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Should I Get a Loan with Mortgage Insurance?

by Karen Picarello

            When you buy a home, there is typically an amount of money paid as a “down payment.” This amount is part of the purchase price of the home that you pay immediately out-of-pocket instead of increasing the amount of a loan. You can pay as much as you want in a down payment including up to the purchase price of the home, but the typical amount paid is 20 percent. If you pay more, you won’t have to get as large of a loan, and you won’t spend as much in interest over the life of the loan.

            In many cases, private lenders will require a down payment in order for them to approve a loan. The bigger the down payment, the less risk to the bank because there is less money they’d have to recover if you defaulted on the loan. Those who foreclose on their loans cause lenders to try to recoup the loan amounts through foreclosure sales, and these homes often sell significantly under market value. Therefore, a higher down payment equals less risk to the bank.

            A first-time home buyer may not have the funds available to put down a significant down payment. In this case, a bank or lender may reduce their risk by requiring mortgage insurance. Mortgage insurance covers the lender for a portion of the principal balance on a loan in case the borrower cannot make payments.

FHA Loans

Federal Housing Administration (FHA) loans are a typical type of loan for first-time home buyers, and they may only make a person pay a down payment of 3.5%. They will also accept lower credit ratings. The Mortgage Insurance Premium (MIP) is a requirement for this loan type, it will be 1.75% of the loan amount. You pay this monthly for the life of the loan or up to 11 years if you put down a larger down payment.

Conventional Loans

Private mortgage insurance may be available for conventional loans when a person only has to put down 3% for a down payment. This can be cancelled after 20% of the home value has built up in equity.

USDA Loans

The U.S. Department of Agriculture offers loans with no down payment, but you have to pay an upfront fee of 1% of the loan amount and an annual fee of 0.35% of the balance of the loan. Similar to all other mortgage insurances, it reduces the risk to the lender.

Should You Get a Loan with Mortgage Insurance?

Sure. If it is the only way you are going to get a loan. The better option is to wait for better financial circumstances or save money for a down payment, but some realities don’t produce this as an option. It does not hurt your credit to have mortgage insurance, but it does hurt your pocketbook. Discuss your options with your lender and a financial adviser, and make sure you make the responsible decision.

Why is Phoenix Real Estate So Hot?

by Karen Picarello

The Phoenix real estate market is booming, and it’s affordable for the moment. How is this market bouncing back from the horror stories of suburbs that haven’t fully bounced back from the recession? It’s all about the job market.

The Recession Hurt

The economy of Phoenix before and during the recession was not as diverse as it is today. When service jobs and construction stalled, Phoenix was forced to adapt. It had too many empty houses. As a result of this adaptation, the entire economy recovered.

Tech and Bioscience

This adaptation and diversification happened the most in the technology and bioscience sectors. Bioscience in particular has been an economy and education milestone for Phoenix, and foundations like the Flinn Foundation continue to cause this field to grow by providing scholarships and opportunities. Technology giants like Plexus, Lifelock, and GoDaddy keep the tech sector going. This is not to mention all the other sectors that thrive due to this, such as the medical technology sector. All of these sectors are recession-proof, so it is safe to say that Phoenix is the place to be if you want to have some economic security.

Jobs + Population Boom

The tech and bioscience diversification that started in Phoenix has brought many young people to the Phoenix area, and they have high-paying jobs. The people moving to Phoenix are not all from the area. Since 2010, over half of a million people have moving to the area. Over 300,000 of those were from different parts of the country, and over 100,000 of them were from foreign countries. These people need places to live, which has helped the construction business as older regions of the city get updated.

The Housing Market

Right now, the housing market is affordable, and median home prices are below $300,000. This means that single people can afford to buy homes. But the market won’t stay like this for long. As more people move to the area, demand will increase for homes, and it will exceed supply. This will drive up prices, and before you know it, it will be a seller’s dream market.

What does this mean for real estate?

It’s great news for real estate. Right now, people should be buying homes, and real estate agencies will thrive in a time of multiple home purchases. Soon, it will be thriving in a different way, and home sellers will enjoy the increase in their property values. It’s all about timing, and a thriving economy is good for everybody.

Long-term Upkeep for the Buyer and Seller

by Karen Picarello

For the Buyer

When a buyer is looking at a home, there are multiple things they should consider that involve the long-term upkeep of the home. These are things in the home that are inevitably going to cost money…it is just a matter of when.

Windows

Single-paned windows are not going to be efficient, and any home buyer will see them as a thing that will need to be changed in the future. If the windows are updated, consider the quality of the multi-pane. Updates on flipped homes are rarely done in quality fashion, so make sure they didn’t cut corners on the windows, or you’ll be in for a hefty bill in your future.

Roof

Most home buyers look at the roof when considering the purchase of a home, and the inspector will definitely comment on the quality of the roof. However, some roof materials last longer than others. Standard asphalt shingles last about 15 to 20 years, but tile roofs may last a lifetime. A tile roof should be considered a long-term savings when it comes to purchasing a home.

Flooring

Don’t be fooled by new flooring when you purchase a new home. If it isn’t quality, it won’t last. Even “hardwood” may be manufactured, which means it can be refinished but only a few times before it has to be replaced. If new laminate flooring has been installed, make sure it is water resistant. You don’t want to include new flooring in your long-term upkeep of the home.

For the Seller

As a home seller, you should be aware of what prospective home buyers are considering and do your best to eliminate fears of long-term upkeep. That doesn’t mean install a tile roof, expensive windows, and solid hardwood floors. What it does mean is make sure your home looks well-maintained. A roof with lifted shingles is going to be a turn-off that will be pointed out by the inspector. Clean flooring with no lifted edges will look well-taken-care-of no matter what the quality. Clean windows will let potential buyers know that the sills aren’t filled with dirt and junk that will decrease their opening and closing capabilities.

For the seller, long-term upkeep is making the home look as if it has been handled correctly, so long-term problems don’t start to creep in. This is hard to do when simultaneously planning a move, so make sure you continue to keep up your home during the hubbub of the moving process.  

5 Home Inspection Tips

by Karen Picarello

When you are buying a house, you may be dealing with a whole lot of people who want to get a sale. The homeowners have staged the home, so it looks great. The real estate agent wants his or her commission. It is difficult to know who to trust in these situations, and that is why home inspections are so necessary.

You can find a good home inspector by asking your real estate agent. You should probably make your contract contingent on a good report, and you should plan to be present during the inspection. They usually take a few hours and cost less than $1,000. Here are a few other tips about home inspections:

1. Insurance

Home inspectors do have some liability, but they can legally limit their liability to the cost of the inspection. If they miss that your furnace needs replaced, the amount of the inspection is not going to cover the cost of the furnace. That is why you should not hire a home inspector that has this in their contract. Instead, look for home inspectors that have insurance. They can purchase Errors & Omissions insurance that covers them for up to one million dollars.

2. Professional Inspectors Group

Formal training is not always a specific requirement for home inspectors, so it is nice to know whether or not your inspector has it. Ask if your inspector belongs to any professional groups, and then look up those groups to see what they require for membership. This will tell you a lot about their ability.

3. Ancillary Testing

If you need ancillary testing, it is nice to know if your inspector can do it. This is for things such as mold or radon. Your inspector may do it for a fee, or you may have to hire a specialist.

4. Reviews

The internet has made it hard to hide if you are a bad home inspector, so use this tool to evaluate your potential inspector. Check out sites like Yelp or Angie’s List, and find out what people are saying about your inspector candidate.

5. What Isn’t Included

Lastly, find out what won’t be included on the inspection. You may want to look at a sample report to find out what will be inspected, and ask questions.

You may want to call your potential home inspector and give him a quick phone interview. If he or she seems shady, go with somebody else! There is something to be said for intuition, and feeling good about your home inspector choice will likely yield better results.

Why You Want a Real Estate Agent

by Karen Picarello

A recent collection of lawsuits has people wondering whether or not real estate agents are necessary anymore. In fact, they are being compared to video rental stores, an industry that is almost extinct in today’s world of internet accessibility.

Real estate information is readily available on multiple websites including MLS.com, Zillow, and Redfin. This has potential buyers and sellers feeling forced into contractual obligations with the realtor industry that force people to pay money to a third party in order to purchase a home. With standard rates reaching as high as 6 percent, it is understandable that people want change.

In the past, only real estate agents had access to all of the home listings on the market. Today, it requires a real estate license to get your home on the MLS, but you can pay out of pocket for this service instead of tacking the real estate fees onto the purchase price of the home. This is much less expensive, but you don’t get all the benefits of having a real estate agent.

This leads one to the question: what good is a real estate agent? This question has many hard-working agents exasperated at the thought that so many people undervalue their services. In reality, the home buying process is held to a higher standard because of the real estate agency industry, and agents simplify the process with their connections and know-how.

If you are selling a home, your real estate agent will interact with multiple buyers and direct them to your home when it seems a good fit. This is something that only live interaction with a person can accomplish. No amount of pictures online can replace this action for sellers or buyers. They streamline the process by showing homes that fit the wants and needs of a potential buyer.

If you are buying a home, it is much easier to deal with the bank, the seller, and the title company throughout the home purchase if you have an agent. Need a home inspection? Your realtor can provide you with a list. Want to view multiple homes in one day? Your realtor can get access. Realtors work for no charge until you buy a home, and they will tirelessly show you homes until you find the right fit.

Most importantly, real estate agencies abide by a code of ethics that includes social responsibility. Imagine a world not regulated by agencies such as the National Association of Realtors. Good luck avoiding misrepresentation of homes and corruption scandals.

Realtors are underappreciated, but you don’t have to buy a home through a realtor. There are many for-sale-by-owner options. But just like all other sales options, it is good to have professionals in the field that can streamline the process and create ethical boundaries.

Mortgage Rates Continue to Fall Amid China Scare

by Karen Picarello

The mortgage giant Freddie Mac just released new numbers showing continued decreasing rates for home loans. Its 30-year fixed rate is down to 4.1%, and its 15-year fixed rate is down to 3.57%. While this is not great economic news, it is great news for those who are looking for a home loan.

Rates continue to fall because of trade tensions between China and the U.S. Trumps tariffs and continued threats to increase tariffs have created an uncertain stock market. Not even strong employment numbers can strengthen predictions about the future, and weakened relations between China and the U.S. could keep mortgage rates low.

What Does this Mean for Prospective Home Buyers?

If you are thinking of purchasing a home with a mortgage anytime soon, you should get ready. Nobody knows how long rates will stay this low. A 4.1% rate is a lot less money to spend over the course of a loan, and if you can swing the 15-year fixed rate, you’ll be debt-free in less than 2 decades.

If your credit isn’t quite up to par, and you don’t think you’ll qualify for a 4.1% rate, you should work on improving it. It is quite possible that the rates will stay low for a while with this administration, but it won’t stay this way forever. You might be able to afford a home quicker than you think.

What Does this Mean for Current Homeowners?

For current homeowners, this means two things. The first thing is that you may want to look into a re-fi. Lower interest rates can take hundreds off of your monthly payment and reduce the overall amount of money you spend on interest over the term of the loan. Re-financing to a 15-year loan will improve the amount of money that is applied to your principle balance each month.

The second thing this means for homeowners is that there may be more people seeking mortgages, and this might be a good time to sell your home. It is a seller’s market, and home values have been increasing. Not only will you be able to get a higher offer for your home, but you will have more people who can successfully get loans out looking. This amounts to more successful closings, and overall, happier home sellers and buyers.

You’d be hard-pressed to find a lot of people who think the tension between China and the U.S. is great, but there has been one good result for the housing market, and that is continued decreasing interest rates.

LEED certification could help you sell your home.

by Karen Picarello

Millennials are buying homes, and they want to live sustainably. That means your energy-DEFICIENT older home is not an appealing prospect in the housing market.  One way to show this eco-friendly generation that your property appeals to their values is through LEED certification. It is LEED certification that could help you sell your home in a market filled with people trying to lessen their impact on the Earth.

What is LEED certification?

The United State Green Building Council has a program called Leadership in Energy and Environmental Design Program (LEED). It created a rating system for the energy efficiency of a home. A house can achieve a certification ranging from silver to platinum depending on the rating or score. Scoring categories include the materials used to build the structure being recycled or sustainable materials, indoor air quality, water efficiency, and reduced energy use. This may be something that is accomplished through LED lighting or solar panels.

How can I have my home certified?

The first thing to do is figure out where you could make energy efficiency improvements to your home. Then, register for LEED here. You will have to meet project goals and have them verified by LEED’s onsite certification process. Once certified, you’ll have a major selling point should you ever decide to sell your home, and all generations of buyers will see your home as one that is updated and efficient, meaning they won’t have to spend as much on utilities bills, and they’ll be eco-friendly.

Is it worth it?

If your home is older, it can be very difficult to impossible to get a platinum certification, as you aren’t going to be able to change the materials the home is built from, etcetera. However, some updates to get even the most basic of certifications will save you money while you’re in your home and reduce your carbon footprint. In some respects, the carbon footprint reduction means it is always worth it. Realistically, you should consider how much your investment will return comfort and savings. If you are planning on selling your home, it is worth a little more consideration. After all, LEED certification is simply peace of mind until you add it to the features of your listing. Then, it can equal a bidding war that could have you making more from your sale.

LEED certification is at the very least worth knowing about, so you can decide whether or not it is right for you. Many commercial buildings are now seeking the certification, as global conscientiousness amounts to public support and thus more earnings. It is always advisable to become more efficient, but you’ll have to decide for yourself if you want to go for the certification.

Buying a Home in a New Area

by Karen Picarello

If you are buying a home outside of your current town, you may be flying blind. If you aren’t familiar with the region, you could accidentally end up in a bad neighborhood or simply with bad neighbors. Don’t be sold on a home just because it fits your idea of a nice-looking residence. Scrutinize a little bit, and dig up the dirt on the neighborhood.

1. Research the Area

Look up statistics about the area. Things like the quality of schools, businesses, and services will help you to get an idea of the area you are considering. If there is a country club, it may be upper end….but visit the country club. It may be a doozy that is on its last leg and has a poorly maintained golf course. Make sure your information is updated. Communities change over time, so don’t rely on old info. Another thing you cannot rely on is social media, but at the same time, it can give you some really good dirt on local drama. If there are any major red flags, research it deeper to see if it’s real.

2. Talk to the Neighbors

There’s no better source than a primary source, and neighbors are just that. Ask them about the neighborhood, and while you’re at it, give them the onceover. Could you live next to them? This does not mean you have to be future besties, but you also need to tolerate one another. It may sound a little intrusive to barge in on the neighbors, but it will actually help break the ice. Who knows? Maybe they’ll help you move.

3. Get an Inspection

You also don’t really know what the last homeowners did. That’s a nice new paint job, but what is it covering up? New floor? Prior water damage? None of these things necessarily mean the other, but an inspection should weed out any major cover-ups. Inspectors will notice things that the potential home buyer may miss, such as a faulty water heater or a termite problem.

4. Check Utilities

Lastly, it is good to check the utilities. Is the home an energy hog? How much is the gas compared to other homes with electric heat? How much more in water does it cost to maintain a full-size swimming pool? This information will help you to determine if it is a home you can truly afford.

Do you really want to live in the exurbs?

by Karen Picarello

The hustle and bustle of Metro Phoenix can be exciting, but it can also cause a person to need some respite. This is why thousands of people have chosen the long commute to the exurbs. Living far away from the city has many advantages, but it also includes major disadvantages such as remoteness and home value volatility. When looking to purchase a home, make sure you consider the good and the bad features of the exurbs before making an offer.

The Good Features of the Exurbs

1. New:

Generally speaking, housing developments in the exurbs are newer than developments in Phoenix or suburbs because things naturally develop in an outward motion. This means you have modern features in the home and won’t run into things like asbestos or lead paint. It also means double-paned windows, central air, finished garages, and many things older homes don’t have.

2. Big:

Developments in the exurbs typically have homes situated on larger lots, as there is room for expansion. In contrast, inner city and suburban developments have often been cramped. If you have a family and want them to be able to play in a sprawling back yard, the exurbs will deliver.

3. Affordable:

One of the biggest draws to the exurbs is that it is affordable. For Millennials looking to start a family and own a decent-sized property, the exurbs is worth the commute. It is also a good option for retirees looking to downsize to a more affordable living situation.

4. Quality Communities:

The exurbs also offers a sense of community that is often lost in crowded landscapes. Many exurbs have country clubs, golf courses, and community parks that make the distance from the city negligible.

The Bad Features of the Exurbs

1. Distance:

A 30 mile commute on a freeway or highway filled with thousands of other exurb inhabitants EVERY day may get old after a while. It is possible to get burned out. However, many people are able to work remotely and only commute to work once or twice a week. Those with flexible work schedules have it made in this situation.

2. Market Volatility:

The housing crisis hit the exurbs hard because people were underwater on their mortgages. The value of homes fell and has only recently regained itself. However, a lot of this problem was caused by people owning homes they could not afford. Due to better lending practices, home buyers are only moving to the exurbs because they can afford it. Will this protect the market? Time will tell.

If you can handle the commute, the exurbs provides a peaceful getaway that you can call home. However, there are some risks like commute burnout and market volatility that are important things to consider before you go all-in on a home offer.

8 Buyer Turnoffs

by Karen Picarello

Selling your home is a balance between home improvements and wasting money on renovations that don’t add value. However, it is not a guessing game to predict what will attract a buyer. Avoid these 8 buyer turnoffs if you want your home to sell quickly.

1. Odor

Mildew, urine, and smoking scents are definite turnoffs to a home. Walking into a home with any rancid odors hits a person in the face like a ton of bricks, and it’s hard to overcome that even with good upkeep and strong bones. People are willing to do a little work on a home prior to moving in. If it requires gallons of KILZ and carpet removal to rid the home of the scents of past owners, buyers will be turned off.

2. Popcorn Ceiling

Removing popcorn ceiling is messy. It has to be wetted down and then scraped. Then, new texture must be applied. It is not a question of whether or not your buyers will want the popcorn removed. Nobody likes it anymore. Furthermore, it could contain asbestos, which is a much bigger problem when it comes to removal. Take care of your popcorn ceilings prior to putting your home on the market, or expect to adjust your price.

3. Cracks

Cracks in walls, floors, or foundations can mean trouble in the future. Homes do settle, and an older home is bound to have some cracks. Just know that any visible cracks will mean weaknesses in the structure of the home to buyers even if it isn’t the case.

4. Clutter

Clutter in a home is an eyesore and detracts from a person’s ability to envision themselves in the home. Dirty hoarding situations are even worse and speak to the homeowner’s ability to maintain the home during their inhabitance. Clean up the clutter, and don’t leave a bad impression.

5. No Curb Appeal

Speaking of first impressions, curb appeal is possibly the most important feature of a home. It is the first thing they see, and if it looks like a dump, people won’t want to enter. They will make up their minds prior to stepping in the front door. This doesn’t mean you have to be perfect, but make it so they can imagine it better with little effort.

6. No Parking

If you only have a single-car driveway, make sure it is available for the viewing of your property. If it is full and potential buyers have to walk a ways to get to the home, they will already see problems.

7. Old Electrical

Old electrical panels and old wiring are a headache for any buyers who aren’t looking for a total remodel. It has to be replaced, and in some cases, a home inspection could ruin lending opportunities.

8. Neighborhood

It’s not within your control, but the neighborhood may also be a big turnoff. It doesn’t matter if you have curb appeal if the rest of the houses are in disrepair or vacant. In order to sell under these conditions you may have to lower the cost or wait for the neighborhood to change. The latter may never happen.

Try to eliminate buyer turnoffs if you want to sell your home quickly. Although many of these items are expensive or out of your control, many are also remedied with minimal expenditures and a bit of elbow grease.

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TeamPicarello
RE/MAX Fine Properties North Scottsdale
21000 N. Pima Road, Suite 100
Scottsdale AZ 85255
Office: (480)860-8733
888-548-8713
Fax: (480)860-8755