Date Archives: January 2018

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January
25

If you want to buy a home this year, you may be in the midst of planning—or perhaps you're already well on your way. Purchasing a home is a process made up of many moving parts, including your finances, your overall goals, your planning ability and your current financial situation. That said, it's the season for New Year's resolutions, right? Start making some financial ones along with your other goals. To get you started, here are five financial resolutions that can help you reach your goal of buying a home in 2018: Make a Budget Just over 40 percent of Americans have a budget. Budgets are invaluable to prospective homeowners, though. Why? Well, you can see how much you spend per month—and you need to know that before deciding on what mortgage payment you can afford. Many people hazard a guess at their discretionary spending. You may think you spend $200 a month on dining out with friends, for example. But if you totaled it up, you may find that it comes out closer to $300. That's important, because those who spend more than they earn, or squeak by financially every month, often do it because they underestimate what they're paying. So, use a personal finance software like Mint or You Need a Budget and enter everything you purchase for at least a month. As you build your budget, divide it into categories determined by your monthly expenditures. You can tweak this going forward. Tally together what you need for necessities, like rent and utilities. Add together discretionary spending, like movies and eating out. How are you doing? If you're within your earnings, great! If not, review your spending for how you can save. Can you eat out less? Maybe cut down on that second or third video streaming service? Brew your coffee at home? Save, Save and Save Again Purchasing a house costs money. If you've been diligently saving for the down payment, congratulations. If not, one of the most crucial things you can do to prepare for homeownership is saving for the down payment. Once you've got the down payment, continue to save, as you will need moving expenses and a cash cushion. As a rule of thumb, moving and establishing a household always costs more than you think. You may need new furniture or plumbing repairs, so be sure you have an emergency stash of cash. Establish a Clear Goal Like budgeting for your expenses, you also need to know your overall savings goal. It's like creating a fund in the event of losing your job—you want a six-month cushion, at least. You will find it easier to save if you can visualize yourself reaching your final goal. Scope out starter homes in your area. Look at neighborhoods you'd like to live in with your family. Use an online mortgage calculator to figure out how much you'd be paying for the average starter home per month. Once you have a general sense of how much your mortgage would cost, as well as utilities, figure out how much you will need for a down payment. While six months' worth of your salary is ideal, you can also aim for three months to start. Get Your Credit Score Most mortgage lenders will only approve mortgages for people with good to excellent credit scores. Good credit scores range from 690-720 and excellent credit scores range from 720-850. The average credit score in the United States is 679. Factors that determine your score include:
  • History of debt payment
  • Total amount of debt
  • Length of credit history
  • Number of credit sources
Credit scores are relatively easy to obtain, whether from banks, financial software or one of the credit reporting companies, such as TransUnion. In fact, you're entitled to a free credit score each year, or every 12 months from Experian, TransUnion and Equifax. Find out your score before applying for a mortgage. If you have a bad credit score, it's unlikely a bank will approve your mortgage application. But, the great thing about getting your credit report is that you will find out what categories are pulling down the score. Knowledge is power—once you know, you can fix it. If your record of paying bills on time is poor, for example, try to take care of them the minute you get the bill. Your score will go up. If your score is average, see if you can increase it before you apply. Many lenders give preferential interest rates and other financial advantages to people with high credit scores, so you want the highest credit score you can get before applying. Pay Down Debt There are two main reasons you want to pay down debt as much as you can before purchasing a house. First, the less debt you have, the higher your credit score is likely to be. The higher your credit score, the more likely your lender is to give you preferential treatment, like a lower interest rate or fewer points and fees. Second, the less debt you have, the lower your money debt obligations are likely to be. Less debt can free up monthly cash that you can put toward your savings, home purchases or other expenses, instead of directing that money toward paying off interest fees. Ready to become a homeowner this year? With these five resolutions, you can make 2018 your year by boosting your savings and credit score, as well as becoming a go-to candidate for a mortgage with low-interest and fees. Megan Wild is a home improvement specialist who loves fixing up old homes and making them beautiful and functional again. When she's not writing, you can find her hiking in the great outdoors or tweeting housing information @Megan_Wild. By Megan Wild Editor's Note: This was originally published on RISMedia's blog, Housecall. See what else is cookin' now at blog.rismedia.com:

Reprinted with permission from RISMedia. ©2018. All rights reserved.

January
19

Believe it or not, being healthy at home isn't just about what's happening in your fridge. Sure, it's a good starting point, but there are actually many ways to create a pro-health environment throughout your home. Here are five simple ways to start.
  1. Declutter the kitchen. In this case, we're not talking about knickknacks—we're talking about food. Go through your cabinets, pantry, fridge and freezer and say goodbye to anything that's been lingering for way too long. Donate canned goods you've been saving 'just in case,' get rid of freezer-burned processed meals and old packages of crackers and snacks. Once your shelves are cleared out, start buying and eating mostly fresh items, picking up just what you need every couple of days as opposed to doing a mega shopping every couple of weeks.
  2. Honor your eating area. If you're wolfing down meals standing up at the kitchen counter or on the sofa in front of the TV, it's likely that you've adopted some poor eating habits. Make sure your dining space is set to sit down and enjoy a mindful eating experience that includes quality time with your loved ones, as well. Not only will this lead to eating better prepared, healthier meals, it will force you to eat more slowly, which will help you avoid overeating.
  3. Check the air quality in your most-frequented space. Whether it's the living room or family room, make sure the air is healthy in the room in which you spend the most time. Dust and vacuum more often than usual (especially if you have pets or use a fireplace frequently), open the windows to circulate air, or use an air purifier or salt rocks to remove impurities. Add some house plants to help absorb carbon dioxide and release additional oxygen.
  4. Carve a restorative niche. Whether it's a small workout area, or a reading and meditation nook, everyone needs to build their own private space within the busy walls of their home. Whether it's for exercise or simple quiet time, having a mini escape right at home is essential to both your physical and mental well-being.
  5. Create a rest-inducing bedroom. Many of us aren't getting enough sleep, which is at the root of a wide variety of health problems. Do a quick analysis of your sleeping quarters to make sure they're conducive to a good night's rest: Is your mattress well-suited for your sleeping needs? Is there a television that needs to go? Is the temperature cool enough? Is an after-hours quiet zone enforced? If not, get your bedroom in sleeping shape pronto.
These five steps will help ensure your home is designed to serve both your physical and emotional health. If you need more real estate information, feel free to contact me.

Reprinted with permission from RISMedia. ©2018. All rights reserved.

January
17

Vienna, VA and Long Island, NY - January 22, 2018 -- Pearl Certification and Century 21 American Homes are proud to announce that American Homes has been accepted into Pearl's prestigious Broker Advantage Program. Century 21 American Homes is the first broker in New York to receive this distinction. "American Homes is dedicated to providing the highest-quality service to our clients," said Principal Broker Mike Litzner. "There's a tremendous opportunity in residential real estate for our agents to make value visible in listing and marketing homes that have energy efficient features. Pearl Certification gives our agents the training and tools needed to showcase their full value. Pearl Certification will help our agents sell homes for more and faster." Long Island, New York-based Century 21 American Homes has over 700 agents and 14 offices. Century 21 American Homes helped over 2,500 customers buy and sell homes in 2017 and finished ranked as #13 in the entire US for producing Century 21 firms. "Only a small number of elite brokers with an exceptional level of professionalism and dedication to high quality customer service are accepted into our Broker Advantage program," said Pearl CEO Cynthia Adams. "American Homes is a perfect fit, and we're delighted to work with them as we launch in the New York market." As a Broker Advantage Program member, Century 21 American Homes' agents receive training on identifying and marketing high-performing, energy efficient features and renewables. As Pearl Partners, American Homes' agents can also offer a discounted certification to sellers. Pearl's certification includes a detailed report of the home's high-performing features, an Appraisal Addendum, and a full-color print and online marketing package. When marketed properly, Pearl's third-party certification has been shown to add 5% or more in value to a home, according to an independent study authored by appraisers. "Buyers want energy efficient, healthy homes, and survey after survey shows they'll pay more for them - but only if they have reliable, investment-grade information about the home's features," said Pearl President and COO Robin LeBaron. "Pearl's partnerships with select brokerages ensures that qualified agents have the training and tools to showcase these homes." Pearl has launched Broker Advantage programs in Virginia and NY, and is currently expanding to Pennsylvania, New Jersey, Maryland, and California. The Vienna, Virginia-based firm, is a 2017 member of the prestigious National Association of Realtors REach Accelerator program.
January
11

If you've never bought a home before, some people may try to tell you that renting is a smarter choice than buying. However, for the vast majority of people, that's simply not true. Here are some of the top myths about the advantage of renting over owning. Myth No. 1: You can't afford a down payment. Many would-be homebuyers opt for renting believing that they won't be able to afford to save the 20 percent down payment. In reality, you usually don't have to put 20 percent down. In fact, you can usually put down 10 percent, or sometimes 5 percent or less. Myth No. 2: Renting is cheaper. Even if your monthly mortgage payment ends up being a little higher than what you might have paid in rent, that money is going toward your own long-term financial investment. When you pay rent, you're making your landlord richer, not yourself. Myth No. 3: You won't recoup your money. Unlike stocks, real estate is, in fact, the safest long-term investment you can make. Yes, the market will go through its cycles, but if you're in it for the long-run, you will earn back your investment (and then some). Myth No. 4: Renting is less of a hassle. Sure, you have less vested in your rental property, but the blood, sweat and tears you put into turning a house into your home is a richly rewarding experience. Not only are you creating the home you've always wanted, without the restrictions of a landlord, you're also building upon your investment. If you'd like more homeowner information, please contact me.

Reprinted with permission from RISMedia. ©2018. All rights reserved.

January
7

A new year has started, and with it a newly enacted tax policy: the Tax Cuts and Jobs Act. While most changes will not be noticeable until consumers file their taxes in 2019, the new tax law stands to alter how consumers view homeownership incentives and could impact real estate markets across the country. Additionally, many consumers, but not all, may see a change to their paychecks by next month due to the new tax rate deductions. These are the biggest real estate-related tax policies and how they could affect homeowners. home tax law 1. Cap on Mortgage Interest Deduction The Tax Cuts and Jobs Act reduced the limit for the mortgage interest rate deduction for new loans starting Dec. 15 to $750,000. Loans that were taken out before this date are grandfathered into the previous tax policy, which featured a $1 million cap on the deduction. Homeowners can refinance their existing mortgage balance up to $1 million while still being able to deduct the interest—the new loan cannot exceed the amount of debt being refinanced. "Although only 1.3 percent of all U.S. mortgages are likely to be impacted by the capping of the mortgage interest deduction, it poses a risk to large urban areas with high-priced housing stock," says realtor.com® Senior Economist Joseph Kirchner, Ph.D. "The No. 1 area with the greatest risk to its home prices and sales is Washington, D.C., followed by California, Hawaii, Massachusetts and New York." Some tax experts state that the overall impact of these changes will not be seen until current homeowners sell, in which case the purchased property would come under the new regulations. "Most estimates suggest that by limiting some buyers' purchasing power, capping the deduction could contribute to slower home value growth in the priciest communities, moderating the gains longtime homeowners can expect when they do eventually sell," says Alexander Casey, Zillow Group Policy Advisor, Related story: More than half (56.7 percent) of RISMedia readers believe the tax bill is not "good for homeownership," according to a poll conducted Dec. 20-21; 32.3 percent believe it is, however, and 11 percent are "not sure." 2. New SALT Deduction Limit In the final bill, taxpayers can itemize deductions up to $10,000 for their total state and local property taxes and income or sales taxes. The cap is the same for both individual and married filers. "Households that pay more than $10,000 in combined state and local taxes each year will be impacted by the new SALT limits," Casey says. "On one hand, taxpayers who still itemize deductions and whose total state and local tax liability exceeds $10,000 will get a smaller tax break; however, for other households, the continued availability of those deductions, even if they are capped, may be the deciding factor between whether or not they itemize deductions. This matters a lot in areas where SALT deductions were a relatively more significant reason for itemizing—areas with lower home prices, but higher taxes (e.g., upstate New York, Southern New Jersey, Inland California)." In the previous law, the SALT deduction was unlimited. "The new SALT limit will have the greatest impact on states that provide a large number of services to their citizens by, first, reducing the benefit of tax cuts by disallowing the full value of this deduction, and, second, compounding the issue of the standard deduction vs. the mortgage interest rate deduction," Kirchner says. 3. Preserved Exclusion of Capital Gains This tax policy remains unchanged from the previous law, which stated that homeowners must live in their home for two out of the past five years in order to qualify for the exclusion. "About 10 percent of home sellers last year sold their home after living in it between two and five years," says Casey. "Keeping the status quo means these sellers no longer need to make that difficult choice, and can instead feel more free to list their home on a more flexible schedule without fear of a potentially hefty tax hit." The Senate bill proposed an increase to the residency requirement to five years of the past eight, but it did not pass to the final version. "Today, homeownership is imperative for middle-class wealth-building and financial stability," says Kirchner. "It allows people to invest in a long-term asset that pads their retirement savings, provides a safety net for unforeseen circumstances, and equity to back investment in education or small business. The survival of the capital gains exclusion means that the advantages of this type of investment will remain (except, of course, with regard to impact of changes to deductions)." 4. Deductibility on Home Equity Loans The new law states that taxpayers will no longer be able to deduct interest paid on home equity loans beginning in 2018, unless the funds are being used to significantly improve the residence. This provision expires in 2026, when it reverts back to the previous cap of $100,000 of home equity debt. "Deductible interest on home equity loans used to provide homeowners another layer of financial security by giving them the ability to obtain low-cost financing," Kirchner says. "Now, without the ability to deduct interest, owners effectively will have to pay more for their loans, which could put downward pressure on the homeownership rate." Casey believes the removal of this homeownership incentive will not have a dramatic impact on the homeownership rate, but will affect home renovations instead. "A lot of personal and economic factors matter more," Casey says. "This deduction is more important for financing major home renovations, so eliminating this deduction could contribute to underinvestment in the housing stock, making it more difficult for struggling communities to reinvent themselves." 5. Doubling of the Standard Deduction In the previous law, the standard deduction for single taxpayers and married couples filing individually was $6,350. This amount is nearly doubled in the new law to $12,000. For married couples filing jointly, the previous standard deduction was $12,700, which has been increased to $24,000. "A doubled standard deduction will have a big impact on how many homeowners ultimately decide to take advantage of the mortgage interest deduction," says Casey. "When you combine a much larger standard deduction, with the fact that some itemized deductions have been capped or pared back, many filers may no longer find it financially advantageous to itemize deductions." He adds that according to Zillow's calculations, under the current tax code, itemizing and claiming the mortgage interest deduction is financially worthwhile on an estimated 44 percent of all U.S. homes. In addition, under the new law, itemizing and claiming the MID is worthwhile on only 14.4 percent of homes nationwide. "The doubling of the standard deduction changes the equation for homeownership incentives and essentially renders the mortgage interest rate deduction ineffective for the majority of owners," says Kirchner. "Until now, most households did not itemize their deductions until they bought a home, which added significant tax benefits to ownership. Based on the changes to the standard deduction, this benefit will disappear for all but those homeowners who have mortgages in excess of $550,000, depending on what other deductions they have." Location and Timing The impact, however, will largely be based on where taxpayers are located. Those in high-cost states may see the biggest changes in how they file, especially with the new $10,000 SALT limit. According to Zillow Research, 51 percent of Americans surveyed last year said they agree with the statement that "the property tax rate in my community is unfair to me." These sentiments may rise in response to residents of high-tax burdened markets receiving a higher tax bill because of the new limit. For example, Zillow analysis conducted for the Wall Street Journal states that a top income earner in New York, who owns in the top-third price range of the metro, pays an estimated $23,000 in property and state income tax every year, which is double the amount now allowed for deductions. The analysis also reported $10,000 in similar circumstances for Raleigh, N.C., and $12,000 for a Chicagoan. These are just a few areas where high-earning taxpayers would be adversely impacted by the new SALT deduction cap. According to a Wall Street Journal article, Moody's Analytics estimates that 80 percent of counties across the country will see a negative impact on home prices in the summer of 2019. Low-tax states, however, may benefit from the new tax code. According to the WSJ, parts of North Carolina, Alabama, Nebraska, Indiana and Tennessee may see boosts in their home prices and local economies. And the same Zillow analysis that surveyed high property and income taxes in other states says an individual in a similar financial situation would pay one-quarter of the amount in Nashville, Tenn. For those that have been on the fence about moving, the tax overhaul may be the deciding factor. But those who live in high-tax states may not see the negative impact from taxes as reason enough to leave their homes. According to NAR research, here are the five metro areas that will be most affected by the new tax law (based on homes with mortgages valued over $750,000): 
  1. San Jose-Sunnyvale-Santa Clara, Calif.
  2. San Francisco-Oakland-Hayward, Calif.
  3. Santa Cruz-Watsonville, Calif.
  4. Santa Maria-Santa Barbara, Calif.
  5. Urban Honolulu, Hawaii
The top five metros based on share of owners that pay over $10,000 in real estate taxes:
  1. New York-Newark-Jersey City, N.Y., N.J., Pa.
  2. Bridgeport-Stamford-Norwalk, Conn.
  3. Trenton, N.J. Metro Area
  4. San Jose-Sunnyvale-Santa Clara, Calif.
  5. San Francisco-Oakland-Hayward, Calif.
"Only 6 percent of homeowners have mortgages exceeding $750,000, and only 5 percent pay more than $10,000 in property taxes, but most homeowners won't itemize under the new regime," said NAR President Elizabeth Mendenhall in response to the bill's passing. "While we're pleased that important homeownership incentives such as the capital gains exclusion survived in conference, additional changes are required to truly incentivize homeownership in the tax code." Timing also plays a role. Many of the provisions in the Tax Cuts and Jobs Act, including individual tax cuts, expire in 2025 and therefore may lead to tax hikes in the future, according to the Distributional Analysis of the Conference Agreement for the TCJA by the Tax Policy Center. The report states that taxes would be reduced by $1,600 on average in 2018, increasing after-tax incomes by 2.2 percent; however, in 2025, the average tax cut as a share of after-tax income would decrease by 1.7 percent for most income groups. "The tax bill decreases homeownership incentives, but these benefits are not the only factors in the homeownership decision," Kirchner says. "In the short run, homebuyers can look forward to more money in their pocket that can be used for a down payment or larger home." He adds that cuts in government services and economic development programs, along with the rescinding of tax cuts for individuals in a few years and the impact of tax reform-induced deficit on inflation, will weaken the impact of the after-tax income boost on homeownership. "The change definitely removes some of the federal government's preferential treatment towards homeownership," Casey says. "Ultimately, with these new reforms, households will be more likely to maximize their tax breaks with a standard deduction. And when someone uses the standard deduction, it doesn't matter if they spent an extra $5,000 on a house, a boat or a vacation—the spending is treated the same when tax season comes. "It will be interesting to see how the temporary nature of some of these tax cuts shake out," says Casey. "Will those households on the edge of homeownership make decisions based on what their new take-home income is in February, or will there be some apprehension if they think their taxes will rise down the road?" According to an NAR statement, "As a result of the changes made throughout the legislative process, NAR is now projecting slower growth in home prices of 1-3 percent in 2018 as low inventories continue to spur price gains; however, some local markets, particularly in high-cost, higher-tax areas, will likely see price declines as a result of the legislation's new restrictions on mortgage interest and state and local taxes." Stay tuned to RISMedia for more developments. Liz Dominguez is RISMedia's associate content editor. Email her your real estate news ideas at ldominguez@rismedia.com. Published with permission from RISMedia.

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