Second Home vs. Investment Property

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If you ever hear someone say they are interested in buying a second home as an investment property, stop them right there. A second home and an investment property are not the same thing. There are several distinctions that set them apart. Let’s take a look.

A second home is just what it sounds like: another location for you to reside at various times of the year. So let’s say you own a home in Needham but you’re interested in buying a winter home in Miami. That falls into the “second home” classification.

An investment property, on the other hand, is intended to generate a return on investment, either through rental income or resale (or both). Examples of investment properties include two-family houses and renovation/flipping projects.

To avoid charges of fraud, your second home should be a considerable distance from your primary residence. The rule of thumb is approximately 50 miles (Wellesley to the Cape, for example, is about 80 or 90 miles.) A two-family second home is unlikely to be approved because it is, by design, intended to be a revenue generating property.

A downpayment on a second home carries less risk and therefore may be the home purchase you can make with the least amount of money down. Your downpayment on an investment property, however, will be higher because the risk is higher. The two-family investment is viewed as a risk by the banks because you’ll be counting on the rent coming in. There’s no guarantee of tenant reliability or year-round occupancy.

I hope this helps clear up any confusion. If you need further clarification, please contact me at 617-965-1236.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to answer your questions and help guide you through the process. I look forward to speaking with you.

FHFA Increasing Loan Limits in 2017

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There’s some good news for those homebuyers looking for a larger loan amount in 2017. The Federal Housing Finance Agency recently announced that loan limits for are rising. The limit on conforming loans moves up from $417,000 to $424,100. This is the first increase in the baseline loan limit since 2006. That’s good news for those of us in the industry, but it’s better news for homebuyers.

A conforming loan — not to be confused with a conventional loan — is a mortgage loan that follows Fannie Mae guidelines. On its surface a $7000 increase may not seem like much when considering a $400,000 mortgage, but that extra bit of cash can come in very handy for those seeking the best financial advantage as possible when purchasing a new home.

Loans that exceed this new limit are considered high balance loans. This translates to higher pricing with the least flexibility. Staying under the cap will get a mortgage with the most underwriting and highest flexibility. Nonconforming or jumbo loans carry a higher interest rate than conforming loans, increasing monthly payments and negatively impacting affordability.

The new loan limit will allow more buyers to borrow more money without having to put more money down. Homeowners can refinance bigger loan sizes while staying within the conforming loan limits.

This increase comes at a time when mortgage rates have increased slightly to just over 4.0%. That’s still an excellent rate, compared to 6% in 2008 and 8% in 2000.

This bodes well for the real estate industry as a whole, with the Federal Housing Finance Agency showing greater confidence in the recovery of home prices across the country. 2017 will be another great year for homebuyers.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to answer your questions and help guide you through the process. I look forward to speaking with you.

Getting Divorced? Here’s Your Mortgage Timeline

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Divorce is rarely a sudden action. Removing oneself from what was once a life-long commitment often takes time and consideration. It also requires planning and strategy which generally takes place with an attorney who specializes in divorce and family law.

Next, it’s important to contact a mortgage professional. There are many questions to ask along with information to gather and understand.

You’ll need to know the answers to questions like these:

  • Can I stay in my home? Will my spouse move out?
  • Should I buy a new home?
  • Does my downpayment come from my assets?
  • Should we sell the house and split the money?
  • How much debt have I accrued?
  • What’s my debt-to-income ratio?
  • What’s my credit score?

After answering these questions, you’ll need to get your name off your current mortgage. This is especially important before securing a mortgage for your new home, even if you’re divorcing and planning to sell. If your name is still on the mortgage in your current home, you may be denied approval for a new one.

In addition, the closing date on your current home must occur before the date of the purchase of your new home. Be careful. You’ll risk getting approved if these timelines are not followed.

Making it through the emotionally difficult process of divorce is hard enough without having the right people in your corner. Please contact me after you’ve met with your attorney — or recommend me to women who are planning a separation or divorce.

Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to help guide you through the process. I look forward to speaking with you.

August’s Home Improver

Which Kitchen Trash Can?

In the good old days when you needed a kitchen trash can you’d go to the supermarket or local hardware store and grab a plastic can and cover and a box of tall kitchen garbage bags. Done! These days, that same simple need is now a quest for the perfect receptacle for your kitchen.

Looks, location and functionality all need to be considered. Plastic or metal? Inside or outside the cabinet? Mechanized cover or old school step-to-open lid? So many choices!

Once you make up your mind, there’s a bigger issue. We know, you thought you were done, but there’s more. Here’s the deal: It’s less about the look than the lid. Covering your trash not only stops odors from spreading, but it also prevents insects from landing on bacteria and then happily spreading it throughout the rest of your house. Yes, people, this is a thing! Your neighbor the germaphobe isn’t as crazy as you thought, now is she?

Those hidden trash cans that hang off the inside of a cabinet door rarely have covers. Your can might be out of sight, but left uncovered it’s quietly inviting flies, ants and mice to feast on whatever you’ve discarded.

So take our advice when it comes to choosing the right kitchen trash can. Pick the style you like most, but remember that an uncovered can is a bacteria-spreading deal-breaker.

3 Things That Can Blow Up Your Mortgage After It’s Been Approved

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A solid income stream, manageable debt and good credit are some of the factors you need to consider when applying for a mortgage. But just when you think you’ve done all the work involved in shaping up your financials and getting your mortgage approval, the whole deal could blow up on you. If you make one of the following very big mistakes, the bank may decide to rescind its offer before you make it to the closing.
1. Keep working. Even if it’s your plan to retire immediately, doing so before you close on your home could be a disaster. Your bank has every right to verify your employment and financial status within 48 hours of closing on what might have been your new home. This also applies to reducing your hours or going from full- to part-time. And by all means, no matter how difficult your boss may be, don’t quit your job until all the papers are signed.
2. Be patient with purchases. You may want a shiny new car to park in your driveway, but that impulse buy may put the kibosh on your brand new home. A fancy new car may be fun to drive, but it’s a little cramped to live in. Any significant shift in your debt-to-income ratio can send your mortgage approval swirling down the drain. So avoid overspending on furniture, appliances, new construction or other pricey purchases before you close.
3. Keep (or raise) your credit score. The weeks before your closing are definitely not the time to get creative with your bill paying. Staying on top of your bills and avoiding maxing out your credit card will keep your approved mortgage on track. Your financial status should remain at least as it was at the time you submitted your application. Anything less could put your mortgage in jeopardy.
A lot can happen between a pre-approval and your closing. It is important to remain vigilant about your financials when making what may be the biggest purchase of your life.
Ready to buy a new home or refinance the one you own? Please get in touch and I’ll be happy to help guide you through the process. I look forward to speaking with you.

June’s Home Improver

DIY: Get Rid of Fruit Flies
Make a do-it-yourself fruit fly trap for pennies.
Fruit flies are nothing but trouble. Those tiny airborne pests love seeking out and eating fruit that is ripe or overripe. Ever wonder how they seem to show up out of the blue as they flit around a bunch of bananas or over a bowl of peaches? Contrary to the popular myth, they don’t spontaneously appear. It just seems that way.
Fruit flies have a remarkable sense of smell and can detect the scent of fruit from quite a distance. They are tiny enough to squeeze through the smallest window screens and hunt down your fruit stash.
Here’s how to make your very own fruit fly trap to keep them away from all that delicious summer produce.
You will need:
1. A bowl or container.
2. Plastic wrap.
3. Apple cider vinegar.
4. Dish detergent.
Pour enough apple cider vinegar to cover the bottom of the bowl. Next, pour a drop or two of dish detergent in the vinegar to break the surface tension. This keeps the flies from sitting on top of the vinegar and laughing at you. Now cover the bowl with plastic wrap and poke some holes in it so the flies can make their way in. Once they go for the vinegar they will drown themselves and you’ll be rid of your fruit fly problem. It sounds mean, but we’ll take a bowl of dead fruit flies over a swarm of live ones any day.
Try it for yourself and let us know the results!
P.S. You may not want to display this trap on your table. It’s effective but it’s kinda gross. Good luck!

How to Qualify for a Mortgage When the Banks Say No

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People sometimes ask me why they should use Westchester Morgtage instead of one of the big banks. It’s a fair question, with an answer that goes beyond great service.

The lending industry bases their approval decisions on the following three criteria. Banks tend to take a conservative approach but mortgage brokers have more flexibility to offer their clients.

1. Credit score. Are you paying your bills on time? Have you defaulted on a credit card or fallen behind on your car payment? The bank will determine the risk of lending you money based on your previous bill-paying history.

2. Income. The bank will take a look at your income and assess your ability to repay both your existing debts and your future expenses. You’ll need to earn enough for them to feel confident in your ability to pay all your expenses while comfortably paying your mortgage premium each month.

3. Equity. This is your collateral available to secure the mortgage. The bank will offer you better rates when you pay a higher amount on your downpayment.

If the bank feels your credit history, income or equity are questionable, they will decline your mortgage application. So now what?

Here’s where an experienced mortgage professional can get a “yes” when the banks say “no.” First, I will get your paperwork and documentation organized up front. If you are divorced or in the process of divorcing, it is critical to show the divorce decree or separation document.

My job is to understand all your income sources and represent them properly for the underwriter. I also look for additional income. Alimony, child support and bonus income are sometimes left off the application and could very well be the difference between the approval or denial of the mortgage.

I dig much deeper than the banks for my clients. If you want the best chance to be approved for a mortgage, starting with Westchester Mortgage is the best path to take. Do you know someone who is thinking about using a bank for their mortgage? Please have them call me so I can help them gain every advantage in securing a mortgage approval.

 

April’s Home Improver

Grimebusters: Silly Putty and Alcohol
That is one grimy keyboard. Grab your silly putty and alcohol.
When was the last time you took a good long look at your computer keyboard? If you haven’t cleaned it in a while you may have noticed anything from dust and crumbs between the keys and dirt and grime smudged on the keypads and spacebar. Pretty gross.
Now before your inner germaphobe starts freaking out about the bacteria you’ve been dabbing onto your fingers with every word you type, there is a fast and easy solution to cleaning up your keyboard without a lot of effort.
1: Silly putty. Remember this stuff? If you’re over 35 or so, you may have used silly putty to pull up cartoon images from newspaper ink when you were a kid. Silly putty can also pick up those pretzel crumbs, pet hair and lint that may have found their way into your keyboard. Just press on some silly putty and all that garbage that’s been hiding between those hard-to-reach nooks and crannies around the keys will be lifted right up into the putty. Awesome! But what about the grimy keypads?
2: Rubbing alcohol. Pour a small amount of alcohol onto a paper towel or cloth. Next, gently rub the alcohol into the keypads until they start to sparkle. Important: Do not use water. Water has a way of ruining keyboards. Instead, use rubbing alcohol. It dries quickly and won’t short circuit your keyboard.
Here’s a video link. Click the image below.
The result should be a keyboard that looks brand new. Enjoy!

What is TRID and How Does It Affect the Closing Process?

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On October 1, 2015, the Consumer Financial Protection Bureau created two new forms designed to protect the home buyer by streamlining two federal acts regulating the mortgage process. The TILA RESPA Integrated Disclosure (TRID, for short) is now required as part of the closing process to:
  • simplify mortgage documentation
  • use language that is easy to understand
  • limit fees charged to home buyers
  • prevent unexpected issues at closings

The first form (Loan Estimate) replaces the Good Faith Estimate and the Truth in Lending disclosure. It details the mortgage terms, including key features, costs and risks of the mortgage, in clear language that makes it understandable for the buyer.

The second form (Closing Disclosure) replaces the HUD-1 Settlement Statement. It is provided three business days prior to the closing and may not be modified once it is submitted. The new form is designed to provide any and all disclosures that will help clarify all of the costs involved in the purchase of the home. If there are changes after the the Closing Disclosure form is sent, a new three-business-day waiting period applies.
Orchestrating a closing involves a number of variables, including coordinating the closing with the real estate agent and the closing attorney. While TRID protects the buyer, it can cause scheduling delays if the mortgage lender is not managing both the financial obligations and the timeline.
TRID can be a beneficial addition to the mortgage and closing process, but it takes a dedicated mortgage professional to manage it so there are no unexpected delays that affect timing — this also includes the scheduling of your moving company, delivery of appliances, transfer of utilities, time off from work, and more.
If you have questions about TRID or you are preparing to purchase a new home, please get in touch and I’ll be happy to help guide you through the process. I look forward to speaking with you.

December’s Home Improver

Cleaning Drapes, Curtains, Shades and Blinds

If you’re planning a New Year’s Eve bash and you want everything in your home to look beautiful for your guests, you may want to have a look at your drapes and curtains. When was the last time you had them cleaned? Drapes, curtains, shades and blinds are sometimes overlooked in terms of general housecleaning.
The cleanliness of your window coverings depends on several factors. More frequent cleaning is required for homes that include pets and cigarette smokers. Other factors include dust and dirt entering from drafty windows along with heating and air-conditioning vents, soil kicked up from vacuuming and dust particles falling from ceiling fans.
For the most part, drapes should be cleaned every two years. The best way to tell is to simply have a close look or shake them out in sunlight to see how much dust and pet dander has built up.
If your drapes must be dry-cleaned but you don’t want to go through the drudgery of taking them down and driving them over to your local dry cleaner, there are companies that do in-home cleaning of fine fabrics.
Your curtains, especially if they are machine washable, should be cleaned every six months to a year. Have a look at dusty shades and blinds. Shades are easily cleaned, but discoloration from the sun may be the reason you have them replaced. Blinds, on the other hand, should be vacuumed with the brush attachment or wiped clean with a feather duster. Fabric blinds should be dry-cleaned.
Keeping your window coverings clean adds a freshness to your home that you may not notice until after you clean them. After years of hanging, they collect more dust and dirt than you may have realized.

Understanding the Generational and Cultural Perception of Debt

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Debt is a four-letter word. Many people won’t talk about it, much less take it on, but you may be surprised to know that debt can be a good thing.
Millennials hate debt, probably because they are drowning in it, primarily from high college loans, auto loans and high-interest credit cards. The debt they have amassed at a young age has kept them from buying homes. Instead they’re opting to rent or just live with mom and dad longer than expected, which is leading to a later start on marriage and family.
Debt is not exclusively generational; it’s cultural, too. Many people who come to the United States are surprised by the “debt culture” here. They tend to avoid debt at all possible costs. Many immigrant families don’t use credit or debit cards. Everything is paid in cash. They rent, save money efficiently and pay everything off quickly. A loan? That’s another four-letter word they avoid.
But there is a difference between “good” and “bad” debt. Anything that depreciates over time is considered bad debt. An auto loan, for example, may be necessary, but your car will be worth much less than what you paid for it at the end of the loan. A home loan, on the other hand, is an investment. A manageable mortgage will leave you with a higher property value on the day of your final mortgage payment. Because property values always increase over time, real estate is one of the safest investments you can make.
Mortgages allow for the redistribution of financial assets over time. They free up cash to pay for those life events that cause those poor young Millennials to struggle in the first place. With interest rates at just under 4%, a home loan is the cheapest money you can borrow.
When it comes to debt, it’s all about perception. Knowing the difference between good and bad debt is a start. I can help you or your children find the right mortgage that will begin what may be the most important investment of their lives.

Please get in touch and I’ll be happy to help guide you through the process and answer your questions. I look forward to helping you.

November’s Home Improver

Tips to Keep Your Home Out of Probate

Guest Article by Lauren E Miller, Esq.

You may have heard stories before of homes that are “stuck” in probate. But what does this mean? What is probate, and should you avoid it? If you are interested in learning the answers to these questions, then read on!
Probate property is any property that is held in your sole name at death. After you pass away, probate is the process through which your assets are transferred to your named beneficiaries (if you have a will) or to your heirs (if you pass away without a will). In the case of your home, the way it is titled on your deed determines whether or not your home is a probate asset.
So what are some examples of ways to title your home that will not avoid probate?
1. Your sole name. If your deed has your name only, and you pass away, your home becomes a probate asset.
2. Multiple names as tenants in common. Unlike “joint tenants,”ownership as “tenants in common”does not include the right of survivorship. For example, let’s say that you and your sibling have equal ownership in a home that you inherited from your parents, as tenants in common. If you die, your fifty percent share will go to your beneficiaries or heirs, and not to your sibling. This means that your 50% share must go through probate.
Here are some ways to title your home that will avoid probate:
1. Joint tenants with right of survivorship. This title allows a property to pass directly to the other person(s) named on the deed.
2. Tenants by the entirety. This type of ownership functions similarly to joint tenants, but is a special title only allowed for married couples. Tenants by the entirety ownership also takes advantage of certain asset protection rules created specifically for married couples.
3. Title in the name of a trust. The are various types of trusts, many of which allow your assets to bypass the probate process.  If your title is in the name of the trustee of your trust, your home can avoid the probate process. Please note: simply having a trust does NOT mean that your house will avoid probate, your house must be placed into the trust before you pass away. If you have questions regarding a specific trust, please consult an attorney.
Okay, so now you know ways to title your home to avoid probate, but why should you care?  Probate is a long and costly process. Most probates in Massachusetts take a minimum of one year. Any assets that must go through probate are inaccessible to the heirs or beneficiaries for months after you have passed away, and real estate cannot be sold right away either.
Now that you understand the basics of how probate works for real estate, ask yourself: Is my home titled to avoid probate?
If you have questions regarding keeping your home out of probate, please contact Lauren E. Miller, Esq., of Ladimer Law Office, PC at (508) 620-4565 or at lmiller@ladimerlaw.com.

Home Buying Confusion: Know the Big Difference Between Assessments, Appraisals and CMAs

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Buying or selling a home is stressful enough without worrying about the difference between assessments, appraisals and CMAs. One might think these terms are synonymous, but they’re not. In fact, they are very different. Let’s have a look at the distinction and clear up some confusion among these three terms.

A home appraisal is created by a licensed real estate appraiser to give an unbiased evaluation of a home’s value. This is used to set a fair market value on the home. This is different from a Comparative Market Analysis (CMA), which is provided by a real estate agent. For financing purposes, appraisals are used–not the tax assessment or CMA.

Recent sales data and knowledge of the local market are factored into the CMA which helps determines the value. The real estate agent then compares the property to similar homes in the area and provides a biased evaluation, in favor of the seller.
A tax assessment is set by the city or town. Your taxes are used to pay for local government, public safety, general infrastructure, public schools and libraries. Local governments may update assessments when market conditions or revenue need to change.
The tax assessment is based on average market values.
Now here’s where the confusion comes in. Assessed values have typically come in lower than appraisals, which causes confusion and for good reason. Here’s why:
The data gathered to estimate the value of your home that you plan to sell in 2016 is based on sales from 2014. So the tax assessment is based on data that’s two years old. That delay in data is why your assed value is showing a lower number than what your appraiser determines.
OK, so now that we’ve got that part out of the way, here’s another point of confusion: the tax assessment for Fiscal Year 2016 runs from July 1, 2015 through June 30, 2016.
As the climate of the real estate market changes and rates begin to rise again, the tax assessment may start catching up to the appraised value. If you’re thinking about buying a new home, this may be the best time to make the investment and secure a mortgage at a low rate.
I hope this clarification helps clear up the confusion. Need more help selling your old home and buying a new one? Please get in touch and I’ll be happy to help guide you through the process and answer your questions. I look forward to helping you.

October’s Home Improver

Trick-or-Treat! What Should Kids Eat?

If you’re a Halloween traditionalist, you’ll expect your kids to finish making the rounds in the neighborhood with a bag filled with chocolate bars, candy, bubble gum and other sweet treats. You’ll also expect them to over-indulge in their plunder until they either reach a frenzied sugar high or they just make themselves sick. That, unfortunately, is the secret trick hidden in the treats.
So how do you temper the sugar rush with something that won’t spike their insulin levels to unnatural highs — without being the family that gives out boring treats? Here are some suggestions.
1. Packaged Foods. Almonds, peanuts and others (ask if allergic before handing out). Mini raisin boxes. Packaged crackers and cheese. Granola and breakfast bars. Juice boxes and fruit rollups (with real fruit).
2. Art Supplies. Crayons and coloring books, stickers, colored pencils, character-shaped erasers, stamps (not postage!), mini colored markers.
3. Toys and Fun Stuff. Snap bracelets, trading cards, bubbles, silly putty, fake eyeballs, spiders, bats, slime and other spooky stuff. Rubber balls, wax vampire teeth, yo-yos and wind-up toys.
Have a Happy and Safe Halloween!