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You might want to reconsider these choices when you’re designing your kitchen…

The kitchen is one area of the home that sees the most wear and tear. All the water, heat, and food spills add up quickly so it’s important to focus on quality and lasting appeal when you’re choosing materials for a kitchen remodel. Here are a few things you should avoid:

Cheap Laminate Countertops: The bottom rung of laminate is extremely susceptible to wear and tear. It can melt if you forget to place a hot pad under a pan that’s fresh out of the oven and the edges can chip off from repeated exposure to moisture and heat.

Flat Paint: A flat or matte finish is great in rooms with lower traffic, but it’s a bad idea in the kitchen where the walls are regularly exposed to splatters and spills. You need paint that can withstand an occasional heavy scrubbing, so opt for gloss or semi-gloss finishes.

Trendy Backsplash: If you watch any home remodeling show, you’ll certainly see kitchens with expensive, elaborate backsplash designs and materials. Those trends can be pricey to pursue and can look dated in a hurry. Subway tile is a cheaper, classic option that you’ll never regret, plus you’ll have more room in your budget to purchase quality materials to be used elsewhere.

Cheap Flooring: Just like the countertops, your kitchen floor needs to be strong enough to take some abuse. Cheap flooring easily scuffs and peels (especially from moisture). Quality flooring is worth the investment.

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How Do I Know the True Market Value of a Home I’m Considering?

Question: “I’m looking at a house that I think might be overpriced. What’s the best way to know for sure? How do I know the market value of a home I’m thinking about buying?”

Let’s start off with a quick definition, just to make sure we’re on the same page. In real estate terms, the “market value” is the most probable price a home will sell for, based on local housing market conditions and recent sales activity.

Notice that this definition does not mention the original price paid by the current owner. Unless they bought the home a month ago, the original purchase price is likely irrelevant to the current market. Likewise, the market value of a home has nothing to do with the homeowner’s current mortgage balance. Many sellers list their homes for the amount needed to pay off the loan. This is wishful thinking, and nothing more.

How to Determine Market Value

So, with that introduction out of the way, let’s get to the heart of your question. How do you know the market value of a home you’re considering?

The first thing you need to do is track home sales in the area. The longer you do this, the better. It gives you a good base of knowledge with regard to asking prices versus selling prices (only the latter determines market value).

Next, you should look for sales data on homes that are similar to the one you’re considering. This is what real estate agents refer to as comparable sales, or comps. The more similar the two properties, the more accurate the pricing comparison.

Try to dig up as many home sales as possible. This will help you support your offer amount, by showing the seller you’re using actual market value for homes in the area. You should lean toward the most recent data. Prices change over time, so recent comps will give you a better idea of what’s happening now, in the current real estate market.

When you determine the market value of a home, you also need to take any unique features into account. For example, let’s say I’ve found sales data for two colonial-style homes that are 2,000 square feet. The home I’m considering is also a colonial with 2,000 square feet. But it has a completely renovated kitchen, a pool, and sits on a more spacious corner lot with a great view. The other houses lack these qualities. So the house I’m considering will likely sell for more than the two comps, despite the fact the homes are similar in size and style.

Here’s a good “formula” to keep in mind when considering the market value of a home in a particular area:

Comparable sale prices + unique features = a good asking price

If a homeowner uses this kind of logic when setting the asking price, the home will probably sell at or near the price they are asking. If they go over this amount, based on greed or the need to pay off their mortgage, the house will probably be on the market for a long time. This is why it’s important to understand true market value before making an offer.

With all of this being said, real estate pricing is not an exact science. So if it comes down to a situation where the owner is asking a little over what you feel is the market value (but you really want the house), you might want to give them what they are asking. Especially if home prices are expected to rise in your area.

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How and Where Do I Begin When Buying a Home?

Beginning a home search can be a disconcerting task, especially for first-time buyers. Perhaps the biggest question is how and where to begin the process. Some people begin by looking at real estate listing websites, while others call real estate agents right off the bat. The process varies.

So, what is the best way to begin your quest for a new home? In truth, any way you begin the process is a good way, because the most important thing is to get started. You will learn a lot as you go along, so the idea at this stage is just to get moving.

Here are some things to keep in mind at this early stage:

Do the Proper Research

Buying real estate can be an overwhelming experience for the first-time buyer. But you can make the process much easier simply by understanding it. Start with the lingo. By learning the terminology associated with home buying and mortgage, you will make smarter decisions along the way.

Next, start learning the differences (and pros and cons) of the different types of home loans. This includes the key differences between fixed and adjustable-rate mortgages, as well as government-backed versus conventional loans.

Your third area of research is the local housing market. What are home prices doing in your area? What is the supply and demand situation? Are you in a buyers’ market, a sellers’ market, or somewhere in between?

Set Your Budget

Early in the home buying process, you should sit down and work out a monthly budget for your mortgage payment and other housing-related costs. Remember, there is a difference between the loan amount you can be approved for by the lender, and the amount you can actually afford. In the end, only you can determine your housing budget.

Establishing a budget will help “frame” your home search so you are only looking at homes within your budget range. Many first-time buyers fail to take this step and therefore waste time and energy looking at homes that are well above their budget.

You can find plenty of websites that offer mortgage calculators, and these tools are a good place to start when determining your budget. Just keep in mind that the one variable you can never predict in advance is the interest rate. Only by speaking to a lender can you get a full mortgage quote that includes the interest rate (based on your credit history and other factors).

Get Pre-Approved for a Mortgage

Pre-approval is when the lender reviews your financial situation to determine how much of a loan they are willing to give you. After completing this process, you’ll be able to show the seller your pre-approval letter. This gives them the confidence that you can buy their home, which is especially important when more than one buyer makes an offer.

Do not confuse pre-qualification with pre-approval. Pre-qual is an informal process in which the lender tells you how much of a mortgage you might qualify for. Pre-approval, on the other hand, is a more detailed review of your finances and is likely to reflect the actual loan amount the lender extends to you. In other words, the person selling the home will pay more attention to the pre-approval letter.

There are different ways to begin the home buying process. The list of steps offered above is a good place to start.

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3 Small Steps to More Sustainable Living

Making little lifestyle changes will do a lot to enhance sustainability for the planet — and make every day Earth Day.

It’s a great feeling every Earth Day to bike to work and show your love of the planet. But sustainable practices — managing how you use resources to ensure that there will enough for future generations — doesn’t have to be limited to once a year. With a few adjustments, sustainable practices can easily become a part of daily life and save you money while you help improve the planet.

What is sustainability?

Sustainable living is an umbrella term that covers many different ideas and programs. It can be as simple as recycling and using less water or as complex as changing state and federal policies to promote wind and solar power and high-speed rail transportation. Local planning commissions can promote sustainability by allowing higher density housing that uses less land.

If you want to support some of these public sustainability programs, you can contact your government representative to express support. You could also support a nonprofit group like the Edible Schoolyard program, which teaches kids how to grow and eat locally.

Opposition to sustainable practices

Not everyone is a fan of sustainable practices. Some people worry that conservation efforts produce more government regulation, increase living costs, and reduce corporate profits. Not sure where you stand on these major policies? Why not start small and see?

Eat locally. One of the biggest impacts a family has on the environment is what it eats. It takes around 10 calories of fossil fuel—in the form of fertilizers, processing, and transportation—to produce a single calorie of supermarket food, according to Michael Pollan, author of The Omnivore’s Dilemma. Cut down on your food’s energy impact by eating food grown near your home.

A 2001 study conducted by the Leopold Center for Sustainable Agriculture, Iowa State University, found that the cost of transporting food from the region or the local area was four and 17 times less, respectively, than buying from national distributors.

Finding local food isn’t difficult

* Local Harvest will help you find farmers markets as well as farms in your region that offer subscription programs. Signing up for a subscription means you pay up front, so there’s a risk if the harvest fails. Costs vary depending on the size of the share and your part of the country. A good estimate from Local Harvest is that you’ll spend about $600 to cover produce for a family of four during a four or five month growing season.

* Keep food even closer to home by growing your own, either in your backyard or in a shared community space. Expect to spend several hours a week seeding, weeding, and harvesting. Gardening is also a great way to teach kids about healthy eating.

The downside of eating locally is that food from a farmer’s market often costs more than the same from the supermarket. And in winter, you may eat a lot of cabbage and potatoes if you stick to local eating.

Buy gently used

Everyone likes something new once in a while—and fast-growing kids require it. Consumer spending is also a big contributor to a healthy economy. But producing and transporting new products from the factory to you also uses lots of resources. One way to get new stuff and still promote sustainability is to trade something you no longer want for what you need.

* Freecycle is a 7 million-strong global network of people who share their possessions—for free. Once you join online, you’ll receive regular email about used items that you can request and pick up. Eva Schmoock, a student nurse and mother of two in Carrboro, N.C., is an avid user. She’s found new homes for everything, including paint and kids’ bathing suits.

* A low-tech option: Organize swap meets with neighbors to lessen your environmental footprint without opening your wallet. Get your kids to put flyers in mailboxes to promote the swap. Or try a consignment shop.

Reduce trash by composting

It isn’t just what you buy that has an impact on the world’s resources, it’s what you throw away. The average American is responsible for almost 5 pounds of garbage a day, 12.5% of which is food scraps, according to the Environmental Protection Agency. That trash clogs landfills and pollutes ground water.

Want to reduce waste? Consider composting. Just put those peels and pods (but no meat or dairy products) in a separate container instead of the garbage can. When the container is full, carry it to your compost pile.

A $10 plastic bucket with a lid will work; fancier models have charcoal filters that cut down on smells but cost two or three times as much. Let your kids scrape plates into the compost pail or empty the full container.

You’ll find a compost bin for every budget. You can fence off a small (out-of-sight) section of your yard with less than $50 worth of mesh wire and poles. Plastic bins and barrels are neater, but can cost several times more. The best part of composting: In six months, nature will convert your waste into terrific fertilizer to sustain your vegetable or flower garden.

Article by HouseLogic Published: August 28, 2009 By Amanda Abrams

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Getting Approved for a Mortgage: 5 Steps to Approval

If you’re like most home buyers, you probably have questions about the mortgage approval process that awaits you. This is only natural, given the size of the investment. The good news is that the approval process is usually straightforward and easy to understand. Here are the basic steps.

Mortgage Approval by the Numbers

In most cases, the approval process includes the following steps: Pre-approval, application, underwriting, property appraisal, and mortgage approval (if all goes well).

1. Pre-approval Process

This is a preliminary review of your financial situation. The lender will pre-approve you for a certain size of loan. Basically, this is a way for the lender to decide whether or not to move forward with the process. If this preliminary review goes well, you move one step closer to mortgage approval.

Among other things, the lender will want to know the approximate cost of the home you plan to buy (even if its hypothetical at this stage), how much money you need to borrow, the type of loan you want, how much money you earn each month, and your total recurring debts.

2. Mortgage Application

Based on the pre-approval process, the lender will have a general idea whether or not you’re a good candidate for a mortgage loan. If they feel you are a candidate, you will likely move on to the mortgage application itself. (Some lenders combine the application and pre-approval process, while others separate the steps. It varies.)

This is where you will have to make a final decision on the type of mortgage loan you want, and also lock in an interest rate for the loan. In nearly all cases, you’ll have to pay an application fee as well.

3. Underwriting and Documentation Review

Underwriting it the most critical part of the process, but also the most “mysterious” to home buyers. The lender’s underwriting department will closely review your documentation, credit score, employment documents, etc. If they find anything wrong, it could slow down the process or, at the worst, derail it altogether. If they find minor issues, they will give you a conditional approval, along with a list of conditions that must be addressed prior to final approval. If you’re lucky, you’ll sail through the underwriting process with no issues whatsoever.

4. Property Appraisal

One of the next major steps in the mortgage approval process is the property appraisal. This is where the lender sends a professional home appraiser out to evaluate the property. The lender wants to make sure the home is worth the amount you have agreed to pay for it. In the event that you default on the loan and can no longer make payments, the lender will have to take on the property and sell it. So they want to know what it’s worth, before approving the loan.

5. Mortgage Approval

If everything goes well up to this point, there is very little between you and your new home. You will attend the closing or settlement process, where you will have to pay all remaining fees and costs. This is also where you get the keys to your new home!

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The Home Buying Process: 12 Steps to Success

First-time buyers typically have a lot of questions about the home buying process, and in particular the various steps encountered along the way. This article lays it all out for you, from start to finish. Here are 12 steps you should take when buying a home.

1. Check Your Credit

Credit scores have always been important for home buyers, but they are more important today on the wake of the housing crisis. According to industry experts, home buyers generally need a credit score of 600 or higher to qualify for a loan, and 720 or higher to qualify for the lowest interest rates. But these numbers are not set in stone.

So your first step should be to review your financial situation. Order your credit reports from Experian, Equifax and TransUnion, and check them for errors. Order your credit score (different from your reports) to see how you stack up against the national average. If necessary, focus on improving your score by paying down credit card balances, making all bill payments on time, etc.

2. Determine Your Budget

Don’t make the mistake of letting a mortgage lender tell you what you can and cannot afford, in terms of a monthly mortgage payment. In reality, the only thing a lender can tell you is the amount you qualify for — not the amount you can realistically afford. You should determine your home buying budget for yourself. There are a lot of free mortgage calculators online that can make this process easier for you.

3. Research and Choose a Type of Mortgage

Do you know the difference between a fixed-rate mortgage and an ARM? This is just one of the things you need to understand before applying for a mortgage loan. The key to success when choosing a mortgage is to consider your long-term plans and find a loan that matches those plans. To do this, you must learn the pros and cons of the primary loan types. Consider the differences between FHA-insured and conventional loans, as well.

4. Get Pre-Approved for a Loan

Pre-approval is a process in which the mortgage lender reviews your financial and credit history to determine your “creditworthiness.” When you get pre-approved for a certain loan amount, there’s a good chance you’ll receive final approval for that amount as well, when the time comes.

Having a pre-approval letter in hand also shows sellers that you are serious about (and capable of) purchasing their home. This can make a big difference in active real estate markets, where the seller may receive multiple offers from competing buyers.

5. Find a Real Estate Agent

If you are buying a home for the first time, or in a new city you’re not familiar with, it’s wise to hire a professional real estate agent. When you compare the amount of money you’ll pay for a new home with the size of the agent’s commission (which typically gets paid by the seller), you’ll see that it’s worthwhile to hire an agent. Choose an agent who specializes in helping buyers, as opposed to sellers.

6. Narrow Your Search

The neighborhood you choose is nearly as important as the house itself, because both have a direct bearing on your quality of life — not to mention future resale value. So research the different neighborhoods and communities in your area. Talk to people who live in them. Use the Internet to gather information. You’re not just buying a house; you’re buying the location as well.

7. Begin House Hunting

This is where you and your agent visit homes to find one that matches your needs. Here are some helpful tips. Take a digital camera with you to get pictures of each home. This will help you remember the details later on. Bring a notepad for the same reason. While you’re at it, you might want to bring a friend along for an unbiased opinion of each property — you know, that outspoken friend who calls it like it is.

8. Evaluate the Asking Price

It’s called the “asking price” for a reason. Just because a property is listed at $250,000 doesn’t necessarily mean it’s worth that amount. It might be wishful thinking on the seller’s part. This is another area where it helps to have a real estate agent. Most agents are experts at validating sale prices against recent sales in the area, and that’s the best way to find out if the price is realistic or inflated.

9. Make an Offer

Once you’ve determined that the price is fair and reasonable, you are ready to make an offer on the property. Always make the offer contingent upon the home inspection (see next item). That way, if the inspector uncovers an issue that you consider to be a deal breaker, you have a way out of the contract. Ask your agent about these and other “contingencies.”

10. Get a Home Inspection

Property inspections usually only cost a few hundred dollars. That’s a small price to pay for the peace of mind you get in return. A home inspector will review the structural and mechanical aspects of the house, including (but not limited to) the roof, foundation, electrical, and heating / cooling system.

11. Attend the Closing / Settlement Process

So, you’ve made it through all of the inspections and the process is still on track. Great! The next step will be the closing / settlement process (it goes by different names in different parts of the country). You can prepare for this process early by putting extra money aside. This is when the title to the property is transferred from the seller to the buyer. You’ll also be signing a lot of paperwork and paying any other fees that are due.

12. Tie Up Loose Ends

After your move, you’ll have a few more tasks on your list. Transfer your utilities if you haven’t done so already. Complete a change-of-address form with the post office (you can do it online these days). Get a safe deposit box for your home insurance policy and other important documents. Set up a mortgage payment schedule or an online auto-pay system. And give yourself a pat on the back … you’re now a homeowner!

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7 Steps to Buying a Condo

Thinking about buying a condo? Great! It can be a very exciting process, and even more so when you know what you’re doing.

But when you don’t know what you’re doing, a condo purchase can be downright scary and costly. No need to fear though, because we’re going to cover the top seven things you should do when buying your first condo.

1. Get pre-approved for a mortgage.

When you’ve been pre-approved by a mortgage lender, you’ll have more leverage with sellers. Pre-approval means a lender has carefully reviewed your financial situation and found you capable of taking on a loan up to a specified amount. It doesn’t guarantee that you’ll get the loan, but it shows sellers you’re serious about buying.

2. Choose the right location.

“Location, location, location” is one of the most commonly used expressions in the real estate industry, and with very good reason. People often choose condo units over traditional homes with a certain lifestyle in mind. So be sure your condo’s location can accommodate that lifestyle. Experiment. Test out the drive from the potential condo to your work, school, shopping, etc. Does it offer the features and amenities you are seeking?

3. Conduct thorough research.

Condo life usually comes with a number of bylaws, association rules and other declarations. Be sure to get this documentation up front to avoid any surprises later on. You’re making a big financial investment, so you’ll need to obtain all of the facts about what’s permitted and what’s prohibited. While you’re at it, get to know the developer too. Find out their history and expertise. Talk to a few of the residents (when applicable) to get their input.

4. Ask about building services.

Condos often have “built-in” services that residential homes do not, such as recreational space. This can be part of their overall appeal. But don’t assume your prospective condo comes with a certain service. Find out to be sure. Is there a door man? Is there a maintenance man or building engineer? If so, what hours will they be available? What other facilities does it provide?

5. Learn about pre-construction pricing.

Developers will sometimes offer significant price breaks in the early stages of development. They do this to attract buyers during the pre-construction phase, when it’s harder to sell a unit. As construction begins on the new development, demand usually goes up. And we all know what happens to prices when demand rises! So if you take advantage of pre-construction pricing, you could save a lot of money in the long haul.

6. Remain flexible.

If you’re buying a condo during the pre-construction phase, give yourself plenty of flexibility with the closing date. Construction delays are not uncommon, so it’s important to consider this when locking in your interest rate, setting a closing date, scheduling a move, etc.

7. Take advantage of tax deductions.

Speak with your accountant to find out what portion of your assessment is tax-deductible. Other expenses that add value to your condo may also be tax-deductible. Get an understanding of these tax implications before making your purchase.

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What Real Estate Agents Do for Home Buyers

What is the role of a real estate agent during a home buying transaction? If you ask a hundred different agents this question, you will likely get just as many different answers.

In truth, the primary role of a real estate agent when working with buyers is a simple one. Your agent’s primary obligation is to help you find a home that meets your needs, and to help facilitate the purchase. In exchange for this service, the real estate agent is paid a commission.

The Commission Earned

Traditionally, real estate agents have earned a six-percent commission for services rendered. The commission is typically split evenly, with three percent going to both the buyer’s and seller’s agent. The commission is usually paid by the seller involved in the transition.

These days, some real estate companies offer “stripped down” services at a reduced commission. For instance, they might only help with the paperwork and closing process, once you have already found a home. They charge a lower commission rate because they offer fewer services than what you would get from a traditional agent relationship.

The Duties Performed

The roles and duties performed may also vary depending on the agent. Some consider themselves selling agents, concentrating their efforts on assisting home sellers. Others consider themselves buying agents and focus their efforts on helping buyers primarily. The majority of real estate professionals assist both buyers and sellers (though usually not within the same transaction).

In the early stages of buying a home, the agent plays an important role. This person will (or should) serve as your guide on the quest to find a new home. He or she should listen to your needs and ask questions in order to determine what is the right kind of home for you, and where to find them.

Your agent should be able to compile a list of potential homes that may suit you. This list will point you in the right direction when you start the house hunting process. Once you find the home you are interested in buying, your agent will help negotiate the deal between you and the seller, serving as a go-between to make offers and counter-offers until an agreement is made.

The Process Delivered

Your agent should also keep the communication flowing and the process moving. This will be done through follow-up phone calls and emails, keeping tabs on paperwork, etc. He or she should keep you updated on a regular basis, and should keep an open line of communication with you.

During the pre-closing inspection (a.k.a. final walk-through), your agent should be with you in case you find any issues that need to be addressed, such as scheduled repairs that were never made. In these cases, your agent will attempt to negotiate some type of agreement regarding the damage.

Depending on the state where you live, your agent may also play an active role in the closing / settlement, or they may not be involved much at all. Either way, it’s helpful to have a professional on hand who is familiar with the transaction from start to finish, just in case additional information or negotiations are needed.

The role of the buyer’s real estate agent is an important one. For this reason, it’s important that you meet with prospective representatives and choose one you are comfortable with. You should be equally confident in their professional abilities and their communication skills. After all, the person you choose will be your direct representative through the entire home buying process.

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FHA Mortgage Insurance Premiums Have Been Reduced for 2017

Do you plan to use an FHA loan to buy a home in 2017. If so, I have some good news. The Department of Housing and Urban Development (HUD) announced this week that it would reduce the FHA annual mortgage insurance premium (MIP) for 2017. This change will take effect later this month, and it could save homeowners an average of $500 this year according to officials.

In 2017, the annual MIP for most home buyers who use a 30-year FHA loan will be reduced to 60 basis points, or 0.60% of the loan amount. See the table below for details.

Mortgage Insurance Premium Table, and Additional Details

Borrowers who use the Federal Housing Administration (FHA) loan program to purchase a house are generally require to pay two different mortgage insurance premiums, or MIPs. This insurance protects the lender in the result of borrower default.

  •     There’s an upfront premium, usually set at 1.75% of the loan amount.
  •     There’s also an annual premium, which is the one being reduced for 2017.

On January 9, 2017, HUD officials announced they would be lowering the annual mortgage insurance premium rate by 25 basis points, or 0.25%. This is great news for borrowers who plan to use an FHA loan to buy a house, because they could save an average of $500 per year according to HUD.

The revised annual mortgage insurance rate will apply to most new FHA mortgage loans with a closing / disbursement date on or after January 27, 2017.

The table below was published along with the official policy update sent out by HUD on January 9, 2017. You’ll see the reduced mortgage insurance premiums under the “New MIP” column on the right.

The FHA’s MIP tables can be confusing at first glance. But there’s a method to reading them. For starters, you’ll want to find your loan’s term or length. If you’re going to use standard 30-year FHA loan, refer to the top half of the table where it says: “term > 15 years.” Next, use the loan amount column that applies to you. The “LTV” column is essentially the inverse of your down payment. Most FHA borrowers put down 3.5%, since that’s the minimum down payment for the program; so the LTV in this case would be 96.5%.

Bottom line: Most FHA borrowers in 2017 will end up with an annual mortgage insurance premium rate of 60 basis points, or 0.60% of the loan amount.

Pros and Cons of the Program

There are pros and cons to every kind of mortgage loan, and this applies to the FHA program as well. Borrowers who use this program generally encounter the added cost of mortgage insurance.

On the surface, this might seem like a drawback to using an FHA loan to buy a house. But this insurance coverage allows people to buy a home who wouldn’t otherwise qualify for a mortgage loan with such a low down payment.

In order to avoid mortgage insurance entirely, you would have to make a down payment of 20% or more, or use a “piggyback” loan strategy. Thus, the FHA program is a viable option for home buyers with limited funds saved up for a down payment.

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