is certainly an important warning flag that would indicate that expert tax advice should be sought before any steps are taken.
There seems to have been an accepted progression for homeowners going from starter home, to gradually moving into one’s dream home, then, downsizing after becoming an empty nester and finally, into a retirement home. However, Marianne Cusato’s 2016 Aging-in-Place Report indicates that many older Americans don’t plan on following that pattern.
61% of homeowners above the age of 55 intend on staying in their homes indefinitely. 2/3 of them believe that the home’s layout will serve their needs without having to make aging-related improvements.
Some of the reasons being cited for staying in place are:
66% say their home is conveniently located
38% say they live close to their family
68% say they feel independent in their home
54% say they are familiar with their neighborhood
66% say the feel safe in their home
Typical renovations that might be considered for their current home are things like grab bars in the tub or shower, shower seats, taller toilets, handheld showerheads and additional handrails on stairways.
It seems that the report’s conclusion is that regardless of a homeowner’s age, they want to thrive in their home. The same emotional reasons that causes a person to want to buy a home are the things that cause them to hold onto them if is practical.
Since the election, rates have started going up and it will have a direct effect on the cost of housing. There is a rule of thumb that a ½% change in interest is approximately equal to 5% change in price.
As the interest rates go up, it will cost you more to live in the very same home or to keep the payment the same, you’ll have to buy a lower priced home.
Before rates rise too much, it may be the best time to buy a home whether you’re going to use it for your principal residence or a rental property. Low interest rates and lower prices make housing more affordable.
In 1966, a gallon of gas was $0.32 and today, it is $2.49. A dozen eggs were $0.60 but they’ve only doubled to $1.33. A gallon of milk was $0.99 and today, it costs $3.98. You could send a letter for five cents and now, it costs forty-seven cents.
The average cost of a new car in 1966 was $3,500 and today, it will cost $33,560. New cars have more features than the earlier models but they’re still ten times more expensive. The median price of a new home was $21,700 and now, is $304,500.
Interestingly, mortgage rates are actually lower today at 4-4.5% than they were fifty years ago when they were just under 7%. The rates have been low for long enough that many people have been lulled into believing that they are not going to go up.
Yes, rates are a little higher but in perspective, they’re still a bargain. Years from now, will you be remembering and comparing what they were back when?
Saving the down payment may be unnecessarily keeping would-be buyers from getting into a home. They may be unaware that the funds might be available.
The NAR Profile of Home Buyers and Sellers reports that 81% of first-time buyers got all or part of their down payment from savings. Less than 4% said that all or part of the down payment came from a withdrawal in their IRA and 8% from their 401(k) or pension fund.
Traditional IRAs have a provision for first-time buyers which include anyone who hasn’t owned a home in the previous two years. A person and their spouse, if married, can each withdraw up to $10,000 from their traditional IRA for a first-time home purchase without incurring the 10% early-withdrawal penalty. However, they will have to recognize the withdrawal as income in that tax year. For more information, go to IRS.gov.
Allowable withdrawals from traditional IRAs can be from yourself and your spouse; your or your spouse’s child; your or your spouse’s grandchild or your or your spouse’s parent or ancestor.
Roth IRA owners can withdraw their contributions tax-free and penalty-free at any age for any reason because the contributions were made with post-tax income. After age 59 ½, earnings may be withdrawn as long as the Roth IRA have been in existence for at least five years.
Up to half of the balance of a 401(k) or $50,000, whichever is less, can be borrowed by the owner at any age for any reason without tax or penalty assuming the employer permits it. There can be specific rules for loans from a 401(k) that would determine the repayment; interest is usually charged but goes back into the owner’s account. You can consult with your HR department to find out the specifics.
A risk in borrowing against a 401(k) comes if your employment ends before the loan has been repaid. The loan may have to be repaid as soon as 60 days to keep the loan from being considered a withdrawal and subject to tax and penalty. Even if you continue with the same employer, failure to repay the loan could be considered a withdrawal also.
Your tax professional can provide you specific information on how making a withdrawal from your retirement program might affect you. Additional information can be found on www.IRS.gov.
There is a common body of knowledge among real estate professionals that indicates that the longer a home is on the market, the lower the price will be. Many sellers discount this belief in the beginning because they feel confident their home will sell quickly.
Lowering the price is the most obvious thing that can be done to encourage buyers but it might be good to look at what builders do. Builders offer a variety of incentives such as upgrades, seller-paid closing costs, interest rate buy downs, washers, dryers, refrigerators or big screen TVs.
Interestingly, much of the resale market doesn’t employ these techniques. According to the latest NAR Home Buyers and Sellers Profile, 64% of sellers did not offer any incentives at all.
21% of sellers offer a home warranty. 16% of sellers offered assistance with closing costs and 6% offered credit toward remodeling or repairs.
The attached chart indicates that while 80% of sellers were not willing to offer incentives in the beginning of their marketing period, as weeks passes and their home hasn’t sold, closer to half did add incentives.
The ideal outcome is to maximize proceeds in the shortest time possible with the fewest unexpected issues. This involves having a firm understanding of current, local market conditions and crafting a marketing plan that will insure results.
There is so much at stake, the value of a trusted real estate professional is essential.