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Buying a Vacation Property? What to Consider When Investing in Your Home-Away-From-Home.

As the number of people purchasing vacation homes is on the rise – many a result of the social limitations caused by the coronavirus pandemic – we offer this helpful guide for those looking to buy a getaway property of their very own. 

Benefits of a Vacation Home

If you’re a frequent traveler and enjoy escaping to one very special spot each year, investing in a vacation home can save you money in the long run. Even better, properties in popular vacation areas often increase in value over time. 

Making such a purchase all the more attractive, you may also be eligible for a tax break from the mortgage on your second home. 

And should you choose to move when you retire, your vacation home could become your primary residence in that special location you already know and love. 

Simply put, vacation homes are a great idea. But what should you consider before investing in one? 

What’s Your Budget?

We aren’t saying it’s all about the money, but, of course, the cost of a second home is one of the most important factors to consider. In addition to a second mortgage, you will also need to factor in the cost of taxes, insurance, utilities, possible HOA fees, and furnishings for the home. 

And that’s just the beginning. As you maintain your vacation home, you may want to consider how it will be cared for when you’re away. Will you need landscaping services? Will you want a security system to protect your unattended home? And don’t forget the cost of traveling there and back. 

While these costs aren’t supposed to discourage you from investing in a vacation home, they are essential considerations when looking for the home that’s right for you and your budget. 

To get a better idea of what your payments will look like, check out our mortgage calculator

Where Do You Want to Rest and Relax?

Location is another essential part of finding the perfect vacation home. Where do you picture yourself escaping for a week away? Where do you want to spend your weekends? You may love the beach, or the city, or the mountains, but do you like that locale enough to spend the majority of your vacations there? You want to choose a place that won’t lose its appeal after a visit or two. 

The second consideration with the location regards distance – in addition to how much it costs to get there, consider travel time. You may choose a vacation home in your DREAM location, but if it takes a half day’s drive to get there, or you need to catch a flight every time you want to visit, then you may not end up spending as much time there as you intended. So, the takeaway here? Decide on a getaway that’s not too far from home!

Is Rental Income a Must?

Many people consider buying a vacation home and then look to rent it out when they aren’t using it. While renting can bring in extra income, it does offer a few challenges. For instance, sometimes renting out your property can have implications for financing and taxes, or homeowner associations may have rules and limitations for renters. 

Also, if you plan to occupy the home during the typical vacation months, consider that there may be fewer available renters during the “off-season.” Renting your property also comes with additional considerations, like how to advertise and who will take care of any significant issues that occur while guests are present. 

If consistent rental income is a must, then do your research on what to expect given your budget and vacation schedule. 

Finding the Vacation Home That’s Right for You

Purchasing a vacation property is an exciting venture, and the professionals at MortgageRight are dedicated to making the home-buying process an easy one – whether it’s for your primary residence or that perfect vacation getaway. Whether you’ve just started looking or you’re ready for a quote, we can help!

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Homebuying Tips Mortgages

Tips For Moving in a Time of Social Distancing

Tips For Moving in a Time of Social Distancing

Moving is never easy. Whether you are a DIY mover or hiring a crew, moving up the street or across the country, packing up a family or flying solo, re-locating is a difficult process. And let’s just say this pandemic isn’t making things any easier. 

So, how can you protect yourself and your family if you are planning on moving during the time of physical distancing? A little preparation can keep COVID-19 from wreaking too much havoc to your moving plans. Your moving checklist is going to be a tiny bit longer, but the good news is you can safely relocate with just a few precautions. 

Here are a few tips from the American Moving Association and the CDC to make sure your move is safe and simple.

Using Moving Services

Moving services, self-storage facilities, and moving truck rentals are all considered essential services and are available at this time. Many of these businesses have already implemented CDC-recommended guidelines including sanitization procedures and PPEs for staff. If you use a moving service, many businesses offer virtual consultations to provide a quote, lowering the risk of exposure. Make sure you communicate fully with your moving company about the protocols of physical distancing when you schedule your moving date

Packing ahead of time will protect everyone involved with your move…including you! Pack, seal, and sanitize your boxes at least 24 hours before your moving team arrives to ensure they are fully disinfected. Prepare a sink with soap and water that your movers can access. If this isn’t possible, have a supply of hand sanitizer for yourself and your movers. 

DIY Moving

Sadly, it may not be possible to bribe your friends with pizza and beer to help you move during this time. Utilize all the resources available with a moving truck to protect yourself when lifting heavy boxes or furniture. Don’t use recycled or free cardboard boxes! While it may be tempting, these are hotbeds for bacteria and viruses. Determine what supplies are needed to pack for your move and so that you can make one trip to the store to get what you need. 

Clean as you pack! Take this opportunity to dust, clean, and disinfect any items in your home that don’t often get scrubbed. If you don’t have disinfectant, one tablespoon of bleach in one gallon of water will do the trick. 

How to Protect Your New Home

Don’t bring anything into your new home that shouldn’t be there! Throw out or donate old furniture and household items you never use. Why move something that will just collect dust in a new space? 

Speaking of dust, clean and sanitize your new home thoroughly once the movers are gone. Immunocompromised individuals may also want to wait 72 hours before spending time in your house. Communicate health concerns to your moving team so that a plan can be made for your move. If your health is a serious concern, consider postponing or canceling your move for a later date.

With a little extra preparation and a little more time, it is still possible to safely move in the time of physical distancing.

Comprehensive Moving Guide

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Silver Linings: How to Make the Best of Buying a Home During a Recession

We are seeing the economic effects of COVID-19 in real-time. This “new normal” is going to be far-reaching, long-lasting, and will likely result in a lengthy recession. It’s not all gloom and doom, though. Markets fluctuate, but they are resilient. There are great ways to make the best of this bad situation, particularly if you plan on buying a home. 

If you have been patiently waiting for housing prices to go down, boy do we have news for you. There has never been a better time to buy. Historically low mortgage rates combined with motivated sellers make this a great buyer’s market. Job instability is a concern, but if you have a stable job situation and a little bit of money saved right now, it could be an opportune time to purchase a home. With less competition from other homebuyers and sellers willing to negotiate, this could be your chance to find your dream home. 

Here are some tips to put you in the best position to buy a home during a recession:

  1. Get pre-approved for a mortgage. Homebuyers who already have financing in place are in a better negotiating position. Having savings is always a bonus, but go ahead and get pre-approved before you start shopping so you can enter every conversation with confidence.
  2. Organize your finances. Don’t get too excited – just because a house is a good deal doesn’t mean you can afford it. Work on your budget. Make sure you take stock of all your assets and debts before you make any big decisions. 
  3. Do your research. With unstable markets, housing prices can fluctuate and give a false sense of value. Make sure you research your neighborhoods well! Knowing historic pricing for an area can give you a sense of objectivity when evaluating an offer.
  4. Get a home inspection. In uncertain times, sellers may be trying to offload homes with problems that are costly to repair. Be very thorough and make sure you’re not buying the home equivalent of a lemon! 
  5. Clear the title. Start with a clean slate. Sometimes the home of your dreams can be the property of your nightmares. Make sure that the property doesn’t have any liens from a contractor or a lending institution. Have a lawyer run the title of your new home to verify it will be transferred without risk.
  6. Use your bargaining power. Watch for motivated sellers. If the price has been reduced on the home several times over the last few months, it may be a signal that they have already moved and are holding the mortgage on two properties. In this situation, the seller may be willing to negotiate to cover closing costs and other fees in order to quickly complete the sale. 
  7. Avoid unnecessary fees. It’s your market right now! When houses move slowly, realtors will sometimes take a few percentage points off of a commission in order to get the deal signed. Negotiating these fees down before closing can benefit both the buyer and the seller, leaving everyone happy.
  8. Use logic. Have the emotional stability to walk away if it’s not the right deal for you. Wait until the right opportunity comes along before you commit.

Even with all these tips in mind, there is no such thing as a foolproof approach to the housing market. An unstable economy means there is risk involved in major purchases like a home, but fortune favors the bold. If you pay attention to these 8 tips, you may be able to find a tremendous deal by acting decisively while others are afraid to move.

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Understanding How Debt Affects Your Mortgage

When determining a target price range for purchasing a home, it’s important to consider your existing debt, as this will affect what kind of mortgage you will qualify for. Your debt to income ratio, or DTI, is one of the most important metrics after your credit score. In this post, we cover everything that a homebuyer needs to know about their DTI and the effect that this will have on the mortgage process. 

What is DTI?

The primary tool mortgage lenders use when considering your application is your DTI, or debt to income ratio. In simple terms, this is the percentage of your income that you must set aside each month toward paying off your debts. This number can be as important as your base income and your credit score when determining your eligibility for a loan. 

Calculating your DTI

To calculate your DTI, lenders will divide your monthly debt obligations by your gross income. This seems simple enough, but this equation fails to take into account taxes, food, utilities, health insurance, transportation costs, or childcare. You will want the lowest DTI possible, not just to ensure a good mortgage rate, but also to be able to still live comfortably while paying off your debts. 

Front-end vs. Back-end DTI

There are two kinds of DTI: front-end DTI and back-end DTI. Front-end DTIs only include housing costs like future mortgage payments, insurance, property tax, and homeowner costs compared with your gross income. Back-end DTIs include all your other debts like credit card debt, student loan debt, and car loans compared with your gross income. Most mortgage lenders will take both DTIs into account when considering your application. 

What is the best debt-to-income ratio?

In order to get approved for a conventional mortgage, your back-end DTI should be less than 43%, however, with excellent credit, you may be eligible for up to 50%. If your ratio is higher than this, you could pay more interest or be denied for a loan. 

Even if your back-end DTI is lower than 43%, only you can determine the debt to income ratio that makes sense for your situation. Just because you can be approved for a loan at a good rate doesn’t mean it’s a great idea. Some mortgage lenders do not have your best interest in mind. They just want to make the largest loan possible. Don’t be fooled! Make sure you do the math before you overcommit yourself to monthly mortgage payments. You know your household budget better than anyone. 

At the end of the day, we recommend paying extra on your debts and avoiding large purchases on credit to lower your DTI before you apply for a mortgage. This helps the mortgage process go smoothly so that you can have both your dream home and financial peace of mind.  

If you have questions about your financial situation or the mortgage process, feel free to reach out to any of our mortgage professionals at (205) 776-8401

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MYTH: Now is Not a Good Time to Buy

Real Estate has appreciated a lot lately and we have heard many potential homebuyers say they’re thinking about waiting until prices come down to buy a home. If rising home values are keeping you on the sidelines, you may be waiting longer than you ever intended.

For instance, should you try and wait it out, the market may have gone up 20% before there is a 10% correction. And while you’re waiting for months or years, you may still pay 10% more for your new home after paying rent when you could have started paying off a new mortgage.

The right time to buy your first home is when you are ready; both financially and emotionally. And significant life events (getting married, relocating, landing a great new job, having children) generally drive the decision to consider purchasing instead of continuing to rent.

At MortgageRight, our experience tells us you cannot time the real estate market when data becomes available many months after market events take place. This, along with so many other variables, makes pinpointing a perfect time to buy nearly impossible.

If you are ready to buy your first home, this may be the right time to buy a home. Competitive interest rates and a variety of home loan programs are currently available that will can meet your needs today.

Don’t let this myth is deter you. Instead of continuing to make rent payments to a landlord, start making payments on your own home.

Contact MortgageRight. Our helpful loan associates area always ready to explain the process and your options.

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First-time Homebuyer Homebuying Homebuying Tips Loans Mortgages Purchase

Defining the First-Time Homebuyer

The U.S. Department of Housing and Urban Development (HUD) describes a first-time homebuyer as someone who meets any of the following conditions:

  • An individual who has not owned a principal residence for three years. A spouse is also considered a first-time homebuyer if he or she meets the above criteria. If you’ve owned a home but your spouse has not, then you can purchase a place together as first-time homebuyers.
  • A single parent who has only owned a home with a former spouse while married
  • A displaced homemaker who has only owned with a spouse.
  • An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
  • An individual who has only owned a property that was not in compliance with state, local or model building codes – and which cannot be brought into compliance for less than the cost of constructing a permanent structure.

Please contact MortgageRight at 205.776.8401 or Contact@MortgageRight.com for more information.

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Mortgage Loans Offering Down Payment Assistance

Assistance for First-Time Homebuyers

Many first-time buyers think they need to have 20% saved up for a down payment, plus funds to cover closing costs. But if not having these funds is the only thing standing between you and buying your first home, don’t worry. Gift funds, down payment assistance, and specialty programs tailored specifically for first time buyers can help you move forward to get the home today.

First-time homebuyer programs are designed to help new buyers achieve their goals of homeownership. These programs generally help remove one of the largest obstacles first-time buyers must overcome when purchasing a home – The Down Payment.

There are even opportunities to qualify for a first-time program even if you have purchased a home before.

A larger down payment is generally recommended for buyers who want to avoid paying mortgage insurance, but saving those funds can take time. For many buyers, the money needed for a down payment can be one of the biggest hurdles to buying their first home.

Fortunately, there are loan programs that contain down payment assistance programs specifically designed to help first-time buyers who have little, or even no cash saved for a down payment.

So, if you have been worrying about where to find the funds needed to purchase your very first home, take a look at a few of the first-time homebuyer down payment assistance programs currently available today:

Loan Products

FHA Loans – FHA loans are insured by the Federal Housing Administration, and these government backed loans have been designed specifically to help buyers achieve their goal of homeownership. FHA loans have lower down payment requirements compared to conventional (private lender) mortgages. With an FHA loan, your down payment can be as low as 3.5% and can be gifted to you from a family member or friend. FHA loan guidelines are also more lenient, and allow for lower credit scores and lower debt ratios. They will also allow the seller to contribute towards closing costs.

USDA Loans – The only government backed loan program that offers 100% financing for all qualifying borrowers, a USDA loan is a great option for first-time buyers looking for a zero down payment option. USDA loans do have some very specific eligibility requirements, including the location of the property. USDA 100% financing loans are intended for buyers who want to purchase rural property outside of major metro areas.

VA Loans – The U.S. Department of Veterans Affairs insures VA loans and helps veterans, active military persons, and surviving spouses purchase their dream homes. VA loans are available with up to 100% financing, have no mortgage insurance requirements, and offer more flexible eligibility guidelines.

From help with closing costs to 100% financing, MortgageRight can help you understand the many programs available to help first-time homebuyers achieve their goal of homeownership.

Buying your first home is exciting and you have many loan programs and options available to you. Partnering with an experienced mortgage loan officer is an important part of buying your first home. From help with closing costs to 100% financing, MortgageRight can help you understand the many programs available to help first-time homebuyers achieve their goal of homeownership.

Contact MortgageRight at 205.776.8401 or Contact@MortgageRight.com for more information.

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Myth: 20% Down Payment Requirement To Purchase Your First Home

You Do Not Need a Large Down Payment to Qualify

According to a recent survey, nearly half of renters overestimate the up front costs of buying their first home. Too many believe they need to put 20% or more toward a down payment when buying a home.

That was most likely the case when your grandparents purchased their first home, but that is no longer the case.

While a 20% down payment is still considered standard, it is not the only option. Fortunately, there are loan programs that contain down payment assistance options that are designed to help first-time buyers who have little, or even no cash saved for a down payment.

In fact, there are many programs that allow buyers to put down as little as 3%. Statistics show that 7 out of 10 first tie homebuyers make a down payment of 5% or less and some first-time homebuyer programs offer NO MONEY DOWN. And as many as 15% of those who have purchased homes within the last 2 years have financed with 0% down.

Perhaps the reason for this supposed myth is due to Private Mortgage Insurance. When you finance a home with less than 20% down, you also have to pay PMI every month until you reach the required equity of 20%. This is true of regular conventional loans, but not for FHA loans which can go as low as 3.5% equity.

At first glance this may seem risky, but the Government wanted more Americans to be able to achieve the American dream. To achieve this and boost homeownership, they created the Federal Housing Administration (FHA) and began offering government backed loans that were insured against default (insurance to the mortgage company or bank in case the borrower ever defaulted on the loan). This made lending to borrowers with a lower down payment and credit scores a reality.

For instance, the FHA will back a loan for a borrower with a 500-579 credit score and a 10% down payment. If the borrower has at least a 580 credit score, they only need a 3.5% down payment to qualify for an FHA mortgage (borrower may pay more over time). Conventional loans programs offer down payments between 3% and 5%. Veterans, military service members and eligible surviving spouses can get mortgages with a down payment as little as zero.

In an analysis of historical loan data by Laurie Goodman, Jun Zhu, and Taz George with the Urban Institute shows why government-backed investors like Fannie Mae see relatively little risk in qualifying mortgage loans with down payments as low as 3-5%. The data shows that credit is a stronger indicator of default risk than down payment size. The percentage of defaults of 5-10% down loans versus 3-5% down is very similar.

“Of loans that originated in 2011 with a down payment between 3-5 percent, only 0.4 percent of borrowers have defaulted. For loans with slightly larger down payments – between 5-10 percent – the default rate was exactly the same. The story is similar for loans made in 2012, with 0.2 percent in the 3-5 percent down payment group defaulting, versus 0.1 percent of loans in the 5-10 percent down payment group.” – Urban Institute

If you’re in the process of buying a home for the first time, you probably have some questions about the best way to find and finance your dream home. At MortgageRight, our goal is to make sure you have the education and support you need. That starts with dispelling many common myths about mortgages and home buying.

Please contact MortgageRight at 205.776.8401 or Contact@MortgageRight.com for more information.