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Buying A Home With Bad Credit

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buying-home-bad-creditYou May Have More Options Than You Think

Buying a home rather than renting is a very rewarding lifestyle choice that has been the core of the American Dream for the last one hundred years or more. For those who do own their homes, even with a high level of finance, it is an entirely different experience from paying rent to a landlord every month.

Regardless of that fact, all too many people wrongly assume that homeownership is out of their reach. The downside of the easy credit on which the consumer culture is built is the risk of bad credit that goes with it. It is a trap that is easy to enter and difficult to exit but the good news is that it might not exclude you from homeownership.

You may be pleasantly surprised, possibly even a little bit skeptical, to find that consumers who have less than stellar credit histories still regularly buy first homes for themselves and their families. Before you dismiss this as a joke, here are a few pointers on how that can work.

Get Your Credit House In Order

You have the right, once a year, to receive a free copy of your credit report from all three of the credit agencies, Transunion, Equifax and Experian. The AnnualCreditReport.com website was set up expressly for that purpose. Warning! It is the only official site to provide this service.

Check carefully that each agency has accurate information and be prepared to dispute any errors or inaccuracies with them directly. Beyond that you may have to still do some savings or pay off credit card debt, but if you wish to have better credit you should be doing that anyway.

One of the greatest obstacles to homeownership is the down payment. There is often more than one way around this problem and to get you in the door and in possession of the title to real estate.

Government Financing Makes All The Difference

First there is government financing through the programs of the Federal Housing Administration (FHA), The FHA’s little brother, the Federal Home Loan Mortgage Corporation, AKA Freddie Mac and, for those who have served in the Unites States military, the Veterans Administration has an excellent program.

Possibly you might have a wealthy relative who is willing to provide financing or lend you the down payment. If not, it is not uncommon for sellers who have capital that they wish to put to work to carry finance. This means they will hold a mortgage note or trust deed in return for payments of principle and interest.

Prepare To Pay For The Privilege

In all cases, you will be paying interest on your financing that will reflect your credit history. Quite simply, better credit gets better terms; poorer credit pays higher interest rates. It is the opportunities that come from the FHA and other programs to make a low down payment that gives consumers with poor credit the chance to buy their own homes.

All is not lost if you have poor credit but you may have to do some work to get to where you can buy a home with bad credit. In any case, you should be working to improve your credit with a sense of urgency. With programs that are available and the vast, diverse nature of the American residential real estate market, you are likely to get the home ownership result that you desire, even with some blemishes on your credit record.

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Planning Your Relocation Across The Nation

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movingCross Country Planning

The rhythm of life is often determined by the need to balance careers and family. Sometimes to best support the family you have to take that job across the country and bring the family with you. This can be a good thing if you have the resources to make the experience as simple and stress-free as possible.

When You Have To Go There Should Be Help Available

Fortunately, companies who hire across country appreciate the importance of supporting the moves of their valuable employees and pay the cost of the move. This is something that you should reasonably expected when you take a new position that requires relocation. Moving is expensive and stressful at the best of times. If you will be making the move for a large multinational corporation you will find that they are well versed in the process and willing to carry much of the cost. Your employer, who needs you where they are sending you, should have a relocation manager within the human resources department to help you move.

When You Have The Initiative You Can Still Have Support

These days, it is increasingly common to relocate in response to great opportunities that come from small companies or startups. These organizations often don’t have the resources or the knowledge base to support your move. Fortunately, relocation services have developed over the years to fill that role. These services can ease you into a new community, avoiding the stress and missteps of dealing with unfamiliar places and cultural ways.

Planning ahead will help make the move as easy as possible. So, speak to relocation service agencies as soon as you decide that relocation is an option, to find out how they can help you and what the cost of their services will be. Also speak with national moving companies, who will ship your possessions and have many years of supporting transfers from one location to any other, many of them truly far afield. Movers are an integral part of the process and the leading companies consider it an important service to help with relocation issues.

Go As So Many Have Before

Before you decide to make the move make sure you have considered the cost of living at the new location. For example if you are moving to New York City or The Bay Area of California you might be shocked to find the extreme cost of the local real estate markets there. There are also issues of local taxation that vary widely across the country or even within counties and local communities; it’s not just about home sales prices but the price of living there, as a whole.

Your real estate professional in your future community is the person who can tell you the most about a community from the perspective of a new homeowner. Speak with a relocation service before you travel and also your moving company to make connections on the other end. You will find that what matters most as you set foot in a new location and step into a new career opportunity is not having the distractions of house hunting in an unknown new town. So research these issues carefully as early in the process as possible. Ideally you will know whether relocation is worthwhile before you accept that appealing job offer.

 

 

 

 

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Do Fixer-Uppers Still Work For Locking In Wealth?

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Investment Property BasicsYou Make Your Profit When You Buy

It is a common misconception that you make your money in high value asset transactions when you sell and get the cash or equivalents. This is not actually the case as you put the asset on your balance sheet when you buy, and the liabilities.

Did you know you have a balance sheet? Maybe not but the document is really just a representation of your assets. It is literally your assets that are real and the value is there whether you have recorded it or not. Keeping track of your assets is certainly a powerful way to track the value and will likely cause you to act in a way that produces more wealth.

It Is All In How You Price It

The secret behind making money on fixer-uppers is that you must begin by pricing the purchase based on the profit you are intending to make and then subtract all of the costs of getting there. Only then can you consider a purchase price.

This works because the profit is a discount based on the full market value in pristine condition. In real estate that discount is traditionally twenty percent or as high as twenty five percent in depressed or recessionary markets.

If you follow this formula you are on the right path to locking in wealth. What you do afterward will determine how your wealth grows. You could sit on it and let it ride the market, this works great if you rent out the property or use it as your own home.

Having financed the transaction and the fix up you could then refinance based on the equity you’ve built in. Remember that discount? You can now refinance with conventional loans that do not require private mortgage insurance, giving you the most efficient revenue situation. Your monthly cost will be based on loan repayments, property tax and insurance. Add in the cost of maintenance and property management and you’re done.

Profits Exchanges And The Certainty Of Taxes

Alternatively you might be determined to realize the value of the home as rapidly as possible. That’s a fancy way of saying you want to flip it for a quick profit. This can be a great way to earn a year’s income or more in one deal, depending on your market. However there are some tax implications that will put you on the hook for capital gains taxes.

You can limit your tax liability by putting your profits directly back into a new project as part of a 1031 exchange. This will limit your tax bill calculation to any funds you keep as cash, known as a boot. Also the time limits on 1031 exchanges are generous; you will have a reasonable amount of time to hunt for the next property in which you can invest profitably.

Do The Work And Realize The Value

So, yes there is a strong argument that fixer-uppers do lock in wealth. The trick is to find them in the first place. You may find that in a typical marketplace you will most likely have to look at many dozens of properties before you find the right one to rehabilitate. If that sounds like investigating one hundred properties or more, you are very likely to be correct, it is a very profitable investment opportunity because of the work you put in both before you find the right property and the work that you put directly into the property itself. Get with you local real estate agent who specializes in working with buyers get ready to do some work and happy hunting!

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Second Homes And Two Perspectives On What They Can Do For You

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Second Home / Investment Home BasicsDo You Mean A Vacation Home Or An Investment?

If you are purchasing a second home there is plenty of ambiguity in the terms used to describe different types of real estate for ambiguity and misunderstanding. That is why there are two perspectives that need to be explored to get a valid definition. Read on to get the breakdown.

The dividing question is whether you intend to use the second property entirely for your personal enjoyment and you have the resources to fund it. Or you need to finance the project to a greater degree and recoup the costs with rental income. In the latter case you might wish to maximize rental income and treat it as a pure investment or you could seek a balance between repayments and enjoyment.

Funding Is The Question And The Answer

The difference in status matters if you are borrowing to fund the purchase of your second home. Loans for vacation homes are usually less expensive than loans for investment properties. Also investment properties will usually have a requirement for a larger minimum down payment. Loans for vacation homes will have restrictions on where they are located, either near some resort location or a minimum distance from your main home.

So the one extreme is the pure vacation home, on the other is the pure investment property, and in between there are the grey areas that lie within the investment property category. You might consider purchasing an investment property primarily, leasing it out as a vacation rental but reserving a particular time of year for personal use.

The additional cost of funding in interest and deposit can be offset by the rental income you receive. For those who have the resources to either self-fund or partially fund, this strategy will yield a minimal cost or possibly even a profit throughout the year.

So investment properties and second homes are really two things in the eyes of the law. However, as a resourceful owner you can make an investment property act as a second home and still get the benefits of both. However, if the idea of a second home that has no investment function appeals to you and it is affordable then why not pursue that option?

Opportunity Outlook In Second Homes

For vacation homes and investment properties the long-term outlook is good. For those of us with the ability to invest and to be patient the value of the property will prove to be a strong asset over time. Ultimately you may wish to cash out and use the proceeds to fund your retirement. Or you can exchange for a larger like-kind property, deferring capital gains for some serious tax advantages under a 1031 exchange.

In every case you should be aware of what you are getting into before you make any commitments. Speak with your financial advisor and your local real estate expert, either can point out the possibilities. You may be surprised at the potential that you can unleash by purchasing the type of vacation or investment home that is right for you.

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Your Second Home and The 1031 Exchange

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1031-exchange-basicsPronounced Ten Thirty One

Let’s say that you have had a second home, a vacation home for a while now, it is a proven good investment, one that has appreciated considerably and you’d like to dispose of it by sale. Technically there could be some problems with the increase in value that has accrued, if you’ve had it for a while. Which means that any cash that you take out of a sale is going to be taxed as a capital gain. Fortunately, there’s a plan for that, as long as you want to keep the value in further real estate investments.

The 1031 exchange refers to the section of the Federal tax code that covers re-investing your profits from the sale of a second home into another of higher value. Because it is defined in the tax code there is a whole host of rules that go along with it. This is a perk for investment properties only; you can’t use it to move up to a nicer home.

The Name Of The 1031 Exchange Game Is Flexibility

You get to exchange like properties for like, the term “like” is very broad in this context. You could exchange commercial space for residential or even undeveloped land. You can even delay the process so that you get the right property to replace your old one.

The great advantage in using a 1031 exchange is that you don’t have to deal with the capital gains tax that arises from the sale of an investment that has grown substantially in value. It prevents a big tax bill when you file your tax returns for that year. If you end up taking out cash in the exchange then that cash will be taxed as a capital gain, charmingly referred to as “the boot”. This is a key point because the tax deferment comes from not taking out the value that you have gained by investing wisely.

Put The Boot Away Until You Are Done

There is one limitation you must keep in mind when you take advantage of a 1031 exchange. It is a deferment, so that when you do finally break the chain, stop reinvesting in real estate and cash out there will be some sort of tax bill to be paid. But that is a good thing because although the tax bill might seem quite large compared to your original investment it is reduced by the compounding gained on the value not given to the government previously, each time you sell and buy new assets.

If you have a vacation home that earns income or you have cash in a bank account that you want to put into a second home or other investment properties the 1031 exchange is a real sweetener. Deferring the capital gain, even as you trade your way into a real estate empire, is a feature that makes investing in real estate so attractive. In fact, it is a great tool for small investors who wish to be big investors one day.

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What To Look For In A Neighborhood

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real-estate-basicsA Few Outstanding Features

The importance of a neighborhood for homebuyers is that, when you are house hunting, you need to keep the big picture in mind. You are looking not just for today but for the value of the home should you wish to sell it at some point in the future.

When you look at a neighborhood for your future home you are thinking about the context and the relationship that you are going to have with the community as a whole. So, there are a few factors that will be important to think about and also do a little research on before you commit to a home and the community in which it sits.

Everyone has different needs in the amenities of a neighborhood and each location will have a selection of features that will appeal to some and not to others and that will have an impact on the value of properties. So, for example, while you might not have young children yourself you want to consider proximity to local elementary schools.

Taxes: Mello Roos Fees

Some counties across the country have higher bond obligations and depend on proper taxes more than others. This can lead to wide variations in your assessment if there is some sort of millage or tax to recoup the cost of a local bond issue. The notorious California Mello Roos taxes are an example of the burden you might end up carrying. So make certain that you find out what sorts of taxes you will have piled on top of the basic local tax load.

Schools Need The Right Distance

You may have a need for the use of public or private schools in the near future or you may not. Regardless, you should take the local schools into careful consideration when you are looking at neighborhoods for your prospective next home.

Other amenities such as shopping and public transportation might be important to you individually. The convenience of accessibility is always a factor in choosing your home. The flip-side to that is if a major freeway runs near by the convenience might be outweighed by the noise volume of the cars and trucks speeding past at all hours of the day.

Crime Statistics

Look at the crime statistics for the neighborhood. These are a matter of public record and so they should be easy enough to access, either through the county records office or through one of the large national real estate websites.

Sources Of Noise And Disruption

Some of the most scenic and pleasant locations can have surprising noise sources such as airports and railway tracks nearby. If the local air force base starts up and moves out a fleet of cargo plans at “oh dark thirty” in the morning on regular occasions you really want to know about it.

Likewise if there is a railroad line track near the property you don’t want to awake a three AM as they sound the horn for the local road crossing. Even if that is the only fault in a location it can be absolutely a deal breaker if you intend to be asleep as it happens.

Invest In Your Neighborhood Choice

Schools, crime levels accessibility must be balanced against nuisance features such as noise. It is the key feature of real estate that every property location is different so take your time to compare each potential new home location measures up for  better or worse.

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The Mature First Time Buyer – It’s Never Too Late To Dream

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Before You Purchase Your HomeThere Is No Time Limit

Home ownership is much more predominant in the older part of the population. That doesn’t mean that that there are no people out there who made it to the senior section without buying a home but who may still wish to do so.

The dynamics are a little different that for younger buyers but that’s not to say that you wouldn’t gain a benefit from owning your own home. Fortunately, even though you might not stick a round long enough to pay off a thirty-year mortgage (but you never know!) there are some affordable options that can make it possible to achieve that further stage of the American dream.

Federal housing laws do not allow lenders and sellers to discriminate based on several sets of protected statuses when offering a home for sale or home financing. One of those is a legal restriction against age discrimination. So, that is one less obstacle to surmount when you decide to buy your first home late in the day.

The principles are the same if you are 65 when you decide to buy your first home or you are 27. You will need to gather your resources, find out if you have any potential blots on your credit history, generate income and some modest funds to pout as a down payment and for costs at closing.

What Becomes Of Your Estate?

If you do end up short on years and long on bank balance then the executors of your estate will be required to sell the home to clear your loan balance before the remainder of your equity can be released to your heirs.

Can you get in trouble with property taxes? In theory yes you could but these days your lender will withhold taxes due to protect their interests. You just have to make the monthly payment and the bank sends the tax money to your county out of those impounds when it falls due.

It All Just Seems So Overwhelming

It doesn’t matter what stage of life you are at when you decide to buy your first home, you will at one point or another feel extremely overwhelmed. That is where your realtor or broker comes in. Any experienced agent knows that this is coming and will make it his or her business to get you through the moments of fear and doubt. That is the real way that they earn their monies.

Statistics do not show homeowners as being happier better adjusted people than those who do not. But still there is a definite satisfaction to be had in owning your first home. The laws against discrimination protect you from missing out, if you can afford it, why should you withhold this simple pleasure of the American Dream from yourself?

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Finding Your Core Credit Information

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credit-report-basicsEach Credit Agency Has A Little List

Credit is recorded by agencies that act as clearinghouses of information about consumer credit, specifically, how consumers use credit over time. There are three agencies that have come to dominate and they are the ones that lenders will turn to when they want to assess the creditworthiness of an applicant. They compile a record of credit applications that consumers make and the record of their behavior when they make payments.

The value of these credit reports is in the amount of information that you contain and they give a detailed picture of how you are likely to behave and if you are going to be responsible based on your credit history and public records. The agencies have deeply involved relationships with lenders and as part of the contract to gain access to consumer records companies report your behavior to the agencies.

Reducing Your Creditworthiness To Points

There is another aspect to your credit record that is derived from the information that is reported about your behavior. The Fair Isaac Credit score or FICO score reduces your credit worthiness to a number. This has become the shorthand for assessment in the financial services industry.

You have the right to review all of your credit reports without charge once a year and every consumer should do so. The agencies and regulators have agreed on a website to allow access at annualcreditreport.com. The agencies also run credit-monitoring services on a variety of terms, a common one is for a monthly fee. Credit Karma is a recent entrant into the market that is disrupting these paid services because you can sign up for free and has immediate access to your credit records and to a wide array of information about your financial self.

Taking Over The World

Your credit score and reports have become vital parts of the modern world. The value and virtue of this state of affairs is one that could be argued at length. In practical terms it is something that must be dealt with, whether you agree with it in principle or not. Everything from banking access to insurance rates and who gets hired for employment are all decided based on the credit background of the applicants.

It used to be that hiring decisions depended on character references and references. Those days are now gone as litigation has made it difficult to give a reference without incurring liabilities. For example, in California and presumably other states as well employers will now limit references to giving confirmation of employment dates and job title. Hence the same companies are forced to seek alternative sources of information and credit histories have become established in that role.

You should take advantage of the information available about your credit reports as discussed above, even if you have no immediate plans to apply for a loan. Getting your financial house in order is vital for all sorts of transactions these days. It is a process of creating a long-term record and you will be glad of the effort invested when the time comes to begin hunting for a home.

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