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Real Estate Apps for Homebuyers

Homebuying is moving to mobile, but in some areas, apps can’t replace the expertise and human element of a licensed broker.

Buying a home? There’s an app for that, as real estate shopping is moving online. While homebuying apps can be great for sorting through amenities and location, there are certain skills only a licensed real estate attorney and broker can help with. Here, we’ll break down what’s useful about real estate apps, and what parts of the homebuying process can’t be replaced with technology.

How Apps Can Help

Much like real estate listing websites, apps can help you research the market, make lists of amenities you want in your dream home, and save the properties you love all in one place for future reference.

The Trulia Real Estate app, for example, helps you sort by location, number of bedrooms and bathrooms, square footage, lot size, open house times and home age. It also includes a mortgage calculator. Similarly, the Zillow app sorts by price, size, neighborhood features, school district and more. It also includes Zestimate®, the tools’ algorithm for finding a home’s value, as well as loan quotes and notifications when prices drop or homes are sold.

The following apps provide similar information, but they do things a little differently: Homesnap lets you take a photo of a house and instantly see information about it, including sales history and school district ratings. With Redfin, you can select a search area and see all available listings in that area, along with photos and more detailed information about each property. It’s popular Hot Homes feature shows you homes that have an 80 percent chance of accepting an offer within two weeks.

Why You Still Need a Broker

While these apps are great for an initial search to get an idea of neighborhood and price range, most of them eventually direct you to a licensed broker to walk you through the official process. Why? Because there are certain skills brokers have that an app cannot replace. Brokers can provide detailed information about the history of the home that you’re looking at — such as if there have been any busted pipes recently and when the roof was last replaced. They can also provide valuable insight about the neighborhood and what it feels like to live there — such how quiet it is, if past clients have enjoyed living there and more.

Brokers have more first-hand market data too, so they can give you advice on certain homes and areas that is more nuanced than statistics provided by an app. They are also experts at assessing the value of a property after a walk-through to know if you’re getting the best possible price. The app gives you a price, but you’ll never know if it’s fair. It’s very difficult to look at a home on an app and know whether or not there are hidden issues. A broker will help you ask the right questions and make that call.

Finally, a broker has the human element of connection. They know the best mortgage lenders, contractors and inspectors. They also know how to negotiate on your behalf, which can be reason enough to hire them. Those belonging to the National Association of Realtors are held to a code of ethics, so they’re generally trustworthy.

Buying a home is a huge investment. Brokers and real estate attorneys have the experience, and are there to help you at every step of your buying journey. Use an app to help you get an idea of what you’re looking for, pick a few favorite properties, and educate yourself on neighborhoods and home amenities, then reach out to a broker and an attorney to help with the actual homebuying process. Our real estate attorneys at Anselmo Lindberg & Associates are here to help. Contact us today.

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How to Know if You’re Ready to Buy a Home

The four questions every potential homebuyer should ask before investing in residential real estate

Buying a house is no small feat: but for those ready to put down roots and make an investment in their future, it can be worth it. If you’re sick of renting and want a home of your own, it’s time to take a look at your financial situation and determine if you’re ready to take the next step. Your decision-making process will differ slightly if you’re considering a condo, a new home or a fixer-upper, but no matter what type of property you’re buying, there are some universal factors to consider before making the leap from rental to ownership. Potential homebuyers should ask themselves these four questions to determine if the timing is right to invest in a residential property.

1. How Is Your Overall Financial Health?

Buying a home is the biggest investment many people will make, so take an honest look at your financial situation to determine if you’re ready. First, think about the down payment, which is usually between 10-20% of the total home cost. If you don’t have at least 10% on hand for the down payment, take a step back and focus on increasing your savings. Ideally, you’ll have closer to 20% for a down payment saved.

Now consider all your debt, including credit card debt, auto loans, student loans, and any other personal debt. Some debt, like student loan debt, is acceptable when applying for a home loan, while other types of debt, namely credit card debt, will work against you. If you have a significant amount of debt, it’s probably because you don’t have enough money to pay it off. This is a red flag that you’re not ready to buy a house. When you’ve paid off all debt outside of loans for large purchases or investments (like student loans or an auto loan), you’ll be in a better position to apply for a home loan and make mortgage payments.

Finally, check your credit score. Get your score to 680 or higher before thinking about applying for a home loan. This might take some time; you may have to reallocate some of your down payment savings toward debt repayment. But these are necessary first steps. If your credit score is less than spectacular due of fraud, dispute the charges, and make sure everything is in order before applying for a loan.

2. How Long Do You Plan to Stay In One Location?

Buying a home is an expensive and time-consuming process, so most people want to make sure they’re going to stay in the home for a while once they move in. If you change locations often for work, renting might be an easier and cheaper option. If you know you’ll stay in one place for years, but you expect your family might grow soon (and potentially outgrow your current home), wait to buy until you know how much space you’ll need. Consider this calculation: Ann Reilley Gugle, a planner in Charlotte, N.C., says it takes at least five years to break even on a home. The upfront costs of buying a property may only level out if you plan to stay for the better part of a decade, or longer.

3. What Are the Patterns or Trends In Your Current Real Estate Market?

Look closely at long and short-term national trends, because recessions or economic growth can dramatically affect the cost-effectiveness of buying real estate. Even more important than national statistics are local trends: the real estate market can change dramatically from city to city and even neighborhood to neighborhood. Real estate value in cities like San Francisco and Seattle has been rapidly climbing in recent years, while home prices in cities in the Midwest have fallen or stayed the same. The rental market in your chosen city may also factor into your decision. In some cities, the rental market can be very expensive, making home ownership more affordable if you have sufficient savings. Combine national trends with trends in your chosen community to get a sense of how the market will determine your home price and value.

4. Do You Fully Understand the Cost of Home Ownership?

The cost of buying a home includes more than the down payment and mortgage. Add to that expenses like property taxes, insurance, HOA dues, repairs, utilities and more. Most online mortgage calculators take homeowners insurance and property taxes into account. Make sure you enter numbers specific to your market, since taxes and insurance rates can vary widely by city. Homeowner association fees cover things like amenities, and can come in handy if something goes wrong in your home. However, they can add up to hundreds of dollars per month, and for some families that might not be worth the cost. Take HOA fees, projected repair fees and regular maintenance costs into account when calculating how much a new home will cost per month. Brandon Turner of Money Under 30 warns against taking on a monthly payment that is more than 25% of your take-home pay. He says that often lenders will tempt buyers to stretch themselves thin, but in the long run it’s not a good idea.

If you’ve asked yourself these four questions and think you’re financially ready to invest in a home, check out our homeowner’s guide and other resources on this topic. Then, contact Anselmo Lindberg and Associates to speak with our experienced real estate attorneys and take the first steps on your way to home ownership.

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Purchasing a Home to Rent or Flip

Everything you need to know about buying real estate for profit

Purchasing an investment property is a great way to generate additional income, but it isn’t as simple as hitting the real estate market in search of a great deal. There are substantial differences between purchasing a primary residence and taking on an investment property. From tax liability and insurance premiums, to what you should expect from a mortgage lender, below we have outlined the key differences between a primary residence and an investment property.

Primary Residences vs. Investment Properties

Primary Residences

A primary residence is the home you live in for the majority of the year. To be considered a primary residence, the property should be within a reasonable distance of your place of employment. If there is ever a question of where you reside for most of the year, you may be required to prove your residence with documentation, such as your voter registration or a tax return.

Primary Residence Benefits

One of the major differences between primary residences and investment properties are the guidelines pertaining to taxes and insurance premiums. Primary residence owners can take advantage of several tax write-offs to make their property taxes much more manageable. According to TurboTax, some of these deductions include mortgage interest, property taxes and the interest on your home equity loan. Primary residence owners are also entitled to $250,000 in profit before they’re forced to pay any taxes on the sale of their property.

Investment Properties

An investment property is as straightforward as it sounds – real estate that is purchased with the intention of earning a profit. Return on the investment can be earned through renting out the property, or by “flipping” or renovating the property with the intention of selling it.

Investment Property Benefits

While it’s easy to benefit from the several deductions associated with primary residences, those with an investment property will not have access to the same advantages. Investment property owners are entitled to some deductions, but they come with a stipulation – the owner must rent out the property.

For the most part, homeowners insurance and rental property insurance are very similar. Just like the tax benefits of a primary residence compared to an investment property, insurance premiums for primary residences are generally much cheaper. The reason for this is because insurance companies assume that renters will leave their units in much worse condition than a home you own. The two major disparities between these types of insurance are loss of rental income, which is designed to protect landlords, and the items protected in covered losses. According to The Nest, you should expect to pay 15-20 percent more for landlord insurance, despite not receiving coverage on several types of damages that are covered under homeowners insurance.

Investment Properties and Mortgage Loans

Working with mortgage lenders to purchase an investment property is a complicated endeavor that can backfire at any moment if you’re not prepared. According to Investopedia, lenders will generally require investors to put a down payment near 30 percent of the final purchase price for investment properties, rather than the typical expectation of 10-20 percent for your primary residence. If you’re unwilling to pay these steep prices on a down payment, you may be interested in a Fix-and-Flip loan. Fix-and-Flip loans are much more affordable up front, but generally have rather high interest rates.

It can be tempting to enter the real estate market before having an understanding of how investment properties work. However, educating yourself on the intricacies of these deals will play a major role in your level of success as a real estate investor. To learn more about becoming a player in the real estate market, contact Anselmo Lindberg & Associates today.

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Understanding the Three Most Common Property Liens

Property liens can come from multiple sources and bring a pending sale to an abrupt halt

No matter how close a sale is to closed, the discovery of an outstanding lien will bring the sale to a grinding halt. While most properties are unencumbered, liens can come from multiple sources, the three most common being the federal government, the courts system or disgruntled technician. Whatever the reason for the lien, ownership cannot be transferred from one party to another until a lien on the home or land has been resolved. To prevent such a burden from taking place, it’s important to understand what a lien is, the different types of common liens, and what you can do to navigate through the lien settlement process.

What is a lien?

A lien is a notice attached to your property stating that another creditor has a claim over your land or home because of an outstanding debt. It’s a public record filed with the county or state—depending on the type of property you own. While there are a number of different types of liens creditors can put in place, the most prominent include tax liens, mechanics’ liens, and judgement liens.

3 Common Property Liens

Judgment Lien.

Loss of a court case with a judgement against you can result in a judgement lien. This may include child support, alimony, or other judgement-related lawsuits. The lien will be held against your property until the payment is fulfilled. This lien can also be inflicted by an attorney if legal services go unpaid.

Tax Lien.

The federal government will place a tax lien on a taxpayer’s property when the taxpayer fails to pay, and shows signs of being incapable of paying, the IRS. This type of lien takes precedence above all other creditor liens. Once a tax lien is in place, it can prevent them from receiving credit in the future and make it nearly impossible to sell their home. If the taxpayer fails to pay the full amount owed or reach a settlement with the IRS, the government can seize any assets owned by the taxpayer.

Mechanics’ Lien.

A mechanics’ lien is filed by a general contractor, plumber, worker, or other repair man when they work on a home. The lien held against the property will enact when the customer and property owner fails to pay for services provided. A mechanics’ lien secures the debt owed to the service provider and will help ensure they will be paid for their services. More on mechanics’ liens here.

How a lien can impact a real estate closing

When looking to sell or refinance your home, it must be proven that your home has a clear title. Having a lien on your home makes your title unclear, and thus, impossible to close on a sale. In order to clear the title, creditors must be paid the amount of debt attached to the property or have the debt settled in the court of law.

What to do if there’s a lien on your property

In the event that a lien is placed on a home you own or are trying to purchase, our real estate attorneys can help you find out details on any liens held against your owned or perspective future property, and take the steps to remove those encumbrances. Whether you’re a buyer or a seller, understanding liens, their implications, and how to navigate them is essential to your future real estate transaction. Call Anselmo Lindberg & Associates to have one of our real estate attorneys assist you in your next purchase or sale of property.

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Everything You Need To Know About Home Inspections

Home Inspections Protect Buyers and Sellers from Costly Surprises

Whether you’re buying your first home or your fifth, a thorough home inspection is essential every time. Before closing on a house, every buyer should arrange their own thorough home inspection, even if the home is new or has no visible flaws.

“No home is perfect, not even new construction,” Brenda Avilla-Kintz, a Realtor with Legacy Real Estate & Associates told US News & World Report. Problems may often be hidden in the attic or walls of even the most perfect-looking house. A home inspection will not only help uncover to this issues, it also gives buyers leverage in negotiating a final price. Without an inspection, these problems will surface later, leaving the new owners stuck paying for repairs on top of their home-buying costs. Home inspections can help protect sellers, too, from being blindsided by unexpected expenses that could threaten the closing of a sale.

Here’s what you need to know about arranging an inspection of a home before you buy.

Commonly-Asked Questions About Home Inspections

What do home inspections cost?

Inspections range between $300 to $800, according to HGTV, and typically take two to four hours. Those few hundred dollars could save you thousands in repair costs.

How do I find a home inspector?

Use an inspector who is regulated by the state, or has an equivalent certification. The American Society of Home Inspectors allows you to search for certified inspectors by state. Cross-reference that list with reviews like you would any other service job, or ask your broker for recommendations.

What will home inspectors look for?

A home inspector will take a thorough look at the entire home from top to bottom. They’ll go up on the roof, into the attic, check outlets, light switches, faucets, appliances, vents, doors, garage doors, windows, plumbing, the carpet—everything. A good home inspector will take photos and let you join the inspection if you wish, so you can ask questions. At the end, they’ll give you a detailed report of any issues they found.

What do you do after the inspection?

Once the inspection is complete, your next steps depend on the inspector’s findings. Ideally, the home is in great shape and you can continue with your contract. If there were minor issues uncovered, you can negotiate with the seller to either make the repairs before the sale, or to close at a lower price to accommodate them. If there are major issues with the roofing, foundation or toxins, you might want to reconsider the purchase. Remember that a ‘fixer-upper’ may sound fun, but only if you’re truly prepared for the repair costs.

Whatever you decide after the inspection, getting it done in the first place is a vital part of the real estate contract process. An experienced attorney can help you review the initial contract and negotiate after the inspection. The attorneys at Anselmo, Lindberg and Associates are experts when it comes to real estate law and will be there with you every step of the way to make sure your inspection process runs smoothly.

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The Pros and Cons of Renting vs. Buying

How to Decide Whether Renting or Buying Is Right for You

You’ve been renting for years and saving up your money, and now you’re ready to think about buying a home. But is buying really better than renting? It depends. If you’re planning to settle for several years, buying could be worth it. If there’s a chance you’ll find a new job in another state, if you’re not sure owning a home is your best investment, if you’d rather outsource your home maintenance or if you live in a costly area, renting might still be the best option.

Don’t Make the Move Just Because You’ve Banked a Down Payment

The New York Times has an excellent calculator that’s a good starting point as you analyze your situation and compare the costs of renting and buying. It includes hidden costs like insurance, appraisal fees, taxes, opportunity costs, and more. As the calculator illustrates, home price and mortgage vs. rent payments are aren’t the only financial factors you need to consider.

Here are a few more pros and cons to consider as you evaluate whether renting or buying is right for you:

Pros of Renting

  • When something is broken, you don’t have to fix it. In an apartment, the building management handles repairs and remodeling. From leaky faucets to replastering walls, all you have to do is call your landlord. Not handling your own repairs saves you both time and money.
  • Renting gives you more freedom. Say you get a fabulous job offer in another state and you want to move, but you can’t sell your house. Renters don’t have that problem. Maybe you want to downsize so you can take a lower-paying dream job, or you want to live in a more urban area. Selling your home can be a long, stressful process—but if you’re renting, all you have to do is sign a new lease.
  • The real estate market doesn’t affect you. Renters aren’t hurt by short-term dips in the real estate market, and they don’t have to worry about whether their home is a good investment when deciding where to live.
  • Renters are mortgage-free. Yes, mortgages build equity over time, but they don’t necessarily bring you financial gains. If the real estate market tanks, or home values in your area go down, you could be at a financial loss if you decide to sell. Renters don’t risk having their largest asset depreciate.
  • Renters have more freedom to invest. Because renters aren’t sinking most of their money into a home, they can use that extra cash to invest in the stock market, their education, starting a business or anything else, which can sometimes have much bigger payoffs.

Cons of Renting

  • It’s never really yours. You could live in the same apartment for years and grow to love it like your own home, but unless you own it, you don’t have that security. You may have restrictions on painting and decorating, the inability to plant a garden or have guests stay long-term, and there’s always a chance your landlord could change or sell the property and you would have to move.
  • You miss out on federal tax benefits. Renters don’t get to deduct their mortgage or property taxes, and they don’t get to take advantage of federal tax credits.
  • Renters don’t build equity. Rent payments go to a landlord, who owns the building. Renters aren’t putting their money anywhere that it could grow. For homeowners, each mortgage payment is an investment in owning a piece of real estate.
  • There are daily annoyances and some hidden costs. Coin-operated laundry can add up, and having to run small changes past your landlord can be frustrating. A nonresponsive or uncommunicative landlord can delay the repair of small problems for longer than you’d like.
  • Price hikes happen. Renters don’t have stability when it comes to rent prices. Homeowners know their mortgage payment will stay the same no matter what happens in the housing market, while renters know that landlords could hike the prices each year, at any time, for any reason.

Pros of Buying

  • Paying a mortgage builds equity. Buying a home can be costly, but every dollar is an investment in something you will eventually own. Any home improvements you make can further increase your home’s value, helping to bring your net worth even higher.
  • Ownership has tax benefits. Homeowners are eligible for federal tax credits and can also deduct property taxes when filing federal income taxes.
  • Homeowners are free to personalize. If you own a home, it’s yours to do with as you please, whether that means painting, knocking down walls or changing your landscape. Through decorating and remodeling, you can create your perfect dream home, without having to win over a landlord or make compromises.
  • Pets aren’t a problem. Many apartments don’t allow pets, and even if they do, they’re often not the most friendly spaces for dogs or other animals. If you own your home, you can provide a comfortable environment for whatever type of furry (or scaly, or water-dwelling) friend you like.
  • There’s potential for rental income. Homeowners can rent out rooms or their entire home through services Airbnb, HomeAway, VRBO or via word of mouth. Short and long-term rentals are great ways to make some extra money and help pay off a mortgage, especially if you travel often.

Cons of Buying

  • You own it. Yes, the hallmark of owning a home could also be its biggest con. Once you own it, you’re stuck with it, at least until you can sell. If you need to switch locations for work, if you lose your job, if you need more space for a growing family or if there are massive repairs needed, you’re stuck with the house. Depending on the situation, ownership can become a financial burden.
  • Maintenance and repairs are your problem. No more calling your landlord when something doesn’t work: now it’s up to you to either DIY fix it or call the plumber, electrician or other specialist. Repairs take time and often carry a big price tag.
  • You’re on the hook for any hidden costs. Buying a home isn’t just about a monthly mortgage payment. There are also appraisal fees, broker fees, insurance, inspections, a down payment and more. This post from Money Crashers breaks down the upfront, recurring and special costs of buying a home. All of these costs may be worth it if you love your home and plan to stay in it for years. But if you expect to buy and sell again soon, these extra costs will add up fast. Factor them into your monthly costs and how much your home will appreciate in the years until you plan to move.
  • Don’t forget property taxes. According to Bankrate, first-time home buyers are often shocked at how high their property taxes are. Make sure to research tax rates in the area before buying, and remember that renters don’t pay these fees. If the neighborhood you love has a high property tax rate, renting might be a better deal.
  • Buying is more expensive upfront. Renters pay little to nothing upfront, while most homeowners pay 5.5% of the home’s value or more before they even move in.

 

If after you’ve weighed the pros and cons and decided that buying is the right choice for you, we can help. Contact Anselmo, Lindberg and Associates’ practiced real estate attorneys to start the process right.

 

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The True Cost of Buying a Fixer Upper

What it really means to take on a rehab

Buying a “fixer upper” home is a growing trend, thanks in large part to popular shows (like the aptly-named HGTV hit Fixer Upper) that showcase fairytale transformations where families end up in luxurious dream homes for a fraction of the price.

When done right, a fixer upper can be a great investment.

“If people are unforgiving upfront about assessing the costs of renovation, the value of property and the neighborhood, and how much money they have, they can come out ahead and buy more house than they otherwise could afford,” says Bradley Inman, CEO of HomeGain.com.

Before diving into a major renovation of your own, it’s important to understand the risks involved in taking on a big home improvement project. Whether you are hiring a contractor or planning a massive DIY project, here are a few things to consider before diving in

Choose Projects Wisely

The easiest projects to make money on are those that only require simple, cosmetic improvements like drywall, refinishing, and paint touchups. Adding window shutters, siding, attractive doors, and updated lighting can add significant value to a home, while costing little to install. With the exception of bathrooms, major additions or improvements can end up costing more than the value they add to your house.

Most real estate experts don’t recommend buying homes that need extensive structural work. Major repairs that require electrical work or foundation upgrades can be costly, and because they’re necessary but not easily seen, they don’t tend to increase the value of the house.

The goal is to keep the value of the house at no more than 10-15% above the median sale price for your area, otherwise it won’t sell. Don’t go overboard with improvements, or you could end up with a home that outprices the market.

Can You Really Fix It Up?

Renovations are cheapest when you can do at least some of the work yourself.

“A fixer-upper is for people who are willing to be do-it-yourselfers, because that can save them a lot of money, and they can keep the increase in home value for themselves,” says real estate agent Fernando Semiao.

If you can paint, install trim, replace windows, strip wallpaper, install cabinets and take care of minor projects you can save yourself a lot of money. Don’t be fooled by the quick, seemingly easy work of Chip and Joanna Gaines on Fixer Upper—home improvement is not as easy as reality TV would have us believe. Know that projects will often be more complicated than you think, take longer than you think, and in some cases, not look as professional as you might have envisioned.

Determine a Fair Price

Talk to an agent in your local market to find out what an average home will sell for, or do research on listing sites like Zillow to get a general idea.If you’re planning to buy a fixer upper, first run through this calculation: find out the value of the home if it didn’t need fixing up, subtract the cost of the work, then decide if it’s worth it to buy and determine your offer price. If a home sells for $200,000, but needs $75,000 of work, a $125,000 offer would make sense. To determine the renovation costs, have a contractor walk through the home with you to give you a written estimate of the scope of work. As a general rule of thumb, budget an additional 25% for permits, incidentals and unforeseen expenses If the cost of improvements are going to exceed the value of the home, it’s probably a good idea to look for a different project.

Note: the Federal Housing Administration does have special loans for those buying a home that needs improvement. Your rehabilitation costs will be bundled with your mortgage. The total property value has to fall into a specific mortgage limit for your area, among other requirements.

Require a Home Inspection

When making your offer, make sure the contract includes an inspection clause. These give you room to back out of the deal if inspectors find issues that are too serious for you to fix. You can also use the findings to help negotiate with the seller for a lower price. Hire a professional inspector to look for things like water leaks, mold, lead-based paint, pests and other potential problems that are not easily seen. Make sure to also bring your contractor to look at areas that might be out of the home inspector’s experience.

Involve an Attorney

The most important consideration when taking on a fixer upper is to make sure that your attorney is involved from start to finish. From reviewing the real estate and construction contracts, to negotiating additional improvements after the inspection, it’s vital that all components of the process are carefully thought out to reduce your liability. The attorneys at Anselmo Lindberg & Associates are experts when it comes to real estate law and are on hand to make sure that your fixer upper runs smoothly.

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Getting Approved for a Mortgage

5 Ways to Guarantee Your Loan

House-hunting before you’ve secured a mortgage is a recipe for heartbreak. Prospective homeowners often apply for a mortgage before they fully understand the process and what factors they can control to improve their standing, leading to costly mistakes that may affect them for decades. In a new NerdWallet survey of recent homebuyers, 31% of respondents thought the process was “stressful,” and 41% said they were unaware of their loan options during the lending process.

High debt-to-income ratios, a spotty credit history with low scores and insufficient income are the top three reasons lenders say they deny mortgage applications. But a savvy homebuyer can improve all three, and enhance their profile in other ways, before they start talking to lenders. One in eight applications will be rejected: follow these five steps to make sure yours won’t be one of them.

1. Review your credit score and get it in shape.

Take a good look at your credit and FICO scores and identify any issues. A “good” score is above 700, and 760 or higher is considered “perfect,” according to Chris Hauber, a mortgage loan originator who broke down the numbers for the real estate listing website Trulia. The size of your down payment can offset a less-than-perfect credit score, but if you’re anywhere in the 600s, there’s work to be done. Take an audit of your spending habits and credit history and identify problem areas. How much monthly debt do you carry, and how much do you owe overall? Check for late payments, debts in collections, and other past misbehaviors, and start paying down your debt aggressively. Accounts in collections should also be settled ASAP: a history of paying bills on time is one of the first things lenders look for. Too little credit can be a problem, too, so start this process early. If something about your score looks wrong, call the credit reporting agencies and ask about specific debts that are listed; incorrect information can and should be removed from your report.

2. Bring down your debt.

A high debt-to-income ratio was to blame for 52% of denied mortgage applications, according to a 2017 survey from NerdWallet. Study your debt and look for areas where you can decrease it. Bills should be paid in full every month, and should always paid on time. Certain debt — like credit card debt — counts against you more than debt like student loans, so tackle those high-impact IOUs first. If you’re having trouble making all of your payments, ask if you can make lower contributions to your student loans, or other low-interest debts, and focus on paying off your credit cards first. If you have money set aside for your down payment, hit pause and use it to level off your debt. Even if you’ve been pre-approved for a mortgage, you can still be denied later if you miss too many credit card payments, so don’t get complacent once you get pre-approval. Similarly, don’t make any big purchases that require high payments, like a new car, before your mortgage is signed. You should be aiming for a debt-to-income ratio around 36%.

3. Save up a sizeable down payment.

Most mortgage lenders will require at least a 10% down payment, so don’t apply until you have that in the bank. The higher your down payment, the lower your mortgage interest rate will be, so it’s worth waiting until your budget exceeds 10% if at all possible. A down payment of less than 20% will require private mortgage insurance (PMI), which can be paid upfront, as a monthly premium, or in a combination of the two. If you’re unable save at least 10%, you may qualify for a Federal Housing Administration loan, which requires a down payment of only 3.5%. Find out if an FHA loan is right for you here. Veterans are also eligible for special loans, as are applicants looking to move to “rural” areas as defined by the USDA.

4. Show consistent income through the years.

Insufficient income over time is one of the top three reasons mortgage applications are denied. Lenders will ask for at least two years’ worth of bank statements and tax returns looking for consistent earnings and deposits. Employment status is also important: if you’re self-employed, be prepared to prove that your income is consistent. Once you’re pre-approved, avoid changing jobs before you buy the home unless you’re sure the lender will consider your new job adequate.

5. Create a budget (and stick to it).

Once you buy a home, you’ll have a large monthly expense on top of your current monthly bills. Creating a budget now shows lenders you’re responsible, financially savvy and prepared. Adhering to that budget before applying for a mortgage also helps you create smart spending habits, allowing you to pay down debt faster, meaning you’re more likely to get approved.
The mortgage lending process can seem long, invasive, and stressful, but if you follow these steps ahead of time — and are proactive about getting your finances in order — you’ll be in the best possible position to be approved for a mortgage loan quickly and painlessly. An attorney can help. Our real estate attorneys offer a personalized experience for new homebuyers and can answer any questions you may have at every stage of the mortgage process.

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6 Mistakes Most Home Buyers Make

Avoid These Top Home Buying Regrets

A home is probably the largest purchase you will ever make in your life. Yet, according to NerdWallet, half of homeowners said if they could do it again, they would do something differently. We don’t want you to have regrets when buying your next home. Here are some of the top regrets homebuyers have. Read through the lessons here so you don’t make these same mistakes, and consider hiring a trusted attorney to help you through the process.

Spending too much money

According to Realty Trac, home-price increase rose higher than wages in 2016, making homeownership hard for many. People who did buy homes often spent more than they expected. Millennials and Generation Xers especially said they regretted purchasing a home that was too expensive. Make sure you know the market you’re walking into, and determine if this is really the best time to buy a home.

Not saving for a down payment

For many millennials, it will take 10 years to save enough money for a 20% down payment on a home, according to Apartment List. Still, many people buy before they have that much saved, and end up making small down payments. Rushing into buying a home without a significant down payment means paying higher interest on a mortgage with higher monthly payments.

Not looking at schools

Even if you don’t have kids now, chances are you’ll stay in your home for a number of years. Many newlyweds or people who only have infants don’t think about schools, as that stage of their kids’ lives seems far away. If you’re planning on having kids or already have a baby, look at the schools in the neighborhood before buying, so you don’t end up having to move or drive your kid to a distant school for a great education.

Not shopping around for a loan

Half of home loan borrowers take the first loan they’re offered, according to the Consumer Financial Protection Bureau. When it comes to loans on big purchases though, even a slightly lower interest rate can save you thousands of dollars over time. When shopping for a loan you should also think about private mortgage insurance and fees, in addition to APR.

Buying too big, or too small

Lots of people think they want or need a big home, only to buy one and realize it’s expensive and difficult to maintain. On the other hand, some people think they don’t want a family, then change their minds and wish they had bought a bigger home. It’s hard to predict life, but take some time to think about your future and what you really want before deciding on a home. Don’t be swayed by size, or rule out the benefits of an extra bedroom.

Not looking at the neighborhood

Often, people will find the perfect house, only to realize they can’t walk to the store, have a terrible commute to work, or don’t have the things they would like in a neighborhood. Look at the area’s walkability score and surrounding businesses before making a decision about buying, even if the house itself seems perfect.

Buying a home isn’t a final life decision. You can always sell if needed. Still, it’s better not to have regrets when it comes to such a big purchase, and when talking about the place you’re planning to make your home. No matter where you are in the home buying process, make sure you have an attorney on your side to help with the mortgage, loans, home inspection, and more.

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5 Tips for Real Estate Brokers

How to work with a real estate attorney to make sure your transaction runs smoothly

The world of real estate is fluid and oftentimes complex. As a broker, odds are you are spending half of your time coordinating between multiple parties, juggling client requests and attempting to manage the expectations of all parties involved. To make sure you keep each of your closings on track from contract to close, follow these five steps from the real estate attorneys at Anselmo Lindberg & Associates.

  1. Establish a Means of Communication: As a real estate team it is vital for us to establish the best line of communication to keep in contact with brokers, lenders, and the client. Before any deal takes place, we ask each member of the team about their preferred method of communication, noting whether they rely on email or phone. Establishing communication before working with each other can save your business and clients from frustration regarding missed emails or phone calls. When communicating to the entire group, do your due diligence to make sure the opposing client or their agent isn’t included on the email.
  2. Clarify Repairs Within the Contract: When working with buyers, we see one common pitfall after the inspection, and that is the request to have any and every issue or old item fixed or replaced. Repairs can hold up the transaction process. Although there are some repairs that are necessary, we work with our brokers to point their client to the home inspection paragraph in the contract. Often there is a dollar amount barrier on what is and is not considered a defect–this is especially true in some of our condominium contracts with repair requests for under $250.
  3. Remind Sellers About Tax Credits: On the seller’s side, the one thing they are often surprised by is that they may be providing their buyers with a tax credit. This can often come as a big shock, since taxes can come with a hefty price tag, but since property taxes in Illinois are paid in arrears, the seller will still owe taxes for time spent in the home, even when they are out of the home. We try to prepare the seller for the tax credit price tag by reminding the broker to explain this clearly to their sellers.
  4. Show Your Clients You Care: We want to go above and beyond to provide our clients with the best service, and we can do that by collaborating with their broker and lender. It’s important for us to help our brokers have access to educational resources that they can provide to their clients, like the ALA real estate section of our blog. Show your clients you care by addressing their questions promptly and with direction. Provide them with the information they need to feel confident that you have their back.
  5. Set Realistic Expectations for Your Clients: Whether you are an attorney or a broker, it’s important to always be upfront with your clients throughout the entire transaction. From our years of experience, we’ve learned the importance of not over-promising on things such as the price of the home, inspection issues, and closing dates. At ALA, we put an emphasis on collaborating with the agents and brokers so that buyers and sellers are given all the information they need from the get-go.

Working side-by-side to establish partnership between attorneys and brokers is essential for our business. Whether we’re working with buyers or sellers, we want to make sure our clients are given the best service and experience possible, and having a real estate power team collaborating on all fronts can ensure this type of success. Are you a broker in need of a trusted attorney to join forces with? At ALA we go the extra mile to ensure our clients are happy and you have sustainable success. Reach out to chat with one of our real estate attorneys and see what a partnership with ALA can do for your business.

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