Lake Norman Real Estate Blog
The purpose of this blog is to provide information to home buyers and sellers. The blog serves as an informal venue for regular communications on the latest real estate news and on what is happening in Lake Norman and surrounding areas.
Buying and selling real estate involves very substantial financial transactions. For most people, a house purchase or sale will be the biggest transaction they will ever handle. When you are dealing with that kind of money, there are many reasons to research and ask questions.
Everybody wants to know how to best time the market when buying a home. It's just natural. Especially if you're thinking about buying in a down market where homes prices are declining. You wonder how low home prices will go and whether you should wait, right?
Some Home Buyers Should Buy Immediately
You're probably thinking: "Of course, she would say that. She's a Realtor, and agents always say 'Now is the best time to buy'." Well, here is why:
- If you are a seller who wants to move up to a more expensive home in a down market, now could be the best time. The longer you wait to sell, the lower the price of your home could fall.
- If you can arrange for alternate housing, a smart strategy is sell now, wait a few months, then buy your new home.
- If you sell and buy simultaneously, you'll still be ahead of the game because the price reduction on the purchase is greater than the loss on the sale.
Consider the "Loss" on Selling Your Present Home
For example, say your present house is worth $300,000, but because of high inventory and few buyers, you must reduce your price by 10%. So, instead of receiving $300,000, you would get $270,000 and "lose" $30,000.
Consider Your Real Profit
Now, consider this. Say you bought this home 10 years ago and paid $100,000. You're still ahead $170,000, less costs of sale, aren't you? (This ignores monthly payments, but you would make those if you were renting, too.)
Consider the "Savings" on Buying Your New Home
If you are planning to move up to a $450,000 house, which is located in the same distressed market, you could probably buy that house at that same 10% discount or $405,000. This would mean you had saved $45,000.
Review of Selling and Buying Numbers
- So you "lost" $30,000 on the sale of your home
- But you "made" $45,000 on the purchase of your new home
- Doesn't that put you $15,000 ahead?
Don't Forget the Impact of Interest Rates
Which way are interest rates moving? Are they moving up or moving down? If interest rates are near an all-time low and beginning to inch up-wards, waiting could cost you more than you would think. You might not be able to afford to buy a home at any price. Following is what happens if you're looking for a loan around $315,000.
Look at the Differences Among Purchase Prices versus Interest Rates
If you have a 20% down payment and qualify for an 80% loan, here are your principal and interest payments on the following purchase prices:
A good strategy is to weigh all the pros and cons of real estate ownership before making the decision to buy or sell. Don't panic over newspaper headlines. Make an informed decision. Run your own numbers.
- Purchase price 392,740 - $1,500 principal and interest payment at 4.00% interest, your loan amount will be $314,192
- Purchase price 381,143 - $1,500 principal and interest payment at 4.25% interest, your loan amount will be $304,915.
- Purchase price 370,052 - $1,500 principal and interest payment at 4.50% interest, your loan amount will be $296,042.
- Purchase price 359,437 - $1,500 principal and interest payment at 4.75% interest, your loan amount will be $287,550.
- Purchase price 349,277 - $1,500 principal and interest payment at 5.00% interest, your loan amount will be $279,422.
One percent will reduce the buying power with $43,463!!! If you wait for prices to further decline, the perceived value could be lost due to higher rates.
Keep in mind that some areas and clients could qualify for up to 100% loan to value.
September 20, 2012
The "fracking " legislation (Senate Bill 820) enacted by the General Assembly this past summer over the Governor's veto included a section addressing concerns pertaining to the well-publicized situation involving buyers of DR Horton homes who claimed they didn't understand that DR Horton had retained mineral rights in the properties they bought. Section 5 of Senate Bill 820 amended the Residential Property Disclosure Act to require sales contracts of residential properties covered under the Act to include an "Oil and Gas Rights Disclosure." The wording and format of the new disclosure is set forth in Senate Bill 820 and a copy of which can be accessed on the General Assembly's web site via the following link: http://www.ncga.state.nc.us/Sessions/2011/Bills/Senate/PDF/S820v6.pdf . .
Section 5 of Senate Bill 820 goes into effect October 1, 2012. Therefore, effective this coming October 1st, the Offer to Purchase and Contract (form 2-T) and Offer to Purchase and Contract used by NC Realtors -- New Construction (form 800-T) have been amended to include the new Oil and Gas Rights Disclosure.
October 8, 2012
Ten do's and don'ts when applying for a mortgage
- Don't change your job before or during the home loan application process.
Along with that, now is not the right time to become self-employed or quit your job. You want to show lenders stability, which means you'll be less likely to default on the loan. Self employed borrowers have to submit two years of business and personal tax returns and a YTD Profit and Loss to verify income.
- Don't change banks and don't issue any NSF checks.
Non Sufficient Fund checks (aka NSF checks), as shown on your monthly bank statement, can be interpreted by an underwriter that you cannot manage your money, making you too big of a risk for mortgage loan approval. Most mortgage programs require the Underwriter to investigate all pages of your two most recent bank statements. Make sure these statements are free of NSF checks. If not, be prepared to provide a well written, concise, explanation letter. The same applies for overdrafts and overdraft fees. Like your employment, you want your banking history to show stability.
- Don't buy furniture, a car, truck or any other form of transportation that you have to finance.
Buying one increases your debt-to-income ratio and that's something that could increase your Debt to Income ratios above the allowed tolerances and the lender will decline the loan application.
- Don't be late on your credit card payments or charge excessively.
You need a track record of responsibility and show that you can manage your money. Credit card balances above 30% of the available credit on a card could impact your credit score negatively. Paying your bills late can lower your credit score and could prevent you from obtaining a mortgage at all. Even if you are able to obtain a mortgage, it will likely be at a much higher interest rate. Lenders will often re-run credit on the day of closing or a few days after closing during the post closing audit to check for debt incurred on the day of closing or prior to closing.
- Don't make large deposits into your bank accounts or let anyone write you a earnest deposit check without consulting with your lender first.
If the earnest money check is going to be from an account other than your own, these funds are considered gift funds. Gift funds must be properly documented via a fully executed gift letter and evidence the donor has the funds to give. Some programs don't allow gift funds at all. If the funds cannot be properly documented or if the mortgage program does not allow gift funds, your loan approval is in jeopardy by not presenting your own funds for the earnest money deposit. Lenders like the money that will be your down payment to be sitting in your account for at least two months also called "seasoning".
- Don't lie on your loan application.
Sounds simple, right? Confirm that all the debts imported by the mortgage originator from your credit report is correct when you sign the final application. Don't leave out any debts or liabilities you have or fudge your income. It's fraud.
- Don't co-sign a loan for anyone.
Cosigning a loan can prevent you from getting a loan of your own? Any outstanding loans on your credit report can change your debt to income ratio, which is what lenders use to determine if you have enough money to add an additional loan. Also, cosigning makes you responsible for that loan; you can be expected to pay the remaining amount of the loan if the other cosigner defaults or doesn't make payments. Any negative activity and late payment can bring your credit score down, making it more difficult and sometimes impossible to get approved for a loan. Don't co-sign on a loan for anyone unless you are prepared to pay the note!!
- Avoid having inquiries made into your credit.
Looking for new credit translates into higher risk for lenders. If your inquiries are related to your mortgage search, it usually doesn't affect your credit score because the assumption is you're rate shopping. But opening credit accounts within a short period of time represents some risk and your credit could take a hit. It's probably not a huge factor in your calculating your ability to repay a loan but why take a chance at this juncture?
- Don't spend your money for closing costs.
Part of the price of financing a loan is the closing costs and you'll likely have some responsibility for paying them. Make sure you have enough for your share of the obligation. Request an estimate from your lender before you commit and pay for an appraisal.
- Do confirm and lock your rate if possible with your lender of choice before paying for an appraisal.
Appraisals under HVCC ruling introduced by New York's Attorney General Andrew Cuomo are no longer portable... they're now tied to the Bank. Larger bank often own a share the appraisal management company. They have to disclose should you ask them to do so. Appraisal might be portable if you are dealing with a broker representing several lenders. Changing lenders after you paid for an appraisal could be a $480.00 mistake, ask before you pay.
February 20, 2013
What to look for when buying in an HOA
When buying a condominium or townhouse in the Lake Norman, Mooresville, NC or surrounding areas, you are not just buying a home; you are also entering into a long term relationship with the Homeowners Association (HOA). It is therefore critically important to thoroughly review all of the documents associate with this organization, including the financial statements for the preceding years.
You want to understand completely its inner workings to determine if your potential purchase is a quality investment or a money pit! Some key questions to discuss with the Homeowners Associates include:
Is the Homeowners Association financially sound?
You will want to obtain written documentation for your answer. This organization should be more than happy to provide copies of the following documents. And, YES, it is highly recommended that you read them, even if they hand you a bundle of 50 pages or more.
- Covenants, Conditions and Restrictions (CC&Rs)
- Rules and Regulations
- By-Laws of the Homeowners Association
- Financial Statements for the Homeowners Association
You may not know, at first, what to look for when reading these documents, so we recommend looking for information on:
- Special assessments of potential future deferred maintenance
- Potential capital improvements being considered
- Financial balance of cash reserves
- Has the Homeowners Associate been involved in any lawsuits?
- Historical rate of dues increases
As a homeowner, why am I paying monthly dues? What's in it for me?
We believe that you should ask as many questions as you like. Some of the coverages to consider when asking about monthly dues might include:
- Cable TV and Internet services
- Grounds keeping, maintenance and landscaping
- Trash removal services
- Management Fees
- Fitness center
- Pool and/or spa
- Road and sidewalk upkeep
- Potential icy weather
- Are there assigned parking spaces? If so, how many?
- Visitor parking
- Gate access for homeowners as well as for guests
How do the fees and monthly dues of this Homeowners Association compare to nearby complexes?
The difference in dues of Homeowners Associations from Cornelius, NC and Mooresville, NC can be quite substantial, yet the differences in services may be almost the same. For example, a condo on Lake Norman recently sold with a monthly HOA monthly dues rate of $120. Around the corner at another condo complex that had recently undergone renovations, the monthly HOA fee was $190. The only difference between the two properties was that the remodeled complex now had stainless steel appliances. Is $70 a month in additional fees worth it? Perhaps, or perhaps not.
Who manages the complex? Get names of people, not companies.
It is not uncommon for larger properties in Mooresville, NC, Lake Norman and the surrounding areas to outsource their professional management needs to a commercial property management company. It might cost a bit more at the beginning, but the money saved in the long run may be quite substantial. This can work in your favor when negotiating for landscaping services or maintenance professional, especially during the bid process. Since the professional property management company is running several other complexes concurrently, they are more apt to get a better rate.
What percentage of the complex is rented space?
This is a good question for a few reasons.
- Tenants are not bad people, but it is a well known fact that renters do not take care of the property as well as the owner. It's just human nature.
- Some lenders will not loan money to potential buyers of properties with over 25% tenant space, so this may impede your getting a loan.
- The HOA may not allow renting at all, or only after a certain grace period. If you were planning to use this as an investment property, you may need to reconsider.
Can you hear the other homeowners around you?
You may get a more accurate response to this question by asking the neighbors or by driving through the complex after professional working hours or on weekends, like a Saturday evening. Corner units have fewer adjoining walls and are therefore usually less noise. Ask about soundproofing materials, but this does not always provide a quiet environment for the more noisy neighbors blasting loud music at all hours of the day and night.
If you are buying a unit next to stairs, you may be worried about hearing footsteps walking up and down constantly. In one case, we advised a Lake Norman Real Estate Gateway potential buyer to talk to the upstairs owner. Turns out, he was the HOA President who was notorious for keeping things quiet.
What are the extra amenities, the parking policies and the pet restrictions?
- Is the fitness center 24-hours? If not, does this work with your schedule?
- What are the hours for the pool, tennis courts, game rooms and other features?
- What is the policy on guest parking? Do you have a pre-assigned space? Can you rent additional spaces if needed?
- What is the fee to replace a lost or stolen gate key, or clubhouse access pass?
- How many pets can you have? Are there size and breed restrictions? What is the "popper scooper" by-law? Can you bring them through the lobby when secured with a leash?
In short, if you are thinking about purchasing a condo or townhouse in the Mooresville, NC or Lake Norman and surrounding areas, we believe that it is always a good idea to first begin by talking to the people who already have residences there. If there is ill will against the Homeowners Association, they will be more than happy to let you know. It's always best to find these things out in advance, and the reasons behind the bad vibes. Homeowners Associations have more power than ever before to penalize its residents in the form of monetary citations for all sorts of potential violations. Make sure you "read the fine print" before buying.
Lake Norman Real Estate Broker
Deducting Private Mortgage Insurance
Deducting Private Mortgage Insurance Homeowners are well aware of the many home-related tax breaks they can claim each filing season. But there also are a lot of added costs that come with purchasing a home. For buyers unable to make a down payment of at least 20 percent of their home's purchase price, one of those costs is private mortgage insurance, or PMI. A PMI policy is coverage that you, the homebuyer, pay for, but it protects your lender in case you default on your loan. Now, however, some PMI payers can at least use those insurance payments as a tax deduction when they file their returns.
Originated in 2007, extended through 2013
This tax deduction was created as part of the Tax Relief and Health Care Act of 2006 and originally applied to private mortgage insurance policies issued in 2007. But because the housing market has been slow to recover, lawmakers have extended this tax break. It now is in effect for premiums paid through 2013. The private mortgage insurance deduction can be taken for policies issued by private insurers as well as insurance provided by the Federal Housing Administration, the Department of Veterans Affairs and the Department of Agriculture's Rural Housing Service.
Counted as interest
Many homeowners itemize deductions because their mortgage interest and property tax payments exceed the standard deduction amount they could claim. It's in the "Interest You Paid" section of your Schedule A that you'll find the private mortgage insurance deduction. It is claimed on line 13. What amount of PMI do you claim? You should find the amount in box 4 of the Form 1098 (or the substitute year-end loan information statement) that your lender sent you.
Time, occupancy restrictions
While it's easy to claim the PMI deduction, make sure you meet the requirements. First, note when you paid the mortgage insurance. The deduction is allowed only if you took out the mortgage on which you pay PMI on or after Jan. 1, 2007. No PMI premiums are deductible if they were made in connection with a home loan that was made before that date. Any associated PMI premiums on new mortgages issued through 2013 will qualify for the deduction.
If you refinanced your home since Jan. 1, 2007, you also qualify for the PMI deduction on that loan. Be careful as to how you structure your refi. The mortgage insurance deduction applies to refinances up to the original loan amount, but not to any extra cash you might get with the new home loan. You also might be able to deduct private mortgage insurance payments on a second home loan. As with your primary residence, the loan on the second home must have been issued in 2007 or later to be deductible. The additional property also must be for your personal use as a second or vacation home. If you rent it out, then you could end up paying the PMI without any help from the Internal Revenue Service, unless you claim tax breaks on the home as rental property.
Finally, while there is no statutory limit on the amount of PMI premiums you can deduct, the amount might be reduced based on your income. The deduction begins being phased out when the homeowner's adjusted gross income, or AGI, is more than $100,000. This income limit applies to single, head of household or married filing jointly taxpayers. The phaseout begins at $50,000 AGI for married persons filing separate returns. The PMI deduction is reduced by 10 percent for each $1,000 a filer's income is over the AGI limit. The deduction disappears completely for most homeowners whose AGI is $109,000 or $54,500 for married filing separately taxpayers.
The Schedule A instructions include a work sheet, as does most tax preparation software, that homeowners can use to determine their reduced private mortgage insurance deduction amount.
Posted in Your Money.