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.

Need Money? Equity May Be the Answer

As a homeowner, your equity is your secret weapon. With every mortgage payment you make, your stake in the home grows — and so does your equity.

When your equity stake is large enough, it can be used to improve your financial standing. Tap into it to pay off debts, use it to cover home improvement costs or, most importantly, consider it a safety net in case of emergency.

Have you been paying down your current mortgage for some time? Then you probably have equity to tap. So what can you do with it?

  • Home Equity Loan: This is a loan you take out in addition to your existing mortgage. It lets you borrow against your stake in the home in exchange for a lump-sum, one-time payment. 

    Often, you’re able to borrow up to 85% of your home’s appraised value, minus what you owe. Many homeowners use these for large expenses like tuition, medical bills or the down payment on an additional property.

  • Home Equity Line of Credit (HELOC): HELOCs work like credit cards, only without the sky-high interest rates. The equity in your home is used to create a line of credit that you draw from as needed. 

    HELOCs typically come with long draw periods (think decades) and are often used for ongoing expenses, like regular home improvements or maintenance. This method should allow you to borrow 75% to 80% of your home’s appraised value, minus what you still owe.

  • Cash-Out Refinance: Refinancing essentially replaces your existing mortgage loan. You take out a new loan larger than the balance on your current one, and then keep the difference in cash to cover whatever expenses you’re facing. 

    You can typically borrow up to 80% of your equity with a cash-out refi. Some homeowners use the money to pay off debts or high-balance credit 

Get a Fresh Look With a New Backsplash

Your kitchen is the heart and soul of your home. After all, it’s the place where countless memories are made alongside family and friends.

So it’s worth making your kitchen a welcoming, appealing space. One easy way to do that? With a stylish backsplash.

That panel of tiles behind your sink, stove and countertops does more than protect your walls from splashes. It also adds dimension and detail to your kitchen.

Looking for fresh backsplash ideas? Try these:

  • Get creative with color pairing. Many people like to match their backsplash to their countertops. But adding red tiles behind a white countertop, for example, can add excitement and character to your kitchen. Or install a black backsplash behind white counters to give your kitchen a chic, modern look.

  • Go for a classic look. Subway tiles are popular for a reason. Named for the tiles you find in subway stations, they’ll give your kitchen a clean, vintage look.

  • Add intricate detail. Sure, you can’t go wrong with classic square or rectangular tiles. But opting for tiles that have been laser cut into complex shapes can give your backsplash an eye-catching mosaic effect.

  • Step outside the box. Moving beyond basic backsplash materials and having fun with different textures is a great way to give your kitchen some memorable flair. Try brick or exposed tin to make it stand out.

  • Emphasize functionality. Adding pegboard with hooks to your backsplash can turn it into a decorative space to store pots, pans and more.

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.

Do you know which documents to prep?

Want a fast and easy homebuying process? Of course you do. So how do you set yourself up for success? Start gathering your paperwork.

It may not be the most exciting part of buying a home, but it’s necessary to see where you stand and what you qualify for. Having your current financial records pulled and ready to go is the first step.

Here’s what you and any co-borrowers will need for a smooth loan process:

Income:

  • W2s or 1099s for the past two years 
  • Pay stubs for the two most recent pay periods
  • Income tax returns for the past two years (especially if you’re self-employed)

Assets:

  • Bank statements for any checking, savings or investment accounts (including 401(k)s, IRAs, etc.) for the past two months
  • Records of any other forms of income you receive (Social Security payments, child or spousal support, etc.)
  • Statements for assets, including stocks and bonds

Will you be receiving a financial gift from friends or family to pay for your down payment or closing costs? Then you should also have a gift letter to disclose that amount of money. And don’t forget to bring a copy of your driver’s license, as well as that of any co-borrowers.

Keep in mind that you may be asked for additional proof of income and assets. It will depend on the loan you’re applying for, as well as your employment status, income, debts and other unique financial factors.

How could wallpaper fit into your decor?

Five years ago, you’d be hard-pressed to find wallpaper in any design magazine or model home. But today? That tried-and-true wall covering is back.

Don’t mistake its resurgence for a nod toward vintage styling, though. Today’s options are modern and sleek. From bold metallics and geometric shapes to elegant botanicals and exposed stone (or concrete or brick) effects, there’s something for everyone. 

No longer just a way to cover barren walls, wallpaper is now cropping up in every area of the house.

Are you thinking of using wallpaper to upgrade your home’s style? Try one of these creative uses:

Cover the ceiling. Wallpaper on the walls? That’s expected. But wallpaper on the ceiling? Now that’s a way to add visual interest. You can even use it strategically to highlight a light fixture or other overhead feature.

Line shelves and cabinets with it. Give your built-in shelves, bookcases, cabinets and drawers a pop of color by lining them with swatches of patterned or solid-toned wallpaper. 

A nice little bonus? It will help keep them clean, too.

Frame it and hang it on a wall. A bright, bold wallpaper can make for a beautiful piece of artwork. Cover a canvas and attach a complementary frame, and it can pull together the color palette in any room.

Use it on the furniture. Forget sanding and staining your wooden furniture to give it a new look. Instead, line the top with a textured wallpaper to make it more eye-catching. It works on tables, dressers, entertainment centers and more.

Steps to Boosting Your Credit Score

Your credit score plays a big role in the homebuying process. It can influence what interest rates you’re eligible for, as well as what options you have for loans in general. 

If your current score isn’t as high as you’d like, don’t lose hope. You can boost your score and improve your chances of qualifying for a mortgage or a better rate. Here are a few ideas that can help:

  • Check your credit report. Credit reporting agencies collect data from a variety of sources, and this info may contain errors. Plus, there’s always the possibility of identity theft. Request a copy of your annual credit report from one (or all) of the three main agencies — Experian, Equifax and TransUnion — and make sure everything is correct. If you see something that looks off, report the issue to get it resolved.

  • Settle any debts in collections. Having an account in collections hurts your credit score. Pay these off as soon as possible, or work with the creditor to set up a payment plan.  

  • Work toward paying off other debts. Start paying down your debts as much as you can, focusing on high-interest ones first. Your total debt balance has a big impact on your score, so reducing even one account can help immensely.

Additionally, don’t open any new credit cards, take out a new car loan or put extra purchases on your existing cards when gearing up for a home purchase. Though this won’t improve your score, it will keep it from getting worse — and that’s just as important.

Are green home updates worth the hassle?

What if you could save money and make money at the same time? With the right home improvements, you can. Lower your utility bills and increase your home’s resale value in one fell swoop when you make smart energy-saving updates to your home.

If you’re investing in renovations this year, make sure these three money-saving upgrades are on your radar:

  • Replace your windows. Over time, window frames loosen, allowing air to flow in and out of the home more easily. Consider replacing your older windows with new, double-paned ones to cut down on drafts. 

    You can even opt for tinted windows to reduce the energy needed to cool your home, possibly saving you hundreds of dollars each year. This has the added benefit of refreshing your home’s look, making it more appealing to future buyers, who might in turn make a larger purchase offer.

  • Switch to Energy Star-approved appliances. These use less water and electricity, and are designed to operate more efficiently on the whole. Energy Star offers rebates on particular products, saving you even more money. 

    Another plus? Green certified homes with Energy Star appliances may sell quicker and for more money than comparable homes that are non-certified.

  • Add more insulation. Upgrading the insulation in your home helps keep inside air from escaping and lowers your energy bills. You can also use spray foam insulation in smaller areas, like walls, crawl spaces or around ducting. 

In addition to these improvements, make sure to learn about any green tax credits, rebates or utility discounts you can receive in your area. Municipalities and utility providers often offer incentives to homeowners who make energy-efficient upgrades to their properties. Those programs can help you save even more.

Making a Competitive Offer on a Home

Finding the right home is only the beginning of your homebuying journey. After that, you’ll have to make an offer — one that both protects your interests as a buyer and helps you stand out from other bidders.

That last part is especially important if you’re buying in a seller’s market, where housing inventory is low and buying competition is high. Want to make sure you make the right offer and snag that dream home? Here’s what you’ll need to know:

  • Tap into your agent’s expertise. Your real estate agent can research the local market for pricing, the number of active listings and more. Being informed about comparable sales can help you make a competitive offer. 

  • Make the right earnest money deposit. Earnest money is used to protect the seller if you back out of the deal. The more you offer, the more confidence they’ll likely have in your bid.

  • Consider your contingencies. Contingencies can be written into the offer to protect your interests as a buyer. But note that a seller’s market may not be suitable for contingency offers.

  • Factor in renovations and repairs. Is the house going to need major repairs before you move in? Factor these expenses into your offer and adjust the price as necessary.

It is possible to make your dreams of homeownership a reality. But keep in mind that you’ll need to have your financing in order before you make an offer on a home.

If you’re starting your homebuying journey and need financing, reach out today.