What Are Home Loans and When Do You Need to Get One?

The housing market is finally back on its feet. According to Kiplinger, there are more people looking to buy homes than at any other time since 2013.

But buying a home will most likely be the largest purchase you’ll ever make. Learning about the process of getting a home loan can protect you from major financial setbacks.

What are home loans? Check out this guide to understanding how the mortgage lending process works and how you can use it to get your first home.

What are Home Loans?

A home loan is a contract between you and a lender that allows you to buy real estate. The contract terms vary depending on the type of home loan you get.

The most common length of time borrowers have to buy real estate is 10, 15 or 30 years. Though you use the loan funds toward the purchase of the home, it technically isn’t yours until the balance is repaid in full.

Lenders have the legal right to take back the property up until your home loan balance is paid off. But most lenders work with homeowners to avoid taking back homes when payments fall behind.

If a lender is forced to take back your property, this process is called foreclosure. Both buyers and lenders try to avoid foreclosure at all costs.

When you don’t honor your home loan contract, the lender doesn’t profit as much and, in some cases, may be forced to sell the home for less than its full value.  In rare cases, lenders sell homes for less than the amount of the mortgage to recoup profits.

This happens when the market value of the home is less than the remaining amount on the mortgage loan. Selling a home for less than the mortgage amount is called a short sale.

Getting Approved

There are few things you can purchase that take longer to buy than a house. Lenders take their time going through your personal finances to make sure you can afford to repay the loan.

The loan approval process usually takes at least 30 days depending on your financial situation. Having all your documents ready for the lender to review is one way to speed up the process.

You need records of both your debt and income to help the lender determine whether the home loan you want is affordable. Here are the most common documents you’ll need when applying for a mortgage loan:

  • Copies of pay stubs showing a minimum of 30 days of income
  • Information on employers from the past two years
  • W-2s for two years
  • Two years of tax returns
  • Three months bank statements
  • If you are a business owner, year-to-date profit and loss statement plus business returns from the last two years

This is just a summary of what most lenders require. You may be asked for more documentation depending on the lender’s underwriting process.

The loan underwriter examines all your financial documents to make sure you aren’t a high risk for the bank. They analyze things like debt to income and employment to see whether you seem financially stable.

If you’re a doctor applying for a home loan, there may be special financing available to help you get qualified. Check here to learn what items you need to begin the loan approval process.

It’s not uncommon for mortgage lenders to request that borrowers not remove any money from their savings account or make any large purchases while applying for a home loan. The lender asks for checking and savings account statements throughout the underwriting process to follow up on your spending.

Paying on a Home Loan

Home loans are one of the biggest purchases most people make in a lifetime. Thirty-year mortgages are common because most people cannot afford a quick repayment on a home loan.

Mortgage loans are repaid with monthly payments that apply toward the interest and principal balance. At the beginning of the loan term, you’ll pay mostly interest on the loan.

This process is called amortization. With a home loan, amortization the amount you pay toward the principal balance of your loan increases each year.

This doesn’t mean your mortgage payments get higher. The amount of interest you pay gets lower as the principal payments get higher.

The only exception is with an interest-only loan. If you apply for an interest-only home loan, you’ll pay only interest payments for a fixed amount of time.

Once the interest-only period is up, you make larger payments toward the principal balance. The downside is that you won’t necessarily keep the same interest rate as the one you started out with.

Interest-only loans are usually adjustable rates which means the rate is subject to change every year. Conventional mortgage loans are fixed-rate which means you pay the same interest rate for the entire term of the loan.

If interest rates drop, you can reapply for a home loan to get a lower rate. This process is called refinancing.

Where Do My Payments Go?

Payments to a home loan don’t just go toward principal and interest. The amount you pay each month covers local taxes and insurances.

The taxes paid are determined based on your property value. Your local city or county government decides the percentage they will charge in property taxes each year.

If you put less than 20 percent down on your mortgage, you’ll pay private mortgage insurance (PMI). This insurance protects the lender in case you don’t repay your mortgage in full.

Do I Need a Home Loan?

You don’t need a home loan if you can afford to buy house cash. There are homes priced so low that homebuyers can afford to buy the home in cash.

These homes are often sold at a foreclosure auction or in lower-priced housing markets. What are home loans?

Home loans give you access to the funds you need to get a new condo, house or apartment. You borrow to get access to a long term place to live that can turn into an investment if it grows in value over time.

For more real estate tips and information, check our blog for updates.

5 Ways to Reduce your Carbon Footprint at Home

We should all be looking at our lifestyle to see how we can reduce our carbon footprint and there are indeed many ways you can make a small difference. While one person won’t make much of a difference by switching lights off when not needed, a collective effort would certainly improve things, and with that in mind, here are a few ways you can help the environment.

  1. Exterior Lighting – If you search online, you’ll find suppliers of solar powered LED garden lighting, which is a great way of saving energy, plus you don’t have to turn the lights on; they come on automatically when the light reduction reaches a certain point. You can also install motion sensors and that means lights are only on when people are around.
  2. Extra Roof Insulation – A simple, yet very effective way to reduce your energy use, the added layer of insulation will help to retain the desired temperature, which will certainly save energy. Your local roofing contractor would be happy to install a layer of composite insulation, which will make all the difference for a small investment.
  3. Continuous Flow Hot Water – Also known as ‘water on demand’, this system does not require a water tank, rather it heats the water as it passes through the pipes, giving you all the hot water you need. The amount of energy that is wasted when you keep heating a whole tank of water is considerable. Talk to KBC Plumbing Albury-Wodonga branch, who would be happy to send a technician to your home where you can discuss the many options.
  4. Solar Power – Tens of thousands of Australian homeowners have discovered the many benefits of the clean and renewable energy the sun provides, and for an initial investment of a few thousand dollars, you can save as much as $2,000 per year. Aside from these huge savings, you are greatly reducing your carbon footprint, and are no longer dependent on the huge energy corporations.
  5. Double Glazing – A sizeable investment yes, but it will pay dividends in the long run; the amount of heat transfer through a single pane of glass is significant and almost 50% of your exterior surfaces are glass. The sealed unit is filled with argon gas and this makes a very effective barrier to heat transfer, thus saving your air-conditioning and HVAC system from working too hard, and each unit is tailor made to fit the opening, ensuring a perfect fit. Some homeowners claim double glazing saves up to 40% of their annual energy consumption and that is a saving worth making.

With the emergence and development of solar power, we will soon be able to switch from traditional energy to a clean and renewable source that will not harm the environment, but until that day arrives, the above ideas will certainly result in reducing your carbon footprint. The Australian government is very much behind the initiative to stop using fossil-fuel energy and will give homeowners a grant if they convert to solar solutions.

7 Pitfalls to Avoid in Real Estate Construction

Building a home is a time-consuming process requiring plenty of planning and proper decision making. Any wrong homeowner decision is irreversible. Careful planning is, therefore, needed when it comes to designing, sourcing, and executing. If you are building your new home, then some errors must be avoided. Before finally constructing a home, you should get proper quantity estimation, construction takeoff, and other relevant details so that you make better decisions. Residential estimating services can help you easily undertake every step of the construction.

Real estate construction is no joke. It pays off, but you should be careful to avoid some pitfalls when opting for real estate construction. If you aren’t prepared, creating anything from nothing may become a terrifyingly messy process. Huge infrastructure programs arrive with a typical collection of concerns. And keep an eye out for these pitfalls which ruin the project. Here are the top 7 pitfalls to avoid.

Create Accurate Drawings before Starting

You cannot begin anything blindly. You cannot go into war without equipping yourself with the right weapons. Well, accurate drawings are the best tools in your arsenal when it comes to real estate construction.

Get accurate drawings from the architect and start planning the construction. Get quantity estimation, construction takeoff, labor costs, and everything else related to the construction beforehand. Get the accurate drawings so that you know what will be constructed, how it will be created, and exactly where it will be created.

Calculate A Budget to Make Educated Financial Decisions

Without a proper and carefully finalized budget, your construction will never be successful or never be hassle-free. A budget allows you to make wise financial decisions.

Get help from a professional to help you make a robust and well-calculated budget for your upcoming construction project. Moreover, you should also be ready for unforeseen costs and additional costs. These will go beyond the previously calculated budget.

Preparation for additional costs is necessary, and it is only possible when you already have a budget to help you make a decision. Regardless of how carefully you prepare the building of your new home, there are risks you will have to pay unexpected and unpredictable expenses.

Problems like dry rot, damage of the termite, and bad soil will add up to your expense. In case your order materials get lost in the transfer, it is essential to clarify with your contractor as to who will cover the unexpected costs. Inquire about the price of distribution too. This will all be handled if you have a calculated budget.

Obtain Bids and Negotiate with Contractors

The real estate is a considerable expense for any individual, whether you own it or rent it or want to construct everything from scratch.

If you are preparing to reshape your house or to build a new building, the expenses may skyrocket without giving you a chance to get back on your feet. Proper construction costs money, but that’s no reason to throw away money by not organizing correctly or bargaining with your contractor. Obtaining bids and negotiating with the contractors is the best way to ensure that you will not have to stretch your financial budget for the construction.

Get bids from a lot of contractors, sub-contractors, and general contractors. Compare the prices offered by different contractors and then choose the lowest one. Take a look at the provided quantity estimation, Construction takeoff, and other helpful elements of the bids. Once you have finalized on one bid, it is time to negotiate with the contractor. Construction estimating firms can help you create a budget to get everything ready.

Prepare a Profit/Loss Analysis

As someone constructing real estate properties, you need a declaration of profit and loss that conveys details in a way that will describe how much you make as a benefit.

The best format is a declaration of construction profit and loss analysis, which describes contract proceeds, direct costs, indirect costs, and overhead costs.  This model fits very similarly to the calculation design of most smaller construction companies. With the help of this analysis, you will be able to understand whether you are losing money on the construction, or actually earning some benefit with this construction.

At the end of the day, it’s about the profit that you’re making with your real estate construction. The profit and loss analysis report should show where the issue resides and where the most reliable output occurs.

Value Engineering

The recently famous term value engineering (VE) is prevalent in the building and real estate construction sectors. It refers to a structured and coordinated method designed to provide all necessary project functions at the lowest possible cost.  Options for cost reduction are investigated and discussed through a community review, without sacrificing efficiency, price, health, or design purpose.

The term value engineering often causes stress and discomfort with a project team since everybody wants the best delivery possible. If you are looking for flawless real estate construction without a lot of surprises, you need to focus on value engineering in every possible way.

Correct Way to Issue Contracts

So, you have finally set out to build your own house and dabble in real estate construction. You’ve picked the style, looked at construction takeoffs, and chosen all the finishes and fixtures for the house. The builder has stated there is only one more thing to take care of, and that is signing the contract to build.

It’s vital that you study and carefully review the document before you agree. The contractor will not inform you that, but you may also want (and you are allowed to) discuss other terms of the contract with a professional. Figure out the best way to issue contracts and get it done right.

Conclusion

Real estate construction is not an easy job, and you need to take a look at every aspect of the situation before you finalize it. Look at the bids, get a well-calculated budget, compare the prices, look at the contract, talk to a lot of people, and negotiate with the contractors. This is the best way to deal with any real estate construction project and get it done right the first time.

Signs You Need To Hire Property Managers

Owning rental property is a smart investment. It may seem like purchasing several properties, finding responsible tenants, and reaping the financial rewards will be easy, but you may quickly realize that it may be more complicated than you thought. Marketing your property, selecting tenants, maintaining your property, and meeting property laws can be overwhelming. While you may try to handle all the tasks on your own, you are not likely to do them as professionally as required. If you are feeling overcome by all the new to-dos on your list, it’s time to hire a property manager. A good property manager can be a worthwhile investment for you and your investments. Here are some of the benefits you will see from taking this step.

Prompt Response to Repairs

When you hire property managers in Austin (or whichever city you live in) you gain a strong partner that can help with repair requests. When a landlord doesn’t have time to address repair tasks in a timely manner, tenants can become upset. Leaving repairs unattended for a long time can also be costly. Not only could you risk losing your tenants but your property could experience damage. Save yourself time and money by hiring a property manager.

Managing Multiple Properties

Owning multiple rental properties can be a great way to build your wealth but, if you find yourself overwhelmed or strapped for time it may be a sign that you need a property management company to assist you. You can hire the company to attend to all your rental properties, without compromising any of them. Property managers can keep tabs on multiple sites much easier than one landlord can. They can find the right tenants and make sure the parking lots and landscaping are maintained too. They provide multiple checks and balances to keep up your investment.

They Can Help You Find New Properties

Building your financial portfolio is crucial for continued growth. If you hire the right property management company, they can even help you watch for new investment opportunities. Austin Luxury Realty is an example of a team of real estate professionals that work in all aspects of the market including, buying, selling and property management.

Owning rental properties is a great idea. However, managing them on your own without professional assistance is a lot of work. Research the property management options in your area and find a company you can trust.

Creating A Real Estate Empire Is Easier Than You Think

Although many people understand that including a diverse array of properties in the real estate portfolio they are building is important, most individuals stop there. Less than 3 percent of those same investors thrive in the world of real estate, and those are the ones that almost casually begin creating a property empire. If you are one of the 97 percent that wants to know the secrets of how to create a successful business empire in the world of real estate, here are a few tips to get you started.

1. Study Real Estate

Although you may understand the types of real estate you have invested in, there are many aspects of the world of property you may not be familiar with. Other than land, commercial buildings, and single-owner properties, there are many other types of investments that you can become part of. Understanding the terms, available properties, and possible investments helped Aubrey Ferrao build an empire in Florida that has few rivals.

2. Use the Internet

You may already have a website, but you need more than just a simple digital presence when you have successfully created an empire. Hire someone to take care of the website for you, and if you own buildings with occupants, find someone to handle the stacks of paperwork associated with finding and keeping good tenants. A building manager may not have the time required to handle everything, so stay on top of making sure your reputation remains intact with your building leaseholders.

3. Talk Real Estate

You may be at a meet-and-greet, a face-to-face, or a business meeting when the largest opportunity of your lifetime walks through the door. Angel investors and large benefactors don’t come along often, but if they don’t know you are a real estate investor, how can they team up with you? So, no matter where you are or what you are doing, let others know you are a real estate investor.

4. Build a Team

You may want to control every little detail of every transaction that comes across your desk, but the reality is that the more successful you become and the larger your empire grows, the less control you have over most details. To counter the loss of control, you need to build a team you can trust. This may include plumbers, contractors, building managers, and real estate personnel. Aubrey Ferrao Fiddlers Creek team helped him build his empire and helped him succeed. Not only can these trusted individuals help you keep your empire moving forward, but they can also help you find more amazing deals.

5. Do Case Studies

Speculation can be the downfall of many investors, so remember to turn to case studies for the truth of any deal. Comparing investment, performance, and product yielding over several years can illustrate your position. Speculation only yields imaginary numbers.

6. Contribute to Community

It may sound counterproductive to give something away before you have made your millions, but when you help build your community by contributing to the activities or helping to remedy problems within the area, you are building a reputation for yourself and your company. As more people begin to recognize your name, you will find many of the individuals in your community may begin reaching out to you as a trusted friend. Not only will this help build your empire, but a solid reputation can go far in the world of business.

Most importantly, believe in yourself. You can build a real estate empire much more quickly than you ever thought possible if you know who you are. Remember, the real estate world moves quickly – so you need to move even faster.

The Pros & Cons of Rental Property Ownership

If you are looking for an investment opportunity to add to your portfolio, acquiring a rental property is a very attractive prospect, and for many Australian investors, letting out their second property offers a good return. Of course, as with any investment, there are risks involved with rental properties, and with that in mind, here are a few pros and cons to help you make the right decision.

The Pros of Property Rental Ownership

If you buy the right property in the right location, you can expect to enjoy top rental, and with the tenant paying your mortgage for you, plus a little profit into the bargain, investing in a rental property has great potential. As a landlord, there are many responsibilities, which include building maintenance and repairs, and most owners will outsource the property management to a company such as Rise Property Management, who take care of everything on your behalf. In fact, your choice of property management provider could be the difference between a profit and a loss, so it pays to really do your homework before making a decision.

Building Maintenance

Every building requires regular maintenance, especially one that is rented out to a tenant, and by enlisting the help of a good property management company, they handle everything on your behalf, including sourcing tenants, collecting the rent and also maintaining the property. Unless you happen to be an experienced builder with a lot of time on your hands, you are advised to outsource the building maintenance to a company that does this for a living.

The Cons of Rental Property Ownership

There are risks involved when buying any rental property, which could include unforseen serious building repairs, letting your property to an unsuitable tenant, or not being able to find a tenant. As you would expect, the location of the property is critical, and it needs to be in very good condition before you can put it on the market for rent, and even then, it is possible that you won’t receive the rent you had hoped for. Making a profit is what rental property ownership is all about, and if you aren’t careful the considerable expenses might result in zero profit, or even worse, losing money on the project. The main reason why a property owner fails to make a profit is a lack of knowledge as to exactly what is required by a property landlord, and if you try to maintain the property yourself, you could end up paying a lot more than you need.

Prior to making any commitment, it is vital that you crunch the numbers and are fully aware of your liabilities as a landlord, and with the help of an established property management company, you can leave everything in their very capable hands. Calculate how much it would cost to purchase a desirable property, while also factoring in the cost of making the property habitable, plus you need to seek out advice regarding capital gains and other financial aspects of owning a property for rent.

Improve Multifamily Property ROI with These Tips

Real estate investments are a good source of passive income. You can increase the return on investment with a few strategies specific for multifamily rental properties. These few tips can generate more passive income by putting your time and resources in the right places.

Manage Expectations

Property managers like Steven Taylor landlord have learned to manage the expectations of their tenants. Knowing the expectations of your target audience can help you address their concerns before they crop up. If you plan to rent to Baby Boomers, you need to make sure you have things they appreciate at your facility such as smart appliances and high-tech security. Millennials may want more focus on online payments and in-house laundry.

Personal Touch

Running a multifamily residence requires a personal touch. Focus on the services you offer to the residents to maintain their satisfaction with their living situation. Keeping the current residents happy with their current location means they tend to stay longer. When you don’t have high tenant turnover, you spend less time marketing and managing move-ins and move-outs. Satisfied tenants who feel appreciated are more likely to spread the word of their residence to others. Word of mouth advertising is the fastest and most effective marketing you can do.

Technology Use

There are many new technological applications that can help you interact with the residents. From online payment systems to forums specifically for residents, technology lets the residents interact with their community and with the management team. The online portal can have a list of frequently asked questions and a place to put in service orders. Services like this can appeal to young renters who are used to doing things from their electronic devices. Focus the technology on serving current and potential renters. A little personal touch combined with amenities and technology can help tenants feel appreciated and increase the return on the investments you’ve made in them and the building.

Covering Your Bases: Do You Know the Difference Between These Three Types of Landlord Insurance?

Every landlord works to make a profit. They typically don’t purchase a building for use by others unless they can generate income from the property or obtain a tax write-off. However, the property needs to be protected at all times so the landlord doesn’t take an unintentional loss. Fortunately, a person may purchase landlord insurance to receive this protection. There are three types of landlord insurance every person in this position should consider obtaining.

Liability Insurance

A landlord may lose a great deal of money fighting lawsuits filed by tenants whether or not the claims have any basis in fact. If any person is injured on the property, for example, the injured person may file suit against the landlord and claim this individual was negligent when it came to maintaining the property. The same is true if a tenant’s property is damaged in any way due to the negligence of the landlord.

Liability insurance steps in to cover any legal fees incurred by the landlord, court costs, damages that must be paid to the tenant if they win the suit, and more. While this type of insurance isn’t mandated by law, it is recommended every landlord have a liability policy in place to protect themselves from the high costs of legal actions. Those interested in obtaining this type of coverage can see more at rogerbutlerinsurance.com

Property Insurance

Landlord property insurance is different in that it actually covers the structure located on the property. Imagine having a fire and the structure is completely destroyed. The landlord is responsible for rebuilding the property and must pay out of pocket to do so if no property insurance has been obtained. Tornadoes, hurricanes, and other natural disasters are typically covered under this portion of an insurance policy as well.

Additional coverage may be needed to cover other structures located on the property, such as a detached garage, shed, or other outbuildings. However, be aware that flood insurance may need to be purchased separately. It’s best to speak to a licensed insurance agent to determine what coverage is needed and in what amounts. Know the estimated replacement value of any buildings to be covered before shopping for this type of policy, as the agent will need this information to provide an accurate quote.

Additional Coverage

Landlords often spend their own money to make a property nice for tenants. For instance, a landlord may choose to install new carpeting right before a new tenant moves in. If something happens to the carpet, the landlord must then take money out of their own pocket to replace or fix it and then possibly sue the tenant to recoup the costs. Another option is to purchase additional coverage that will pay for these types of expenses so the landlord doesn’t have to. It’s an option every landlord should consider, weighing the benefits and costs of the coverage to determine if they feel it is necessary.

Landlords may also choose to include a clause in the rental agreement requiring tenants to obtain renter’s insurance. This type of policy covers any belongings on the tenant if they are damaged in a fire, natural disaster, or another occurrence. Again, speak to an agent to determine if this type of policy will be needed and when it should be obtained. The landlord needs to be protected at all times, and the right insurance coverage ensures they are.

 

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