Why Put More Down

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The least amount in a down payment is an attractive option when people are thinking of buying a home. A common reason is to have cash available for furnishing the new home and possible unexpected expenses.

Some people don’t have any options because they only have enough for a minimum down payment and the closing costs. For those fortunate buyers who do have extra money available, let’s look at why you’d want to do such a thing.

Most loans in excess of 80% loan to value require mortgage insurance to protect the lenders for the upper portion of the loan if the home were to go into foreclosure. FHA requires an up-front premium of 1.75% of the amount borrowed plus a monthly amount of .85% on the balance. FHA mortgage insurance premium must be paid for the life of the loan.

Mortgage insurance on conventional loans varies depending on the borrowers’ credit and the amount of down payment being made. Unlike FHA, when the unpaid balance reaches 78% of the original amount borrowed, the mortgage insurance is no longer needed. If the home enjoys rapid appreciation, after a period, the lender may allow the borrower to get an appraisal to show that the unpaid balance is now less that 78% of the current appraised value.

The premium for mortgage insurance on conventional loans can be paid as a single premium upfront in cash or financed into the mortgage. A second option would be monthly mortgage insurance included in the payment until it is no longer needed. A third option could be lender-paid MI where the cost is included in the mortgage interest rate for the life of the loan.

VA loans do not require mortgage insurance but there is a one-time funding fee of 2.3% that can be paid in cash at closing or added to the amount borrowed. Disabled veterans and Purple Heart recipients are not required to pay the funding fee.

Putting at least 20% down payment on a home not only will avoid the mortgage insurance, it could also help you to get a little lower interest rate. Since the loan to value is lower, there is less risk for the lender.

A $350,000 with a 10% down payment at 4% interest could have a monthly mortgage insurance cost between $70 to $130. A trusted mortgage professional can help you assess the options you have available. It is always better to make some of these decisions before you start shopping for a home.

This is another reason it is good to start by getting pre-approved with a trusted mortgage professional. If you need a recommendation, call me at (480) 797-4884.

Tres enfoques de evaluación: comparación de mercado

El precio de venta de propiedades similares.

Después de que se hayan reunido y analizado todos los datos necesarios, el evaluador pasa al cuarto paso en el proceso de evaluación. Aquí, el tasador considera cuál de los tres enfoques de tasación debe realizarse en función de la propiedad y el propósito de la tasación.

Los tres enfoques de evaluación son:

El enfoque de comparación de mercado, también conocido como el enfoque de comparación de ventas;
El enfoque de costo derivado bajo el método de reemplazo o reproducción; y
El enfoque de ingresos, derivado bajo el multiplicador de renta bruta o método de ingreso de capitalización.
El enfoque de comparación de mercado es el enfoque más utilizado para establecer el valor justo de mercado de los bienes raíces residenciales.

Aplicando el enfoque de comparación de mercado, el tasador observa los precios de venta actuales de propiedades similares para ayudar a establecer el valor comparable de la propiedad tasada. Esto se refiere al precio por el que se vendió realmente la propiedad, no al precio artificial por el que fue incluido en la lista.

Se realizan ajustes por cualquier diferencia en propiedades similares, como su ubicación, obsolescencia, tamaño de lote y condición.

Por ejemplo, considere el vecino del dueño de una propiedad que recientemente vendió su residencia por $ 445,000.

La casa del vecino tiene una edad, tamaño y condición similares a la del propietario, excepto que tiene una chimenea por valor de $ 5,000 que el propietario no tiene. Ajustar la diferencia en las mejoras, la chimenea, entre la casa del propietario y la del vecino establecería el valor de la casa del propietario en aproximadamente $ 440,000.

Para producir el informe de evaluación más confiable, el evaluador reúne datos sobre numerosas ventas comparables, a menudo llamadas comps.

El tasador luego compara cada uno con la propiedad que se evalúa por sus similitudes.

La información de ventas se obtiene más comúnmente del servicio de listado múltiple (MLS), pero también se puede obtener a través de registros de impuestos y compañías de seguros de títulos.

¡Contácteme hoy si tiene preguntas sobre la compra de una casa o la venta de su casa!
Nunca estoy demasiado ocupada para sus referencias.

Stella Bonin

Corretaje residencial de Coldwell Banker
480.797.4884 / 619.250.6214
stella.bonin@yahoo.com

Tengo licencia en California y Arizona y tenemos oficinas alrededor del mundo.

Oficina de Bienes Raíces de California Lic. # 01222569
Departamento de Bienes Raíces de Arizona Lic. # BR550696000

“Igualdad de oportunidades de vivienda”

Three Appraisal Approaches: Market Comparison

The selling price of similar properties

After all the necessary data have been gathered and analyzed, the appraiser proceeds to the fourth step in the appraisal process. Here, the appraiser considers which of the three appraisal approaches to perform based on the property and the purpose of the appraisal.

The three appraisal approaches are:

  • The market comparison approachalso known as the sales comparison approach;
  • The cost approach derived under the replacement or reproduction method; and
  • The income approach, derived under the gross rent multiplier or capitalization income method.

The market comparison approach is the most commonly used approach to establish the fair market value of the residential real estate.

Applying the market comparison approach, the appraiser looks at the current selling prices of similar properties to help establish the comparable value of the property appraised. This refers to the price the property was actually sold for, not the artificial price for which it was listed.

Adjustments are made for any differences in similar properties, such as their location, obsolescence, lot size and condition.

For example, consider a property owner’s neighbor who recently sold their residence for $445,000.

The neighbor’s house is of a similar age, size and condition as the owner’s house, except it have a fireplace worth $5,000 which the owner does not have. Adjusting for the difference in the improvements — the fireplace — between the owner’s and neighbor’s house would establish the value of the owner’s house at approximately $440,000.

To produce the most reliable appraisal report, the appraiser gathers data on numerous comparable sales, frequently called comps.

The appraiser then compares each against the property being appraised for their similarities.

Sales information is most commonly obtained from the multiple listing service (MLS) but it can also be obtained through tax records and title insurance companies.

Contact me today with questions about buying a home or listing your home!
I am never too busy for your referrals.

Stella Bonin

Coldwell Banker Residential Brokerage
480.797.4884 / 619.250.6214
stella.bonin@yahoo.com

I am licensed in California and Arizona and we have offices around the country.

California Bureau of Real Estate Lic. # 01222569
Arizona Department of Real Estate Lic. # BR550696000

“Equal Housing Opportunity”

Financing Home Improvements

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Home improvement loans provide a source of funds for owners to finance the improvements they want to make. These are usually, personal installment loans that are not collateralized by the home itself. Since there is more risk for the lender with this type of loan, the interest rate is higher than a normal mortgage loan.

In today’s market, the rates on home improvement loans could vary between 6% and 36%. A borrower’s credit score will determine the interest rate; the lower the score, the higher the rate and the higher the score, the lower the rate.

Smaller loan amounts are under $40,000 with larger loan amounts over $40,000 based on the extent of the improvements to be made. With all things being equal, a larger loan may have a lower interest rate.

Besides the interest rate being higher than a regular mortgage, the term is shorter. Similar to a car loan, the term can be between five and seven years. A $50,000 home improvement loan for a borrower, with good but not great credit, could have a 12% interest rate for seven years. That would make the monthly payment $882.64.

An alternative way to fund the improvements would be to do a cash out refinance. These types of loans are collateralized by the home. The current mortgage would be paid off with the new mortgage plus the amount for the improvements. Lenders will usually require that the owner maintain a minimum of 20% equity in the home.

Assuming a homeowner owed $230,000 on the existing mortgage and wanted $50,000 for improvements. The new loan amount would be $280,000 and the home would have to appraise for at least $350,000 for the homeowner to have a 20% equity remaining.

Another thing that occurs on a refinance is that the standard term for mortgages is 30 years which means the owner would be financing the improvements for 30 years instead of a shorter term. The advantage would be a smaller payment.

Let’s say in this example, the owner originally borrowed $250,000 at 4.5% for 30 years with a payment of $1,266.71. After 54 payments, the unpaid balance is $230,335. If they did a cash out refinance at 4.5% for 30 years for the additional $50,000 and financed the estimated closing costs of $8,700, the new payment would be $1,464.50.

Using the home improvement loan, the combined payments would be $2,149.35 which would be $684.85 higher. While the cash out refinance produces a lower payment, it adds $8,700 to the amount owed and stretches it out over a longer period. Home improvement loans have lower closing costs than regular mortgage loans.

Another alternative loan is a HELOC or Home Equity Line of Credit which can be explored and compared to the two options mentioned above. If a homeowner is going to finance improvements, a comparison of different types of loans and payments can be helpful in the decision-making process.

A trusted mortgage professional is a valuable resource to assist you with current and accurate information.

Contact me today with questions about buying a home or listing your home!
I am never too busy for your referrals.

Stella Bonin

Coldwell Banker Residential Brokerage
480.797.4884 / 619.250.6214
stella.bonin@yahoo.com

I am licensed in California and Arizona and we have offices around the country.

California Bureau of Real Estate Lic. # 01222569
Arizona Department of Real Estate Lic. # BR550696000

“Equal Housing Opportunity”

House-Hacking Rental Property

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House-hacking refers to buying a multifamily property on an owner-occupied mortgage, living in one unit and renting the others. If you’re thinking about becoming a rental mogul, starting early is an advantage. Not only will you have longer to accumulate a larger portfolio, you can increase the leverage on the first acquisitions if they are owner-occupied.

Leverage is the use of other people’s money to finance an investment. The higher the loan-to-value, the greater the leverage which can increase the yield.

A $200,000 rental property with an 80% LTV at 4.5% for 30 years producing a 16.88% before-tax rate of return would increase to a 23% return on investment by increasing the mortgage to 90%. A typical down payment on an investor property in today’s market is 20-25% but, in some cases, a higher loan-to-value is possible.

Owner-occupied, multi-unit properties, two to four units, allow a borrower to occupy one of the units and rent the others out. The cash flows from the rental units subsidize the cost of housing for the unit occupied by the owner. VA will guarantee 100% of the mortgage for eligible veterans, while FHA will loan up to 96.5% for qualifying borrowers.

Consider a four-unit property was purchased as owner-occupied and the other three units were rented for $800 each. If an FHA loan was obtained, the owner could live for roughly $355 a month after collecting the rent and paying the expenses. Assume the owner lived in it for two years and then, rented out the fourth unit for the same $800 per month. The cash flow would rise to $4,800 a year with a before-tax rate of return of 30% based on a 2% appreciation.

Occupy 1 unit Rent all 4 units
Gross Scheduled Income @ $800 monthly each $2,400 $3,200
Cash Flow Before Tax $4,59 $4,861
Before Tax Rate of Return 20.77% 30.56%

Rental properties offer the investor to borrow large loan-to-value mortgages at fixed interest rates for up to 30 years on appreciating assets with tax advantages and reasonable control that many other investments don’t enjoy.

Some people consider rental properties the IDEAL investment with each letter in the acronym standing for a benefit it provides. It provides income from the rent which many investments do not have. Depreciation is a non-cash deduction from income that increases cash flow. Equity buildup occurs as each payment is made by reducing the principal owed. Appreciation happens over time as the value of the property increases. L stands for leverage that was explained earlier in this article.

You may be able to buy another four unit as an owner-occupant before you need to start using a normal investor’s down payment. In the meantime, you could have eight units that are increasing in value while the mortgage balance is decreasing with every payment made. If there is sufficient equity in the properties by the time, you’re ready to buy more, you may be able to take cash out of the existing ones to use for the down payments.

This can be a great way to turbocharge your net worth by becoming an owner and a real estate investor at the same time. To learn more about rental properties, download the Rental Income Properties guide and/or contact me at (480) 797-4884 to schedule an appointment to meet to discuss the possibilities.

Coldwell Banker Residential Brokerage
480.797.4884 / 619.250.6214
stella.bonin@yahoo.com

I am licensed in California and Arizona and we have offices around the country.

California Bureau of Real Estate Lic. # 01222569
Arizona Department of Real Estate Lic. # BR550696000

“Equal Housing Opportunity”