Sunrise Homes & Renovations, Inc.

Why the Cheapest Home on the Block Might Not Be the Best Deal

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Finding a home at a bargain price can be exciting, especially in a competitive market. However, the lowest-priced home in a neighborhood is not always the best deal in the long run. While it may seem like a smart financial move upfront, there are several factors that could make it a less-than-ideal investment. Here is why buying the cheapest home on the block might not always work in your favor.

Hidden Repair and Renovation Costs
One of the main reasons a home is priced significantly lower than others in the area is due to its condition. Older systems, outdated interiors, and structural issues can quickly turn what seems like a deal into a costly renovation project. If a home requires major repairs, such as a new roof, updated electrical wiring, or plumbing work, those expenses can add up quickly, negating any initial savings on the purchase price.

Before purchasing, it is essential to get a professional home inspection and obtain estimates for necessary repairs. Sometimes, the cost of fixing up a discounted home can exceed what it would have cost to buy a more updated home at a slightly higher price.

Resale Value Concerns
The future resale value of a home is an important consideration when making a purchase. If a home is priced lower than others in the neighborhood, there may be a reason beyond just its current condition. Factors such as a poor layout, undesirable location within the neighborhood, or limited potential for upgrades could make it harder to sell later.

Additionally, if the home does not appreciate in value at the same rate as surrounding properties, it may not build as much equity over time. Buyers should consider whether the home will be appealing to future buyers and if improvements will yield a good return on investment.

Neighborhood Compatibility and Market Trends
Buying the least expensive home on the block can sometimes mean settling for a property that does not fit well within the overall character of the neighborhood. If the surrounding homes are much larger, newer, or better maintained, it could affect the home s desirability. In some cases, the cheapest home in a high-end neighborhood may require expensive upgrades just to keep up with the surrounding properties.

It is also important to consider the long-term trends of the neighborhood. If the area is declining or if property values are stagnant, the bargain home may not gain value over time. Researching local market trends and talking to real estate professionals can help buyers make a more informed decision.

Financing Challenges
Lenders often have stricter requirements for homes that need significant repairs or that fall below certain price points. Some low-cost homes may not qualify for traditional financing if they do not meet minimum property standards. This could mean needing a renovation loan, which often comes with different terms and additional requirements.

Making a Smart Buying Decision
While the cheapest home on the block can sometimes be a great opportunity, buyers should carefully evaluate the costs, resale potential, and overall fit with their long-term goals. Working with a knowledgeable real estate agent and thoroughly assessing the property can help ensure that what looks like a deal today does not become a financial burden in the future.

Should You Lower Your Amortization to Pay Off Your Mortgage Faster?

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Paying off your mortgage faster is a tempting goal. After all, who doesn’t want to own their home outright sooner and save on interest along the way? One way to do this is by lowering your amortization period, which is the time it takes to repay your mortgage in full. But is it the right move for you? 

What Happens When You Lower Your Amortization?

Lowering your amortization means shortening the repayment period for your mortgage. For example, instead of a 30-year term, you might choose 15 or 20 years. While this strategy can lead to significant savings in interest and help you build equity faster, it also comes with higher monthly payments.

1. Higher Monthly Payments

When you shorten your amortization, your monthly payments will increase because you’re spreading the same loan amount over a shorter period. For example, if your current monthly payment is $1,500 on a 30-year mortgage, a shorter 15-year amortization could increase it to $2,200 or more (depending on the interest rate and loan amount). Before committing to a shorter term, ensure these higher payments fit comfortably into your budget without overextending yourself.

2. Long-Term Interest Savings

The primary benefit of lowering your amortization is reducing the total interest paid over the life of your mortgage. Since you’re paying off the loan faster, the lender has less time to collect interest.

For instance, a 30-year mortgage may cost tens of thousands more in interest compared to a 15-year term. By lowering your amortization, you could save a significant amount of money, which you can redirect toward other financial goals like retirement or investments.

3. The Importance of Flexibility

While paying off your mortgage faster has its perks, it’s essential to consider the impact on your overall financial flexibility. Life can be unpredictable, and unexpected expenses like car repairs, medical bills, or job changes can strain your budget.

With higher monthly payments from a shorter amortization, you might have less room to maneuver during tough times. On the other hand, opting for a longer amortization gives you lower payments and more flexibility. You can always make extra payments to pay down your mortgage faster when it suits your financial situation.

Alternative Option: If flexibility is a priority, stick to a longer amortization and consider making lump-sum payments or increasing your monthly payments when you have extra funds. Many lenders allow these options without penalties, letting you enjoy both flexibility and progress toward mortgage freedom.

How to Decide What’s Best for You

When considering whether to lower your amortization, ask yourself these questions:

  1. Can I afford the higher monthly payments comfortably?

  2. Do I have a solid emergency fund in place?

  3. How important is flexibility in my budget?

  4. What are my other financial goals, such as retirement savings or paying off other debt?

If paying off your mortgage faster aligns with your goals and you can handle the higher payments, lowering your amortization could be a smart move. However, if you value financial flexibility or anticipate changes in your income or expenses, a longer term with extra payments might be the better choice.

There’s no one-size-fits-all answer when it comes to mortgage amortization. It’s all about balancing your priorities—speed versus flexibility. If you’re unsure which option is right for you, let’s discuss your unique financial situation and goals. Together, we can determine the best approach to help you achieve mortgage freedom while maintaining a healthy financial balance.

How to Buy a Home if You Owe Taxes

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If you’re considering buying a home while dealing with unpaid taxes, you might be wondering how your tax debt affects your mortgage approval. The good news is, it is possible to buy a home even if you owe taxes. Here’s what you need to know about how owing taxes can impact your homebuying process.

How Owing the IRS Affects Buying a Home

You might not need to wait until your tax debt is completely paid off to apply for a mortgage. It’s important to speak with a loan officer who can guide you through your options based on your specific financial situation. If you’ve been paying off your tax debt through a payment plan, be sure to let your loan officer know and provide supporting documentation and proof of payment.

Getting a Mortgage While You Owe Taxes

While paying off your tax debt isn’t always required before getting a mortgage, there are specific qualifications for mortgages when you have unfiled taxes or a tax lien.

How to Qualify for a Mortgage with Unfiled Taxes

When applying for a mortgage, you’ll need to provide the last two years of your tax returns. If your taxes are unfiled, you’ll need to file an extension with the IRS or your state government to remain eligible.

How to Qualify for a Mortgage with a Tax Lien

A tax lien gives the government a legal claim to your property due to unpaid taxes. Federal and state liens typically need to be paid off before closing to qualify for a mortgage. The IRS releases the lien within 30 days after the tax debt is paid in full.

Exceptions to the Rule

In some cases, exceptions are made for tax liens if you have a payment plan in place. These exceptions depend on the type of loan program.

Conventional Home Loan Requirements

  • Fannie Mae (FNMA): Requires you to pay off all past-due taxes, including any tax liens, in full before closing. However, Fannie Mae allows installment plans unless there’s a Notice of Federal Tax Lien.
  • Freddie Mac (FHLMC): If you have a tax lien, Freddie Mac requires it to be paid off or be under a repayment plan for at least three months. Payment history must be documented and included in your debt-to-income ratio.

Government Home Loan Requirements

Government-backed loans (like VA, USDA, and FHA) have more flexibility but still require you to resolve your tax lien situation.

  • VA and USDA: You must pay off tax liens in full or have a repayment plan for at least three months.
  • FHA: If your tax liens are delinquent, they must be current or part of a written payment agreement that’s included in your debt-to-income ratio. You’ll need to make at least three months of timely payments.

Does Owing Taxes Affect Mortgage Approval?

Tax debt won’t automatically disqualify you from getting a mortgage, but paying off your debt will increase your chances of approval. If you can’t pay off your tax debt in full, request an installment agreement and ensure you’re making timely payments.

Why Getting Preapproved Before Your House Hunt Is Crucial

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Buying a home is one of the biggest financial decisions you’ll ever make, and you want to make sure you’re as prepared as possible. Whether you’re just starting to browse homes or are ready to put in an offer, one of the most important steps you can take is getting preapproved for a mortgage. Not only does it streamline the home-buying process, but it also puts you in the best position to make a successful offer. Here’s why getting preapproved now, before you start your house hunt, can make all the difference.

What Does It Mean to Be Preapproved?

Preapproval means a lender has reviewed your financial situation in detail and has confirmed that you are eligible for a mortgage, up to a certain loan amount. Unlike pre-qualification, which is based on a quick estimate of your financial status, preapproval involves a thorough review of your income, credit history, debts, and assets.

To get preapproved, you will need to provide the following documentation:

  • Proof of income: Pay stubs, W-2s, or tax returns to show your regular income.
  • Bank statements and assets: Documentation of your savings, retirement accounts, or other assets that can be used for a down payment or closing costs.
  • Credit report: Your credit score will determine the interest rate you qualify for and your ability to secure financing.
  • Tax returns: Lenders often request your past two years of tax returns to verify your income history and assess your financial stability.
  • Employment verification: A letter from your employer confirming your job and salary.
  • ID: A government-issued ID like a driver’s license or state ID.
  • Gift letters: If you’re receiving financial help from family or friends, you may need to provide a gift letter to confirm it’s not a loan.

Preapproved vs. Prequalified: What’s the Difference?

While you might come across the term prequalification during your home search, it’s important to understand the distinction between being prequalified and preapproved.

Prequalification is a simpler process where the lender gathers basic financial information to give you a rough estimate of how much you can borrow. However, it doesn’t carry the same weight as preapproval. Prequalification can be helpful if you’re just beginning to look at homes, but it doesn’t carry the same authority or guarantee as preapproval.

Preapproval, on the other hand, is a more detailed and formal process. Since it involves submitting documentation and having your financial information reviewed by the lender, it offers a more accurate picture of what you can afford. A preapproval letter gives you a competitive edge, especially in a competitive housing market.

Why Getting Preapproved Now Makes a Big Difference

  1. Know Your Budget Upfront
    One of the main benefits of getting preapproved is that it helps you understand exactly how much home you can afford. Without a clear budget, you might waste time looking at homes that are out of your price range. A pre-approval letter ensures you won’t fall in love with a house you can’t afford, saving you time and emotional energy.
  2. Stand Out in a Competitive Market
    If you’re in a market where multiple offers are common, having a preapproval letter can give you a distinct advantage. Sellers want to know that potential buyers can actually secure the financing needed to complete the transaction. If you show up with a pre-approval letter, you demonstrate that you’re a serious, qualified buyer. In many cases, sellers may choose an offer from a preapproved buyer over one from someone who hasn’t completed this step.
  3. Faster Home Search and Closing
    Preapproval can also speed up the home search process. In a competitive market, some real estate agents and sellers won’t even entertain offers from buyers who aren’t preapproved. When you have a pre-approval letter, you can immediately start making offers on homes you love. Furthermore, because the lender has already reviewed your financials, the closing process will likely go much faster, reducing the time between offer acceptance and homeownership.
  4. Secure the Best Interest Rate
    The better your financial position, the better the interest rate you can secure. A pre-approval takes into account your credit score, debt, and income to give you a solid picture of your potential loan terms. If you receive a pre-approval with favorable terms, it can give you an edge in negotiating the best deal.
  5. Confidence in Your Offer
    When you make an offer on a home, you want to feel confident that your financing will be approved. Preapproval gives you that peace of mind. You know that the lender has already done the homework and that you’re in a strong position to secure the loan you need.

How Preapproval Can Help You Make the Best Offer

In today’s housing market, being preapproved is almost a necessity. Without it, you may find yourself losing out on your dream home to another buyer who has already taken the necessary steps.

By getting preapproved before you even start your house hunt, you’ll save time, avoid frustration, and improve your chances of getting your offer accepted. While the process may take a little effort upfront, the benefits are well worth it. You’ll enter the market as a serious, prepared buyer — and that could be the key to getting the home you’ve always wanted.

If you’re thinking about buying a home, getting preapproved is your first step. Give us a call to see what options are available for you.

 

What’s Ahead For Mortgage Rates This Week – July 27, 2020

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What's Ahead For Mortgage Rates This Week - July 27, 2020Last week’s economic reporting included readings on sales of new and previously owned homes. State and federal data on new and continuing jobless claims were released along with Freddie Mac’s weekly report on mortgage rates.

Sales of New and Existing Homes Rise in June

Sales of new homes rose at their highest rate in 13 years according to the Commerce Department. New homes sold at a seasonally-adjusted annual pace of 776,000 sales, which exceeded the expected reading of 710.000 new single-family homes sold and May’s reading of 682,000 new homes sold. Analysts said that increased interest in relocating to suburban areas and low mortgage rates fueled buyer interest in new homes.

The National Association of Realtors® reported a sharp increase in sales of previously-owned homes during June. Sales were nearly 20.70 percent higher than in May; 4.72 million previously-owned homes were sold in June at a seasonally-adjusted annual pace. May’s reading for pre-owned homes sold was 3.91 million homes sold. June’s sales pace for previously owned homes was the highest month-to-month gain since 1968.

Sales of previously-owned homes were sharply lower than pre-pandemic levels; potential home buyers were sidelined by concerns over jobs and the general economy.

Mortgage Rates Rise, Jobless Claims Mixed

Freddie Mac reported higher mortgage rates last week. Rates for 30-year fixed-rate mortgages averaged 3.01 percent and were three basis points higher. Rates for 15-year fixed-rate mortgages rose by six basis points to an average of 2.54 percent; Mortgage rates for 5/1 adjustable rate mortgages averaged 3.09 percent and were three basis points higher. Discount points averaged 0.80 percent for 30-year fixed-rate mortgages and 0.70 percent for 15-year fixed-rate mortgages. Discount points for 5/1 adjustable rate mortgages averaged 0.30 percent.

Initial jobless claims rose to 1.42 million claims from the prior week’s reading of 1.31 million claims. State and federal jobless claims fell to 2.35 million state and federal jobless claims from the prior week’s reading of 2.47 million initial jobless claims filed. Ongoing state jobless claims fell to 16.20 million claims as compared to the prior week’s reading of 17.30 million ongoing jobless claims. State and federal continuing jobless claims fell to 31.80 million claims from the prior week’s reading of 32.00 million ongoing claims for state and federal jobless claims.

What’s Ahead

This week’s scheduled economic reports include readings from S&P Case-Shiller Home Price Indices, data on pending home sales and the Fed’s FOMC post-meeting statement and press conference. Weekly readings on mortgage rates and new and continuing jobless claims will be released along with a monthly report on consumer sentiment.

The Pros and Cons of Mortgage Rate Locks

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The Pros and Cons of Mortgage Rate LocksIf you’re just jumping into the game of home purchasing, you are likely considering all of your loan options and may even have heard the term mortgage rate lock. For those who don’t like to gamble, a mortgage rate lock can offer a bit of reassurance, but there are also some downsides to this type of protection. Before signing off on this, here are the details on rate locks so you can make an informed decision.

What Is A Rate Lock?

For many people who are buying a home in such a tumultuous market, the idea of interest rates can make the heart race a little faster, but this is the purpose of rate locks which offer consistency in a market in flux.

Instead of having to deal with day-to-day fluctuations of the rate which increases or decreases what you owe a rate lock is a lender promise that you will be held to a specific rate or your rate will not rise above a certain number.

Easy Balancing Of The Budget

The easy thing about utilizing the rate lock, especially for a buyer who is less familiar with the market, is that it will enable you to instantly determine your monthly payments based on that rate. Instead of having to pay more per month, you’ll be able to estimate exactly what your payment will be and it won’t rise above the limit you’ve set for yourself. While daily fluctuations can be a drag, a mortgage lock takes the guesswork out of the day-to-day.

The Added Cost Of Security

It might seem like a rate lock is an option that everyone would utilize, given the stability, but lenders charge for this type of offer because of the risk factor. While lenders can certainly stand to gain if your rate lock is higher than the interest rates, in the event that they rise beyond this point, they will end up losing money. So, while a 30-day rate lock may not end up costing you, this type of lock stretched over a longer period may actually end up costing you more than fluctuating rates.

If you’re not familiar with the world of investing and interest rates, a mortgage rate lock can sound like a great idea; however, there are downsides to this offer and they’re worth considering before getting locked in. If you are currently on the hunt for a home, contact your local real estate professionals for more information.