Should You Schedule a Pest and Termite Inspection for the Home You’re Buying?

Whether you’re an aspiring first-time homebuyer and about to make your first offer or you have just purchased your second or third home, you’re probably excited to enjoy your new space. But wait, is that a little critter by the backdoor? Maybe it’s just an ant… nothing to worry about, right? Just to be sure there aren’t any other pests lurking about your new house, you might want to consider getting a pest and termite inspection. Here are five reasons you should schedule a termite and pest inspection before any unwanted visitors wreak havoc on your dream home.

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Why should you get a pest and termite inspection?

As a new homeowner, it’s always a good idea to cover all your bases and have a pest and termite inspection performed. Homes in more humid climates – think homes in Miami, FL or houses in Houston, TX – are more susceptible to termite infestations due to the increased moisture in the surrounding environment. If you’ve seen any signs of a termite infestation, it might be a good idea to have a termite inspection. These signs can include buckling floorboards, creaky floors, or damaged wood.

For those still in the homebuying process, if you see signs of termite damage in the house, you should consider adding a termite contingency when making an offer on a home. A termite contingency may give you the option to back out of the sale if there’s been significant damage found. Otherwise, you can try to negotiate with the seller to pay for the repairs. 

What if you’re planning on just getting a regular home inspection? Your home inspector likely won’t look for specific types of pest or termite damage. However, if your home inspector does find damage, contacting a pest or termite inspector should be your next step. A pest or termite control specialist can help you determine what the best course of action is, likely scheduling an inspection to determine the extent of the damage.

Is a pest and termite inspection required before closing on a home?

If you’ve already purchased your home, then you didn’t miss out on any required inspections. For most homebuyers, termite and pest inspections are not required before closing on a home. However, certain types of loans such as FHA and VA loans may require you to pay for a pest inspection before your mortgage approval, so it’s best to check with your mortgage lender or real estate agent. Your real estate agent will also know if your particular state or county requires a pest inspection before purchasing a home.

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5 benefits of having a termite or pest inspection

There are several benefits of having your home inspected for termites or pests.

1) Negotiating power. If the home you’re looking to buy ends up having damage from termites or pests, you’ll likely have better negotiating power. Your real estate agent can help you decide what negotiations to make. These negotiations may include asking the seller to reduce the price so you can pay for pest control services or asking the seller to pay for any repairs or fumigation services before you close on the home.

2) Peace of mind. These inspections will be able to tell you if there’s any structural damage from pests or termites. Your inspector will disclose any issues they find. Then you’ll have an idea of what kind of maintenance you might need as the home’s future owner. 

3) Save money. Moving into a new home can feel like the dream, but it’s always a good idea to know what you’re getting yourself into. Without a pest or termite inspection, you may be foregoing a critical type of home inspection that may end up costing you more money down the road if a problem is left untreated.

4) Prepare for future expenses. If your pest or termite inspector finds certain types of pests in the home you’ll have a better idea of what to look out for as a homeowner. That way, you will know if your new home or the area you’ve moved to is susceptible to specific pests. It will also help you to plan ahead for any costs associated with keeping these pests away.

5) Find a local pest control company. Say your home is more susceptible to termites because you’re buying a house in a more humid area, or that spiders or mice are more common in your county. The good news is you’ve found a local pest control company to help you schedule regular maintenance. You’ll know just who to call for help if any critters start appearing in your house.

What to expect during a pest inspection

The inspection will take roughly 30 minutes but can vary based on the size of the home and whether there’s a basement, crawl space, or any extra areas. The inspector will examine the interior and exterior of the home for any signs of damage, infestation, or specific areas that might be more susceptible to pests. They’ll check for any signs of moisture. Damaged wood or buckled paint indicate the presence of wood-destroying insects like termites. They are more likely to be found in these areas vulnerable areas.

The inspector will check for a variety of different bugs such as carpenter ants, fleas, mosquitos, and moths, among others. Where you are located may also play a role in the types of pests your inspector will look for. Some pests are more likely to be found in certain areas or are local to your region. If these types of local pests are found during the inspection, your pest inspector may recommend regular pest control to keep these critters at bay. 

The post Should You Schedule a Pest and Termite Inspection for the Home You’re Buying? appeared first on Redfin | Real Estate Tips for Home Buying, Selling & More.

Source: redfin.com

5 Tips Every Renter and Homeowner Should Know About Insurance

This week, I had to evacuate because of Hurricane Dorian. If you’ve ever experienced a natural disaster or had to evacuate your home, you know that insurance is a top concern. No matter where you live, there are common threats—such as California earthquakes, Oklahoma tornados, and Texas floods—that affect renters and homeowners.

Let's review five essential insurance tips that every renter and homeowner should know. You’ll learn the variety of protections you get from basic renters and home policies, mistakes to avoid when buying a policy, and ways to save money on premiums.

5 Tips Every Renter or Homeowner Should Know About Insurance

  1. Not every type of damage is covered
  2. Certain belongings have low coverage limits
  3. Know the difference between cash value and replacement cost
  4. There are special types of deductibles
  5. Don’t leave discounts on the table

Here’s more information about each insurance tip.

1. Not every kind of damage is covered

A basic homeowners policy pays for claims when a natural disaster—such as a fire, tornado, hail, or windstorm—damages your property. Personal belongings like your furniture, electronics, and clothing are generally covered up to specific limits for damage and theft.

Home insurance includes liability, which protects you from legal issues that could arise if someone is hurt on your property.

Homeowners coverage also pays "additional living expenses." That might include things like some amount of hotel and meal expenses if you can't stay in your home after a covered disaster.

If you’re a renter, you also need insurance, because your landlord is not required to cover you. Renters insurance gives the same protections as a homeowners policy. You get coverage for your personal belongings, liability, and additional living expenses. But it doesn’t cover damage to rental property because that’s your landlord’s responsibility.

Unfortunately, about half of renters don’t have renters insurance. Many mistakenly believe that their landlord would pay to repair or replace their damaged or stolen personal belongings. Or they mistakenly think a renters policy is too expensive. The good news is that a typical renters policy is quite affordable, costing just $185 per year on average across the U.S.

The good news is that a typical renters policy is quite affordable, costing just $185 per year on average across the US.

But what surprises many people is that a standard home or renters policy doesn't cover some natural disasters. These include earthquakes and flooding from groundwater.

If you live in an earthquake-prone area, you can typically add earthquake coverage to a home or renters policy. But flooding is a different category of insurance that must be purchased separately. Flooding is handled differently than other types of disasters because it’s the nation’s most common and expensive disaster. Floods can happen anywhere, and they don’t even have to be catastrophic to cause significant damage.

If your town or community participates in the National Flood Insurance Program, you can buy a policy for your rental or your home. And if you buy a home in a designated flood zone, mortgage lenders typically require you to have flood insurance.

Most flood policies have a 30-day waiting period, so you can’t wait until a storm is bearing down on you to sign up. You'd be too late.

Even though the federal government backs flood insurance, it’s brokered by regular insurance companies or agents. You can learn more at floodsmart.gov.

Most flood policies have a 30-day waiting period, so you can’t wait until a storm is bearing down on you to sign up.

Remember that water damage from rain, high winds, or a tree that fell on your roof are covered by a standard home or renters insurance policy. But damages to your home or personal belongings that occur due to rising groundwater are never covered, except when you have flood insurance.

Also note that if you have a home-based business with inventory, specialized equipment, or customers who enter your property, you typically need a commercial policy. Likewise, if you turn your home into a rental, Airbnb, or a vacation property, you generally need additional coverage or a landlord insurance policy.

2. Certain belongings have low coverage limits

Just like not every disaster is covered, not every type of personal belonging is fully covered under a home or renters policy. Some belongings, such as cash, aren’t coved at all. Many others have coverage caps.

For instance, jewelry, watches, furs, silverware, electronics, and firearms are typically limited to one or two thousand dollars of coverage. If you have jewelry that’s worth $10,000 and it’s lost or stolen, you’d come up very short with just $2,000 of coverage.

If you have items worth more than the coverage caps, you can add an insurance rider for more coverage. This addition is known as “scheduling” your personal property. It costs more, but it gives your most expensive items separate coverage so they could be replaced.

Another often-overlooked protection you get with renters and home insurance is that your belongings are covered outside of your home.

Another often-overlooked protection you get with renters and home insurance is that your belongings are covered outside of your home. If your vacation luggage gets stolen, you lose valuable jewelry, or your laptop gets stolen from your car, your homeowners or renters policy covers it.

So, pay close attention to the insurance limits for possessions inside and outside of your home and consider adding a rider or property schedule to beef up coverage when needed for valuable items.

3. Know the difference between actual cash value and replacement cost.

It can be a little confusing to know exactly how much money you’d receive from a renters or home insurance claim. So be sure you understand the different types of policies you can buy.

Actual cash value coverage pays to repair or replace your property or possessions up to the policy limits, minus a deduction for depreciation. The calculation can vary from insurer to insurer. But what you need to know is that a cash value policy only pays a percentage of what it would cost you to go out and buy a new item.

Cash value coverage is the least expensive option. However, it means that if you experience a severe disaster, you probably won't receive enough to rebuild your home or fully replace personal belongings.

Replacement cost coverage pays to repair or replace your property and possessions up to the policy limits, without a deduction for depreciation. That means you would receive enough money to rebuild a home with materials of similar quality. Or buy new items to replace your damaged belongings.

Yes, replacement coverage costs more than cash value. But it would allow you to replace what you lost.

There are also guaranteed or extended replacement cost policies which give you even more protection. They pay to replace your home as it was before a disaster, even if costs more than your policy limit.

Remember that a home insurance policy is based on the cost to rebuild your home and any outbuildings, not the amount you paid for the property or its appraised value.

Remember that a home insurance policy is based on the cost to rebuild your home and any outbuildings, not the amount you paid for the property or its appraised value. You never include the value of your land in your home insurance. Depending on the age, location, and style of your home, the insured value could be much higher or lower than its market value.

4. There are special types of deductibles.

A deductible is an amount you’re responsible for paying for an insured loss. The higher your deductible, the more you can save on premiums. So be sure to get quotes for different deductible amounts when shopping for renters and home insurance.

As I previously mentioned, disasters such as windstorms, hailstorms, and hurricanes, are typically covered by standard renters and home insurance. However, in some high-risk areas, you may have separate deductibles for damage caused by these disasters.

According to the Insurance Information Institute, nineteen states and the District of Columbia have hurricane deductibles: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and Washington D.C.

These special deductibles are additional and separate from the regular deductible for all other types of claims, such as fire or theft. A hurricane deductible applies only to damage from hurricanes, and windstorm or wind/hail deductibles would apply to any wind damage.

Hurricane and wind deductibles are typically given as a percentage that may vary from 1% to 5% of a home's insured value but can be even higher in some coastal areas. The amount you must pay depends on your insured value and the "trigger" event.

For instance, if you have a 3% hurricane deductible and your home is insured for $200,000, you’d be responsible for the first $6,000 ($200,000 x 3%) in repair costs. That’s much more expensive than paying a standard $500 or $1,000 home deductible.

In some states, the triggering event for hurricane deductibles to apply is when a Category 1 storm causes damage whether it made landfall or not. Other states allow Category 2 to be the threshold. In others, a hurricane deductible applies from the moment a hurricane watch or warning gets issued until 72 hours after it ends.

A hurricane deductible can only be applied once each hurricane season, from June to November.

5. Don’t leave discounts on the table.

When it comes to the price of renters and home insurance, there are some factors you can control and some you can’t. Here are some ways to save and typical discounts to ask for:

  • Bundling insurance is when you purchase different types of policies, such as renters or home and auto, from the same insurance company. Buying two or more policies can help reduce your total cost. Just make sure that the combined price from one insurer is less than buying policies separately from different insurers.
  • Shopping around may seem obvious, but many people don’t do it. Prices can vary considerably from insurer to insurer. Be sure to compare the same coverage and deductibles to get the best deal possible.
  • Installing safety features in your home or rental, such as smoke detectors, alarm systems, deadbolts, storm shutters, shatterproof windows, or roofing, may allow you to qualify for discounts. Even being a non-smoker or being retired reduces the risk for insurers, so be sure to let them know any factors that could work in your favor.
  • Raising your deductible is an easy way to cut the cost of premiums. Just make sure that you could afford to pay it in the event of a claim. Also, the savings vary depending on where you live and your insurer, so get quotes with multiple scenarios.
  • Maintaining good credit is vital for many aspects of your financial life, including the rates you pay for home, renters, and auto insurance. Depending on where you live, having poor credit can cause you to pay double the premium compared to having excellent credit! The only states that currently prohibit home insurers from using credit when setting rates are California, Maryland, and Massachusetts
  • Being a loyal customer can pay off with a discount. However, don’t let that keep you from periodically shopping around to make sure you’re still getting a good deal.

No one enjoys paying for home or renters policy, but when disaster strikes, you’re the victim of theft, or you get involved in a lawsuit, having insurance can be a financial lifesaver.

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Source: quickanddirtytips.com

Options for Teacher Student Loan Forgiveness

Loan forgiveness is a trade-off. It’s about incentivizing graduates to work in low paying or otherwise undesirable positions in exchange for erasing or significantly reducing their student loan balance. Without these programs, important community institutions would be severely understaffed.

If you’re a teacher or education student reading this, those criteria probably sound familiar.

Many school districts struggle to fully staff their schools, especially when it comes to certain positions. Loan forgiveness programs are one of the best ways for them to attract job candidates and retain them for long enough to make an impact.

Teachers have several options when it comes to loan forgiveness. Here’s what you should know about each one.

Teacher Loan Forgiveness

The Teacher Loan Forgiveness Program is the only federal loan forgiveness program specifically designed for teachers. Math or science teachers who teach in secondary schools or special education teachers can have up to $17,500 worth of loans forgiven. Any other kind of teacher can only receive up to $5,000 worth of loan forgiveness.

The program has strict requirements. Teachers must hold a license or certification in their state and teach for five consecutive years in a school that primarily serves low-income students. A list of eligible schools is available here.

Teachers qualify even if they work at different schools for each of the five years, but each of those schools must be eligible.

Teacher Loan Forgiveness is only available for Direct Subsidized and Unsubsidized Loans, as well as Subsidized and Unsubsidized Federal Stafford Loans. Perkins loans are not eligible.

If you have a Direct Consolidation Loan or a Federal Consolidation Loan that includes a Perkins loan, that portion won’t be eligible for Teacher Loan Forgiveness. PLUS or graduate school loans are also not eligible for Teacher Loan Forgiveness.

Public Service Loan Forgiveness

The Public Service Loan Forgiveness Program (PSLF) is arguably the best forgiveness option for teachers. Unlike the Teacher Loan Forgiveness program, borrowers don’t have to work consecutive years to qualify. This is especially helpful for teachers who take a year or two off.

Teachers can work for an elementary or secondary school, in either a public or private school setting. They must work at least 30 hours a week to qualify. After 120 qualifying payments, they can apply to have their remaining loan balance forgiven. There is no limit on how much will be discharged, and teachers won’t owe taxes on the forgiven amount.

Only Direct Loans are eligible for PSLF. If you have FFEL or Perkins Loans, you’ll have to consolidate them into a Direct Consolidation Loan to qualify.

Teachers should submit the PSLF employer certification form every year, which will verify the employer and calculate how many qualifying payments have been made.

PSLF can be used with Teacher Loan Forgiveness, but borrowers will only receive credit for one program at a time. If $5,000 of your loans is forgiven after five years through Teacher Loan Forgiveness, those five years’ worth of payments will not count toward PSLF.

While working toward PSLF, teachers will have to choose from one of the income-driven repayment plans. These options will lower your monthly payment.

Perkins Loan Teacher Cancellation

Teachers with Perkins loans can have their loan balance entirely discharged. To be eligible, they must work full-time in a school with low-income children or as a special education teacher. Teachers can also become eligible by teaching a subject that has a shortage of teachers in their state.

Private school teachers and those who have two part-time teaching jobs also qualify. Preschool and kindergarten teachers may only be eligible if their state considers those grades to be part of elementary education.

Unlike PSLF or the Teacher Loan Forgiveness program, teachers can earn partial loan forgiveness. They’ll get 100% forgiveness after five years of service.

Here’s how much will be forgiven each year:

  • 15% forgiven after one year of work
  • 15% forgiven after two years of work
  • 20% forgiven after three years of work
  • 20% forgiven after four years of work
  • 30% forgiven after five years of work

State Forgiveness Programs

Your state may have its own teacher forgiveness program. Go here to see what options are available. You can also try Googling your state and “teacher forgiveness program” and see what comes up. You may have to teach in an underserved area or teach a specific subject to qualify.

Options for Private Student Loans

Teachers with private loans rarely have access to loan forgiveness. Here are some options available to them:

Refinance private loans

If you want to save money on private loans, your best option is to refinance to a lower interest rate.

Private lenders often require a credit score of 650 or higher to qualify for a refinance. Some lenders may also have an income requirement, but this depends on the specific lender. For example, LendKey accepts borrowers with low salaries.

When you refinance private loans, make sure you understand the term you’re signing up for. For example, if you have five years left on your private loans and refinance to a 10-year term, you may end up paying more interest over the life of the loan because the term is doubled.

If you can afford it, keep making the same payments as you were before. Assuming you haven’t significantly changed your budget or lost your source of income, this should be doable. Keeping the same payment rate will let you repay the loan faster and save on interest.

Take out a home equity loan

If you’re a homeowner, you can withdraw extra equity from your house and use it to repay your student loans. Generally, you’ll need to have 80% or more equity in the home to qualify.

Home equity loans may have lower interest rates and longer terms than private student loans. It may also be easier to qualify for a home equity loan because the bank has collateral behind it.

The downside to this strategy is that if you default on a home equity loan, the bank may repossess your house. Comparatively, refinancing your private student loans has much lower stakes.

The post Options for Teacher Student Loan Forgiveness appeared first on MintLife Blog.

Source: mint.intuit.com

Colorado First-Time Homebuyer Programs

Housing prices are on the rise in Colorado making it more challenging than ever to become a first-time homeowner. Thankfully, the Colorado Housing and Finance Agency (CHFA) has several home buyer programs and grants for down payment and closing cost assistance for first-time homebuyers. Get Pre-Approved for a Mortgage and Check Rates National First-Time Homebuyer […]

The post Colorado First-Time Homebuyer Programs appeared first on The Lenders Network.

Source: thelendersnetwork.com

How COVID-19 is Affecting Mortgages

Coronavirus cases are increasing at a phenomenal rate and sending the economy into free-fall. Every industry will be affected in some way, but the housing market could be one of the hardest hit. Borrowers are struggling to pay their mortgages, lenders are seeing far fewer applications, and we could be just around the corner from a housing crisis akin to the decline of 2008.

So, what’s happening here, how is COVID-19 affecting mortgages and are we likely to see any major issues on the horizon?

How Will COVID-19 Impact Mortgages?

In early March, mortgage rates dropped to an all-time low, hinting at things to come. The rate for a 30-year fixed-term mortgage fell to 3.29%, compared to March of 2019 when rates were 4.14%. That may not seem like much of a difference, but the difference between 3.29% and 4.14% on a $200,000 30-year mortgage is around $35,000.

And this is just the tip of the iceberg; the start of the problem.

Experts predict that rates will continue to fall as we progress through 2020 and COVID-19 continues to wreak havoc on the US economy.

As noted in our recent guide to Coronavirus Mortgage Relief, lenders are already providing lenders with debt relief options to help them manage their mortgage in this difficult time. Foreclosure is expensive and it’s an expense that banks and credit unions can’t afford right now. They want homeowners to pay their bills and keep their homes and they will do everything they can to make that happen.

The federal government is also lending a helping hand by way of the CARES act, and we could see more significant moves on behalf of lenders and the government before the year draws to a close.

In other words, although big moves have been made and huge changes have taken place, all of this could pale in comparison to what happens when the pandemic is eradicated and the rebuilding process begins.

Can You Benefit from this?

If you’re a homeowner tied to a high-interest rate, you could benefit from the current reduced interest rates by refinancing your mortgage. You could do that now and capitalize on the all-time low rates mentioned above or wait to see what happens in the next few months.

In any case, you can get a much lower rate than what you already have and potentially save thousands of dollars over the life of your loan.

It’s not about profiting from a bad situation, it’s about making life easier for yourself so you can navigate through this chaos. If your monthly mortgage payment is reduced, you’ll have more money in your pocket every month, which means you can put more cash towards unsecured debts and your monthly grocery bill.

It also reduces your chances of defaulting and being foreclosed upon in the future.

COVID-19 and the Housing Market

In the spring of 2019, the housing market was booming. It was a good time to invest in bricks and mortar and it seemed like there were some bright years ahead for homeowners and investors. 

In 2020, the shadow of the coronavirus pandemic fell on the country and now, a year on from that boom, the housing market has ground to a screeching halt. No one is selling because no one is buying. The market hasn’t necessarily crashed, but it has paused, and that could cause some huge problems in the near future.

What happens to all the homeowners who were selling their homes before this crisis and wanted to sell during? As soon as the pandemic fades away, they’ll all list their homes at the same time, and they’ll no doubt be joined by countless other homeowners who are selling because of the pandemic.

Once the market reopens, it will be flooded with homes for sale. At the same time, homeowners once ready to buy will now be struggling to deal with the consequences of the pandemic, while others will be hesitant of buying and will want to bide their time. Sellers will get desperate, prices will drop, and it will be a buyer’s market.

It’s hard to predict just how far house prices will fall or even if they will fall at all, but if the last few months are anything to go by, it’s fair to assume that the damage will be considerable.

Could it be a Seller’s Market?

While it seems most likely that post-pandemic USA will be a buyer’s market, it could also go the other way. Millions of Americans could be looking to purchase homes in 2020. If all of them are waiting for the end of the pandemic in the hope that the prices will be lower and the interest rates more favorable, they could overload the market.

Buyers may also be desperate to sink their money into bricks and mortar, believing it to be a safe investment and protection against any future economic issues. After all, when you rent, you’re always at the mercy of the landlord and have few guarantees that your home will still be your home months down the line.

That’s a scary thought in the middle of a pandemic, where it may be difficult, and in some cases impossible, to move into another property on short notice.

To remedy this, renters may be desperate to buy and may jump into the housing market as soon as the chaos dies down. A sudden rush of buyers will send the market in the opposite direction, allowing sellers to jack up their prices. 

COVID-19, Mortgages, and the Future of the Housing Market

Most of which we discussed above is speculation. We can predict the likelihood of it being a buyer’s market and of interest rates falling based on everything that has happened thus far, but we can’t say that it will happen for certain.

COVID-19 has made life very unpredictable. In December 2019, when word of the first Chinese cases began to filter to our shores, few could have guessed that just 3 months later, the world would be in lockdown, everyone would be going crazy for toilet paper, and people would be dying in their droves. 

At the beginning of the outbreak, when Europe was on its knees, President Trump was dismissive of the risks and suggested that everything would be okay, the US would be safe, and the virus would be fleeting. A few weeks later, the United States became the worst affected country and fatalities entered double figures.

It’s a novel pandemic that few predicted, and no one was prepared for, and as things stand it’s less about fighting the disease and more about avoiding it. 

As a result, we can’t be certain that the housing market will decline or that mortgage rates will drop. We just have to wait and see and hope that we all get through this with our lives, properties, and professions intact.

How COVID-19 is Affecting Mortgages is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

The REO Guide: 10 Steps to Buying a Bank-Owned Home

The REO Guide: 10 Steps to Buying a Bank-Owned Home

Many potential homebuyers and investors overlook bank-owned properties, but for buyers who take the time to understand the REO process, these homes can be a significant opportunity.

Some homebuyers are intimidated by foreclosed and bank-owned homes because they often require more renovations — and a different type of negotiation — than other options on the market. However, some REO properties come at a significant discount, and, if you’re willing to work through some of the nuances of the post-foreclosure market, you can set yourself up for a great deal.

What is a Real Estate Owned (REO) Property?

REO, which stands for “Real Estate Owned,” is a term applied to foreclosed properties whose ownership has transferred to the bank or lender.

In order to become an REO property, it must go through these general steps:

  1. Loan Default. The homeowner/borrower defaults on (fails to make) their mortgage payments for a certain length of time, with the qualifying amount usually specified in the mortgage terms.
  2. Foreclosure. The lender initiates legal proceedings against the borrower to foreclose on the property.
  3. Auction. The property is then offered to the public at a foreclosure auction and typically sold to the highest bidder. If the property sells to a third party at the auction, the bank or lender recoups some of the cost of the outstanding loan balance, interest and fees from the sale of the property.
  4. REO Status. If the home fails to sell at auction to a third party, possession typically passes to the lender and it becomes a Real Estate Owned (REO) property. The lender prepares to sell it, which may involve evicting occupants and removing outstanding liens attached to the property.

REO properties are attractive to homebuyers or real estate investors for several reasons. In many cases, lenders are motivated sellers who do not want to sit on their REO inventory, and (depending on the bank’s history with the property) these homes may be priced at a discount. However, other factors — like the home being sold “as is” — may affect the ultimate price, so it’s important to work through the process methodically to make sure you account for every variable.

10 Steps to Buying REO Properties

The process for buying an REO home is similar to the standard home buying process, but there are a few key exceptions to keep in mind. Whether you’re buying the home to live in or as an investment, these 10 steps should help set you up for success with bank-owned properties.

Step 1: Browse Available REO Properties

Before you get too far into the process, take a look at the properties available in your target market or price range. There are several ways for prospective homebuyers to browse available REO properties:

  • Bank and lender listings: Lender-specific listings, such as PennyMac REO listings, show all available bank-owned properties from a certain lender.
  • Multiple Listing Service: Lenders and Realtors® often use the Multiple Listing Service to list REO properties, making it easy to find options from multiple lenders in one place.
  • Real estate agent: A real estate agent will be able to find REO offerings from multiple lenders in your desired area.
  • Online services: Other online services, such as Zillow, offer tools to look up foreclosures by certain characteristics or in certain areas. Some of these tools are free to use, while others may charge a fee.

Step 2: Find a Lender and Discuss REO Financing

Once you’ve found a property you are interested in, talk to a lender about your financing options. This is particularly important because of the timing of the REO homebuying process; lenders are motivated to sell and want to get these homes off of their books, so the more prepared you are with financing, the better.

One thing that can speed up the REO homebuying process is getting pre-approved by the lender that owns the home. With this pre-approval, the lender that owns the REO property will know that you are financially qualified to purchase the property, making them more likely to accept your offer.

Step 3: Find a Real Estate Buyer’s Agent Who Knows REO Homes

A buyer’s agent is a great partner to have while you navigate the home buying process. Your buyer’s agent helps make sure you are finding the best properties at the best possible prices, and they will use their experience to guide you through every stage of the process. Your agent should also be able to tell you if you need to hire anyone else, such as an attorney or an inspection service, depending on your state and situation.

If you are specifically interested in REO properties, try to find a buyer’s agent who works with REO properties frequently. This way, your real estate agent knows the ins and outs of negotiating with a lender, how to calculate the cost of necessary repairs, how to work within the lender’s timeline and how to prepare you for what comes next.

Step 4: Refine Your List of Lender-Owned Properties

Once you are working with a buyer’s agent, you can start narrowing down your list of REO properties. Some major characteristics that should be taken into account include the following:

  • Listing price
  • Significant repairs needed (and the overall impact on price)
  • Location (and proximity to a school, workplace, or other desired area)
  • Number of bedrooms and bathrooms
  • Quality of neighborhood and surrounding areas
  • Community resources in the area, such as parks, gyms, places of worship, etc.
  • Lender-specific contingencies or requirements

Once you have taken your “must have” features into account, if you are left with multiple properties, refine your list based on “nice to have“ features like a large yard, a finished basement or an in-ground pool. Share your favorite homes with your agent, who can set up tours for properties at the top of your list.

Step 5: Get an Appraisal on Your Ideal Property

Some REO homes go for a great price, but buying a bank-owned home is not an automatic bargain. An REO property may be discounted based on an undesirable location or severe damage, or it can be overpriced based on comparable sales in the area or the lender’s desire to recoup the money spent. Either way, it’s a good idea to consider getting an appraisal so you know how the true value compares to the asking price.

An appraisal will help you get an objective estimated value, which you can compare to the bank’s asking price to see if the price is fair. During the appraisal, a licensed appraiser will take inventory of major systems (i.e., HVAC, plumbing), the structural integrity of the home, and check the prices of comparable homes in the area.

Note: An appraisal, which tries to estimate true home value, is different from a home inspection, which tries to take inventory of current and potential issues. An appraisal will help you decide whether or not the asking price is fair; an inspection will help you understand the repairs and renovations needed, which is critical for a bank-owned home.

Step 6: Make an Offer

Once you’ve found a property that is right for you, it’s time to make an offer.

Your agent will help you decide what kind of offer is likely to be accepted, put together the offer and submit it to the lender. Depending on the lender, you may need to submit special contract forms or paperwork. It is also common to attach an earnest money deposit check to your offer. This check (commonly 1-2% of the purchase price) is usually held in an escrow account until the purchase is finalized.

Make sure to consider the inspection process as you are making your offer. You may choose to make the offer contingent on inspection so you are protected if the inspection uncovers significant (and potentially dangerous) issues. If necessary repairs are well-documented, you can use that documentation to make your case for a low offer. Talk to your agent to understand your options when it comes to inspection contingencies.

Step 7: Have the Property Inspected

An inspection should be part of buying any home, but it is crucial for bank-owned homes. Real estate owned properties are typically sold “as is,” meaning the homebuyer is on the hook for any repairs — including major structural issues — that need to be fixed. An REO home may have been vacant for weeks or months, it may be neglected due to the homeowner’s financial trouble, or the previous owners may have removed items or damaged the property before vacating. Additionally, it’s possible that the property has gone through non-permitted renovations.

With that in mind, you need to be 100% sure you know what needs to be fixed before finalizing the loan. Having a home inspection done is the best way to take a thorough inventory of what repairs need to be made. The cost of these repairs should be added to the asking price so you have a better idea of what the home will cost you (and whether it’s still a good deal after repair costs are factored in).

In some cases, the lender may conduct an inspection when the home becomes bank-owned. If so, make sure you get a copy of the inspection report and review it thoroughly to decide if it is comprehensive enough to help make your decision.

Step 8: Negotiate Details

For better or worse, negotiating with a lender for a bank-owned home is different from negotiating with a homeowner.

On one hand, dealing with a bank instead of a homeowner means you don’t have to worry about emotional attachments to the home influencing the decision. You are also usually dealing with a very motivated lender who wants to get rid of the property (especially if it’s been on the market more than 30 days).

On the other hand, banks typically take longer to respond to an offer (or a question) than a homeowner because the offer must be reviewed by several individuals or companies. When the lender does respond, they will expect you to respond quickly to keep the process moving.

Working with a lender also means jumping through more corporate hoops. Banks are also more likely to present a counter offer because they must demonstrate they tried to get the best possible price for the property. In addition, the lender may ask you to sign a purchase addendum (which you should thoroughly review with your real estate agent or lawyer) and your final offer may be contingent on corporate approval.

Step 9: Finalize Your Loan

Now that you have submitted an offer, several things will be going on at once: the home inspection, negotiations with the bank, and the finalizing of your loan. During this time, you will be filling out paperwork and sharing information with your lender to ensure your loan is the right fit for the offer you have submitted.

Now is also the time to verify the status of the title. The bank typically clears the title before selling a bank-owned home but you can never assume this is the case. Contact the lender to see if the title has been cleared. If not, the lender may have a title company standing by to perform these services. If you are expected to do so yourself, hire a title company to run a full, insured title search before closing the deal.

Step 10: Closing

Once all of the paperwork is in place, you’ve wired in your down payment and your loan funds are in place, it’s time to close.

Closing on an REO property is similar to any other closing, with a few notable exceptions. If you’re unable to close by a predetermined closing date, the lender may charge a penalty for each day beyond the deadline. (You can try to avoid these delays by getting pre-approved for a loan and getting assurance that your financing will come through by a given date.)

At the closing, you and the lender representative will sign the documents necessary to transfer the house into your name and to finish your mortgage. After you’ve signed everything and the money goes to the right place, you’ll get the keys and a new title: homeowner.

Is an REO Home the Right Fit For You?

A bank-owned home can be a great opportunity for homebuyers or investors to find a good deal — but only if you’re willing to be patient and thorough. Dealing with a lender rather than an individual seller may mean slower response times and a more difficult negotiation, but it can lead to a potentially lower price from a motivated seller that has already handled outstanding taxes.

Browse PennyMac REO listings to see available bank-owned properties from PennyMac, or call a PennyMac Loan Officer to discuss your options today.

Source: pennymacusa.com

Where Upper-Middle-Class People Are Moving

Image shows two adults with their baby in front of a large beige house with a landscaped front yard and spacious driveway. SmartAsset analyzed IRS data to conduct its study on where upper-middle-class people are moving.

The middle class may be feeling the squeeze, but the upper-middle class certainly isn’t. The former cohort has shrunk from 61% of households in 1971 to just 52% now, according to the Pew Research Center. The upper-middle class, by contrast, has seen an uptick to 12% of households compared to just 10% almost 40 years ago. This growing, high-earning demographic, which SmartAsset defined as those with incomes between $100,000 and $200,000, is also on the move, migrating across state lines potentially for job opportunities, attractive housing markets or lower tax liabilities.

To find where upper-middle-class people are moving, SmartAsset analyzed inflows and outflows of people in this income range in every state as well as Washington, D.C. For details on our data sources and how we put all the information together to create our final rankings, check out the Data and Methodology section below.

This is SmartAsset’s second study on where upper-middle-class people are moving. Read the 2019 version here.

Key Findings

  • The South and West dominate the top of the list. According to Census regional divisions, half of our top 10 states are in the American South (Florida, Texas, North Carolina, South Carolina and Tennessee), and the other half are in the West (Arizona, Idaho, Nevada, Washington State and Colorado).
  • Upper-middle-class Americans are gravitating toward tax havens. Four states in our top 10 – Florida, Texas, Nevada and Washington – have no income tax. Two other states – North Carolina and Colorado – have a flat rate income tax. Furthermore, Tennessee does not have a personal income tax but does tax some dividends and interest.

1. Florida

Florida’s warm weather and lack of a state income tax may be why so many upper-middle-class people want to move there. The net migration of upper-middle-class people to Florida between 2017 and 2018 was 18,876, nearly three times as many as the next closest state.

New or prospective Florida residents may wish to consult SmartAsset’s list of the state’s top financial advisor firms.

2. Texas

Texas saw a net gain of 6,706 upper-middle-class people from 2017 to 2018. Again, the lack of income tax in the Lone Star State may account, in part, for this influx.

3. Arizona

Arizona does have income tax, but it’s among the lower rates in the nation, topping off at 4.50% for incomes higher than $159,000. The net migration of upper-middle-class people to the state from 2017 to 2018 was 6,685.

4. North Carolina

North Carolina saw a net gain of 6,002 upper-middle-class people over the time period we considered for this study. North Carolina has several big cities, access to many beaches and a flat income tax rate of 5.25%, all of which could be attractive to people with incomes from $100,000 to $200,000.

5. South Carolina

South Carolina has among the lowest property tax rates in the nation, so high-income earners can buy their dream house without worrying about being overwhelmed by taxes. The Palmetto State saw an increase of 4,927 upper-middle-class people from 2017 to 2018.

6. Tennessee

Tennessee is another state that does not tax salaries or wages (but there are taxes on interest and dividend income). The Volunteer State gained 3,215 upper-middle-class people from 2017 to 2018.

7. Idaho

Though Idaho has fairly high income taxes, it has low property taxes and is actually one of the best states for homeowners. That may explain, in part, the appeal of the state, which saw a net migration of 2,708 upper-middle-class people between 2017 and 2018.

8. Nevada

Nevada is another state offering no income tax, which is a strong incentive for people making higher incomes. The Silver State gained 2,644 upper-middle-class citizens from 2017 to 2018.

9. Washington

Washington State is another state with no income tax. This factor could be one contributor to the increase in upper-middle-class residents by 2,593 from 2017 to 2018. Those in Washington seeking a financial advisor firm to work with may wish to consult SmartAsset’s list here.

10. Colorado

Colorado gained 2,580 upper-middle-class residents between 2017 and 2018. Those interested in moving there might wish to note that the Rocky Mountain State has a flat income tax of 4.63% and relatively low property taxes.

Data and Methodology

To find out where upper-middle-class people are moving, SmartAsset compared data from tax returns between 2017 and 2018 for every state and Washington, D.C. We found the inflows and outflows for people earning between $100,000 and $200,000 and subtracted the outflows from the inflows to calculate the net migration. Then, we ranked all 50 states, along with Washington, D.C., by this net figure. All data is from the IRS.

Tips for Managing Your Money in the Upper-Middle Class

  • Seek professional financial advice. If you are an upper-middle-class income earner, a financial advisor can help you make the most of your funds. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool connects you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors, get started now.
  • Considering moving to a new state? Even if you’re in the upper-middle class with a substantial income, you don’t want to blow your budget on housing. Find out how much house you can afford so that you can narrow down your search.
  • Did you factor in taxes? Taxes are important when considering where to move. See your tax burden with SmartAsset’s income tax calculator.

Questions about our study? Contact press@smartasset.com

Photo credit: Â©iStock.com/akurtz

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Source: smartasset.com