Mortgage or Marriage Certificate

No, this in not one of those chicken or the egg conversations.  I want to touch on the practical side for those Edmond, Oklahoma friends and neighbors deciding whether or not to purchase a home with their partner before getting married.  Here are three factors to consider when contemplating taking out a mortgage before turning your significant other into your wife or husband.

  1. Mortgage approval.  Banks prefer to see two supporting incomes during the mortgage approval process, even if the couple applying together are not (yet) married; more income equals better ability to repay.  However, if one of the two applicants has a poor credit score their inclusion on the mortgage application can actually hurt your chances for securing financing.  In that case you might consider having the applicant with the superior credit rating apply alone.  Of course that leaves you with only one qualifying income to support your application, translating to an approval for a smaller loan amount.  Hmm…Much to consider.
  2. Down payment.  Are you both able to equally contribute to the down payment on the home purchase?  If not, why not take the practical step of including how much each of you do contribute in the mortgage paperwork just on the chance that the relationship dissolves before anyone ever walks down the aisle.  This way everyone protects their equity, and you both can move forward confidently purchasing a home before signing a marriage certificate.
  3. Title.  How will you, as an unmarried couple take title to the property?  Divorce, and the subsequent division of property can become a very messy ordeal.  Breaking up, for unwed couples who own property together can be just as trying because the individuals are not afforded the same legal protections as married couples.  If you’re considering buying a home before marriage write up a legal contract spelling out who is responsible in the event of a break for ongoing issues like the mortgage, taxes, maintenance costs, capital gains, and more.

The Reality of Less Than 20% Down

The reality is…YES, you can put less than 20% down on the purchase of your new Edmond, Oklahoma dream home.  Yes.  Yes, you can.   But before you do, let’s first take a quick look at the pros and cons for putting less down:

Cons:

  1. Your interest rate will be a little bit higher than if you were able to put 20% down, raising your potential monthly payments
  2. Your lender will require you to carry private mortgage insurance (PMI), also raising your monthly payments
  3. By putting less down you are borrowing more, increasing the principal of the loan and in turn your increasing your monthly payments

Pros:

  1. Putting less down means you are able to save your down payment quicker, and in turn to move into your dream home sooner than if you have to wait until you save the 20%
  2. Getting into your new home gives you all the benefits of your new location like, for example, a new shorter commute to work, or having your children in their new school district.  Maybe you can now have that garden you always wanted, or even a dog.  Maybe it’s the kids being able to have their own bedrooms for the very first time.

The pros and cons of putting less money down on a purchase of a new home really come down to money and time.  Can you afford to put more down?  If so, maybe you should.  It will save you some money on monthly payments and total payments over the life of the loan.  If you don’t have 20% and you really wanted to get into a new home before the new baby is born (another great example), then go with the smaller down payment.  It all comes down to what you’re comfortable with, and the best way to determine that is to consult with a professional mortgage lender you trust and get pre-approved for a loan.  They will help you determine how much you qualify to borrow, what interest rate you will be looking at, and what your monthly payments will look like.

Real Estate Tax Related Articles

It’s tax season again.  Most of you have already filed your income taxes.  Some of you haven’t yet.  I imagine some of our Edmond, Oklahoma friends and family are even filing for an extension.  Regardless, below are a handful of helpful links to articles on a variety of Real Estate tax related topics that I felt important to pass on to everyone.  Who knows, maybe one of these articles can help you save a little money this tax season…and the next, and the next…

Here are the topics and the links:

Top 10 Tax Deductions for Homeowners
Tax Implications of Selling Your House
9 Sins Homeowners Often Commit on Their Taxes
This Could Be the Last Time to Claim 3 Popular Tax Benefits
Moved Recently? Check Out These 5 Tax Tips
6 Home Deduction Traps to Avoid
Energy Tax Credits You Can Claim
Tax Deduction Options to Know About If You Work from Home

Until next time…

Most Popular Homeowner Tax Deductions for 2013

If you’re an Edmond, Oklahoma homeowner don’t miss out on any available tax deductions you may qualify for on your 2013 Federal income taxes.  Check these out, and check with your tax preparer to make sure you received all the deductions you deserve.  Here we go:

1.  Mortgage Interest Deduction
2.  Home Improvement Loan Interest Deduction
3.  Private Mortgage Insurance (PMI) Deduction
4. Mortgage Points/Origination Deduction
5. Energy Efficiency Upgrades/Repairs Deduction
6. Profit on Sale of Real Estate Deduction
7. Real Estate Selling Cost Deduction
8. Home Office Deduction
9. Property Tax Deduction
10. Loan Forgiveness Deduction

Want more detailed information on each of these deductions?  Check out this great article.

Positive Signs

Nationwide, mortgage default rates and credit card defaults have been on the decline.  Further, for the first time since September of 2008, credit card default rates are higher than foreclosure rates.  When the housing bubble burst many homeowners found that they owed more on their mortgages than their homes were worth.  Couple that with higher unemployment and you have a sector of folks who valued their credit cards (and the safety net of funds) more than their homes.  Today, unemployment is more than 3% lower than in September of 2009 when mortgage defaults peaked at 4.92%.  Positive Signs for our Edmond, Oklahoma friends and family.

Mortgage Delinquency:          1.71%  (September 2008: 5.03%)
Credit Card Delinquency:       1.83%  (September 2008: 5.12%)
Auto Loan Delinquency:        0.87%  (September 2008: 1.65%)

Why do car loans today and historically have lower delinquency rates?  People have to drive to work.

How Far Will Your Dollar Stretch in a New City?

Your career is primed to take a new step – maybe even a giant step – forward.  You have been offered a new promotion and opportunity, both dependent on moving your family to Dallas, Texas, or Atlanta, Georgia, or Seattle, Washington…or Oklahoma City, Oklahoma.

Not all cities and states are created equal, or maybe it would be more accurate to say, The cost of living in all cities and states is not equal.

Before we go too far let’s start with the government’s share of your new paycheck.  Yes, you’re still going to have to pay Federal taxes every year, and you may even be moving up a tax bracket (or two) with the new promotion.  But what about state taxes?  How much would you expect to pay in Texas, or Georgia, or Washington compared to where you live right now?  Does your current or destination location even have state income taxes (Texas and Washington have no state income tax, and Georgia’s ranges from 1 – 6%, for example).  My point: Don’t forget to take into account Uncle Sam’s share when reviewing your family’s potential new income and considering a move to further your career.

Back to cost of living.  Here’s a handy tool to help you see just what you can expect to pay, more or less, for the same products, services, utilities, housing, transportation, and health care, comparing your potential new city with where you’re currently living.

Better to have an idea up front on potential changes to the family budget before you pack up and move.  You know what they always say, Knowledge is power…And congratulations on your promotion!

Buying a Home After Bankruptcy

First things first.  If you’re still somewhere in the process of your bankruptcy there’s not much you’ll be able to do to work toward obtaining a new mortgage until your bankruptcy is discharged.  I’m not qualified to give legal advice, so check with your lawyer on the status of your case.  In the four types of bankruptcy filings (chapters 7, 11, 12, and 13) discharge happens at different points in the process.  For our purposes, discharge is the point at which the legal obligation to repay a debt is removed from the borrower(s).  For more information check here for the US Courts government page on bankruptcy.

After your discharge has occurred you’ll want to get copies from all three credit reporting agencies to make sure those discharged debts are removed from your reports.  And yes, you do have to check all three.  Just because one report is up to date does not mean the others are in the same condition.  Each agency collects and processes data independently, so be thorough.  Everyone is entitled to one free report each year from each of the three agencies – Experian, Equifax, and TransUnion.  Don’t get roped into paying for extra unnecessary services from these companies.  You do not have to give them your credit card info for the free report.

After your bankruptcy is discharged and you clean up your credit reports it really comes down to making good financial decisions and rebuilding your credit.  Don’t plan on making any great headway quickly with this process; this is more of a marathon than a sprint, but it can be done.  Check out this great article for tips on credit rebuilding and responsible personal financing, and start working toward buying your first Edmond, Oklahoma home after bankruptcy.

Seller’s Closing Costs

Thinking about selling your Edmond, Oklahoma home this coming year?  Part of the successful transfer of Real Estate from the seller of a home to the buyer is avoiding surprises.  Surprises in Real Estate, especially on the day of closing generally translate to money coming out of someone’s pocket.  The best way to ensure you’re walking away from the closing table with what you expected to see on the bottom line of your settlement statement is to work with a quality Realtor who can help you accurately estimate the true costs of selling your home.  Here are some of the expenses involved for the seller to successfully get to the closing table:

  1. Loan payoff costs.  This is the fee involved in paying off, and closing your existing mortgage with your current lender and can include pre-payment penalty fees
  2. Real Estate commissions.  Generally the home seller pays commissions to both the listing Realtor (your Realtor) and the selling Realtor (buyer’s agent’s Realtor)
  3. Transfer taxes
  4. Title Insurance
  5. Notary
  6. Attorney fees if attorneys are used in the transaction

Buyer’s Closing Costs

The price of a new Edmond, Oklahoma home is more than just the sum of the size of your down payment and the mortgage you obtain for the purchase.  There are many other costs involved you should be aware of ahead of making an offer on a home.  Some can be paid with the mortgage proceeds at the closing table.  These generally are related to the paperwork end of the purchase, like loan application fees, etc.  Some costs relate more to the actual home, like inspections.  All of these costs affect your bottom line and need to be budgeted for so you’re not left scraping for extra funds at the last minute.  Here we go:

  1. Fees associated with obtaining the mortgage
  2. Home inspection costs
  3. Homeowner’s insurance
  4. Title insurance
  5. Title settlement fee
  6. Property taxes
  7. Transfer taxes (which may be shared with the sellers)

Closing costs generally range between 2 – 7% of the sales price of the home, and lenders are required to give you a good faith estimate shortly after you make application for the mortgage.

Budgeting for Unexpected Home Repairs

Not all home improvements are as exciting as taking a dreary Edmond, Oklahoma basement and finishing it to include a fifth bedroom, home theater, game room, and personal pottery studio.  Some improvements can be categorized more under unplanned repairs (and unplanned expenses) necessary to bring a home back to normal, everyday working condition.  We’re talking replacing a dead furnace, re-roofing cracked and warped shingles, or replacing a dishwasher.

How do you plan for the unexpected repair expense?  One way is the 1% rule, that is to say, plan on 1% of the value of your home in repair costs annually.  This way, whether you set aside some money every month, or every paycheck you’ll have the funds available when costly maintenance issues arise.

An alternate method for budgeting for the unexpected is using the $1 per square foot rule.  With this method you simply take the total number of square feet in your home and put a dollar sign in front of it to estimate how much your annual maintenance expenses may be.

It’s important to keep in mind most household appliances last 10 – 15 years before needing to be replaced.  So if you bought your home with all brand new appliances, and you’re nearing your 10 year anniversary, you may want to start budgeting for a new dishwasher, stove, water heater, fridge…