home financing

Extra Costs of Buying a Home in 2021: What You MUST Know

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When buying a new home, it’s essential to factor in all the possible additional costs. These can add up quickly, so you should familiarize yourself with them as soon as you decide to search for a new home. Accounting for additional expenses in your budget will make the already stressful process of buying a home a bit easier. These are the extra costs of buying a new home that you need to know about. 

Property taxes

person holding paper near pen and calculator

As a homeowner, you’re required to pay property taxes. The property tax is determined by the city, township, or country where your new property is located (the effective average rate is 1.1% of the home’s assessed value).

Sometimes property taxes are easy to forget to include in your budget calculations as they’re often rolled in with your mortgage. 

Closing Costs

When the real estate transaction comes to an end, you’re required to pay a plethora of fees known as closing costs. To avoid unpleasant surprises, you should talk to your realtor and ask them about the specific closing costs. They usually include:

  • Lawyer fees
  • Cost of inspection
  • Document fees
  • Appraisal fees
  • Surveyance fee
  • Sales brokerage commission
  • Title cost
  • Mortgage application
  • Home warranty

Paying For The Escrow

Making escrow is an important part of the budget you need to buy a new home. Generally, buyers are asked to pay for escrow upfront to cover some costs (insurance, property taxes, etc.). 

Earnest Money

Earnest money, a form of security deposit made in large transactions such as real estate dealings, is paid upfront before filling out the paperwork. Since it’s a deposit, home buyers will receive the money-back once the transaction goes through. If the buyer should back out of the deal, they probably won’t get their deposit back. 

The amount of earnest money ranges from a few hundred to thousands of dollars; the precise amount ought to be listed in the contract. 

School Taxes

Homebuyers that have children who go to or about to start school are probably happy to pay more in school taxes if it ensures high-quality education for their children. Those who don’t have school-age children might want to look into what school taxes they’re expected to pay because it could be a deal-breaker. The amount of school taxes varies from district to district. 

Homeowner’s Insurance

Homeowner’s insurance is not that much of a surprise expense since banks and mortgage companies require it before issuing a loan.

Oftentimes homeowner’s insurance is included in monthly mortgage rates. It’s essential not to overlook this expense as it could go up or down depending on your needs. For instance, most basic homeowner’s policies don’t provide coverage against natural disasters like hurricanes, floods, or earthquakes. If you’re buying a house in an area prone to disasters, you’ll probably want to pay for extra insurance.

Interest Rates

There is no way around interest rates – they’re the inevitable part of buying a new home. The good news is that having a good credit card rating will get you a lower interest rate. 

Moving Costs

Don’t forget to account for all the moving costs. Moving vans are usually expensive, depending on how far your new home is. If you’re making a long-distance move, you have to think about moving costs upfront as they will likely cost you an arm and a leg. 

Utilities

Those who are moving to a bigger home need to consider that the utilities might cost a lot more than they’re used to. It’s important to consider costs for: 

  • Gas
  • Electricity
  • Sewer
  • Water
  • Cable 
  • Internet

Costs for installing Internet, cable, and other services can add up quickly, so you need to be aware of these expenses beforehand and make sure to include them when you’re planning your budget. 

Home Maintenance and Repairs

Depending on the state of the home you’re buying, you will need to invest a substantial amount into repairs and renovations. This is particularly true if you’ve purchased a fixer-upper. Even if your new home is in somewhat good condition, never underestimate the possibility of an extra cost appearing out of nowhere.

Some repair costs are not so expensive, while some might require you to cough up thousands of dollars. Furthermore, some are not that urgent, and some require immediate renovation, for example, if the roof is in poor condition, you will need to get on that as soon as possible. Repairs that cannot wait can end up costing you a lot more than you’ve hoped. 

That’s why it’s smart to always have a portion of your budget dedicated to the expenses that cover home maintenance and repairs. 

The Takeaway

Buying a new home will undoubtedly carry a myriad of unplanned expenses. By doing research and preparing yourself for additional costs, you’re staying ahead of things.

If you hadn’t thought about all the extra costs and how much they will take out of your pocket, perhaps you’re not quite ready to buy a new home yet. While you’re saving up more money, looking at homes in Minnesota, New York City or Las Vegas it’s the perfect time to take a look at some homes for rent.

Forever Home: A First-Timers Guide to Understanding Home Loans

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If you are considering buying your first home and have no or low credit, you may still be able to procure financing. This article will explain five loan programs for first-time buyers. Read on to find out whether you qualify!

Federal Housing Administration Loan

housing loan blocks on brown wooden surface

First-time homebuyers and those with no or low credit may be eligible for a loan that is guaranteed by the Federal Housing Administration (FHA). The FHA program was created in 1934 to allow lenders to relax certain criteria to broaden the pool of eligible home loan borrowers. 

Borrowers must have a steady income and provide proof of employment for the last two years to qualify for an FHA loan. That proof may take the form of pay stubs, income tax returns, and bank statements.

Currently, those with a credit score of at least 580 can qualify for an FHA loan with as little as 3.5% or the purchase price as a down payment. Those with a credit score between 500 and 579 will still qualify for an FHA loan but must come up with 10% of the purchase price as a down payment. All borrowers regardless of credit score must have less than a 43% debt-to-income ratio.

While the FHA makes mortgages available to more people, it imposes more requirements on the property purchased. For example, the property must be inspected and meet certain standards. It also must appraise for the purchase price. The borrower must certify that the property will be their primary residence. The FHA will not guarantee loans to purchase rentals or vacation homes.

There is an additional cost for those with low or no credit to procure a loan through the FHA. The FHA requires that borrowers purchase and maintain mortgage insurance. Mortgage insurance pays the loan should the borrower default. 

Veterans Administration Loan

A borrower who is serving or has served in any branch of the military and their eligible spouses may qualify for a home loan through the Veterans Administration (VA). 

Like FHA loans, VA loans are provided by private lenders such as banks and mortgage companies. The VA guarantees a portion of the loan, enabling the lender to provide eligible borrowers with more favorable terms such as a lower interest rate or a low or no down payment.

Home Purchase Loans through the VA

VA-guaranteed loans are available for homes for a service member’s or a veteran’s occupancy, as well as for the occupancy of an eligible spouse and/or dependent of active duty service members. 

To be eligible for a VA home purchase loan, a borrower must have a satisfactory credit score, sufficient income to meet their mortgage payments and other monthly obligations, and a valid Certificate of Eligibility (COE). Borrowers can apply for a COE here.

VA Interest Rate Reduction Refinance Loan 

An Interest Rate Reduction Refinance Loan (IRRRL), also called a Streamline Refinance Loan, helps current VA borrowers obtain a lower interest rate by refinancing their existing VA loan. 

Native American Direct Loan Through the VA

The Native American Direct Loan (NADL) Program helps eligible Native American Veterans finance the purchase, building, or renovation or improvement of homes on Federal Trust Land. NADL also can reduce the interest rate on an existing VA loan for eligible Native American Veteran borrowers. 

Adapted Housing Grants through the VA

The VA’s Adapted Housing Grants help veterans with a permanent and total disability incurred while in service to purchase, build, or adapt an existing home to assist them in living with their disability more independently. Common modifications to homes include building ramps and widening doorways to accommodate wheelchairs. 

In 2021, veterans with qualifying service-connected disabilities can get up to $100,896 through a Specially Adapted Housing Grant. Qualifying injuries include:

  • The loss or loss of use of more than one limb
  • The loss or loss of use of a lower leg;
  • Blindness in both eyes (with 20/200 visual acuity or less)
  • Certain severe burns
  • The loss or loss of use of one lower extremity (foot or leg) causing the inability to walk without the help of braces, crutches, canes, or a wheelchair

Only 120 veterans and service members can qualify for an Adapted Housing Grant based on the loss of one extremity each fiscal year. Those who apply but are turned down because the quota was met are encouraged to reapply the following year.

U.S. Department of Agriculture Loan 

According to David Offen, Esq., bankruptcy lawyer in Philadelphia, “The USDA Rural Development Guaranteed Housing Loan Program was created in 2017 to develop, maintain, and occupy eligible rural properties. Urban properties are not eligible, but there may be some opportunity in some suburban areas.”

The USDA issues mortgages to low- and very-low-income applicants purchasing eligible properties at interest rates as low as 1%. The income threshold for eligibility for direct loans from the USDA varies by region.

The USDA also guarantees mortgages issued by participating local lenders, similar to the way the FHA and VA guarantee home loans. The interest rate will be low as will the required down payment, however, those putting little to no money down will have to purchase and maintain mortgage insurance. 

Federal Home Purchase and Renovation Loans

There are four federal programs that allow borrowers, even first-time home buyers, to extend the amount they could otherwise borrow by the amount needed to renovate or improve the property.

The Energy Efficient Mortgage Program

The Energy Efficient Mortgage Program (EEM) allows a borrower to borrow more to purchase a home with energy-saving upgrades and green renovations.

203(k) Loans backed by the Federal Housing Administration

The FHA backs loans to borrowers who want to purchase a fixer-upper. 203(k) Loans are guaranteed in the amount the property will be worth once improvements have been made.

CHOICE Renovation Loan

Guaranteed by Freddie Mac, this conventional loan program allows borrowers to finance both the purchase and renovation of a property with a low down payment.

HomeStyle Loan

This is a conventional loan offered through Fannie Mae to finance the purchase of a fixer-upper as well as needed improvements with just 3% down for first-time buyers.

Visit the websites of the programs you may be eligible for, and talk with a local lender. Obtaining financing through one of these programs may allow you to purchase the home of your dreams.

Selling a Manufactured Home in a Tough Market

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A manufactured home is also known as a mobile home, depending on the year it was built. Basically, one can move a manufactured home or a mobile home around as they wish from one piece of land without breaking it up. While such a home might be useful for many people (a young couple, small families looking for a starter home, or someone who just loves traveling around), there might come a time when you want to move on from your mobile home by selling it. 

white camper trailer in between green trees

Selling a manufactured home shouldn’t be a difficult feat but the real estate market for selling such homes is still unpredictable. There are also loans and mortgages involved which many sellers may want to avoid. You can choose a cash buyer if a quick process is a goal but there are many options and avenues available today for transferring mobile homes from one land to another. 

Let’s discuss some of these now: 

Selling for Cash

It’s especially tempting to sell a manufactured home or a mobile home for cash. You get the money right away and will probably avoid a lot of legal trouble as well. However, you still have to verify that your mobile home buyer has the required funds before signing anything. Once both parties agree, you should get a deposit in hand. 

Approval from the community

The same precautions apply to other real estate aspects of selling a mobile home. For instance, if your buyer might need to obtain approval from the relevant manufactured home community, they should take that step as soon as possible. Make sure to structure the approval so that the deposit can be refunded if their application process is not successful. 

Moving the home from the land

The buyer might also plan to move the manufactured home away from the current land. In this case, you’ll have to get in touch with the park management to start the procedure. Most communities will require a notice of thirty to sixty days if someone wants to move a home out of their land. No matter what the situation is, you should ensure that your collaboration is with a trustworthy and sincere mobile home buyer. 

Selling through Payments

If you’re selling a manufactured home but don’t need all that money right away, selling a mobile home through payments is also a good idea. This step will turn you into a sort of bank but it’s still important to get a significant amount as the down payment from your buyer. 

The terms for this real estate agreement should also be outlined and understood by both parties well in advance. In the contract, make sure you state the amount of the payment and the duration of the payment terms. 

Staying away from risks

You might also choose to sell one or more homes to a housing community instead of any particular individual. In that case, you don’t really want your manufactured home moved away until the payment is completed in full. See that your agreement contract states this condition in no uncertain terms. A mobile home or manufactured home is at risk when it’s moved from the actual land. A lot can go wrong which is why you should practice some caution and ask a real estate professional for help. 

Selling to the Manufactured Home Community

Another avenue for selling a manufactured home is to have the manufactured home community as the buyer party. This is a logical option if the residents of your home want to move away. Most manufactured home communities would prefer that their homes stay in place, so they’ll probably be willing to buy you out. However, you still have to consider the pros and cons of choosing this process.

Pros of selling to the manufactured home community

If there are any manufactured homes for sale on their land, the relevant community would probably be willing to buy it very quickly. You get the money fast, and the buying party is a reliable one. It’s the same land you’ve probably dealt with before so you know that the home and the land are in good hands. 

Another upside is that the community will usually be the one taking care of any paperwork. The title transfer and other nuances can be bothersome. So, it’s nice to have a real estate manager who can take the responsibility off your hands. 

Cons of selling to the manufactured home community

On the other hand, selling a mobile home or manufactured home has many aspects. With the community, you might get a much lower offer than with some other party. If you’re in a hurry, you might have to make this compromise. 

If you do have time on your hands, it’s probably a good idea to hold off on the sale as much as you can. 

Selling to a Manufactured Home Dealership

Mobile home dealerships or manufactured home dealerships are familiar with selling and buying new or used manufactured homes. They might even take a used manufactured home as a trade-in for credit to purchase a new mobile home or manufactured home. In a way, it’s much like a car dealership that could exchange your old car for a new one at a reduced price. 

You might be on the lookout for a new mobile home. So, check out any local manufactured home dealership to see if they’re interested in a trade-in. Such dealerships might also consider buying used mobile homes and putting them on sale for their buyer list. This list usually includes investors or other homeowners like yourself. 

Pros of selling to a manufacturing or mobile home dealership

Just like selling to a manufactured home community, the main advantage you get by selling a mobile home to dealers is that it’s a quick process. You get the deal done and the money in hand relatively quickly. 

Cons of selling to a manufacturing or mobile home dealership

The main disadvantage of this step is that you get a lower offer than you initially expected. However, make the final decision after getting both the bad and the good about such a deal. 

Selling the mobile home to an Investor

If a manufactured homeowner is in a hurry to sell their property, whether attached to land or not, an investor might be the best way to go. 

Before you make up your mind, though, remember that investors are also interested in profits just like the communities and dealerships out there. With an investor, though, there might be some leeway to make the situation work for both parties concerned. 

Precautions about working with an investor while selling a mobile home

First of all, make sure that any investor you deal with is trustworthy. If they’re reliable and follow up on what they say or promise, that’s generally a green signal. 

In any case, you have to make it clear that the investor needs to get approval from the manufactured home community before taking ownership of the home. If they want to move the home away from the park, the management concerned should be on board with that decision. 

Finding Buyers

If you’re looking for mobile home buyers other than your own manufactured home community or a manufactured home dealership, you’ll have to be a bit proactive. Buyers for manufactured homes or mobile homes are certainly in the market. However, you’d probably have to go through at least one of the following steps to find them: 

Advertising offline

Once you understand the different kinds of buyers in the real estate market, decide how you want to sell. You can then start making signs and advertisements to find buyers. 

First of all, the front window of your manufactured home should have a ‘For Sale by Owner’ sign in it. The sign should have a valid number on it. 

Second, advertise through flyers, billboards, and any other physical form you can afford. You can also ask your social circle to spread the word. 

Advertising online

Your next step is to go online and list your manufactured or mobile home for sale on the relevant selling sites. Facebook is one good platform, Craigslist is another. Try out any other site that has good reviews about a mobile home and has worked for other manufactured homeowners in the recent past. 

Make sure you advertise in the right departments; if you’re selling the manufactured home on a payment contract, advertise your mobile home within the ‘For Rent’ section. The description could include a statement about rent to own mobile homes.

For a cash sale, advertise in the ‘For Sale’ sections on your chosen websites. 

The Takeaway

Selling a manufactured home requires a bit of know-how. So, it’s best to research your requirements and needs as much as possible. Several factors will contribute to this sale and taking a good look at your particular situation is essential. Get a real estate agent with the relevant experience to start with. That way, you’ll hopefully be sailing along to your next move in record time.

How to Approach Selling a Luxury Property in a Difficult Market

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Placing a luxury property on the market is a lot different to listing a less expensive one. Just fixing the main cosmetic issues won’t necessarily address the concerns that prospective buyers may have in this higher price range. Here is how to approach selling a luxury property in a difficult market. 

Oak Alley Plantation, Southern Plantation, Mansion

Choose the Right Season to List Your Property

A waterfront property that’s listed when the weather is blustery with sand blowing up into the air isn’t going to be well received by potential buyers. Similarly, homes that look delightful with the fall colors may not be as attractive in springtime. 

Choosing the best season to list the property is half the battle. Failing to take this into consideration could lead to the home getting poor reception. Then, when the listing has been up too long, it becomes harder to sell as people start to question what’s wrong with it. By listing at the right time, you can avoid these potential pitfalls. 

Deal with Realtors That Already Handle Luxury Homes

While a newer realtor may be interested in picking up the listing and running with it, that’s not always the best move. It’s also an issue if your home sits in one price bracket, but they’ve only previously handled smaller transaction values.

Their contact list is likely to be limited to the lower end, which likely will restrict the interest they can generate and offers they can procure. 

Get the Staging Right

If the home has recently been renovated, but it’s not seen plush furnishings added or finishing touches made, that could be a problem. Plans may have caused you to make a late decision to put the house on the market even though it’s technically not ready to show. 

One way to get around this is virtual staging. This is the idea of replacing photographic visuals with a mixture of real shots of the interior coupled with imaginative staging elements. This is done by removing objects from the image and adding in furnishings digitally to complete the final presentation. 

Virtual staging is an affordable way to provide excellent new visuals without the need for physical staging. At a time when some sellers wish to limit the number of strangers visiting their homes, technology has come to the rescue. 

Accept Price Guidance from an Experienced Realtor

When selling a luxury piece of real estate, you may have a price in mind. Nevertheless, what your home can command currently on the market may vary markedly from your golden number. 

It’s important to listen to an experienced realtor on pricing. They have access to recent comps in the market. Even without those, they should have a good idea about valuations. When they advise what they feel the home is worth, asking them to list it significantly above this level risks the home going unsold.  

In a difficult market where homes aren’t selling as quickly, and prospective buyers are making lower offers, patience is required. Also, listen to the realtor because they usually know their job well, and given that they stand to gain from the sale too, they’re unlikely to steer you wrong.

contract for deed financing

Should You Consider Contract for Deed Financing in 2021?

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Interest rates are at record lows. Housing prices are at record highs. Multiple offers are the norm in some cities. You really want to buy a home, but the last time you tried to get a mortgage, you were denied. Worse, with COVID-19, a weakening stock market, an uncertain future, and post-election trauma, lenders are clinging to tight underwriting standards.

If you have a low credit score combined with some serious recent credit dings, conventional financing could be very difficult to obtain. Let’s look at some alternatives that can get you into your own home in 2021, including contract for deed.

Find Someone to Cosign

person in orange long sleeve shirt writing on white paper

If you can’t qualify for a mortgage, find someone that can. This might be a relative, a friend or even your employer. A person with excellent credit that will agree to be on the hook for your mortgage can be the answer to your credit difficulties. Rocket Mortgage puts it best as they say, “When someone cosigns on a mortgage loan, it means they agree to take responsibility for the loan if you default. Cosigning on a loan isn’t just a character reference.

It’s a legally binding contract that makes another person partially responsible for your debt.” Just make sure that your prospective cosigner understands their legal obligation.

Think About a Duplex

white and red house

Sure, you want a single-family home, but checking out a multifamily situation might be an eye opener. With a duplex you can rent the other side of your home and possibly collect up to half—or even more—of your monthly mortgage obligation. If you can show that you only need to come up with $1000 of your own money to make your $2000 monthly mortgage payment, you may be able to qualify without a cosigner.

The Simple Dollar expounds on this as they mention, “One reason buying a duplex is such an appealing idea is that there’s a lower barrier to entry than if you were buying a free-standing rental property. We already mentioned how you typically need at least 20% to put down on a single-family investment property, but the rules are a lot different if you’re buying a property to live in yourself.”

Don’t Leave Deals on the Table

white printer paper on red textile

Research all of the financing avenues that may be available to you. If you are a veteran, for example, you can get a no-money-down mortgage even in you have a very low credit score. VA loans are great if you are a first-time home buyer.

In addition, bet you didn’t know this, courtesy of the USDA:

“The USDA Loan is a mortgage option available to some rural and suburban homebuyers. USDA Home Loans are issued by qualified lenders and guaranteed by the United States Department of Agriculture (USDA). USDA Home Loans are particularly favorable to those living in rural or low-income areas. USDA Loans offer $0 money down, lenient eligibility requirements and competitive interest rates – due to the loan being guaranteed by the USDA.”

Rent-to-Own

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In states that allow it, you might want to look at a rent-to-own deal. In these situations, someone that owns a home free and clear will rent it to you and apply part of your monthly rent to a future down payment. At some time, you will be able to purchase the home from the owner, and many times the owner will act as the bank and finance the property. While this arrangement does work for some, there is room for difficulty with this arrangement. Sometimes unscrupulous owners will enter into a deal they know will be difficult for the tenant to keep, i.e., an inflated monthly payment, and if a late payment occurs, that can be quickly followed by an eviction. In these cases, all down payment money is usually lost, and the owner then looks for another victim.

Contract for Deed

person writing on paper

If your credit is just not up to par, if you can’t find a co-signer, if duplexes aren’t your thing, and if rent-to-own sounds too risky, consider contract for deed. In some states like Minnesota, contract for deed deals have been utilized for years. The Morris Law Group explains the process well:

“Instead of purchasing a home with a mortgage, the buyer agrees to directly pay the seller in monthly installments. The buyer is able to occupy the home after the closing of the sale, but the seller still retains legal title to the property until all payments have been made under the contract; actual ownership passes to the buyer only after the final payment is made. Contracts for deed have long been a financing option for property transactions between family members or friends. Some nonprofit housing organizations also use them to help low-income families find a path to homeownership.”

The C4D Crew takes this process a step further as they will work with you when you find a home you want to buy. C4D will buy the home you are interested in, and then they will sell it to you on a contract for deed basis. You don’t have to find a free and clear home, nor do you have to convince a reticent homeowner to enter into a contract for deed deal. These guys do it all.

Of course, your credit will need to be checked, but C4D understands that bad things happen to good people and they can look past issues like tax problems, divorce, job loss, and even a recent bankruptcy.

Yes, if you can find traditional financing that’s great!  But if you can’t, and you want a legitimate way to own your own home, you really need to consider contract for deed financing.

real estate investing

6 Encouraging Reasons to Invest in Real Estate During COVID-19

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While many people think that the stock market has been the only investment game in town during COVID-19, savvy investors are looking for real estate opportunities. While the current set of economic conditions is certainly unique, there are six great reasons to invest in real estate during the pandemic.

red and white UNKs restaurant

Interest Rates

Mortgage interest rates are at record lows, and buyers with good credit can get a rate below three percent. Rates of six percent or more were not unheard of before the Great Recession that began in 2008, and the difference between a $250,000 loan at six percent and one at three percent is a healthy $400 monthly.

person using MacBook pro

While it’s true that rates for investors may be a bit higher than those for would-be homeowners, the purchase of a duplex is a great way to capitalize on these low rates since a duplex would be owner-occupied and therefore more easily qualify for better loan terms.

The Rental Market is Stable

Top apartment rental site ABODO reported in September, “Last month we said, until there is a therapeutic treatment or a proven COVID-19 vaccine, we’re predicting a stable rental market at best, and that is what we saw in September. There are some hopeful signs that the pandemic is easing in some parts of the country, and the much-anticipated vaccine seems to be moving to fruition. That said, even if the virus disappeared tomorrow, we still see a stable apartment rental market because we just do not foresee things returning to normal for a while.”

red and blue love neon light signage

A stable market means that investors can get the rents they need to cash flow their units. And if you’re prudent and careful as you screen tenants, you can help avoid the perils of the eviction process.

There Are Good Deals Out There

If you live in Austin, TX where Tesla just announced that it is building a new plant, you can forget about finding bargains. We found the following in a recent Boston Globe article, however, and this is beginning to ring true in some areas.

“As sales slump, home prices will fall later this year and early next in the ‘low single digits’’ nationwide, according to Mark Zandi, chief economist at Moody’s Analytics. The declines may be more pronounced in West Coast markets, which were already overvalued relative to incomes, he said.”

Buyers need to be patient, but anyone that is selling their home during the pandemic probably has to sell it, so discounted properties can be found.

Values are Values – No Matter What

An investor who wants to cash flow $400 per month on a four-family and is able to find the property that makes that happen should pull the trigger regardless of the state of the housing market. If a low-interest rate can be locked in, and if property tax rates look stable, there’s no reason to wait.

The Worst May Be Over

At this writing, it doesn’t look like there will be mass lockdowns again in the U.S. The idea behind the first wave of lockdowns was to flatten the virus’ curve thereby not overwhelming the hospitals. While the site of refrigerated trucks commandeered to hold dead bodies was chilling both literally and figuratively, the health care system has been able to back off from that Armageddon-like scenario, and hospitals seem to be handling their COVID-19 patient load. Even if the pandemic trudges along, the economy may have seen its lows and things may just stay stagnant until a vaccine, therapeutic treatment and/or true herd immunity crowds out the pathogen.

Real Estate is Adapting

Some industries like restaurants, bars and caterers have been severely injured by the pandemic. In fact, the bedrock of many catering operations–the buffet–has been altered, transformed and may no longer be viable as a method to serve food.

The real estate industry, however, has stepped up to their own plate with an array of technological innovations like virtual tours. Landlords, for example, can rent apartments without having to physically show them, and that adds a sense of security to prospective tenants. The real estate industry has found a way to thrive even during this crippling pandemic.

Investing in real estate shouldn’t only be reserved for good times. And as shown above, there are many solid reasons to become a real estate investor even during COVID-19.

Red Flags to Look for When Buying a House

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Shopping for a new home is one of the most exciting and stressful life events. While it’s certainly fun to check out the different houses and imagine yourself living in them, at the same time, finding that “perfect” house can be daunting, time-consuming, at times disappointing, and downright stressful. Of course, the best way to ensure the process goes smoothly is to be specific in what you’re looking for, the budget you are working with, and what you will and will not accept. 

Brown and White House Beside Trees

With that said, here’s a look at red flags you will want to be aware of before making an offer on a home.

A Lot of Homes for Sale in the Neighborhood

While it may seem like a jackpot that there are so many homes to choose from in a particular neighborhood, this can also be a red flag. Why the mass exodus, what is prompting everyone to sell at the same time? Sure it could be totally harmless and nothing to the story at all, but at the same time, it’s worth a little investigating and asking questions. This is when it can be helpful to work with a realtor, as they can offer some insight.

The Home Is in Need of Major Repairs

While there are certainly those that don’t shy away from a DIY challenge, other buyers want to be able to move in and have things relatively ready to go. If there are massive repairs needed, then you’re going to need a budget to get it done. Some of the most costly projects can include new windows, a new roof, foundation issues, and a new furnace.

Is There Lead Paint in the House?

If you’ve been looking at older homes and they tend to fit your personal style a little better, then you’ll need to be hyper-aware of the potential of lead paint in the home. Basically, any of the houses built before 1978 here in the United States would have contained at least traces of lead in the paint that was used. Lead-based paints were the norm back then, but now people know much better.

Today, people realize just how hazardous this substance is to have in the house and as zotapro.com points out, that it needs to be removed properly, safely, and professionally. While it can certainly be remedied and the house will be made safe to live in, it’s something you at least need to be aware of since it will be a priority to get done.

Signs There Is an Infestation of Pests

Another red flag is a sign the house has an infestation problem. That could be an issue with bugs, rodents, or any other type of pest. It will then become your problem and your expense and trouble to get rid of them and repair any damage that may have been caused. 

Go Into the Deal Well-Informed

Keep in mind what is a red flag for some may not be for you. It’s all about being aware of the situation you are entering so that there are no surprises after the fact.

Key Tips to Rally Back from COVID-19 Bankruptcy in 2020

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Previously successful people have had to declare bankruptcy, and gotten bankruptcy loans, recently because of COVID-19.

Restaurants and bars are prime examples, but many other companies like Gold’s Gym, Hertz,  GNC and Chuck E. Cheese to name a few have had to invoke bankruptcy protection with bankruptcy loans. 

Many of these filings were under Chapter 11 of the U.S. Bankruptcy Code. Chapter 11 allows companies to restructure their debts, formulate a survival plan, and continue to operate. If there is no hope of continued operation, one alternative is to file under Chapter 7. A Chapter 7 filing invokes a liquidation process that disposes of the company’s assets while dividing the proceeds among creditors.

If you have a business and you did not sign for anything personally, you could possibly avoid any personal credit issues since the business entity would have been responsible for all debts.

As most small business owners understand, however, it’s very difficult for a new business to operate without signing for something personally whether it’s a lease, a bank loan, or even a guaranty to a food supplier. Therefore, even if your business files for bankruptcy, anything you have personally signed for will quickly become your personal responsibility. Worse, any taxes owed by the business may be assessed to the officers and directors, and these taxes are usually not dischargeable in bankruptcy

The Struggle Continues with Bankruptcy Loans

bankruptcy loans during covid-19 and stress

In other situations, a consumer may have lost their job and this can result in bills due that just cannot be paid. Even with COVID-19 relief provisions that have staved off some rent and mortgage payments, some unfortunate individuals are being crushed under the weight of debt because their cash flow has been seriously restricted.

This is another reason that some of those affected by COVID-19 have had to declare bankruptcy.

Not Financial Death

person holding paper near pen and calculator

In previous times, personal bankruptcy used to be considered. financial death, but this is no longer the case. There is life after bankruptcy, as The Moran Law Group explains: “Damaged credit improves over time, just like wounds heal. A credit report is not like a wine glass that once it’s broken, it’s gone forever.” 

Important note: For example, if you are going to declare bankruptcy in Kentucky, or Illinois, or any other state for that matter, make sure you do it right. Consult with a bankruptcy attorney before you file to make sure that everything that can be discharged is actually discharged.

No Scarlet Letter for Bankruptcy Loans

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No one is going to know you filed bankruptcy by just looking at you, and if you do things correctly, you may be able to still live in your home.

State vs. Federal Exemptions

Different states have different bankruptcy exemptions, i.e. the list of items that can’t be attached or taken by creditors. Check out this chart to view the top five exemptions under Texas law, for example, compared to federal law.  This chart is courtesy of the  National Bankruptcy Forum:

Type of exemption Texas law Federal law
Homestead Unlimited, except by acreage based on location of the property $23,675 of equity in principal place of residence
Personal property Up to $100,000; $50,000 if a single adult without a family. Includes clothing and food, up to two firearms, several animals, limited jewelry, and more $12,625 aggregate value on household goods, plus federal wildcard exemption applicable ($1,250 plus $11,850 of any unused portion of your homestead exemption)
Vehicle Entire value of one motor vehicle per licensed household member $3,775
Wages Exempt for personal services, except for the enforcement of court-ordered child support payments Income you’ve earned but not yet received becomes part of your bankruptcy estate
Pension/retirement Exempt, including benefits for teachers, police officers, municipal employees, etc. Exempt, with a cap of about $1.28 million on IRAs and Roth IRAs

What Now?

If you have declared bankruptcy, these are the important things you need to do now to begin your recovery.

Credit Cards

blue and white card on green surface

Before debit cards became so popular, newly bankrupt individuals worried that they would not be able to get a plane ticket without a credit card. This is not true now, as a debit card can be used to purchase plane tickets. Unfortunately, credit cards are necessary for some transactions, like car rental—even though Hertz is in Chapter 11 bankruptcy itself—and you’ll need to get a card.

Luckily, newly bankrupt persons can apply for a secured credit card that works like a regular credit card except that you have to guaranty your card with a cash deposit. This is valuable it because you will have started to rebuild your credit as new on time payments will be reported to credit bureaus.

Another good strategy is to ask a relative to add you as a user on one of their credit card accounts. That way, you’ll have a fresh line of credit and again, on-time payments will help raise your score.

Vehicle

black bmw m 3 coupe

If you owed money on your vehicle, it could be repossessed during the bankruptcy. Either let that happen or talk to your lender about other possibilities. You may be able to refinance the old loan with a cosigner, and there are other ways that a lender may help allow you to stay in your vehicle. If nothing else, make sure you find some reliable transportation—even a used beater that runs may be better than taking the bus.

Utilities

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Your local electric company will automatically discharge your old bill, but you may have to come up with a small deposit to continue service. Consider using a cosigner for the account if utility companies are giving you trouble.

Applying for a New Job

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Smaller employers may not care about your credit score, but larger ones regularly access credit reports, and a fresh bankruptcy could cause some employers to think twice about your application. Therefore, make sure you engage the services of a quality recruiter along with a professional resume writer to help ensure that you won’t be automatically rejected because of bad credit.

Invoke Sympathy

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You just declared bankruptcy. You’re emotionally devasted. Use this as leverage to keep lingering creditors from bothering you. If you owe money to the IRS, contact them and ask for some time to get your finances in order. A 120-day hold on your account can be welcome, and you can use that time to regroup.

If you have unfortunately lost your home and have to rent an apartment, consider renting from a landlord you can talk to personally, rather than a property management company that might automatically reject you. If you can explain your situation directly to a landlord, you might be given a chance you wouldn’t otherwise be afforded. 

Personal bankruptcy is not to be taken lightly, but it’s not the end of the world. Many people that declared bankruptcy during the Great Recession that began in 2008 are now homeowners. Yes, bankruptcy is a financial setback, but with diligence and hard work, you can overcome any short-term issues that it creates.

mortgage forbearance

Coronavirus Mortgage Forbearance: What Is It and How Can You Get It?

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These are scary times, and if you have lost your job, taken a pay cut, or have been placed on even a temporary furlough, making your monthly mortgage payment can be tough. Any financial advisor will tell you that even one 30-day late mortgage payment will destroy your credit score and seriously hinder your chances of buying a property in the future. Luckily, the recently passed CARES Act offers at least temporary relief under certain circumstances.

Federally Backed Loans

mortgage Scrabble tiles

Many mortgage loans are backed, securitized and/or purchased by one of the following federal agencies:

  •     Fannie Mae
  •     Freddie Mac
  •     Federal Housing Administration (FHA)
  •     U.S. Department of Veterans Affairs (VA)
  •     U.S. Department of Agriculture (USDA)

If your home loan fits into one of the above categories, you’re eligible for forbearance. Our friends at Nolo tell us:

“Under forbearance, your loan payments are postponed or reduced, but interest continues to accrue during the period of forbearance.”

The CARES Act allows you to request mortgage forbearance for up to 180 days and this request, according to the law, shall be granted. You can then ask for an additional 180 days if you make the request before the end of the first forbearance period. At the end of the forbearance period—whether it is 90 days or 360—you have choices. Rocket Mortgage, for example, explains what they offer after forbearance has ended:

  • With a repayment plan, we’ll add part of your past-due amount to your regular mortgage payment each month.
  • With a deferral or partial claim, we’ll set all or part of your past-due amount aside to be paid later. It will be due when you pay off your mortgage, sell your home or refinance. You won’t be charged any interest on the deferred balance.
  • With a loan modification, we’ll modify the terms of your existing loan to include your past-due payments.

As you can see, if you can’t make your monthly mortgage payment, the CARES Act does give you some great options.

No Negative Credit Reporting

turned-on MacBook Pro

Federal student loans come with built-in forbearance opportunities. While the rules have changed in recent years, forbearance is usually granted upon request and there are no negative credit report or credit score issues. 

A homeowner could always request forbearance from a lender because of financial hardship, and lenders were picky about granting relief. Furthermore, before COVID-19, any granted mortgage forbearance would be negatively reported to credit bureaus and credit scores would take a serious hit.

In these COVID-19 times, this is no longer the case, as the CARES act specifically prohibits any lender from negatively reporting a COVID-19 related forbearance.

Why Not Ask for Forbearance?

housing loan blocks on brown wooden surface

The HUD factsheet entitled CARES Act Forbearance Fact Sheet for Borrowers with FHA, VA, or USDA Loans, explicitly states that:

“For loans insured or guaranteed by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), or the Rural Housing Service (RHS), The CARES Act provides a mortgage payment forbearance option for all borrowers who, either directly or indirectly, suffer a financial hardship due to the novel coronavirus (COVID-19)national emergency. No documentation is required to prove your hardship beyond your assertion that you are suffering from such a hardship. However, if you can still make your mortgage payments, you should continue to do so.”

And even if your loan is not included in the categories previously listed, many lenders will still work with you to grant some type of payment relief. With no hit to your credit score and little required financial hardship documentation, why just use the forbearance option and quit making mortgage payments for a year?

Interest Accrues and Payments are Still Owed

white and red wooden house miniature on brown table

One issue with forbearance is that mortgage interest still accrues. So, if you have a new $300,000 mortgage at 4.5 percent, over $1000 of your monthly payment during your first year will be credited toward interest. If you don’t make those payments that interest still accrues. And at that end of your forbearance, you also owe every payment amount you have missed.

If you have a big mortgage and a big house, your principal and interest might be $4000 per month. If you are allowed to miss 12 payments, you will have increased your balance due by close to $50,000 when the forbearance ends. 

If you have lost your job because of COVID-19 and you can’t make your mortgage payments, CARES Act forbearance can be a great help as you restructure your financial life. If you have just taken a small hit due to the coronavirus and you are able to make your payments, think twice about the effects a forbearance might have on your current mortgage. 

While it might be great to be mortgage payment free for 12 months, realizing that you have just added over $50,000 to your loan amount may not be as comforting.

How Coronavirus Will Impact Your Mortgage Rates

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Mortgage rates have been what some may call artificially low since the Great Recession that began in 2008.

Check out this chart from Freddie Mac and you’ll see that average mortgage rates —t hat topped out at a breathtaking 18.48 percent in January of 1982 — have been below five percent since early 2010. Since then, these low rates have meant a huge increase in buying power for those seeking homes. 

You’ll see some more recent information in the image below.

coronavirus mortgage rates

image via themortgagereport.com

For example, a $350,000 loan at five percent would cost $1,879 per month (principal and interest), while that same loan at four percent would cost $208 dollars less per month. That’s more than a 10 percent payment decrease.

Coronavirus Effects on Mortgage Rates

The pandemic caused an unprecedented near-total forced economic shutdown, and the U.S. government responded with a massive dose of liquidity that included individual stimulus checks, expanded unemployment benefits, forgivable Payroll Protection Program loans, and help from the Federal Reserve in the form of lowered interest rates. This caused mortgage rates to fall below three percent in some cases, further extending buying power. 

mortgage Scrabble tiles

Higher Credit Scores Needed

While three percent interest rates are a great incentive to home buyers, these coronavirus mortgage rates can be more difficult to attain since many lenders quickly pivoted to recession-mode and subsequently raised minimum credit score requirements.

Bankrate.com tells us:

“Wells Fargo and US Bank both adjusted their minimum score requirement to 680 (including for FHA and VA loans, which typically feature lower credit-score requirements as low as 580), while Flagstar Bank upped its minimum to 640.”

person using laptop computer holding card

While buyers can carefully check their credit reports for errors and correct them in order to boost their scores, this fix will not work for those that have legitimate credit issues, and therefore many buyers may be unable to avail themselves of these historically low rates.

Consider a 15-Year Term

Well-qualified buyers can get an amazing 2.87 percent rate for a 15-year mortgage. 15-year coronavirus mortgage rates will mean a higher monthly mortgage payment initially, but the entire loan would be retired in 15 years.

housing loan blocks on brown wooden surface

If buyers can qualify for and afford a 15-year mortgage, it’s definitely an option to seriously consider. It might also be something to consider, if you’re thinking about selling a house after 1 year

Refinancing an Existing Loan

Those that bought homes with loans with pre-coronavirus mortgage rates of four percent or more might consider refinancing their current loans. A person with a $350,000 mortgage currently at four percent can save a not insignificant $195 per month if a three percent rate can be secured.

person sitting on chair holding iPad

Even if there are some refinancing closing costs included, these can be overcome in a few years by factoring that almost $200 per month in savings.

Forbearance for Coronavirus Mortgage Rates

The Consumer Financial Protection Bureau succinctly explains options that are available to homeowners that cannot make mortgage payments due to the pandemic:

“If you experience financial hardship due to the coronavirus pandemic, you have a right to request a forbearance for up to 180 days. You also have the right to request an extension for up to another 180 days. You must contact your loan servicer to request this forbearance. There will be no additional fees, penalties or additional interest (beyond scheduled amounts) added to your account. You do not need to submit additional documentation to qualify other than your claim to have a pandemic-related financial hardship.”

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If you are having trouble making payments, you do have to take the first step and contact your loan servicer as mortgage forbearance is not automatic, so make sure that you proactively do this before you make a late payment.

Tighter Mortgage Lending Criteria

As we had mentioned previously, banks have tightened mortgage lending standards. For those with less than perfect credit, this can now be a problem. In good times, a credit blip or issue can sometimes be ignored, but in perilous times like these, one late payment can derail an otherwise solid mortgage loan application. 

person holding white Samsung Galaxy Tab

If you did everything possible to nudge your credit score to 650 and now you find that the low coronavirus mortgage rates are still out of reach, you might want to consider some non-traditional financing options like contract for deed.

An MN contract for deed deal allows a third-party company like C4D, for example, to purchase a home from the seller and lease it back to you. When you have made all of the monthly payments, or if you are able to get conventional financing before the contract officially ends, the deed is given to you.

The stock market certainly seems to think that coronavirus troubles are behind us, and if true, mortgage interest rates could rise in the near to medium term. Therefore, if you can lock in one of these low rates now, you may be participating in a once in a lifetime financial opportunity.