206-999-1690
larryreichle@remax.net
LOGIN | REGISTER

Larry & Kathy Reichle

Issaquah Real Estate | Call: 206-999-1690

Can You Use Bonus Income to Help Qualify for a Home Loan?

by Leave a Comment

Yes, you can. But the bonus income needs to follow a few rules, first. Employees get paid in different ways. The most common is a regular paycheck on the 1st and the 15th of each month or maybe every other week. One of the primary responsibilities of a mortgage lender when evaluating a loan application is to make the determination the borrowers have the ability to repay the new mortgage along with any existing monthly credit obligations. The process is relatively simple. The lender compares total monthly credit obligations with gross monthly income. When calculating the mortgage payment, which includes an amount for taxes and insurance, lenders like to see this amount be somewhere near 28-33 percent of gross monthly income and closer to 41 percent when including all monthly payments.

Lenders then verify income by reviewing the most recent paycheck stubs covering a 30 day period. The stubs will show the gross income, deductions and net pay. It will also show a year-to-date amount. In addition, copies of your last two years of W2 forms will be needed. Lending guidelines require there be at least a two-year history of employment and then make the determination the income is likely to continue into the future. If someone is self-employed, then the last two years of personal and business income tax returns will be reviewed along with a year-to-date profit and loss statement.

Okay, but what about a bonus? Can that be used if needed? Guidelines for bonus income follow the same type of review as other types of income. Is there a history of receiving bonus income? There needs to be verification the bonus income has been received for two years. In addition, the bonus income needs to be regular and of a similar amount each time. Let’s say an employee gets a bonus each quarter for reaching a particular goal. The bonus amount is $1,000. The lender will need verification this amount has been received for the past two years. With this history, the lender can reasonably determine the bonus is likely to continue. Using this example, there is an additional $333 per month that can help the borrowers qualify.

If on the other hand, the bonus amounts vary in amount or frequency, it’s possible the income cannot be used, even though there is evidence the employee has received it. Or, the bonus might be an annual bonus paid at the first of every year. In this instance, the additional income can’t help, even though it’s been the same for the past two years. Why? Because a bonus paid in January probably might not be around come August or September.

One final note about bonus income- if more than 25 percent of the individual’s income comes from a bonus or as a commission, that person is then considered self-employed and will be underwritten as such. If you’re planning on using your bonus income to help qualify, it’s a good idea to speak with your loan officer first to see how you’ll need to document this additional income.

Written by: David Reed

 

 

How much house can I afford to buy?

by Leave a Comment

If you’re thinking of making the move from renter to homeowner, simply diving into home shopping is the wrong first step. What you need to do is first answer the question:

“How much house can I afford?”

The best way to determine your spending ability is to do a step-by-step calculation. While there are alternate rules of thumb for figuring out your housing budget — such as a ceiling of 2.5 times your annual salary or limiting your housing payments to a third of your gross monthly income — you should not take shortcuts on a financial decision as important as this.

Calculating ‘how much mortgage can I afford?’

Here are the major factors you will need to consider to determine how much house you can afford to buy:

Income. 

First, add up the income that will be used to qualify for the mortgage, including bonuses and commissions. Make sure you have the documentation to prove every source of income; otherwise it cannot be counted when you meet with a mortgage lender.

Debt. 

Add all the payments you make each month for car loans, credit cards, student loans and any other debt. Based on your income, there are limits on how much debt you’ll be allowed to carry, including your mortgage. These debts will limit how much mortgage you can borrow.

DTI ratio.

When a mortgage lender calculates your level of debt based upon how much money you make, it is known as your “debt-to-income (DTI) ratio.” Debt-to-income ratios are the province of mortgage calculators. One important ratio, referred to by mortgage professionals as your “front-end” or “top-end” ratio, is calculated by taking your proposed housing expense divided by your gross (before-tax) income. Many mortgage calculators set 28 percent as the desirable value for this ratio. The other ratio involves all of your loan payments – your housing expenses and your monthly debts (but not utilities or other living expenses) — divided by your gross monthly income. A home affordability calculator frequently set this number at 36 percent. This is called your “back-end” or “bottom-end” ratio.

Monthly obligations.

While your mortgage lender cares about your auto and credit card payments, they really don’t care whether you have cable TV, the latest iPhone or even that you eat on a regular basis. Those monthly expenses are up to you to include, and cable, smartphones and a few trips to the grocery store can easily add up to several hundred dollars each month.

Down payment. 

The minimum down payment for an FHA loan is 3.5 percent; for conventional loans, the minimum is 3 percent for certain buyers and 5 percent for most buyers.

Taxes.

Today, it’s easy to get an idea on a home’s property taxes by looking at the listing online. You can also get in contact with the county tax office or ask a local Realtor to investigate for you. Most homeowners will have their property taxes paid from an escrow account attached to their monthly mortgage payments. One percent in taxes is equal to $1,000 per year for a $100,000 home.

Insurance.

Lenders require homeowners insurance to cover your property. Contact an insurance company or ask a Realtor to estimate your homeowners insurance costs which will vary according to the type of property, cost and features of the home, and its location. To get a rough idea, you can ask a family member or friend what they pay for insurance (if their home is similar to the home you are interested in buying).

Homeowners association dues.

If the property you purchase includes monthly dues, don’t forget to include those fees in your monthly payments.

Mortgage insurance.

If you make a down payment of less than 20 percent on a conventional loan, you will need to pay mortgage insurance. You can utilize HSH.com’s mortgage insurance calculator to see how much this could cost each month. For FHA loans, there is an upfront and annual mortgage insurance premium.

Interest rate.

You can check today’s mortgage rates at HSH.com, but remember that your rate will depend on your credit score, the type of property you are buying, and the choices you make regarding fees and points. A lender will be able to give you a customized mortgage quote given your situation.

Loan term.

While many buyers opt for a 30-year home loan, if you can afford higher monthly payments, you may want to consider a shorter loan term. Shorter loans have lower interest rates and cost you less over the life of the loan.

As a homeowner, you need to have enough money set aside in an emergency fund — at least three months worth of expenses – in case you lose your job or have a medical emergency, and enough reserves set aside to pay for maintenance and unexpected repairs.

Considering all your financial goals and your monthly comfort level with your mortgage payment is the key to accurately calculating how much house you can afford. It’s smart never to borrow the maximum amount you can qualify for so that you leave yourself some financial breathing room.

Keith Gumbinger

15 Best Things to Do in Seattle

by Leave a Comment

Don’t let the cloudy skies deceive you: Seattle is full of things to do—outside, on the water, in the air, and inside. A stone’s throw from Mt. Ranier and with direct water access, seafood- and boat-lovers can fish, tour, or just sit nearby and enjoy the views. Iconic spots like the Space Needle and Pike Place Market remain central attractions for good reason, and the city’s got its own arts scene, well-captured by the Museum of Pop Culture and performance venues like Kremwork. You certainly won’t be bored while you’re here; you’re more likely to struggle to fit it all in. Let our curated list of the what to do in Seattle be your guide.

ACTIVITY

Museum of Pop Culture

$

The collections here focus on the most impactful moments in popular culture, including science fiction, rock music, and many others across the pop culture spectrum, with innovative exhibits and interactive installations bringing it all to life.

ACTIVITY

Let’s Go Sailing

$$

Those looking for a classy way to cruise the Puget Sound will find it on Let’s Go Sailing’s racing yachts. The sleek vessels coast through Seattle’s waters, offering glimpses of sea life, Mount Rainier, and the coastline. Excursions are customizable, for private charters or group trips.

BAR

Starbucks Reserve Roastery

$

This massive, gleaming roastery is the Starbucks Mecca. Translation: Be prepared to be awed and overwhelmed. It’s not just an oversized Starbucks—there is a coffee-centric cocktail bar serving espresso martinis, multiple food counters, and of course, a roasting area with tours available, all served in a theatric environment.

ACTIVITY

Seattle Art Museum

$

The Seattle Art Museum’s sleek and contemporary digs are as artful as the works that inhabit it. As an institution of Seattle’s art scene, it’s a must-see for any visiting art lover. The multi-level space is expertly curated, with a permanent collection, rotating exhibits, a library, and restaurant.

ACTIVITY

Pacific Science Center

$

Designed by Minoru Yamasaki for the 1962 World’s Fair, this science museum boasts 300 interactive exhibits, two IMAX theaters, and the coveted Laser Dome. Science geeks, inventors, and creative kids (and adults) lose track of time nerding out on all the exhibits.

ACTIVITY

Ethnic Seattle Food Tour

$

Exploring Seattle’s ethnic neighborhoods can be overwhelming without a guide to help navigate the unfamiliar signs and specialty foods at hole-in-the-wall restaurants with foreign menus. Ethnic Seattle helps guide patrons through Little Saigon and Japantown on manageable 2.5-hour tours.

SHOP

Pike Place Market

$

Pike Place Market is one of Seattle’s most iconic destinations. This century-old public market houses dozens of stalls and shops for farmers, restaurants, purveyors, and artisans, all overlooking the Elliott Bay waterfront.

ACTIVITY

Wing Luke Museum of the Asian Pacific American Experience

$

This 60,000-square-foot facility pays tribute to the confluence of Asian and Pacific American history. Set in an industrial-chic brick building, three floors house contemporary galleries with temporary and permanent exhibits, in addition to historic spaces accessible through guided tours.

ACTIVITY

Seattle Aquarium

$

Situated on Pier 59, appropriately right on the Elliott Bay, the Seattle Aquarium has become a landmark for the city and a fun way for people to see the diverse underwater world of the Pacific Northwest.

ACTIVITY

Ballard Kayak

$

Launching from the Shilshole Bay Marina, Ballard Kayak & Paddleboard hosts people looking to get a closer view of Seattle’s waterways without venturing too far from shore. Manageable group sizes make it a pleasant experience as you paddle your way through Seattle’s coves, locks, and sounds.

ACTIVITY

Seattle Cycling Tours

$

From basic Seattle cycling tours to neighborhood-focused outings like “Amazonia” to Bainbridge Island half-day journeys, Seattle Cycling Tours has nearly every inch of bike-able asphalt covered. Group sizes tend to hover around a dozen, and the local guide will dish plenty of narrative about the city along the way.

BAR

The Crocodile

$

This classic Seattle music venue draws people for its casual setting, national acts, and devoted music community. A stage and dance floor are the centerpiece, and black-and-white rock-and-roll photos proudly decorate the walls, while a bar on the back dishes out pizza.

ACTIVITY

Seward Park

This sprawling, lush park spans 300 acres of forested land and is home to an array of native wildlife like eagles. A 2.4-mile bike path makes covering a lot of ground with little time a cinch. After exploring the old growth forest, carve out time to walk the shoreline and check out the art studio.

ACTIVITY

Space Needle

$

The Space Needle is undoubtedly one of Seattle’s most iconic landmarks. Built for the 1962 World’s Fair, it’s a futuristic observation tower and the most prominent building in Seattle skyline. Visitors can reach the top of the Space Needle by elevator for unparalleled views of the Seattle area. It’s undergoing a major $100 million renovation that will be unveiled in summer 2018.

BAR

Kremwerk

$$

This eccentric performance venue and nightclub hosts some of Seattle’s wildest nights in its industrial blue-shaded basement—DJ nights, drag shows, and an epic dance floor ensures it. Seattle’s underground music and arts culture gravitates to this LGBTQ-friendly venue.

 

 

 

 

8 Things to Do Before Applying for a Mortgage

by Leave a Comment

Know what to expect

Buying a house is one of the largest financial commitments many people make in their lifetimes. Between the down payment, principal, interest, taxes, and insurance payments, utilities, maintenance, repairs, and updates, the financial outflows can be overwhelming.

A key aspect for most homebuyers is a mortgage — a loan secured by the house that enables the buyer to pay for the cost of the house over time, instead of all at once. It’s a big deal to apply for and get a mortgage, and taking care of these eight items before you do will help you along the way.

1. Determine how much house you need

If your income is decent and your credit score is good, you might find that banks are willing to lend you more money than it takes to buy a house that meets what you really need out of a home. While it’s tempting to buy up to a larger house in a nicer neighborhood, remember that many of the costs — not just the mortgage payment — scale right along with the price of the home you’re buying. Keeping your home buying decision attuned to what you really need will help you keep your total costs in check.

Key factors to consider include:

  •          How many people will be living in the house?
  •          Is the school district a ‘must have’ of a ‘nice to have’?
  •          What does the commute look like to work/grocery stores/etc.?
  •          Is the neighborhood safe?
  •          How much work are you willing to do to update/upgrade/maintain the home?

2. Scrape together a down payment

Most lenders will give you better terms on your mortgage if you have a substantial amount of your own cash tied up in the home you’re buying. Generally speaking, you’ll need at least a 20% down payment to get the best rates and terms on your mortgage. That means that if your house costs $200,000, you’d need to cough up $40,000 of that amount yourself and be able to borrow the other $160,000.

You might be able to get a mortgage if you have a smaller down payment, but chances are that you’d pay a higher interest rate and/or be stuck paying private mortgage insurance on top of your mortgage. Those raise your cost of borrowing over time, which means you’ll end up paying more in the long run than if you had the down payment available.

3. Check your credit report — and clean up any errors

If you’re borrowing a large chunk of money, lenders want to know you’re a good risk before they offer you theirs. To see most of what the lenders see, you’ll want to check your credit report. You can get a free copy of your credit report from each of the major credit bureaus once per year by visiting AnnualCreditReport.com. From that report you can see which companies you owe money to, how much you owe, and whether or not you’re considered to be on time with your payments.

Around 20% of credit reports have errors in them, either because of things like identity theft or because of more mundane clerical errors in data entry. If you see errors in your reports, the bureaus have a process to allow you to challenge those errors to get them corrected. By correcting errors before you apply for your mortgage, you improve both your chances of getting that mortgage and getting good terms on it.

4. Pay off what you can, and get current on everything else

In addition to wanting to see that you have a good history of managing your debts, mortgage lenders want to make sure you’re not over-extending yourself by taking on that large of a debt. They will calculate ratios based on how much you currently pay towards debt service and how much in total you will pay towards debt service once you have your mortgage.

Generally speaking, you’ll need to be putting less than 36% of your income towards debt service before considering your mortgage. Once your mortgage is factored in, you’ll absolutely need to keep that ratio below 43% of your income to have a qualified mortgage.

If that sounds like a crazy high percentage of your income to be putting towards debt, you’re absolutely right. The less you owe, the easier it is for you to make your payments on time and in full, and the more flexibility you have when things go wrong. By getting your other debts under control first, the less risk you’ll pose to the lender, and the better the overall deal you’ll qualify for.

5. Document your income — and the source of your down payment

Your lender will want to see proof that you make enough money to cover your mortgage payment as well as proof that youcame up with the money for your down payment. Proof of income comes in the form of your W-2 or 1099 from work or investment income that you use to file your taxes. A recent paystub would also help showcase that you’re still earning the income you’re claiming as part of your ability to pay your mortgage.

Proof of down payment money comes from checking account, savings account, and brokerage account statements, along with explanations for any large deposits into those accounts in recent months. The lender is looking for evidence that the money you’re using to make your down payment is yours, and they prefer “seasoned” money over recent windfalls.

Seasoned money is money that you’ve saved up over time, and it’s preferable because it gives the lender confidence that you’re good with money. If the lender suspects your down payment money is a gift or loan from family members — because it’s a recent deposit of a lot of money — the lender will ask for documentation on where that money came from. If the lender isn’t satisfied with the explanation, it could jeopardize your ability to get favorable rates or the mortgage at all.

6. Figure out what mortgage terms you want

The key choices you’ll make are the length of the mortgage and the rate type of the mortgage. The most common length for a mortgage is 30 years, followed by 15 years, but several other lengths are also possible. As a general rule, the shorter the length of the mortgage, the lower the interest rate you’ll pay on it, but the higher your monthly payments will be because you’re paying the balance down that much faster.

You can also choose between fixed rate and adjustable rate mortgages. With a fixed rate mortgage, your interest rate and the principal and interest part of your payment never move throughout the life of your mortgage. With an adjustable rate mortgage, your interest rate resets every year — sometimes after a preset number of introductory years at a steady rate. With an adjustable rate mortgage, you take on the risk of rising interest rates, but the benefit is typically a lower starting rate than a fixed rate loan has.

7. Avoid taking on any new debts around the time of your mortgage

If you’re buying a house, you’ll typically have a lot of expenses above and beyond the house payment. Things like renovating, buying new furniture, moving, fixing up your old place, and so on all require money. Avoid the temptation to borrow money for any of those items — or anything else — between the time you start shopping for a house and the time you close on your mortgage.

That can be trickier than it sounds. Even if the merchant offers you deferred payments like “no payments for 90 days” or interest free financing, it still counts as a loan and shows up on your credit report. If your lender sees you taking on excessive borrowing capacity before your mortgage is issued, it will react in a way that protects its interests. That likely means either cancelling your mortgage altogether or reducing the amount you can borrow based on your credit no longer being as strong as it had been previously.

8. Research lenders before applying for your loan

The act of applying for credit — whether or not you’re approved for that credit and regardless of whether you accept that credit — causes an inquiry on your credit report. That inquiry will typically lower your credit score by a few points. If your credit is borderline, the impact to your credit score can be enough to knock you into a higher risk tier or out of contention for a mortgage altogether.

As a result, you’ll want to check around to see which select group of lenders you want to do business with before filling out the mortgage application. Banks and credit unions frequently post their current mortgage rates online, and other mortgage lenders often advertise on real estate listing or similar sites. By researching lenders in advance and limiting your applications, you reduce your credit inquiries and the cost and hassle of applying for your mortgage.

A home is a big commitment — so plan for it

Your home may very well be the largest financial commitment you’ll make in your lifetime. By planning well for the financing associated with it, you can minimize the costs of ownership and put more of your hard earned cash towards what really counts, rather than towards fees, interest, and overhead costs. And that will go a long way towards allowing you to enjoy your home — and the mortgage burning party you might want to throw once you’ve paid it off.

 

When You Want To Renovate Everything, How Do You Choose What To Do First?

by Leave a Comment

New fence. Covered patio. Expanded bathroom. Painted kitchen cabinets. They all cost about $3,000 (give or take a couple bucks). So when you want to renovate everything, how do you chose? What comes first, and what shouldn’t you bother with at all? It’s all so confusing.

That’s the conundrum many people face when they go to renovate, or they’re simply trying to make a plan of action that doesn’t include having to sell their house because they’ve gone broke fixing it up. Moving forward can be tricky, and the renovation process can be anxiety-producing. Taking the time to properly research, set your budget, and determine the return on investment of individual projects – if that’s even important to you – are the keys to success. Follow these tips before you swing that hammer.

Ask yourself why you’re doing it

“It is vital that you know the objective of the renovation before you start as this will help you keep on track and make the appropriate decisions once the work has started,” said Your Investment Property. “The objective may be any one of the following: increase rental return; improve capital value; own enjoyment; keep up with the next door neighbors; provide an income when property is flipped (ie: purchased, renovated and then sold in a short period of time); or something else that is important to you.”

Prioritize

This one can be hard when what you really want is a top-to-bottom overhaul, and it may require you to have a few tough conversations with yourself. You may love the idea of a covered patio, but will you get real use out of it? If you’re a person who doesn’t much like to go outside (or if the covered patio would only be the beginning of the expense because you’ll now need to add an outdoor fan and a heater and drapes and mosquito netting and new outdoor furniture and a waterproof television once you have the patio cover), perhaps your dollars are better spent elsewhere. When you have limited funds, taking care of renovations on items that are more frequently used, or that you can at least look at and appreciate on a more regular basis, might be a better bet.

Consider your budget

About that budget…some renovations obviously cost more than others. And some might be more important to you than others. Some of us have instant gratification issues (umm, guilty!). Perhaps it would be best to knock out a few small items that will make you feel good about your progress. Or, perhaps what you really need is a couple months of serious money-saving so you can put in those countertops you’ve been dreaming of.

Ask around

You might be able to slash your hard costs by finding a skilled handyman to do your flooring installation instead of going with a flooring company. Or, you may be able to take advantage of a special from a big box store that cuts down on costs, like free carpet installation at Home Depot – a special they are currently offering. Signing up for daily emails from Home Depot and Lowes is another way to take advantage of limited-time specials that can save you money. Both have “Daily Deals” they send out in their emails, which are good for that day (and until they’re all sold out) only.

Consider the ROI

If you can’t rule out one or the other based on how much use you think you’ll get from the areas you’re looking to renovate, look at the potential value. One might provide a much better return on investment than the other. The Cost vs. Value Report, which “compares average cost for 21 popular remodeling projects in 149 markets with the value those projects retain at resale in 100 U.S. markets,” is our Bible when it comes to determining ROI.

Assess Your House

You might have a lot of “wants” related to renovating, like updating your master bath and re-facing your fireplace. But there may be more pressing issues that need to be addressed before you get to the pretty stuff. “Hire a licensed home inspector to check your house from top to bottom,” said Home Guides. “He’ll climb into the attic to check for dampness, scour the basement looking for leaks, test the heating and air conditioning systems, examine the roof, the plumbing and electrical panels. Evaluate the results before deciding on a plan of action.

Think about everyday costs

New appliances and items like new doors and windows can have a significant upfront cost, but they will save you money on a regular basis because they’re energy-efficient.

WRITTEN BY JAYMI NACIRI

Here are 3 ways parents can help their grown kids to own a house

by Leave a Comment

When responsible first-time homebuyers need help buying a home, the family bank sometimes can lend a hand.

Younger homebuyers face a mountain of obstacles, including rising home prices and interest rates, too few homes for sale and unpaid college debt. Student debt is a major source of trouble. When the National Association of Realtors surveyed recent homebuyers who had problems saving up a down payment, 53 percent of those in the youngest group (37 and younger) blamed student loan debt for their difficulty.

Families appear to be pitching in to help, according to the results of that survey in the 2018 NAR Home Buyer and Seller Generational Trends Report. Among homebuyers who made a down payment, 23 percent of those 37 and younger used a gift and 6 percent a loan from family or friends — the highest proportion for either type of assistance among all age groups.

Family assistance like this works best when the kids qualify for a mortgage on their own and parents make the purchase more affordable with, for example, a bigger down payment or a lower interest rate, says Jeremy Heckman, a certified financial planner with Accredited Investors Wealth Management in Edina, Minnesota.

FIRST, THE GROUND RULES

To create a businesslike distance for these transactions, Heckman suggests that parents:

• Consider disclosing the assistance to all immediate family

• Consider treating all siblings equally

• Use contracts

• Document gifts

Formal agreements offer important benefits, says San Francisco real estate attorney Andy Sirkin. They define obligations and minimize misunderstandings. And if parent lenders die or become incapacitated, all their heirs can view the transaction and its history.

WAYS TO HELP

Here are three ways parents can help make it more affordable for new homebuyers to purchase a home:

1. GIVE MONEY

A gift of money is often best, Heckman says. Parents can write a check for any amount they choose. That’s it — no contract or ongoing commitments. Or they can pay all or part of an expense such as mortgage closing costs. Providing down-payment assistance can help new borrowers avoid paying for private mortgage insurance, which helps keep their monthly payment low.

HOW IT WORKS

Strict rules dictate how cash gifts are used in a home purchase, and they vary by mortgage type, lender and lender offer, says Mark Case, a senior vice president at SunTrust Mortgage.

Lenders like to see money gifts — easily traceable checks, bank transfers or wire transfers — in a borrower’s bank account three or four months before applying for a mortgage, Case says. Givers and recipients may need to sign letters confirming that the money isn’t a loan.

When it comes to taxes, anyone can give any other person a gift up to $15,000 in value (money or, say, stocks) in 2018 without filing the gift-tax return IRS Form 709 . So a parent with two children can give each of them — and even the children’s partners — up to $15,000 this year without having to complete Form 709. A tax professional can confirm how the rules apply to individuals’ specific circumstances.

2. FINANCE THE MORTGAGE

Parents with cash to invest can become the mortgage lender, offering extra-easy terms, like no closing costs or no down payment. Heckman says they can charge a higher rate of interest on their money than it earns in a savings or money market account and still offer kids a lower-than-market mortgage rate.

“I said, ‘This could be a win-win for both of us,’” says Jay Weil, an attorney in Wayne, New Jersey. He and his wife, Judy, have financed two mortgages for their son Matt and Matt’s wife, Allison.

HOW IT WORKS

Jay and Judy fully funded the younger couple’s first home, a Columbia, Maryland, townhouse. They decided to use a service that facilitates family loans. They worked with National Family Mortgage, which charges one-time setup fees of $725 to $2,100, depending on the loan size; provides all necessary forms and documents to meet state, local and IRS requirements; guides families through the settlement and filing process; and connects borrowers with loan servicers.

Then in 2017, the Weils lent the kids money again, for a $579,900 house in Laurel, Maryland. Matt and Allison got two loans. One was a primary mortgage from SunTrust Mortgage for $259,900, at 3.875 percent. His parents provided a second mortgage for $260,000 at 1.98 percent. They used money earned from the sale of their first home to make a down payment.

Family lenders must charge at least the Applicable Federal Rate , the minimum interest rate required to keep the assistance from being considered a gift.

3. CO-BORROW

Although riskier for parents, co-borrowing is another option. Mortgages with co-borrowers were nearly a quarter of all new-purchase mortgages in the third quarter of 2017, according to ATTOM Data Solutions, a real estate data company.

Co-borrowing helps borrowers overcome a limited credit history or a too-high debt-to-income ratio, says Case, of SunTrust Mortgage.

HOW IT WORKS

Parents apply for the mortgage, too. They must meet the lender’s credit requirements and sign loan papers with their kids at closing.

Aside from the mortgage itself, a separate family contract can define expectations and details such as who gets how much equity when the home sells and what happens in case problems arise, says Sirkin, the real estate attorney.

For parents interested in being co-borrowers, there are some things to keep in mind:

• Not all loans allow co-borrowers, so it’s good to confirm the option when shopping for mortgages

• Some lenders may call this step co-signing, which may have different parameters, but the outcome is the same: Parents and children are equally responsible for the loan and any missed mortgage payments

• Parents’ credit could be affected, making it hard to finance another big purchase later, even if children make payments on time

With all the headwinds facing first-time homebuyers, family help sometimes makes all the difference.

By MARILYN LEWIS
NerdWallet


Suze Orman: First thing to do now if you want to buy a home soon

by Leave a Comment

 

If you’re planning to buy a home this year, you’ve hopefully saved up more than you think you’ll need for a down payment. But stockpiling money isn’t the only thing that should be on your financial checklist before becoming a homeowner.

First and foremost, you should check in on your credit score, that’s because, the higher your credit score, the better rate you’ll be able to get on a mortgage. And that matters because even a fraction of a percent can dramatically alter the total you’ll pay over time.

Your goal should be to get the best possible loan. The better your financial profile is, the lower the interest rate you will be offered. Even a small interest rate difference can add up to tens of thousands of dollars in savings over the life of a loan.

FICO credit scores range from 300 to 850 and signify your trustworthiness to financial institutions. While anything over 650 is considered decent, Orman recommends aiming for a score of 740 or higher before applying for a loan.

If your score is lower than 740, please focus on boosting it as much as possible over the next few months. Every 10 or 20 point increase can help your cause. A 700 score might earn you a better offer than a 680 score.

That’s because a high score tells lenders that you have a proven track record of being responsible with your money.  It means we’re more likely to want to give you a loan, because we know you’re going to pay us back.

If your score is less than ideal, Orman recommends taking three immediate actions to improve it: pay down credit card balances, pay down other debt, such as student loans, and stop buying anything that isn’t completely necessary.

You want to improve your credit utilization ratio, which is calculated by dividing your balance by your credit limit. Ideally, you’ll never hold a balance of more than 30 percent of your limit. So If you have a card limit of $10,000, you never want your balance to exceed $3,000.

As you get ready to consider putting in an offer on a home, you want to pay down as much debt as possible and refrain from splurging.

The best advice is to charge as little as possible in the months leading up to a home purchase.

You’ll also want to have excess cash on hand that can prove to lenders that you’ll be covered even in the event of an emergency. “Though there is no hard-and-fast rule, lenders want to know that if you get laid off, or sick, you can cover the mortgage for at least a few months,” Orman says.

Be sure to do your own research on how to boost your credit score to before buying a house and read up on the four things you should be doingif you’re aiming for a perfect credit score.

Emmie Martin, CNBC

Best of the Burbs: The Next Generation of Seattle Suburbs

by Leave a Comment

 

Living outside the city has always been an attractive option for many, but with housing prices in Seattle going up, up and up, the suburbs around us are more magnetic than ever.

The Issaquah Highlands, a planned community, offers city-like density and amenities in the burbs

No matter how you look at it, neighborhoods in the city are still a huge magnet for newcomers and long-timers. Since 2010, Seattle has grown by 105,000 people; more than 26,900 of those residents have come in just the past year, a greater number than all the rest of King County combined. But with home prices skyrocketing, inventory low and bidding wars over homes the norm—especially for those in the fixer-upper category—home buyers and renters alike are opting out of the city and looking outward for more: more space, more options and more cash remaining for things not related to mortgage, rent or remodeling.

In a trend forecast for 2018 from Svenja Gudell, Zillow’s chief economist, people who already own homes in the city will stay put and remodel rather than seek a different home, while would-be homeowners just entering the market will look for new construction in the affordable category, which means heading to cities where zoning laws and land costs make that easier. In other words, the suburbs.

Combined with this is a big group that’s embracing the suburbs: millennials. With the oldest of this generation in their mid-30s, they are beginning to settle down, albeit a little later than previous generations (who, on average, bought homes at age 29). According to Zillow, almost 50 percent of millennial homeowners live in the suburbs, and they’re choosing larger properties with more bang for their buck, paying a median price of $217,000 for a home that is about 1,800 square feet.

So, are we entering a new era of greater suburban sprawl in the Puget Sound region? Yes and no. While these places don’t have the density of Seattle, they are growing. According to the Puget Sound Regional Council, King County held the largest share of regional construction permitting activity in the area, with 18,400 units (72 percent) as of 2015. (See here the area’s fastest-growing burbs.)

But many of these suburbs, from Duvall to Bremerton to Gig Harbor, are different than suburbs of the past: They’re walkable (like Edmonds), they’re economically and racially diverse (Burien), and they have decent public transportation options (SeaTac and Kent). And many have amenities to spare, driven by the influx of newcomers who want a taste of the big city in their bedroom communities: performing arts centers, good restaurants, boutique shopping and trendy fitness options, all in pedestrian-friendly town centers rather than strip malls, or malls in general.

Often, when home buyers begin looking for a place to put down roots, their expectations are upended—they discover they can find what they want in places they may never have considered before. Charles Mortimer, a Redfin real estate agent, had a customer who found a place in Des Moines, a town not on the client’s radar but with a lot of new construction (part of a trend in cities south of Seattle). Another client seeking a home in North Seattle—for its schools and commute time into the city—ended up buying just outside of Tacoma and was happy to commute to Seattle via the Sounder train. That’s somewhat of an open secret these days: Commuting from the burbs often takes as much (or as little) time as it takes to get from Ballard to downtown, but minus the in-city gridlock angst.

So, where should you locate? Here we’ve distilled the best of the Seattle suburbs—and exurbs—to help you decide the next place to call home.

By Niki Stojnic

 

 

Seattle and Honolulu Move up the Ranks of the Best Cities for Public Transit in 2018

by Leave a Comment

 

 

New York, San Francisco and Boston top the list of the 10 best cities for public transit according to the updated Transit Score® rankings by Redfin. Transit Score, a tool by Redfin company Walk Score®, rates locations based on how convenient they are to public transportation. Each of the top three cities has a Transit Score above 70, meaning it has an excellent transit rating, with transit being a convenient option for most trips.

While the rank order for the six best cities for public transit has stayed the same since 2012 when Transit Score first launched, there was a lot of movement at the bottom of the top-10 list.

In 7th place, Seattle has a Transit Score of 59.6, up 2.6 points since 2016, the biggest jump among the top 10. In the past two years, Seattle has expanded its Link light rail service, adding two new stations in 2016, making it easier and faster to get to Capitol Hill and the University of Washington. A 2017 survey by the Seattle Department of Transportation found that public transit use had increased by 48 percent in the past seven years.

“Seattle is not only the coolest city in the country – we are now one of the most transit-friendly cities,” said Seattle Mayor Jenny Durkan. “For our visitors, commuters and residents, public transit is safe, affordable, and a vital component in making sure our city is accessible to all. With the opening of new light rail stations and one of the highest bus riderships in the country, Seattle is making significant strides towards becoming a world-class transit city.”

Honolulu gained 1.6 points of Transit Score since 2016 and entered the top 10 list for the first time, replacing Miami. More than 69 million passengers in Honolulu ride TheBus annually and the city is planning a new rail system to further improve public transportation.

“Honolulu has been a public transportation city for many years now and the fact that our residents and visitors use TheBus an average of 214,000 trips every weekday is a testament to this fact,” said Honolulu Mayor Kirk Caldwell. “The new Transit Score ranking announced today by Redfin is proof that the nearly 2,000 workers who keep our bus system running strive for excellence each and every day, and our commitment to a transit system that covers all of O‘ahu will only improve once our rail project begins service along our busiest and most populated corridor.”

Below is a ranking of the top 10 U.S. cities (with populations of more than 300,000) for public transit.

Rank City Transit Score Change from 2016 Previous Rank (2016)
1 New York 85.3 +1.2 1
2 San Francisco 80.4 0 2
3 Boston 72.6 -1.8 3
4 Washington, D.C. 68.5 -2.2 4
5 Philadelphia 66.8 +0.1 5
6 Chicago 65.0 +0.3 6
7 Seattle 59.6 +2.6 10
8 Minneapolis 57.6 0 9
9 Baltimore 57.2 -0.6 8
10 Honolulu 57.2 +1.7 11

Top 5 Biggest Transit Score Increases

Raleigh, NC had the largest Transit Score increase, up 6.3 points from 2016 to 28.9 this year.

Rounding out the top five places with the largest Transit Score increases are Phoenix, AZ (+3.8), Aurora, CO (+3.5), Seattle, WA (+2.6)  and Atlanta, GA (+1.7).

Top 5 Biggest Transit Score Decreases

Washington D.C. had the largest decrease among all major cities in Transit Score, dropping 2.2 points to 68.5 in 2018. The decrease can be attributed to changes in Metrobus and Metrorail scheduling, where some bus routes were discontinued and the frequency of trains during rush hour was lowered.

“Once touted as the gold standard for public transit, D.C.’s Metro is now reckoning with decades of deferred maintenance,” said Redfin Washington D.C. agent John Marcario. “Tough decisions to reduce service and shut down lines for extended periods for repair are causing short-term frustration, but will hopefully make the system better in the long run. Despite the fall in Transit Score, access to transit remains a top priority for D.C. home buyers, who are still willing to pay a premium to live near a metro station.”

Bakersfield, CA (-2.2), Miami FL (-2.2), Boston, MA (-1.8) and Baltimore, MD (-0.6) rounded out the cities with the biggest Transit Score decreases from 2016 to 2018.

New Cities Added

With the addition of 600 new U.S. cities and more than 4,000 new neighborhoods, Transit Score ratings are now available for more than 900 cities and nearly 15,000 neighborhoods on walkscore.com. Among the newly added cities are big ones like Jacksonville, FL (22.4) and Charlotte, NC (27.4), along with smaller cities with Transit Score ratings like Hartford, CT (54.2) and Syracuse, NY (44.1).

To see how your home, neighborhood or city stacks up, search issaquahrealestate.com

Methodology

The Transit Score algorithm calculates a score by summing the relative usefulness of public transit (bus, subway, light rail, ferry, etc.) routes near a given location. Usefulness is defined as the distance to the nearest stop on the route, the frequency of the route, and type of route (with twice as much weight given to heavy/light rail than to bus service). Transit Score is based on data published in General Transit Feed Specification (GTFS) format by transit agencies across the country.

Contact Us

Issaquah real estate

Larry & Kathy Reichle
371 NE Gilman Blvd. #160
Issaquah, WA 98027

Phone: 206-999-1690

Contact Us

Digital Millennium Copyright Act Notice (DMCA)

Eastside Real Estate Blog