The RE/MAX Associates Louisville Real Estate Blog

FHA Loans: Are They Right for You?

With restrictions relaxed for FHA loans, they can be enticing, but look out for their hidden thorns that can cost you over the long run. If you were told there’s a loan out there that is designed to make it easier for you to qualify for financing for your home, you’d probably say, “where do I sign?”

FHA loans were created in the 1930’s by the Federal Housing Administration. What makes them unique is they offer borrowers a better deal than the traditional home loans. They are a better deal because these loans are mortgages insured by the FHA. Before you sign your name (life) away, let’s examine these loans closely and see if they are right for you or not. We’ll see how they work, and the pros and cons that come with it.

Advantages of the FHA loan

FHA loans, simply put, make home ownership more attainable. You are allowed to qualify with a down payment of just 3.5%. Credit scores are also allowed to be low with still reasonable interest rates. Another thing you can do is use gifted money for your down payment. These FHA loans also usually carry a higher debt-to-income ratio than most lenders will accept.

This is enticing because it first-time home buyers and young people who do not have 20% of a down payment, and/or may have less than desirable credit scores.

How FHA loans work

Just like every good deal out there, there’s a catch. Since these loans are insured by the FHA, if the borrower defaults on his loan, the FHA is obligated to pay the bank. A good note to consider is the premiums are quite high so the FHA loan can become rather expensive.

Because the FHA has the monetary obligation (worst-case scenario) the rules are a bit more relaxed than with other type loans. The lenders aren’t the ones at risk, but the government is, and they feel it’s the...

Four Tips to Make Your Bedroom Cozy Again

Is your bedroom lacking a certain feeling? Does it just not quite feel cozy enough when you lay down? Well I will give you four easy tips that will help transform your bedroom into the cozy castle it’s meant to be.

Since your room is lacking that specific something in the air, and let’s look around. Dirty socks and undies on the floor, got it. Throw pillows scattered throughout the floor, of course. Nightstand supplied with Kleenex and vitamins instead of candles and body lotions, sad but true. Our bedroom is supposed to be this romantic get-away that we are supposed to believe is the perfect setting. We are also supposed to believe each night our significant other is supposed to be intimate and romantic with us, but chances are they are leaving their dirty undies on your side of the bedroom, hot right? Well I can try to fix this with a few foolproof set of ideas to make your bedroom this cozy bungalow you’ve always wanted.

  1. Mood Lighting: Candles will never let you down, they bring sexy in the atmosphere. They allow you to turn off your lights and crawl back into bed without hurting yourself; not to mention that the minimal light it gives off creates an air of intimacy. You can also purchase the flameless candles. There are many dim lighting options here, some you can even buy to program. There’s a vast selection.
  2. Freshen Up: Wanting to be in the bed is the first step to sexy. Fresh sheets and properly made bed are much more inviting than used sheets with blankets thrown over everything. Concentrate on which fabrics you buy too. Certain fabrics (throw vs. down) gel better with certain seasons. Make sure you have the right blanket for the right touch. A pleasant fragrance never hurts to have in the air either.
  3. Change the Scenery: Put up very thin dark red or navy swath over your blinds. Move all portraits of other people out of the room, and replace them with photos of you and your spouse. Put away your electronics,...

Where to Stash Your Down Payment

When you are ready to buy a house, everyone knows you must have a down payment. This requires a giant lump of cash. Where do you put it while you are saving though?

 In order to protect yourself, you’ll want to place it in “cash equivalents”. These are protected by the Federal Deposit Insurance Corporation (FDIC) or the U.S. Government. But don’t trust the government with your money, they suck at handling money, but I digress. This money won’t give you much of a return, but it will be readily available when you need it.

 Listed below are some RISK-FREE savings options.

 Online Savings Accounts

Definitely consider an online bank account since they have the best interest rates. If you do your banking online you won’t have to work around the banks hours. This also makes banking so much easier because of automatic transfers and direct deposits. Checking your account info is also a breeze because you can do it from your phone.

You will also be less likely to go grab it out of the bank and spend it elsewhere. This way the money can stay in the bank and be used as you intended.

The following websites were ranked as some of the best savings accounts: GE Capital Bank, MySavingsDirect, Barclays, iGoBanking.com, and Ally Bank.

 CD’s

Just like savings accounts, most CD’s are FDIC insured. Unlike savings accounts, you can be penalized for withdrawing early. Investing in a short-term CD is an option if you feel you might withdraw it early. However, the longer you sign up for the better the interest rate.

Another option with CD’s is called laddering. Laddering allows you to divide up your time periods for a certain amount of cash. You can lock up a chunk of cash with three months, and another chunk for a year or more.

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Escrow: How Much Do You Really Know

Escrow is a big factor in home ownership, so don't be caught off-guard when closing day finally comes. So when you are about to buy a house or refinance a property, you will receive a good faith estimate close to when you "go into" escrow. This estimate includes a line item for the escrow account information. What this essentially is is an extra fund used to pay for property taxes and insurance.

 

Back in the dark ages when a person wanted to buy a house, they would get a traditional home loan. However, the payments towards property taxes and insurance would come out of their own pocket. It wasn't uncommon that during tax time homeowners would be falling a bit short on their payments.

 

Because this happened quite frequently, mortgage lenders began offering, and sometimes requiring, the borrowers to pay these taxes and insurance payments into a separate account. This became known as an escrow account, and as the payments became due, the mortgage lenders would pay them for the borrower.

The mortgage lender would also use this fund to collect interest. When you consider the amount of houses needing an escrow account in one area, pool them all together, the lender will be earning a ton of money. As this system became more integrated, some mortgage lenders started to make the borrower have their money upfront. Occasionally, the borrower would receive a quarter-point discount on a mortgage interest rate for escrowing their taxes and insurance.

 

During closing time, buyers would have to throw down a significantly large amount of cash to begin an escrow account, sometimes up to six months’ worth of taxes and insurance. Chances are they are not thrilled about the interest lost by not having these funds invested. Since these issues are real, a good portion of borrowers choose not to escrow these monies when the lenders give them the option.

 

What's Best for Buyers?

 

Generally this...

4 Mental Traps to Avoid When Buying Your Next Home

Do you think you are ready to buy a house, but worry about all the details you could miss? Maybe you are a bit too excited. Before you sign over your John Hancock, stop for a minute and self-diagnose yourself if you are falling in one of thsese common homeowner traps.

1.       Assuming that buying is always better than rentingMost people believe that renting a home is like throwing money away. This is just an opinion, nothing more. The decision to buy against renting needs to be based on several factors. Factors like your tax bracket, the amount of time you will be spending in the residence, the average prices in your area, and the mortgage rate for which you qualify. There are more but those are just a few. As an example, let’s say you play to live somewhere for three years and the home will cost $100,000. Essentially this is costing you $,1000 a month. In this case you may just want to buy something. On the other hand, if you want a house that’s $650,000 and you could rent for $,1000, this might be the better choice.

2.       Believing your current needs reflect your future needsLet’s imagine you are in a relationship with a significant other. You both enjoy traveling and don’t want to spend a ton on keeping your home maintained. You will probably land on a small home that fits both of your needs, and ignoring the ones that are not in a decent school district. When you are buying a home, think about the future, not the present. You had better buy the home you will want to be living in in five to ten years down the road. You might make a family in the meantime and that extra space will be crucial! Do not neglect other factors like HOA fees, proximity to jobs, school districts, yard size, and neighborhood safety. Your wife asks you to build a swimming pool, but in three years, your youngest child goes off to college and you want to travel like you all used to. Who has time to upkeep a pool...

Selling or Refinancing with Low Equity

If you are looking to sell or refinance, but don’t quite have enough equity, your best bet is to find the right mortgage broker to reveal all your options. Feeling underwater is never good, and all you can think about is breathing. Even though the economy is picking up again, a lot of people were hit by the housing crisis. You, or someone you know could steal be dealing with a home that is underwater.

More than 10% of homeowners in 2014 with a mortgage were regarded as “under-equitied”. This means they have less than 20% equity in their homes.

You cannot say that you’ve thought about running if you currently owe more than it’s worth. Of course there are the 6%-10% fees when you do finally sell your home. You could also end up having to bring some money to the closing depending on how much you owe. This compensates for the lack of equity.

Another option is to have a short sale. However, your lender has to agree to this. Besides getting you away from your mortgage, it will do quite a number on your credit, meaning it will be next to impossible to find another mortgage in the near future.

There is always the possibility of delaying your home sale and working to correct your financial situation. You could even make a profit in the long run, but remember this will not happen overnight.

Ideally, it’s best to take on more than one strategy, and reduce your loan-to-value ratio. Hopefully below 80% in a matter of time. Here are a few ideas to get you started.

  • Contact your lender: Banks generally hold programs in place to help you refinance and make your payments more affordable. Even though it may not be an option to refinance, or a bit too expensive, the bank could have other options as well. This considers your loan-to-value ratio, and if it is above 80% you will be forced to pay for the added expense of mortgage insurance. You should also ask if you would...

Should You Wait to Make an Offer on a New Listing?

It’s sensible and smart to not be the first bid for every now listing, but how long is long enough to wait to enter your bid? And how do you know when to simply pass, or proceed in making that bid on your dream home.

There is no one-size-fits-all answer. Pace is determined by the market and the seller’s motivation/determination.  But you shouldn’t wait too long when you find your next potential home.

Do your homework and get to know the neighborhood. Find when all the neighboring houses sold and for how much. Make sure to have your mortgage preapproval letter ready as well.

If you are a buyer and know you WANT this house, do not wait. Go for it!

Use caution with early offers

Most sellers begin to believe they have priced their homes too low when offers start coming in fast. But we all know the first offer is the best offer. They usually tend to become worse with time. Real estate agents’ jobs are to sell properties at the highest price, in the shortest amount of time.

Make a fair proposal

A house’s greatest interest is when it just gets to the market.

Here’s a good example: a family is looking to buy a house, but had lost several contracts previously to cash buyers. Finally they found a good home and waited 10 days to bid $10,000 below the asking price. The family did their homework and knew the true value of the home, and what they were willing to offer. The seller asked to meet them in the middle and only go down by $5,000. A deal was made and both parties win.

Show your appeal

Besides being fair with your bid, make one that is appealing. Make yourself look appealing, by not needing to sell your current home before buying this home. You want to look like a perfect candidate. It also helps to groom yourself and not...

Transforming Your Boring Apartment on a Budget

Home decoration and design shouldn’t be rocket science, but occasional it can be for some people. The goal is to make this living space appeal to you and your tastes right? I’m going to let you in on a few tips and tricks to decorate on a budget, which will give your apartment a significant upgrade.

Plan ahead of time – A lot of people often try and do the one stop shop. They pick a random store and buy random furniture and accessories to furnish their homes. Decorating without planning ahead is a mistake. Not only are you going to spend more money than you planned, it won’t be as appealing as you originally thought.

It’s all about being prepared. Being ready and doing your homework to know where to buy the accessories you need.  Once you have the store(s) located, start checking all the prices.

Choose a color scheme – Choosing a right color scheme makes a world of a difference. This act alone can be the most important transformation technique of the process. Painting is relatively cheap so without a whole lot of money you can make your place into a brand new place, with a brand new feel. Choose colors you like, since you will be the one living in it.

Be sure to check out other existing schemes and choose the ones that appeal to you the most.

Add carpets or rugs – Apartments with a naked floor are boring. Adding carpets/rugs with freshen the atmosphere with colors, and give the feel of a larger space. Dust and dirty will also no longer be visible! Having a carpet will only require cleaning every-now-and-then instead of daily.  

If you have a small room, go for a big rug. This has the effect of making your room feel much bigger than it actually is. The best places to shop for cheap carpets/rugs are IKEA, Walmart, and eBay.

Mix Furniture- The final transformation piece is to replace your furniture. Look at many stores, because the more options you have, the more potential...

Spring Cleaning Tips: The Most Missed

Spring is just about here, so it’s time to start the season fresh with a fresh clean house. After this horribly long and gloomy winter, it’s time to bring out all the cleaning gear you’ve got and get to work. As important as spring cleaning is, don’t let it take up your entire weekend. Use these quick hacks to make it go by faster and more efficiently.

  1. Soak the oven racks in the tub: Never mind the self-cleaning oven. Lay a towel down in your bathtub and put the racks on it. Fill the water until the racks are submerged. Next, add one cup of dishwasher detergent or powdered laundry. Mix it up and let it soak overnight.
  2. Clean your bed with liquor: Vodka is good for more than just getting your buzz on. It can also eliminate and kill odor-causing bacteria and disinfect. Fill a spray bottle with a cheap bottle of vodka and lightly spray across your mattress. Let it air-dry before making your bed.
  3. Dust your ceiling fans with pillowcases: Ceilings aren’t easy to reach, and they can often cause a problem when cleaning them. A good way to make sure they don’t make a mess is to put a pillowcase over the blade and slide it down, trapping all the built up dust.
  4. Goodbye soap scum: Soap scum lines in bathtubs are disgusting, so rub baby oil over them and watch them disappear. A benefit of the baby oil is it will make future dirt and scum bead up and fall down, so no more rings!
  5. Give your pillows the fold-over test: You need to change your pillows every couple of years, so give them the test. If you can fold them in half and it springs back to normal, it’s still good to use. If it stays stuck in half, pitch that pillow and get yourself another one.
  6. Get streak free windows: The most effective way to clean your windows perfectly is to get a bucket of hot water, a teaspoon of dish soap, and a cup of white vinegar. Give them a good scrubbing, and use a squeegee to remove excess water. The key is to not have streaks, and...

Looking Back at 2014

It’s always a good idea to know where you stand in the beginning of a new year. Looking back at last year and trying to predict what is to come for this year in real estate, is what it’s all about. So let’s take a look back at last year, and go a little bit more into 2014.

All of Louisville’s MLS includes the counties of Jefferson, Shelby, and even Oldham. 2014 was the third straight year in which the number of units sold rose from the previous 12 months.

2011 was a relatively low year, only selling 11,720 units, however, each year beyond that sold significantly more units. 2012 sold 13,572, 2013 sold 15,745, and 2014 sold 16,082. Every year increased by decent margins. All of these numbers come directly from the MLS, which include single family homes, along with multi-family properties, rentals and vacant land or lots.

Since 2009, the MLS has sold 26% more homes in 2014. This isn’t a horrible number considering some of the other markets around the country that are decreasing in units sold.

So all in all, real estate continues to be on the up and up. Keep watching your local market and watch what happens. Hopefully these numbers continue to rise!

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The Need to Knows About Home Improvement & Taxes

If you are one the people who have an older type house and are looking to modernize it, read this article carefully. Whether you are making improvements, repairs, or just updating, your wallet will still take the same financial impact. They key is how to categorize each “upgrade”, this will determine if you can catch a tax break down the road or not.

A repair

A repair means your home is returned to its previous condition and doesn’t make it better than before. The nature and timing of the repair will determine how it will be viewed on your return. For example, patching and painting walls is tax neutral. They have no tax advantage.

Let’s say someone in your house has a disability, and they are bound to a wheelchair. If you build a wheelchair ramp, you are then allowed to claim every cent as a medical expense, but only if the improvement doesn’t increase the value of your home.

Energy-efficient upgrades

To qualify for an energy tax credit, you must improve your home using alternative energy. The Residential Energy Efficient Property Credit is equal to 30% of the cost of qualified equipment. A short list of the equipment is solar water heaters, wind turbines, and solar electric equipment. These credits have no cap for most property types, and the improvements do not have to be made directly to your home.

Can updates to a home office be deducted?

Yes! Repairs and improvements to the part of your home where you conduct your business is definitely worthy of a deduction. You just have to make sure the repair or improvement meets the criteria for business expenses to take the deduction. Deducting the cost over time could also be a reality, so check the rules carefully.

If none of these circumstances apply?

Don’t worry, if all your home improvements are viewed as capital improvements, you can still get a tax break by increasing your basis for purposes of calculating a gain or a loss come...

What's Stopping You From Selling Your Home? Probably YOU!

 There’s no doubt about it, selling your home is stressful. Moving in good time and at a good price makes you feel the pressure. So now you have your agent, know what you’re getting into, and put in the seat to make your home shine, and it is ready to sell. So why is the home not selling, and why has the market turned cold all of a sudden? Hate to say it, but it may be YOU.

You may not believe me, but just take a listen. If your home isn’t selling, and the obvious bases are covered, you may want to look a bit harder in the mirror to figure this problem out. Here are a few ways you could unintentionally be sabotaging your own home sale.

Limiting Property Access

One of the biggest things you can do for yourself is let interested parties actually view the property. It sounds quite obvious, but if you limit the availability of views, you are driving potential buyers away. We know, weekends aren’t good, and evenings aren’t the best for you, but the goal is to sell your house. Set aside some time and make your home available to the public and get it sold!

House-showing Drama

If you are demanding to be present when you show your house, chances are you aren’t helping your home get sold.

Agents and buyers need their space to speak openly and honestly about the condition of the home. Having the owner of the house can be quite awkward and can limit what is said. Don’t be a third wheel; give the buyer some space without you being in the back of their mind.

Ignoring Advice

You are working with an agent because they are the professional in this situation. Follow their advice when they suggest an upgrade here, and a repair there. If you are ignoring their input, why did you hire them in the first place? Also, if you continue ignoring your agent, and the home isn’t sold after a period of time, they may just wipe their hands clean of it and...

Reasons to Reconsider Selling your Home by Yourself

Many metropolitan areas have seen property values increase in the past couple years. In 2014, those increases slowed significantly. But now that winter is almost over, home selling is about to pick up again.

For the homeowners who want to sell, but are waiting for their home to increase in value is quite natural. They want to maximize their profit, which means cutting out the middle man and selling themselves.

Here’s the reality: Selling your home yourself isn’t going to make much of a difference. You won’t be saving boatloads of money as you planned. The money you planned on saving from commission doesn’t add up to much when you consider the amount you would have gotten for your home if you used an agent. They bring pricing expertise, negotiating skills, and access to the table. They are professionals and can get the top dollar for your home, while getting your home sold in a timely manner.

The numbers don’t lie. It usually takes longer to sell when a home is “for sale by owner”, and sells for less. These numbers come from the National Associates of Realtors. These agents know the process quite well. It’s how they make their living so you can trust them. Here are five quick tips on why DIY is only good for home repairs and not home sales.

  1. Pricing- The biggest aspect of getting your home sold is to make sure it is priced correctly. You lose money when it is priced too low, and you don’t sell it when it is priced too high. The emotional connection between a home seller and their home creates a sense of inflated value. The professional real estate agent knows the true market value and isn’t looking at it through jaded eyes.
  2. Negotiating- Selling your home is a major transaction. The three important negotiations in the sale: the initial offer, the counter offer, and the postoffer period that includes inspections and requests for concessions. You need a skilled negotiator for this process.
  3. Exposure- To...

How to Nail Your Home Loan Interview

You are saving up for your down payment on your new house, and you’re curious to how much you will qualify for, and what the inspections might say. But one thing you are not anticipating is the home loan interview. This is where I will teach you a few tips to nailing this interview.

They will probably ask you about your housing goals, your financials, budgets, and your credit payment history. It does get rather personal, so be prepared. The following tips will make this interview be much easier for you.

  1. Dress for success – The idea here is to treat this interview like you would a job interview. There’s a certain perception of a person who is dressed nicely vs a [person who looks too casual. If dressing like a boss makes you feel more confident, then by all means dress like a boss. Dressing in a manner that exudes a se5rious commitment to paying a mortgage, your loan officer or broker will surely be willing to help you.
  2. Come prepared – This is a serious matter, so treat is as such. I would not recommend going into this ready to wing it. You will need appropriate preparation for your loan adviser to serve you to the best of their abilities. You will want to bring your past two years tax returns and W2s, most recent pay stubs, and two months of bank statements. What they want to see here is proof of income, good credit, good savings, and so forth. But the credit is the biggest part.
  3. Ask anything, no such thing as a dumb question – Have yourself a list of questions for this interview. The loan officer should answer everything you have, whether it’s about the process, what they need from you, or the timing of the approval.
  4. Respond honestly, and in a timely manner – Once your loan officer asks for the items needed from you, it’s best to get them back as quickly as possible. This helps them get your loan complete. You will be asked for items that seem unrelated and silly, but they’re serious...