What To Consider When Buying A Fixer-Upper

In your imagination it seems like a great idea – you purchase an older run-down property and you have the chance to fix it up and turn it into the home of your dreams.

To Renovate, Or Not To Renovate

However, the renovation project that is simply a quick montage in your imagination will actually take several months or years and thousands of dollars in real life.

The concept of renovating a "fixer-upper" property is exciting, but the reality is a lot of work and investment. How can you make sure that you are making the right choice for you?

One of the main advantages of buying a fixer-upper property is that you will usually be able to get the property for a much cheaper price. But is it worth it for the amount of time and money you will need to invest in the property?

Here Are Some Questions You Should Be Asking Yourself When Making Your Decision:

• Do you (or your friends and family members) have the skills to be able to perform most of the renovations yourself? If you do the labor yourself, you will be able to save thousands of dollars that you would have spent hiring contractors, which will make the renovation a much more profitable project.
• Are you comfortable with the idea of living in a construction zone, perhaps for several months or more? There will be dust and noise everywhere and you might have to cope without a kitchen or a shower for a while.
• Make sure that you have a thorough inspection of the home performed so that you can see whether the home has a sturdy foundation, good wiring and plumbing, etc. If your inspection reveals any structural issues or water damage, you might be in for more than you bargained for. You need to start with a house that has "good bones".
• If the home has serious structural, plumbing or wiring problems you should stay away – these repairs are very expensive but "invisible", so you are unlikely to recoup your costs when you sell the home.
• Add up the estimated costs for renovating the property along with the cost of the home – does it still work out to be a better deal or would you be better off buying a new property.
• What is your strategy for financing the renovations? If your only option is putting it on the credit card, you might want to think twice because this is a very high interest option.

Buying a fixer-upper property can be a great investment and can give you the opportunity to transform a run-down old house into the property of your dreams. However, make sure you that you consider the choice carefully before making your decision.

For more information about home mortgage advice and how to get approved to buy a home, contact your trusted mortgage professional. 

What To Consider When Buying A Fixer-Upper

In your imagination it seems like a great idea – you purchase an older run-down property and you have the chance to fix it up and turn it into the home of your dreams.

To Renovate, Or Not To Renovate

However, the renovation project that is simply a quick montage in your imagination will actually take several months or years and thousands of dollars in real life.

The concept of renovating a "fixer-upper" property is exciting, but the reality is a lot of work and investment. How can you make sure that you are making the right choice for you?

One of the main advantages of buying a fixer-upper property is that you will usually be able to get the property for a much cheaper price. But is it worth it for the amount of time and money you will need to invest in the property?

Here Are Some Questions You Should Be Asking Yourself When Making Your Decision:

• Do you (or your friends and family members) have the skills to be able to perform most of the renovations yourself? If you do the labor yourself, you will be able to save thousands of dollars that you would have spent hiring contractors, which will make the renovation a much more profitable project.
• Are you comfortable with the idea of living in a construction zone, perhaps for several months or more? There will be dust and noise everywhere and you might have to cope without a kitchen or a shower for a while.
• Make sure that you have a thorough inspection of the home performed so that you can see whether the home has a sturdy foundation, good wiring and plumbing, etc. If your inspection reveals any structural issues or water damage, you might be in for more than you bargained for. You need to start with a house that has "good bones".
• If the home has serious structural, plumbing or wiring problems you should stay away – these repairs are very expensive but "invisible", so you are unlikely to recoup your costs when you sell the home.
• Add up the estimated costs for renovating the property along with the cost of the home – does it still work out to be a better deal or would you be better off buying a new property.
• What is your strategy for financing the renovations? If your only option is putting it on the credit card, you might want to think twice because this is a very high interest option.

Buying a fixer-upper property can be a great investment and can give you the opportunity to transform a run-down old house into the property of your dreams. However, make sure you that you consider the choice carefully before making your decision.

For more information about home mortgage advice and how to get approved to buy a home, contact your trusted mortgage professional. 

How A Mortgage Pre-Approval Can Help You Get A Better Deal On Your Home Purchase

Oftentimes, when you are searching for a new home, it may seem obtaining a pre-approval for your mortgage loan is a waste of time and energy. However, there are some significant benefits to a pre-approval which should not be overlooked.

In many cases, buyers can use a pre-approval for leverage when negotiating with sellers and may wind up buying a home for far less than what the listed price is.

Knowing Your Limitations

One significant benefit of a mortgage pre-approval is knowing exactly how much money you will be able to borrow. This means you will be looking at homes you know you can afford.

Whether you are working on your own or you've sought the assistance of a real estate broker, there will be no question in your mind how much money you can spend.

Approaching A Seller

When someone is attempting to sell a home, chances are they are either buying a new home or they are relocating. This means they may be facing certain time constraints which can be difficult when they list their home.

When sellers are faced with multiple offers, chances are the potential buyer who has a pre-approval will often be the offer that is accepted, even if it's slightly lower than other buyers.

Benefits For The Seller

It may seem the seller has nothing to gain if they are taking less money for their home simply because you have a pre-approval. However, this is typically not the case.

Keep in mind the usual process is the buyer makes an offer, they search for a loan and they may eventually get turned down for a mortgage. This means the seller has to start the process all over again; typically 30 to 60 days after they received the first offer.

A pre-approval can give you a great deal of negotiating power simply because your lender has already validated your credit information, your employment, debt and income.

This means when you begin negotiating with a seller, the time from signing a purchase and sale agreement to closing your loan is typically significantly shortened.

Can I Have A Co-Signer For My Mortgage Loan?

Like credit cards or car loans, some mortgages allow borrowers to have co-signers on the loan with them, enhancing their loan application.

However, a co-signer on a mortgage loan doesn't have the same impact that it might on another loan. Furthermore, it poses serious drawbacks for the co-signer.

What Is A Mortgage Co-Signer?

A mortgage co-signer is a person that isn't an owner-occupant of the house. However, the co-signer is on the hook for the loan.

Typically, a co-signer is a family member or close friend that wants to help the primary borrower qualify for a mortgage.

To that end, he signs the loan documents along with the primary borrower, taking full responsibility for them. 

When a co-signer applies for a mortgage, the lender considers the co-signer's income and savings along with the borrower's.

For instance, if a borrower only has $3,000 per month in income but wants to have a mortgage that, when added up with his other payments, works out to a total debt load of $1,800 per month, a lender might not be willing to make the loan.

If the borrower adds a co-signer with $3,000 per month in income and no debt, the lender looks at the $1,800 in payments against the combined income of $6,000, and is much more likely to approve it.

Co-Signer Limitations

Co-signers can add income, but they can't mitigate credit problems.

Typically, the lender will look at the least qualified borrower's credit score when deciding whether or not to make the loan.

This means that a co-signer might not be able to help a borrower who has adequate income but doesn't have adequate credit.

There Are Risks In Co-Signing For A Mortgage

Co-signing arrangements carry risks for both the borrower and the co-signer.

The co-signer gets all of the downsides of debt without the benefits. He doesn't get to use or own the house, but he's responsible for it if the mortgage goes unpaid.

The co-signer's credit could be ruined and he could be sued (in some states) if the borrower doesn't pay and he doesn't step in.

For the borrower, having a co-signer may an additional level of pressure to make payments since defaulting on the loan will hurt him and his co-signer.

3 Important Credit Considerations Before You Apply For A Mortgage

Before applying for a mortgage, borrowers need to build a plan for how they are going to manage their credit both going into the mortgage process and as they navigate through it.

Lenders like to know that borrowers have a strong likelihood of repaying the loans they take out and, as such, look carefully at an applicant's credit.

Here are three must-dos that can help an applicant turn into a home owner.

Pre-Checking Credit Reports

Before even starting the home loan application process, borrowers are well served to check their own credit reports and see what appears. If everything is correct, their credit score can help them understand what type of loans are open to them and what they might cost.

When errors come up, pre-checking gives the applicant time to have the errors corrected before applying for a loan.

When an applicant has credit issues, knowing gives him time to fix them. He can pay down balances, add new lines to his report or take other action in advance of applying.

Manage The Debt To Income Ratio

Mortgage lenders calculate a borrower's ability to borrow based on the debt-to-income ratio. They add up the proposed mortgage payment and the other debt payments and divide them into his monthly gross income.

If he has too much debt or not enough income he won't get the loan he wants.

To manage this, borrowers have two choices.

One is to earn more by taking on a second job. The other is to have lower payments.

Paying down credit cards can be a quick way to solve this problem.

Avoid Taking On New Debt

When an applicant takes on more debt while applying for a home loan, it can cause three problems:

1. The inquiry can drop his credit score.
2. The payments can change his DTI.
3. The lender might not feel good about a borrower taking on more debt.

Getting a mortgage can be tough. The key is to understand what lenders want to see and give it to them.

If you need help understanding credit and how to prepare for your mortgage transaction, contact your trusted mortgage professional.

What's Ahead For Mortgage Rates This Week - February 10, 2014

Residential Construction Spending Up

Last week's mortgage and housing-related reports began with Construction Spending for December, with a reading of 0.10 percent or a seasonally adjusted $930.5 billion. December's reading fell short of an expected increase of 0.40 percent.

Spending for private sector projects rose by 1.00 percent; of this amount, residential construction spending increased by 2.60 percent and private sector spending for non-residential construction fell by -0.70 percent.

Although construction spending posted a fractional gain, the good news is that construction spending is currently dominated by residential construction and that due to inclement winter weather, any gain in construction spending during December could be considered positive.

Jobs and Unemployment Data Mixed

Employment related reports dominated the week's economic reports. The ADP employment report for January indicated that only 175,000 new private sector jobs were added for the lowest reading in five months.

December saw 227,000 new jobs. Severe weather conditions were the cause of lower than expected jobs growth. Month-to-month job reports can be unpredictable, but quarterly results provided positive information as the three month period ended in January 2014 saw average monthly job growth of 230,000 jobs as compared to an average reading of 220,000 jobs added during the same period a year ago.

New Jobless Claims came in at 331,000, significantly less than the prior week's reading of 351,000 new jobless claims, and also lower than the forecast reading of 337,000 new jobless claims. Analysts said that these readings supported gradual improvement in the economy.

The Bureau of Labor Statistics (BLS) released its Non-Farm Payrolls report for January, which indicated that 113,000 new jobs were added during the first month of 2014.

This reading was better than December's reported 75,000 jobs added, and suggested to economists that bad weather was not the underlying cause of the dip in jobs growth. Healthcare and government sectors cut jobs in January.

With lower job growth, a higher unemployment rate would seem likely, but the national unemployment rate dropped to 6.60 percent from last week's reading of 6.70 percent.

The Federal Reserve's FOMC Committee has established a benchmark reading of 6.50 percent as one of the economic indicators it uses in decisions concerning federal stimulus programs.

Readings for labor and unemployment are important for the overall economy and housing markets; consumers worried about jobs that they might lose or jobs they cannot find likely won't be buying homes in the near term.

Mortgage Rates Drop

According to last week's Freddie Mac's Primary Mortgage Market Survey, average mortgage rates dropped across the board. The reported rate for a 30-year fixed rate mortgage was 3.23 percent, down from the prior week's 3.32 percent. Discount points were unchanged at 0.70 percent.

The rate for a 15-year fixed rate mortgage fell by seven basis points to 3.33 percent. Discount points ticked upward from 0.60 to 0.70 percent. The rate for a 5/1 adjustable rate mortgage fell by four basis points to 3.08 percent with discount points unchanged.

What's Coming Up This Week

This week's scheduled economic news includes Weekly Jobless claims, Freddie Mac's report on average mortgage rates, along with retail sales and retail sales except automotive sales.

The University of Michigan Consumer Sentiment report will be released Friday.