Monday, June 26, 2017

The Worst Mortgage Advice Home Buyers Actually Believe

Getting a mortgage is a daunting prospect, which explains why so many people seem eager to pat your hand and say, “Let me give you a little advice.” Sure, those pearls of wisdom may come from an ocean of good intentions, but the suggestions might not necessarily be right for you. In fact, they could be dead wrong.
So before you take some friendly outside counsel as gospel, be sure to check it against our list of the worst mortgage advice people often give.

‘Don't bother getting pre-approved for a mortgage'

Why you might hear this: Hey, you've barely begun shopping for a home! There's no need to get all serious about mortgages just yet. And besides, a mortgage pre-approval isn't real anyway your application isn't reviewed by an underwriter, so it's no guarantee you'll get approved for a mortgage later. So why bother?
Why it's bad advice: While a pre-approval might not be “official,” it will help you avoid major problems down the road.
“Getting pre-approved by a bank is one way to avoid the heartbreak that comes from falling in love with a house you can never buy,” says Maryalene LaPonsie of MoneyTalks. “It may also give you an edge if there are multiple offers for the same property. A seller will feel more confident selecting a bid from someone with a mortgage pre-approval rather than a person who hasn’t even begun the process.”

‘Get your mortgage from the bank where you already have an account'

Why you might hear this: When it comes to convenience, you just can't beat the bank you're already using. Plus, since you have an existing relationship with it, it’ll give you the best rates, right?
Why it's bad advice: You already know to shop around for a home. You need to do the same with your loan.
“Even though the big bank where I keep my checking and savings accounts claims they’ll give me better service and an easier application process, that may not always be true,” says Albert Tumpson, a banking and real estate attorney who owns several properties and refinances them every couple of years. “I’ve found more favorable terms with other venues. Always go with the most favorable terms.”

‘Don't bother reading the fine print'

Why you might hear this: Because actually perusing all that mortgage paperwork will drive you insane! And besides, this is the standard contract that everyone gets. Just sign here, here, and here—and you'll save yourself a ton of headaches.
Why it's bad advice: Because that fine print contains some clauses that could cost you serious money!
“Take your time and go over every last word with a fine-toothed comb,” says Jamie, a homeowner who purchased her second home two years ago. She was astounded when her lender asked her to sign a mortgage contract involving hundreds of thousands of dollars without “bothering” to read the details. Jamie ended up taking several hours to go over the contract and found several items to dispute. So what if the process took a little longer? It was well worth the wait.

‘Always go with the lowest interest rate'

Why you might hear this: A lower interest rate means lower monthly payments. Duh.
Why it's bad advice: Lower interest rates can have all sorts of strings attached—often in the form of an adjustable-rate mortgage.
ARMs are not always a bad thing, but just be on the alert when someone suggests an interest-only ARM, says Shant Khatchadourian, president of SKR Capital Group. “Interest-only ARMs can result in significant payment shock, especially if rates increase down the line and amortization kicks in.”
In the past, as interest rates were dropping and home values were rising rapidly, interest-only ARMs worked well for some people—especially those who didn’t plan to stay in the home beyond the length of the loan’s first term. But although interest rates are low, they're likely to rise soon, so beware.

‘Borrow as much as you're approved for, even if you don't need it'

Why you might hear this: Who doesn't want a bigger and better house? Besides, a bank wouldn't approve you for all that money unless you could afford to pay it back, right? Right?
Why it's bad advice: It's always wise to live slightly below your means, since you never know when life might pitch you a financial curveball, such as a layoff or medical problem.
“You can qualify for monthly payments up to 50% of your income these days,” says Khatchadourian. “But half of your gross income seems like quite a bit for most people, especially when they factor in taxes and insurance.”
So be sure to make a budget, decide what monthly payment you’re comfortable with, and stick to it.

Lisa Johnson Mandell is an award-winning writer who covers lifestyle, entertainment, real estate, design, and travel. Find her on

Sunday, June 25, 2017

How Much Are Closing Costs? What Home Buyers and Sellers Can Expect

Closing costs are the fees paid to third parties that help facilitate the sale of a home, and they vary widely by location. But as a rule, you can estimate that they typically total 2% to 7% of the home's purchase price. So on a $250,000 home, your closing costs would amount to anywhere from $5,000 to $17,500. Yep that's one heck of a wide range. More on that below.
Both buyers and sellers typically pitch in on closing costs, but buyers shoulder the lion's share of the load (3% to 4% of the home's price) compared with sellers (1% to 3%). And while some closing costs must be paid before the home is officially sold (e.g., the home inspection fee when the service is rendered), most are paid at the end when you close on the home and the keys exchange hands.

Watch: This Is How Much Closing Costs Will Inflate Your Home's Price

How much are closing costs for buyers?

Home buyers pay the majority of closing costs since many of these fees are associated with the mortgage.
“If you're paying cash for a property, there are still a few closing costs, but they are significantly less,” says Cara Ameer, a Realtor® in Ponte Vedra, FL. Here are some of the fees home buyers should brace themselves to pay:
  • A loan origination fee, which lenders charge for processing the paperwork for your loan.
  • A fee for running your credit report.
  • A fee for the underwriter, who assesses your credit worthiness.
  • A fee for the appraisal of the home you hope to own to make sure its value matches the size of the loan you want.
  • A fee for the home inspection, which checks the home for potential problems from cracks in the foundation to a leaky roof.
  • A fee for a title search to unearth any liens on the property that could interfere with your ownership of it.
  • A survey fee if it's a single-family home or townhome (but not condos)
  • Taxes, also called stamp taxes, on the money you've borrowed for your home loan.

How much are closing costs for sellers?

Here are the closing costs that sellers are typically responsible for:
  • A closing fee, paid to the title company or attorney's office where everyone meets to close on the home.
  • Taxes on the home sale.
  • A fee for an attorney, if the home seller has one.
  • A fee for transferring the title to the new owner.
While this doesn't seem like much compared with what home buyers have to cough up, keep in mind that sellers typically pay all real estate agents' commissions, which amount to 4% to 7% of the home's sales price. So, no one sneaks through a home closing scot-free.

Why closing costs vary

The reason for the huge disparity in closing costs boils down to the fact that different states and municipalities have different legal requirements—and fees—for the sale of a home.
“If you live in a jurisdiction with high title insurance premiums and property transfer taxes, they can really add up,” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “New York City, for instance, has something called a mansion tax, which adds a 1% tax to sales that exceed $1 million. And then there are the surprise expenses that can crop up like so-called ‘flip taxes’ that condos charge sellers.”
To estimate your closing costs, plug your numbers into an online closing costs calculator, or ask your Realtor, lender, or mortgage broker for a more accurate estimate. Then, at least three days before closing, the lender is required by federal law to send buyers a closing disclosure that outlines those costs once again. (Meanwhile sellers should receive similar documents from their Realtor outlining their own costs.)
Word to the wise: “Before you close, make sure to review these documents to see if the numbers line up to what you were originally quoted,” says Ameer. Errors can and do creep in, and since you're already ponying up so much cash, it pays, literally, to eyeball those numbers one last time before the big day.

Judy Dutton is a senior editor at covering news and advice about home buying, selling, decorating, and everything in between (

Saturday, June 24, 2017

10 Ways to Find Out About a Neighborhood Without Being There


"So what's the neighborhood really like?" is the ubiquitous
refrain among home buyers shopping in areas they're
unfamiliar with. And though your real estate agent can fill
lots of the big-picture details, it pays to do your research
before committing to a residential purchase.
Short of stopping people on the street for intel—and being
greeted by strange, skittish looks, or way worse—there are
some far easier ways to get a feel for what living in a
neighborhood is really like.
Best of all, you can even do them from afar (you're welcome,
relocators)! For starters, you can get local information on 
various neighborhoods on our site. Then for more deets,
get digging in the resources below.

For general demographics...

The first census required by the U.S. Constitution was
completed in 1790, and U.S. Census Bureau workers have been counting the population—now more than 322 million
people—every 10 years ever since. It's all easily accessible,
and you'd be amazed at the depth of detail. Their latest
count, the 2010 Census, breaks down the nitty-gritty of age,
race, population density, and even average commute
times to work by neighborhood. The bureau's maps also
offer a graphic overview of select demographics.

For what's notable and unique...

Type any address into NeighborhoodScout and its
proprietary search algorithm provides a ton of
data—median home price, crime rates, ease of
commute—in one easy-to-digest snapshot. And beyond
that, the site can tell you what makes a neighborhood
unique. For instance, you may learn that a certain area
has a high percentage of brownstones, or gay/lesbian
families, or homeowners who don't own cars.

For walkability ...

Since “walkability" is such a buzzword, especially
among millennials, it makes sense that there's a site
devoted to telling you how easy it is to get around by
foot. That's where Walk Score comes in. How easily
you can you hoof it to a coffee shop, grocery shopping,
and parks gets crunched into one overall rating showing
how conducive an area is to walking. You say you'd rather
spend your time getting around on two wheels instead of
two feet? Bike Score gives you a sense of a neighborhood's
bike-friendliness from the extent of its bike lanes and trails.

For an idea of what a neighborhood stroll is like ...

The free walking app Walc shows you what you'll actually
see on a jaunt, rather than the nondescript compass
directions used for every other directional app. Simply
enter a potential address into Walc, add a destination,
and take a leisurely stroll in a neighborhood, without ever
stepping foot on a street. You'll get a sense of place from
the landmarks that pop up: Do you turn right at an alehouse
or a Pilates studio?

For public transportation access ...

Each day, 35 million Americans use public transportation, making access to it a must for, well, at least 35 million
people. To check out an area's accessibility to trains,
buses, and light rail, David Reiss, a professor of law
and research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School, recommends
researching the Transit Score. “These scores are great,
really giving you a sense of how important it is to have a
car in a particular community," he says.

For school quality ...

Sure, a seller may tell you a local school is great. But
don't rely on bias when it comes to your child's education.
Instead, go to the nonprofit and type in
a potential ZIP code. You'll have a chance to read school
report cards crafted by reviews from teachers, parents,
and even the students themselves. Or, if you already know
which school district you want your child to attend, download's mobile appyou can search for homes by 
school district. 

For crime rates...

To see how safe it would be to set foot outside your home,
enter your address into My Local Crime to pull up any
recent local crimes from vandalism to shootings. Click
on the map function to see where exactly those crimes
were committed (in other words, maybe certain blocks to
avoid after dark?).

For the lay of the land, literally...

When Professor Reiss asked students to find interesting
web resources to learn about neighborhoods, they
discovered that topological maps are a cool tool. Most maps
show only a two-dimensional rendering. Topographical maps,
which add the third dimension of elevation, show the surface
and physical features of a given neighborhood. Besides highlighting hills and valleys, topography is important when it comes to weather events (just ask anyone in a flood plain).

To find out what people do there for fun...

You know Yelp can help you discover local restaurants, and that Moviefone can let you know what theaters might be
near you. But what about entertainment, culture and nightlife? Enter Gravy, a website and app that gives you the rundown .on an area's events, from rock concerts to church suppers.

To find a neighborhood just like the one you're 

already in ...

Love your neighborhood, but feel it's time to move? Head
back to NeighborhoodScout once more. Users can find their
ideal neighborhood by selecting filters that take into account
their lifestyle preferences—whether family-friendly or suitable
for first-time home buyers. Alternatively, if you love your current neighborhood, enter your address to find comparable towns throughout the country.

Margaret Heidenry is a writer living in Brooklyn, NY. Her work has appeared in The New York Times Magazine, Vanity Fair, and Boston Magazine.

Friday, June 23, 2017

What Is An HOA? Homeowners Association - Explained

If you're buying a condo, townhouse, or freestanding home in a neighborhood with shared common areas—such as a swimming pool, parking garage, or even just the security gates and sidewalks in front of each residence—odds are these areas are maintained by a homeowners association, or HOA.
So what is an HOA, and how will it affect your life?
HOAs help ensure that your community looks its best and functions smoothly, says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. For instance, if the pump in the community swimming pool stops working, someone has to take care of it before the water turns green and toxic, right? Rather than expect any one individual in the neighborhood to volunteer their time and money to fix the problem, HOAs are responsible for getting the job done. And the number of Americans living in HOAs is on the rise, growing from a mere 1% in 1970 to 1 in 4 today, according to the Foundation for Community Association Research. So, it's wise to know exactly how they work.

How much are HOA fees?

To cover these maintenance expenses, HOAs collect fees (monthly or yearly) from all community members. For a typical single-family home, HOA fees will cost homeowners around the $200 to $300 per month, although they can be lower or much higher depending on the size of your unit and the services provided. The larger the home, the higher the HOA fee—which makes sense, because the family of four in a three-bedroom condo is probably going to be using the common facilities more than a single woman living in a studio.
In addition, most HOAs charge their members a little more than monthly expenses require, so that they can build up a reserve to pay for emergencies and big-ticket items like repairing the roof and water heaters, or acquiring new carpeting, paint, and lights for the hallways.
If the HOA doesn’t have enough money in reserve to cover necessary expenses, it can issue a special “assessment,” or an extra fee, in addition to your monthly dues, so that the repairs can be made. For example, if the elevator in your condo building goes out and it’s going to cost $15,000 to replace it—but the HOA reserve account holds only $12,000—you and the rest of the residents are going to have to pony up at least an additional $3,000, divided among you, to make up the difference.
And yes, you would still have to contribute your share even if you live on the first floor.

HOA rules: What to expect

All HOAs have boards, made up of homeowners in the complex who are typically elected by all homeowners. These board members will set up regular meetings where owners can gather and discuss major decisions and issues with their community. For major expenditures, all members of the HOA usually vote.
In addition to maintaining the common areas, HOAs are also responsible for seeing that its community members follow certain rules. Homeowners receive a copy of these rules, knowns as “covenants, conditions, and restrictions” (CC&Rs), when they move in, and they’re required to sign a contract saying that they’ll abide by them.
CC&Rs can cover everything from your type of mailbox to the size and breed of your dog. Some HOAs require you to purchase extra homeowners insurance if you own a pit bull, for example; others prohibit certain breeds entirely. An HOA may even regulate what color you paint your house, and what kind of curtains you can hang if your unit faces the street. Its goal is not to meddle—it's merely to maintain a neighborhood aesthetic. However, if you don't like being told what to do with your home, an HOA may not be for you.

What happens if you violate HOA rules?

That varies from place to place, but if you break the rules—or fall behind in paying your HOA dues—the consequences can be severe. You could be evicted, or worse. Some HOAs have the right to foreclose on your property, says Bob Tankel, a Florida attorney specializing in HOA law. So make sure you read your CC&Rs carefully so you know what to expect, and know the pros and cons of HOA living before you buy in.

Lisa Johnson Mandell is an award-winning writer who covers lifestyle, entertainment, real estate, design, and travel. Find her on

Thursday, June 22, 2017

What Are Restrictive Covenants?

Odds are you're all for rules that keep the real estate you're buying in good shape! But some CC&Rs don't always sit well with some residents and are seen as too, well, restrictive. It all depends on your perspective and how much freedom you want over your home—or protection from your neighbors exercising that same freedom in ways you might not like.

Common restrictive covenants

Restrictive covenants differ from community to community, but there are some you can expect to see:
  • Permissible colors for exterior house paint
  • Minimum property and landscaping standards
  • Types of fencing allowed
  • Types of window treatments allowed
  • Limitations on the type of security lights you can attach to the house
  • Controls on installing sporting equipment such as a basketball hoop in the driveway
  • Restrictions that limit vehicle storage or recreational vehicle parking
  • Curbs on property uses that generate noise or smells (e.g., raising livestock)
  • Rules on commercial or business uses of land reserved for residences
While it's easy to focus on what these rules say you can't do, try to turn the tables and see the upsides, too.
A reasonable HOA is like heaven,” says Bruce Ailion, Realtor® and attorney for Re/Max Town and Country in Atlanta. Several years ago he represented a builder of family homes that were sold to investors; with no restrictive covenants in place, the community looked terrible two years later. By contrast, a nearby community that had instituted an HOA to oversee lawn care and home exteriors was thriving.
“Those properties looked like new, and year after year the gap in price between the two communities has grown,” he says.

When to review your CC&Rs

After your offer to buy a home is accepted, you are legally entitled to receive and review the community's CC&Rs over a certain numbers of days (typically between three and 10). Warning: Some CC&Rs can be hundreds of pages, but given these are the laws you'll have to abide by, this is required reading that you skip at your own peril.
If you spot anything in the restrictive covenants you absolutely can't live with, you can bring it up with the HOA board or just back out of your contract completely (and keep your deposit). It may seem extreme, but if this is the place you hope to call home, living with rules that seriously cramp your style may just not be worth the trouble.

Can you change restrictive covenants?

Restrictive covenants, however, aren't set in stone. They can be contested and changed with a majority vote of the shareholders, aka neighbors in your development. This can work for or against you depending on where you stand. Ailion says he has seen neighborhoods tighten regulations by issuing fines for cars parked in the streets, bicycles left outside the garage, nonstandard mailboxes, and other potentially petty problems.
“Yes, restrictive covenants keep the appearance of the property up and can prevent eyesores such as wrecked cars, unkempt lawns, and oddball home colors," Ailion says. But he admits there are times when CC&Rs can be so restrictive that they start infringing on the rights of their residents.
But even in that case, there are things you can do. In January 2016, for instance, when an HOA in Keizer, OR, wouldn't allow a family to park their RV in their driveway—a necessity for their disabled child—the family fought back with a lawsuit, arguing that the Fair Housing Act requires HOAs to make "reasonable accommodations" for people with disabilities.
The bottom line: Restrictive covenants are meant to protect residents, but they can be changed if they're out of line. Make sure to review them before you buy a home, and if you disagree, by all means speak up! Many others may be glad you did.

Cathie Ericson is a journalist who writes about real estate, finance, and health. She lives in Portland, OR.

Tuesday, June 20, 2017

Does Staging Matter?

These days listing a home may mean staging it. But does staging make your house sell faster, or for more money? It depends on what's in the home, its condition, and its location. Here’s where staging helps:
It can help an empty house sell faster, which generally means more money. Home buyers place a higher value on staged homes, which helps buyers focus on living in the house, rather than wondering how they'll fill all this empty space.
Staging can help sell a house in a less desirable area. When a buyer has fewer "nice" options, then a staged home stands out.
Homes with odd layouts can benefit from staging.
A home with tasteful newer furnishings probably does not need
much outside staging.Cleaning, decluttering and rearranging can do the trick.