How much should you expect to pay in closing costs to buy a home

So you want to buy a house but you’re not sure how much money you need for closing costs on top of the down payment.  Well, here is an overview of what you can expect to pay in North New Jersey on a home purchase of $500,000.

Information was provided by:

Paul Davis from Annie-Mac Home Mortgages                                 
pdavis@annie-mac.com                                                     
856-334-3181

When you receive a loan estimate (LE) from a lender, there are approximately six categories of charges, collectively known as closing costs or sometimes called settlement charges.

The categories are as follows:

Origination charges – these are the costs for originating the loan and any loan discount points you would elect to pay to discount the interest rate. The origination charges vary from bank to bank. Banks are subject to an incredible amount of compliance requirements and the additional staffing required to meet the compliance regulations has greatly increased the cost for banks to originate a loan. You can expect to pay anywhere from $500 up to $2,500 for origination charges. The origination charge is often called the bank fee.

Services you cannot shop for – the charges in this category include the credit report, the flood certification, tax service, lender’s title insurance and appraisal fees. The credit report is anywhere from $15 to $30 per applicant. The flood certification, which is provided by FEMA, is $25. The tax service is typically $75. The lender’s title insurance policy has to be enough to cover the amount of the mortgage. In this scenario, figure $1700 for the necessary coverage. The cost of the appraisal is determined by the type of loan and the type of home that is being purchased. An FHA appraisal tends to be $50 to $75 higher than an appraisal on a conventional loan. Expect to pay between $375 and $475 for an appraisal on a single family home. Appraisals performed on multi-family homes and homes to be used as investment properties are more expensive because more work is required by the appraiser.

Services you can shop for – the charges in this category are for items such as the title services, any elective inspections or treatments, and attorney fees. You can expect title services to cost an additional $1200-1400. The home inspection could cost anywhere from $600 up to $1,000 and typically includes a termite inspection. Often times a client will choose to have the grounds of the subject property checked for underground tanks. The cost of these sweeps are typically below $400. A land survey, while not required by the lender and typically not required by the title company, is money well spent to firmly establish the legal boundaries of your subject property. These land surveys can run from $450 up to $1,000.  Attorney fees vary but you can expect to pay around $1200 to $1500.

Taxes and other government fees – each County has a charge to record the deed and the mortgage at the County Courthouse. Expect to pay between $400 and $500.

Prepaids – prepaids are for items such as home insurance premiums (the lenders require 12 months to be paid up front), any mortgage insurance premium if required, and prepaid interest which is collected at settlement to cover the interest that accrues from settlement day until the last day of the month. Also, any property taxes that are due within 60 days of settlement are typically collected.

Initial escrow payment at closing – if you elect to have the lender collect for the property taxes and the homeowners insurance (and flood insurance when required), this is known as ‘escrowing’. The lender will project how many months of taxes and insurance are required to be collected at settlement so that, with your monthly contributions, the escrow account will have sufficient funds to pay the taxes and insurance premiums as they come due.

In total, these costs amount to roughly 2-5% of the purchase price of the home and are in addition to the cash down payment you will need for the loan.

For more information to go: http://www.urbansuburb.com.

The Split-Level Home Makes a Come Back

Photo by The Cleary Company. See more traditional exterior designs

Photo Credit: Houzz

A split-level home is a style of house in which the floor levels are staggered. There are typically two short sets of stairs, one going up to a bedroom level, and one going down to a basement level. The basement level is usually at grade level or slightly below and finished, and often contains additional living area.  Sometimes there is an additional basement level, below grade, which is frequently unfinished. Split-level houses originated in the 1950s as an alternative to the one level ranch home.  The design proliferated in the 1960s particularly in the suburbs where sloped terrains and smaller lots could not necessarily accommodate a more sprawling ranch design.  No other architectural style elicits such reaction as the split-level home but long after the Brady Bunch era, this style is having a resurgence in popularity.

There are several reasons for the split-level’s increase in popularity:

• Compared to more prolific architectural styles, like the colonial, dollar per square foot, the split-level gives you much more bang for the buck
• The proportion of living space to bedroom space is usually greater in a split-level design versus other architectural styles which are more vertical like victorian styles
• They usually have a more open floor plan with the kitchen, dining and living rooms in close proximity and often having no or partial walls
• The garage is typically attached providing easy access to the home and not taking up valuable yard space for a detached garage
• The “split”of the more formal entertaining spaces and more casual family spaces lends itself well to family living.  There is space for everyone!

 

For more information to go: http://www.urbansuburb.com.

If Your New Year’s Resolution is to Buy a House This Year

 

Here are 3 things you should do immediately if you plan to buy in 2017:

1. Clean up your credit.  Your credit score is one of the most important determinants of not only getting a mortgage but also what mortgage rate you qualify for.  But errors on your credit report can bring down your credit score and take time to fix.  Don’t wait until you find that home you want to buy to find out there are any issues.
2. Talk to a mortgage broker and get pre-approved.  While an online mortgage calculator will give you some idea of monthly payments, you will need a pre-approval to buy that house you love.  If you plan to buy in the next 6 months go ahead and get the pre-approval so you are ready.  Most pre-approvals are good for 6 months.  A mortgage broker will also explain what you need in terms of cash for the down payment and closing costs so that you can plan and save.  Many people believe you need 20% cash down payment but there are many loan programs out there that don’t require that much down.  So talk to a mortgage broker.
3. Educate yourself on the market.  I am happy to work with people early on in the buying process.  I give tours of different towns and provide information and resources so that my clients can find the right place to call home.  But deciding on the right town is just one thing, there is also understanding what houses go for in that town and what factors impact price and by how much.  I not only show people houses but then show them what they actually sell for, since in some of the markets where I work many houses go well over ask.  There is at least a 2-3 month lag between houses coming on the market and selling, so it is best to plan ahead.  This will most likely be the biggest investment in your life, so just like any other investment make sure you have the knowledge to empower your decision making.

For more information go to http://www.urbansuburb.com or call me at 201-463-3754.

 

Buying a Short Sale

What is a short sale?

A short sale occurs when a property is sold at a price lower that the amount the homeowner owes on the mortgage, and the homeowner’s mortgage lender or lenders agree to the “short” payoff.  The important thing here is that the lender or lenders must agree to the short sale.

How can a home end up as a short sale?

The homeowner may be unable to continue paying the mortgage or the market value of the home could have decreased below the amount of equity the seller has in the home and the homeowner is not able to make up the difference.  The homeowner is better off selling as a short sale than waiting for the bank to foreclose because the impact to the homeowner’s credit score is usually not as bad with a short sale as with a foreclosure.  The bank also avoids the process of foreclosing and reselling the home.

How can a buyer tell if a property is a short sale?

The easiest thing to do is to ask your real estate agent, who has access to databases which provide such information.  Property listings may also provide this information but not always.  A buyer should look for wording such as: “third party approval required”, “lender approval required”, or “subject to bank approval”.

What are the downsides of buying a short sale versus a traditional sale?

There are many issues with buying a short sale that buyers must be aware of up front when deciding if a short sale purchase is for them.

1. The list price may not be the price.  Often a short sale property is listed before the bank has approved the price.  There is the possibility that the buyer will make an offer and the seller accept it only to have the bank come back with a higher price.
2. You are on the bank’s timeline.  Once the offer is submitted to the lender, it typically takes 1-2 months to get a response from them, but it can take up to 9 months or even longer to get a response.  Then once approved, the lender will want the property to close quickly.  This uncertainty in timing can be an issue for buyers especially if they need someplace to live.
3. You need to bear some risk up front before you even know if the lender will accept the offer.  While you are waiting for the lender’s response, you will still incur costs associated with the transaction such as attorney’s fees, the property appraisal for the purchase mortgage, and inspections.
4. The home is sold “as is”.  Having made the decision to short sell their property, it is unlikely the sellers will make necessary repairs and lenders usually do not negotiate inspection items.
5. Some financing options may be difficult with a short sale.  An FHA loan in particular may be difficult in buying a short sale because there could be issues such as peeling paint, asbestos, missing roof shingles…etc that an FHA appraiser notes.  These would then have to be fixed for the FHA loan to close.  If a home requires significant work, a renovation loan such as a Fannie Mae Homestyle loan or an FHA 203K probably makes more sense.  Talk to your mortgage broker before making an offer on a short sale to make sure financing won’t be a problem later.

Thinking about buying a short sale, talk to me.  Here is a review from a client who recently purchased a short sale through me in Montclair.

We are so grateful to have had Diane Russell help us purchase our lovely home in Montclair. We had been working with Diane for about a year before we first saw our house. It was listed as a short sale shortly after we made our first of many offers on it. We knew that this was going to be a complicated process. We were told that there were no guarantees that we would even get the house and there were several risks involved in pursuing the house. Despite the potential for loss, we really loved the house and felt confident that Diane would help us do everything possible to make it work. Diane worked diligently for over six months to make sure that we had the best chance of purchasing the house. She was consistently optimistic and patient and used her resources to assess the risks involved and figure out what we needed to do to buy the house at the right price. She was steady, professional, and effective when communicating on our behalf with attorneys, banks, the seller’s representatives, inspectors, contractors, and the town of Montclair when necessary. She was always responsive and willing to answer any questions we had throughout the process. We highly recommend Diane to anyone looking to purchase a home in the Montclair area.

-Elizabeth Cornwell 

For more information or to talk to me about buying a short sale, e-mail me at dianeirussell@yahoo.com or call me at 201-463-3754.

How a mortgage preapproval helps you in the home buying process

Buyers are often eager to get their home search started but here is why you need a mortgage preapproval before you start your home search.

• Most importantly you need to know how much home you can afford.  If you are searching for homes in the $600,000s and then find out you only qualify to buy a home up to $450,000 based on what you have for a down payment and can borrow, you might be disappointed in what that reduction in buying power means in terms of house size, features and location.
• Not all home loans are the same and depending on the loan type that best suites your financial picture and personal situation, there are different requirements and loan amounts you could qualify for.  It is best to speak to a mortgage professional to decide what is the best loan product for you and what those mean in terms of down payment requirements and monthly expenses.
• Getting a preapproval before you shop for a house gives you time to fix unexpected errors on your credit reports.  Those errors do happen, such as a bill that was paid that still shows up as a  delinquency, a credit card you didn’t open that is on your report or in my case, a credit card company reported my death to the credit reporting agencies.  That one was interesting to clear up!  Needless to say it took time.
• In a competitive market which we are currently in, at least in the Montclair area, you won’t be taken seriously making an offer on a house unless you have a preapproval included in the offer package.
• Because of the competitive market, the timelines are accelerated.  It is not uncommon for a house to come on the market or showings to begin Thursday or Friday and offers being due the following Tuesday afternoon.  If you have not already started the process to get preapproved, that can be very rushed to get all the paperwork in and also contemplate a strong offer.  This can create additional stress on an already stressful multiple bidding situation.
• Lastly, having the preapproval means that when you do find that dream home, the process can be accelerated because the lender has the majority of the paperwork needed to ultimately provide the mortgage commitment.  Some lenders even offer different levels of preapproval further simplifying the process of the loan application after the offer to purchase is accepted.

For more information or if you would like a referral to a mortgage broker, please contact me at http://www.urbansuburb.com.

Knob & Tube Wiring

 

What is Knob and Tube wiring?

Knob and Tube wiring was an early standardized method of electrical wiring used from about 1880 to the 1940s.  Knob an Tube wiring gets its name from the ceramic knob used to hold wires in place and the ceramic tubes that act as protective casings for wires running through wall studs or floor joists.  The system is considered obsolete but many older homes can still have some evidence of knob and tube particularly if the electric has not been updated.  The picture above was taken at a house I recently sold in Glen Ridge.

Why is Knob and Tube a concern?

Knob and Tube can be a safety hazard.  According to Anderson Electric, the dangers from this system arise from its age, improper modifications, and situations where building insulation envelopes the wires.  Insulation around the Knob and Tube wires will cause heat to build up, and this creates a fire hazard.  It also has no ground wire and thus cannot service any three-pronged appliances.  Wiring must be grounded in order to be used safely in wet locations such as kitchens, bathrooms, laundry rooms and outdoors.

Why is this important in a real estate transaction?

Other than the safety concerns noted above, the other complication of Knob and Tube wiring is the difficulty it can cause in obtaining home owners insurance.  Many insurance companies will refuse to insure a house with Knob and Tube wiring.  Others will command a higher premium or will insist the wiring be updated within a certain amount of time.  Removing Knob and Tube wiring is also costly.  According to Angie’s List, the cost is around $8000 to $15,000 to rewire a 1,500 to 3,000 square-foot home.  In my experience it, can be even higher.  This also does not take into account the repairs needed to fix the damage made to walls to remove the outdated wiring.

If you are planning on selling your home and know you have Knob and Tube, I recommend that you proactively remedy the situation.  Don’t wait for the buyers’ inspector to find the issue and potentially lose a qualified buyer.  If you are buying a home from this era, make sure you do a home inspection and hire a qualified and licensed home inspector who can look for evidence of Knob and Tube.

For more information go to http://www.urbansuburb.com.

 

All About Reverse Mortgages

Reverse mortgages can be a great option for retirement but many people do not know about this financing tool.  Here Liz Ciccone, Reverse Mortgage Specialist with RMF (Reverse Mortgage Funding) answers some frequently asked questions about reverse mortgages.

What is a reverse mortgage?

A reverse mortgage is a home-secured loan that’s exclusively for homeowners and homebuyers age 62 and older.  It allows borrowers to convert some of the equity in their home into income-tax-free funds.  (Not tax advice, consult a tax professional.)  There are different loan products to choose from that offer you options on what interest rate you are charged, how much money you can access, and how you receive your payments.  Unlike a regular “forward” mortgage or traditional home equity loan or home equity line of credit, there are no monthly principal and interest payments as long as at least one of the borrowers lives in the home as their primary residence.  As with any mortgage, in order for the loan to remain in good standing the borrower must also keep up with property-related taxes, insurance and upkeep.

How is a reverse mortgage different from a traditional home equity loan or home equity line of credit?

A reverse mortgage offers certain advantages:

• With a traditional home equity loan or home equity line of credit, you must make monthly principal and interest payments on the balance while you live in the home – with a reverse mortgage, you don’t.  Your reverse mortgage balance, including accrued interest and fees, does not have to be repaid until you sell the home or permanently leave the home, as long as you meet your loan obligations (which includes keeping current with property-related taxes, insurance and upkeep).
• With a reverse mortgage line of credit, the unused amount in your credit line actually grows over time – giving you access to more available funds.  This means that the less you take out up front, the more will be available for you later.
• And the lender cannot “freeze” or reduce the line of credit, as long as you fulfill your loan obligations – so it will be there if and when you need it.

What are the basic requirements for a reverse mortgage?

To be eligible for a reverse mortgage, you’ll need to meet the requirements set by the federal government:

• All borrowers must be age 62 or older (this applies to all co-owners listed on the home’s title).
• The home must be your principal residence.  And it must meet standards set by the United States Department of Housing and Urban Development (HUD) on property type and condition.  You may be able to use your reverse mortgage to pay for any required repairs in order to meet these standards.
• Eligible property types include single-family homes, 2-4 unit properties, manufactured homes meeting certain criteria, condominiums that are approved by the Federal Housing Administration (FHA), and townhouses.  Co-ops do not qualify.

How much money can I get?

The specific amount depends on several factors, including:

• Your age
• The type of reverse mortgage you select
• Current interest rates
• Appraised value of your home
• Federal Housing Administration (FHA) lending limits

HUD also regulates the amount of money that can be withdrawn during the first year of your reverse mortgage.  This is to help preserve your home equity for a longer period of time.

When will the principal and interest charges become due?

The loan must be paid in full when one of the following occurs:

• A “maturity event” – the loan becomes due and payable when the home is sold, or the borrower or non-borrowing spouse meeting certain criteria no longer occupies the home as their principal residence (i.e., passes away, moves out, or vacates the property for more than 12 months).
• You fail to pay property taxes or homeowners insurance.
• You let the property deteriorate beyond what is considered reasonable wear and tear, and do not correct the problem.

Can I use a reverse mortgage to purchase a home?

Yes, with the HECM (Home Equity Conversion Mortgage) For Purchase loan, qualified borrowers can use their loan proceeds to buy a home that better suits their needs and lifestyle.  It’s a home financing option that can make it easier for buyers age 62 and older to afford the home they want, while preserving more of their saving.

Provided by:

Liz Ciccone
HECM Specialist
NMLS #781623
(973) 600-5124

For more information go to http://www.urbansuburb.com

The Benefits of Staging a House for Sale

Before and After Staging by Stanton Home Staging Services

What is staging?

Home staging refers to the process of preparing a home for sale in order to appeal to the greatest number of potential buyers.  The goal is to help buyers visualize themselves in the home and create an atmosphere so that the buyers feel “at home” there.   Research shows that buyers make up their minds to purchase a home within  60 seconds of stepping in the front door.  And you only get one chance to make a first impression!

Why is staging important?

Simply put, staged homes sell faster and for more money.  The National Association of Realtors has stated that staged homes sell 50% faster and for more money than non-staged homes.  Statistics show average price increases of 6.9% to 10%.

Which rooms are the most important to stage?

According to a recent report by the National Association of Realtors “2015 Profile of Home Staging”, in order of importance are: the living room, kitchen, master bedroom, dining room, bathroom, children’s bedroom, then guest room to stage.

How much does staging cost?

According to the “2015 Profile of Home Staging”, the median spend was $675 per home staged.  This amount can increase substantially if rental furniture and art are required.

What is usually involved in staging?

At a minimum, it is decluttering, thoroughly cleaning, and addressing any major aesthetic issues such as outdated fixtures or very personal paint colors.  A more complete staging process should start with a consultation in which a stager will take in the most marketable properties of a home and look to accentuate those.  The stager may recommend items to be removed, suggest new furniture placement or paint colors, rearrange art and accessories, or take measurements for rental items.  An example would be to rearrange furniture to accentuate a fire place or return a formal dining room currently used as a home office to its original intended purpose.  The goal is to create a warm inviting atmosphere that does not leave much to the imagination.

For more information or to ask us about staging your home for sale: go to http://www.urbansuburb.com or contact me at 201-463-3754.

The Tax Benefits of Home Ownership

 

Provided by:

Albert Rodriguez CPA

248 Lorraine Ave, 4^th floor

Montclair, NJ 07043

Rodriguezcpa.net/973-783-1040

 

The deductibility of homeowner expenses is a significant area of tax savings. Here is what is deductible from your taxes if you own your home:

Mortgage Loan Interest

Interest on your main home and a second home are generally deductible as an itemized deduction. The qualified loan(s) can be first and second mortgages, home improvement loans or a home equity loan.

Mortgage Costs

Costs paid in advance as “points” and loan origination fees at closing are deductible.

Refinancing “Points”

Points paid during refinancing can be deductible, but must be spread out in equal amounts over the life of the new loan.

Real Estate Taxes

Property taxes paid on your main and second homes are deductible as an itemized deduction.

Rental Income Less Than 15 Days

If you rent your home for less than 15 days during the year, you do not need to claim the income.

Assessments

Expenses for maintenance or repair are deductible.

Home Office

Homeowners may also qualify for a home office deduction if certain qualifications are met. The key criteria for a home office are:

• Principal place for your business
• Where your patients, clients or customers meet with you in the normal course of business
• The area is used exclusively and on a regular basis for business
• The area is used at the convenience of your employer
• The area is the sole place for storing products used for your business
• A place to conduct the administrative or management activities of your trade or business, provided there is no other fixed location for such activities

You are limited to home office deductions equal to but not greater than the gross income of the business minus other business activity expenses.

These charges are not deductible:

Lender Imposed Closing Charges

Charges related to the mortgage loan, but not loan interest, are generally not deductible. These include appraisal fees, notary fees, preparation and loan registration fees.

Seller Paid “Points”

The seller may not deduct “points” paid on behalf of the buyer.

Homeowners Insurance

The insurance premiums are not deductible even if the payments are escrowed as part of your monthly payment.

State and Community Charges

Charges by the state or township for services such as water and sewer are not deductible.

Assessments That Improve Your Property

State and local assessments such as sidewalks are generally not deductible.

When you sell your home you may be able to exclude up to $500,000 (married couples) or $250,000 (single person) of your gain when selling your house. This tax-free gain can be used once every two years for your primary residence. To qualify for the gain exclusion, you must also meet a two-year out of the last five-year residency requirement. But even this qualification has some exceptions if you are required to move due to unforeseen circumstances. In addition, qualified home improvements can be added to your home’s value to reduce the possible gain. Home improvements include such things as adding a room, finishing an unfinished basement, adding a new roof, or paving your driveway. Repairs and maintenance are not considered improvements unless they are done in conjunction with a remodeling project.

 

This article provides only summary information, for specific questions about your situation, please contact your tax professional.

For more information go to http://www.urbansuburb.com

 

Landscaping for Selling Success

Before

 

After

 

 

 

Provided by:

Cynthia Corhan-Aitken

Twig & Vine Design, LLC

http://www.twigandvinedesign.com

 

When the time comes to put your home on the market, there is a certain protocol that takes place.  A realtor comes in, walks the house, a price is decided upon and then it begins.

The decluttering phase!  Take away family pictures, clear the countertops in the kitchen to make it look bigger, clean the carpet, fix this, repair that.  But what about the outside of the house, does that go through the same process?  Shouldn’t it be decluttered and cleaned up as well, after all it is the first impression for a prospective buyer.

Since the first impression is the curb appeal, the entry to the front door should be carefully considered.  Looking back to when we bought the house we lived in, my first impression was not a good one.  When we drove up we could barely see the house for the 2 huge pine trees on either side of the front entry.  They covered the house and once inside made the house dark and dreary.  In addition, the landscaping in the back of the house as well as the front was overgrown and a bit of a bramble.  Luckily for our seller, the inside made up for the neglect of the outside and being a landscape designer and a big gardener, the outside offered a chance to really make a change and put a stamp of my own on a 100 year old house.  To make this point though, it turned out someone I know also looked at this house.  They were seriously considering it and were ready to make an offer but what held them back was the gardens, they thought it would need too much work and were frightened off by that.

In its overgrown state, it looked overwhelming and daunting.

So…how to landscape for selling success?  I am not a realtor nor a sales person of any sort but I do know curb appeal and here is my advice.  Stand in front of your house, maybe even look at it from across the street.  And look at it, really look at it.  Not like someone who has lived in it, has loved it, has emotional ties to it, look at it like someone will look at it with no emotion at all.  Now that you have done that, what do you see, what do you really see?  Are the front windows blocked by overgrown evergreens that have been there for years.  Are the hedges, leggy and spindly and just unattractive.  Are the shrubs overgrown, out of shape.  Maybe it is time for a good pruning?  Maybe it is time to declutter the yard and make the first impression of your house a happy and welcome one.   Once the garden “decluttering” has been accomplished think about adding some colorful annuals at the boarder.  They will bloom on and on and will continue to keep things looking nice.  In addition, consider adding some flowering pots for a finished look.

The only problem, once you are done you might not want to leave.

Have fun!