10 Ways to Turn Off Potential Buyers

As a result of our obsession with photos and visuals today, buyers make judgments of homes immediately. Many will do their first showing online, so if your photos turn them off, they may never step foot inside.

Sellers need to go to great lengths to get buyers in the door. If you can get them through, it’s the small (and often obvious) things that will keep them interested. Though it’s a home first and foremost, it’s also an investment. Make changes or alterations that could turn off a buyer, and you risk hurting your bottom line.

If you’re planning to put your house on the market, be aware of these 10 ways you might be turning off potential buyers.

1. Turn your garage into a family room.

A family room might be attractive – to a family. But if you’ve sacrificed the garage, the trade-off might be a turn-off, especially to people who don’t have kids or who live in dense urban areas, where parking is at a premium. Even in the suburbs, most people want a covered, secure place to park their cars.

Don’t forget that a garage often doubles as a storage location, housing everything from the lawn mower to excess paper towels and cleansers. If you go glam with your garage, you’re likely to force a buyer to look elsewhere.

2. Convert a bedroom into a something other than a bedroom.

Aside from location and price, one of the first things a buyer searches for is number of bedrooms. Why? Because it’s a fundamental requirement.

You might think that having a wine cellar with built-in refrigerators in your home will make it attractive to potential buyers because it was attractive to you. But that’s not for everyone.

And while it’s true many people work from home today, at least part of the time, that doesn’t mean they want a dedicated home office -especially one with built-in desks or bookcases they can’t easily remove.

If you must convert a bedroom into something else, make sure you can readily change it back into a bedroom when you go to sell. If you have lots of bedrooms, buyers might be more forgiving. But a buyer who needs three might see your custom home office as a turn-off.

3. Lay down carpet over hardwood floors.

People like hardwood floors. They look cleaner, add a design element, don’t show dirt as much, and consumers with allergies prefer them over carpets.

If you have gleaming hardwood floors, show them off. Let the buyer decide if she wants to cover them. It’s easier for her to purchase new carpeting of her choosing than to get past yours.

4. Install over-the-top light fixtures.

A beautiful chandelier can enliven a dining room. But it can also turn off buyers who prefer simpler, less ornate fixtures.

Did you fall in love with a dark light fixture on a trip to Casablanca? That’s great. And you should use it for your enjoyment. But when it comes time to sell, replace it with something more neutral.

Remember, you want to appeal to the masses when your home is for sale. You want to stand out from a crowded field of sellers – but in the right way.

5. Turn your kid’s room into a miniature theme park.

Little kids have big imaginations. They tend to love Disney characters, spaceships, and superheroes, and their parents are often all-too-willing to turn their rooms into fantasy caves.

But the more you transform a child’s bedroom into something resembling a Disneyland ride, the more you’ll turn off most potential buyers. Your buyer might have teenage children, and see the removal of wallpaper, paint or little-kid-inspired light fixtures as too much work.

If you can, neutralize the kids’ rooms before you go on the market.

6. Add an above-ground pool.

Does it get hot in the summer where you live? Wish you had a backyard pool, but can’t afford to have a “real” pool installed? Then you might be tempted to buy and set up an above-ground pool.

For most buyers, though, these pools are an eyesore. Also, an above-ground pool can leave a big dead spot of grass in your backyard – another eyesore.

If you must have it, consider dismantling it before going on the market. Of course, be sure you’re ready to sell, or you may be stuck without a place to cool off next summer.

7. Leave dirty dishes in the sink.

A kitchen full of dirty dishes is not only unattractive, but it sends a strong message to the buyer: You don’t care about your home.


If your home is for sale, buyers will be coming through, and you want to impress them. Would you keep dirty dishes in the sink for your in-laws or overnight guests? Probably not. Then why wouldn’t you clean up for your potential customers?

Putting your home up for sale, and keeping it on the market, is work. If you aren’t cut out for it, considering holding off until you are ready to clean up for the buyers.

8. Make buyers take off their shoes.

This turn-off cuts both ways. As an agent, I always hated being forced to take my shoes off in someone else’s home - until I sold my own. Not only was it inconvenient, but also I wasn’t happy about my socks picking up a random homeowner’s dirt, pet hair and dust.

Once I became a first-time home seller, and one with sparkling new hardwood floors and carpet, I couldn’t imagine allowing dirt and grime from the outside world to dirty up my floors.

So what’s the compromise? Shoe covers from a medical supply store. Buyers and agents don’t need to take off their shoes, simply cover them. It’s a win-win for everyone.

9. Smoke cigarettes in every room of your house – for years.

Over time, the smell of smoke permeates your home. It gets into the carpet, drapes, wood paneling - just about everywhere. And that’s a big turn-off to most buyers today.

Getting rid of the smoke smell can be a big job. If you’re a smoker, seriously consider how you want to present your home to the market. For a long-term smoke-filled home, it means painting, removing carpets, and doing lots of deep cleaning. If you don’t do it, don’t expect to get top dollar for your home.

10. Keep Fido’s bed and toys front and center.

Family pets bring a lot of joy to the home. But they don’t always bring the same joy to a prospective buyer. Dog’s toys, filled with saliva, dirt and dust, can be a sore both for the eyes and the nose.

If you have a pet, put a plan in place to move the food and water bowls as well as the toys and dog’s bed to a better location, like in the garage.

It’s your home – for now

Part of the joy of owning a home is that you can do whatever you want with it, to it, and in it. You should enjoy it. But if you want to sell it quickly and for top dollar down the road, try to picture how others might react to any renovations, additions or modifications you make.

The more specific you get – such as turning your kid’s room into a miniature castle – the harder it will be to sell your home later, and the less return on investment you’ll get. When considering changes to your home, always consider resale.


Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Source: zillow.com

Why I Expect Mortgage Rates to Go Down Sometime Soon

If you thought 2021 was bad, just in general, you might think 2022 is even worse, if the subject happens to be mortgage rates.

They’ve started the year off with a bang, higher, and are now at their highest point in about two years.

A lot of market watchers expected mortgage rates to rise in 2022, but perhaps not this quickly and violently.

For example, the 30-year fixed finished the year 2021 close to 3%, and is now hovering around 3.5%, depending on the loan scenario in question.

It could be even higher than that depending on your FICO score and LTV ratio, and there’s fear things could get even worse.

A Big Jump in Mortgage Rates Is Often Followed by a Correction

Now I don’t want to be a sucker and try to time the market, but I’ve been thinking about this ever since mortgage rates shot up a week or so ago.

It seems like it came out of nowhere, despite the advanced warnings that the Fed would be raising rates this year.

The Fed thing was telegraphed and baked in, but the ongoing story has been inflation, which started off as “transitory” and lately became more concerning and perhaps permanent.

That has forced the Fed to get a bit more aggressive, prompting the dual stock market and bond market carnage we’ve seen lately.

At the same time, most 2022 mortgage rate predictions have called this, though just not this quickly.

There’s also a sense that the worst is behind us with COVID, even if omicron is leading to record numbers in all categories.

I’m hearing a lot of pandemic becomes endemic…emphasis on end.

So Much Bad News Yet Mortgage Interest Rates Are Higher?

mortgage rate trend

While it’s decidedly gloomy out there, here’s why I think mortgage rates might actually get cheaper next month.

If you look at short periods of volatility, they’re usually followed by a correction, whether it’s up or down. This seems to apply to most things, most notably the stock market.

Because mortgage interest rates surged so quickly, there’s a good chance they could fall back to earth for that very reason alone.

Simply put, too much selling makes something oversold and ripe for a purchase, in this case mortgage-backed securities (MBS).

Just look at this 30-year fixed chart from MND, which shows periods of rate spikes, followed by some correcting.

It’s obviously not a perfect science, and still a risk, but I could see rates taking a breather in February. Or perhaps March.

There are other factors working in favor of that argument, like surging COVID cases and hospitalizations.

Yes, we’ve all heard that the omicron variant is “mild,” but somehow daily cases are set to triple the record set a year ago.

And some 132,646 Americans are currently hospitalized with COVID, above the 132,051 record set in January of last year.

While it seems like everyone has COVID, it seems fewer are getting severe disease, despite the hospitalizations.

There’s also a sense that this was expected, seeing that we’ve been through a bad winter already. And there was much more mingling this holiday season.

That could explain why mortgage rates haven’t gone down, but UP. But give it time and things could change direction.

And I think it’d be silly to think there isn’t a next variant on the horizon, even if it’s all media hype.

There’s also that psychology when you think something can’t possibly happen that it does. And right now, it’s hard to imagine mortgage rates improving.

Mortgage Lender Competition to the Rescue?

Lastly, consider mortgage lenders for a moment. While an everyday homeowner or prospective home buyer certainly won’t like a higher mortgage rate, lenders despise them.

A big rate surge like this one will tank their loan volume in a hurry and have them wondering about rightsizing their staff.

It’ll make a cash out refinance less attractive and put a rate and term refinance out of reach for millions of homeowners.

When volume drops, lenders have to get more aggressive pricing-wise to stay afloat. It might mean making less per loan to get the loan to begin with!

And as I’ve written about before, it can be wise to apply for a home loan when it’s not busy.

Not just because your loan will get to the finish line faster, but because it should be cheaper, relatively speaking.

Why? Because the lender is willing to shrink their profit margin to get your business. When they’re slammed, they’ll maybe even ignore you.

So if it feels like all hope is lost on the mortgage rate front, it probably isn’t, for that reason alone.

When things turn around is another question. Does it happen in the next week or two, in February, or in March? Do things get worse before they get better?

I’m not sure, but I do think we could see a reprieve before the traditional home buying season gets underway in later March and April.

It might be short-lived though, so be ready to pounce if and when it happens.

Read more: What time of year are mortgage rates lowest?

Source: thetruthaboutmortgage.com

Selling a House As Is: What It Means for Buyers

Selling a house as is sounds like a pretty sweet deal for sellers. Sellers don’t have to scurry around fixing the place up.

But what does an as-is home sale mean for buyers? When looking through property listings and the term “as is” appears, some people see it as a warning.

Others, such as real estate investors, may see a house being sold as is as an opportunity. That might get prospective buyers wondering what exactly does “as is” mean?

Selling a house as is: What does “as is” mean in real estate?

Technically, when a real estate agent lists an as is home sale, it means the homeowner is selling the home in its current condition, and will make no repairs or improvements before the sale (or negotiate with the buyer for any credits to fund these fix-its). The term “as is” is rarely tacked on a property sales listing that’s perfect and move-in ready.

On the contrary, people often sell as-is homes that are in disrepair, because the homeowners or other sellers can’t afford to fix these flaws before selling (which would help them sell the home for a higher price).

Alternatively, a home may have been through foreclosure and is now owned by a bank, or the seller may have died and left the house to inheritors or an estate agent who have little idea what could be wrong with it but need to sell.

Whatever the reason, the current sellers aren’t willing to pretty up a home before selling it. They just want to sell the real estate and move on. All of this means that the buyer of this house inherits any problems a home may have, too.

When a real estate agent lists as home to sell “as is,” that doesn’t change the legal rights of the buyer. The listing agent must still have the seller disclose known problems, and the buyer can still negotiate an offer with the final sale, contingent upon a real estate inspection.


Watch: Sellers: Fix These Issues Before a Home Inspection


Pros and cons of as-is home sales

So how can “as is” be the aforementioned opportunity, if the buyer is taking on all those problems?

It all comes down to cash value. Those two short words in a listing usually indicate that the home may be considered to be a fixer-upper. The house will have a relatively low list price to start with, and the sellers might even entertain still lower offers.

A real estate agent may even list a house with serious problems as “cash offers only,” if the house’s problems could prevent it from qualifying for a mortgage.

If the prospective buyers happen to be contractors or handy with a hammer, are looking for a property to flip, or maybe just want an extreme bargain, the promise of an as-is sale could be music to their ears.

Cash buyers and corporate investors look for home sellers who want a fast sale, but they expect those sellers to offer a low list price in exchange.

Yet the downsides of an as-is property are obvious and should not be underestimated. Any number of things could be wrong with the house that are not immediately apparent to the eye. Buyers might think they’re getting a killer deal, but they could also be throwing their life savings into a black hole.

Should you buy a house being sold as is?

Now that you know the pros and cons of an as-is home sale, you might be wondering whether to move ahead with the sale—and how. Since these sales can be bargains, they are worth considering, although there’s one precaution buyers will definitely want to take prior to the sale: a home inspection.

A home inspector examines the house from basement to rafters and will point out any problems plaguing the place that may make the buyer want to reconsider the sale. The problems can be current or potentially in the buyer’s future, such as an old roof that may need replacing five years later.

A real estate inspection costs around $300 to $500, and typically occurs after the buyer has made a sales offer on real estate that’s been accepted and put down a deposit.

The buyer, not the seller, pays for the inspections—which makes sense, because that way the inspector is not working for the seller.

On houses that aren’t selling as is, buyers may use problems found during the inspection to demand that repairs be made (or that credits be given so they can make those repairs themselves).

While as-is home sellers have already made it clear they won’t lift a finger on that front, an inspection still serves an important purpose for buyers before the sale.

Provided the buyers place an inspection contingency in the contract, this means that if the inspector unearths problems, the buyers don’t want to address, they can walk away from the deal with deposit in hand.

“You should always elect to do a home inspection, especially on a bank-owned property where no one knew how the home was cared for and no one knows what happened right before the past owners left the property,” says Winston Westbrook, a broker and owner of Westbrook National Real Estate Co. specializing in short sales and distressed real estate.

“Yes, you lose out on the cost of the home inspection, but the cost of the home inspection is well worth it, considering the headache you would have had in the future trying to make the house livable.”

On the other hand, if the inspection reveals additional problems, you might consider offering a lower price based on estimated costs of home improvement.

Remember that, despite what the seller says in the real estate listing, a real estate deal is still open to negotiation. If the sellers have a property on the market and it doesn’t sell, they may be open to selling at a lower price.

The sellers may even make certain fixes requested by home buyers, if that’s the only way they can sell the house.

Unless it’s a hot real estate selling market and other potential buyers are competing with you, the listing agent knows that the property won’t sell until you get a deal that works for you.

Source: realtor.com

Hazard Insurance vs. Homeowners Insurance

If you’re a soon-to-be homeowner, your lender might mention that you’re required to purchase hazard insurance. You may be wondering, ‘is hazard insurance the same as homeowners insurance?’ In fact, hazard insurance is a part of your standard homeowner’s insurance policy.

Let’s look at the ins and outs of hazard insurance, including what it covers and what it doesn’t, and how much you can expect to pay for it.

Is Hazard Insurance the Same as Homeowners Insurance?

A common misconception is that hazard insurance is the same as homeowners insurance when, in fact, it’s a part of it. That’s because people sometimes refer to homeowners insurance as hazard insurance. You can think of it as a piece of fruit in a fruit and cheese basket — not the entire kit and caboodle.

Hazard insurance typically refers to the protection of the structure of your home and additional structures on the property (like a shed, deck or detached garage), whereas homeowners insurance as a whole also includes coverage for liability, additional living expenses, and personal belongings.

Recommended: Homeowners Insurance Coverage Options to Know

What Is Hazard Insurance?

Hazard insurance is part of homeowners insurance, and it typically covers the structure or dwelling, but not liability, personal belongings, or additional living expenses. Because it’s a part of a standard homeowners insurance policy, it cannot be purchased as a standalone policy. Rather, it’s folded into your homeowners insurance.

Hazard is oftentimes confused with catastrophic insurance, which is a standalone policy that covers against perils that aren’t included in a standard homeowners insurance policy, such as floods, earthquakes, and terrorist attacks.

What Does Hazard Insurance Cover?

Should there be damage to the actual structure of your home, the hazard insurance portion of your homeowners’ insurance policy will offer a payout. This usually includes damage or destruction to the actual building of your home from natural events, such as extreme weather or a natural disaster.

However, what specifically hazard insurance covers will depend on whether it’s a named perils or an open perils policy. Read on for more details on what those entail.

Named Perils

Named perils essentially means events, incidences, or risks that are “named” or “listed” under your plan as covered. In other words, if it’s not listed, then it’s not covered.

A named perils policy typically protects against 16 specific types of perils, including:

•  Windstorms or hail

•  Fire or lightning

•  Explosions

•  Riots or civil disruption

•  Smoke

•  Theft

•  Falling objects

•  Vandalism or malicious mischief

•  Damage caused by vehicles

•  Damage caused by aircraft

•  Damage from ice, snow or sleet

•  Volcanic eruption

•  Accidental discharge or overflow of water or steam from HVAC, a plumbing issue, a household appliance or a sprinkler system

•  Accidental cracking, tearing apart, burning or bulging of HVAC or a fire-protective system

•  Freezing of HVAC or a household appliance

•  Accidental damage from electrical current that is artificially generated

A homeowners insurance policy that is a named perils insurance policy is usually less expensive than an open perils policy.

Open Perils

While a named perils policy will only cover what’s listed in your policy, an open perils policy will provide coverage unless something is specifically excluded and noted as such in your policy.

Typical exclusions under an open perils policy include:

•  War

•  Nuclear hazard

•  Water damage from a sewer backup

•  Damage from pets

•  Power failure

•  Mold or fungus

•  Damage due to an infestation of animals or insects

•  Negligence and general wear and tear

•  Smog, rust or corrosion

An open perils policy tends to be for newer homes or homes in low-risk areas. Additionally, because an open perils homeowners insurance policy tends to be more comprehensive, they typically cost more compared to a named perils policy.

What Isn’t Covered by Hazard Insurance?

Now that we’ve looked at what hazard insurance may cover, here’s what typically isn’t covered.

Flood Coverage

Flood coverage isn’t part of a standard homeowners insurance policy, so you’ll need to take out a separate policy if you want it. In fact, if you live in an area that’s a designated high-risk flood zone, you may be required to take out flood insurance.

The cost of the policy generally hinges on how much of a risk your home is, which factors in your location, and the age of your home.

Earthquake Coverage

Earthquake coverage is another item that hazard insurance doesn’t offer, so if you live in an area that’s subject to earthquakes, you may want to get an earthquake insurance policy. This can either be tacked on to an existing policy as a rider or purchased separately.

When you purchase earthquake coverage, your home is usually protected against cracking and shaking that can damage or destroy buildings and personal possessions. But if there’s water or fire damage because of an earthquake, then that generally would be taken care of by a standard homeowners insurance policy.

How Much Does Hazard Insurance Cost?

As hazard insurance is part of a standard homeowners insurance policy, you won’t need to pay anything extra. According to the most recent data from the Insurance Information Institute (III), the average cost of a homeowners policy in the U.S. is $1,249.

Keep in mind that the cost can vary depending on a host of factors: the location of the home, the cost to rebuild, the size and structure of your home, your age, your credit score, your deductible and the type of policy and amount of coverage you desire.

Do You Need Hazard Insurance?

In short, yes. As you will need homeowners insurance if you are taking out a mortgage on your home, and hazard insurance is folded into homeowners insurance, then you’ll need hazard insurance.

When shopping around for hazard insurance, think about what is required by your mortgage lender, and what coverage amount would be suitable for your home and situation. Play around with different deductibles and coverage amounts to see how they would impact your premium, and don’t forget that discounts can also lower the cost of your insurance.

The Takeaway

Hazard insurance and homeowners insurance aren’t the same thing. Rather, hazard insurance refers specifically to coverage for the structure of your home and is an element of homeowners insurance. What your hazard insurance policy will cover depends on whether you have a named or open perils policy, though it generally won’t extend to damage from earthquakes or floods.

If you’re taking out a mortgage on your home, you’re generally required to get homeowners insurance — and, by extension, hazard insurance. SoFi has teamed up with Lemonade to make it easy to get homeowners insurance. Simply chat with Lemonade’s A.I. bot to get an insurance plan crafted for you, and then Lemonade will send a quote to your lender.

Check your price on homeowners insurance today.

Photo credit: iStock/MicroStockHub

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi offers customers the opportunity to reach the following Insurance Agents:

Home & Renters: Lemonade Insurance Agency (LIA) is acting as the agent of Lemonade Insurance Company in selling this insurance policy, in which it receives compensation based on the premiums for the insurance policies it sells.


Source: sofi.com

Guarantor vs. Cosigner: Important Differences You Need to Know

Lining up a guarantor or co-signer can help you move more quickly through your rental journey.

Just when you thought the long search was over, property management denied your rental application. Wait. What?

There are several reasons this might happen, but the big red flag for landlords and property managers is your financials — credit history, income, outstanding bills. Landlords need to protect themselves by making sure you can pay the monthly rent and those red flags get in the way.

But don’t despair. You can help your case and increase the odds you land the next apartment by getting a cosigner or a guarantor. Although these terms are often used interchangeably, a cosigner and guarantor are two different things.

What is a guarantor?

Who do you call when you need help? For most people, it’s a family member or close friend. A guarantor is usually in one of those categories. He or she signs up to take on the responsibility of paying your rent, rental fees or damages if you’re unable to fulfill your rental obligations. A guarantor is an outside person who signs the lease but doesn’t live with you.

What is a cosigner?

A cosigner is often a roommate who shares your living space. Your roomie signs the lease with you and becomes responsible for paying part of the rent and fees. But the cosigner can also be someone from the outside, as long as they promise to pay your rent if you can’t.

A cosigner has more financial responsibility than a guarantor since the cosigner is responsible for rent on day one. The guarantor only steps in if a renter can’t make payments. Plus, if a cosigner is a roommate, he or she has to pick up the slack if the other roommates can’t make rent.

Why would I need a guarantor or a cosigner?

Here are a few reasons you might consider getting a guarantor or cosigner:

Income is too low

When a landlord or property manager looks over your application to determine whether you can afford the rent, they often use the 40X rule (which is eerily similar to the 30 percent rule that renters should consider. It’s eerie because the numbers work out the same. But you math people knew that already.) This means that a landlord expects your gross salary to equal 40 times the monthly rent (i.e., if you earn $64,000 before taxes, you can spend $19,200 on rent, or $1,600 each month). Note that in New York City, many landlords use the rule that a tenant must earn an annual salary of 40 times the rent to qualify.

Bad credit score

According to Experian, a credit reporting agency, a score of 700 or above (out of 850) is good, 800 or above is excellent, 580 to 700 is fair and anything below 580 is poor. Most people fall between 600 and 750. Statista reports that the average credit score of renters of mid-range apartments in the U.S. was 626 in 2020.

First-time renters

Just out of school? Just got your first “real” job? Most people need help on their first rental go-’round, especially if they have little credit history for the landlord to check into.

Rent is crazy high

If you don’t think you can swing it, get a guarantor on board early on. Or, find a roommate to cosign the lease with you.

It’s required

If the landlord believes there might be trouble ahead when it comes to paying the monthly rent (based on all of the above), he or she may require a prospective tenant to have a guarantor.

Group all in over paperwork

Group all in over paperwork

Can there be more than one guarantor?

Usually, one guarantor suffices even if you’ve got a roommate. Make sure that person is aware that they’ll be financially liable for you and all the roommates.

But, if you and your roomies’ combined incomes are still close to the edge, the landlord might specify that you each need your own guarantor. If there are multiple guarantors, they’ll need their own contract to determine what happens if one of the roommates doesn’t make the rent.

Who can be a guarantor or a cosigner?

Family, friends or sometimes a colleague may be a cosigner or a guarantor. In general, landlords prefer parents as guarantors. Landlords also have stricter requirements for cosigners and guarantors than they do for prospective tenants.

For example, a guarantor has to have a high credit score (at least 700) and an income that’s a specified multiple of the monthly rent, usually 80 to 100 times (as opposed to the 40X rule for a renter.) A landlord may also request a guarantor live nearby in case the renter skips town or defaults. If the guarantor is a homeowner, that’s a plus.

Are there alternatives to getting a guarantor vs. a cosigner?

There are other ways to get support if you don’t have anyone to turn to.

  • Offer to pay several months’ rent upfront.
  • Try to sublet an apartment, rather than rent one on your own directly from a landlord. In a sublet, you rent from the tenant.
  • Find a lenient landlord, maybe one who rents a portion of a house, rather than renting in a building with a rental company on its payroll.
  • Use a company, such as The Guarantors or Insurent, which, for a fee, will help you with a guarantor and other rental services. Co-signing.com does the same when you need a cosigner.

Choose wisely

Getting an apartment, especially in high rent towns, is stressful enough. Consider a guarantor vs. a cosigner as part of your due diligence at the start of your rental journey.

Having the discussion will be difficult so lay out your talking points beforehand. Explain the high costs of rentals and the number of other renters you’re competing with for a place to live. You may draw up a separate contract with the person defining how you will pay them if you miss rent.

Remember that asking someone to be a cosigner or guarantor will change your relationship with that person. The landlord will need all sorts of personal and financial information about the person. And, if you bug out on the rent, you’ll have to face that individual. Make sure you choose wisely and be as transparent as possible.

The hope is that you’ll only have to do this once.

Source: rent.com

Do You Qualify as a First-Time Homebuyer?

A first-time homebuyer isn’t just someone purchasing a first home. It can be anyone who has not owned a principal residence in the past three years, some single parents, and others.

If the thought of a down payment and closing costs put a chill down your spine, realize that first-time homebuyers often have access to down payment assistance in the form of grants or low- or no-interest loans.

‘First-Time Homebuyer’ Under the Microscope

To get a sense of who qualifies for a mortgage as a first-time homebuyer, let’s take a look at the government’s definition.

The U.S. Department of Housing and Urban Development (HUD) says first-time buyers meet any of these criteria:

•   An individual who has not held ownership in a principal residence during the three-year period ending on the date of the purchase.

•   A single parent who has only owned a home with a former spouse.

•   An individual who is a displaced homemaker (has worked only in the home for a substantial number of years providing unpaid household services for family members) and has only owned a home with a spouse.

•   Both spouses if one spouse is or was a homeowner but the other has not owned a home.

•   A person who has only owned a principal residence that was not permanently attached to a foundation (such as a mobile home when the wheels are in place).

•   An individual who has owned a property that is not in compliance with state, local, or model building codes and that cannot be brought into compliance for less than the cost of constructing a permanent structure.

For conventional (nongovernment) financing through private lenders, Fannie Mae’s criteria are similar.

You can use our Home Affordability
Calculator to get an estimate of how
much house you can afford.

Options for First-Time Homebuyers

First-time homebuyers may not realize that they, like other buyers, may qualify to buy a home with much less than 20% down.

They also have access to programs that may ease the credit requirements of homeownership.

Federal Government-Backed Mortgages

When the federal government insures mortgages, the loans pose less of a risk to lenders, so lenders may offer you a lower interest rate.

There are three government-backed home loan options. In exchange for a low down payment, you’ll pay an upfront and annual mortgage insurance premium for FHA loans, an upfront guarantee fee and annual fee for USDA loans, or a one-time funding fee for VA loans.

FHA Loans

The Federal Housing Administration, part of HUD, insures fixed-rate mortgages issued by approved lenders . On average, more than 80% of FHA-insured mortgages are for first-time homebuyers each year.

If you have a FICO® credit score of 580 or higher, you could get an FHA loan with just 3.5% down. If you have a score between 500 and 579, you may still qualify for a loan with 10% down.

USDA Loans

The U.S. Department of Agriculture offers assistance to buy (or, in some cases, even build) a home in certain rural areas. Your income has to be within a certain percentage of the average median income for the area.

If you qualify, the loan requires no down payment and offers a fixed interest rate.

The USDA has an interactive map to determine if a community is considered rural.

VA Loans

A mortgage guaranteed in part by the Department of Veterans Affairs requires no down payment and is available for military members, veterans, and certain surviving military spouses.

Although a VA loan does not state a minimum credit score, lenders who make the loan will set their minimum score for the product based on their risk tolerance.

Government-Backed Conventional Mortgages

Fannie Mae and Freddie Mac, government-backed mortgage companies, do not originate home loans; they buy and guarantee mortgages issued through lenders in the secondary mortgage market.

They make mortgages available that are geared toward lower-income, lower-credit score borrowers.

Freddie Mac’s Home Possible program offers down payment options as low as 3%. There are also sweat equity down payment options and flexible terms.

Fannie Mae’s 97% LTV program also offers 3% down payment loans.

Fannie Mae’s HomePath Ready Buyer program offers first-time homebuyers the ability to buy foreclosed properties with as little as 3% down and help with closing costs.

A Mortgage for Certain Civil Servants

If you’re a law enforcement officer, firefighter, or EMT working for a federal, state, local, or Indian tribal government agency, or a teacher at a public or private school, the HUD-backed Good Neighbor Next Door program could be a good fit. It provides 50% off the listing price of a foreclosed home in specific revitalization areas. In turn, you have to commit to living there for 36 months.

Homes are listed on the HUD website each week, and you have to put an offer in within seven days.

Only a registered HUD broker can submit a bid for you on a property.

If using an FHA loan to buy a home in the Good Neighbor Next Door program, the down payment will be $100. If using a VA loan to purchase a house through the program, buyers will receive 100% financing. If using a conventional home loan, the usual down payment requirements stay the same.

State, County, and City Assistance

It isn’t just the federal government that helps to get first-time buyers into homes. State, county, and city governments and nonprofit organizations run many down payment assistance programs.

HUD is the gatekeeper, steering buyers to state and local programs and offering advice from HUD home assistance counselors.

The National Council of State Housing Agencies has a state-by-state list of housing finance agencies, which cater to low- and middle-income households. Contact the agency to learn about the programs it offers and to get answers to housing finance questions.

Using Gift Money

First-time homebuyers might also want to think about seeking down payment and closing cost help from family members.

If you’re using a cash gift, your lender will want a formal gift letter, and the gift cannot be a loan. Home loans backed by Fannie Mae and Freddie Mac only allow down payment gifts from someone related to the borrower. Government-backed loans have looser requirements.

Want to use your 401(k) to make a down payment? You could, but financial advisors frown on the idea. Borrowing from your 401(k) can do damage to your retirement savings.

The Takeaway

First-time homebuyers are in the catbird seat if they don’t have much of a down payment or their credit isn’t stellar. Lots of programs, from local to federal, give first-time homeowners a break.

SoFi offers home loans with as little as 5% down. See how your rate and terms stack up against the competition.

It’s easy to find your rate.

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Source: sofi.com

How Retirees Can Earn Extra Cash by Turning Their Home into an Airbnb

While staying at an Airbnb in the Hudson Valley last year, Kathy Corby, a retired physician, realized she would love to own a home there and share it as an Airbnb. She soon bought an 1890s Cape Cod with four bedrooms and two bathrooms in Saugerties, N.Y. Corby named it Lilac House after the huge, surrounding lilac bushes. She furnished the home with leftover furniture after downsizing into her Philadelphia condo and bought the rest on Black Friday. In early 2021, she hosted her first Airbnb guests and quickly earned the coveted status of Superhost. Lilac House is not only paying its own way, from mortgage to utilities, but also generating income. In her first nine months, Corby, 72, earned about $1,500 per month after expenses but before taxes. She spends about a week there every month. “I have my cake and can eat it, too,” she says.

Airbnb is an online home-sharing reservation service that connects hosts and guests. The site offers advice and tools to create and manage a listing, whether a house or a single room. According to an annual survey of Airbnb hosts, about 25% are retirees. They use their earnings to pay for living expenses, home improvements and extended travel, like the host who shipped a Volkswagen bus to Europe and used it to tour the continent for five months. But make no mistake: As a host, you are running a business with all the risks and rewards that go with it. “Expect that this will be more work than you anticipate. It’s NOT a get-rich-quick scheme! There is a lot of emotional, physical and financial labor that goes into hosting,” says host Laura2592 in an online post.

Creating a listing is free, but Airbnb deducts a 3% fee from the proceeds of every booking. Airbnb charges guests as soon as you confirm their reservation, and you generally receive payment 24 hours after check-in, usually by direct deposit or PayPal. The interactive tool What’s My Place Worth at Airbnb.com/host estimates your earning potential. Actual earnings will depend mainly on the demand for accommodations in your area, your nightly rate and availability, positive reviews and any municipal restrictions.

After each stay, guests can rate hosts with up to five stars and post reviews, or vice versa. Airbnb says the key to keeping guests happy is warm hospitality and an accurate listing that tells travelers what to expect. The company asks that you respond to inquiries and requests within 24 hours, accept them whenever you’re available, avoid canceling on guests and maintain a high overall rating. The Superhost status goes to those who rate at least a 4.8 from 5.0 overall for the past 365 days of reviews, with minimum cancellations and rapid response times to guest questions or requests, among other requirements. Superhosts can charge higher nightly rates and earn more as a result.

During the pandemic, Corby and other nonurban hosts fared better than urban hosts, as cooped-up city dwellers looked for space where they could work and play. As travel rebounds, guests still want pet-friendly listings with wireless internet and remote workspaces.

The Legalities of Running an Airbnb

Before you begin shopping for luxury bedding, though, make sure you can create a short-term rental legally. Many cities have introduced tougher restrictions for short-term rental properties to protect their community’s quality of life and housing market. Once you accept Airbnb’s terms of service and activate a listing, you agree to comply with its policies and follow your local laws and regulations. Don’t overlook the covenants, conditions and restrictions of your homeowner’s association. If you violate those, the HOA could fine you or place a lien on your property, says Stephen Fishman, a lawyer and author for legal publisher Nolo Press.

Local governments typically require you to register your Airbnb, obtain a permit and a business license, pay fees ranging from $100 to several hundred dollars, and renew those annually. You may be required to pass an inspection and notify your neighbors of the rental. If you have unruly guests, you could incur citations, fines and the enduring wrath of your neighbors.

Make Your Airbnb Comfy

Carla Reissman, 65, of Arlington, Va., began hosting an Airbnb in her home after her husband, Ted Kennedy, 65, retired unexpectedly early. With two kids in college, the couple needed to supplement her income. They outfitted a spare bedroom on their first floor with furniture they bought on Craigslist (bed, beside table, lamp, reading chair, dresser and mirror) and reserved a nearby bathroom for guests in residence. With their master suite on the second floor, the couple preserved their privacy and that of guests. The kitchen was offlimits to guests, except to store their provisions in the fridge. Reissman provided guests with towels, bath soap, a Wi-Fi password and a cup of tea or coffee in the morning. “It was safe, clean, comfortable and not ugly,” says Reissman, who has since stopped hosting to travel with her husband.

Airbnb shows hosts how to create a guest-friendly space, and new hosts can ask questions of Superhosts on Airbnb.com/d/superhost. Corby, however, felt that she learned more from two books: Airbnb for Dummies (Wiley, $19.99) and Optimize Your Bnb (OptimizeMy Bnb.com LLC, $14.99). Her many amenities include five ways to make coffee, a burr grinder and a supply of high-end beans. It’s smart to test-drive your space by staying overnight in it yourself.

Lack of cleanliness is a top reason for a negative review. Airbnb requires a five-step cleaning and sanitizing process, which was developed in response to the pandemic and the standards of the pickiest guest, for whom one stray hair may be one too many. Corby once drove five hours in a snowstorm to clean her house between guests when her maid service couldn’t make it.

Establish Rules for Your Airbnb

Decide how you’ll check in guests. Reissman receives guests in person or hides a key when she can’t. With a lockbox or electronic lock, you can have contactless check-in and change the combination or code between guests for security. Corby uses an Apple smart lock with a keypad at the front door.

Add house rules to your listing to avoid misunderstandings that could lead to poor reviews. Rules can address times for checking in and out; any restrictions for smoking, parties and pets; and health and safety reminders, such as masking and social distancing requirements. In the U.S., Airbnb performs background checks on hosts and guests, and you can also require that guests provide a photo of their government ID for verification prior to their stay.

For the inside skinny on anything Airbnb, visit Airbnb’s Community Forum (community.withairbnb.com), Airhosts Forum (airhostsforum.com) and the Reddit Airbnb Subreddit (reddit.com/r/AirBnB).

How to Price Your Airbnb

You can charge whatever nightly rate you want but be realistic. Many guests choose Airbnb because it’s cheaper than staying in a hotel. Reissman researched Airbnb prices in her area before charging $60 per night. Her rate attracts guests with modest budgets, including retirees, international students, as well as businesspeople living on a per diem. She figures she earned about $20,000 over 80 bookings in two years.

Airbnb suggests starting with a lower-than-average nightly rate until you glean a positive review or two. Airbnb’s Smart Pricing Tool helps you match your price to demand, and you can set custom prices, such as a lower rate during the week and a higher one on weekends or during special events. Corby uses a subscription tool from AirDNA ($20 to $100 a month) that automatically optimizes pricing for her market. It recommends daily rates for up to a year in advance; rates rise with demand or fall to maximize bookings as the date of a special event nears. Corby’s nightly rate has ranged from about $320 to $750.

You can add fees for cleaning and additional guests beyond a number you set. Airbnb also charges most guests a service fee of up to 14.2% of the cost of their stay (excluding Airbnb fees and taxes).

Pay Taxes on Your Airbnb Income

In many cities, Airbnb will collect and remit some of the local occupancy taxes for you.

If you rent out part or all of your home for more than 14 days during the year, you must report your rental income and expenses on Schedule E of your 1040, with income taxes owed on any profit. Airbnb will report to the IRS how much rental income it collected and paid you annually. You can deduct mortgage interest, property taxes, maintenance and other ownership costs for the portion of the property rented out. Because that portion of your state and local property taxes won’t count toward the $10,000 cap on state and local taxes, you may be better off itemizing deductions.

As long as you don’t provide substantial services to your guests — such as breakfast, fresh linens and room cleaning during their stay — you won’t be considered self-employed and won’t need to pay the 15.3% selfemployment tax. For more information, see Every Airbnb Host’s Tax Guide, by Stephen Fishman (Nolo Press, $19.99). Consult your tax adviser, too.

Check Your Homeowners Insurance Coverage

Airbnb provides up to $1 million of Host Protection Insurance to cover liability claims for injury to a guest or property damage to their belongings. Its Host Guarantee ostensibly provides protection for every booking at no additional cost, of up to $1 million in property damage. But don’t rely on those protections alone.

Ask your home insurer about what property damage and liability coverage it offers for short-term rentals by paying guests, which could be excluded as a business activity. “Make clear how often you plan to rent out your home, whether you’ll be at home while renting, and how many people you’ll be hosting,” says Fishman. Your insurer may cover home-sharing up to certain limits as a standard endorsement or you may need to buy a supplement. Corby purchased home-sharing coverage from Proper Insurance for her home, its contents as well as the business liability and income it generates.

Overall, hosting has been a positive experience for Corby and Reissman, who have met people of different nationalities and even made new friends as a result. “If you think about hosting only as a monetary transaction, you might be disappointed,” Reissman says.

Corby recalls a couple of guests who disobeyed all the house rules, smoking inside and leaving debris on the floor, the child who drew tic-tack-toe and his initials into a new leather couch and the guest who texted constantly while Corby was vacationing four time zones away. Reissman had guests who left hair dye in the bathroom sink and sex toys under the bed. You may have to be available at the most inconvenient times and sacrifice your use of the property to guests. Corby hoped to spend leaf season in the Hudson Valley, but by mid-August, guests had booked every opening. Christmas week at Lilac House, however, has been reserved just for her family.

Source: kiplinger.com