Archive for HOMEBUYER’S GUIDE

Aug
28

10 Steps To Cut Your Real Estate Taxes: Talking Down Your House

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 More homeowners are appealing their tax assessments. Here’s what to do if you get a tax-bill shock.

 Local assessors, sometimes part-timers with little training, too often guesstimate a home’s assessed value. That number is then multiplied by the tax rate to determine your annual real estate tax bill. “Do not assume an assessor is necessarily an ‘expert.’ Assessors are often elected officials lacking any special skills,” warns the National Taxpayers Union (NTU) in a handy guide, How to Fight Property Taxes, downloadable from its website for $9.95.

What makes that bad situation even worse these days is that some state and local governments have raised real estate tax rates to compensate for falling house values and/or weak sales and income tax revenues. So a too-high home assessment becomes even more painful.

Higher tax bills, the greater information available on the Web and the growth of special low-price appeals services are all leading more folks to challenge their assessments.

Is it worth fighting? Peter Sepp, executive vice president of the NTU, estimates that 20% to 40% of those who appeal win some reduction. Billionaire Tom Golisano saved $100,000 last year by appealing the $6 million assessment of his Mendon, N.Y. estate to a state court, which cut the assessment in half. “The New York system is very unfair to taxpayers,” says Robert Jacobson, Golisano’s attorney.

You’re more likely to save hundreds than thousands, but here are nine steps to take when your next tax assessment arrives in the mail.

1. Pin down the basics

First, determine the assessment base, which is usually (but not always) stated on the bill or in an accompanying pamphlet. In some localities properties are assessed at a fraction of market value. A too-high assessment representing 80% of your home’s value might look reasonable if you wrongly assume it’s 100% of the value.

Next, determine the assessment date. Your home’s worth as of that date–not its current value–is what’s significant. Some areas have three- or five-year revaluation cycles. Your house, now worth $400,000, might show a $500,000 assessment, based on 2007 values. You can still appeal this year’s bill, but understand you’ll be fighting over what your home was worth back then, not what it is worth now. Even more confusing, some areas phase in multiyear assessments, meaning your annual assessment could–legitimately–be rising, even while your actual property value is falling. You can always appeal a current tax bill assessment, but you usually can’t go back and fight over last year’s bill.

 2. Act quickly

Deadlines and rules vary, and most are not taxpayer-friendly. You might have only 25 days after getting your assessment notice to file an appeal and then only a few days until the hearing. Meanwhile, pay your bill on time; an appeal won’t ordinarily delay the due date.

3. Get your property record

Your assessor’s office has filing cabinets (or a computer) stuffed with “tax cards” for each property. “It’s a gold mine of information,” says Richard Michaud, a real estate lawyer with Bernkopf Goodman in Boston. Even if the assessor has put information on the Web, you’ll usually get more details by visiting the assessor’s office.

Check that all information is correct, including the square footage, number of bathrooms and fireplaces, and the quality (or depreciation factor) used to value your home. If you find factual mistakes, go in for a friendly chat and ask the assessor to correct it. “Your tax assessor isn’t your enemy. He’s an official trying to do his job. Often you can work these issues out very informally,” says Michaud.

4. Be a nosy neighbor

While you’re at the assessor’s office, get your neighbors’ property tax cards if you can. Assessments are always available as public records, and often the cards are, too.

You have a good chance of reducing your tax bill with an appeal if your house is assessed for more than what similar, nearby properties sold for or are assessed for. If all the neighbors have made improvements, and you haven’t, make sure your assessment is lower. A drive-by assessor might have judged all the houses as being of equal value, unaware that only yours still has the original lime-green bathroom fixtures, no central air and a wet basement. Think like a buyer trying to talk down the price of your house.

Another resource: The real estate agent who sold you your house might put together a list of comparable property sales (not listings) for you in hopes of a future referral.

5. Use the Web

You can search for all the houses on your cul de sac on Zillow.com or Trulia.com and compare basic stats (size, number of baths) and the assessment and sales histories–a particularly useful exercise if your locality hasn’t put such data online. Warning: The value estimates on these sites tell you what you might sell your house for today and are irrelevant for your appeal. Boards can throw out the data you submit if it postdates the assessment date.

One new Web service, ValueAppeal, charges $99 (refundable if you don’t win) for online help putting together an appeal package, including up to 15 comparable property sales. Before you pay you plug in your address to see if you’re one of the 25% of folks who ValueAppeal estimates can save $300 or more a year by appealing. (If not, the service won’t take your money, giving it an 80% success rate, claims founder Charles Walsh.)

6. Consider hiring a pro

If you’re not intimidated by local bureaucrats, you can argue the initial appeal yourself (typically in front of a local board). At the other extreme, if big dollars are at stake or you fight all the way up to court, you’ll likely need a lawyer.

In between are various services that file a large number of appeals. Some don’t require any payment up front from you; instead they collect a share (usually 50%) of the first year’s reduction in taxes. That’s not a bad deal if the assessment will affect your bill for three or more years.

Or you could find a local pro who specializes in your area and knows the detailed (and possibly quirky) criteria that affect assessments there. “The system is nuts,” says Sheila Anderson, who does appeals in Florida for residential and commercial clients. “If you don’t know what’s in the pages and pages of criteria that affect how you are assessed, you could be blindsided,” she adds.

7. Don’t shoot yourself in the foot

If the facts don’t support your case, an appeal could actually lead to a higher valuation of your property. Perhaps the assessor has listed your lot as larger than it is but missed your addition. Be aware that an appeals board will likely ask what improvements you’ve made to the property, whether or not you ever filed for a building permit. You’ll be under oath when you answer.

8. Search out exemptions

You might also get your tax bill reduced by finding an exemption you qualify for and aren’t getting, such as a homestead exemption for a principal residence. Also common are exemptions for low-income seniors and veterans. Marc Soss, a tax lawyer in Sarasota, Fla., returned from service in Afghanistan and found he was eligible for a one-time $1,500 combat rebate on his real estate taxes. Separately he filled out an application, as a disabled vet, to get $5,000 chopped off his assessment, translating to $70 a year in savings. “Most people are completely unaware of these breaks,” says Soss.

9. Work to reform the system

After a partial victory knocking $400 off the annual tax bill on her family’s one-story stucco Odessa, Fla. home, Sara Cucchi, a former industrial engineer and now stay-at-home mom, is applying to be on her county’s appeals board. “I want the system to work the way it’s supposed to work,” she says.

If you are over 65 and live in your own home in California, check for parcel taxes on your property tax bill. You may be able to file for an exemption from such parcel taxes, typically levied by school districts.

 

Disclaimer: We are a real estate company. Please consult a legal and tax expert before using any of these strategies.

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Feb
07

Low Cost Ways to Fix Your Home for Sale

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Real Estate Corner…

Q. We’ve purchased a new house, and are selling our existing home. We don’t have a lot of money to fix up our existing home before selling it. Do you have any inexpensive suggestions?

 

A: The typical realtor response is, “floors and paint” but there are several other low cost things that you can do.

 

 

 

  •  Deep-clean the house and “make it sparkle

 

  •  If your master bedroom looks drab, add new linens, pillows, and shams to spice up the bedroom and add a little color.

 

  • Buy a bright colored shower curtain and rug to perk up a dull bathroom.

 

  • Re-grout if your bathroom grout is chipped or discolored.

 

  • Eliminate clutter. Remove photos, knickknacks, refrigerator magnets and other personal items.

 

  • Organize your cabinets and closets.

 

  • Clear off kitchen and bathroom counter tops. Put away appliances.

 

  • Arrange your furniture so it focuses on your home’s strongest feature (it may be a view, a garden, flowers, or a painting).

 

  • Remove excess furniture.

 

  • Create a “model home” look, clean, attractive with well-place items.

 

  • Dress up your rooms with attractive area rugs and framed prints.

 

  •  Install new light fixtures if they’re damaged or unappealing.

 

  • Paint your walls in neutral tones. Paint the front door if needed.

 

  • Trim bushes and make sure the outside landscaping is neat and clean.

 

  • If you are in the market for a buying or selling a home and need competant and caring representation, contact us at 602.315.9292 or Info@MetroRealtyphx.com.
Jan
11

NACA:Neighborhood Assistance Corporation of America: Reducing your Mortgage Payment

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A couple of people that we know have had success with this program. It may not be for everyone. With any program like this, please seek the advise of your financial planner, attorney, or other professional having to do with these kinds of matters.

 

From their website: www.naca.com

Click here for their video

The Neighborhood Assistance Corporation of America ("NACA") is a non-profit, community advocacy and homeownership organization. NACA’s primary goal is to build strong, healthy neighborhoods in urban and rural areas nationwide through affordable homeownership. NACA has made the dream of homeownership a reality for thousands of working people by counseling them honestly and effectively, enabling even those with poor credit to purchase a home or refinance a predatory loan with far better terms than those provided even in the prime market.

Investing in working people

The NACA homeownership program is our answer to the huge subprime and predatory lending industry. NACA has conclusively shown that when working people get the benefit of a prime rate loan, they can resolve their financial problems, make their mortgage payments and become prime borrowers. NACA’s track record of helping people who have credit problems become homeowners or refinance out of a predatory loan debunks the myth that high rates and fees are necessary to compensate for their "credit risk."

Started in 1988, NACA has a tremendous track record of successful advocacy against predatory and discriminatory lenders as well as providing the best mortgage program in America with $10 billion in funding commitments. NACA is the largest housing services organization in the country and is rapidly expanding by growing its existing 30+ offices, headquartered in Boston, MA, opening many new offices nationwide, and expanding the services it offers its membership. NACA’s confrontational community organizing and unprecedented mortgage program have set the national standard for assisting low- and moderate-income people to achieve the dream of homeownership.

NACA – America’s Best Mortgage Program
The incredible NACA mortgage allows NACA Members to purchase or refinance homes with:

  • no down payment,
  • no closing costs,
  • no fees,
  • no requirement for perfect credit,
  • and at a below-market interest rate.

 

 

Everyone gets the same incredible terms, including the below-market interest rate, regardless of their credit score or other factors. NACA also provides free, comprehensive housing services. NACA counsels Members into the extraordinary NACA mortgage using character-based lending criteria that takes each Member’s circumstances into account to determine whether they are ready for homeownership and what they can afford. This is in contrast to risk-based pricing where people are often given loans they cannot afford while brokers and others make tremendous fees and profits.

Property renovation and foreclosure prevention
NACA also provides property renovation assistance and Membership Assistance for NACA homeowners. NACA’s Home and Neighborhood Development ("HAND") Department addresses repair issues, and where appropriate provides rehab assistance throughout the renovation process. NACA’s Membership Assistance Program (MAP) provides comprehensive counseling for Members who are delinquent on their home payments, including establishing payment agreements and providing financial assistance to help Members avoid foreclosure.

Innovative technology
The NACA program has developed state-of-the-art mortgage software for web-based counseling, processing and underwriting., called "NACA Lynx", which is the envy of the mortgage industry. This is a paperless system that allows for character lending, loan processing and underwriting to be done on a very large scale.

Powerful national advocacy
NACA has revolutionized mortgage lending with its mortgage services and advocacy. NACA’s organizing department continues the aggressive advocacy against predatory lenders and the fight for economic justice. NACA is a high-profile organization, with its program and advocacy featured in the national media, including the Wall Street Journal, Prime Time Live, Boston Globe, Washington Post, major news outlets, and local networks nationwide.

NACA’s committed staff and contacting NACA

Our staff of hundreds of dedicated staff is committed to working with you to access this incredible mortgage product and to advocate for strong neighborhoods and economic justice. We are always looking for qualified staff—see our current job listings for details. To keep updated on NACA services, campaigns, and relevant legislative happenings, sign up by clicking Contact Us.

 

http://www.youtube.com/watch?v=MXsYLZEsmx0 NACA\'s History

 

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Dec
15

The Hottest Remodeling Trends for 2011

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You'll get the most out of your dollar by keeping an eye on what shows up in high-end homes. It’s the difference between Harvest Gold and rich wood.

 If you want to get the maximum value from your remodel when you sell your home, you need to pay attention to trends. But not just today's fads: what's more important is what will be hot when it's time to put your house on the market.

Home improvements, after all, start to date the moment they're completed. How fast their value slides may depend on your ability to forecast what will appeal to future buyers.

Guess right, and the remodel you do today can look almost as cutting edge five or even 10 years from now. Guess wrong, and you've just spent thousands on the avocado green, shag-carpeted, conversation pit turn-off of the future.

To navigate this minefield, keep in mind the following:

High-end homes drive the remodeling market. About 90% of the growth in remodeling industry over the last decade was, according to Harvard University's Joint Center for Housing Studies, fueled by high-end homeowners (defined as those with houses worth $400,000 or more in 2003 dollars).

The trends hatched in this market tend to percolate down to the middle market, said remodeling expert Jim Lapides of the National Association of Home Builders' Remodelors Council, and eventually are incorporated into the new-home market.

So, if you want to know what will be in vogue in your neighborhood five years out, tour some open houses in more affluent communities to see what's happening there now.

Boomers are big, but GenXers are growing. Boomers own more of the housing stock and spend more on remodeling than other groups. But the cohort just behind them — those born from 1965 to 1974 – is coming on fast, according to Harvard's housing center.

While aging boomers may be looking to downsize and make their lives easier, midlife GenXers might be looking for more space to handle growing families. If you want your house to appeal to the largest number of buyers, you may have to think about features that appeal to both groups.

 Durability is key. Investing in quality materials can pay off if they hold up well over the years, said interior designer Juliana Catlin, past president of the American Society of Interior Designers and owner of Catlin Interiors in Jacksonville, Fla.

A cheap surface might show so many gouges and dings after five years that a buyer will insist you pay for replacing it, while a well chosen stone or tile surface could still be adding value a decade from now.

 

Consider the next buyer. One of the big trends in remodeling, particularly among GenXers, is making a personal statement, said Joan Stephens, chairman of the National Association of the Remodeling Industry and owner of Stronghold Remodeling in Boise, Idaho.

These homeowners don't want their kitchens or baths to look like anyone else's; they might invest big bucks in, say, custom glass-tile designs or bold-colored countertops.

But Catlin worries these personal statements will date quickly and alienate future buyers."You have to think how it's going to translate for the next owners," Catlin said. "You may love your dark green countertop, but the next owner's favorite color could be yellow."

That's why Catlin advises homeowners who care about resale to choose more neutral colors for floors, countertops and other hard surfaces, using easily changeable paint and accessories to infuse personality.

Catlin also cautions against structural changes that can permanently devalue your home, like eliminating a bedroom or removing a tub from a bathroom (thus converting it from an all-important "full" bath to a three-quarters version).

 Another tip: make your remodel more timeless by matching it to the style of your home. "A cottage-style home looks better with a cottage-style kitchen," Catlin said. "A Mediterranean kitchen looks better in a Mediterranean home."

Be particularly cautious of any remodel that's a sharp contrast; an ultra-modern kitchen can look great if the rest of your house is sleek and uncluttered, but can look like a space ship landed if the rest of your home is shabby chic.

 In the kitchen

Highly polished granite and stainless steel were the hot trends in the 1990s — so much so that now there's a backlash among high-end homeowners. Instead of gleam, remodelers are going for warmth, Stephens said Color is hot right now, as in bright-red enameled stoves. But color trends are tricky to navigate, so a more conservative but still trendy choice might be panels that help refrigerators and dishwashers blend in with the cabinetry.

Higher-end appliances are also in big demand, Lapides said. Remodelers may not spend $6,000 on commercial-grade appliances, but they certainly want an upgrade from the entry level.

Stone countertops are still popular of course, but more homeowners are becoming wary of the drawbacks, said Vince Butler, chairman of the Remodelors Council. (Granite and other natural stones can be permanently stained by cooking oils and etched by common cleaners.) Butler said he is installing more synthetic or engineered stone countertops and seeing renewed interest in "solid surfaces" like Corian.

 "It may not have the eye appeal [of granite] but I think as people live with it, it may be easier to take care of," Butler said.

 Some, though, wonder if the monster/gourmet kitchen trend might begin to peter out, particularly among homes designed to appeal to older boomers.

"I think in the future people are going to be tired of cooking," said syndicated columnist and former builder Tim Carter, whose AsktheBuilder.com site focuses on remodeling as well as new construction issues.

 "It doesn't make much sense to invest $100,000 in a (kitchen remodel) if you don't cook that much."

 For the frugal: The good news is that minor kitchen remodels actually seem to pay off better at resale time than major redos, at least according to Remodeling Magazine's annual Cost vs. Value survey.

 Someone who spent an average $14,913 refacing cabinets, replacing laminate countertops and installing new cooktop, oven and sink in 2005 would recoup an estimated 98.5% of the cost on average if the home sold within a year, whereas someone who spent $81,552 on an upscale, tear-everything-outand- replace-it remodel would recoup 84.8% on average.

The bath

Utilitarian is out. Think spa — as in lots of space, big soaking or whirlpool tubs, multiple shower heads or even steam attachments in the shower. Dual sinks are a given in master baths, and luxuries like heated floors and towel warmers are popular with upscale renovators. Many renovators are putting the toilet in a separate room or partitioned area.

Remodelers are also shelling out, big time, for custom tile, said Butler, who runs Butler Bros. remodeling company in Clifton, Va.

 "It's the place where people are really expressing themselves," he said. "We've seen some master bathrooms where they spent $20,000 just on tile, and these are not extremely expensive homes. These are middle-class homes."

Be careful about going overboard if your primary goal is boosting resale value, however. The remodeling survey found a midrange remodel costing $10,499 would recoup 102.2% of its cost if the house sold within a year, while a more-elaborate $26,052 renovation would bring back 93.2%.

For the frugal: Adding multiple shower heads to a shower typically costs just a few hundred dollars, making it one of the most economical ways to add a spa feel. Also, try to avoid moving fixtures, since that can add enormously to a project's cost.

Underfoot

Wood floors are still desirable, with bamboo becoming more popular. Tile is still a good choice for kitchens and baths, although concrete is being used more often (either stained or just sealed). In addition, high-end linoleum — which sounds like an oxymoron, but isn't — is being used in more fashionable homes.

 For the frugal: Laminate flooring designed to look like wood can be less expensive and more durable than the real thing, but choose carefully: some of the products can look kind of cheesy, Carlin warned. If you have the real thing hiding under carpeting or other flooring, spring for refinishing to add real value to your home.

 Accessibility

Contractors polled by the National Association of Home Builders said universal design — making homes more accessible for the elderly and disabled — would be one of the top future trends in remodeling (second only to the ever-rising cost of labor).

 Since most folks want to "age in place," making sure they can get around their homes as they age will be increasingly important.

 Of course, baby boomers don't want to be reminded they're getting old, so one way to tout accessible design is to point out how their parents can benefit when they visit.

"When you're selling to that demographic, you kind of skirt the issue," Stephens said.

Fortunately, most aspects of universal design involve fairly subtle changes that add little if any cost to a remodeling project.

 Wider hallways and doorways, for example, are aesthetically pleasing as well as more functional when you're maneuvering a wheelchair, walker or even a big piece of furniture. (Ever try to get a king-sized bed or monster couch through a narrow door?)

Step-in showers, with no lip or tub wall separating them from the rest of the bathroom, can add to that spa feeling, while the extra lighting that can help aged eyes also makes the house feel brighter and more desirable.

 For the frugal: Again, universal design can be incorporated into virtually any remodel. Or you can tackle projects one by one, such as replacing regular doorknobs with lever-style handles, removing thresholds between rooms and adding better lighting.

 Floor plans

Open is still in and likely to remain so for the foreseeable future, design experts agree. Cooks don't want to be isolated in the kitchen, and open floor plans make even smaller homes feel roomier.

By contrast, the value of additions appears to be waning, at least according to the survey, which showed most projects that added square footage didn't pay off as well as other remodels. Carter, for one, expects that trend to continue if energy prices remain high.

 "The cost to heat and cool a home in the future is going to be staggering," Carter predicted. "If we don't have any major improvements in insulation, the only way you're going to save money on heating and cooling is by having a smaller home."

 For the frugal: Knocking down a few walls costs a lot less than adding square footage. If you're a do-it-yourselfer, though, make sure you're not destroying load-bearing walls.

Bonus rooms

Carter thinks retired baby boomers are going to want workshops and hobby rooms to pursue their leisure-time passions.

 Lapides suggests that "Costco rooms" may be on the rise, as homeowners look for ways to store "all the 10-pound bags of pretzels they bought at Costco." The extra storage might be incorporated into a space that also serves as the laundry and mud rooms, Lapides said.

 In fact, incorporating more storage throughout the house is likely to pay off, since our propensity to acquire stuff is unlikely to abate in the next decade.

 Catlin also sees more houses incorporating home offices, which traditionally haven't added as much value as other remodeling projects. One solution is to build the office into the closet of a guest room, so later occupants have the flexibility to use the space the way they want.

 For the frugal: You probably won't want to build rooms devoted to a single use, but adding shelves or cabinets can be an inexpensive way to increase a room's functionality.

 

The high-tech home

Movies, video games and other content increasingly will be delivered via broadband, so Carter recommends installing conduit that can help future electricians run wires from wherever the cable or satellite enters to your house to the rooms where you have your computers and entertainment centers.

 He also likes the idea of "electronics closets" to house all the home entertainment gear and minimize visual clutter. Sensors can be built into the wall above the TV screen to transmit your remote controls' signals to the gear in the closet.

 Another wiring project that's hot, Stephens said, involves putting speakers throughout the house as well as outside.

 For the frugal: Adding speaker wire is an inexpensive, if potentially messy, do-it-yourself job since you likely will be running wires through attics and crawlspaces. Adding conduit is cheap if you've already got walls torn open for other projects; otherwise, hold off.

 Have fun with your remodeling projects!

Okay, you have found the “perfect” home and are now ready to sign a mortgage. There are many things to consider and here are  our top three.

Tip #1: Pay more than your monthly payments.

In fact, you may be able to write two checks. One for your monthly payment and another check towards the principal. This extra money will towards paying off your remaining principal, which lowers the overall interest you will pay throughout the life of your loan. This tip and approach does not apply to interest-only type loans.

Tip #2: Avoid prepayment penalties in your contract, if you can:

 Some lenders try to stop you from paying off your mortgage early. It cuts into their profits. Do not accept a mortgage with a prepayment penalty if you can help it. The mortgage company may attach a fee to your mortgage if you pay it early.

Tip # 3: Understand Points:

Remember, lenders offer lower interest rates on mortgages at times with points attached. It is a kind of exchange. Points or origination costs are a percentage of of your total loan and must be paid “typically” up front. For example, a mortgage with three points means that you have to pay 3% of the total mortgage up front to your lender. In most cases, the costs of paying more up front outweighs the benefits.

If you are going to live in your home for a long time (15 + years) and are  not going to refinance, you may want to consider this option.

Please ask the advice of your lender or mortgage company before entering into a contract. This information is our opinion only and should be regarded as such.

For any real estate questions, please do not hesitate to contact us at Info@MetroRealtyphx.com or 602.687.9933.

Wow! The mortgage rates are the lowest I have ever seen. If you are in the market for a property, now would be the time to buy but… be very careful and cautious when obtaining a mortgage. There may be hidden costs in the mortgage you obtain. Read the fine print and look at the APR.

What is the APR? The APR, the annual percentage rate, by  law, includes all cost in a single rate. This rate avoids all of the confusion with the various charges that may be accrued.

If you see one 30 year fixed rate with an APR of 7% and another with an APR of 7.5%, you can feel confident that the one with the lower APR has the lower rate.

Please ask your lender for all mortgage advise. For real estate information, please contact us at Info@MetroRealtyphx.com or 602. 687.9933.

Making a decision on the term of your mortgage is always very difficult. I have tried to simplify the information for you below.

Longer Mortgage Terms: The length of the mortgage affects both the total cost of the mortgage and the size of the monthly payments. You will pay more for your property overall but longer mortgage terms have lower monthly payments.

Shorter Mortgage Terms: These terms generate less total interest over time so that you will pay less for your property overall than a longer term mortgage.

Here is an example of the differences in mortgage terms. The example below is not exact. Please check with your mortgage professional for any questions you may have.

Mortgage Term                   Monthly Payment             Total Cost
15 year                                           $1,687.73                               $303, 787.81
30 year                                          $ 1,199.15                               $431,676.25

Which Term Should you Choose?

This is a very personal decision and you will have to analyze your particular financial situation. If you choose the shorter term, you will pay less overall but you would have to decide if you could handle the payments.  If you cannot, a longer term might be the solution for  you.

For any mortgage questions, confer with your lender. For any real estate questions, contact us at Info@MetroRealtyphx.com or call 602.687.9933.

Now that you have decided to buy a home, it is time to look for financing, it is time to obtain a mortgage. 

A mortgage is a loan secured by a property/house and paid in installments over a set period of time. The mortgage secures your promise that the money borrowed will be repaid.For most of us, a mortgage is the largest and most serious financial obligation we ever make.

Freddie Mac states; there are many different types of mortgages, each with its own advantages and disadvantages, it is very important that you do your research.Remember that many people were impacted by predatory lenders and given mortgages that they could not sustain during the housing crisis of the last two years. Understanding these differences will enable you to choose the right mortgage for your financial situation and housing goals. Be an educated consumer!

For any other information on mortgages, log on to the Freddie Mac website.

Types of Mortgages

The two types of mortgages most commonly offered are fixed-rate and adjustable-rate mortgages.

1. Fixed-Rate Mortgages- Interest rates rise and fall over time. Back in the ’80’s the interest rate hovered around 19%, whereas a couple of years ago the interest rate was around 5%. A fixed rate mortgage locks you in to a permanant rate, there are no fluctuations. The mortgage term can be 15,20,30, or 40 years but the most common are the 15 and 30 year fixed mortgage.

  • Advantages: Stability: The interest rate never changes, even if the economy tanks. Your monthly payments will never change. If you are paying $1000 a month today, you will pay $1000 five years from now.
  • Disadvantages: Higher initial costs: The interest rates are usually higher than the initial rates of an adjustable mortgage.

2. Adjustable Rate Mortgages-The interest rates can change at certain points throughout the term of the loan. Most ARMs offer a fixed rate for a certain period of time (3,5,7,or 10 years). After that, the rate adjusts to match the interest rates that the financial markets are offering at the time.

  • Advantages: Lower initial costs: During the initial fixed term of an ARM, interest rates are usually lower than a fixed mortgage rates. Your payments are lower initially.
  • Disadvantages: Risk: ARMs expose you to risk. Initially, the rates are lower but after the initial phase is over and the rates rise, you’ll pay more.

Different ARMs adjust their interest rates in different ways. Always seek the advice of your financial adviser and your mortgage professional for any questions on mortgage.

3. Interest Only Mortgages

Certain ARMs allow you to pay interest only. With most ARMs, you pay the principal (the actual price) plus interest on the loan for a fixed period of time. This mortgage is different. Since you don’t have to pay down the principal, monthly payments are much lower than the standard fixed rate mortgages. However, when the interest only period expires (usually 5-7 years), you must either:

  • Pay off the entire balance in a lump sum                                                                                             
  • Start paying off the principal within each monthly payment.

This is the most crucial part of your homebuying process and should only be handled by a mortgage professional. Please seek the advice of financial professionals during your mortgage selection process.

For any other real estate questions, contact us at Info@MetroRealtyphx.com or 602.687.9933.

What would the United States of America be without its taxes?   The same thing goes for your home mortgage. Not only does it require its property taxes, it needs insurance as well.

The total monthly payments are often referred to as the PITI. These initials stand for principal, interest, taxes, and insurance.

Property taxes: Our Arizona property taxes go towards schools, libraries, emergency services, and other governmental services. There is no way around them.

Each monthly mortgage payment may include a prorated portion of the annual property taxes that you owe.

For example, if your annual taxes are $2,200, each of your monthly payments may include $200 of property tax, in addition to the principal and interest. Sometimes, you may pay your property tax payments directly without having them included in your mortgage payment.

Insurance: It has become almost a standard requirement for the homeowner to purchase homeowner’s insurance. This insurance may cover both the home and its contents in the event of a flood, fire, or other damage. Usually you, as the homeowner, should purchase insurance from a separate insurance firm.

Additionally, if you can’t afford a down payment of at least 20% of the purchase price, you will probably have to buy private mortgage insurance (PMI). This insurance protects the lender if the buyer defaults on the mortgage. PMI may add $50-100 or possibly more to the monthly mortgage bill.

Bankrate.com has a monthly mortgage calculator to help with giving you an idea of what you may have to pay.

Always consult your lender or financial consultant regarding any mortgage related questions.

For any other questions, you can contact us at Info@MetroRealtyphx.com or 602.687.9933 .