DIY Home Staging Tip Sheet

If you’re trying to sell your home and are on a low budget, try some of these do-it-yourself tricks.

Exterior and Landscaping

To help sell your home, be sure the area that everyone notices when they pull in your driveway is clear of clutter. DIY tips for exterior:

* Make the front door/entrance area inviting

* Remove rust and paint from railing

* Pick up any clutter from the yard or sidewalk

* Weed flower beds, mow lawn, rake leaves and trim shrubs

* Remove personal items from porch or deck

* Give your mail box, front door, window ledges, shutters and down spouts some fresh paint

* Replace or repair shingles

* Boats should be kept in a garage or behind a fence

* Outdoor furniture on a deck is very appealing.

* Remove grass growing in concrete cracks

* Any area that is dirty or moldy, power wash it

* Consider adding mulch around flower beds and trees


* Place fresh flowers around the house or bake some cookies the day you will be showing the home

* If an item is not needed for your day to day life, box it up or get rid of it

* If you have many family pictures, it is best to remove some when showing your home. If it is too “personalized”, buyers cannot envision themselves in the home.

* Painting is one of the best ways to bring your house up to date. Play it safe by using white, cream, beige or pastel colors.

* Empty trash and ash trays


* Closets should be neat and organized

* People like storage space and if a closet is more than two thirds full it will appear that there is not adequate storage space

* Hang clothes neatly and organize shoes

* Place some cedar chips in closets


* Baseboards need to be dusted

* Replace worn vent covers

* Clean or replace carpet


* Bookshelves should be dusted and organized

* Stand a brass plate or something shiny on a dark bookcase

* Hide or get rid of worn-out throw pillows

* All beds should be made

Kitchen & Bathroom

* Remove magnets from refrigerator

* Remove small appliances or other items from the kitchen counter

* Replace any damaged caulk on sink, tub or counter

* Clean tile grout

* Straighten medicine cabinets; people like to take a peek

* Tighten or replace knobs or wobbly drawers

* Use window cleaner to make the faucets shine

* Replace any missing or damaged tiles

* Repair any leaking faucets

* All drains should be free flowing

Walls & ceilings

* Paint or stain woodwork

* Repair cracks in ceilings or walls

* If you have small nail holes, you can dab some toothpaste in the holes and let dry. For larger holes, you should use caulking.

Windows & Lighting

* If the view from a window isn’t attractive, hang a plant in front of the window

* Increase light bulb wattage to help brighten rooms

* Keep curtains open during daylight hours to use natural light

* Turn on enough lights so the home is well lit when showing the home

* Clear window ledges to give a clear view of the yard

* Curtains should be clean. If you have dark curtains, replace them with light colored curtains

A fact sheet is a strong marketing tool. It should include the total heated/cooled square footage, sizes of each room, as well as any additional information about the home that you feel is important. Talk to your Realtor about a fact sheet for your home.

A Few Ideas To Make Money Off Your Home

Having your own home is a huge benefit in today’s unstable financial times, but few people really seem to take advantage of the ways they could use their home to save money. Whether you’re looking for a second income of you just want to get yourself out of a sticky financial situation, these quick tricks will get some cash rolling in fast – making your home a help rather than a hindrance!


If your home has a designated car parking space that you’re not using, you’ll be surprised at how much you could make by renting it out online. While this is particularly popular in cities, where parking prices are at a premium, you may also find it successful in smaller towns. As well as people driving into the area for work or university, you might find your neighbours will be happy to pay for a space for guests’ cars or even a second car of their own, so let the surrounding houses know what you’re planning to do and inquire as to whether they’d like to hire it out. It doesn’t cost anything to maintain, which means that if you can find somebody happy to rent, you could end up with a pretty good income!

Spare rooms

Lodging with a family is the ideal solution for students who don’t fancy the idea of bunking in halls – generally speaking this works to your advantage, as they tend to be quieter to live with! Renting unoccupied rooms out is a great way to bring in a relatively large sum of money – around £4,000-5,000 per year – and it’s up to you what terms you impose. Some lodgers may be happy to stick to their room at all times, while others will ask for meals to be included. A lot depends on whether they’re students or professionals, but do make sure they have a regular income. Long-term lodgers often become integrated with the family after a while, so be smart and make sure you like them as people before you offer them your spare room!

Solar Power

If you don’t have anything to rent out, don’t worry; there are still ways of making money using your existing property. The government recently launched a solar incentive known as Feed-In Tarriffs, giving you the opportunity to sell electricity generated by solar panels back to the National Grid, in return for a little spare cash. It’s not hugely lucrative, but it adds up over time, and decreases your overall bill costs.

Sell up!

To really drop your monthly outgoings, consider downsizing your property and moving into a smaller, more modern home. This will ensure far lower bills and living expenses, and is relatively easy to arrange – while estate agents can take months to arrange a sale, property buying companies will offer you an instant price, which is ideal if you’re looking to cut ties with the property ASAP. It’s also a great option if you’re moving out of the country, as you won’t get caught in a property chain!

Things You Should Consider Before Buying A Timeshare

Some of our readers most likely suffered through hours of listening to an insistent sales talk on timeshares. Some have probably even bought one out of pressure, or from excitement about how beautiful the resort is or the superb vacation destinations.

If you are thinking of buying one, here are a few things to reflect on:

Never go to timeshare talks simply because you are given a free hotel accomodation or some other freebies. Never sign up at expos and shopping-malls that indicate at something bordering on a vacation timeshare club. It’s a catch to get you to pay attention to sales reps who will do and say anything to make you buy one.

If you fail the first step, then get out as soon as possible. Well, if you’re too civil, then stay and listen. But never, under any condition should you buy a timeshare on the spot. You will be pressured to sign up for that once-in-a-bluemoon package, which they happen to offer to everyone else every day. Don’t make a irrational decision, which is what the salesperson is hoping you’d do. Think about it. Ask friends. Visit online chat rooms about the company. Better yet, take your own sweet time. Ask yourself: Are you really and truly going to use it to make it worth the money?

Do your research. Study the resort’s organization company in the Internet. Ask around for references. Is it a legitimate company? What are its international affiliates? How long has it been operating?

Ask for the specifics. Timeshares are infamous for hidden charges such as annual fees, maintenance costs, parking fees, etc. There are also limitations on when and how often you can use your timeshare. Exchanging your week for someone else’s can also be difficult for popular destinations, especially during peak season when you usually plan a vacation.

Get the resale values of the timeshare you’re planning to purchase. Most likely, it’s going to be a lot lower than the original cost. You can however benefit you by buying from the secondary market instead. You get the timeshare at a significantly bargain price.

What Should I Do When I Can't Pay My Mortgage?

Change happens. When you bought your home you may have budgeted carefully and never anticipated having difficulty making your mortgage payment. But maybe, like millions of Americans, you have had a change in your financial situation or your finances can’t keep pace with larger economic trends. Perhaps you took on an interest-only mortgage to buy your home but after 13 interest rate hikes in the last 2 years you are having trouble meeting your monthly mortgage payment. Or perhaps you are facing unexpected expenses related to an illness, a move, an addition to the family or special needs for an aging parent. Maybe you have suffered a loss of income due to a job layoff, corporate downsizing, illness or injury, change in career or return to school. If you are a homeowner, a change in your financial situation – or the economy at large – can affect your ability to make your monthly mortgage payment.

Whatever the reason behind your current financial situation it’s reasonable to think that it is a high priority for you to remain in your home. You can start by getting a clear grip on your home-related expenses…in other words, how much it is really costing you to live in your present home. Here’s a list of home and home-related costs to tally up:

Monthly mortgage amount:
Homeowner’s insurance:
Homeowner’s/condo association fees:
Property tax:
Home repair/maintenance fees:

Compare that amount with your current income. Do your mortgage and housing-related expenses add up to more than 40 percent of your family’s income? That percentage is the rule of thumb that some experts use to determine what is financially reasonable for you to be able to afford for monthly housing payments. It might quickly become clear why your current home is putting you in a financial pinch. While you probably can’t do anything about your homeowner’s/condo fees, property tax and insurance costs you could probably make minor changes to lower your utility costs, home repair fees, and landscaping work. But the crux of the matter is zeroing in on how to make your monthly mortgage payment IN FULL and ON TIME.

If you’re at the point where you could easily envision yourself getting behind on your mortgage payments – and especially if you are already behind – consider taking the following steps:

  • Contact your lender. While you may be afraid or embarrassed to face this situation head on, the truth is that most lenders WANT to work with you. They have a financial stake in seeing you avoid foreclosure – it can cost lenders up to 20 percent of the remaining principal balance on your home to foreclose. Lenders want their money back – not a physical home to have to resell.
  • Do not ignore your lenders’ letters or calls. If you can’t make your mortgage payment, or you can’t make the total mortgage payment amount, contact your lender immediately. Technically your mortgage is in default when you have not made your payment by close of business the day it’s due. Lenders can begin the foreclosure process anytime after that point. The good news, however, is that most lenders want to avoid foreclosure and will work with you to do so. In fact the secondary mortgage market associations — Fannie Mae, Freddie Mac as well as the Federal Housing Administration (FHA) — require their mortgage companies to work with borrowers to avoid foreclosure if at all possible.
  • It is your responsibility to get in touch as soon as possible with your lender and let them know that you want to remain current on your mortgage but you may need help. Your lender will probably put you in touch with a workout specialist in its Loss Mitigation or Loss Recovery Department. Be prepared to explain why you can’t make the payment/s, how much income you’re currently making and what your other monthly expenses are. Keep a record of when you call and who you talk to and follow up each phone conversation with a letter if possible, keeping a copy for yourself.
  • If you are contacted by someone by phone, ask them to send you something in writing to verify that they are employees at your lending institution. Do not send payment by check made out to anyone other than your lender to any address other than your lender’s address. Do not authorize anyone to charge a mortgage payment to your credit card by phone. Fraudulent collection agents have been known to contact homeowners posing as a lender’s workout specialist but they are really just going to collect their commission from your check and allow the foreclosure proceedings to continue.
  • Stay in the home. If you abandon the home and don’t make your payments, your bank will assume that you are not able or wiling to maintain the mortgage and they will foreclose quickly so they can re-sell the home and minimize their losses.
  • Get legal advice or professional help. Possible sources of help are your neighborhood legal services office, a bar association panel of pro bono attorneys or local programs who provide legal assistance for the disabled, elderly or poor. Don’t be rushed to sign anything, especially if you feel someone is pushing you to file for bankruptcy or to allow foreclosure to happen before you understand and have considered all your options.
  • Contact a local housing counseling agency. These agencies offer help free of charge and can provide you with information on local services and programs that may be of help to you. Click here for a list of U.S. Department of Housing and Urban Development (HUD) approved counseling agencies.
  • Pay your mortgage first. It’s your choice, but if keeping your home is a high priority, you may want to consider making your mortgage payment first or keeping it as a main financial priority when repaying other debts including student loans, credit card payments, etc. If you are unsure about how to prioritize your debt repayments talk with someone at a reputable credit counseling agency or afinancial professional.
  • Explore assistance options. A nonprofit housing agency or your lender may be able to give you information on assistance options you may qualify for. For example, you may qualify for Supplement Security Income (SSI) if you are an older homeowner, or local tax abatement programs. If utility and energy costs are becoming an increasing cost and concern, contact your utility companies to discuss possible payment plans and assistance options.

In addition to working with your lender, to make your mortgage payment you will most likely need to consider how to increase your income and/or reduce your expenses. Let’s look at both options.

To increase your income, consider possible sources and opportunities such as:

  • Securing a regular part-time job, temporary or seasonal work.
  • Considering how you could be able to make some additional money from home with a skill (i.e. tutoring, writing, bookkeeping, etc.) or from a hobby.
  • Determining if you are eligible for Social security benefits, pension benefits, life insurance benefits or disability benefits.
  • Make sure you have been paid or repaid loans you may have made or past due child support or alimony.
  • Did you get a tax refund last year? Look at that as money you could have been getting back in your paycheck every month except that you were lending it to the government for free! Talk to someone in your office’s Human Resources department about how to change your withholding and increase your monthly take-home pay.

On the other hand, you should also consider how you could trim expenses. If you’re not sure what you’re currently spending money on, you could begin by creating a budget to track what you’re spending money on. Click here for our Budgeting for Beginners section including our Budgeting for Beginners worksheet to get started.

You may be able to make some relatively minor lifestyle changes to reduce your expenses which you can then use to make your monthly mortgage payment. Some tips for reducing expenses include:

  • Go grocery shopping ONLY with a list – compulsive or unplanned shopping leads to greater spending.
  • Try eating out less and eating at home more – or switching and going out for lunch instead of dinner to save money (lunch is almost always a less expensive meal than a dinner entrée).
  • Talk with friends and neighbors about “swapping skills” to get repair work done on your home, landscaping, etc. for one another instead of hiring (and paying for!) a professional.
  • Get a free energy audit from your utility companies to determine what small improvements and changes you could make to cut back on your home energy costs. For example, could you change your regular thermostat setting to save money? Could you plant shade trees and shrubs near the house and lower blinds during the day time to lower cooling costs? If you anticipate needing to replace major appliances, look for energy-saving appliances. Click here for more tips on lowering home energy costs.
  • Try comparison shopping for big-ticket items online and at outlet stores and discount centers before making a final purchase. Keep the receipt and check to see if the item goes on sale – often stores will refund the difference in price.
  • Call current service providers (i.e. your phone company(ies), internet service provider, etc.) to see what discounts they can give you to keep you as a customer. If you have paid your bills in full and on time many companies, including credit card companies, will reduce your fees and/or interest rate to keep your business if you ask.
  • Review your bills carefully to see if you are paying for any services (i.e. cable TV features, internet service, phone features, etc.) that you don’t use or really need and cancel those services.
  • Check your bank statements to see what automatic deductions/payments you are having made from your account(s) that you may not even be aware of – or that you no longer really use/want to support. For example you may have a gym membership or cell phone service you don’t use.
  • Comparison shop for better rates on insurance policies or consider changing your current deductibles – particularly on car insurance – to save money.
  • Perform regular maintenance on your car (i.e. tune-ups, oil changes, etc.) to keep it running well and to reduce the possibility of costly repairs in the future.
  • Look for free or inexpensive entertainment options in your community rather than a high-priced vacation. There are endless possibilities including state and national parks, museums, galleries, zoos, memorials, libraries, festivals and fairs, etc.!
  • For family entertainment look for restaurants offering “kids eat free” nights and movie theaters that have matinees and cut-price movies.
  • Consider vacationing with another family (or two) to trim costs.
  • Cut back on gift-giving or substitute homemade gifts or “coupons” to spend time together at a fun activity.
  • Consider implementing an allowance or chore system with your kids so they have to earn money for their discretionary purchases instead of you feeling the pressure to finance their every desire.

As much as you may want to avoid dealing with this frightening financial reality you know – deep down – that this problem is not going to solve itself. You may want to think about how important your home is to you, and after looking at your budget, if you can cut back enough, or make additional extra money, to hold onto your home. Take a deep breath, get a grasp on your current financial reality and then work with your lender and your family to determine how you could lower your expenses and/or increase your income and stay in your home. As difficult as it can be to hear, this is a good example of a situation where ignoring it won’t improve it. It will take work to keep your home and stay current on your mortgage but you can look into options and make changes that will prevent you from this significant loss for you and your family.


Everything You Need To Know ABout Selling Your Home

Every year millions of Americans sell their homes. Some of the most common reasons for selling a home are:

  • Relocating for a job
  • Needing or wanting more room for a growing family
  • Moving after retirement
  • Downsizing
  • Moving to a more desirable or convenient neighborhood for work or school

This month we’re going to look at what to consider before putting your house on the market, and whether or not you want to sell your home yourself or use a real estate professional.

Once you’ve made the decision to sell your home, there are a few things to do before you put your home on the market. Putting a home “on the market” means that you’ve officially put your house up for sale. At that point buyers and Realtors expect to be able to walk through and view the home. Following are a few tips to best prepare your home and yourself for the process.

Once you’ve made the decision to sell your home, there are a few things to do before you put your home on the market. Putting a home “on the market” means that you’ve officially put your house up for sale. At that point buyers and Realtors expect to be able to walk through and view the home. Following are a few tips to best prepare your home and yourself for the process.

1. Honestly evaluate what needs to be done.
Perhaps at no other time is the saying “First impressions count” more true than when a potential buyer walks into a home for sale. From the moment a buyer pulls up to your house – before they even get out of the car – he or she has begun making mental notes about the condition of the home. You significantly increase the chances, and the speed with which, you sell your home if you take an objective look at the condition of your home – inside and out – and decide what you’re willing to do before putting your home on the market. Try imagining that you are a potential buyer and walk around your property, and through the interior, to make mental notes of what could be repaired, cleaned or improved. Anything that you notice the buyer is bound to notice as well.

2. Decide, Do or Delegate
Once you’ve listed everything that needs to be done to your home before selling, split the list into three categories:
“Things I Will Do”
“Things I Will Hire Someone to Do”
“Things I Don’t Want to Do and Will Negotiate With the Seller”

Just because you know that something ought to be done to the house before putting it on the market, doesn’t mean that you personally have to do it. Consider hiring someone to do a few things to the house. For example hire a professional to steam clean the carpets or repair drywall. Or, you might decide that you’re not willing to either do it yourself or hire someone else. In that case you should be willing to negotiate with the potential buyers. For example, you could reduce the asking price to compensate for the extra work that the new owners will face, or create some sort of “allowance” to offset the cost, such as a carpet allowance if you don’t want to re-carpet the house but you know that realistically it really does need replacing.

3. Clean and de-clutter
Now it’s time to clean. A clean house makes a huge impression on new buyers. To make the cleaning easier, start by de-cluttering. Think about de-cluttering as your first stage of packing. De-cluttering means getting rid of (either boxing up and storing or throwing out) all the small knick-knacks, decorations and everyday clutter lying around your house. For example, put away paperwork, photos, collections, take the coupons and magnets off the refrigerator, clear off as much tabletop and countertop space as possible. Be ruthless. If possible rent a storage unit to store your boxed up “clutter” including extra furniture. The goal is to make rooms look as big and open as possible.

As proud as you are of your personal possessions and family mementos, you want for a potential buyer to be able to see him/herself in the home. So take down little Susie’s entire art portfolio from kindergarten and your entire wall of family vacation photo collages. Think neutral. Think model home. You want it to be clean, spacious and inviting, but also a place where your buyer could envision his or her furniture, pictures and collectibles.

Once you’ve de-cluttered, clean like you’ve never cleaned before. You want it to sparkle, shine, and positively scream “buy me!” Now is a great time to splurge and consider getting a cleaning service. You want walls scrubbed, curtains laundered, windows washed, and floors waxed. Clean up the yard, mow, pick up sticks, trim bushes and clear walkways. Make as many small repairs as possible such as cleaning or re-grouting caulking in tubs and around windows, replacing light bulbs, and touch-up painting.

After deciding to sell your home, the next biggest decision you’ll face is how to sell your home, specifically whether you’ll choose to use a Realtor or sell your home on your own.

Using a Realtor
First let’s consider using a Realtor.
How do you find a Realtor? You can find an agent through:

  • Your area’s local Realtor association
  • In the phone book under “Realtors”
  • By word of mouth or referrals

Just as when buying a home through a Realtor you should interview a potential agent before signing any contract. Click here for a list of questions to ask a potential real estate agent.

Once you’ve decided to use an agent, he or she will typically ask you to sign a document saying that he/she has the exclusive right to list and sell your property. Why? Because agents make their money from their commission, the money they make only once your house sells. If you list your home with multiple agents, then he/she will be doing a lot of work to market and sell your home only to find out that someone else has made the final sale and collected the commission!

There are three types of contracts:

1) Exclusive right to sell. Agent is the only one with your authority to list and sell the home.
2) Exclusive agency. You won’t pay the agent if you actually end up finding the buyer. You pay the agent only if he/she brings you a buyer
3) Open. You are willing to pay commission to any agent who brings the buyer.

More than likely your Realtor will want you to give them an “exclusive right to sell” your property in the contract. The things you want to make sure you understand before signing a contract with a Realtor are:

  • Length of contract. How long are you agreeing to use the agent? Is the contract automatically extended?
  • Commission. Typical commission is six percent of the homes’ sales price, but you may be able to negotiate that lower.
  • Services. What type of services will the realtor provide, i.e. advertise the property, hold open houses, negotiate contracts, assist buyer in finding financing, coordinate the closing, etc.
  • Seller Permission. What permission are you giving your agent by signing the contract? For example, are you agreeing to have a lock box (a device that allows Realtors to enter your home with a potential client when you’re not home) placed on your door? A sign posted in your yard? To have your home listed on the company’s marketing pieces?
  • Earnest Money Description. Who will hold the buyer’s earnest money deposit (the money the seller puts down to make a firm offer on your home and take it off the market) and when will it be paid out to you, the seller?

Selling your home is more of an art than a science. Whether you’re using a Realtor or selling your home on your own, you’ll want to evaluate several factors before determining your sale price. Factors to consider are:

Type of market. Is it a buyer’s market or seller’s market – meaning are there many homes similar to yours on the market and how quickly are they selling?

Time line. Do you need to sell quickly? If you need to move quickly you won’t want to price it higher than necessary and then have to relist it at a lower sales price.

Condition of the home. How much work needs to be done to repair or renovate your home? Are you willing to do work prior to listing or are you willing to sell “as is?”

It’s critical to price your home competitively. Price your home too high and you’ll scare away serious buyers. Price it too low and you’ll lose out on potential income.

The first step in pricing your home is getting a list of comparables, or a comparative market analysis (CMA) from a Realtor (for a flat fee). A CMA lists the sales price and actual price of all homes sold, currently listed and listed but not sold, in your area. It will also list key points about each property including age of home, style, number of bedrooms and bathrooms, and lot size.

Check through back issues of your local paper’s Real Estate section that lists home sales. You can also get a list of home sales prices and taxes on every home in your country or city through your local county or city’s tax office.

When judging your home against your list of comparable home sales, take into consideration the style and age of your home, number of bedrooms & bathrooms, upgrades, lot size, and school district. If your home has distinct advantages over other listings, you could potentially price it higher. If your property isn’t as attractive, you may want to price it a bit lower.

Remember that sales price should not be your sole focus. Everyone wants to feel like they’re getting the most for their money. Be prepared to negotiate. For example, will you consider lowering your sales price to help with closing costs? Will you consider paying down points for the buyer? What type of repairs are you willing to make?

If you use a real estate professional or Realtor, he or she can do an analysis to help you determine how to price your home. The next step is marketing your home.

Marketing your home means getting word out that your house is for sale. If you’re using a Realtor, he/she will do this for you. Your Realtor will send out letters or postcards to potential clients, run ads in local papers, network with other Realtors, and put your home on the Multiple Listing System (MLS), the Realtor’s online home listing system.

If you have chosen to sell your home on your own, marketing your home is typically the most time-consuming part of the process. There are several ways to market your home:


  • Take out an ad in the real estate section of local paper. Include home address, key features, sales price and contact information.
  • Put ads or notices in community papers, up at local stores, in civic association newsletters or newsletters through your company or union
  • Put up “Home for Sale” signs in your neighborhood. You can get these signs at an office supply store or companies like “For Sale by Owner” that provide services a la carte (meaning that you can pick and choose which services you’d like to purchase from the company).
  • Post a “For Sale” sign in your front yard, preferably a sign that has a covered box attached where you can put copies of your home’s fact sheet offering viewers more information on your home.

Once you begin to get word out, you want to encourage people to come by and tour or at least pick up a fact sheet on your home. Following is some information to include on your home’s fact sheet:

  • Home address and photo
  • Contact information – include phone number(s) and email where a buyer can reach you
  • Highlights of home
  • Number of bedrooms and bathrooms
  • Age and style of home – i.e. colonial, ranch, townhouse, duplex, contemporary, split-level, etc.
  • Recent upgrades – i.e. new roofing, appliances,
  • Rooms in home – i.e. living room, dining room, finished basement, office, den, etc. Include room dimensions if possible.
  • Flooring (i.e. carpet, hardwood, vinyl)
  • Square footage of house
  • Outdoor amenities such as decks, landscaping, hot tub, pool, storage shed, etc.
  • Lot size
  • Utilities – i.e. gas, electric heat, sewage, well water, etc.
  • Estimate of property tax and monthly utilities
  • Information on neighborhood – i.e. walking distance to shopping, restaurants; public transportation routes; school system; local attractions such as community pool or recreation center

Using the Internet
Check out Internet possibilities for marketing your home. For example, your local paper may run an online real estate section. If you’re willing to work with a buyer who has an agent (meaning that you’re willing to pay a portion of the agent’s commission, typically up to three percent of the home sales price), then you might want to consider using the Multiple Listing System (MLS). The MLS is the Realtor’s Internet service to post listings. Realtors nationwide use the MLS to search for properties for their clients. You should be able to find a Realtor who will list your home on the MLS for a flat fee (typically between $200 – $300). Once you post your home on MLS, be prepared for a flurry of phone calls from Realtors.

What Is Refinancing?

With the recent historically low interest rates there was a record surge of people refinancing their mortgages. If you are still in the process of considering, or buying a home, you may be wondering, “what is refinancing?” If you do own a home you may be wondering, “when should I consider refinancing my mortgage?” Let’s take a look at both questions and the issues you’ll want to work through to determine when, or if, refinancing is right for you.

When you buy a home you obtain a mortgage, also called a purchase loan by mortgage professionals. It’s simply a loan to purchase a home. The bank or financial institution making your mortgage charges you interest – a fee for borrowing their money. That fee is represented as a percentage of the total amount you borrow, for example, 6% or 7.15%. But here’s the catch – interest rates change. If the Federal Reserve cuts the prime rate (the rate at which banks can borrow money from the Federal Reserve) then consumer interest rates fall. That means that you may be able to get a mortgage with a lower interest rate than your current mortgage.

Less interest = a cheaper monthly mortgage bill = significant savings over the life of your loan.

When you refinance you’re getting a new home loan (at a lower interest rate) to pay off your old home loan.

Bank posters, web banners and TV ads scream “Save hundreds a month on your mortgage!” And who wouldn’t want to? But how do you know if it makes sense to refinance? There are three basic reasons to refinance:

(1)  You want to get a new type of loan.
You may have originally obtained an ARM (adjustable-rate mortgage), but would like the steady predictability of a fixed-rate mortgage. Or maybe you like having an ARM but want to lower your loan’s lifetime cap to reduce the highest possible interest rate you could ever be charged. Lifetime caps on ARMs are usually around 5 or 6%, meaning that your interest rate can never go 5 or 6% higher or drop 5 or 6% lower than the rate you locked in at purchase.

Let’s look at how refinancing an ARM would affect its lifetime cap. Let’s say the original interest rate on your ARM was 7.75% and you have a 5% lifetime cap. That means that your rate can drop to as low as 2.75% but can also go as high as 12.75%. Now if you refinance to a 6% ARM your lifetime cap can drop to as low at 1% and rise only as high as 11% — that’s a nearly 2% difference between the highest amount you could have to pay with your current loan and how much you could have to pay with a new, lower interest rate loan.

Or maybe you originally got a “balloon loan.” A balloon loan is a mortgage with an initial payment period at a low interest rate and then the entire balance of the mortgage due upon maturity of the loan. If your balloon is about to come due, you’ll have to pay off the entire remainder of the mortgage. If you’re not in a position to pay off the entire balance of the mortgage, you’ll want to consider refinancing to another type of loan to extend your payments over the full lifetime of the loan.

As you can see there are several cases where it makes sense to refinance not only to get a lower interest rate loan, but also a new type of loan.

2)  You want to tap into the equity you’ve built up in your home.
A home is most people’s biggest investment. And if you’ve been in your home for 10, 20, 30 years then you’ve built up some equity (savings) in your home. Maybe rates are low and you’d like to tap into that savings to help pay for a child’s college tuition; pay down debt, or make some home renovations. Refinancing to take some money out of your home is called a “cash-out refi.” Getting your hands on a little extra cash sounds enticing, but think twice before rushing to refinance.

First, remember that the money you take out of your home will be taxed as income so consider the tax implications before signing on the dotted line.
Second, be aware that your lender may charge a higher interest rate for a “cash-out refi,” because in essence you’re lowering the amount of savings you have in your home. Some lenders will add up to 1/2% to your interest rate if by refinancing you’re raising your LTV (loan to value) to 80 percent or more (meaning that you have 20 percent or less of your own cash savings built up in your home).

You can avoid the additional rate increase by either finding another lender who doesn’t charge a higher interest rate or you can take out slightly less cash from your home and keep your LTV at closer to 75%. Or you might want to consider other alternatives altogether such as obtaining a home equity loan, taking out a personal line of credit or looking into reverse mortgages as an option to tap into the equity of your home.

The higher the LTV, the less of your own money you have built up in your home. A 100% LTV loan means that you’re borrowing the total amount of the mortgage and have none of your own money invested. Lenders like to see homeowners have at least 80% LTV.

3)  You want to lower your interest rate and save on your monthly mortgage amount.
This is probably the most common reason people give for refinancing. It only makes sense – if you’re paying 8.5% interest on your loan and you have the opportunity to pay only 7%, why wouldn’t you? But there is more to refinancing than just the interest rate. There are a few things to consider and a little math to do before refinancing.

What About Condominiums

Housing stock, meaning the type of housing available, varies across the country. In some markets, including large cities such as New York, Boston and San Francisco, cooperatives, or co-ops, are popular housing options. Condominiums, or condos, are also a very common housing option, particularly in urban or suburban areas. Although some of the basics of home buying hold regardless of the type of home you’re looking to purchase, there are a few things to know before buying a condo or co-op.

The first thing to know is what, exactly, are condos and co-ops? Well, they’re not a type of home, like you might think of when you hear “colonial” or “ranch-style.” Condos and co-ops are really a form of ownership. Let’s take a look at each one separately.When you buy a condominium (condo) you’re purchasing both an individual residence unit and partial ownership of all common areas in the development, such as recreational facilities, community rooms, grounds, etc. Some of the benefits of owning a condo include:

  • Not having to worry about home maintenance. When you purchase a condo part of your monthly or annual fees goes to pay for landscaping, litter removal, exterior housing upkeep and repairs. If you’d like to put an end to snow shoveling or lawn mowing, a condo may be for you!
  • All the amenities. Many condo developments offer onsite amenities such as a pool, gym, or tennis courts. Frequently condo associations will also host social events for residents.
  • Enjoying the financial benefits of homeownership. Unlike renting, when you buy a condo you’re building equity, or savings, in your unit and if you take on a mortgage to finance your condo you can write the mortgage interest off your taxes.

All condo communities have an association. All residents are members of the association. The association collectively votes on rules governing the community, such as parking restrictions, pool privileges, trash removal, pet restrictions, even unit decorations and modifications. A board of directors heads the association; members living in the development are voted to the board by other residents.

When you buy a condo you’re agreeing to abide by the bylaws and restrictions governing the development. You’re also agreeing to pay condo fees. The association uses condo fees to pay for routine maintenance and community improvements. Condo fees are typically monthly fees, but it can vary by development. It is usually a fixed fee for the year with the association included in discussions on any increase at year-end. The association should also keep a reserve fund for unexpected repairs or expenses. Otherwise condo owners can be charged an assessment if expenses arise and the fund is empty.

Financing a condo purchase is similar to obtaining a mortgage on a single-family home, except that your lender may have restrictions on types of condos approved for FHA financing. The lender may also charge a slightly higher interest rate depending on the owner-occupancy rate of the development. That’s because lenders want to be assured that the development is financially sound. The higher the investor-owner rate, or the number of buyers who will rent their units out rather than occupy them, the potentially less financially stable the development. Renters are more transient and investor owners may be more likely to default (not pay) their loan than occupant owners.

When you purchase a co-operative, also known as a “co-op,” you’re actually buying a share in a cooperative corporation that owns a building. In turn, the corporation gives you a “proprietary lease” which entitles you to occupy an individual unit in that building. Leases can vary; for as little as 10 or as much as 50 years. Leases can be either automatically renewable or renewed only with the approval of the other co-op shareholders. Co-ops are primarily found in large cities like Boston, New York or San Francisco.

Like condos, co-ops are overseen by a board. To buy a co-op not only do you have to qualify for financing (if you’re not paying cash outright), but also pass an interview and be approved by the co-op board to live there. The board may require references and financial statements as part of the interview and approval process. Regardless of how you feel about having to be “approved” to purchase a co-op there is actually a very practical reason for the process. The co-op board members are also owners in the property. As owners they would be required to pick up the mortgage on your unit in the event that you default on your loan.

Just as with condos, you’ll pay not only for your co-op ownership share, but also a monthly co-op fee to pay for ongoing building maintenance, repairs, and unexpected expenses.

There are a few unique financial aspects to purchasing a co-op. First, if you need to obtain outside financing to purchase a co-op, a lender will review not just your financial situation but also the financial situation of the cooperative. Why? Although it’s not very common, a lender wants to make sure that the co-op is financially stable and not likely to go bankrupt or default on the building’s mortgage. You should be concerned about the co-op’s financial stability as well because in the event that the co-op should default on the building mortgage, you will lose your ownership equity. That means you become a rental tenant and the bank holding the mortgage on the building is now your landlord.

Another difference when purchasing a co-op is that because you’re actually purchasing a share of a company and not real estate, you won’t be able to take a mortgage interest tax deduction. You should consult a tax attorney or accountant to learn what other tax deductions you may qualify for instead.

Buying A Brand New Construction Home

At some point most of us have thought about our “dream home.” Wouldn’t it be fun to choose your floor plan, appliances, carpet and paint? It’s also nice to think that you could be the home’s first owner. The reality, however, is that as exciting as it can be to purchase a newly built home there can be considerable questions, hurdles and sometimes complications. Let’s look at the issues surrounding newly built homes.

Let’s begin by looking at the different types of newly built homes there are to choose from. There are essentially three types to consider:


  • Custom built homes. This is the true definition of a “dream home.” When you purchase a custom built home you’re actually contracting a builder to build a home to your exact specifications. Having a home custom built can be very expensive, but it’s going to be the home of your design.
  • Semi-custom home. When purchasing a semi-custom home, typically in a new home development or planned community, you can choose from a set of pre-designed homes. You don’t have the total input and control over design as with a custom built home, but you can move significant structural features such as walls, doors and windows, and often choose most amenities such as carpeting, appliances, countertops and paint color.
  • Tract home. Tract homes are perhaps the most common type of newly built homes. That’s because builders can save money in construction and supply costs by offering a handful of varying floor plans and limited set of mostly decorative choices (i.e. flooring, paint, countertops, etc.).

Because new homes are built on vacant land they’re often built in outlying suburbs, rural or more remote areas. Before signing a contract you’ll want to consider:

  • What is the current sold vs. for sale ratio? If the development is mostly vacant you’ll want to know how quickly building will be completed and when you can expect your new neighbors to start moving in.
  • Where are the neighboring communities? You’ll want to think through where you’ll shop, how long your commute will be, etc.
  • How is any adjacent or nearby vacant land zoned? Are there plans for nearby building? You wouldn’t want to move into the home of your dreams only to discover a month later that you’re about to have a new highway running through your backyard or that a new airport runway is opening that will have planes flying directly overhead.



Closing Your Loan

Closing, sometimes called “going to settlement,” on a home is like the part of the wedding ceremony where the bride and groom exchange vows. It’s where you and the seller seal the deal! Closing on a home loan is when you sign all the papers transferring ownership of the property from the seller to the buyer (you!); obtain insurance and write checks to pay the remainder of the down payment and closing costs. This is where all of your work is about to pay off!

But before you get too excited, there’s still a lot that has to take place before you can close on your home. Most likely the closing will be held at the office of a title company or a title attorney. If you and/or your seller are using a Realtor he/she will set up the closing time and location.

There are three last hurdles to clear before closing: financing, obtaining insurance and contract fulfillment.

Unless you’re paying cash outright to buy your home you’re probably going to get a mortgage. If you have already made an offer on a home you have begun the mortgage process. Before you can finalize the home sale you’ll need to make sure that your lender has approved your home loan, which means that the bank has agreed to lend you the money you need to pay for the home. Your lender needs to have completed your loan package and sent it to your closing office. In addition to having your mortgage loan approved, you’ll have two other major categories of expenses to pay at closing: the balance of your down payment and closing costs.

Balance of your Down Payment
At closing you’ll have to pay the remainder of the down payment. Remember that whatever you put down as an earnest money deposit will be applied toward your down payment amount. You’ll need a cashier’s check or certified check (which you can get from your bank) for the down payment.

Closing costs
Your lender, or your Realtor will tell you how much money you’ll need to bring to closing. Remember, closing costs can add up to nearly 3 percent of the sales price of the home so be ready to potentially have to write a large check. When you get to closing you’ll be handed something called a “Settlement Statement.” This is a standard form that details the costs to be paid by the buyer and the seller.

Closing costs are broken down by category:

  • Items Payable in Connection with the Loan – these are fees for services provided in connection with preparing your loan for closing, such as points, processing fees, credit report fee, appraisal fee, and loan origination fee.
  • Items Required By the Lender to Be Paid in Advance – such as interest on the loan, mortgage insurance and county taxes.
  • Reserves Deposited with Lender – hazard and mortgage insurance, city and county taxes, assessments
  • Title Charges – settlement or closing fee, title search, document preparation, notary fees, attorney’s fees, lenders’ and owners’ coverage
  • Government Recording and Transfer Charges – recording fees, city/county tax stamps, grantor’s tax and re-recording deed fee
  • Additional Settlement Charges – such as survey and pest inspection.

Before you can close on your loan you’ll be required to obtain two types of insurance – homeowner’s insurance and title insurance.

(1) Homeowners’ Insurance
Homeowner’s insurance protects your home and possessions in the event of an unfortunate event or accident. There are two components to homeowner’s insurance – casualty or property insurance and liability insurance.

  • Casualty/property insurance – covers your personal property (home, possessions) in the event of a disaster or accident
  • Liability insurance – protects you in the event that something happens to a person while they’re on your property and they choose to sue you.

You can choose from the one basic policy (called HO-1) or from 5 others which offer several “add-ons” such as coverage in the event of building collapse, renter’s insurance, condo or co-op insurance. Your lender will let you know the minimum amount of insurance that you’re required to carry in order to close on your loan.

Your lender will require you to prepay the entire first year of the insurance policy and perhaps a few initial months at closing to cover any possible raises in the premium or other fees charged by the insurance company. Then your lender will include your insurance payment in with your monthly mortgage payment. That money will be put into a special account called an “escrow account.” That money will be paid out to the insurance company at the end of the year by your lender.

(2) Title Insurance
Your lender requires title insurance to make sure that when you close on the home you own the home free and clear. A title search will make sure that no one else can lay legal claim to the property and that there are no outstanding taxes or personal property issues with the home. The insurance covers the lender in case a problem does arise with legal ownership of the property.


Putting An Offer In On A New Home

When you’ve found the home you want the next step is decide whether or not you want to make an offer, meaning that you want to tell the seller that you want to purchase the home. Making an offer is where you put pen to paper and outline exactly how much money you’re willing to pay for the home and under what conditions you will purchase the home (i.e. move-in date, repairs requested, financing conditions, etc.) Emotionally, making an offer on a home is sort of like asking somebody out. It’s exciting, nerve-wracking, and you’re often uncertain of what sort of response you’ll receive. This month we’re going to demystify the process involved in making an offer on a home.

Where to Begin?
If you’re using a real estate agent you’ll have help in negotiating with the sellers and filling out the paperwork. If you’re buying a home on your own the seller may have an agent that will handle the process. Remember, however, that the seller’s agent does not work for you and is being paid to look after the seller’s interests, not yours. If neither you nor the seller has an agent, then you’ll need to jointly draw up a contract. Many office supply stores carry standard home purchase agreement forms that you can use. If you do draw up a contract on your own, it’s a good idea to have it reviewed by a real estate attorney. You can find a real estate attorney in the phone book and ask if they will review contracts for a flat fee. Whether you have an agent helping you walk through the process or not, the most important thing to know is that when it comes to making an offer on a home everything – everything – must be in writing.

What’s Involved in a Contract?
Once you begin filling out the paperwork to make an offer on a home, called a contract, you’ll see that it’s more than just offering to pay a set amount for the home. There are a lot of variables in buying a home that can be negotiated. Let’s review the most common items covered in a contract:

Sales Price
How do you know how much to offer for a home? Is it safe to just always pay the asking price or should you offer less hoping to leave room for negotiating? The answer really depends on what type of a real estate market you’re in. For example, if you’re buying a home in a hot selling market, meaning that homes are selling quickly, you’ll likely want to offer the asking price. If it’s not such a competitive buying environment and houses are staying on the market longer, you have more room to maneuver and might want to consider offering less than the asking price. How much? That depends. You’ll want to take into consideration:

  • How much you’re looking at paying in closing costs;
  • What if any repairs you’ll have to make upon move-in;
  • How much other comparable homes in the neighborhood have sold for (not just what they listed for, but their actual sales price). You can find that out by asking your agent or hiring an agent for a flat fee to run what’s called a “comparative market analysis.” A comparative analysis is a printout of all the recent home sales in the area where you’re looking to buy. The analysis can help you determine how much you feel comfortable offering for the home and whether or not the home you’re looking to buy is overpriced or is a “good buy.”
  • How long the house has been on the market;
  • Whether or not the price on the house has been reduced;
  • How much the sellers bought the home for (you can find that out by looking for information on the property you’re looking to buy at your county’s tax office);
  • What the seller’s situation is – for example are they relocating and need to move quickly.

You can also have an appraisal done to get an accurate value on your home before making an offer, but you’ll have to find a professional home appraiser yourself (or your realtor should be able to help you find one), and pay for it. The bank that is handling your mortgage application will require that you have an appraisal after your contract has been accepted because they want to make sure that the home is not overpriced.

Financing Assistance
The largest out of pocket costs you’ll encounter when buying a home are the down payment and closing costs (the costs associated with transferring ownership from the seller to the buyer). Closing costs alone can add up to around 3% of the purchase price of the home. And that’s money you’ll need to pay upfront in cash (as opposed to taking out a loan to finance the fee.) You can write it into your offer that you’d like to ask the seller to help you pay some or all of the closing costs.

Personal Property
The general rule of thumb is that anything that is attached to the home conveys, or is sold along with, the home. For example, a deck or cabinets that you wanted to have the owner sell to you along with the property. If, however, there are other items that you’d like to purchase along with the home you’ll want to note that in your offer. For example, do you want to ask for window treatments (curtains, blinds, shades), deck furniture, refrigerator, washer & dryer, storage units/sheds, etc.? Be aware, however, that if you ask for items to convey the seller may want to renegotiate the selling price of the home.

Terms and Conditions
In addition to the sales price, financing assistance, and personal property, you’ll want to include your requests for terms and conditions of the purchase such as:

  • Are there any repairs you want the seller to make? You’ll have the opportunity to re-negotiate for other potential repairs after the home inspection, but if you notice anything prior to making the offer you should include it in the contract.
  • Do you want them to have the house professionally cleaned, or “broom-swept”?
  • What is your preferred date to settle on the house (meaning the date you go to closing to finalize the sale)?
  • What is your preferred date to move in?
  • Do you want the seller to provide you with a home warranty? It’s not required, but you may want to request it, particularly if the current homeowner has a policy that he/she can transfer as part of the home sales. A home warranty will provide insurance against any major appliance malfunction or repair.

You can request an assortment of tests to be run on your home prior to purchase, including a test for radon, lead-based paint, asbestos, and termites.

  • Termite Inspection. The termite inspection is required. If the home fails the termite inspection, the seller will be required to have the property treated for termites prior to selling.
  • Lead-Based Paint. If the home you’re buying was built before 1978 you may also want to consider ordering an inspection for lead-based paint. Prior to 1978 lead-based paint was commonly used in residential homes. By law the seller is required to disclose if they know of any lead-based paint present in the home. Lead-based paint is of particular concern for young children who tend to touch and ingest things more so than adults. Elevated levels of lead in paint can lead to nervous system, muscular, brain, and a host of other disorders.
  • Radon. Radon is a colorless, odorless gas that moves up through the ground and enters homes typically through the foundation or basement area. Radon has been linked to lung cancer, particularly in smokers.
  • Asbestos. Although asbestos is harmless unless airborne, if you’re looking to purchase an older home, chances are good that the builder used asbestos in the flooring, walls, siding, or other area of the home. If you’re considering doing major renovation to an older home it’s good to know if you’ll be working with materials that contain asbestos. Asbestos has been linked to lung cancer.

Remember that in addition to ordering the tests, you can also negotiate to have the seller pay a portion or all of the fees for the tests to be performed.

A contingency is a clause in your contract saying that if something goes wrong you are not legally bound to purchase the property. It’s basically a way of giving you an “exit door” out of the contract. There are two standard contingencies that most homebuyers include in their offer: a home inspection contingency and a financing contingency.

  • The home inspection contingency means that you have the right to renegotiate the terms of the offer or can walk away from the deal altogether if the home inspection turns up something that you weren’t aware of or is something that carries a high dollar value, such as replacing a roof, furnace, or major appliance.
  • The financing contingency means that you are not obligated to buy the home if you aren’t able to secure financing from a lender either because you don’t qualify for the loan or because you’re unable to sell the home you’re currently living in that you were planning to use as money for the down payment.

Earnest Money Deposit
You will have to make an earnest money deposit to show the seller that you’re serious about your offer. A seller doesn’t want to take his/her house off the market, which is what happens when they accept a contract, if he/she is not sure that you’re genuinely serious about buying the home. The amount of the deposit that you’ll be required to make varies, but is typically between 1-5% of the sales price. The check will not be cashed right away. Instead it will be held by a third party (such as a title attorney or a real estate agent) to ensure its safety. If your contract is accepted and you purchase the house your check will be cashed and the deposit is subtracted from your down payment (meaning you’ll be required to put that much less down at closing).

There are a few different scenarios if the contract falls through.

  • If you back out of the deal you’ll forfeit your deposit.
  • If the seller breaks the contract the deposit will be refunded to you.
  • If you have a home inspection contingency and the home inspection reveals something that you want to ask the seller to repair and the seller refuses, you have the right to walk away from the contract and the deposit will be refunded to you.

The contract should indicate who would hold the deposit and under what circumstances it will be refunded to the buyer (usually only if the financing falls through or if the seller backs out of the agreement to accept another contract).

Before Sending the Offer
Review it! Remember that if the seller accepts the contract it’s legally binding. So take a few minutes to carefully review the document. If you’re not working with a real estate agent you might want to find a real estate attorney to review it for a flat fee. Also, it’s a good idea to include a time limit on your offer. By giving the seller a certain amount of time to accept or reject your offer you won’t have to wait on pins and needles indefinitely.

Hearing Back from the Seller
Once you make an offer on a home, one of three things happens:

  1. The seller accepts your offer and you have a legally-binding contract,
  2. The seller rejects your offer and the contract offer is null and void, or
  3. The seller presents a counter offer with revisions to your original offer. This is where negotiating happens. Think of it like a dance. You know what you want; the seller knows what he/she wants; and the counter offer process is the dance you’ll both go through to find the agreeable middle ground. Remember that everyone wants to feel like they’re getting something that’s important to them.

Once you receive a counter offer, you’ll want to review their requested changes and then add any additional changes on your part or sign/initial to accept changes and send back. Theoretically this could go on forever, but typically buyers and sellers reach agreement by the second or third go-around. Remember that all counteroffers (yours and the seller’s) need to be in writing. Even if he/she calls you to discuss changes, request that they fax you a copy in writing. Nothing is valid or legally-binding if it’s not in writing!