Month: November 2014

What Is Your Real Estate Risk Tolerance?

When you’re planning to buy a home—whether as a first-time home buyer or as a seasoned pro—deciding how much you can afford is a critical initial step. Once you know that, you’ll be able to find a mortgage tailored to fit your style.


But figuring it out takes more than knowing your debt-to-income ratio. Real estate is an investment, and you need to know your risk tolerance when investing.

Are you conservative, aggressive or somewhere in the middle? Here’s how to tell your real estate risk tolerance.

Income Level

Start by taking a look at your income level.

If you make a higher income, you can afford to be an aggressive borrower, with up to 41% of your monthly take-home pay going toward your debts and 36% going toward housing expenses.

If your income falls in the middle to lower range for your area, an aggressive plan may not work for you.

“Let’s use 41% debt ratio as a benchmark,” says Casey Fleming, mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage.”

“If you make $60,000 per year, that’s $5,000 per month. A 41% debt ratio means that $2,050 is committed to monthly debts—before groceries, taxes, health insurance, utilities, beer, etc. Most folks will eventually get into trouble if they do this.”

Financial Stability

How you make your income also factors into the equation.

“If you have a steady base plus windfall income from bonuses, commissions or stock options, then the windfall income could be used as your ‘rainy day’ bucket, and pushing your debt ratio to 41% makes sense,” Fleming says.

On the other hand, if your work is steady—but you don’t see a promotion or raise in your future—a moderate financial plan would suit you better.

And if you’re self-employed, a conservative approach is best.

“If someone is self-employed or on 100% commission, unless they have a superb, steady track record, I would never want to see them push the envelope,” she adds.

Saving Habits

Before you apply for a mortgage, take a hard look at how much you have—or haven’t—socked away.

“If someone is a good saver, I’m more comfortable with them pushing the debt-ratio envelope, because I know they can manage tight months,” Fleming says. “This is especially true if they will have good reserves after close of escrow.”

If you don’t have large cash reserves in your savings account, you’ll save yourself trouble later on by choosing a conservative mortgage.


Your age is also an important deciding factor.

If you’re younger, purchasing your first home, have many years of work ahead of you and feel like you’re in line for pay increases and promotions as you go on, choosing an aggressive plan may make sense. You’ll put more toward your debts and mortgage payments each month—but you’ll be able to build up equity faster.

However, if you’re nearing retirement or already retired, this strategy may not work.

“If you’re looking at retirement, you shouldn’t be using your current income to calculate your debt ratios—you should be using your projected retirement income,” Fleming says.

This lower, more stagnant income might be better suited to a conservative financial approach.

Bringing It All Together

Once you know what type of borrower you are,®’s Home Affordability Calculator can help you see what your mortgage and monthly expenses may look like.

By plugging some basic financial information into the calculator and selecting your borrowing type, you’ll be able to see an estimated monthly payment breakdown—including principle and interest payments, property tax, home insurance and mortgage insurance.

Use this tool to help you manage your real estate risk tolerance.

How to Negotiate Your Closing Costs

At the end of the home-buying process, you will be faced with closing costs, the fees due at signing required to complete a home sale. Closing costs can be expensive, but some of those fees may be negotiable.


Check the Market Temperature

The nature of the housing market may dictate whether the buyer or the seller picks up various closing costs.

If it’s a buyer’s market—a bit cold and homes aren’t selling well—sellers may be more willing to bargain and take on some closing costs.

If it’s a seller’s market—the market is hot and homes are selling quickly—the seller has the advantage and little incentive to give the buyer a break.

However, you shouldn’t accept any fishy-looking fees without asking first.

Which Closing Costs Are Negotiable?

When you apply for a loan, your lender or mortgage broker must provide a good faith estimate (GFE) of fees due at closing.

This is a very useful tool, but bear in mind these are estimates—not guarantees. Compare the GFE to the final closing costs statement and the HUD-1 settlement statement to look for big differences.

Some fees are generated by third parties and typically don’t change very much, no matter where you find your loan. Then there are additional expenses you can’t control, like taxes and government fees.

Other fees may be junk fees—costs that are put in by the lender to pad out the bill. These fees should be able to be negotiated or waived.

Negotiable fees are generally found in the 800s section of the GFE. They may include the following:

Title Insurance: The lender will recommend one, but you don’t need to accept it. You can shop around, compare fees, and go with the one that suits you best. However, you can’t have this waived.
Commitment fee: These are just there to make sure you don’t jump to another lender. Ask to have it waived. If you can’t, negotiate that if the loan falls through due to the lender, the fee will not be charged.
Application fee: Some loans have an application fee. Ask your lender if they will waive or credit this fee towards closing costs.
Miscellaneous fees: Ask exactly what these are for, especially if they are high.
Courier and mail fees: With almost everything being digital, your lender should provide evidence these fees were necessary.
Discount points: These increase your closing costs but reduce your interest rate. If you have discount points and your closing costs are too high, you may want to eliminate them. Talk it over with your lender and be sure to figure out the new monthly mortgage payments if you do.
Just Ask If You Have Questions

It is your right to question anything on your HUD-1 and GFE documents, so do ask questions if you feel a cost is too high or doesn’t make sense.

Simply asking the lender to explain certain fees might be enough for the lender to waive them, particularly if they were junk fees to begin with.

Don’t Get Intimidated by Closing Costs

Even if your closing costs rise significantly beyond your GFE, you may feel pressured to accept them to avoid losing the home to another buyer.


Many lenders would rather close a deal instead of going through the process again with another buyer. Use that to your advantage and be prepared to walk away from the table.

As you review your closing costs, be your own advocate. It’s a good idea to visit a few different lenders and compare GFEs.

Always make sure you receive a thorough explanation for any fees that seem unusual, unnecessary or just too costly.

3 Tips to Sell Your House in the Fall

Although the real estate business tends to slow down in the fall, the season still can be an attractive time to put a home on the market. If you want to sell your house in the next few months, it can be done.


Potential buyers—such as empty nesters or millennials who aren’t worried about moving after the school year has started—will compete for fewer homes on the market and will likely want to seal a deal before the holiday season kicks into high gear.

Here are three tips to help make your home more attractive in autumn, so you can sell your house before winter comes.

1. Clean Up

As many regions slowly shift from a sellers’ market to a moderate or buyers’ market, you’ll want to do everything you can to make your house look its best.

Pay particular attention to eliminating clutter and safety hazards that can crop up with cooler weather:

Make sure your yard, walkways and gutters are free of leaves and debris.
Mow your lawn so it looks neat.
Trim trees so unexpected winds don’t knock down branches that could damage your home or hurt anybody.
If it is rainy, be sure you have a good doormat so visitors can wipe their feet and not traipse mud and water through the house.
If you already have snow, be sure stairs and walkways leading to your front door are not icy.
Wash decks and wipe down windows so they sparkle instead of appear streaked by rain.
Vacuum and wash down the fireplace, especially if it hasn’t been used in months.
If you live in a region where it’s still warm enough to use the patio, make sure the area is inviting and arranged with the views from indoors in mind.
Above all, make sure your doorway and the rest of the house is clear from knick knacks, bicycles and toys that make your home appear cluttered.

2. Create Autumn Curb Appeal

If your house’s exterior looks drab, you may want to consider painting it a warm color, planting seasonal flowers, or placing pumpkins strategically along your walkup to accent your home’s appeal with instant color.

Potential buyers will make an instant judgment when they see your home, and you want to be sure it’s positive.

While you don’t want to go overboard with fall decorations that detract from the home itself, a few displays like a festive front-door wreath—and lighting so people can clearly see the path to your front door—can make your home feel fresh, even in the fall.

3. Keep the House Cozy

Entering a cold house could leave an unfavorable impression. So warm up your home with a fresh coat of paint and set the thermostat at a comfortable temperature.

Another way to warm up a home is with light, especially as days get shorter leading into winter. Be sure to open blinds and curtains so plenty of light illuminates the home’s interior.

A few embellishments like red, orange or golden yellow pillows can breathe new life into dull sofa—or a fall centerpiece can highlight a certain area of the home.

While you don’t want your home to look like the latest department store display, well-chosen embellishments that give potential buyers the impression you’ve paid attention to the fine details and taken care of any problems with the home will help you put your best face forward.

And remember, there’s nothing wrong with trying to sweeten the deal with the comforting aroma of a freshly-baked, cinnamon-laced apple pie or pumpkin cupcake to leave a lasting impression of your home as the potential buyer takes a bite.

5 Tips for Selling a Home From Out of State

Trying to sell a house is challenging enough, and if you’re selling a home from out of state, it can be positively intimidating.


Property and maintenance costs can add up quickly on an empty home, and you don’t want to have to buy special vacant-home insurance.

Whether you’ve had to relocate because of a new job, are selling a second home, or are trying to settle the estate of a former relative, a few simple steps can help you to sell quickly and avoid carrying charges for property that you’re not living in.

Remember, when you’re selling a home from out of state, your goal is to get the best price for your property in a reasonable period.

If you take the time to address these crucial areas before you carry on with your life in another state, you’re likely to secure a sale quickly—so you’re not carrying multiple mortgages or paying for upkeep on an empty home.

1. Choose a REALTOR® Carefully

Much of the success of the sale of your home is going to hinge on using a REALTOR®, who will be responsible for showing and marketing the home, checking on it in your absence, possibly hiring contractors to handle upgrades and repairs, and ensuring there is a smooth sales transaction.

With so much riding on your selected real estate agent, interview a few recommended agents and determine which one you can rely on the most. You’ll want to find someone to partner with who is readily available, even if you’re calling from another time zone, and responsive to potential buyers.

To avoid potential family arguments, you’d be well-advised to trust a professional—rather than a relative—to help you navigate the sales process.

2. Pick the Right Price

Because you’re trying to sell the home quickly, it’s important to price the home accurately rather than test the market with a high figure and take price cuts later.

Your for-sale listing will have the most impact as soon as it is published. That’s when you’re most likely to get fair market value for the home—before people start questioning why your house has sat on the market for so long.

Rely on your agent to look at the home and advise you on how best to price it after looking at comparable home sales. Ask him or her to predict how long the home will remain on the market at that price compared to other price points.

Also be sure to determine in advance the highest and lowest price you’d want to accept for the home. When multiple people have an interest in a property—for example, when siblings are selling a deceased parent’s property—you don’t want to get into last-minute squabbles about what the property is worth and possibly let a sale fall through.

3. De-Clutter

Buyers want a home that looks move-in ready. That means you’ll need to make sure the place is clean and free of clutter.

If you need to clear out a deceased relative’s belongings, first remove important documents and heirlooms—and then consider using an auction company and professional cleaner to get the most value from the former belongings and to dispose of what is left over.

Be sure to make any necessary home repairs and don’t ignore cosmetic upgrades. Although you don’t need to renovate the entire home, it’ll help to fix major problems, have the home professionally cleaned and repainted, and show off the hardwood floors.

With that in mind, before you skip town, you might want to hire an on-call handyman to address last-minute repairs who can accept online payments.

4. Set the Stage

Because you’re probably taking most of your belongings with you when you move out of state—or are trying to get rid of a relative’s belongings if you’re clearing out a home—it’s probably in your best interest to hire a professional stager who can help your home look its best.

Homes that are staged and are appropriately priced consistently sell faster than non-staged properties.

5. Take Professional Photos

Once you have everything in its place and are ready to show off your home, do so with professional photos.

A professional photographer will know how to best capture your home’s best features. Especially now that many potential home buyers start shopping online, professional photos can enhance your listing.

You’d be surprised how many potential home buyers are turned off by something as trivial as having the toilet seat up in the photo of the bathroom.