Talk to a Lender. You would be surprised at what options are available.

There is increasing difficulty for first-time home buyers to save for their down payment as indicated in the graph.  Several factors that contribute to this trend include rising rents, rising home prices, student loan debt and flat wages.


Some would-be buyers feel they cannot buy a home today but a large part of those decisions may be based on inaccurate assumptions.

Nine out of ten non-owners believe they need ten percent or more for a down payment. The typical down payment for first-time buyers is six percent. VA has 100% loan programs as well as USDA for certain qualifying areas and buyers. FHA is known for 3.5% down payments. And FNMA and Freddie Mac have down payments as low as 3% and 5%.

There are gift provisions available for buyers who have an “angel” who would like to help them with their down payment.

There are ways to borrow against a person’s qualified retirement program for a down payment. It isn’t necessarily limited to the buyer but could include a relative. Interestingly, a son or daughter can borrow against their retirement to benefit their parents.

In some respects, having good credit and sufficient income is more important than the down payment. Don’t rely on “common knowledge.” Get expert advice and counsel to see if there is a way to advance your dream of owning a home.

What you should .expect from a Realtor

Businesses must treat customers fairly if they expect to do business with them again or get recommendations to their friends. Customers of stores like Nordstrom’s understand that a salesperson is an employee and represents the company.


The line becomes less clear in some industries, especially ones that involve real estate. Agency is a legal relationship authorizing a person to act for or in the place of another. It involves responsibilities that exceed treating a person fairly.

The duties a buyer or seller can expect to receive from a real estate salesperson or broker include but are not limited to honesty, accountability, full disclosure, representation and reasonable skill and care. Buyers and sellers might additionally expect representation, obedience, loyalty and confidentiality.  State laws can differ on specific duties.

Mortgage and title officers are limited in their duties to the buyer to honesty and accountability and specific requirements under the federal Real Estate Settlement and Procedures Act.

A special relationship with a real estate agent makes it advantageous to have them coordinate efforts with the other professionals in the home buying process. Since most buyers’ and sellers’ transactions are infrequent, the agent can bring valuable experience to the transaction.

Every buyer and seller should discuss the level of service they expect from the real estate professional they work with. Another good question is what happens if the purchase and sale are within the same company.

Why Do We Want You to Get Pre-Approved? Here's Why!

Surely, you remember being a child at an amusement park when after having stood in line with your friends and family, waiting to get on a terrific ride, you discovered the sign that read, “you must be this tall to ride.”


Not only was it disappointing, it was slightly embarrassing. You never want to go through that again.  (I still go through it! ;))

A remarkably similar situation occurs when people are buying a home. After finding the right home and negotiating the contract, they find out that they don’t measure up financially.  It’s not something that anyone wants to go through if they have a choice.

Regardless of what you think you know, if you’re buying a home with a loan, you need to physically visit with a trusted mortgage professional before you get serious.

• You’ll find out your credit score which will directly affect the mortgage rate you’ll pay. 
• You might discover blemishes on your credit that possibly can be corrected. 
• You’ll even get a pre-approval letter that you can submit with an offer which could dramatically affect your negotiations in the current competitive market.

Some rides don't turn out to be as good as you thought they were going to be.  A person certainly doesn’t want that disappointment with a lender. Contact me for a recommendation of trusted mortgage professional.

Get Your Mortgage In line before searching for a home.

While low inventory is certainly challenging buyers, not having a clear understanding of mortgage financing is also causing issues. By having good information, they are able to make better decisions as well as compete favorably.


Most buyers don’t realize how the mortgage rate is determined for a borrower. While annual income is important, a good credit score, low debt-to-income ratio, loan-to-value ratio and ability to repay the loan are vital concerns.

A variety of myths seem to permeate the market such as rates are set and released once a day; FHA loans are for first-time buyers only; pre-qualification commits the lender; lender fees are not negotiable and adjustable rate mortgages always go up.
Misunderstanding of actual mortgage practices may be a contributing factor to why more buyers are not taking advantage of what are still historically low mortgage rates.

While getting solid information about mortgages and being pre-approved from a lender are very important, it is only one step in the home buying process. Success in buying a home in today’s market should begin with a real estate professional who will coordinate all the different parts of the transaction including mortgage, title, insurance, inspections.

When is the right time to buy?

“More has been lost due to indecision than was ever lost to making the wrong decision.” Interest rates have as much effect on housing costs as price and when they are both trending upward, it can be very expensive to wait.


There can be some legitimate reasons for postponing a purchase such as needing to save the down payment, improve your credit or waiting to find out about a possible transfer. The problem is that prices and interest rates could, and very likely will, go up in the future.

If the price of $250,000 home went up 5% and the interest rate went from 4.5% to 5.25%, the payments would increase by $176.42. The additional cost over a seven-year period would be close to $15,000.

The questions that indecisive buyers need to ask themselves is “how am I going to feel knowing that if I had not waited, I could have been living in the home for less money?” and “What would I have spent the money on if I didn’t have to make the larger payment?”
Use the Cost of Waiting to Buy calculator to find out how much indecision may be costing you.

1031 Tax Exchange- Great option for investors.

The cartoon character Wimpy would say that he’d gladly repay you Tuesday for a hamburger today. Some real estate investors say a similar thing to Uncle Sam to be able to hold on to their proceeds from the sale of an investment and agree to pay the tax later. 

The benefit of a 1031 exchange is that it allows the investor to defer the tax due from the sale into the replacement property. This allows more money to be reinvested. In the example shown, the investor has 27% more to invest now by deferring the tax into the future.

The property to be exchanged must be like-kind which means real estate for real estate.   Rental property can be exchanged for other rental or investment property.  Personal-use properties like a first or second home are not eligible for exchanges.

There are some critical dates that restrict the validity of the exchange. The investor must identify the replacement property within 45 days of the sale of the relinquished property. The replacement property must be closed within 180 days of the sale of the relinquished property.

• The replacement property must be equal to or greater in value, equity and debt than the one being relinquished.
• All net proceeds must be used in acquiring the replacement property.

There are specific rules involved in constructing a valid tax-deferred exchange. There are three professionals that should be involved: a tax advisor, a real estate professional and a qualified intermediary who will assist in the acquisition and transfer of both the relinquished property and the replacement property. Additional information can be found in IRS Publication 544.

Know your mortgage options

During the banking crisis in the Great Recession, certain types of mortgages were unavailable that are once again being offered. Fortunately, the 80-10-10 mortgage is one of those making a reappearance and it can save borrowers a considerable amount of money. 

The objective of an 80-10-10 mortgage is to avoid the expense of mortgage insurance for buyers wanting a 90% loan. A buyer can obtain an 80% first mortgage and a 10% second mortgage with a 10% down payment and not be required to have private mortgage insurance.

For example, a buyer could put $30,000 down on a home priced at $300,000 and get an 80% first mortgage without mortgage insurance.

The borrower could get a second mortgage, either through the same lender or a third party.
In the example, the 80-10-10 would save a buyer $193.71 per month which can be a considerable amount of money over a ten-year period. The interest rate on the second loan will be higher than the first because there is more risk.

Helping buyers make better choices is a valuable service real estate professionals can provide. Having the right tools and information can make the decisions easier to understand. Using an 80-10-10 calculator, you can see what the savings might be for your situation.

Plan Your Estate Properly - Be Prepared

An estate plan is a collection of documents to ensure that your wishes are carried out because of death or incapacity to make decisions for yourself. Spouses, minor children, adult children, property and investments can all be factors that should motivate a person to undergo the process.

Will – this document specifies the way a person wants to manage and distribute his/her assets after their death. When a person dies without a will, the laws of the state where the person resided will determine the distribution of the property.

Durable Power of Attorney – this document grants to a designated person the authority to act on behalf of the principal in in legal affairs should the principal become incapacitated. Among other things, this would allow the attorney-in-fact to buy and sell property on the behalf of the principal.

Healthcare Proxy – this document grants that a designated person can legally make healthcare decisions on behalf of the principal when they are incapable of making and executing specific decisions stated in the proxy.

Living Will – this document directs physicians with respect to life-prolonging medical treatments in case they become unable to communicate their decisions.

Hippa Release – this document allows heath care providers to release your health care information to a designated person. Otherwise, they are required by federal law to protect the privacy of your health information.

Letter of Instruction – This document contains information and instructions about a person’s wishes upon death. It is intended to offer details on whom to contact and where to find important documents about personal and financial matters.

Requirements of these documents can vary from state to state and legal advice should be obtained. If you need a current estimate of value on real estate that may be involved, usually a price opinion from a licensed real estate professional will suffice. It would be my privilege to assist you with this at no cost or obligation.

Paying Cash? Need a tax deductions?

The National Association of REALTORS® reports in its 2016 Profile of Home Buyers and Sellers that 12% of all buyers paid cash for their home.
Before paying cash for a home, a buyer should decide if they might put a loan on the home in the near future.  It may affect the ability to deduct the interest on a mortgage placed on the home at a later date.

Homeowners can currently deduct the interest on up to $1 million of acquisition debt which are the borrowed funds used to buy, build or improve a home. Paying cash for a home establishes acquisition debt at zero. The only deductible interest to the owner would be home equity debt which is limited to $100,000 over acquisition debt.
Paying cash certainly seems like a simple decision but it may limit a homeowner’s ability to deduct interest on a future mortgage. You can get more information about this from IRS Publication 936 or from your tax professional.

What are first time home buyers doing now?

Yogi Berra said he’d give his right arm to be ambidextrous. While most first-time home buyers are not going to that extreme, it is interesting to see what sacrifices are being made according to the National Association of REALTORS® 2016 Profile of Home Buyers and Sellers.

• 43% - cut spending on luxury or non-essential items
• 34% - cut spending on entertainment
• 27% - cut spending on clothes
• 14% - canceled vacation plans
  9% - earned extra income through a second job
• 7% - sold or decided not to purchase a vehicle
• 44% - did not need to make any sacrifices

Forty-percent of first-time buyers experienced some difficulty during the mortgage application and approval process. Single, male buyers expressed a higher incidence of difficulty than single females and married or unmarried couples.
Pre-approval from a qualified mortgage lender before the home search process begins is still considered the best advice for all buyers who will purchase with a mortgage. Your real estate professional can make recommendations for a loan officer that could help you avoid unnecessary aggravations.

Getting a Mortgage can have benefits than borrowing from a family member.

Occasionally, when dealing with close relatives who might also become heirs, signing a note and handling the paperwork properly may seem like a needless effort but it could mean the difference in being able to take a legitimate interest deduction.

Home mortgage interest is deductible only if the loan is a secured debt which involves the buyer signing an instrument like a mortgage or deed of trust that makes the ownership of the home security for the debt. That instrument must then be recorded or otherwise perfected according to state or local law and the home, in case of default, must be able to satisfy the debt.

In a family situation, a parent, grandparent or other relative may decide to loan a buyer the money to purchase a home because they have it available and it isn’t earning much in certificates of deposit. They offer to loan it for a rate equal to what a conventional lender is charging but without the fees.
While it may appear to be a win-win situation, there could be problems if things are not done correctly. Even if the borrower makes the payments, they are not entitled to an interest deduction unless three criteria are met: 1) sign a debt instrument specifying the terms 2) securing and record the debt properly and 3) the home is sufficient collateral for the loan.

It would be prudent to consult with an attorney before you sign the final settlement papers to be comfortable that both buyer and the lender-relative are complying with IRS regulations. For more information, see IRS Publication 936 – Home Mortgage Interest.

Insurance Claims - Be Prepared.

People who experience a property loss are usually asked by their insurance company for proof of purchase which can come in the form of a receipt or current inventory of their personal belongings.
Even the most organized people might find it challenging to find receipts for all the valuables in their home. If the inventory isn’t up-to-date, a homeowner might forget to add some items to the claim and may not recognize the omission for long after the claim is settled.

The inventory can serve as a guide to make sure a homeowner gets compensated for all the loss.

Photographs and videos can be adequate proof that the items belonged to the insured. A series of pictures of the different rooms, closets, cabinets and drawers are helpful. When video is used, consider commenting as it is shot and be sure to go slow enough and close enough to things becoming recorded.

For your convenience, download a Home Inventory, complete it, and save a copy off premise. Good places for your inventory could be a safety deposit box or digitally, in the cloud if you have server-based storage available like Dropbox.

Growing Number of Empty Nesters are not moving.

There seems to have been an accepted progression for homeowners going from starter home, to gradually moving into one’s dream home, then, downsizing after becoming an empty nester and finally, into a retirement home. However, Marianne Cusato’s 2016 Aging-in-Place Report indicates that many older Americans don’t plan on following that pattern.
61% of homeowners above the age of 55 intend on staying in their homes indefinitely. 2/3 of them believe that the home’s layout will serve their needs without having to make aging-related improvements.

Some of the reasons being cited for staying in place are:

• 66% say their home is conveniently located
• 38% say they live close to their family
• 68% say they feel independent in their home
• 54% say they are familiar with their neighborhood
• 66% say the feel safe in their home

Typical renovations that might be considered for their current home are things like grab bars in the tub or shower, shower seats, taller toilets, handheld shower heads and additional handrails on stairways.

It seems that the report’s conclusion is that regardless of a homeowner’s age, they want to thrive in their home. The same emotional reasons that causes a person to want to buy a home are the things that cause them to hold onto them if is practical.

How to pay down your mortgage and grow equity quickly.

Most people think they’ll have a house payment and a car payment for the rest of their lives but it doesn’t have to be with a plan and a little discipline. The plan is to make additional principal contributions to a fixed rate mortgage to shorten the term and save tens of thousands in interest. 
If a person were to make an additional $100 payment each month applied to principal on a $175,000 mortgage, it would shorten the loan by five years six months. If the person were to make $200 a month additional payments, it would shorten the loan by 9 years. $459 additional payment would shorten it to 15 years.

If a person does make a decision to regularly pre-pay their mortgage, it will be their responsibility to verify that the lender is applying the money to the principal each time as opposed to being placed in the reserve account for taxes and insurance.

In today’s market, a savings account pays around 0.5% or less. Even with the low mortgage rates available, there is still a considerable savings. People who might need the funds in the near future should carefully consider this option due to the difficulty to access equity easily from one’s home.
Make your own projections using the Equity Accelerator.

Don't Forget to Save for Home Maintenance

Homeownership, part of the American Dream: a home of your own where you can feel safe, raise your family, share with your friends and enjoy life. The benefits are easily recognizable but maintenance is just a real and should be considered.
Property taxes and insurance are two of the largest expenses homeowners have aside from their mortgage interest. But, as any homeowner knows, there will be occasional expenses for repairing toilets, faucets, windows and other things. There are also the significantly larger expenses that arise like replacing a water heater or HVAC unit. And don’t overlook the periodic maintenance like painting or floor coverings.

Financial experts suggest that homeowners save one to four percent of the home’s value per year for repairs and maintenance. Two to eight thousand dollars a year may sound like more than you’ll need but the cost of an air conditioning unit can easily be $6,000.

Some homeowners purchase home warranties to avoid the unexpected costs. An annual premium instead of an unexpected large expenditure. Coverage varies from company to company and are not intended to cover existing conditions.

The alternative to not saving for these anticipated expenditures means that a homeowner might have to put it on a credit card at a very high interest rate or get a home improvement loan. Appreciation is a distinct benefit of home ownership and deferred maintenance can limit the value as well as lengthen the market time when it sells.

Do You Need Down Payment Assistance? You May Actually Have it and Don't Realize It.

Saving the down payment may be unnecessarily keeping would-be buyers from getting into a home. They may be unaware that the funds might be available.
The NAR Profile of Home Buyers and Sellers reports that 81% of first-time buyers got all or part of their down payment from savings. Less than 4% said that all or part of the down payment came from a withdrawal in their IRA and 8% from their 401(k) or pension fund. 
Traditional IRAs have a provision for first-time buyers which include anyone who hasn’t owned a home in the previous two years. A person and their spouse, if married, can each withdraw up to $10,000 from their traditional IRA for a first-time home purchase without incurring the 10% early-withdrawal penalty. However, they will have to recognize the withdrawal as income in that tax year. For more information, go to IRS.gov.
Allowable withdrawals from traditional IRAs can be from yourself and your spouse; your or your spouse’s child; your or your spouse’s grandchild or your or your spouse’s parent or ancestor.
Roth IRA owners can withdraw their contributions tax-free and penalty-free at any age for any reason because the contributions were made with post-tax income. After age 59 ½, earnings may be withdrawn as long as the Roth IRA have been in existence for at least five years.
Up to half of the balance of a 401(k) or $50,000, whichever is less, can be borrowed by the owner at any age for any reason without tax or penalty assuming the employer permits it. There can be specific rules for loans from a 401(k) that would determine the repayment; interest is usually charged but goes back into the owner’s account. You can consult with your HR department to find out the specifics.
A risk in borrowing against a 401(k) comes if your employment ends before the loan has been repaid. The loan may have to be repaid as soon as 60 days to keep the loan from being considered a withdrawal and subject to tax and penalty. Even if you continue with the same employer, failure to repay the loan could be considered a withdrawal also.
Your tax professional can provide you specific information on how making a withdrawal from your retirement program might affect you. Additional information can be found on www.IRS.gov.

Tax benefit you or your loves ones should know about.

Special consideration is made by IRS for the sale of a jointly-owned principal residence after the death of a spouse. Surviving spouse may qualify to exclude up to $500,000 of gain instead of the $250,000 exclusion for single people if certain requirements are met.

• The sale needs to take place no more than two years after the date of death of the spouse. 
• Surviving spouse must not have remarried as of the sale date. 
• The home must have been used as a principal residence for two of the last five years prior to the death.  
• The home must have been owned for two of the last five years prior to the death.
• Survivor can count any time when spouse owned the home as time they owned it and any time the home was the spouse’s residence as time when it was their residence.
• Neither spouse may have excluded gain from the sale of another principal residence during the last two years prior to the death.

If you have been widowed in the last two years and have substantial gain in your principal residence, it would be worth investigating the possibilities. Time is a critical factor in qualification. Contact your tax professional for advice about your specific situation. Contact me to find out what your home is worth in today’s market. See IRS Publication 523 – surviving spouse.

Real Estate is in High Demand

Real estate is the overwhelming preferred choice by Americans as identified in a recent survey. With the Dow Jones industrial average reaching record highs, it might be expected that the stock market would be the favored choice but that wasn’t the outcome.
Analysis of the report suggests that the popularity for houses could be that they are tangible assets that you can see where your money is actually invested compared to stocks and bonds which tend to be unclear where the money is invested.
There are several distinct advantages of homes as investments over other popular alternatives.

1. High loan-to-value mortgages available
2. At fixed interest rates
3. For long periods of time
4. On appreciating assets
5. With definite tax advantages
6. And reasonable control.

Another advantage of rental homes is that most people are comfortable with them. It is the same type of property that they live in but used as a rental. They have a tendency to understand the key components such as value, appreciation, rent, maintenance and financing.

Buy Now or Buy Later

It has been said that change is the only constant. Most of the financial experts have been expecting interest rates to increase along with home prices. While homes, in most markets, have definitely seen increases over the past five years, the mortgage rates today are actually lower than they were a year ago. 
If the interest rates were to increase by 1% over the next year while homes appreciated at 6% during the same time frame, a $250,000 home would go up by $15,000 and the payment would be $211.53 more each month for as long as the owner had the mortgage. The increased payments alone would amount to $17,769 for the next seven years.
When facing a decision to postpone a purchase for a year, a legitimate question to ask oneself would be: “how will it feel to have to pay more to live in basically the same home a year from now?”
It is easy to understand that if the price of a $250,000 home goes up by 6%, it increases the price by $15,000. A slightly more difficult concept to realize is that if the interest rate were to go up by ½%, it is approximately equal to a 5% increase in price. A 1% increase in mortgage rates would approximately equal a 10% change in price. This means that if a home goes up in price by 6% and the interest rate goes up by 1%, it is equivalent to the price of the home going up by a little more than 16%.
Use the Cost of Waiting to Buy calculator to estimate what it might cost to wait to purchase based on your own estimates of what interest rates and prices will do in the next year.

Educate Yourself on Taxes for Your Investment Property

In the last few years, some people who were unable to sell their homes, rented them instead. The market has improved in most places and the home may easily sell now and possibly, for a higher price.


Even though the opportunity to sell in the near future might not change, there could be another opportunity that could quickly disappear for some homeowners.

Most homeowners are aware that there is a capital gain exclusion on the profits of a principal residence of up to $250,000 for single taxpayers and $500,000 for married taxpayers filing jointly. The rule requires that you must own and use the home as your principal residence for two out of the last five years.

A homeowner can rent their home for up to three years and still be eligible for the exclusion. As an example, if they had owned and lived in it for two years and then rented it for two and a half years, they would need to sell and close the transaction before the remaining six months expired.

If there was a $200,000 profit in the home that didn’t qualify for the exclusion, a 15% long-term capital gain tax of $30,000 could become due depending on the tax bracket of the owner. With some careful planning, the tax could be avoided. Awareness of the time frames and the right team of tax and real estate professionals could save a considerable amount of the homeowner’s equity.