Marianne Belanger's Blog
Shopping for a new home should be an exciting experience, but if you are unsure of where you stand with your credit, it can be a little nerve-wracking. Having good credit will not only help you to secure more favorable interest rates for your mortgage, but it can also help you to avoid less favorable loan structures, higher down payments, and additional costs such as PMI. The best way to prepare yourself for your financing is to whip your credit into shape before your hunt begins. Check out three ways to help prep your credit.
Check for Any Collections
Collections are delinquent accounts that can seriously affect your credit score. Review your credit report and address any collections that are listed. If there are ones on there in error, file a dispute with the credit bureaus. If you owe the debt and can pay it, contact the collection company and ask if you can satisfy the debt by paying it and have it removed from the report. Finally, if you can not afford to pay the whole debt, discuss with the creditor possible settlement options.
Don't Request Any New Credit
When you open a new credit card or credit account, it can affect your credit in multiple ways. First, it will count as a hard inquiry, which can slightly lower your score, and secondly, it may change the average of your credit history. Mortgage companies don't like to see a lot of credit being acquired right before a mortgage is being established, so if it can wait, let it wait until the mortgage is secured.
Pay Down Your Credit Card Balances
If you have the means to reduce the balance of your credit cards, now is the ideal time. Your credit score is affected by your credit card balances in two primary ways. The first being the amount of debt that is listed on all of your credit cards. The second is the ratio of the amount owed on your card in relation to the credit limit on the card. A good ratio is less than 30%, so to keep your credit score high, you will want to be below this percentage. Paying a large chunk of your debt can increase your score by several points, and also improve your debt to income ratio. Just be sure to do this at least thirty days out so that the new balance is reflected when your score is pulled.
Don't let poor credit lower your chances of buying the home that you always wanted. Follow the tips above to pump up your credit before applying for your next mortgage. Even a few points can mean significant savings.
The methods for getting started in real estate investing range from strategies that are active to others that are more passive. Many methods fall in between those extremes but all have their own level of associated risk. Here we'll touch on some of the lower risk ways to get started with property investment.
Buy, Remodel, Rent, Refinance, Repeat is a method that is also known as BRRR. With careful planning and execution, it can be an effective way to start building a portfolio of rental properties without using all your cash.
The BRRR method basically involves purchasing a property that needs improvements and is being sold for under its potential value. First, use short-term financing or cash to buy the property.
Once you've remodeled, rented it out and otherwise stabilized it as an income generator, you refinance the property using a more conventional mortgage. Doing so could free up most of the original capital for your next purchase.
2. Own Then Rent
This strategy involves choosing a house that works as your home and as an investment rental property in the future. There are numerous advantages to adopting this method.
You can improve and remodel the home while it accrues equity. Choosing projects that will return the most return on your investment is crucial.
Once you've done so, you can level up to another home. After doing this a few times, you can build up a small real estate portfolio.
3. Own and Rent Out
A home such as a duplex, triplex or fourplex has built-in investment and profit potential. You live in one of the units while renting out the others. This strategy also works if you purchase a home with a guest house, mother-in-law apartment or a basement with a separate entrance.
Using this strategy provides you with valuable time to build experience as a landlord or property manager. In this scenario, you'll live in close proximity to your renters which could be an adjustment if you're moving from a single-family residence.
4. Live in Then Flip
This strategy is a variation on the others already listed. Once you purchase a house, move in and start making improvements. Wait a minimum of two years and then sell it for a profit.
Be sure to follow the IRS rules regarding profits from home sales. By doing so, you won't be subject to the taxes on that money up to $250,000 for individuals and $500,000 for couples who file jointly.
This list is by no means an inclusive one. It does, however, provide you with actionable steps you can take to get started as a real estate investor.
If possible, it helps to maintain a flexible deadline as you navigate the homebuying journey. Because if you have a tight deadline in place, you risk making a rash homebuying decision. And as a result, you may pay too much to acquire a home. Perhaps even worse, you risk purchasing a house that fails to match your expectations.
As you prepare to kick off your homebuying quest, it helps to plan ahead. Fortunately, there are lots of things you can do to streamline your home search and discover your ideal residence in no time at all.
Now, let's take a look at three tips to help you accelerate the homebuying journey.
1. Prepare Homebuying Criteria
If you know you want to buy a home, you should put together property buying criteria. That way, you can enter the housing market with a plan in hand to acquire your dream residence.
To establish homebuying criteria, think about where you want to reside. For instance, if you want a home close to parks and other family-friendly attractions, you should hone your house search accordingly. On the other hand, if you need a house that offers quick, easy access to family members, you should search for a home near these relatives.
Consider the features you want to find in your dream home, too. If you make a list of home must-haves, you can focus exclusively on houses that have the features you require.
2. Establish a Budget
Usually, it is beneficial to begin a home search with a mortgage at your disposal. If you get pre-approved for a mortgage, you will know how much you can spend on a house. Then, you can search for houses that won't force you to exceed your budget.
To obtain a mortgage, you should meet with a variety of banks and credit unions. These financial institutions can teach you everything you need to know about home financing. Plus, they can help you make an informed mortgage selection.
3. Hire a Real Estate Agent
With a real estate agent at your side, you should have no trouble performing a successful home search.
A real estate agent is devoted to homebuyers' success, and as such, will do what it takes to help you achieve your desired results. For instance, if you want to buy an affordable house in a small town, a real estate agent will make it simple for you to do just that. Or, if you want to purchase a home near your office in the city, a real estate agent will craft a custom homebuying plan so you can accomplish your goal.
Furthermore, a real estate agent takes the guesswork out of buying a house. If you ever have homebuying concerns or questions, a real estate agent will respond to them – without exception.
Want to enjoy a fast, stress-free homebuying experience? Take advantage of the aforementioned tips, and you may be better equipped than ever before to seamlessly navigate the homebuying journey.
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A home showing will help you gain the insights you need to make an informed decision about a house purchase. At the same time, you may have many concerns about whether a residence is right for you, even after you complete a home showing.
Ultimately, there are many questions to consider after you finish a house showing to ensure you can make the right choice about a residence, and these include:
1. How did I feel as I walked through a home?
Oftentimes, homebuyers try to envision what life may be like if they purchase a residence. As these buyers walk through a house during a showing, it sometimes can be simple to imagine the possibilities if you buy this residence. On the other hand, it may be tough to envision a future in a particular home if a house fails to match or exceed your expectations.
Think about how you felt as you explored each room in a house during a showing. If you left a home showing with a good feeling about a residence, it may be beneficial to submit an offer or set up a follow-up showing. Conversely, if a home showing left you feeling uncomfortable with a residence, you may want to continue your search for your dream house.
2. Are there any major issues with a home?
Generally, it is a good idea to ask lots of questions about a house during a showing. This will enable you to learn about the condition of a home and determine whether major repairs are necessary.
A home in need of significant upgrades offers opportunities for homebuyers who are looking for a "fixer-upper" house. In fact, if you submit an offer on a fixer-upper home, you may be able to perform assorted repairs to enhance a house's condition and value.
Comparatively, if you are unwilling to perform substantial home upgrades, there is no need to worry. You can always forego submitting an offer on a house after a showing, and by doing so, continue your pursuit for your ideal home.
3. Is a home a viable long-term investment?
As a homebuyer, it is important to find a house that will serve you well both now and in the future. Because if you fail to do so, you risk purchasing a house that will only decline in value in the years to come.
If you feel that a home is a viable long-term investment following a showing, you may want to submit an offer to acquire this residence. Then, if a seller accepts your offer, you can conduct a home inspection and move forward in the homebuying process.
Lastly, as you consider what to do after a home showing, you may want to collaborate with a real estate agent. This housing market professional can help you evaluate the pros and cons of submitting an offer on a particular residence. Perhaps best of all, a real estate agent will offer expert tips to ensure you can find your dream residence in no time at all.