Using Gift Money Toward a Down Payment

Down payments can be a big hurdle when buying a home. In fact, nearly a third of first-time buyers received money from friends or relatives to source their down payment.

Are you considering a similar move? If so, proceed with caution. Though getting gift money is quite common, it also comes with some unique challenges.

Here’s what you should do to make sure your down payment gift goes off without a hitch:

  1. Know the rules and regulations around your loan. Different mortgage products have different rules for gift money. The allowed amount may be limited, or the funds may need to be deposited in a certain time frame in order to qualify. We can discuss these specifics together.

  2. Make it clear that you’re not expected to repay the money. If you’re taking on more debt, it will impact your home loan finances. To prove that it’s a gift instead of a loan, you’ll need to ask whoever is giving you the money to write a gift letter, asserting that it does not need to be repaid.

  3. Keep it in your account for a few months beforehand. Ideally, you should get the gift money a few months before you apply for your mortgage. Anything beyond 60 days out should work, and you’ll avoid an unusual deposit during the loan process.

  4. Understand the tax rules around gift money. You won’t have to pay taxes on the money, but depending on how much you’re given, the gift-giver might have to. Make sure they’re aware of these implications before moving forward.

If you’re one of the many buyers considering using gift money for your down payment, reach out today so we can walk through the process.

4 Scenarios for Adjustable-Rate Loans

A 30-year, fixed-rate home loan isn’t right for everyone. Depending on your plans, it might actually cost you more in the long run.

Though they’re less common, adjustable-rate mortgages (ARMs) are a better fit for many homebuyers. They may offer a more affordable monthly payment and cost less in interest throughout the life of the loan.

Are you thinking of buying a home or refinancing your current one? Here are some scenarios in which you might want to consider an adjustable-rate loan:

  1. You only plan to live there in the short term. ARMs are a great option if you only plan to be in the house for a few years. They usually come with lower rates than long-term, fixed-rate loans for the first five, seven or even 10 years.

  2. You expect to make more money down the line. These loans tend to come with low rates upfront. Then, after a few years, your rate can change — which means a possible increase. If you know you’ll have the income to support a higher payment down the road, then an ARM might work for you.

  3. You’re comfortable with refinancing in a few years. Another option would be to refinance to a fixed-rate loan during the initial period of your ARM. It would be similar to going through the home loan application process again, but you could end up with a new low rate for the long haul.

  4. You plan to pay off your loan early. If you’re able to pay off the loan before your rate can rise, you may save overall. Some loans do carry prepayment penalties, but you’ll learn if your loan is one of them early in the process.

ARMs are a bit more complex than fixed-rate mortgages, so make sure to reach out for more personalized guidance.

Get Your House-Hunting Checklist

There’s a lot to consider when you’re searching for a home. You have to ask important questions: Which features are must-haves and which ones are simply desirable? How far are you willing to commute to work, grocery stores and other frequently visited places?

Some of the decisions you have to make during your home search are a little bit more fun, like which architectural styles you prefer and what fixtures and finishes you’d like to have. And it’s important to note these details.

So once you’re preapproved for a mortgage, start your search off on the right foot with a house-hunting checklist. Bring it with you while touring homes, checking things off and taking notes so you can more easily compare each option.

Get the checklist below to make your next home search go smoothly.

Click here to get your checklist.

Worry Less With This First-Timer Guide

You’re thinking of buying your first home — a place to call your own. But, like many, you don’t even know where to begin. The process of buying a home seems so complicated and expensive.

https://content.outboundengine.com/ebooks/First-Time+Homebuyers+Guide+2019.pdf

Don’t worry! We can walk through the process together, from getting your financing set up to moving in after the closing. This first-time buyers’ guide was written just for you, to help simplify one of the biggest purchases you’ll make in life.

Click the image to download the guide.

If you’d like to learn more about the homebuying process, or if you have any questions while reading the guide, please get in touch.

Home Loans Don’t Have to Be Confusing

There’s nothing like walking into a house and realizing it’s the one — your dream home!

But before you go house hunting, you should get preapproved for a loan that’s just as perfect for you. Making sense of the financial language might initially seem intimidating, but it’s the first step to living that dream.

Get in touch if you’d like help answering the following questions:

15 or 30 years?
If paying off your loan sooner is important to you, a 15-year mortgage might be a good fit. These typically have a lower interest rate, but you’ll have a higher monthly payment due to the shorter loan term.

If you need (or want) a lower monthly payment, a 30-year mortgage might be better suited to your lifestyle.

Fixed or adjustable?
Fixed-rate mortgages are generally uncomplicated and have specified monthly payments that make budgeting easier. You neither save when market rates go down nor suffer when they spike.

Adjustable-rate mortgages (ARMs) typically start with lower interest rates that stay fixed for a set amount of time. Once that period ends, your rates vary at predetermined intervals.

Conventional or government?
The typical 20% down payment you’ve probably heard about is associated with conventional loans, but it isn’t a must. Your credit score, debt-to-income ratio and down payment all factor into your interest rate.

Don’t have a big down payment or excellent credit? Consider a government-backed loan. With an FHA loan, you only need a small down payment, dependent on your credit score. The VA offers mortgages with no down payment to active military, reservists, veterans and spouses. And if you’re in a rural area, you may qualify for a zero-down USDA loan.

Curious about which type of home loan will be the best fit for you? Reach out today.

Does your home need extra protection?

You’ve just purchased insurance for your new home. But now you’re wondering if you’ll receive reimbursement if your detached workshop or beloved antique vase is damaged in a fire.

The ins and outs of homeowners insurance can be tricky, but having the right plan to protect your property and assets is essential. You can talk to your insurance agent anytime to set things straight or adjust your coverage.

Let’s go over what the typical insurance plan covers — and what it doesn’t.

  • Covered: Dwelling Protection
    This covers your home’s structure when there’s catastrophic damage caused by fire, theft and more. It should also cover separate structures like sheds, garages or workshops on your property.

    Extra: Flooding and Earth Movement
    If you live in an area that’s prone to earthquakes, flooding or landslides, you’ll need to get a separate policy to cover your home and belongings.

  • Covered: Personal Property
    This aspect of your policy refers to standard household items, like furniture or electronics, that are damaged by a covered risk.

    Extra: Endorsement or Floater
    For high-value items that exceed standard reimbursement limits, like jewelry and rare collectibles, you’ll probably want to extend your personal property coverage.

  • Covered: Liability Coverage
    If someone who doesn’t live in your home gets injured on your property, liability coverage pays for their medical bills or legal fees. It should also cover you if you (or a member of your household) damage a neighbor’s property.

    Extra: Umbrella or Excess Liability
    Think you may need more coverage than what’s provided by your standard homeowners policy? It’s a good idea to talk to your agent about this broader coverage.

Your homeowners insurance doesn’t have to be standard. You can adjust your deductibles, add on extra protection and fine-tune your coverage as your needs change.

Get in touch if you want to know more about homeownership or need an insurance agent referral.

Buying a Home When You’re Self-Employed

While being an independent contractor, freelancer or entrepreneur can certainly be a freeing career choice, it also comes with some challenges. For instance, it can make getting a mortgage loan harder.

Without W-2s, a consistent salary and an employer to back you up, it’s harder to prove your income as a self-employed professional — let alone show you’re not a risk as a borrower.

Are you planning to buy a home or refinance while self-employed? These five tips could improve your chances of approval:

  1. Get your finances in order. You’ll need to prove your income through bank statements, invoices, profit-and-loss statements and balance sheets. Be sure they’re ready and organized before applying for your loan.

  2. Reduce your tax write-offs. Maxing out your deductions can seem smart, but when a home loan is on the line, it can actually hurt you. The more write-offs you take, the lower your income looks, meaning you seem like a riskier bet.

  3. Boost your credit score. Higher credit scores are always more appealing when it comes to getting a loan, so take time to improve yours. Pay down debts, settle any overdue accounts and ensure your credit report is accurate.

  4. Bring in a co-borrower. When you add a second borrower to the loan, their income is factored in, too. Make sure you choose a co-borrower with good credit, a low debt-to-income ratio and steady pay.

  5. Keep your work consistent. Don’t switch industries just before applying for your loan. It’s best if you’re in the same line of work for at least two years.

Getting a mortgage while self-employed certainly has its challenges, but it’s not impossible by any means. Reach out today for more home financing guidance.

What’s included in a mortgage payment?

If you’re buying your first home, it might seem like going from paying rent to paying a mortgage is merely switching out one monthly bill for another.

But rents and mortgages differ on a couple of levels. For one, mortgage payments contribute to your stake in the home. The more payments you make, the more of the home you legally own.

The other major difference is what a mortgage includes. While rent is simply a once-a-month fee, a mortgage payment comprises what is known as PITI.

That acronym stands for:

  • Principal: This portion of your payment goes toward the total balance of your mortgage loan, without any other charges. 
  • Interest: This is the extra cost of financing your home. Your interest rate (which is set when you apply for the loan) determines how much interest you pay annually.
  • Taxes: As a homeowner, you’ll need to pay property taxes. These are typically paid monthly as part of your mortgage, and they could be included in your escrow account.
  • Insurance: Your homeowners insurance policy, which can also be paid using escrow, protects your home from weather damage, theft and other potential issues. If you require private mortgage insurance, that will add to your monthly costs as well.

If you’re considering buying your first home, it’s essential that you understand what goes into a mortgage payment — as well as how you pay off that loan year over year.

And don’t assume that all of the monthly fees add up to more than your rent, especially when you consider the equity you’ll be building.

Want to learn more about the costs you can expect when purchasing a home? Get in touch today if you have questions.

WHAT TO DO WITH MATERIALS AFTER RENOVATION

You’ve finally renovated that ancient bathroom of yours, and it’s just what you imagined — beautiful, trendy, sophisticated and welcoming.

Now you’re faced with a decision: What do you do with your old stuff — the fixtures, furnishings and decor? What about all those leftover materials and unused building supplies?

For items that can’t be used as is, you might want to consider:

  • Restoring or upcycling materials. Did you not use all of the wood purchased for cabinets and shelving? Or the marble for the countertops? Well, you could always use those materials to create an accent for another part of your home.

  • Donating to thrift stores or charities. Habitat for Humanity and other local charities are great options. If you’ve got bulkier items, some secondhand shops and charities will even pick them up from your home.

  • Recycling any eligible materials. Head to your local recycling center if you have items that are metal, glass, paper, cardboard or plastic. Some places will even accept batteries and electronics if you have no more use for them.

  • Contacting a scrap metal dealer. A scrap metal dealer may be interested in purchasing pieces of metal left over from the renovation.

  • Throwing it in a dumpster. Be aware that you might be required to pay a fee if you throw items in the city or county dump. Renting a dumpster for your property could also be an option.

If you’re working with an architect or designer, be sure to get their opinions. They may be able to recommend which items you should keep around as spare supplies.

Open Houses: Put Your Best Foot Forward

Attending an open house can be a great way to tour an available property, decide what you like and scope out the local competition. Who knows? It might even lead you to a great buyer’s agent.

Because of this, it’s essential you make a good impression on these outings. Want to be prepared for the open houses you visit? Follow these five etiquette rules:

  1. Don’t show up early or late. Open houses can mean long and tiring days for real estate agents. Respect the established open house hours. If they don’t work with your schedule, contact the listing agent to set up a private tour at a later time.

  2. Let the hosting agent know if you’re already represented. Already have an agent on your side? That’s okay — but make sure you’re upfront about it. Many agents use open houses as a way to get new client leads, so let them use their valuable time to speak with customers who need them.

  3. Give other buyers space. Don’t be surprised if other buyers show up while you’re on the property. Give them room to explore the home and respect their space. No one wants someone rushing them out of every room.

  4. Ask permission before opening a closed door or drawer. Maybe you want to check out the closet space, but you have to respect the homeowner’s privacy. Those areas are likely closed off for a reason.

  5. Avoid bad-mouthing any design or decor items. You might offend the agent if they staged the home. And the homeowners might find out too. Your words may come back to haunt you if you decide to make an offer.

An open house could be how you find your next home.