Expect a Shift in Building Trends
When home building comes back, it will look much different than it does today as trends and needs have shifted. By 2015, housing development will see the following changes:
- Master planned communities will look different and be styled to appeal to more buyers.
- How planned communities look will depend on their location in the country.
- Builders will think more in terms of life style rather than type of buyer (first-time, move-up). Things to consider or multi-generational living, baby boomers that might want single floor living, low maintenance, and lots of amenities,
etc. - The bigger is better trend is declining and the median size of new homes is either holding steady or declining.
- A home that has a smaller lot with less landscaping and room for vegetable plots is more appealing.
- People want flexible, open spaces that are energy efficient.
What’s Hot in Real Estate – The Rental Market
Investors who purchase apartment houses see better deals now than in the last four years. In contrast to housing, where prices are low, inventory high, loans are difficult to get, and 40% of the market is foreclosures or short sales, the rental market (especially apartments) have rents growing, vacancies declining, and can produce cash flow that is positive from day one. In fact, rents nationwide now average $991, which is up from $930 in 2006. Here in the San Francisco Bay Area, the average is $ 1,025 to $1,200, because there are less units available here and there has been very little building in the last few years.
So, if you are thinking about investing in a rental property, think apartments and here is what you should look for:
- A property that produces at least 6% return on your cash investment in the first year.
- Expenses that do not exceed 40% of the gross income
- A cap rate percentage the higher the better and a debt service coverage ratio that is the lower the better
- A property that gets you to break even or cash flow positive day one
And, if you don’t want to be an owner, consider Real Estate REITS– they are hot again. They pass along on average 90% of their income to their investors each year and are returning in some cases 20% percent.
How can I correct mistakes or dispute information on my credit report?
It’s not easy, but it can be done. Credit bureaus are legally required to investigate disputed information by contacting the creditor that originally supplied them with the information. The three major credit bureaus usually have the same information for each consumer file — but not always. You need only contact the bureau that actually shows an error.
Factual information cannot be removed from a credit report, and the credit bureaus will not automatically remove information from your reports just because you dispute it. You have to prove that information is wrong with supporting documentation before a credit bureau will correct a report. Under the Fair Credit Reporting Act (FCRA), a credit bureau must within 30 days remove or modify a disputed item if it is found to be inaccurate, incomplete or cannot be verified after a reasonable investigation.
Contact information for the three major U.S. credit bureaus:
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Experian P.O. Box 2002 Allen, TX 759013 (888) 397-3742 www.experian.com |
TransUnion P.O. Box 1000 Chester, PA 19022 (800) 888-4213 www.transunion.com |
Equifax P.O. Box 740241 Atlanta, GA 30374 (800) 685-1111 www.equifax.com |
* W.J. Bradley is not a credit counseling or financial advisement firm and this information is for educational purposes only and is not to be taken as guidelines or guarantees to improve your credit or financial situation or eligibility to secure a home loan.
Why should I buy, instead of rent?
Paying rent is like lining your landlord’s pockets — you pay while they build equity, write off the interest on their mortgage and deduct their property taxes. When you own your home, it is an investment. Over the long term, the worth of a home generally increases, which means your home may make you some money when you decide to sell, or act as collateral for a loan that can pay for debt consolidation, medical bills, college tuition or a fabulous vacation. Plus, your home is yours, to paint, decorate and renovate any way you like!
The Difference between pre-approval and pre-qualification.
For many new homebuyers, the terms pre-qualification and pre-approval seem interchangeable. But they are not — and the distinction is an important one.
When you get pre-qualified, I perform a quick check to determine generally how large a home loan you can afford. Essentially, when a buyer is pre-qualified, the lender is saying it would most likely approve the buyer for “x” amount.
In order to get pre-qualified, you’ll need to provide me with some basic information on gross monthly income, other reliable reoccurring income, the balances and payments on current debts, and how much money has been saved for a down payment. Qualifying ratios are applied to those figures to determine what percentage of your gross monthly income can be used to pay for the home loan and attached expenses.
Pre-approval goes much deeper. In order to issue a pre-approval, I need to examine and verify your debt, income, savings, assets and credit report to ensure you can repay the loan amount. Where pre-qualification is a sort of educated guesstimate of the buyer’s purchasing power, pre-approval says the prospective lender would definitely be approved for the loan.
This is particularly useful when home shopping for multiple reasons. To begin with, pre-approval instantly lets you know what your actual budget is. When you begin home shopping, knowing what you can afford from the outset will help you and your real estate agent better focus your efforts to find the best home for your money. It sets the scope of your home-buying strategy.
Once you find a home within your budget that you like, being pre-approved provides you with an advantageous position over other buyers, because pre-approval assures the seller that you have access to the loan necessary to back your offer. I will provide you with a letter or certificate demonstrating that you are pre-approved for a certain amount of money, which you can provide as part of your offer.
Would you, a relative or a friend like to learn more, or get pre-qualified or pre-approved for a home loan at no cost? Please contact me and I will be happy to help you!
Credit scores affect your life — beyond just mortgage interest rates.
Credit scores are often used in determining prices for auto and homeowners insurance. Employers have also begun using the scores as part of background checks when making hiring decisions.
The practice of using credit scores in nontraditional ways is expanding. It’s more important than ever to educate yourself about credit. If you have more questions, I can help you find local resources to provide you with credit counseling and more in-depth information.
Check your credit score at least once a year. Correct any errors and take steps to improve your credit. Maintaining a healthy credit score will smooth the way for you to achieve many of your future goals.
* W.J. Bradley is not a credit counseling or financial advisement firm and this information is for educational purposes only and is not to be taken as guidelines or guarantees to improve your credit or financial situation or eligibility to secure a home loan.
Indonesia, Haiti, New Zealand, now Japan… Are you ready for the Big One?
We have had several major Earthquakes around the world the past three years, and the USGS has predicted an 80% chance of a 6.0 or larger earthquake will hit northern California within the next 30 years, or for most of us, sometime in our lifetime. There is a 60% chance of that Earthquake happening in the Bay Area. It’s not IF, but WHEN the big one will happen!
California houses two-thirds of the nation’s earthquake risk, with most residents living within 30 miles of a major fault. But just 12 percent of homes with fire insurance also have earthquake coverage. This is particularly ironic considering our Home, for most or us, is our largest asset. Buying auto, homeowners and life insurance is considered a normal part of our insurance portfolio, yet most of us consider it an acceptable risk to leave our largest asset unprotected from this inevitable peril.
What would happen if a major Earthquake occurs and you do not have earthquake coverage? Many believe the government will assist those devastated by this eventuality. But Federal disaster relief has historically been to offer low interest SBA loans to eligible homeowner’s and businesses, to repair or replace damaged property.
This is additional debt that you will be adding to your current mortgage which you are still be responsible for. The maximum SBA personal property loan is $40,000 and the maximum SBA real property loan for primary home repair is $200,000. FEMA disaster grants are available to those who do not qualify for a loan, but the average grant is less than $15,000, and the maximum is $26,200. Would that rebuild your home in the Bay Area? It can be argued that it is even more important for those with less resources to invest in Earthquake Insurance.
Along with your earthquake kit, (which should include camping gear, water, food and cash, all of which may be difficult to access if the big one hits); you should give strong consideration to adding an Earthquake policy to your Insurance portfolio. As recent events have served to remind us, we live in an area that has seen, and will see again, this type of calamity. It’s a wise investment in your peace of mind.
The Revised Estate Tax
The tax cuts in 2001 by Bush lowered estate taxes over 10 years. These cuts brought the existing estate tax rate from a high of 55% to 35% over a 10-year period. The 35% estate tax rate was to stay in effect through the end of 2009. Then, estate taxes were set to disappear in 2010 and finally return to pre-tax cut levels at the start of 2011.
Now, there are changes that have taken place for tax years 2011 and 2012. The new law sets the federal estate tax rate at a flat 35%. In addition to this lowered rate, there are additional benefits:
- The number of people affected by the estate tax are reduced as estates under $5 million are not subject to any taxation. The limit was previously $3.5 million.
- The $5 million estate tax exemption is now portable, which allows for easier post-death planning.
- After the death of the first spouse, any unused portion of the spouse’s $5 million exemption may go into the other spouse’s estate.
- The bill now increases the total lifetime exclusion for gift giving to $5 million (previously $1 million), but unifies the estate gift and generation skipping taxes.
- This revision also gives estates of 2010 the choice of whether to use 2010 or 2011 estate tax rules. This is important because even though in 2010 there was no estate tax, there was a change in the capital gains tax of the estate. Prior to 2010, estates got a stepped-up cost basis (value to current market) for any assets in the estate. Thus, a property bought 20 years ago for $100,000 that is worth $500,000 today, would go into the estate as $500,000. But, in 2010, it would go into the estate
at $100,000 and the heirs would have to pay a capital gains tax on the difference.
House Hunting: 3 Ls and 4 Cs
While house hunting, keep in mind the 3 Ls and 4 Cs.
The 3 Ls
- Location, location, location. You can redo the house, but you can never change the location. What’s important in this area is commute time, schools/parks, shopping, and community events.
- Land or lot size. This is another thing that you cannot change. Also, is flat important? Is a large lot necessary? What if it slopes or has an odd shape? These could all affect adding on, putting in a pool, etc.
- Layout. Does the layout work for your needs? Are there enough bedrooms? Are they together or do you want them on separate floors? Is the kitchen an open space? Layouts can be changed somewhat, but they are costly.
The 4 Cs
- Condition. Is it in mint condition or is a redo needed? Will a redo be major or minor,/li>
- Color. This is simply a cosmetic issue. Don’t run from pink décor or flocked wallpaper if the house a good location and good bones. Color can easily be changed.
- Clutter. Don’t let a homeowner’s clutter stop you from visualizing your furniture in the house. Focus on the architecture, layout, and style of the home. Sellers take their clutter with them.
- Cleanliness. A dirty home means sellers will get lower offers. That might be a plus for you. You get a bargain and can then paint, clean up, redo floors, etc.
The Fast and the Flawless
Closing on time, with little or no red tape, saves you money, time and worry.
That’s why W.J. Bradley has put together a team of the best processors, underwriters, closers and funders in the business. They’re fast, they’re accurate, and their goal is to make sure you get your loan when you need it. In fact, we have some of the fastest turn times in the mortgage lending industry, measuring the time in hours, not days.
Our entire team is charged with the task of ensuring you have the best customer experience every step of the way. Our Operations team is just as committed to providing you with excellent service as I am! Together, they do the work so you don’t have to worry.
WJB also employs state-of-the-art technology to ensure speed and accuracy when processing your loan. We will keep you apprised of the progress of your application throughout the process and we’re here to answer any questions you have, at any time.
If you’re ready to discuss refinancing a current loan or purchasing a new home, call W.J. Bradley today. We’re building a secure future: yours.
