Monday, October 13, 2014

Homeownership Expenses You Might Not Anticipate



We asked a few financial bloggers to share their experiences and advice on the expenses of buying and owning homes.


Purchasing a home is an exciting time, especially for first-time buyers. However, the financial commitment is sometimes overwhelming.
Beyond the standard mortgage, taxes and insurance calculations, homeowners inevitably face unexpected fees, repairs and lifestyle adjustments when settling into their new homes. We asked a few financial bloggers to share their experiences and advice on the expenses of buying and owning homes.

What was the most unanticipated expense of buying your home?

Two years ago, we purchased our home in New York after owning homes in Georgia and Florida, and we were surprised at how much higher our closing costs were in New York versus the other states. The biggest surprise was the lawyer fee we were required to pay. When we purchased homes in the past, everything was handled through the escrow agent, and additional legal fees were not required. — Shannon McLay of Financially Blonde

What are the most surprising expenses you encounter as a homeowner?

The surprising expenses are seasonal: decorating the house for the holidays, planting flowers in the spring, home projects in the summer. While it’s easy to think about the weekly and monthly routine expenses, those are more difficult to plan around. — Joe Saul-Sehy of Stacking Benjamins

Which bills increased when you became a homeowner?

Condo fees and heat! When we were renting, our landlord paid for heat and hot water. Let’s just say, now that we’re homeowners we’re taking shorter showers and wearing more sweaters in the winter. — Student Debt Survivor

What is the most expensive cost of owning a home vs. renting?

The answer has got to be maintenance. We would never have had to buy a new roof as renters, but we had to pay approximately $15,000 for the entire roof to be reshingled. The others would to have new landscaping put in ($7,000), and all windows, which were installed in 1961, were replaced with double-pane windows ($15,000). Ongoing expenses, like utilities (natural gas, electricity, water, trash), gardeners, property tax, and insurance are not all that costly, but they add up over the course of a year to just under $10,000. — Save and Conquer

How did your budget change after buying a home?

We were very aggressive with saving our money prior to buying our house. We were saving over 50 percent of our income. We didn’t go out very often, and we tried to eat at home. We bought a fixer-upper because it was in a better location and the price was more affordable than new builds. DIY Network and Pinterest make DIY updates seem so easy and affordable. Prior to homeownership, we never had to worry about paying for repairs or really about updating our apartment. We were renters. Now, I have to make sure any purchase fits in our budget. I’m also saving for bigger improvements like the patio. Instead of going shopping for clothes and shoes, I’m allocating that money to Lowe’s or Home Depot! So far, we have had to call a plumber to fix a leak, the exterminator to exterminate, and now, our garbage disposal is broken. $100 here and there adds up. — Savvy Financial Latina

What advice can you offer prospective home buyers beginning their shopping experiences?

Transitioning from a renter to a homeowner can be an expensive endeavor. You need to have much more money in your emergency fund to cover various things that can go wrong. Don’t forget to budget for property taxes, home insurance, repairs, HOA fees, utilities, furnishing and landscaping. There are many more expenses when you’re a homeowner. — Retire By 40

What saving strategies did you use to prepare for the expenses of homeownership?

I’m not sure if it’s a savings strategy, but whenever my wife or I wanted to spend on certain things, we’d say to ourselves, “We’re saving for a house.” That helped us focus on our priorities and goals, and not spend on things that we might have otherwise. I think it is also important to try living on your future budget as a homeowner to ensure that you can afford to buy a house. — Living Rich Cheaply

What financial concerns do you have about purchasing a home now?

My main reservation is that I don’t know how long I plan on staying in one area. I still want to travel the world before I buy. When I’m ready, I’ll create a realistic budget for a home and stick to it. Too many people create a budget and go over, and then fail to realize that they still have to pay property taxes, property, insurance and more. — Alexis Schroeder of FITnancials

How can first-time buyers financially plan for the total costs of homeownership?

Save as much money as you can. If you’re able to save for a 20 percent down payment, that’s even better. Once you move in you’ll be amazed at how often something will need your attention. That will generally take money. Go in with having money set aside to cover things that might pop up. You should also put money aside each month to cover those things. You might feel it, but the last thing you want is to be surprised by an expense and not be financially prepared for it. — John Schmoll of WiseDollar



Friday, September 26, 2014

What You Don't Know About Your Credit Score... Could Cost You!



Today we are excited to have Nabil Captan as our guest blogger. Nabil is a nationally recognized credit scoring expert, educator, author and producer. In today’s post, he explains how what you don’t know about your credit score could end up costing you. Enjoy! – The KCM Crew

Informed consumers considering a home purchase today want to do the right thing and plan ahead. Many do not seek immediate professional guidance from a Realtor or a mortgage loan officer. Instead, they hunt for hours online, looking at numerous websites for available homes for sale. They also consult websites to find the best interest rate and terms for future monthly mortgage payments. Many consumers feel betrayed, cheated and at times embarrassed to learn that the credit scores they counted on, to get that specific interest rate for their loan, are not used by mortgage lenders.

When shopping for a good mortgage interest rate, consumers also need to know their credit score, and utilize an online mortgage calculator to compute future monthly mortgage payments. A Google search for “credit score” will yield hundreds of results. The consumer accepts the provider’s terms and conditions to get a free credit score. Terrific! Unaware that in exchange they just received a meaningless credit score that lenders never use. They also handed over their Non-Public Personal Information (NPPI) to that credit score provider for life.

Before we go any further, let’s look at available credit scoring products available to consumers today:
  • FICO credit score from Fair Isaac Corporation/myfico.com, range 300 to 850
  • Plus Score from Experian, range 320 to 830
  • Trans Risk Score from TransUnion, range 300 to 850
  • Equifax Credit Score from Equifax, range 300 to 850
  • Vantage Score from all three bureaus, two ranges, 300 to 850 and 501-990
What is a FICO Score?

In 1958, Bill Fair and Earl Isaac, a mathematician and engineer, formed a company in San Rafael, California. They created tools to help risk managers make a better decision when taking financial risk. Today, 90 percent of all lenders use the FICO score, first created in 1989 by Fair Isaac, and it’s the only score Fannie Mae and Freddie Mac, the Federal Housing Agency and Veterans Affairs will accept in underwriting loans they guarantee.

What is a Consumer Score?

The three credit bureaus, in their understanding of the credit scoring model created by FICO, decided to create their own scoring models, and in 2004 – 2006 they unveiled the “consumer” scores: Plus Score, Trans Risk Score, Equifax Credit Score, and Vantage Score. However, these are not genuine FICO scores, and mortgage lenders don’t use them. Consider this comparison: Would you buy a watch that gives the approximate time of day?

The three credit bureaus work with major financial institutions, professional organizations, comparison sites, personal finance businesses, clubs such as Costco, AAA, Sam’s Club, and many data-mining brokers to bombard consumers in the race of the free credit score mania, all with the enticement of a “consumer” score that is not used by lenders, in hopes of obtaining subscriptions or fees from consumers. Fees that are totally unnecessary!

Know Your Score

Gaining access to one’s own credit report and credit score prior to loan approval with no strings attached could be helpful, and at all times beneficial. With little effort, inaccuracy of information can be instantly corrected at the credit bureau level, and with a few simple steps, credit scores could be enhanced. For example, paying down revolving account balances before a creditor’s statement-ending date (the creditor later updates account information with the credit bureaus), thus reducing revolving account balances at a particular point in time, will positively add more points to a score. It’s priceless.

More Information

Consumers have a legal right to access their annual credit report at no charge once a year from annualcreditreport.com, a site sponsored by the three major credit bureaus: Experian, Equifax and TransUnion.

These reports provide all the basic consumer data, but do not reveal a credit score. If you have a need for the FICO credit score that is actually used by mortgage lenders, myfico.com is the website to visit. For $19.95 per bureau, consumers can purchase a customized credit report with a genuine FICO score.

Additional websites to visit: the Federal Trade Commission (ftc.gov) and the Consumer Financial Protection Bureau (cfpb.gov) for true answers to questions about any financial concepts, financial products, dispute and complaint submissions, and much more.

Today’s homebuyer has instant access to answers. To be relevant in today’s market, real estate professionals need to know the absolute correct response to basic credit questions. It’s important.


Copyright 2014 Nabil Captan, Captan & Company. All rights reserved.

Monday, September 15, 2014

Buying a Home is 38% Less Expensive than Renting!



In Trulia’s 2014 Rent vs. Buy Report, they explained that homeownership remains cheaper than renting throughout the 100 largest metro areas in the United States; ranging from an average of 5% in Honolulu, all the way to 66% in Detroit, and 38% Nationwide!

The other interesting findings in the report include:
Even though prices increased sharply in many markets over the past year, low mortgage rates have kept homeownership from becoming more expensive than renting.

Some markets might tip in favor of renting later this year as prices continue to rise faster than rents and if – as most economists expect – mortgage rates rise, due both to the strengthening economy and Fed tapering.

Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989.

Bottom Line

Buying a home makes sense. Rental costs have historically increased at a higher rate of inflation. Lock in a mortgage payment now before home prices and mortgage rates rise as experts expect they will.
By The KCM Crew

Tuesday, September 9, 2014

You Need A Professional When Buying A Home

Many people wonder whether they should hire a real estate professional to assist them in buying their dream home or if they should first try to go it on their own. In today’s market: you need an experienced professional!

You Need an Expert Guide if you are Traveling a Dangerous Path

The field of real estate is loaded with land mines. You need a true expert to guide you through the dangerous pitfalls that currently exist. Finding a home that is priced appropriately and ready for you to move in to can be tricky. An agent listens to your wants and needs, and can sift out the homes that do not fit within the parameters of your “dream home”.
A great agent will also have relationships with mortgage professionals and other experts that you will need in securing your dream home.

You Need a Skilled Negotiator

In today’s market, hiring a talented negotiator could save you thousands, perhaps tens of thousands of dollars. Each step of the way – from the original offer, to the possible renegotiation of that offer after a home inspection, to the possible cancellation of the deal based on a troubled appraisal – you need someone who can keep the deal together until it closes.
Realize that when an agent is negotiating their commission with you, they are negotiating their own salary; the salary that keeps a roof over their family’s head; the salary that puts food on their family’s table. If they are quick to take less when negotiating for themselves and their families, what makes you think they will not act the same way when negotiating for you and your family? If they were Clark Kent when negotiating with you, they will not turn into Superman when negotiating with the buyer or seller in your deal.

Bottom Line

Famous sayings become famous because they are true. You get what you pay for. Just like a good accountant or a good attorney, a good agent will save you money…not cost you money.

by The KCM Crew

Friday, September 5, 2014

5 Questions You Should Ask Your Real Estate Agent

Whether you are buying or selling a home, the process can be challenging. That is why we always suggest that you take on the services of a real estate professional when embarking on a potential home move. However, not all real estate agents are the same. A family must make sure they hire someone who truly understands the current housing market and, not only that, knows how to connect the dots to explain how market conditions may impact your decision.
How can you make sure you have an agent who meets these requirements?
Here are just a few questions every real estate professional should be able to answer for their clients and customers:
  • Are home values approaching a new bubble or will prices continue to appreciate?
  • Is it better for a first time buyer or a move-up buyer to wait until they save a bigger down payment before they purchase a home?
  • Where will 30-year mortgage rates likely be in 12 months?
  • Why do I need an agent when I can just as easily find the house online myself?
  • Is buying a home still a good investment for my family?
Make sure you hire an agent that can answer questions like those above. That will guarantee the home buying or selling process will be much easier for you and your family.

by The KCM Crew