Category: Home Buying Tips

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What Is Mortgage Insurance?

The last time you bought a car or an expensive piece of jewelry, you likely insured it. This is because with a large purchase came an inherent risk — and if your valuable property is stolen or damaged, you don’t want to be left empty-handed.  The same thing is true of lenders who approve your mortgage loan. Every day, mortgage lenders across the country approve tens of millions of dollars in home loans, and they need to be sure they are protecting that risk. That’s where mortgage insurance comes in.

 

Why is it needed, and how much will it be?

Lenders often require that borrowers pay mortgage insurance, which protects the lender if the homebuyer becomes unable to pay their monthly mortgage payment. Think back to your own car insurance policies for reference. In mortgage insurance, the borrower pays the insurance premiums, but the lender is the beneficiary. If a borrower defaults on their loan payments, the insurance company will have to pay the lender a pre-determined percentage on the potential loss.

There are two main types of mortgage insurance. The first is mortgage insurance purchased from the government, which backs Federal Housing Administration (FHA) loans. The second is private mortgage insurance, which is designated for conventional loans that are bought from Fannie Mae and Freddie Mac.

(Note: Loans backed by Veterans Affairs (VA loans) do not require any mortgage insurance, but the VA funding fee provides similar coverage against loss).

 

Mortgage insurance for FHA loans

FHA loans are often called “helper loans,” because the lending standards favor first-time buyers and other homebuyers who may not have a large down payment saved. In fact, FHA loans can be approved with as little as 3.5 percent down at closing.

FHA loans are backed by the government, which then requires that FHA borrowers purchase mortgage insurance. To protect their risk, FHA requires two things. First, borrowers must pay an upfront mortgage insurance premium (MIP) of 1.75% of the total of the loan. This “upfront” MIP can actually be added to the loan amount and financed. Second, FHA borrowers must also pay an annual MIP of .85% throughout the life of the loan.

 

Private mortgage insurance (PMI) for conventional loans

Conventional loans are not backed by the government, so private lenders may require borrowers to purchase private mortgage insurance if they put less than 20 percent down at closing.  Often, conventional buyers will be expected to pay private MIPs until their loan-to-value (LTV) ratio hits 80 percent or lower. The LTV ratio is the amount of money you borrowed divided by the value of the property you purchased. In general, a lower LTV ratio means less risk for the lender because the borrower is much less likely to default on their loan when they have built up sufficient equity to sell.

 

A mortgage loan officer can walk you through all the expenses you should expect at closing and beyond, so you can determine your true buying power as you enter the market. Click here to get started on the process of getting a home mortgage loan!

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4 Things You Should Know About Buying During the Holidays

For many buyers, purchasing a home over the holidays can be ideal. In addition to competing against fewer buyers, you’ll finish the season off with the greatest gift of all — a new place to call home for years to come. Here are four t insights you can use as you purchase a home in Central Kentucky this holiday season.

 

1. You’ll compete against a smaller, committed pool of buyers

The holidays are a less popular time to buy a home, so you may see fewer buyers at open houses. Don’t assume this means you are without competition – holiday buyers are more dedicated to getting to the closing table, and multiple offers are still possible due to limited inventory in many areas. Be prepared to move quickly on a home that meets your criteria.

 

2. Think twice about putting in low offers

You might think that people selling over the holidays may be extremely motivated to move and willing to accept an offer for well under asking price. While Scrooge would approve of this philosophy, most sellers simply aren’t that desperate. To avoid losing a home you love, make sure your initial bid is competitive.

 

3. Limit your travel and don’t overschedule yourself

It can be difficult to slow down during the holidays, but in our fast-moving market, you’ll need to work around seller schedules. Whether you find a house through online searches or your Rector Hayden Agent sends a hidden gem your way, your goal should be to see it in person as soon as possible.

4. Ready to find “the one” this holiday season?

If you’re hoping to get a head start on buying before the hectic spring market arrives, start now! Contact your Rector Hayden Agent today to get started.

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4 Questions to Ask When Buying a Condo

4 Questions to Ask When Buying a Condo

Four questions to ask when buying a condo

Whether you’re a first-time buyer hoping to buy a starter home, or a downsizer looking for a fresh start, a condo could be just what you need.  Here are four questions you can ask as you tour condos with your Rector Hayden Agent.

1)  What are the HOA fees? How is the budget spent?

Homeowners Associations (HOAs) are a big plus for condo owners who don’t want to worry with exterior maintenance issues…or even carpet cleaning in common hallways. But it’s important to remember that HOA fees are technically a part of your housing cost, and they should be considered when you are determining your budget.

When inquiring about your HOA fees, be sure to ask how the budget is allocated and who controls the purse strings. If the building is 10 to 20 years old, for example, experts recommend that 25 to 30 percent of the incoming fees be earmarked for future major repairs.

2)  What are the HOA rules and regulations, and the perks or community resources?

Every homeowners association is different, so be sure to ask if the condo:

  • Allows pets
  • Has regulations about upkeep of private property (including balconies)
  • Requires that your unit be owner occupied
  • Charges fines — and what fines are most common

Condos can have plenty of perks.  Ask if your condo has:

  • A pool, Jacuzzi or sauna
  • Tennis courts or a community gym
  • Indoor or outdoor party rooms
  • A community-gardening area

3) Has the unit been sound-proofed?

Be sure to inquire about any sound-proofing that has been done to the space and ask to speak with other owners about their experiences.

4)  Is there parking and storage available?

While almost all condos (especially complexes) offer parking, it’s important to ask if you get a complimentary parking spot or if you’ll have to pay for parking.

Also, consider any larger items you have, like bicycles, skis, luggage, camping equipment and more. Ask if the condo comes with a private storage space (they are often located in the parking garage or a basement) and be sure to check out the storage in person to see if it matches your needs.

 

Ready for a condo?

The questions above are just a few of the important factors you should consider when buying a condo. Reach out to your Rector Hayden Agent today to get the expert advice you’ll need to help you on the path to condo homeownership.

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Renting Vs. Buying – Which One Suits You?

Renting a Home versus Buying a Home


When Buying a Home Beats Renting

The past few years have given rise to the notion that, counter to the long-held “American Dream,” buying a house isn’t always the right decision. It’s the industry-old question of renting vs. buying. Some people consider their financial situation and other factors and find it makes more sense to keep renting.

But if you’re contemplating the decision, here are four signs — apart from interest rates or location, location, location — that it might be time to become a homeowner.

When it’s time to build wealth

It’s been said that paying rent is just throwing money away, and there’s some truth to that. If you’re in good enough financial shape to get and pay a mortgage, your money doesn’t go into a landlord’s pocket — it goes into your own. You’ll be building equity toward owning what could become a valuable investment.

Nothing’s guaranteed, of course, and it’s hard to predict whether a home’s value will increase or decrease in the short term. But, over time, housing prices almost always go up.

When you have the capital

Buying a home will put a dent in your finances, especially at first. You’ll need to make a down payment, and most lenders want 20% of the home’s value upfront. (There are vehicles, particularly ones backed by the Federal Housing Administration, that take down payments as low as 3%. Just know that a lower down payment means you’ll likely being paying more in mortgage insurance and carrying a higher interest rate.)

Add expenses such as earnest money and closing costs, and new homeowners can end up feeling “house poor” for a while. If you can afford these intimidating upfront costs and still have a some money left in savings, it may mean now’s the time to buy.

When you have no plans to move

If you anticipate that your career, your family or good old-fashioned wanderlust will have you looking to settle someplace else in the next couple of years, it’s best to keep renting. But if you can’t imagine living anywhere else, now might be the time to put down roots. A good rule of thumb is 10 years: If you don’t expect to be going anywhere for a decade, you’re more likely to come out ahead financially by buying a home and building equity.

When you’re looking to take control

Homeownership eliminates a lot of the uncertainty of renting — from depending on someone else for repairs to a sudden spike in your rent to perhaps the building where you live getting sold and you having to quickly find a new place. Your home is your own, and you call the shots. Nobody’s going to take your security deposit if you decide to paint the living room walls.

And if you’re still not sure about renting vs. buying, ask an expert. Rector-Hayden Mortgage can help customers decide whether buying a home is indeed the right decision.

Post written by: Doug Gross, NerdWallet

© Copyright 2015 NerdWallet, Inc. All Rights Reserved

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Considerations for Today’s Tech-Savvy Home Buyers

There are a number of great apps and programs that can easily control the systems in your home – many of which can be mastered even if your tech skills are less than expert.   Here are some tech-related tips to consider when buying a home in today’s market!

Get connected

While most homes will be wired for cable and Internet, you might want to see if the nearest cell tower is providing good mobile phone service for you in case your Wi-Fi doesn’t reach to that grill in the backyard. Obviously, if you love the home this may not be a deal-breaker, but it’s nice to know if you’ll need to consider switching phone carriers before moving into your new abode.

Create a smart home

Many buyers want to connect their home’s systems, appliances and technologies so they can easily control them from their mobile devices. A common example of this is the Nest thermostat, which becomes intelligent to your living habits over time and turns itself down when you’re away.  Nest also features a live-streaming service, to provide a full smart home service that includes smoke and carbon monoxide detection.

The Rachio smart sprinkler system is good way to keep your utility bills down. Rachio measures weather conditions in your area and makes sure your lawn is watered only as much as it needs to stay lush and green.

While devices like Nest and Rachio help you save money, many other smart home products are designed with convenience and safety in mind. For example, products like Ascend and LiftMaster open and close your garage door from your smartphone, allowing you to let in guests when you’re not around or to double check that your home is secure even after you get to work.  Similarly, the August Smart Lock detects when you (or approved guests) are approaching and unlocks your front door. That’s right — you can finally carry all seven grocery bags into your home at once! Plus, August’s customization options mean you can give 24/7 access to your world-traveler brother who shows up unannounced but only let your contractor in when you have a set appointment.

Also, for those of us who aren’t morning people, there are several automatic coffee makers out there that will brew coffee on demand from your smartphone in just minutes. Although you can set up a brew time in advance, just think of the power you’ll feel when you hit “brew” — then “snooze” — allowing a few more minutes of sleep and the promise of a fresh cup of joe when you finally arise!

One final thought – remember that if you control security systems or smart appliances with your mobile phone, you need to be sure the device is protected against hackers. Add a pass code to your phone, and download an app that will remotely erase data if your phone is lost or stolen.

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How Your Credit Score Affects Your Mortgage

How Your Credit Score Affects Your Mortgage

Have you ever wondered how your credit score affects your mortgage?

When purchasing a home, it’s important to consider all the factors that comprise your mortgage payment. One factor within your control is your credit score – if you have a high credit score, you will likely be granted a lower interest rate on your mortgage. Here’s how to heighten or maintain your credit score as you are buying a home.

When getting a home loan, one factor within your control is your credit score.

First, it’s important to understand that your credit score represents your money habits, including your bill payment history, current debt, and your credit history. As payment history comprises 35 percent of your total credit score, it’s important to pay your bills on time and in full. The second highest factor is your total debt, so paying down your credit cards or other loans can positively impact your credit score.

What is a Credit Score?

A number that represents your money habits; including bill payment history, current debt, and other lines of credit.

In addition to the factors listed above, your credit score will decrease any time you open new lines of credit, so avoid opening new credit cards when you are searching for or buying a home. It is smart to avoid big purchases as you are home searching too, whether you are paying for them in full or purchasing them on credit.

Avoid opening new lines of credit when searching for/ buying a new home.

While you may have a house budget in your head based on the money you have saved for a down payment and your total income, it’s important to get a mortgage pre-approval from a lender before you begin your home search. A pre-approval is the estimated price of what you can afford, and it takes into account your credit score and other financial information. A mortgage pre-approval not only helps you limit your home search, it can also make your offer more appealing to sellers who want to speed up the closing process.

A mortgage pre-approval letter can make your offer more appealing to sellers.

Click here to get a free, no-obligation pre-approval from one of the top lenders in our area – Rector Hayden Mortgage!

One of the best benefits of working with a Rector Hayden REALTOR® is having access to our in-house Lending Company, Rector Hayden Mortgage!  Aaron Mason, our chief Mortgage Loan Officer, is on hand 5 days a week to answer any questions about the loan process.  Aaron assists our agents and their clients in finding competitive rates and unique loan options that are CUSTOM FIT for your situation.

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Minimize Your Mortgage Expenses

Here’s how homebuyers and homeowners alike can take steps to help lower their mortgage costs!

When applying for a mortgage or a refinance, there’s often a fee charged up-front by the lender to begin the process.  Before applying for a loan, be sure to ask about the application fee that will be charged – and don’t hesitate to shop around to compare these fees (important: also ask if the lender will refund this fee if the loan is not approved).  TIP:  Rector Hayden Mortgage does NOT charge an application fee!

It is always a good idea to compare rates and fees from potential lenders when buying or refinancing. Lenders offer different fees and can also offer different rates, depending on a variety of factors. TIP:  Rector Hayden Mortgage offers rates and fees that are often the LOWEST to be found!

When buying or refinancing, your credit score and history will be important to lenders, so keeping track of your financial situation in the months leading up to applying for a loan or refinance is crucial.

Rector Hayden Realtors’ affiliated lender, Rector Hayden Mortgage, provides a vast menu of mortgage programs and products.  Get started today! Click here for more about Rector-Hayden Mortgage. One of the best benefits of working with a Rector Hayden REALTOR® is having access to our in-house Lending Company, Rector Hayden Mortgage!  Aaron Mason, our chief Mortgage Loan Officer, is on hand 5 days a week to answer any questions about the loan process.  Aaron assists our agents and their clients in finding competitive rates and unique loan options that are CUSTOM FIT for your situation.  info piece

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6 Tips for a Successful Home Search

Thinking of buying? 

Whatever the reason – a recent “life event”, upsizing, downsizing or tired of paying rent
– it’s a great time to achieve your homeownership goals!

Pre-Tip: Get a Rector Hayden Agent to assist you.

#1.  Determine your limits

Financial experts often say that you shouldn’t spend more than 28 percent of your total income on housing, but it really varies for each person.  Keep in mind that your current credit score will be a major factor in how much money you can borrow.

You can determine your general range by playing around with online mortgage calculators, but it’s best to work with a lender to get pre-approved for a mortgage.  Why?  Well, the difference between a $200,000 and $250,000 home can be stark, and it’s best not to get your hopes up before you know what you can afford.  Your Rector Hayden Agent will be invaluable in guiding you to the best lenders in town – including Rector Hayden Mortgage!

#2.  Begin the hunt

Now the fun stuff – the online search!  Just 20 years ago, buyers had to search through thick, printed listing books to find homes that matched their price and location. Luckily today, your search can begin from your couch……or while in line at Starbucks.

Rector Hayden’s top home-search website and exclusive home search app have every available MLS listing in Lexington and Central Kentucky – updated at the top of every hour — so you can perform the most accurate and up-to-date searches!  Set up an account on either and save and share homes with your family and friends – as well as connect with your agent so they can see your likes and dislikes as well!

#4.  Finalize your needs

You may find yourself falling in love with homes in different locations, with varying styles, prices and features. That’s actually a good thing in today’s seller’s market — to get to the closing table, it may be necessary to keep your mind open to several options.

Work with your Rector Hayden Agent to determine your top needs, and then keep in mind the qualities and amenities that are unlikely to change versus those that you can alter. For example, a neighborhood’s walkability is pretty set, but you can always tear up carpet to put in hardwood floors, or refinish a kitchen to get the farmer’s sink you love. Once you have an established set of needs, it’s time to begin looking in earnest.

#5.  Tour inside homes…and think resale

Your Rector Hayden Agent will set up the showings for you – and as you view the homes and get the overall “feel”, if can be beneficial to think of yourself as an inspector. Pay attention to when upgrades were done, or if appliances have been replaced recently. It’s important to take note of how much work your eventual home will need.

It’s also good to talk with your Rector Hayden Agent about the potential resale value of the home.  At this point, you may not have any thoughts about ever selling – but it’s wise to ensure that your investment will be a good one in the future, should you ever decide to sell.

Want to learn more about the Home Buying Journey?  Walk through our online e-journey to get a feel for all of the steps toward buying your next home.  But remember, a Rector Hayden Buyer’s Agent is your BEST resource on your home buying journey!

buyersjourney_screenshot

 

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5 Tips to Compete in Multiple Offers!

Over the past few months, our local market here in Central Kentucky has seen its lowest inventory in over a decade. With a shortage of homes for sale in Lexington and Central Kentucky, buyers may find themselves in multiple offers in this market.

Common wisdom says that the highest offer will win every time, but the reality of multiple offers is a bit more complex. Here are insights you can use if you enter multiple offers when buying a home this year.

 

1. Assess the market

Your Rector Hayden Agent will help you identify if multiple offers are common in the homes, neighborhoods and price point you want to buy. If you’re hoping to purchase in the higher-demand areas and subdivisions in Lexington and Central Kentucky, it’s likely that you’ll need a multiple offers plan before you enter the market. Remember, real estate is all about location and local quality of life, so hiring a specialist who can advise you properly will be critical to making the right bid.

 

2. Go BIG to Get Home

While the highest bid isn’t the only consideration sellers make, you’re unlikely to get the sale if your offer is at the bottom of the heap. When making an initial offer on a home in high demand, your Rector Hayden Agent can help you make an attractive offer. Together, you can strategize on the benefits of making your best offer out of the gate — meaning you would walk away if the home still hit multiple offers — or offering below your “ceiling” in order to have leverage once other bids come in.

 

3. Nix the Contingencies

In a market where buyers have the advantage, contingencies are common. Buyers may make an offer that is contingent on the sale of their own home or on a passed home inspection. When sellers have multiple offers to choose from, they are unlikely to look at offers that include such contingencies. Provided the home is free of major issues, consider making a “clean offer.” This could be one way to appeal to a seller outside of having the highest offer.

 

4. Put Cash Down

Another way to impress sellers is to prove you can pay a substantial amount of money at closing. If you can afford a down payment of roughly 10 to 20 percent, the seller and their agent may feel more comfortable with you than another buyer who has less to offer up front. We’ll work with your mortgage loan officer to ensure you’re making a strong — but safe and comfortable — offer.

 

5. Offer Better Timing

One last way to stand out in multiple offers is to offer the seller a beneficial path to closing. If we know the homeowner is hoping to sell the home immediately, it would benefit you to offer a closing with a month or even a few weeks. If the seller is waiting on a new construction home that won’t be ready for 60 – 90 days, offer a delayed closing. When multiple bids are close, these types of generosities can make all the difference.

 

Are you ready?

Ready to enter this hot market? We can discuss the frequency of multiple offers in your selected area, then determine your strategy for standing out no matter what your budget. Reach out to your Rector Hayden Agent today to get started!

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Home Buying Tips

5 Tips for Showing Houses in the Snow

Wear Appropriate Shoes and Clothing when Showing Houses in the Snow

Dress Appropriately When Showing Houses in the Snow!

This is the most important tip for showing houses in the snow!
Safety is our top priority at Rector Hayden, and snowy property can make for a more difficult showing day.

Wear sturdy shoes with good traction.  Snowy/Icy days are not the time for your gorgeous Jimmy Choo’s you received for Christmas or your slick-bottomed dress loafers.  Choose good snow boots with a thick tread so that you’ll also have the best balance and your feet will stay warm and dry.  Snow boots will not make you unprofessional, but rather give credit to your character as one smart agent!

Dress in layers.  You may be showing homes without the heat turned on which would increase your exposure to cold temperatures.  Have a scarf, hat, and mittens to protect extremities.

Take Hand Warmers and Protect Extremities when Showing Houses in the Snow

Bring Instant Hand Warmers

As a follow-up to dressing warmly when showing houses in the snow, a great investment is to keep some instant hand warms ‘handy’.  Keep them in your pockets to warm up your fingers – and as a great gift to assist your clients and keep them happy and cozy while they look.

You can buy in bulk on Amazon! http://www.amazon.com/HotHands-Hand-Warmers/dp/B00PX20LO0

Keep Cat Litter or Pea Gravel in your car in case of emergencies while Showing Houses in the Snow

Keep Cat Litter in your car

Whether or not you have a 4-Wheel Drive Vehicle, keeping a bag of pea gravel or cat litter in your car can be a great asset in case you become stuck.  Many times snow plows push drifts up into the driveways of homes and along the curbs of residential areas.  You and your client may have trouble parking in cleared areas and become stuck on ice or snow.  Pouring cat litter or gravel around your tires can help gain traction and pull your car out of a rut.

Have a Tow Truck Number on hand just in case while Showing Houses in the Snow

Have a tow truck number on call

Just in case the kitty litter trick doesn’t help – keep a tow truck number saved in your phone or planner.  Maybe even a company you’ve worked with before!  If your client’s car (or your own) gets too stuck, having a number ready to call is professional and helpful.  It could very well make a lasting impression with your client that you cared enough to help them with their vehicle.

Don't Forget to Stay Hydrated when Showing Houses in the Snow

Stay hydrated

Dehydration in the winter is actually a very common ailment – for an agent or a client!  With cold temperatures and harsh winds, it can be easy for your skin to become dry and cracked, as well as it may deter you from drinking enough liquids throughout the day.  However, staying hydrated is key to feeling your best and avoiding catching illnesses.  Bring some water bottles (they’ll stay chilled enough in your trunk).

 

BONUS TIP:

appblockStay Warm and Cozy – search for your next home using the Rector Hayden Home Search App!  Available FOR FREE on the Apple App Store and on Google Play!  Browse nearby homes using augmented reality, see full-resolution photo galleries and even look at commute times for your potential dream home!  Download Central KY’s Best Home Search App Today: http://app.rhr.com/