Category: Real Estate

The American Dream

 

The American Dream
What does your American Dream Look like?

We all have desires to live the American Dream and part of that dream is owning property? I know for a fact that houses provide the average person the ability to increase net worth. When you have that responsibility of owning your home, you feel a sense of pride and can take on projects that increase the value of the house with ease. Because there’s so much involved with owning a house that it just increases your get to work with a hammer skill, even if you contract out the big jobs, you will learn smaller tasks around the house.  There’s over a hundred million videos on YouTube on how to maintain your house, coupled with famously tailored HGTV shows that give you a plethora of ideas on how to get the best bang for your buck. Over time with all the upgrades, increased equity, and home market values rising, these are usually signs of increased wealth for many homeowners. Now let’s talk about the benefits as well as the drawbacks of home ownership that you need to know right now.

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5 Ways to Make a Mortgage Calculator Work for You

5 Ways to Make a Mortgage Calculator Work for You
5 Ways to Make a Mortgage Calculator Work for You
The following is a Guest Post. If you are interested in being featured on this site send email.
Before the age of the Internet, many of the statistics that were involved in calculating the true price of a mortgage were beyond the reach of the average person. With online mortgage calculators, however, these calculations can be done quite easily by someone who simply takes the time to perform them. These calculations can prove indispensable when it comes to negotiating the best price with real estate professionals.

Below are just a few of the ways in which you can make a mortgage calculator work on your behalf.

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Home Buying with Down Payment Assistance

Home buying with down payment assistance
Need Help with the Down Payment?

Home Buyers did you know there is a company that is offering down payment assistance in certain markets for a 40% equity stake in the eventual sale of the property. If you could not afford the 20% down payment would you consider this as a viable option? This company is willing to give up to 10% of the down payment for mortgages above 625K.

I think this can bring complications later down the line, but if you plan to stay in the property forever I see some benefits with it as well. The company is listed in the article below and they will be sort of living in your basement with a second lien on your property. I will discuss the pros and cons of this type of arraignment later in the post, but let’s think about the emotional rationale first. If and when you finally pay off your mortgage, this company will assume the first lien, and if you ever sell they will take 40% of the proceeds. Wait one second they only invested 10% of the down payment and now they want 40%. That is a big difference to the tune of 30%, and a big capital appreciation for the company. On top of that your house if in a decent neighborhood will appreciate about 3% per year, and they will get all that wonderful increase in market value for doing a one-time investment. Now that you heard this shocking news, does it change your mind?

Home Buying with Down Payment Assistance 

Pros:

Help with half of the down payment

Avoid PMI (Private Mortgage Insurance)

Less mortgage interest to payoff over the life of the loan

Increased cash flow because you borrowed less from Mortgage Company

You can always pay back the investing company and remove the lien (But at what % cost)

Invest the other half of the down payment in other investments (If you saved it)

Cons:

Investing company will always have a lien on property (Have rights to it)

Loss of 40% equity Stake in property when sold (Sacrifice Upside Market value)

The property is never fully yours

Only available for Jumbo Mortgages above 625K

AS you can clearly see the pros list outnumbers the cons list. But the reality is the cons future losses might be more devastating to your net worth. The 40% share of the future property value might be 300 thousand dollars in 15 -20 years. I now will ask you this, will you trade with me 62,500 for $300,000? The difference is 237,500 dollars in eventual proceeds of the property assuming the mortgage is completely paid off. I would not take that trade if I were you, and I would rather be patient and save the other 10% if I didn’t have it right now.

Resource: Article

Comment if you are in the process of home buying and you do not mind taking down payment assistance?

Rich Uncle EL

Alternative Mortgage Lender

Alternative mortgage lender

How do you feel about getting milk, bread, grapes, and a mortgage all under one roof? This is the case for some Costco members who can now take advantage of the financial services to buy or refinance a home. This is not your typical mortgage lender, in fact I would place them as an alternative mortgage lender category. When I saw this ad in the Costco connection magazine I immediately thought I might use them to see how good they really are for providing a lending experience. Just to let you know I have never used Costco to book a vacation, buy a car, or any other service above grocery shopping so I am a bit skeptical. Costco has a great customer service reputation for in store members, but will this really translate well towards getting a mortgage done the right way. I have heard great things about their travel booking experience, but I am not sure that this great service will branch over to mortgage lending.

The picture that came with the ad shows a young couple with a huge smile standing next to a sold sign in front of a beautiful house. What a perfect picture scenario did they paint right there for all the club members to see, that you too can be a happy homeowner one day if you get a mortgage from Costco. Do you want to know what we really see in the ad? How much money will Costco really save me with fees? One thing that is synonymous with Costco is getting a lot for a bargain. After reading the ad I did see a great plug for the program on the side of the flier it basically stated, Costco set caps on fees and margins and the participating lenders will adhere to this policy. The lender fees cannot exceed $600 for executive members and $750 for all other members.

The whole process is done online, beginning with an initial application, and then from that point on you will deal with the lenders by email or telephone.  The next step as per the flier is selecting the preferred lender you will desire to work with based on the variables important for you. Examples for the selection process can be the lowest interest rate, lender / point fees, program term, and who is actually licensed in the state you want to buy in. I wonder how much of a cut Costco will get after each closing has been completed.

After filling out a small Quote Request form on the Costco Finance site, I selected two lenders with the least amount of fees, as you can see the rate offered is for a 30 year mortgage. Below you will see the disclosure information about the fees given after a quote request is submitted.

 

LenderProgramInterest RateAPRLoan Details
Conf 30 yr Fixed Full Doc

3.500%

3.529%

Mon. Payment: $988
Est. Total Cost: $825**
Conf 30 Yr Fixed Full Doc

3.500%

3.535%

Mon. Payment: $988
Est. Total Cost: $950**

** Estimated Total Cost is a combination of lender fees and third party fees. Lender fees include application, commitment and processing fees and are not to exceed $600 per transaction for Costco Executive Members, and $750 for Gold Star and Business Members. Third party fees are expenses for services which are required and are provided by someone other than the lender. Third party fees include items such as appraisal, flood certification, credit report, etc. Additionally, due to the complexity of state by state charges, Estimated Total Cost provided above does not include title, escrow, transfer tax, or recording fees.

After placing a quote request I would not mind getting a mortgage for 3.5% with fees totaling less than a thousand bucks.

Comment if you can see yourself applying for a mortgage loan through Costco?

 

Rich Uncle EL

Would you rather a house or a condo?

 

 

 

Lately I have been talking to several people and they have asked me this question over and over. I tell them the same thing, It depends on your situation and how you want to live. Let me further explain and break down my own consideration analysis based on the question above.

House or Condo Considerations:

1.   What lifestyle do you want to lead? (A plot of land with a house or apartment in a building?)
2.   Take into consideration maintenance fees for both situations. (One is forced on you and the other is at your leisure)
3.   Cheaper Price or more Square Footage? (Condos cheaper and houses more living space)
4.   Have to consider all the rules and regulations associated with Condo Living. (Rules or no rules)
5.   Do you entertain a lot? (Another negative for condo living as neighbors might knock on your door)
6.   Hate to cut grass or shovel snow? (A negative for house purchases)
7.   If you move how easy would it be to resell or rent out the property? (1000 monthly maintenance= hard sell)
8.   Do you require a lot of Storage needs? (Condos do not come with Basements)
9.   Additional costs for a Condo: Parking, Laundry-Coin Operated, Staff Bonuses, and Gym Memberships. (If not included in maintenance fees)
10.  Additional Costs for a house: Taxes are higher, Utilities higher, Water expense is based on your consumption, if something breaks then you are fully responsible for replacement costs.

These are the major considerations that should be weighed to determine if a house is for you or if a condo is best for you. People with demanding schedules and high work related stressed individuals prefer condo living above house living for obvious reasons. Do you have to fly constantly for work and live alone ? I would suggest a condo for this type of person. One Caveat is any new bylaws or regulations the board decides to place on the building then you have to abide by it. Are you single but would like extra income from renters? A house will get you the best bang for your buck. Do you want to be in the an urban area in close proximity to entertainment? Condo living is best for that type of person.

I guess I am a bit biased as I am a family man with a desire to buy a house, but anybody considering making a huge purchase like this should look at the list above and make their own determinations based on the answers from the questions above. I found a good article that gives non-biased advice for would by buyers see link -, Realtor Site. I am more inclined to buy a house, but it has to be a good location, with average taxes and it has to have the precise charm and square footage I desire. Obviously the pic above is a mansion which I would never own because of my frugal ways and only reserved for multi millionaires, but what a better way to shoot for stars and get motivated than to show you a MC mansion that you can possibly one day own if you read my blog and want to live like a NBA player. HA HA.

Resources for Buyers:

Best Places to Live Statistics

Walk Score

Flood Check

CNN Money Best Places

Rent or Buy

Deciding what type of home to live in before jumping into it is a great way to watch your money.

Rent or Buy?

     
     I did some research on what kind of calculations would help a person decide whether to rent or buy a home. People need to move for many reasons for example: career changes, educational pursuits, proximity to family. All of these are perfect reasons why a person might switch area codes and the next question depending on your finances is if one should rent or buy?  Obviously most of you think that if you have the money and your finances are in order that the reasonable thing would be to buy, but the smart thing to do is to research first. I have listed two tests below to guide you:


Test 1 
Step One: Pull several multiple listing statistics from the local Realtor on the specific town. 
 Step Two: Find out the average annual appreciation over the past ten years for the town
 Step Three: Find the average days on market in the town.   




     For example, if the houses are going up 3% a year and it takes them 6 months to sell, you probably don’t want to buy in that area because you’ll probably lose money and have a hard time selling. Therefore you will only consider renting if you had to move to that town. If house values go up 15% a year and sell in a couple weeks, then you should buy because you will make money in about four years of living in the area. 


Test 2
-Multiply expected annual rent times 15
-If purchase price is more than the 15 X rent expense- Rent
-If purchase price of home is less than 15 X rent expense – Buy


Consider what is the average rent for the town as well as what the median purchase prices are for homes in the town.  The test most real estate experts use is if the house is 15 times more than the annual rent then renting is more economical.      


Now you have two approaches to apply before you take the major step of buying or renting in a specific city or town. Obviously there are many other variables to consider but now you are a step closer to deciding if it’s right to become a home owner in a town you may not know anything about. 


Saving $$$ in real estate is another way to watch your money.