Do You Own the Land Under Your Home?

Do your due diligence to ensure you know about liens, easements or land grants made on property you’re thinking about purchasing.

When you buy a home, you probably assume that you own everything in and around it within the property lines. But in some parts of the country, homeowners are discovering the property they’re buying does not fully include the land beneath it.

For example, in Tampa Bay, FL a family realized at closing that their home builder had already signed away the rights to the land underneath their home to its own energy company. The “mineral rights” grant gave the energy company the freedom to drill, mine or explore for precious minerals beneath the home.

How is this even possible, and how can it be avoided? Who really owns the land beneath your home? Here’s what you need to know.

You probably own the land

Generally speaking, it’s likely that you own the property underneath and around your house. Most property ownership law is based on the Latin doctrine, “For whoever owns the soil, it is theirs up to heaven and down to hell.”

There can be exceptions, though. On occasion, a buyer will uncover an easement for a driveway or walkway that goes through their property. This is why it’s important to carefully review contracts and disclosures.

Contract and disclosures

A seller, be it a home builder or a homeowner, can’t claim any sort of rights to the property without first disclosing those rights in the real estate contract or in some sort of disclosure statement.

Each state is different with regard to how things are disclosed. Many disclosure statements require the seller to tell the buyer whether or not someone else has laid claim to the property or if the buyer is limited to claims in the future. If the seller is unaware, or the home you’re purchasing is in a state that doesn’t require the seller to disclose, then you should carefully review the property’s title report before signing off.

Preliminary title report

There can be a situation in which a seller doesn’t know that someone else has laid claim to the property. For example, this could happen in the case of a resale in a newer subdivision where the current owner bought from a homebuilder directly.

Throughout the years, there have been instances when an easement, encroachment or even a small mechanic’s lien sits on a title unbeknownst to the current seller. When this happens, all parties must work together to determine the best course of action. Access to the land below your home would have to be granted via a deed and, as such, it would show up on the preliminary title report.

The title report provides ownership information and acknowledges loans, deeds or trusts, easements, encroachments, unpaid property taxes or anything else that has been recorded against the property. If a homebuilder deeded mineral rights to themselves, for instance, they would have had to record that deed. If so, it stays on the title report until they and the current owner agree to take it off.

How to avoid last-minute disclosures

In Tampa Bay, unsuspecting homeowners signed over to the builder’s holding company the “eternal rights to practically anything of value (found) buried underground, including gold, groundwater and gemstones,” according to the Tampa Bay Times. If that weren’t enough, homeowners who didn’t realize they had signed over the mineral rights, or who did so at the last minute under duress, could have trouble selling their home later to wary buyers.

With any home purchase, you should give yourself enough time so that you can do your due diligence, either as a contingency to the contract or in the period leading up to the contract before you sign it.

When buyers think about due diligence, they immediately think “property inspection.” And in the case of new construction, it’s uncommon to do an inspection. But there is so much more to due diligence than a simple property inspection.

Never wait until the closing to discover such a big disclosure, as the unfortunate buyers in Tampa Bay experienced. It’s common practice for a good listing agent or seller, in states where disclosure is required, to raise something like mineral rights as a red flag to all buyers from the get-go.

Deeding access to the land below your home isn’t simply some “fine print” buried in the closing papers that could be easily overlooked. Such a disclosure would require paragraphs, if not pages, of documentation.

Best course of action: Review all documentation, disclosures and title paperwork prior to signing a real estate contract or during a due diligence period. If you’re uncertain, ask your agent for help reviewing the documents or hire a real estate attorney to pore through the paperwork on your behalf.

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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

18 Simple Storage Tips for Small Apartments

The average U.S. household has 300,000 things in it.

From the tiniest thumbtack to each book on your shelf and every piece of clothing hanging in your closet, there’s a lot of stuff to keep organized. It’s even more daunting if you’re bringing it all into a smaller apartment.

Many people tend to look at a smaller home and see what’s missing — space. Yet, fewer closets and less built-in storage doesn’t mean you’re missing out on somewhere to put your stuff.

If you’re smart with your furniture choices, color picks and organizational tactics, every corner of a small space can become a “beloved spot.”

Cut the clutter

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When working with a smaller living space, your goal, according to Michelle Crouch writing for Reader’s Digest, should be to remove clutter not create more storage space. Clutter can manifest as items you want to keep, but not display, as well as things that you no longer need.

Certain keepsakes you want to hold onto can spend some time in a storage unit until you have a larger home. Paper records, greeting cards, mementos from special events (that aren’t that special anymore) and old letters from past relationships are all things that no longer need to follow you from place to place.

In fact, having a smaller apartment can help you triage what you really want to keep with you. What’s left can either go into storage or head to the round file (a.k.a. the trash.)

Rearrange what’s left

After narrowing down your necessities, take a look at your apartment for hidden storage opportunities. Each room can yield more space than you may think upon the first inspection. Taking a close and thoughtful look can help you find the right place for all your belongings, even in a small apartment.

Bedroom

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There are two areas in your bedroom that can be great for storage — your closet and under your bed. Maximizing space in your closet is possible with a variety of storage ideas. From special hangers to repurposing household items, your closet can hold twice as much stuff as you think.

  • Use vertical space: Stack shirts or pants on shelves
  • Shower curtain hangers: Install these in your closet to hold scarves, belts or even tank tops freeing up drawer space in your bedroom for bulkier items
  • Over-the-door shoe organizer: Less stuff on the ground helps your small space feel less cluttered
  • Under-bed storage: Even if you have a bed that’s lower to the ground, special storage bins exist that will slide under. Store your off-season clothing here to free up more space for the items you need.

Bathroom

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Tips for organizing small spaces are handiest in the bathroom. It’s most likely the tightest space in a small apartment, but there’s room to spare in there, too. Overlooked areas ideal for extra storage include above the toilet and inside cabinets.

  • Over-the-toilet shelf: Since it slides in around the toilet, you’re not adding to the footprint within the bathroom. This is a great place to hold toiletries that don’t fit on the sink.
  • Over-the-door hooks: Perfect for wet towels or bathrobes
  • Shower caddies: Hang these over your shower head to hold soap and shampoo
  • Small storage containers on the inside of your bathroom cabinets: A great place for your hairdryer and straightener
  • A wine rack or special shelf for fresh towels: Putting them up on the wall makes sure they aren’t taking up valuable closet or cabinet space. It also looks decorative if you incorporate towels in vibrant colors.

Kitchen

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The best way to increase storage space in your kitchen is to add more counter space.

  • Make use of all free space: Large bowls have a lot of space in them. Condense your Tupperware or dishes by putting smaller objects inside of larger ones.
  • Appliances for storage: No cabinets, no problem! Your oven or microwave is a great place to keep dishes, pots and pans out of sight.
  • Portable chef’s cart: Put cutlery or even small kitchen appliances under it, then wheel the cart near an outlet when you have to plug in something. It gives you an extra surface to prep food, and you can move it out of the way when you’re done.
  • Wall hooks and over-the-door storage: Hang large utensils, pots and pans, cleaning supplies and even pantry staples

Living room

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Most likely the largest room in your apartment, the living room can serve as a catch-all for the stuff you need to store that won’t naturally go somewhere else.

  • Decorative boxes: They can fit under coffee tables or desks, and can hold almost anything. Store magazines, board games and puzzles, along with any personal items you want to keep but don’t need to display.
  • Book cart: If your couch is set up against a wall, consider moving it forward a little bit to create even more storage space. Slide in a cart to hold all your books in a way that’s easy to access.
  • Portable desk: Living rooms in small apartments often double as an office. Make the space less cluttered with the convenience of wheeling your small, portable workstation back into a corner when it’s not in use.

Hallways

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While not technically a room, don’t dismiss the potential for storage in seemingly useless spaces. Your hallways are the perfect location for things like coats, shoes or umbrellas.

  • Coat rack: Give your guests a spot to hang their coats when they visit, rather than tossing them on a chair or your couch
  • Shoe cubby: Clear some space off the floor and keep your shoes organized

A word about shelving

Small storage shelves can go in almost any space in your home. They’re a universal space-saving device because they turn wall space into storage space. Especially in corners, which can feel like unusable areas of your apartment, shelves can save the day.

Trade in the cute, framed pictures you’ve put up on one wall and install shelves for instant storage. Deeper shelves can hold small bins, masking the appearance of anything that’s not so cute, and special corner shelving units nestle in nicely. There are so many shelving ideas out there, it’ll be easy to incorporate a few in your apartment.

After everything gets put away

Now that you’ve found a spot in your apartment for all your stuff, it’s time to decorate. Just because you have a small space doesn’t mean every nook and cranny has to go to holding stuff.

Leave a little room to make things pretty and transform your small space into the perfect home.

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Source: apartmentguide.com

Earnest Money And Deposits: 4 Things You Should Know

In this intense seller’s market, buyers are pulling out the stops in order to compete. For some, that may mean offering over list price, waiving inspection, or offering other incentives to the seller. Two of the most common incentives are earnest money and non-refundable deposits. These incentives help to show a seller that a buyer is serious, but they do have some risks for buyers. Here are four things you should know about earnest money and deposits before you sign the contract!

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Earnest Money & Deposits Are Credits At Closing

Earnest money is a deposit that represents a buyer’s good faith in entering into an offer to purchase a property. While buyers must pay earnest money and deposits before closing, they are both considered credits to the buyer at closing. Desiree Kumar, a licensed attorney with AMT Law Group in Illinois and a former real estate agent, reminds buyers, “Both deposits and earnest money deposits function similarly and are both typically credited at closing.” How the earnest money or deposit is credited is typically at the discretion of the lender, so buyers should communicate with their loan officer to determine how those funds will be credited.

You Might Not Get The Money Back

If you’re asking yourself, “Is earnest money refundable?”—you aren’t alone. According to Kumar, the most misunderstood aspect of deposits and earnest money is “that they are always refundable.” This misunderstanding can lead to an unpleasant financial situation and even litigation if a buyer terminates a contract. Kumar says “earnest money provisions have a propensity for litigation,” however, depending on how the contract is written, earnest money can be refundable. To determine if your earnest money is refundable, Kumar advises “The executed offer will dictate what happens to the earnest money upon termination of the contract. It is important to understand what the offer says before signing it.”

Tip: It is possible for sellers to negotiate for earnest money to become non-refundable after inspection. If buyers are looking for ways to strengthen their offer, they might consider this option.

Non-refundable deposits, common with new construction, differ from earnest money. “Deposits generally benefit the seller,” says Kumar. And in this market of rising building costs, builders prefer buyers to pay a deposit. In most cases, unlike with earnest money, these deposits are not refundable to the buyer if they terminate. However, Kumar reminds buyers “Depending upon the reason for termination, the deposit may still be refundable.” But she would advise buyers considering a non-refundable deposit to remember “that no matter the reason, they cannot get their deposit back, even if the sale does not go through.”

Tip: Buyers have the right to have an attorney review a contract before signing it. Fully understanding the legal wording and ramifications of a termination is critical to avoid any future litigation.  

How The Money Is Accessed Varies

Both types of pre-payments are handled differently when it comes to who has access to the funds. For example, earnest money is held by a 3rd party until closing or termination. In most cases, earnest money funds are typically held in escrow until closing, meaning sellers can’t access those funds until closing. Earnest money funds can be held by the real estate brokerage, the title company, closing attorney or other 3rd party.

Deposits, on the other hand, can vary. Depending upon how the contract is written, deposits can be spent immediately by the seller and may not have to be held in escrow. Even if the funds are immediately accessible by the seller, if the buyer does close then they still receive a credit at closing.

Tip: Non-refundable deposits typically benefit the seller and are another way to make an offer stand out among multiple offers; however, buyers should be aware of the risks involved before agreeing to a deposit.

One Benefits The Seller and One Benefits The Buyer

Non-refundable deposits tend to benefit the seller, since (in most cases) these deposits are not refundable to the buyer. The amount of the deposit can be determined by the buyer, the seller, or negotiated between the two. While sellers like the appeal of non-refundable deposits, Kumar states she “very rarely advise[s] a buyer to enter into an offer with a non-refundable deposit.” The risk with a non-refundable deposit is that the buyer could lose the money if they fail to close.

Earnest money, on the other hand, can benefit the buyer. Again, depending on how the contract is written, that “good faith” can be refundable to the buyer if they fail to close. If sellers are wanting a guaranteed payment should the buyer fail to close, a non-refundable deposit may be the best option for them; however, it’s important both sides understand what happens to the funds upon termination and what can legally be done with the funds prior to termination or closing.

Work With an Agent!

In this intense market, buyers are desperately searching for ways to make their offer stand out. By strategically structuring an offer with benefits to the seller, this can help a buyer’s offer to standout. It’s important to know which type of pre-payment offers the most benefits and least risk. The best way to safely navigate the current real estate market is to utilize the services of an experienced real estate agent. You can find an agent in your area by using Homes.com agent search tool!


Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She’s passionate about the power of real estate. She’s also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.

Source: homes.com

Understanding Seller Concessions

Buying a new home requires managing a lot of moving parts, from mortgage preapproval to closing. Even after an offer is accepted, buyers and sellers are still at the negotiating table. If closing costs or surprise expenses become too much for the buyer, a seller concession could help seal the deal.

Although seller concessions can work to a buyer’s advantage, they are neither a guaranteed outcome nor a one-size-fits-all solution for every real estate transaction.

To determine if seller concessions are the right move from a buyer’s perspective, here are some key things to know, including what costs they can cover and when to consider asking for them.

Recommended: How Much Are Closing Costs on a New Home?

What Are Seller Concessions?

Seller concessions represent a seller’s contribution toward the buyer’s closing costs, which include certain prepaid expenses and discount points. A seller concession is not the equivalent of a price reduction; nor is it received as cash or a loan discount.

Closing costs usually range from 2% to 5% of a home’s purchase price. When combined with a down payment, the upfront expense of buying a home can be burdensome, especially for first-time homebuyers.

Buyers can ask for concessions on the initial purchase offer or later if the home inspection reveals problems that require repairs.

Although this can be a helpful tool to negotiate a house price, there are rules for eligible costs and limits to how much buyers can ask for.

Recommended: Home Buyer’s Guide

What Costs Can Seller Concessions Cover?

A buyer’s closing costs can vary case by case. Generally, buyers incur fees related to the mortgage loan and other expenses to complete the real estate transaction.

There are also types of prepaid expenses and home repairs that can be requested as a seller concession.

Some common examples of eligible costs include the following:

•   Property taxes: If the sellers have paid their taxes for the year, the buyer may be required to reimburse the sellers for their prorated share.

•   Appraisal fees: Determining the estimated home value may be required by a lender to obtain a mortgage. Appraisal costs can vary by geography and home size but generally run between $300 and $500.

•   Loan origination fees: Money paid to a lender to process a mortgage, origination fees, can be bundled into seller concessions.

•   Homeowners insurance costs: Prepaid components of closing costs like homeowners insurance premiums can be included in seller concessions.

•   Title insurance costs: A title insurance company will search if there are any liens or claims against the property. This verification, which averages $1,000 but varies widely, protects both the homeowner and lender.

•   Funding fees: One-time funding fees for federally guaranteed mortgages, such as FHA and VA loans, can be paid through seller contributions. Rates vary based on down payment and loan type.

•   Attorney fees: Many states require a lawyer to handle real estate closings. Associated fees can run $500 to $1,500, based on location.

•   Recording fees: Some local governments may charge a fee to document the purchase of a home.

•   HOA fees: If a home is in a neighborhood with a homeowners association, there will likely be monthly dues to pay for maintenance and services. A portion of these fees may be covered by the seller.

•   Discount points: Buyers may pay an upfront fee, known as discount points, to lower the interest rate they pay over the life of the mortgage loan. (The cost of one point is 1% of the loan amount.)

•   Home repairs: If any issues emerge during a home inspection, the repair costs can be requested as a seller concession.

Closing costs can also be influenced by the mortgage lender. When shopping for a mortgage, evaluating expected fees and closing costs is a useful way to compare lenders. Factoring in these costs early on can give buyers a more accurate idea of what they can afford and better inform their negotiations with a seller.

Recommended: Home Improvement Calculator

Rules and Limits for Seller Concessions

Determining how much to ask for in seller concessions isn’t just about negotiating power. For starters, the seller’s contributions can’t exceed the buyer’s closing costs.

Other factors can affect the allowable amount of seller concessions, including the type of mortgage loan and whether the home will serve as a primary residence, vacation home, or investment property.

Here’s a breakdown of how concessions work for common types of loans.

Conventional Loans

Guidance on seller concessions for conventional loans is set by Fannie Mae and Freddie Mac. These federally sponsored enterprises buy and guarantee mortgages issued through lenders in the secondary mortgage market.

With conventional loans, the limit on seller concessions is calculated as a percentage of the home sale price based on the down payment and occupancy type.

If it’s an investment property, buyers can only request up to 2% of the sale price in seller concessions.

For a primary or secondary residence, seller concessions can add up to the following percentages of the home sale price:

•   Up to 3% when the down payment is less than 10%
•   Up to 6% when the down payment is 10-25%
•   Up to 9% when the down payment is greater than 25%

FHA Loans

FHA loans, which are insured by the Federal Housing Administration, are a popular financing choice because down payments may be as low as 3.5%, depending on a borrower’s credit score.

For this type of mortgage, seller concessions are limited to 6% of the home sale price.

VA Loans

Active service members, veterans, and surviving spouses may qualify for a mortgage loan guaranteed by the Department of Veterans Affairs. For buyers with this type of mortgage, seller concessions are capped at 4% of the home sale price.

VA loans also dictate what types of costs may qualify as a seller concession. Some eligible examples: paying property taxes and VA loan fees or gifting home furnishings, such as a television.

Seller Concession Advantages

There are a few key ways seller concessions can benefit a homebuyer. For starters, they can reduce the amount paid out of pocket for closing costs. This can make the upfront costs of a home purchase more affordable and avoid depleting savings.

Reducing closing costs could help a buyer make a higher offer on a home, too. If it’s a seller’s market, this could be an option to be a more competitive buyer.

Buyers planning significant home remodeling may want to request seller concessions to keep more cash on hand for their projects.

Seller Concession Disadvantages

Seller concessions can also come with some drawbacks. If sellers are looking for a quick deal, they may view concessions as time-consuming and decline an offer.

When sellers agree to contribute to a buyer’s closing costs, the purchase price can go up accordingly. The deal could go awry if the home is appraised at a value less than the agreed-upon sale price. Unless the seller agrees to lower the asking price to align with the appraised value, the buyer may have to increase their down payment to qualify for their original financing.

Another potential downside is that buyers could ultimately pay more over the loan’s term if they receive seller concessions than they would otherwise. If a buyer offers, say, $350,000 and requests $3,000 in concessions, the seller may counteroffer with a purchase price of $353,000, with $3,000 in concessions.

The Takeaway

Seller concessions can make a home purchase more affordable for buyers by reducing closing costs and expenses, but whether it’s a buyer’s or seller’s market will affect a buyer’s potential to negotiate. A real estate agent can offer guidance on asking for seller concessions.

The vast majority of homebuyers finance their purchase. So for most buyers, finding the right mortgage is an important step in landing their dream home.

SoFi offers home loans with competitive rates and down payments as low as 5%. And prequalifying takes just a few minutes.

Buying a home? Find out how much you could qualify for with SoFi.



SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

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.

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Source: sofi.com

Why We Built A New Home, and What We Learned Along The Way

Buying a home is an incredibly personal decision, but there’s an added level of complexity when it’s a new home build. For our family, the decision to build came from a discussion my husband and I had when we were all at home together during quarantine. We were actually quite surprised that we were even considering leaving our current home we loved so much, but not after we came to a couple realizations.

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Why Did We Choose a New Home Build?

Space
In the next couple years we’ll have full-fledged teenagers who will be driving. We need a home that will give them space to interact with their friends separately from us, but also a place for them to park their cars. Thinking even further down the road, when they have families of their own, we’ll want a space where everyone can fit comfortably without feeling cramped.

Our Love of Water
During quarantine, beaches and water access points shut down. We love to be outdoors, and we quickly realized how important it was for us to be near the water. Since our children are now in virtual school, we were able to expand our search radius; and while living beachfront was outside of our price range, we actually found the next best thing. We stumbled upon what would become our new home site that backed up to a small lake!

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No More Big Projects
This was a hard realization for me, but one that I’ve been avoiding to acknowledge for quite some time. After we finished renovating my friend’s beach condo, I realized my body physically can’t handle the big projects like it used to. Building a new, sturdy home with fully functioning, well….everything….sounds way more desirable than taking on another project house!

Market Was Hot and Rates Were Low
Our current home is in a very desirable location and we knew that selling it would not be an issue. The bigger incentive to sell and build were the interest rates, and since we had no idea how much longer they’d stay so low, the time to act was now. To add icing on the cake, the area we chose with the lake is actually less expensive than our current location; not only did we get a great rate, but we’ll be getting an amazing house for the cost.

(READ MORE: 5 Reasons You Should Pay for a Pre-Drywall Inspection)

The Most Surprising Parts of Building and Designing

Every Builder is Different
We’ve built a home one other time, and we quickly learned that what was an upgrade the first time around is now a standard feature. My advice? Double check the list of standard features from your builder, which will help you determine what you should and can upgrade.

Timing is Everything
The shutdown during quarantine had a ripple effect on nearly everything, including home building. The builder warned us early in the process that the timeline would be determined by the availability of supplies. Thankfully, the builder was willing to work with us since we were up against a hot market. We all knew that the second we listed our home, we would be at the mercy of buyer competition, so we had to be flexible with our schedule. If we listed our home too soon, we could find ourselves in a situation of moving to another location until the home build was complete (something we were trying to avoid with two virtually-educated school kids and three dogs).

Upgrade Options Might Not Be As Available 
Even though the builder had a lot of standard features we considered upgrades, we were surprised by the limited options to choose from when we did decided to upgrade. Being a DIYer and having access to unlimited options, this part was challenging. We were not doing a custom build, but we thought that there would be a little bit more to choose from. Instead we opted not to upgrade things like faucets, lighting fixtures, and appliances. Instead we’ll take those on later with something that we’re in love with.

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It is crazy to believe that building a home today came from a single conversation, followed by a series of events we could have never imagined at the beginning of 2020. Our perspectives and situational changes definitely had us taking a deeper look into our future and what we ultimately wanted for our life and where we pictured ourselves living. While we love our current home and all the hard work we put into it, we are definitely looking forward to making memories in our new home.

Don’t Go it Alone

Home building may not be for everyone, but if you’re wanting that new home experience from the ground up, check out Homes.com’s “How to Build” section. It’s a one-stop resource that walks you through the process of a new home build so you can be prepared, organized and ready to enjoy your new home.

Happy building!


Brooke has a lifestyle blog called Cribbs Style and currently lives in Charleston, SC. This wife, mom of two almost tweens, and mom of three fur children enjoys all things DIY and organizing. When she’s not helping others tackle the chaos of life, she’s either working out, at the beach, or just enjoying time with family and friends.

Source: homes.com

Obama’s Broad Based Refinancing Plan

It took a few weeks, but we’ve finally got concrete details regarding the Obama Administration’s so-called “Broad Based Refinancing Plan.”

First off, homeowners with Fannie Mae and Freddie Mac-backed mortgages who are unable to refinance their mortgage to take advantage of the near-record low mortgage rates will be able to go through HARP 2.0.

HARP 2.0 was introduced back in October to address the needs of homeowners who were too deeply underwater to meet the max loan-to-value ratio cap of 125 percent.

Borrowers with underwater mortgages backed by Fannie and Freddie will continue to go through this program assuming they meet the guidelines.

So nothing really changes here, except perhaps the actual adoption of the problem, which appears to have been sluggish thus far.

Refinancing Program for Non-GSE Mortgages

What about all the underwater borrowers with non-GSE mortgages, those that are not backed by Fannie and Freddie?

Well, Obama is “calling on Congress” to pass a new refinancing program geared toward these homeowners, managed by the FHA.

It would be open to all those with non-GSE mortgages (less jumbo mortgages) who have kept up with their mortgage payments.

The big distinction here is that it requires Congressional approval, which may be an uphill battle. So really it’s just an idea at this point, not a live program.

Still, these are the proposed guidelines:

  • Borrower is current on mortgage for past 6 months and hasn’t missed more than one payment in previous 6 months.
  • Minimum credit score of 580
  • Loan amount does not exceed max conforming loan amount
  • Loan is tied to a single-family, owner-occupied property

Borrowers who meet these very simple guidelines will apply via a streamlined process designed to make it easier and cheaper to refinance.

To determine eligibility, a borrower must only prove they are currently employed. However, even the unemployed can qualify if other requirements are met and they present “limited credit risk.”

A new tax return and appraisal is not necessary to refinance.

The Obama administration will work with Congress to set loan-to-value limits for loans submitted to the program.

While a number hasn’t been set, the Administration used 140 LTV as an example, noting that mortgage lenders could write down the balance of mortgages that exceed that number.

How Will the Refinance Program Be Paid For?

Good question. Well, the cost of the refinancing program is estimated to range anywhere from $5 to $10 billion (quite a range isn’t it).

To avoid any taxpayer burden, the refinancing plan will be fully paid for by the proposed “Financial Crisis Responsibility Fee,” which imposes a fee on the largest financial institutions.

This fee will be based on the size of the institution and risk of their activities.

The FHA, who is set to manage the program, will even pay for a borrower’s closing costs if they choose to go with a shorter-term mortgage, such as a 15-year mortgage.

Those who refinance into mortgages with terms of 20 years or less will have their closing costs paid for the FHA. The GSEs will do the same for HARP 2.0 borrowers.

The Administration hopes this will promote responsible borrowing and reduce the amount of time it takes for borrowers to get back above water.

HAMP Expansion

The existing Home Affordable Mortgage Program is also being expanded to help more borrowers receive assistance.

The first-lien mortgage debt-to-income ratio limit of 31% apparently eliminates certain borrowers from the program because it doesn’t address other monthly obligations.

So the program will consider secondary debt with more flexible debt-to-income criteria.

Additionally, rental properties will be added to the program so long as a tenant currently occupies them or the borrower intends to rent the unit.

Finally, the Treasury will offer bigger incentives to the owners of mortgages who agree to write down principal.

Currently, owners receive between 6 to 21 cents on the dollar for principal reductions. This amount will be tripled to 18 to 63 percent on the dollar.

Fannie Mae and Freddie Mac, who do not currently receive compensation for principal reductions on loan modifications, will also receive principal reduction incentives

The Losers

The obvious losers are holders of jumbo mortgages, who are more than likely homeowners in hard-hit states like California and Florida where home prices have plummeted.

There doesn’t appear to be any relief for this type of homeowner, which is certainly a concern.

Additionally, those behind on their mortgage payments won’t benefit from this new refinance program.

So really only borrowers who have been able to make their mortgage payment each month will benefit.

Also, investors who hold non-GSE loans won’t see any benefit. And those with poor credit scores will be out of luck.

In other words, plenty of homeowners will miss out here, but it’s a tall order to include everyone.

Homeowners Bill of Rights

For the record, the Obama Administration also introduced several other initiatives, including a “Homeowner Bill of Rights,” which will once again revamp and simplify mortgage disclosures.

This includes a foreclosure appeals process and guidelines that prevent conflicts of interest that wind up doing harm to homeowners, along with a joint investigation into loan origination and servicing abuses.

Major banks and the GSEs will also provide up to 12 months forbearance for unemployed borrowers.

Additionally, a pilot program that transitions foreclosed property into rental housing will be employed to stabilize neighborhoods and get the housing market out of its funk.

Final Thoughts

At first glance, it sounds like an awesome program to save housing once and for all. But upon closer inspection, a lot of homeowners are left out, as mentioned above.

Along with that, the borrowers that are targeted may not really be the ones that need help.

The reality is that millions of people who are currently behind on their mortgages are going to lose their homes. And this program won’t change that. It’s simply going to help those on the brink, or even those that don’t even necessarily need assistance to make their mortgage payments, but want to catch a break after buying at the wrong time.

Sure, if all goes well, it could reduce foreclosures to some extent, bolster home prices somewhat, and get more money flowing into the economy. But it still requires Congressional approval to work. And even then, we won’t see a housing recovery without meaningful economic improvement.

Source: thetruthaboutmortgage.com

What Does it Mean to Rent to Own?

Some things you don’t want to rent to own. Bowling shoes, for instance. But a home? Yes indeed, that’s a great option for many people.

A rent-to-own agreement is a solid option for people who long to live in an honest-to-goodness home, but who can’t get a mortgage or don’t have a lot of down payment money. Any legal agreement requires intense scrutiny and understanding, so read up on the basics of rent to own before going any further. It’s for your own good, promise.

What does rent to own mean?

The phrase “rent to own” is fairly straightforward.

Renters pay a set amount per month in rent. On top of that, the renter also pays a preset amount. These extra funds go into an escrow account for future use as a down payment on this particular home. This is also known as a rent credit or rent premium and is usually 20 percent above-market rent.

So, a person could pay $1,000 per month in rent, plus $250 per month for the eventual down payment. Think of it as forced saving, if you will. It’s also standard for the renter to put down 3 to 5 percent of the home’s value as a nonrefundable deposit before taking residence.

Rent-to-own agreements can vary in length but are usually one to three years.

A rent-to-town lease agreement A rent-to-town lease agreement

Types of rent to own agreements

Don’t make the mistake of assuming that legal mumbo jumbo sounds the same, so it means the same. In fact, that’s a pretty financially perilous error. There are a number of different ways to structure a rent-to-own agreement. These are the two most common.

Option to buy agreement

This type of agreement lets the tenant choose whether or not to buy the home at the end of the agreed-upon period. The risk here is that if the renter chooses not to purchase the home they forfeit any accrued rent premiums, not to mention the option fee. Ouch. This is also known as a lease-option agreement. In order to proceed at the end of the agreement, the renter must obtain a mortgage. The owner cannot sell the home out from under the renter during the agreement. The renter can also opt not to buy the home at the end of the agreement. The purchase price is usually frozen at the beginning.

Obligation-to-buy agreement

Also known as a lease-purchase agreement, there’s no wiggle room here. This type of contract means that you will buy the home once the lease expires. Hence, the word “obligation.” If you don’t buy the house, you’ll lose any premiums paid during the process. There might also be legal ramifications. Clearly, this is a much riskier option.

How to rent to own

So you want to rent to own. How do you go about it? Here are some solid options.

Find a real estate agent

It might be tempting to do the legwork yourself, but a great agent can save you tons of time and money. First, they have access to search resources and property networks that you don’t. Second, they work with sellers all the time and can spot crooks from a mile away. They are also adept at helping to negotiate a contract that’s reasonable to both the tenant and the seller.

Find a rent-to-own program

Companies have emerged in recent years that will actually buy the home you’re interested in, and agree to lease it to you for a period of time. After which you can choose whether or not to purchase. Renter and seller choose a purchase price at the beginning, which is a big boon for the renter if the market trends upward.

One of the most well-known such companies is Home Partners of America, which doesn’t even require the renter to build equity during the process. This is ideal in areas where rentals are scarce, such as good school districts.

Approach the landlord directly

Perhaps you’re already renting a home that you love. Ask the landlord if he’s interested in selling in the future. Who knows? He might be about ready to cash out. Or, keep an eye on the real estate listings. If a home hasn’t sold after a long time with no movement the owner could entertain other options.

A backyard of a blue house. A backyard of a blue house.

Things to remember before you rent-to-own

Whether you use an agent or not, denote in the contract if the landlord or the tenant (you) is responsible for home maintenance, repairs, landscaping, homeowners association dues, property taxes and so on. Failure to do so could cause some nasty and expensive surprises.

Also, complete a thorough home inspection before you sign the contract. No one wants to rent to own a home with a major foundation or other pricey problem. While you’re at it, check out the seller’s disclosure to find out about any hidden past problems.

Lastly, make sure to discuss your situation with a future lender. You’ll need to be able to afford the home in one to three years. Are you on the right path? If not, what needs to change?

Pros and cons of rent-to-own

  • Pro: A rent-to-own agreement with a rent credit forces the renter to put away money. Saving for the future is a good thing!
  • Pro: Rent to owns are a good way to break into a desirable area.
  • Pro: The purchase price is typically set at the beginning of the agreement, so this could be great if the market explodes.
  • Pro: A contract leaves little doubt as to who’s on the hook for what.
  • Con: If a renter chooses not to purchase the home they forfeit rent credit money (and any deposit).
  • Con: Many rent-to-own homes are not located in such desirable areas, so it might take extra legwork and patience to find one.
  • Con: The market could also tank, leaving you to weigh whether to pay more than the current value of the home or not.
  • Con: Be sure to follow your contract to a “t,” so that you don’t wind up losing a deposit or get fined.

There’s no place like a rent-to-own home

The path to homeownership has changed tremendously just in the last decade or two. As long as you consult with trusted experts and weigh your individual situation carefully, selecting a rent-to-own home is a great route to take.

The information contained in this article is for educational purposes only and does not, and is not intended to, constitute legal or financial advice. Readers are encouraged to seek professional legal or financial advice as they may deem it necessary.

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Source: apartmentguide.com

Understanding the Role of the Real Estate Agent

Not sure you need an agent to help with your real estate transaction? Here are seven ways they bring value you might be missing out on.

The road to homeownership can be bumpy, and it’s often filled with unexpected turns and detours. That’s why it makes sense to have a real estate pro help guide the way.

While real estate websites and mobile apps can help you identify houses you may be interested in, an experienced agent does much more, including:

1. Guide. Before you tour your first home, your agent will take time to learn more about your wants, needs, preferences, budget and motivation. A good real estate agent will help you narrow your search and identify your priorities.

2. Educate. You should expect your agent to provide data on the local home market and comparable sales. The home-buying process can be complicated. A good agent will explain the steps involved – in a manner that makes them understandable – and provide counsel along the way.

3. Network. An agent who is familiar with your target neighborhoods will often know about homes that are for sale – even before they’re officially listed. Experienced agents tend to know other agents in the area and have good working relationships with them; this can lead to smooth transactions. Your agent may also be able to refer you to trusted professionals including lenders, home inspectors and contractors.

4. Advocate. When you work with a buyer’s agent, their fiduciary responsibility is to you. That means you have an expert who is looking out for your best financial interests, an expert who’s contractually bound to do everything in their power to protect you. If you find yourself in a situation where the same agent represents both the buyer and seller, things can get trickier, advises Scottsdale, Arizona-based real estate agent Dru Bloomfield.

“A lot of people think they’ll get a lower price by going straight to the listing agent, but that’s always not true,” she says. “If I was representing both the buyer and seller, I’d be hard-pressed to take a low-ball offer to the seller. But, as a buyer’s agent I’d do it, because I have no emotional ties or fiduciary responsibility to the seller. Buyers should work with an agent who can fully represent them.”

5. Negotiate. Your agent will handle the details of the negotiation process, including the preparation of all necessary offer and counteroffer forms. Once your inspection is done, the agent can also help you negotiate for repairs. Even the most reasonable consumers can become distraught when battling over repair requests; an agent can do “the ask” without becoming overly emotional.

6. Manage minutia. The paperwork that goes along with a real estate transaction can be exhaustive. If you forget to initial a clause or check a box, all those documents will need to be resubmitted. A good real estate agent understands the associated deadlines and details and can help you navigate these complex documents.

7. Look out. Any number of pitfalls can kill a deal as it inches toward closing; perhaps the title of the house isn’t clear, the lender hasn’t met the financing deadline or the seller has failed to disclose a plumbing problem. An experienced real estate agent knows to watch for trouble before it’s too late, and can skillfully deal with challenges as they arise.

Professional real estate agents do so much more than drive clients around to look at homes. Find an agent you trust and with whom you feel comfortable working; you’re sure to benefit from their experience, knowledge of the local market and negotiation skills.

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Originally published July 21, 2014.

Source: zillow.com