Blog Category: Personal
Happy holidays and a happy and successful new year to us all! This is always the time of year we look back on the year that has passed. More importantly, we look forward to the new year and we make our new year’s resolutions. I’d like to make some resolutions both business and personal for the new year.
Condominium fees are a waste of money. This is a common refrain I hear from people that are considering buying a condo. But are condo fees really a waste of money? Condo fees are thought a waste of money for people that do not properly maintain their home. For people that are used to owning a single-family home, with no mandated condo fees, they may:
- Never do any maintenance on the systems.
- Never consider that they’ll have to replace the roof.
- Infrequently repaint, re-carpet, or refinish floors.
All this tiresome talk about the fiscal cliff is a non-event. It reminds me of all the drama over Y2K. Y2K was the Year 2000 computer problem also known as the Y2K problem, the Millennium bug, the Y2K bug, or simply Y2K. This was when computers all over the world were supposedly going to go haywire. This was because of the practice of abbreviating a four digit year to two digits in all of the computer programming. I woke up the morning of January 1st 2000, and turned on my computer just fine. I did online banking just fine, and surfed the Internet and there were no downed websites, etc. It was a non-event, so is this supposed fiscal cliff.
Yes, we are all in databases. Likely hundreds of them. Every single time we call an organization, buy something or ask a vendor a question, we go in a database. Companies and salespeople do not set up costly structures. Go through licensing and training. And spend money on products and services. Hoping that you will call, and call again, and remember to call in the future. Quite frankly, humans do not remember. We forget.
Is It Cheaper to Rent or Own a House? If you are planning on moving and are financially stable enough to potentially qualify for a mortgage, there is a lot for you to consider. Buying a home usually requires a down payment plus closing costs. Renting also comes with its own fees, but those are generally less than you will need to buy a home. Here, we will explore whether it is cheaper to rent or own a house. And the pros and cons of both.
I wrote an article in February 2013 discussing the low inventory environment. I was wondering where the sellers were and predicting that inventory would eventually start to rise, which would put a lid or even some downward pressure on real estate prices. To read that article click here. So where are prices and inventory headed now, a few quarters later?
I think it is important to remind everyone that the mortgage business, at the end of the day, is a sales business. And loan officers are salespeople. We are trained as salespeople. We are incentivized as salespeople. Within the corporate hierarchy we are known solely as salespeople. But the consumer seems to forget that they are dealing with salespeople.
Going dark on your salesperson. All salespeople have experienced this, no matter how good. You educate a potential client, you spend hours and hours with them answering questions, you create a relationship, and you truly seek to help them to earn your commission. And then it happens, they go dark. No contact. No return calls. No email reply. No nothing. It is eerie. You start to wonder what you did wrong.
Confirmation bias, what is it? It is the psychological thing within most of us that colors our ability to admit we are wrong. I suffer from it mostly within the realm of investing. When I make an investment, I am never wrong. But of course, I am, many times. But I cannot admit it until its too late. Because I am so smart, I cannot be wrong!
When you move into a new home there are numerous tasks to track. It is almost impossible to keep everything organized, unless you keep track through a task list or use some sort of technology tool.
Although the closing will seem like a long time off once you get under contract for a new home, it will all happen quickly. And a lot of tasks related to moving into your new home require a lot of advance notice! It is time to start planning things ASAP, do not procrastinate. The below will help.
Renters becoming homebuyers is an interesting process. All homeowners have been renters at one point. Before a renter will make a move up to home ownership and become a first time homeowner, they will talk to a mortgage lender. They need to see what they are qualified for. What do you think the rules are for a renter as far as how much mortgage they can qualify for? They are the same rules as anyone else. The debt ratio limits are the same. The income requirements are the same. The credit score requirements are the same.
Renters becoming homebuyers – What is different for a renter?
The one thing that is different is that an underwriter will look for something called “payment shock”. They will try and determine if the monthly payment on a new loan amount is too much for a former renter to handle because it is too large of an increase from their former rent payment. If there is payment shock the underwriter will look for compensating factors that suggest that a renter can handle the payment shock. Compensating factors would be having extra cash reserves, or an exceptional credit score, or a very stable employment history. As you can see, renters becoming homebuyers can be tricky.
Renters want their mortgage payment to be the same as their rent
Most renters will say, “I want my mortgage payment to be about the same as my rent payment.” That will almost never happen. You cannot make an arbitrary decision on what your mortgage payment will be based on your comfort level with how much you have paid in rent. You would be comparing two completely different entities. Market rental prices and the square footage you were comfortable living in when in a rental are almost always completely different than those that you will look for when buying. And even neighborhood, amenities, views, level of finish, and other things will also be different. So the price is going to be different. Also, renters need to remember that they’re going to pay property taxes when they own a home, which you don’t do when you rent one.
My own first homeownership story
Speaking of Renters becoming homebuyers, let’s talk about when I bought my first house. I had been living with a childhood friend for 2 years. I was right out of college. My friend Doug told me his parents had divorced, had each moved into a new home, and that left him living in the home he had grown up in. And he was living there alone. His parents had paid off the mortgage and had decided to let Doug live in it rent free. It was a 4 bedroom house! So Doug asked me to live there as well.
He said all I had to do was split the utilities with him. So from 1986 through much of 1988 I had a place to live for $150 a month! But then I wanted my own space, and bought a townhouse. The payment was going to be $1,118 a month. I panicked! How could I afford this? I had been living in a place for $150 a month! But I could afford it easily. I was qualified, I made enough money, I had good credit. It was all going to be fine. My reaction was based on emotion and what I had been comfortable with. My reaction was not based on any fiscal reality.
The bottom line is to buy what you are qualified for, and not what you formerly rented for. You will never stop renting if this is your prerequisite for home ownership.
The Wicked Witch of the East is back.
She is called Fannie Mae.
She is dressed in black.
Government makes her stronger every day.
She is fed by our tax dollars,
and is hungrier than ever.
She makes mortgage clients holler,
with paperwork that ends…never.
Dodd/Frank makes things worse,
it is reactive legislation.
As usual the legislators,
should have stayed on vacation.
Fannie Mae paperwork is arbitrary,
ridiculous, bloated and a bitch.
Getting a mortgage is as scary,
as a midnight visit from a witch!
To rent or to buy is an old question with varied answers. The answer depends on your ability to come up with a down payment, your ability to commit to a specific area, your creditworthiness, and much more. Those are questions for each individual to answer. But there is interesting math related to how much rent costs, that should be reviewed in helping you determine your answer.
Should you trust a financial advisor? I was recently reading an article that referenced a survey about the degree of trust people place in different professionals. The survey was done by John Hancock. The thing I found striking was that people trust their financial advisor more than any other professional. This includes their primary doctor or their accountant. Let us get a few things straight.