Joseph Reidy's Blog
Artificial Intelligence, or AI, is the latest technology hitting shelves and being brought into homes. We now not only have the ability to control various devices in our home from an app on our phone but we can also create reports to gain insight into how we use them. Data enthusiasts unite!
The Nest learning thermostat is every Dad’s best friend. You now have the hard data to back up why everyone needs to keep the house temperature exactly where you set it. And if anyone does turn it up you can turn it back down right from your phone.
If you are a data enthusiast you can use reports to see how much energy you’ve used throughout the week and/or month. Let’s be honest that’s enough to make us all data enthusiast converts.
Nest Cam IQ allows you to keep watch over your domain. It has face recognition capabilities and high-quality footage to recognize family members, frequent visitors, and intruders. When you add the Nest Aware feature you can even get updates right on your phone of the comings and goings of your home.
With microphone capability, you’re able to speak to those in the room, even if your two towns over. Keep your home safe, dogs off of the couch and teens from breaking house rules. And night mode utilized LED lights to get clear pictures for 24/7 film coverage.
Nest Protect is the smart smoke and carbon monoxide alarm you wish you always had. It recognizes the difference between smoke and steam which means no more obnoxious false alarms when cooking. You can use your towels solely for drying your hands again.
If that alarm happens to go off when you aren’t home it alerts your phone so you’re in the know at all times. It even warns you when the alarm is about to go off so it does scare the bejeezus out of you. As in it actually says “Heads up. There’s smoke in the kitchen” (or whichever room it’s installed in).
Nest Protect even has a motion detector and nightlight. So it knows to give you a little light as you walk by at night. You don’t have to choose between stumbling in the dark or fighting bleary-eyed through the brightness of normal lighting.
One last thing: if you upgrade to a Rheem water heater you can sync it up to your Nest Protect. Why would you want to do that? If one of your alarms does go off you can set up a trigger reaction where your water heater will shut off. It can also sync up to your Nest thermostat and turn the heat off as well.
While working from home and making your own schedule, either freelance or as a contract worker, allows for a particular type of freedom and control of schedules, a dress codes, income limitations, and your life, when it comes to qualifying for a mortgage, your 1099-MISC status comes with some drawbacks.
The so-called “gig-economy” places workers squarely in the “self-employed” column with its tax breaks that reduce the bottom line, letting you keep more of the money you work for. Unfortunately, the mortgage banking industry has not completely caught up to the new reality. The challenge is differing between “provable” income while retaining the tax advantages of self-employment.
Conventional Mortgage Lenders
Typically, the mortgage industry bases your credit-worthiness on provable income. Underwriters (the folks tasked with determining your creditworthiness) use W-2 forms and tax returns to qualify homebuyers for a conventional loan. Without these standard forms, proving your income is difficult for many self-employed would-be homeowners.
Conventional lenders follow a prescribed formula to prove income and credit-worthiness, so many mortgage underwriters merely look at your after-tax and post-deduction income. The result for 1099 workers is a lower provable income than the reality of most entrepreneurs or self-employed workers situation. Certain expenses such as one-time investments in equipment or product, and some depletions or deductions for your existing home, add back into your income on paper, but qualifying with 1099 income requires extra effort on your part.
Unconventional Mortgage Lenders
Conventional lenders offer conventional loans. These are loans qualified for selling on to FreddieMac or FannieMae. Alternative loans—those provided by smaller lenders and investors that hope to realize a better return than a conventional loan offers—might be a more likely option for the self-employed. These loans are not without some added risk. To make them attractive to investors, the interest rate on non-conforming loans typically is higher, and down-payment requirements might be higher as well. Some alternative mortgages with lower interest rates or lower down-payments might be available to self-employed borrowers with exceptionally great credit or an extensive portfolio.
Plan two years in advance: position yourself to qualify for a loan. Once you know where you stand, you can work to move into better condition to qualify. Organize your books and keep accurate financial records. You need to prove your income, so use an invoicing system to show receivables. Often, lenders want to look at two or more years of both tax returns and bank statements. They want to see an average over 24 months to determine your annual income and your ability to pay your mortgage. Keep profit and loss statements, expense reports and a balance sheet. If your accounting is complicated, get professional help. Utilizing a professional bookkeeper and CPA might just save you money and show you have solid business intent.
Save up a more substantial down payment: The more you put down, the less you need to borrow. Showing consistent savings also proves your ability to set money aside and prioritize savings and spending.
Improve your credit score: Sometimes it seems your credit score doesn’t make sense. After all, the calculations and formulas used remain a mystery. You can make significant strides in increasing your score though, by paying attention to two things: payment history and credit utilization.
- Payment history is just what it sounds like—the history of how you pay your bills. Avoid paying late and try to pay early. Your payment history makes up more than thirty-three percent of your total score.
- Credit utilization—the ration of how much credit you have available to how much you’ve used—is another large chunk of your score. If you have a credit card with $2500 available, and you’ve only used $250 (on average) you are using just ten percent of your available credit. On the other hand, if your card only has $250 available and you’ve used just $125 you have used half of the available credit. The higher the percent of your combined usage to your combined credit (all credit cards, personal loans, vehicle loans, etc.) the lower your score.
- The remaining parts of your credit score relate to the length of time you’ve had credit, how many accounts are new, how often you apply for credit and a mix of other bits of information. To help this area, avoid applying for credit cards, car loans or personal loans (furniture, appliances, etc.) for the two years leading up to when you apply for a mortgage. When you pay off a credit card, cut up the card or put it away, but avoid closing the account. Older accounts have a higher point value compared to newer ones, even if you aren’t currently using them.
Start now working on your credit and establishing the best accounting practices to prove your income. Speak with a mortgage lender for information on what it takes to pre-qualify for a loan in your situation.
An open house may prove to be exceedingly important, particularly for a buyer who plans ahead and makes the most of this opportunity. Because if a buyer enters an open house with a plan in hand, he or she can gain the necessary insights to determine whether to set up a home showing or consider other residences.
Now, let's take a look at three things that every buyer needs to know about open houses.
1. Open houses generally take place on weekends.
If you plan to pursue a home in the near future, you may want to keep your weekends open. That way, you can attend as many open houses as possible and boost the likelihood of discovering your ideal residence.
Most open houses are held on Saturdays and Sundays, and these events may begin late in the morning and end late in the afternoon. There is no requirement to attend an open house as soon as it begins. However, it is important to remember that the early bird catches the worm. And the sooner you attend an open house, the sooner you can determine whether a residence is right for you.
2. Each open house is designed to provide a stress-free experience.
During an open house, you can walk around a residence and explore all aspects of a home at your own pace. Meanwhile, a seller's real estate agent is present and can respond to your concerns or questions as well.
Oftentimes, it helps to craft a list of questions prior to an open house. This will enable you to receive immediate responses to your queries from a seller's real estate agent.
You also may want to carry a notepad and pencil with you as you walk through an open house. This will allow you to keep track of any notable home features or flaws, and ultimately, weigh the pros and cons of a residence.
3. An open house provides no guarantees.
There is no guarantee that you'll find your dream residence during the first open house you attend. In fact, you may need to attend dozens of open house events before you discover a home that matches or exceeds your expectations.
As a buyer, there is no need to leave anything to chance as you search for your ideal house. And if you collaborate with a real estate agent, you can stay up to date about open house events for residences that correspond to your homebuying criteria.
A real estate agent is a property buying expert and will do everything possible to help you discover your dream house. In addition to keeping you informed about open house events, a real estate agent will set up home showings and offer homebuying recommendations and suggestions. By doing so, a real estate agent will help you achieve the best-possible results during the property buying journey.
Hire a local real estate agent today, and you can take the first step to find and buy your dream house.
You’ve been paying off your mortgage for 10 years, building equity while making careful financial decisions to ensure that you’re on track to pay off your mortgage. So, all of those payments are essentially money in the bank for you, right?
Not quite. The equity you’ve built toward is home isn’t really accessible until you either fully pay off the home, sell your home and use your equity toward a down payment, or use it to take out a second mortgage.
In today’s article, we’re going to be talking about second mortgages--what they are, when to use them, and when you should seek out other options. Hopefully, by the end, you’ll be able to make a more informed decision.
What is a second mortgage?
A second mortgage is somewhat deceptively named. The process of taking out a second mortgage revolves around using your equity as collateral toward a second loan. That loan amount doesn’t have to be used toward a home, however. It can be spent pretty much at the discretion of the homeowner, as long as you stay within the spending limits of the loan terms.
Why take out a second mortgage?
Homeowners typically take out a second mortgage when an expense is tossed their way, whether foreseen or unforeseen. It could be a costly house or vehicle repair, a child’s education, or any other large expense that you might not have been aptly prepared for.
Types of second mortgages
There are two main types of second mortgages that homeowners qualify for. First is a standard home equity loan. You receive a fixed-rate loan that usually paid off over a loan term of 15 or 30 years.
The other type of second mortgage is a home equity line of credit (HELOC, for short). A HELOC is similar to a credit card in that you are approved for a certain amount but don’t need to spend the full amount.
Risks of home equity lines of credit
This type of loan is ideal for expenses that you maybe don’t know the full cost of. However, there is an inherent risk in taking on an expense that might go over the credit limit of your HELOC.
Just like with credit cards, interest rates vary. However, the interest rate is linked to something called a “benchmark rate.” When interest rates for the benchmark increase, so do your HELOC rates.
Aside from the variable interest rates, HELOCs can also prove to be difficult to manage for people who are already in credit card debt. So, it’s only recommended that you take out a HELOC if you are sure that you can stay on top of your monthly payments and are in good standing with other credit lenders.
Risks of home equity loans
Standard home equity loans aren’t without their own risks. For one, you’re putting your house on the line when you take out a second mortgage. So, before taking out a home equity loan on a new expense, be sure that you can manage that expense or you could risk losing your home.
Having a second mortgage can also make it difficult to refinance your home loan, which could cost you in the long run if it would otherwise pay off to refinance.
Benefits of second mortgages
Second mortgages do have their time and place. Home equity loans, for example, can help you achieve a lower interest rate than a typical loan if you have a great deal of equity built in your home. This could make the most financial sense over the long term.
Similarly, a HELOC might be a better option than a credit card for homeowners who don’t have a credit score high enough to land them a good interest rate.
If you intend to find your dream house, it helps to establish a homebuying strategy. That way, you can enter the real estate market with a plan in place to accomplish your desired goals.
Now, let's take a look at three tips to help you craft an effective homebuying strategy.
1. Create Homebuying Criteria
If you know where you want to reside, you can narrow your house search. As a result, you may be better equipped than other buyers to accelerate the homebuying journey.
Creating a list of home must-haves and wants usually is a great starting point for homebuyers. This list typically forces homebuyers to think about what separates an ordinary residence from a dream house. And once a homebuyer crafts a list of home must-haves and wants, this buyer can search for residences that meet his or her expectations.
2. Budget for a Home
In most instances, homebuyers lack the necessary financing to buy a house. Luckily, lenders are available that can help a homebuyer assess mortgage options and get pre-approved for home financing.
Budgeting for a home is a major part of the homebuying process. Because if you know exactly how much you can spend on a residence, you could speed up your house search.
To get pre-approved for a mortgage, you should meet with a variety of banks and credit unions. Then, when you find the right mortgage, you can enter the real estate market with a budget at your disposal.
3. Hire a Real Estate Agent
There is no requirement to hire a real estate agent before you pursue your dream house. Yet the advantages of hiring a real estate agent can be significant, and perhaps it is easy to understand why.
For homebuyers, a real estate agent takes the guesswork out of finding the right house at the right price. A real estate agent also collaborates with a homebuyer and will go above and beyond the call of duty to ensure a buyer can achieve the optimal results.
If you want to purchase a house as quickly as possible, it may be a good idea to hire a real estate agent sooner rather than later. Oftentimes, a real estate agent will meet with you and learn about your homebuying aspirations. He or she next will work with you to craft a homebuying strategy and launch a successful house search.
Furthermore, a real estate agent is a housing market expert who will help you overcome any potential homebuying hurdles. A real estate agent understands the challenges associated with purchasing a house and will help you identify and address such issues before they escalate. And if you ever have concerns or questions as you search for your ideal residence, a real estate agent will respond to them.
Enter the real estate market with a plan in hand – take advantage of the aforementioned tips, and you can create an effective strategy to streamline your search for your dream residence.