There are a lot of expenses associated with purchasing a home. A homebuyer will need to set aside enough money for the down payment and various closing costs. But as a homeowner, there are expenses above and beyond the mortgage you’ll be responsible for.
One of the most commonly overlooked expenses are the property taxes and depending on the area you purchase your home in, the property taxes can be a considerable expense. Understanding property taxes, how to calculate them and what they pay for is very important.
Property tax is not only an expense associated with owning a home, in some states you may also have to pay property taxes on your cars. Property tax is paid to the city/town you live in, and the money is used for local projects and expenses. These projects or expenses include; paying for town employees (teachers, police officers, the fire department, waste removal, the city dump, etc.), parks, recreation centers, and even maintaining public roads and infrastructure.
Most homes listed online will have the property tax associated with the listing. If you’re working with a licensed real estate agent, they’ll also be able to tell you exactly what your property tax obligation would be if you purchased the home. With that said, it’s important to know exactly what goes into calculating your property taxes.
Understanding the value of your home/property is the first step to calculating your property tax obligation, as property tax is derived from the overall value of the property. The assessed value of your home can change every year, and generally speaking most towns will do a ‘rebalance’ every 3-5 years.
Each town or county has its own tax rate, also known as the mill levy. Some towns have a higher tax rate, where other areas are well known for their low tax rates. You can find the tax rate online, or by contacting the local tax office in the town you want to purchase a home in, or by working with a local real estate agent.
Once you know your home's assessed value, and the mill rate, you can do some simple math to get an understanding of what the property tax obligation will be. If you contact the town and ask them what the mill rate is, they may give you a whole number. For example, the town may say your mill levy is 90.
Convert 90 into a percentage (90/1000 = .090) and multiply that by your home's assessed value. If your assessed value is $30,000, your tax responsibility is $30,000 x .090 = $2,700 a year.
One of the most frustrating things about property taxes is how they can vary by town. One town may have a mill rate of 35 whereas the town next door may have a mill rate of 15! The tax one pays on their property will impact how much of a mortgage a lender will approve them for.
Additionally, depending on the mill rate per town, the property tax expense can actually make a less expensive home cost more money per month when you factor in the property tax expense. Here’s an example:
Option 1Option 2Home Price$300,000$250,000Down Payment20%20%Interest Rate3%3%Annual Property Tax$2,000$5,000Home Insurance$1,260$1,260Monthly Payment$1,284$1,365
Some mortgage companies roll the property tax into your monthly payment. This is known as having an escrow account. You’ll pay the mortgage company each month, and they’ll pay property taxes to the town accordingly.
Following the above example, if your property tax is $2,700/year, each month you’ll pay $225 to the mortgage company. They’ll keep that money safe and will pay the town either bi-yearly or yearly, depending on the town's requirements.
If you do not have an escrow account with your mortgage company, the homeowner will be responsible for paying the town at the proper interval. Some towns require bi-yearly payments, whereas other towns require yearly payments. It’s best to account for this expense each month so you’re not faced with an unexpected or unbudgeted expense.
(IMAGE PLACEHOLDER)
The government does give some tax breaks to various homeowners. The most common tax breaks are given to:
Many states offer property tax exemptions for disabled veterans. The amount discounted, and income threshold, varies by state. Some states also offer discounts on property tax for non-disabled veterans, contingent on a minimum of 90 days of service and honorable discharge.
Similar to the above exemptions or tax breaks, farmland can also qualify for a tax break! Many states have a qualification requirement for what constitutes as farmland, and what discount or exemption the property is eligible for.
To better understand what discounts or exemptions your property may qualify for, contact your local tax assessor.
Capital gains tax is not the same as property tax. Capital gains is the tax you pay when you sell an asset (most commonly real estate or stocks). You’ll pay tax on the profit you’ve made between the acquisition price and the sale price.
The 2020 tax law excludes capital gain tax for single filers if the capital gain was less than $250,000. For married couples, capital gains tax is excluded for the first $500,000 in profit. If the property is an investment property, and not your primary residence, there is no capital gain exemption.
Understanding property tax is a critical piece to calculating how much owning a home truly costs. Property tax is not a one size fits all approach. Various towns/counties have a drastically different property tax rate. The higher the property tax is, the more your monthly or yearly payment will be.
The tax you pay on your property pays for a variety of expenses. Between the first responders salary, building and maintaining schools and parks, and even paving the roads, property taxes cover a wide range of expenses. Towns that properly manage their budget and spending habits tend to have a favorable tax rate.
Buying a home? You’ll likely need to get it appraised before you receive the clear to close. If you’re wondering what is the home appraisal process, or why you should care, this article is for you. We’ll cover everything you need to know on both the buy and sell side of the appraisal.
Simply put, the home appraisal process is when a licensed home appraiser carefully reviews and inspects the home you’re looking to buy. The appraisers job is to provide a fair valuation on the property. This valuation is not the price the house is currently listed for, but what the house is worth in the eyes of a bank/lender. Getting a home appraised can help prevent overpaying for a property.
First and foremost, as the home buyer, you may be required to get the property you wish to buy appraised. Unless you’re paying for the house fully in cash, many lenders will demand the home gets appraised before they issue a loan.
Appraisals typically happen once an offer has been accepted. The mortgage lender will order the appraisal, and the results will be shared with all parties involved. Lenders will only issue a loan up to the appraised value of the home.
The home appraisal process doesn’t take long. Generally speaking, the professional appraisal will finish the job in just a few hours. Keep in mind, the appraisal is not the same as a home inspection. The appraiser will still carefully review the home, but their scope of view differs from what an actual home inspector will look for.
On average, a home appraisal costs between $200 and $700. There are a few variables that can influence the cost of the appraisal. Such variables include the size of the home. A home that is only 1000 square feet may cost $200 to appraise, whereas a home that is 3,500 square feet may be closer to $600 or $700. Additionally, the type of home may also influence the price. A one story condo may be less expensive to appraise than a 3 story colonial.
First and foremost, a home appraiser will inspect the quality of the home. Is the home in good condition, or does a lot of work need to be done to it? For example; are the hardwood floors in good condition, are there stains on the carpet, is the roof, gutters, shutters, and doors in good condition? Once the basics are inspected, the home appraiser will begin to look for value adding items.
Items that add value to your home are not necessarily essential, but are certainly appreciated by the buyer and can be rather expensive. These items include; decks, energy-efficient appliances or systems, fireplaces, a fence that surrounds your property line, interior trim work, and various updates/upgrades to the home.
If you’re looking to sell your home, there are various steps you can do to help your house appraise out, or increase the appraised value of your home.
If you’ve lived in the home for a while, there is a good chance you’ve done some work to the home. Perhaps you’ve replaced the windows, upgraded the electrical system, replaced the HVAC system, or added a deck. Getting all of your paperwork in order, and leaving that paperwork on the counter for the home appraisal, will help the appraiser get an understanding of what work has been completed.
Additionally, they’ll want to see the closed permits for the jobs completed, so be sure to have the permit information neatly organized as well.
It can be difficult to look past a cluttered home. A neatly organized home is always easier on the eyes, and makes the home look better. Not only does a neatly organized room look better, it’s also more practical. If your attic or crawl spaces are cluttered, and the appraiser can’t move around the mess, they may not be able to fully complete the valuation.
Before the home is appraised, you may want to complete some basic work yourself. If doors are damaged, you should replace them. If there is a huge stain in the carpet, consider renting a carpet cleaner to remove the stain. You don’t need to go crazy and replace the entire kitchen, but there may be a list of items you can complete yourself, without breaking the bank, that can help improve the appraised value of your home.
Your entire property will be appraised, not just the inside of your home. Make sure your grass is mowed and edged, add some mulch to the mulch beds, and plant some flowers. Dedicating a Saturday or Sunday to sprucing up the yard will likely pay dividends.
If the foundation is leaking water, if the roof needs to be replaced, or if the sliding door doesn’t open to the deck, get that fixed before it’s identified. Understandably, these are not cheap fixes, but it may make the difference between selling your home and not selling your home. Remember, a bank will not issue a mortgage for the listing price unless the house appraises for at least the listing price. If there are major damages with the home, it may not appraise for the price you were hoping for!
The house should have the right placement of smoke alarms. If there is a security system, make sure it works properly. These small details are often overlooked by the seller, but a professional quickly picks up on them and begins to deduct against the home's value.
Craftsmanship, build quality, and the condition of the home will all help increase the value of a home. Having a new roof, updated electrical, a well maintained and functioning HVAC system, and updated rooms will all help improve the home's value.
You don’t have to go nuts and redo your entire house before putting it in the market. There are plenty of small jobs one could do themselves that can help increase the value of the home. Adding updated lighting fixtures, faucets, replacing doors, and doing a thorough deep clean will certainly pay dividends.
If you were looking to make investments in the home before listing it, be sure to spend that money wisely. Don’t replace the appliances if the roof is leaking. If the siding is chipped or falling off the house, be sure to address that before you add ceiling fans to the bedrooms. Updated kitchens and bathrooms are certainly a huge selling point in any market, and will help increase your home's value.
If the home is in bad condition, that will certainly negatively impact the appraised value of your home.
For instance, if your hardwood floors are cracked, discolored, or if there are boards missing, that will be a red flag. If the yard is overgrown and not maintained, that will also negatively impact the home's value.
Buyers and appraisers understand not every home is brand new construction. However, it’s hard to look past a leaky roof or a cracked window.
In the event you do not agree with the results of the home appraisal, you do have the opportunity to dispute the appraisal.
The first thing you’d have to do is receive a copy of the appraisal. Figure out what negatively impacted the home's value, and verify the information is correct. For example, if the report suggests the HVAC is dated, but you just replaced the system in recent years, you have every right to bring that up and dispute the claim.
If the appraiser failed to identify the upgrades or improvements in the home, you can also call attention to all the changes you’ve made and the money you spent.
Home appraisers aren’t perfect. There certainly can be a margin of error on the report. In the event you believe the report is off base, you can request a second appraisal.
What happens if the home appraisal is less than the sale price? That happens all the time. If the home buyer is fixed on this home and would happily over pay for it, they’ll still have an opportunity to do so. The bank will only provide a mortgage for what the appraised value is. If the appraised value is less than the asking price, and the buyer still wants the home, they’ll have to make up that difference with cash.
This is rare as people generally don’t want to overpay for something. More commonly, the seller will need to lower their listing price to be aligned with the appraised value of the home.
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Getting a home appraised is looked at as an unavoidable step in the home buying process. Although many people are intimidated with the appraisal process, as a home buyer, you ultimately want to get this done.
A home appraisal is designed to provide a fair, unbiased, valuation on the home. The listing price is not always the appraised price. In many cases, the appraised price may be lower. Without knowing the true value, you may overpay for a home.
As a home seller, there are various steps you can take to help increase the value of your home. Many steps can be completed on a tight budget, and most of them won’t take a great deal of time.
Whenever you’re looking to buy a home, you need to understand the all in cost of that home. Doing this will help you budget and plan accordingly.
There’s a lot more that goes into the true expense of a home beyond the listing price. Sure, principle and interest payments play a major role in determining your mortgage expense; as does the homeowners insurance expense. But property taxes can drastically change your monthly payment once factored in. This can make a once affordable home go way out of your budget.
If you’re wondering how property taxes work, you are not alone. Our customers often inquire about this. So, in this article we’ll get into the details of property taxes. Once you finish reading, you should be a property tax expert.
On a high level, property tax is typically paid once or twice a year to your local government tax collector. Property tax is the ‘fee’ you pay for owning property. Additionally, these taxes are used for the maintenance and funding of the town.
In other words, property tax is simply the money you owe your municipality for your property. Your home isn’t the only property that is taxed. You’ll also pay property taxes on the vehicles you own! This is a financial expense which you’ll be required to pay in accordance with the laws of your local government.
Property taxes are due various times throughout the year. Due dates depend on the county, city, or town. Most commonly, property taxes are either due once a year or twice a year (at the first and middle of each year).
Furthermore, many mortgage lenders may pay the property tax for their customers. To do so, lenders will use the money they keep in the customers escrow account. Instead of the homeowner paying the taxes themselves, the mortgage company will divide the yearly property tax value by 12. In addition, the mortgage company will charge the homeowner as part of their mortgage payment each month. That money will likely be kept in escrow until the property tax is due.
Once due, the lender should pay the property tax on the homeowners behalf.
Now that we covered some of the basic principles, let’s discuss what property tax is used for.
Property tax is a source of income for the state and local governments. It’s expensive to maintain a town, and the only way to do so is to charge the town's residents a property tax. Furthermore, income that’s received is then used to invest in various buildings, services, and amenities throughout the town.
For example, property taxes are used to help fund things such as the public school system in your town. They also fund the upkeep of the roads, parks, walkways, the first responders working within your town, and more. Property taxes also helps build new schools, pave more roads, or keep the beaches clean. These property taxes are also used to pay for the town's employees.
Property tax is not calculated off of your income. It doesn’t even take in account of people you have living in your home. There’s a bit of mathematics that goes into the equation, but we’ll keep it high level.
To calculate property tax, you must know the assessed value of your home, and the mill levy or mill rate.
The assessed value of your home is quite different from the appraised value of your home. The assessed value is determined by the city, county, or municipality. The mill levy or mill rate is the amount of tax you pay for every $1,000 of appraised home value. The formula to calculate the property tax is (assessed value x mill rate) / 1000.
Here’s an example:
Assessed Value
Mill Rate
Sum
Total After Dividing Sum By 1000
$300,000
20
6,000,000
$6,000 in property tax
As shown above, this homeowner would owe $6,000/year in property tax for their property.
Do all residents in the town pay the same amount of property tax? The short answer is no.
Although every property is assessed, all properties are not taxed, or not taxed in full. There are various exemptions one can qualify for. Additionally, these exemptions are not a ‘one size fits all’ approach. This is because various towns, states, counties and cities have their own list.
Some of the more common exemptions include; exceptions, or reduced taxes for senior citizens, those with a disability, veterans, animal welfare centers, churches, or non-for-profits.
Your local government should have a list of all exceptions. Contact the tax collector's office to see if they offer an electronic copy of this document. In the case your local government does not have a list, you can stop by their office. While there you can see if you qualify for any exemptions or breaks on property taxes. It could save you quite a bit of money if so.
Property tax, for many of us, is unavoidabled.
The local government invests a lot of money for the upkeep of your town. Between the cost of education, the upkeep, and the various services the government provides - running and managing a town is rather expensive!
In order for a town to keep up with that expense, they must charge their residents. This tax rate changes from county to county, or town from town. In fact, some parts of town have a different tax rate than others.
When calculating your property tax, be sure to consider the total property tax cost before buying a home. Some towns have a high mill rate, meaning the tax expense will be high. Towns with low mill rates will typically have lower tax expenses per year.
Moreover, it’s also worth considering how well the town manages their money and budget. Just because a town is charging you a lot of money in tax doesn’t mean you’re getting a lot of value. The specific town may be spending far more money than they take in; meaning they have to charge their residence even more money just to stay above water.
If you’re looking to buy a house that is part of an HOA, then you’ll want to be educated about HOA rules and regulations. Many homebuyers deliberately seek out homes within an HOA community.
Other homebuyers would never even consider purchasing a home in an HOA community because of the HOA rules. If you fall into the category of people who want to live in an HOA, keep reading! We have compiled key information about HOA rules for you.
Before diving into some of the typical HOA rules, let's take a step back and talk about what an HOA is. Simply put, HOA stands for homeowner’s association. A homeowner’s associate is a privately-held organization that oversees subdivisions, condominium complexes, co-ops, and townhouses.
An HOA is typically made up of various board members who are all in charge of enforcing the HOA rules and regulations. No homeowner’s association is the same. Some homeowner’s associations are stricter than others, and some provide more benefits than others.
An HOA property will have an HOA fee associated with it. This fee is typically paid monthly to the homeowner’s association.
There are various HOA rules and regulations that a homeowner living in an HOA will need to follow once they purchase a home within an HOA community. HOA rules and regulations could either be the biggest appeal or the single greatest deterrent when looking for a place to call home. Let’s take a look at some of the most common HOA rules.
Fee Obligation:
First and foremost, all homeowners will likely be required to pay a monthly HOA fee if they purchase a home within an HOA community. The homeowner’s association will put the money from fees towards a variety of goods and services.
Fees are commonly put towards the following responsibilities:
It’s certainly not uncommon for a homeowner’s association to have strict pet regulations. Some HOA rules restrict homeowners from owning a pet, or if they do allow pets on the premises, the HOA may restrict certain breeds or types of animals from living on site.
For instance, the homeowner’s association may allow cats or dogs as pets, but they might restrict residents from raising chickens in their backyard. Other homeowner’s associations can restrict the size of pets, so while they may allow cats and dogs, they might not allow pets that surpass a specific weight limit.
If you take a lot of pride in your home and you hate it when your neighbors let their property fall apart, you may love living in an HOA community. Just about every HOA community will have an HOA rule or two centered around the upkeep, architecture, and appearance of all homes.
The HOA community will likely require landscaping in a timely fashion. You won’t see overgrown grass or bushes in an HOA community. Additionally, the homeowner’s association will also likely have restrictions regarding the appearance of the home. You might be restricted in terms of what color you can paint your front door or house in general.
Also, for example, if the siding of your home is falling apart, the homeowner’s association can require you to replace the siding by a specific date. Homeowner’s associations often take it one step further as well. They may not allow boats to be parked in the driveway, on the street, or in the yard, nor will they allow inoperable cars take up space in driveways or on streets.
Your HOA fees will typically act as insurance for the exterior of your home, but this doesn’t mean HOA fees can cover anything inside of your home. If a tree falls onto your roof, the HOA fee will cover the cost of roof repairs. But if your washer overflows and floods your home, you’ll have to check your homeowner’s insurance policy and see if the HOA will cover interior damage to your home.
Plenty of homeowner’s associations typically have a common area like a clubhouse or an outdoor area. There will likely be additional rules for the common areas.
For example, one of the rules might be that the common area closes at 10pm every night. Another rule might be that you have to reserve the common area a certain number of days in advance if you want to host a party or other event in that space.
Once a homeowner’s association has determined that a specific property is in violation of a rule, the HOA will proceed by enforcing the rule in a few different ways. First and foremost, the HOA can issue a warning and provide the homeowner with an opportunity to fix, or correct, the issue.
For instance, if the homeowner's lawn is overgrown beyond the maximum length according to the HOA, then the homeowner’s association will give the homeowner an opportunity to cut the grass and bring the yard back to compliance. This warning is often time-bound, meaning the homeowner will have to fix their yard by a specific date.
If the homeowner fails to fix the issue by a specific date, the HOA reserves the right to fine the homeowner. This fine can grow in size if the issue persists.
If the fine does not motivate the homeowner to fix the underlying issue, privileges could be lost. For instance, if the HOA has a community gym, the homeowner’s association may restrict the homeowner from using the gym until the fine is paid and the issue is resolved.
One of the common questions regarding HOA rules is, “Can the police get involved and enforce the rules?” To be honest, the answer to this question is not very straightforward.
The police enforce state and local laws. If the HOA rule is also aligned with statewide and local laws, then yes, the police can get involved and enforce the rule.
However, in most cases, going against HOA rules is typically not a criminal act on a state or local level. The HOA cannot rely on the police to enforce rules because most of the HOA rules are not laws.
There are times where HOA rules are unenforceable. Let’s look at some of the times where HOA rules cannot be enforced.
If the HOA rule violates your rights or goes against the law, the homeowner’s association cannot enforce the rule. The homeowner’s association can make an effort to enforce the rule, but if it goes against the rights of a homeowner, then the homeowner can counter their efforts in court. A common example is when an HOA rule directly contradicts a homeowner’s freedom of speech.
A homeowner cannot be singled out by the HOA. Unless the homeowner is violating a rule, the homeowner’s association cannot issue fines against the homeowner without a legitimate reason.
This is referred to as a situation where the HOA has no power to act. It’s similar to police enforcing the law. They cannot arrest someone just for the sake of arresting someone.
HOA rules are subject to change with time. However, when an HOA rule changes, proper procedures must be followed. If protocols are not followed, then the rule cannot be enforced.
Following the point made regarding there being no power to act, if the HOA is enforcing a rule with you, they need to enforce the rule with every other homeowner who violates the same rule. You cannot be singled out within your community.
Generally speaking, a homeowner can handle an unenforceable HOA rule through a few different channels. Most commonly, the homeowner can seek legal counsel or talk to the HOA board.
Seeking legal counsel is always an option. If the homeowner believes certain HOA rules are violating the law, legal counsel can step in and represent the homeowner.
Homeowners are also encouraged to talk to the HOA board of directors. When reaching out to the board, explain why the rule cannot be enforced or why you believe there is a flaw in the enforcement of an underlying rule.
Homeowner’s associations are either hated deeply or loved with a passion. For those that are looking to live in an area where everyone has a well maintained home, and the neighborhood has a strong sense of order and community, a homeowner’s association may be perfect for you.
However, if you are not interested in following rules, or do not agree with the rules of a specific association, you certainly shouldn’t consider purchasing a property within that community. Be sure to fully understand all the HOA rules before purchasing your property.
Innovative and cost-effective home improvement ideas are all over the internet, especially when it comes to DIY projects that will add value to your home without emptying your checking account or maxing out your credit card.
If you want cheap-as-chips hacks to improve your home in a way that looks like you hired A-list TV renovators, you’ll need to use your resources, carefully plan for every penny, and prevent yourself from going overboard. You got this!
Here are some DIY home projects that are easy enough to complete over the weekend and on a budget. Best of all, each one has the potential to improve or enhance homeowner, visitor, and potential purchaser impression, whether you’re thinking about selling soon or you’re planning to stay for years to come.
Looking for instant curb appeal improvement? You can get started by reviving your front door. Just about everyone who visits your home will enter your house through the front door, and as the years go by, your front door might sustain natural damage caused by sunlight and weather.
Over time, a hardwood front door can start looking shabby, tired, and weathered. Choosing a bright color for your front door can add a pop of personality while serving as a welcoming statement for guests and family members.
Cost: You’ll need tools like painter’s tape to cover existing hardware, a paintbrush, drop cloths, rags, and sanding blocks. You’ll also need an outdoor or exterior-grade paint, primer, a paint bucket, and a stir stick. A front door refresh should only cost you between $50 and $100, depending on which tools and materials you already own.
Fireplaces do not have to be traditional. Even when your fireplace is not in use, it is a focal point of the room. Adding a mantel, replacing old brick with a minimalistic surround, or overlaying a basic builder with reclaimed barn wood planks can add a contemporary, modern, or farmhouse aesthetic to an otherwise drab fixture.
Cost: Costs will vary depending on the size of your project and the materials that you’ll need to purchase. Basic mantels can be purchased for under $100 both online and in stores. Barnwood wall paneling can be purchased for anywhere from $5 to $9 per square foot through Wayfair. Reclaimed barn wood planks can be found on Amazon, at Home Depot, or at Lowe’s.
Paint can change a room drastically, making it appear brighter, larger, smaller, or cozier. Many people say that changing the paint colors in a home will change the entire mood of the room. Accent walls and ceilings can highlight features in a room, like a window or a skylight, all while adding a pop of color. You can even make a room feel shorter or longer depending on the color you select for the walls!
Cost: Painting a room yourself will cost you anywhere from $100 to $300 depending on the room supplies that you need to buy and the size of the room. If you hire a professional painter, you will likely spend at least twice as much on the project, but on the bright side, you will not have to be concerned about doing the job yourself, so it’s a reasonable trade-off.
Shiplap is a popular building material made famous by renovation reality shows. Historically, it was used as siding for barns and sheds. In the last decade, installing it as part of the interior of a house has become very popular, sparking debate among DIYers as to whether shiplap is timeless or trendy.
Installing shiplap in a horizontal manner as part of the interior of a room can move the eye horizontally around the space, making the room feel larger. Installing it vertically emphasizes the height of the room, making the room feel taller and bigger than it really is.
Cost: Also known as engineered wood wall paneling or medium-density fiberboard, shiplap can be purchased at any home improvement store as well as online through Wayfair. Costs will vary depending on where you purchase the shiplap from, but it will almost always be more expensive than drywall no matter where you buy it.
Adding texture to a kitchen or bathroom is a sure way to make it pop, even if you’re working with a monochromatic theme. Tile backsplash can upgrade any and all kitchens and bathrooms. Unfortunately, peel-and-stick wallpaper is often viewed as being inferior to tile backsplash.
However, if it’s installed correctly, it may be difficult to tell the difference. No special skills are required to install backsplash, and there is no demolition, dry time, or clean-up required. Today’s peel-and-stick backsplash options are leaps and bounds better than these materials when they were first created a few decades earlier.
Cost: Plan to spend between $6 and $25 per square foot. In most cases, you can easily install it yourself, so it’s likely that you won’t have to spend money on professional services in addition to purchasing the peel-and-stick wallpaper.
Just like you can use peel-and-stick wallpaper for bathroom or kitchen backsplashes, you can also use peel-and-stick wallpaper for entire walls! The verdict is in, and it says that wallpaper is definitely back in style. For DIY home improvement fans, peel-and-stick wallpaper is perfect for both short- and long-term purposes. For instance, self-adhesive vinyl wallpapers are easy to install and remove.
Cost: The costs of peel-and-stick wallpaper will fully depend on the amount of paper you need, meaning smaller accent walls will be more budget-friendly than the cost to cover the walls in a large room. An 8 x 12 wall will cost $432 to fully cover if you purchase your peel-and-stick wallpaper from Wallblush.
Instantly upgrade your living room and bedrooms with crown moulding, which can both enhance the visual appeal of a room and hide all imperfections, cracks, or blemishes in ceilings. You can install beautiful flat-back crown molding without having to use miter saws or nails, too.
Cost: Plain recycled polystyrene crown molding starts at about $60 per package. You’ll need to purchase corner and transition pieces as well, though the number of them will depend on the size and the layout of your room.
Caulk is king! In just a short period of time and for very low costs, you can improve the visual appearance of your bathroom, prevent mold from growing, minimize the likelihood of mildew growth, and make your bathroom look newer and cleaner all at once!
Caulk is the material used for the sake of sealing seams in your bathroom. Plus, it is easy to install. Start by removing the old caulk first. You can do this with a razor blade. From there, apply the new caulk with a caulking gun. If it’s your first time working with caulk, take a moment to review best practices on YouTube before making any changes.
Cost: Caulking is inexpensive. You can purchase an inexpensive caulk gun for about $5 as well as white acrylic latex caulk for less than $3 per tube.
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Remember that DIY home improvement projects can be budget-friendly, but most of the magic is in the cost calculations and budgeting efforts you utilize. It is so easy for even the most well-intentioned renovator to get out of control on a Saturday morning at the local home improvement store, especially with a credit card in their pocket.
If you want or need to stick to a budget, walk into the store knowing how much you’ll spend, and hold yourself to your promise to stick to your budget. This may require you to plan a reconnaissance mission, use tools that you already have, or ask to borrow tools from parents, friends, and neighbors. You can stretch your dollars even more if you are flexible when it comes to colors, styles, and the ultimate aesthetic of your renovations.
In times of economic hardship, like the present economic events caused by the COVID-19 pandemic, many homeowners struggle to meet their mortgage payments. Employers end up cutting back work hours, causing financial circumstances to become very unpredictable.
Whether you are facing financial instability because of the pandemic or unrelated life events, there are ways to work with your lender and save your home from foreclosure. One of the most accessible short-term solutions is forbearance.
Mortgage forbearance is an agreement between a homeowner and their lender that allows the homeowner to suspend or lower their monthly payment amounts for a set period of time. If you are in the process of finding new work or you are temporarily making less money per month than before, forbearance can give you a temporary break from your regular monthly mortgage payments while you get back on your feet.
Each lender treats mortgage forbearance a little differently. It’s important to note that forbearance doesn’t permanently lower your mortgage payments and you will still owe amount of money that you don’t pay during the forbearance period to your lender.
Whether or not you qualify for forbearance depends on your lender and your loan type. For example, government-backed loans are treated differently than private loans. No matter your situation, clarity and initiative are key.
Set up a meeting with your lender as soon as you can so that you can settle on a plan before you miss any payments and subsequently damage your credit. Providing proof of the events that led to financial hardship, like your bills or proof of your loss of income, will give them information they need to understand and reasses your situation.
The payment plan for your loan after forbearance is up to the entity that actually owns your loan, which in almost every case is different from your lender. For example, Fannie Mae and Freddie Mac both offer standardized repayment plans. Currently, they each allow up to twelve months of forbearance under the CARES Act, which we’ll cover momentarily.
The payment plan and repayment options for privately-backed mortgage loans will vary depending on which entity owns your loan. Contacting your lender to find out who owns your mortgage loan will help you better understand your repayment options.
Since so many homeowners have faced financial hardship due to COVID-19, the federal government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act applies to any loan owned by the government entities like Fannie Mae and Freddie Mac.
The CARES Act has made it possible for homeowners to use forbearance plans to pause or reduce their mortgage payments if they are struggling to meet their mortgage due to the economic impact of COVID-19. Home loans backed or insured by Fannie Mae, Freddie Mac, HUD, the VA, or the USDA are covered under the CARES Act during the COVID-19 pandemic.
Homeowners with federally-backed loans covered by the CARES Act can repay their mortgage after forbearance in one of many ways. One option is to submit a lump sum payment that covers the missed amount in full at the end of forbearance.
However, this often isn’t always feasible option for those struggling financially. That’s why options like a short-term repayment plan, where you pay an additional payment each month along with your mortgage, or an extended loan modification, which extends your loan term and adds the missed payments to the end of your loan, exist.
Borrowers who can’t afford their mortgage at its current interest rate and monthly payment value may be eligible for a flex modification option. This is available on a case-by-case basis and it will change your loan terms in a way that works for both you and the lender.
Private lenders offer similar options to the ones listed above, but their repayment plans vary depending on the bank or institution. Contact your lender to get more information about who owns the loan and the available forbearance options.
Mortgage forbearances or deferments will not hurt your credit. However, it’s crucial to arrange an agreement with your lender as soon as possible. Mortgage payments that go unpaid for more than 30 days without an explanation are typically reported to credit bureaus.
At that point, your missed payments will hurt your score. The sooner you talk to your lender, the better your chances are of finding a viable solution before you start missing your payments.
To understand whether or not you should look into mortgage forbearance, it’s important to compare it with a loan modification. Forbearance is a temporary fix that only suspends your payments for a set amount of time. Plus, the missed payments are still due to the lender after the forbearance period is over.
A loan modification is often an option for those who are already in default on their loans because they have missed payments. Homeowners are eligible for loan modifications on a case-by-case basis. With a loan modification, the terms of their loans will be changed in a way that works better for their financial situations. Typically, this extends the length of the loan but even so, it gives them more time to pay off their loan in smaller doses.
Mortgage forbearance can help a homeowner during times of financial stress or instability by suspending or reducing monthly payments in a way that won’t negatively affect credit score or lead to foreclosure. Homeowners will still have to repay the missed amount eventually, but with forbearance, they have more time to find a job or save up the money they need in order to make regular payments again.
If you think forbearance might be a good option for you, don’t hesitate to reach out to your lender. Provide them with details of your financial situation so that they can find a solution that suits your needs when it comes to making payments on your mortgage loan.
Multigenerational living is on the upswing as an increasingly high number of households are embracing cohabitation. The reason could be to fulfill a specific need or simply by choice.
But either way, a 2019 report revealed that 20 percent of Americans reside in the same household with two or more adults, which is a major contrast to 12 percent in 1980. This latest housing trend in real estate has heightened collective interest in a type of household add-on known as in-law suites.
An in-law suite is the name for a small abode that is either part of or attached to a home. It’s often added for the purpose of allowing an older family member to enjoy a tinge of privacy and solitude at home.
An in-law suite is known by many other names, including mother-in-law suites, accessory dwelling units (ADUs), secondary units, granny flats, and ohana units in Hawaii. But no matter what you call them, in-law suite additions typically include a separate area with a bathroom.
These add-ons are usually located in the basement or next to the garage of existing homes. They are very helpful for multiple reasons, and providing a cozy place for an elderly family member is only one of many.
There are a lot of reasons to incorporate an in-law suite into your home. Multigenerational living, particularly with mothers, is on the rise. Currently, over 40% of Americans purchasing a home are contemplating including an older person or adult child as part of their households.
The main allure is the cost savings of living in the same home. It also promotes family bonding as you get to spend more time with your beloved relatives. For instance, Granny may adopt the role of a standby babysitter who spends valuable time with her grandkids.
In other situations, elderly family members might be suffering from a terminal or difficult disease that requires in-house caregiving. By welcoming your family member into your home, you’ll save a lot of money by not having to pay for caretakers or at-home services.
Home Office: The pandemic has normalized working from home, making the mother-in-law area the best place to oversee a small business or work on your remote career.
Guest Sections: Whenever out-of-town visitors stay with you, an in-law suite is a lifesaver as it’s the most suitable place for friends and extended family members to enjoy their own bedroom and bathroom space. Wouldn't you rather make a memorable impression on your guests than ask them to stay in a hotel? In-law suites can make that possible.
Housing a Grown-Up Relative: Adult children who are working towards financial stability can be housed in your mother-in-law suite until they become fully financially independent on their own. You can also charge your relative a small fee for staying with your relative if you’d like.
Short- or Long-Term Leasing: Many in-law additions are well-equipped living spaces, thereby making them eligible rental apartments that can generate ancillary revenue.
With so many options of what you can use an in-law suite for, you’ll need to know what to look out for when creating an in-law suite as well.
Regulation: First, you need to know if you're permitted by law to create an in-law suite. In some regions, zoning laws may prohibit you from adding a supporting property. In places where building the suite is legal, there will still be restrictions regarding the legal size and the purpose of your in-law suite.
Maintenance Costs: We have already provided you with insight into the cost of creating a mother-in-law suite, but your spending requirements won’t stop after the final addition is commissioned. You'll need to include the cost of utilities, like electricity bills and plumbing expenses. Over time, repairs will be necessary, so keep extra cash for that.
Design: You need to create a safe design for your in-law suite, especially if you intend to accommodate an older relative. Consider installing guardrails to prevent the chances of falling or windbreakers if your neighborhood is prone to violent weather.
Municipal laws vary when it comes to the legality of an in-law suite and its use. Approach your local zoning office to find out whether installing a suite on your property is permissible.
You'll also need to obtain building permits. Still, there might be some limitations on what can be integrated into the suite. For instance, some municipal laws do not permit in-law suites to contain complete kitchens in an effort to eliminate the risk of stove fires.
Some laws also stipulate that the suite cannot be leased if it is not being used for the purpose of housing a relative. All in all, make sure you’re aware of local laws and abide by the applicable laws before you begin to construct an in-law suite on your property.
Buyers are quick to identify the potential benefits of a mother-in-law suite, whether it be for a home office, for relatives, or for making passive income by renting it out for profit. So yes, a mother-in-law suite does add value.
A common way to add a mother-in-law suite is by remodeling a space that is not being utilized. The garage is a perfect example. The garage is either attached to the existing house or detached completely, but either way, it works great as an in-law suite.
You can add extra square footage to the garage if necessary and create a spacious in-law suite from there! Another option is to convert an existing bedroom that offers some sense of privacy, particularly one that is near the back of your house. This opens up more options for design uniqueness and expansion, like adding a door that leads outside or creating a roomy bathroom.
When creating an in-law suite, you can expect to spend an average of $32,000 to $63,000. Building a new structure altogether, as opposed to adding an in-law suite to your existing home, can cost upwards of $125,000.
The exact amount of money that it will cost to build a mother-in-law suite will depend on the size you want it to be and what you plan to add to it. The overall expenses will also depend on whether the suite is intended to be used as a standalone structure or an annexation of the existing house.
Now that you have a better idea of what it could cost to install a mother-in-law suite, let's talk about the two major types of in-law suites.
As the term implies, a freestanding in-law suite is a standalone design, meaning this type of in-law suite will be completely detached from your house. This is a suitable option for anyone who wants to offer ultimate privacy to guests. A freestanding in-law suite is expensive, and you may need to spend even more money to modify the existing property so that it accommodates the new sub-unit. Expect to dole out up to $100,000 on a freestanding in-suite project.
If you don't have an additional room that can be converted into a secondary unit, you can build an add-on from scratch. Most remodelers debate the benefits of this style as some believe it lowers the risk of violating the structural integrity of the house while others disagree. But either way, the attached in-law suite idea is not as expensive as the freestanding option. Rather, attached in-law suites usually cost anywhere from $30,000 to $60,000 on average.
Over the course of the building process for your mother-in-law suite, you may consider buying a foreclosed home. Some foreclosed homes are in great shape, while others need considerable work.
With enough money to cover repair costs, you can secure an enviable deal. But first, you need to know the answers to common questions that prospective homeowners ask before buying a foreclosed house.
This is a very important question. If there is a lien on the home, it will carry over, meaning once you own the home, the lien will become your responsibility. In other words, the lien will be transferred to you when you purchase the home. The seller is probably selling their home because they want to get rid of the lien. Never omit this question as the answer can make or break your decision to purchase the home after all.
This is a primary question that yields straightforward answers. Make sure you are informed about any and all issues pertaining to the home’s foundation, problems with neighbors, previous inspections, the age of the roof, fittings, electrical, and plumbing concerns, among other house-related details that you need to be aware of before you buy the property.
Whether the house you're buying is foreclosed or not, you must do your due diligence by exploring the neighborhood. Find out if there are amenities like parks, centers, schools, or anything else that may pique your interest. Knowing the neighborhood through and through will put you in a better bargaining position. Plus, there will be fewer surprises awaiting you when you move in and turn the house into a home.
A mother-in-law suite is a secondary suite that offers a myriad of benefits, like providing the most thrilling live-in for your grandma or helping your adult child as they make their way to financial independence. Just make sure the type of in-law suite that you decide to create is within your budget and that your project abides by local legal stipulations.
If you’re looking to buy a house, and do not have a mountain of cash saved up, you’ll need to consider getting a mortgage to help you finance this large expense.
But what exactly is a mortgage? Simply put, a mortgage is a debt instrument used to purchase real estate. A lender will loan a borrower money, and the borrower is obligated to pay the lender back.
An agreed upon repayment plan is established between both parties, and various terms and conditions must be met.
If you're wondering, how does a mortgage work - we’ll start at a high level and break it down step by step. A borrower borrows money from a mortgage lender and agrees to pay the mortgage lender back the full amount of the loan, plus any interest expense. The lender conducts their own research on the borrower before agreeing to lend them money.
There’s a lot of parties and terminology involved in the process.
The first step in getting a mortgage is to work with a licensed loan officer. Be sure whoever you are working with is licensed and registered to sell mortgages.
Loan officers help answer how to get a mortgage, and they’ll assist you with a variety of tasks. They’ll help you determine which mortgage works best for you, will shop for the best interest rate, and will even assist you with all the paperwork you need to complete. We’ll get into more of these details below.
You can select from a variety of mortgage options, each of them serves a purpose. A common option is a fixed-rate 30-year mortgage. This means for the duration of the loan, 30 years, the borrower will pay a fixed interest rate and payment each month. This fixed rate concept can also be applied to other mortgage options, such as a 15-year mortgage.
The following are some common words associated with mortgages and mortgage transactions.
A down payment is simply the amount of money you put down on your home. If the price of the home is $300,000 and you put down $30,000 as your down payment, you put down 10%. Various mortgage types will require a specific percentage for a down payment.
The interest rate is what the lender charges you for borrowing their money, in addition to the principal balance. This rate is referenced as a percentage. For example, a borrower with a fixed interest rate of 3.5% will pay that flat borrowing fee for the life of their loan.
Your loan can have a fixed interest rate, meaning it doesn’t change for the duration of the loan. Or, your loan may have an adjustable interest rate, meaning it can change over time. The lower the rate, the more favorable borrowing money is.
What's the difference between an interest rate and an annual percentage rate (APR)? Find out here!
This is a trickier concept, but amortization is the process of gradually writing off the initial cost of an asset. Remember, someone gets a mortgage for a given period of time. In the early years of the mortgage, the borrower’s payments fund mostly interest expenses.
As the years progress, the borrowers interest expense lessens, and more of their monthly mortgage payment is allocated to the principal balance. Visually seeing this may help paint a clearer picture.
Escrow is another common term used in the mortgage or real estate industry. Escrow is a contractual arrangement where a legal third party receives, holds, and distributes property or money for two parties. Escrow is essentially an unbiased middleman between the buyer and seller, or the buyer and an insurance company.
A buyer gives the escrow agent money to hold, and the homeowner selling their home gives the escrow agent the home. When the sale is finalized, the escrow agent gives the new homebuyer the home and the former owner the money. If the deal doesn't go through, the escrow agent is obligated to give the buyer back their money and the home goes back to the seller.
If you’re curious how to calculate a mortgage payment, there are a few components that give you the final monthly number.
The principal balance is the initial balance of the loan. Using the same example as above, if the home was $300,000 and your down payment was $30,000, or 10 percent, you borrowed a total of $270,000 from the lender - which is the principal balance. Each mortgage payment reduces the outstanding principal balance. The more principal balance you reduce, the more equity you have in your home.
Interest is the fee a lender charges you for borrowing the principal balance. The lower the fee is, the less money you pay. If you have a great credit score, a low debt to income ratio, and put down a sizable down payment, you’ll likely have a more favorable, or lower, interest rate. If your credit score is less than average, and you’re not putting down a large down payment, you may have a higher interest rate.
The interest rate changes with various government involvement and economic conditions. But if you have a fixed rate interest rate, you’re locked into that rate for the life of the loan. Only when your mortgage is an adjustable rate mortgage do you have to worry about your payments being volatile.
Taxes vary by state, county or even on a town level. The tax rate is also referred to as a mill rate. Some mortgage companies allow you to roll your tax expense into the monthly mortgage payment, utilizing the escrow system we discussed above. If your taxes aren’t rolled into the monthly payment, you’ll be responsible for paying your town directly.
Similar to car insurance, you must carry insurance on your home. How much you pay in insurance will vary, just as it does on a car. Variables that impact the insurance expense include; crime rate in the area, if the house has a pool, if the house is in a flood zone, and the value of the property.
Mortgages are not one size fits all. There are various types of mortgages you can choose from. Each one has a purpose; your goals, financial situation and comfort level will dictate which loan is right for you.
A conventional mortgage is a loan that is not secured by a government agency. Conventional mortgages are common, but they typically come with a higher interest rate as they are not insured by the federal government. A private lender, or Fannie and Freddie Mac issue conventional mortgages.
There are three government agencies that can issue a mortgage.
A jumbo loan is used to purchase homes that cost more than what a conforming loan allows. This amount is variable depending on where you live, and can change year over year.
A fixed rate mortgage is when the interest rate on the loan remains the same throughout the duration of the loan. This can be a fixed rate 15 year mortgage, 20 year mortgage, or even 30 years. The interest rate will not change, which makes budgeting easier.
An adjustable rate mortgage is the opposite of fixed rate. When you have an adjustable rate mortgage, your interest expense can go up or down throughout the life of the mortgage. Considering the rate can fluctuate, it makes budgeting a bit more difficult.
Now with a better understanding of the various types of mortgages, how much mortgage can I afford may be the next question on your mind! Remember, the mortgage payment consists of; principal, interest, taxes and insurance. Let’s visit the qualification process.
A lender (or bank) takes a lot of financial variables into consideration when determining your maximum monthly mortgage payment including: your debt to income ratio; credit score; annual household income; and your income potential. Two people with the exact same income can qualify for different mortgage amounts.
Person A makes $80,000/year, has no debt and a high credit score. Person B makes $80,000/year, has a high debt-to-income ratio, and a lower credit score. The lender is likely more inclined to lend person A more money, as they have more confidence person A has the ability to pay them back.
Your lender, and various financial calculators, can figure out what your monthly mortgage payment is. But, it’s important to fully understand what that number is made up of.
Remember, your mortgage payment consists of; principal, interest, taxes, homeowners insurance, and potentially mortgage insurance. You’ll have to understand what the annual amount of each of those expenses are and divide by 12 to get your monthly rate.
The formula can get a bit complex considering the math you’ll have to do on the interest rate. It’s best to know what variables make up your mortgage amount and leverage an online calculator to get the final amount.
Wondering what fees and costs you'll have to pay at closing? Find out here.
Getting a mortgage doesn’t need to be complicated. In fact, in today’s modern world, you can get a mortgage right from the comfort of your own home.
The first step is to get pre approved for a loan. To do this, find a trustworthy lender you’re comfortable working with. All lenders will require a bit of paperwork from you. This includes bank records, pay stubs, insight into your expenses, identification, etc. Supply the lender with accurate records, and within a few days you’ll be pre approved for a specific mortgage amount. You’re now ready to start shopping for a home!
Armed with the pre approval letter, real estate agents will be willing to take you on as a client. The pre approved letter helps you and the real estate agent determine what homes are in your price range.
You can look for homes in your desired price range and area from just about anywhere. Zillow and Trulia are popular real estate sites that will show you homes based on whatever criteria you give them.
Once you find the right place to call home, it's now time to finalize your loan. You’ll submit an offer to the seller, and if they accept, you’re ready to progress to the next step. Pending approval, you’ll go back to your lender and begin the loan finalization process. This includes getting the home appraised, inspected, and one final review of your financials.
The lender wants to be certain your debt to income, and credit score, remains aligned with what they saw when you were pre approved.
If everything aligns, you’ll be ready to close. Generally speaking, there is a bit of a waiting period between submitting your offer, getting it accepted, and officially closing on the loan. Both the buyer and the seller will agree to a closing date at some point in the near future. Once that day comes, you’ll do one final walk through of the home before officially closing.
Our Mortgage Learning Center features blogs on a wide range of mortgage and refinancing topics.
A mortgage is a debt instrument used to help finance real estate purchases. Everyone has a different financial history, and various financial goals, so there are many different mortgage options you can choose from. Some mortgages have an adjustable rate, whereas some mortgages have a fixed interest rate. The duration of the loan can vary as well.
Buying a house and obtaining a mortgage is a huge financial decision. It’s best to work with a professional throughout each process. They’ll help answer any questions that come up along the way, and will provide guidance where appropriate. Be sure to only work with licensed mortgage brokers when applying for a loan.
A home doesn’t just fall into foreclosure status. There are stages and processes that take place behind the scenes before a home is sold via foreclosure. One of those steps is known as pre-foreclosure.
No one ever wants to experience foreclosure. Understanding the pre-foreclosure processes and which options are available to you as a homeowner is important. We’ll be covering everything you need to know below.
What does a pre-foreclosure mean? Before unpacking that question, let’s take a step back and review what a foreclosure is.
A foreclosure is when a lender enters the legal process of seizing property because the owner has not lived up to their contract by paying the mortgage. This is a legal right that the lender holds, and this right can be found within the original closing documents.
A pre-foreclosure is what occurs before the house actually goes into full legal foreclosure. If a homeowner were to ever fall behind on the mortgage, the mortgage company would likely make numerous efforts to collect their money.
This includes sending letters to the homeowner and contacting them by phone to discuss payment options. If their communication efforts are left unanswered, the lender will have little choice but to move forward with the pre-foreclosure and foreclosure processes.
If you are late on a single payment, generally speaking, your home will not move into the pre-foreclosure status. Depending on which state a home is in, lenders are unlikely to move forward with this process until the homeowner has fallen behind on their mortgage by about three to six months.
If or when that occurs, the lender executes the first steps of the pre-foreclosure process. The pre-foreclosure status is essentially a time clock between the homeowner and the lender. If the outstanding balance isn’t paid in full within a specific period of time, the lender moves forward with the foreclosure and reclaims the property.
If you own a home and it’s in pre-foreclosure, you still have options. There are measures you can take to avoid your home going into foreclosure. Let’s take a look at some of them.
One of the first options you can try is modifying your existing mortgage, especially if you purchased your home years ago when interest rates were higher. Refinancing your home with a lower interest rate can save you money each month.
A short sale is another option you may want to consider if your home is in pre-foreclosure. Many mortgage lenders do not like to hold onto or sell physical real estate themselves. Therefore, they may be inclined to do a short sale.
A short sale is when the homeowner sells their home at market value, typically for less than what they owe on it. For example, if the outstanding mortgage balance is $280,000, the lender and homeowner can join together to sell the property for $250,000.
The homeowner isn’t responsible for the $30,000 difference, but it is very likely to negatively impact the homeowner’s credit score as well as their ability to buy another home in the near future.
A deed in lieu of foreclosure is when the homeowner signs the deed over to a mortgage company. In exchange, the mortgage company will forgive the debt. Like a short sale, this will result in the loss of the home and subsequently require the homeowner to move.
Forbearance is when the mortgage company agrees to stop collecting monthly payments for a specific period of time. However, once the period of time has elapsed, the mortgage company can require the homeowner to pay the outstanding balance in full in the form of a one-time payment or in combination with another repayment plan such as a loan modification.
For example, if your mortgage is $2,000 per month and your forbearance period was 4 months, the mortgage company would expect $8,000 at the end of the 4 months
Lenders are also often open to talking about repayment plans. If you temporarily fall behind with your finances due to an unforeseen circumstance, a mortgage company may be willing to work with you in this way.
For example, if you were injured and your injury made it impossible for you to work, then that situation would prevent you from earning an income. A mortgage company may be willing to accept smaller payments or interest-only payments for a set period of time until you are able to return to work
Pre-foreclosure is not only on the homeowner’s mind. It can also be something a homebuyer is looking for. If you’ve ever shopped for homes online, you’ve likely seen homes in pre-foreclosure. But should you buy them?
Let’s explore what it means to purchase a pre-foreclosure home.
Pre-foreclosure homes, or homes soon to be in foreclosure, are generally priced below their market value. The reasoning is simple: the lender likely wants to get back at least what is owed on the home. Remember, lenders are typically in the business of buying and selling physical real estate properties.
If the home was initially purchased for $400,000, and the existing mortgage value is $250,000, the lender may just be interested in recovering $250,000, rather than trying to get the current market value of the home. In such cases, you may be able to get a great deal on a house you couldn’t otherwise afford.
Even though the house may be priced well below market, it might not be in your best interest to purchase the property. If the homeowner fell behind on their mortgage payment, they may not have had the money to maintain the home.
There could be mechanical issues with various appliances, the roof may be in terrible condition, and any repairs that were done to the home may have been done incorrectly or unsafely just to save money. This is not true for all homes with a pre-foreclosure or foreclosure status, but it can certainly apply to many of them
Our Mortgage Learning Center features blogs on a wide range of mortgage and refinancing topics.
Whether you're a homeowner facing a pre-foreclosure situation or a homebuyer looking to purchase a home in foreclosure, you should be aware of your options. A real estate transaction on both the buying and selling side can have lingering side effects. Knowledge is power, and knowing your options can help you avoid making costly mistakes.
Research indicates that 58% of homeowners in HOA communities and single-family homes pay an average monthly fee of $250. Despite this substantial number, homeowners lack adequate information about HOA fees and why they have to pay for them in the first place.
Typically, properties in homeowners' association communities come with the requirement that the homeowners will pay a certain amount of money per month. These costs are generally used to provide additional amenities like gym equipment, swimming pools, and security.
All in all, HOA fees are a way of ensuring that both current and future homeowners can enjoy all of the features and components of the neighborhood for years. Let's take a deeper dive into what HOA fees are and how they affect your finances.
Do you know what the differences between a COA, HOA, and POA are? Read all about them here.
An HOA fee is the amount of money homeowners are required to pay their association. These funds go directly to a management company that schedules maintenance and improvement within the community.
HOA fees are usually levied on condominium owners. However, they may also be applicable to homeowners of single-family homes. Let's take a closer look at what HOA fees are.
HOA fees are used to pay expenses related to the upkeep of a condominium community’s common areas. Communities often include lobbies, swimming pools, patios, and elevators, among other features. Plus, there are usually services offered as amenities, like landscaping or standard utilities such as water, sewage, and garbage disposal.
The homeowner’s association may even impose specific assessments intended to take care of major repairs like roofing or elevator replacement. At the same time, HOA fees that apply to single-family homes in various neighborhoods are put towards neighborhood amenities such as clubhouses, tennis courts, or parks
Depending on the association, HOA fees may vary drastically. However, some experts believe that an accurate range of HOA fees is anywhere from $100 to $700 per month. Keep in mind that the exact costs of your homeowner’s association fees will be dependent on what your HOA provides you.
Oftentimes the more services and amenities in your community, the higher your HOA fees will be. Moreover, you may have to deal with even higher costs if the reserve funds are not managed adequately.
HOA dues are not deductible for your personal residence. But keep in mind that if you rent out your property and pay on-time HOA fees, you can reap the benefits of a tax break.
Moreover, a home office deduction may also be possible if you work from your place of residence. Reach out to a tax accountant to learn more about your tax break options.
These dues cover many amenities and services, including but not limited to the following:
Before purchasing a home that requires HOA fees, you should first thoroughly understand these payment processes. Let's discuss the different ways HOA dues can affect your monthly finances.
Before you purchase a home that is part of an HOA, you and your lender need to spend some time evaluating the property's monthly HOA costs. This way, you can determine whether you can afford the dues in addition to your mortgage.
One major caveat of HOA fees is that they can change over time. The fees can spike up when home projects require additional financing or as the result of automatic inflation adjustments. In some cases, housing payments can become unaffordable for homeowners strictly because of the HOA fees, so make sure you ask your lender about the HOA's history of increasing fees.
HOA fees cover routine costs as well as occasional expenses. However, in some cases, critical projects and emergency repairs will require unexpected out-of-pocket fees for homeowners. In these cases, homeowners will have to pay an additional assessment which can cost several hundreds or thousands of dollars.
If you live in a multi-unit property, HOA fees go towards a premium insurance policy that doesn't cover your personal property, your unit's interior, the home you reside in, damage originating from your unit, or your personal liability.
Discuss the risks associated with an HOA with your insurance provider to find out which policy will match your needs the best. Make sure you fully understand the prices of the policy before you purchase an HOA property to ensure that you are aware of its future costs.
Purchasing a home in an HOA community means you've agreed to pay these monthly fees. If you fail to pay the costs, you'll owe money to your HOA. Plus, your HOA has the power to send past-due accounts to collections.
They may even put a lien on your home or initiate a foreclosure. From there, collection accounts and public records will start appearing on your credit reports. These negative marks on your credit reports will make it harder for you to secure other loans or find affordable housing in the future.
HOA fees cover the costs of various repairs and renovations in your neighborhood. But the fact of the matter is that you may not need everything that you pay fees for.
That is the major downside of living in a shared space. For instance, you may not ever use the pool or the rooftop patio but you'll still have to help pay for them anyway.
When you purchase a property that boasts as an HOA community, you'll have to pay dues for every day you live there. On the brighter side, you only have to pay a prorated amount once you’ve sold your home
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If homeowners fail to pay the requisitory assessments, the homeowner’s association can collect the dues with the help of various conventional collection processes. From sending demand letters and making collection calls, to initiating foreclosures and filing a civil suit, homeowner’s associations will pursue legal action against homeowners who don’t pay their HOA fees.
Homeowner’s association fees refer to monthly dues that homeowner’s associations collect. Typically, HOA fees are used to pay for costs of repairs, maintenance, and other amenities in the community.
Overall, it is important to understand HOA fees and what these fees entail prior to purchasing a property. To make sure this property’s community is in your best interest, further investigate what the community’s amenities are and how these payments contribute to your neighborhood.
*Does not apply to third party fees and closing costs.
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