How To Find The Right Real Estate Agent For You

Sometimes the most difficult part of buying a home is simply knowing where to start. That’s why it’s crucial to have a team of professionals guiding you every step of the way. Your real estate agent and mortgage lender should be educated, informed, and willing to find the ideal long-term solution that meets your wants and needs.

So, where do you begin? Should you get a loan? Talk with an agent? Let’s break it down.

Start with a Lender

The first step toward owning the home of your dreams is knowing exactly what you can afford. This is why you should meet with a lender before doing anything else. Having a good idea of what homes are within your budget will save you time, and possibly money, in the end.

Not to mention, having an approval letter from a lender can increase your bargaining and buying power when it comes time to make an offer, especially in bigger cities and booming markets.

Do Your Research

If your lender is local, they’ll most likely have a list of recommended real estate agents in your area. The Polder Group only works with all the top agents in Arizona and can give you the best recommendation for your needs.

When searching, it’s important to know the difference between a real estate agent and a Realtor. (That’s right— there’s a difference.) You’ve most likely heard these two terms used interchangeably, but there are actually distinctive requirements for each role.

A real estate agent is a professional who has obtained a real estate license to assist in the buying and selling of properties. In some cases, agents will have a specific focus, either listing or buying.

A Realtor, on the other hand, is a real estate agent who is also an active member of the National Association of Realtors (NAR).  Agents within this organization are required to adhere to an extensive Code of Ethics, which can be an attractive quality to buyers who want to know the agent they’re working with has their best interest in mind.

Interview Your Agents

Once you’ve found a few agents that meet your basic standards, it’s a good idea to interview them. This is your opportunity to learn more about the agent’s style, personality, and willingness to work with you.

You’ll want to hit on these topics while interviewing potential agents:

How long have you been in the business? A young agent could have more time to focus on your transaction, but most real estate agents learn as they go. A seasoned agent will have experience more speedbumps and will know how to avoid them.

 

What is your intended strategy to buy/sell my house? As a buyer, you need to know how willing your agent is to spend time searching for a home that meets your needs. As the seller, it wouldn’t hurt to know ahead of time what their average listing price to sales price ratio is. Does their selling strategy support your financial needs, and if not, do you need to reconsider?

Can you provide a list of references? Any agent worth their salt will have a long list of references willing to speak on behalf of them.

How much do you charge? Most real estate agent fees are negotiable. According to The Balance, agents will typically charge from 1% to 6% to represent one side of a transaction, either the seller or the buyer. A listing agent might charge 3.5% for herself and another 3.5% for the buyer’s agent, for a total of 7%. Percentages will vary. Keep in mind, a top agent might charge more for their services.

Trust Yourself

At the end of the day, you should go with an agent that you trust and know will help you in any way possible. But don’t forget to:

  • Review your contract
  • Double-check any references
  • Take time to consider all options

Ready to begin the journey to homeownership? Contact The Polder Group Today and let us help you get started on the best foot possible

USING RENTAL INCOME TO QUALIFY FOR A MORTGAGE

One of the key factors in your mortgage approval while buying a home is your debt-to-income ratio (DTI). Aside from your job, there are other sources of income that could impact your DTI. One that you may not have considered yet is the potential for rental income from property you already own, or even from the home you are buying. Is that even possible? Yes! There are a few different scenarios where this could work for you.

 

The answers to these questions may vary depending on what kind of financing you use. So, we’ll focus on conventional financing.

The home I’m buying is an investment property. Can I use rental income to offset the mortgage payment?

Purchasing a home specifically to rent out is a common scenario. How is the rental income calculated, and how much of it can be used toward your DTI?

Your mortgage advisor will order an appraisal of the home, including an appraiser’s opinion of market rent. We will then use 75% of the appraiser’s opinion of rent toward the qualifying income for your new property.

For example, if the appraiser’s opinion of market rent for the home is $2,000 per month, your lender would use $1,500 per month toward your qualifying income. But why not use the full $2,000? The remaining 25% that is not being used is to account for periods of vacancy and the costs of maintenance on the home.

The home I’m buying is two or more units. I’ll be renting out the unit(s) that I’m not living in. Can I use the rental income from the other unit(s)?

This is another common scenario. You’ll be occupying a portion of the dwelling yourself, so the loan is treated as an “owner-occupied” transaction. But you can still use potential rental income toward your qualifying income.

Your mortgage advisor will order an appraisal, and you can count 75% of the appraiser’s opinion of market rent toward your qualifying income, for the unit(s) you will not be occupying yourself. The appraisal will be specifically for a 2-4 unit property and will break out the rental value per unit, so you won’t have to get a mathematics degree to figure out how much rental income can be used.

The home I’m interested in buying for myself has a small additional living space; can I use the rental income from that toward qualifying?

Accessory Dwelling Units (ADU), also known as “mother-in-law apartments,” “studio above the garage,” “basement apartments,” “granny flats,” and many other terms, are increasingly common. These are a secondary smaller dwelling adjacent to the main home on one lot.

It’s common to advertise the additional unit as a source of additional revenue for someone to rent out while they live in the main home. While this may be possible (check with the city for local zoning restrictions), potential rental payments from an ADU cannot be used as a source of rental income to help you qualify for a larger home loan.

 

I’m buying a new home to use as my primary residence, and I plan on converting my current residence into a rental— can I use the rental income from my current residence toward qualifying?

Yes, you can! Your mortgage advisor will need you to provide a copy of an executed lease agreement and the security deposit check or first month’s rent check. In some cases, you will be able to use 75% of the lease amount toward your qualifying income.

I own an investment property already— can I use the rental income from that property toward qualifying for a home loan?

Your mortgage advisor will ask you for your most recent tax returns to use in calculating how much rental income we can use from that property. This is not a set percentage, and won’t be based on a current lease agreement. So, you will need to work directly with your mortgage advisor to find out how much money can be used toward qualifying in your specific scenario.

I own an investment property that I purchased in the middle of last year. My tax returns don’t show an accurate reflection of the income I would’ve made if I’d owned the full year. Is that going to impact how much rental income can be used toward qualifying for a home loan?

If your rental property was acquired during or after the most recent tax filing year or was out of service for an extended period of time, it is possible to use more income than what is reported on your tax returns.

Work directly with your mortgage advisor to explain your specific scenario. We can help you determine how much income can be used toward qualifying. You should prepare to provide documentation, such as a settlement statement to prove when the home was acquired, a current lease agreement to show what it’s being rented for, and/or documentation to explain why the rental property was out of service for a specific amount of time.

These are just a few of the questions we have seen about rental income and qualifying for a home loan. Our experienced team of Home Loan Experts are ready to answer any additional questions you may have. 520-495-0222.

Benefits of a VA Loan

Did you know that if you are a Veteran, you can qualify for a VA Loan? A VA Loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs and was created to make housing affordable for eligible U.S. veterans and members of the military.

VA home loans are available to veterans, reservists, active-duty military personnel, and surviving spouses of veterans with 100% entitlement. Eligible veterans may be able to buy a home with no down payment, refinance up to 100% of the home’s value and pay no private mortgage insurance.

These loans carry a number of benefits (such as no down payment) that make them far more appealing than conventional loans in most cases for those who qualify.

Benefits of a VA Loan

The biggest benefit of a VA loan, for many borrowers, is that there is no need for a down payment. There aren’t many loan types that don’t require a down payment, and VA is one of them. There is no need to pay Private Mortgage Insurance (PMI) or arrange for a “piggyback” mortgage to cover your down payment.

Another significant benefit of a VA home loan is the competitive interest rate. Many times with a lower down payment, the interest rate will increase. But VA loans don’t have that problem!

What Can You Do With a VA Loan?

  • Specifically, a VA home loan can help veterans:
  • Buy a home or residential condominium
  • Build a home
  • Repair, alter or improve a home
  • Refinance an existing home loan
  • Buy and improve a manufactured home lot
  • Add energy-efficient improvements to a home
  • Purchase and improve a home simultaneously with energy-efficient improvements
  • Refinance an existing VA loan to reduce the interest rate

VA Loan Limits for 2019

If you want to purchase a home, condominium or manufactured home, the VA can guarantee up to the conforming loan limit of the total loan – with additional benefits such as no down payment and no private mortgage insurance (PMI). Keep in mind, your VA loan may have a funding fee depending on which benefits you qualify for.

VA Refi

If you are considering refinancing an existing loan, VA offers you two options. You can either refinance to reduce your current interest rate. This is also known as a “streamline loan” or “Interest Rate Reduction Refinancing Loan (IRRRL).”

Veterans also have the option to take equity out (a “cash-out” loan). You can obtain a VA cash-out loan for up to 100 percent of your home’s value.

VA Jumbo 

Veterans can use a Jumbo VA loan to purchase or refinance when the loan amount exceeds the conventional loan limits. Jumbo VA loans require a down payment. The amount of the down payment is determined using a calculation that factors in the county loan limits for the area the home is in, and the portion of the amount exceeding that loan limit which the VA will guarantee.

Our expert mortgage advisors can explain the details on how much of a down payment would be based on your specific scenario. Typically, the amount of down payment required on a VA Jumbo loan will be significantly lower than what’s required on a conventional jumbo loan. VA Jumbo loans also do not require mortgage insurance, regardless of the down payment amount, whereas conventional loans with down payments less than 20% always require mortgage insurance.

Do You Qualify?

Reach out to us on The Polder Group at Summit Funding. We are here to help.

Mortgage Process Paperwork

At The Polder Group, we find that borrowers often comment about the amount of paperwork mandated for mortgage loan applications. Many buyers are told that the process was much less complicated fifteen or twenty years ago.

There are two main reasons for the change: government guidelines, and the fact that banks do not want to be in the real estate business.

Turning Problems into Solutions

During the run-up to the housing crisis, many people “qualified” for mortgages they could never payback. This led to millions of families losing their homes, and something the government wants to make sure won’t ever happen again.

As a result of that foreclosure crisis, banks were forced to take on the responsibility of liquidating millions of foreclosed homes and negotiating millions of short sales. Just like the government, they don’t want more foreclosures. The combination of those factors spurred the banks to tighten up their lending practices.

Consider this scenario: If you loan your friend $20 to cover dinner, you expect them to eventually pay you back. There’s no paperwork, and you know they’re good for the money. On the other hand, loaning a friend $5,000 to buy a car is something entirely different. It’s not quite the same easy transaction as a bar tab.

Now imagine you have to loan your friend $500,000 to buy a home! You can see why all lenders, including PG at Summit Funding, want to make sure the property is valued correctly, the seller is the legal owner, and the buyers earn what they say they earn.

Paperwork You’ll Need

What kind of paperwork will you expect to see throughout the process? Things usually start with the loan application. Underwriting your loan requires documents and signatures, and you may be required to produce, in hard copy or electronically:

Tax Returns

Pay Stubs

W-2s (or other proof of income)

Bank Statements (and other assets)

Credit History

Gift Letters

Photo ID

Renting History

When your loan closes, you’ll also be asked to sign the loan documents, and vouch that you have received the loan and title documents.

The good news is that stricter paperwork means lenders, feel more comfortable offering low mortgage interest rates. People who bought homes fifteen or twenty years ago experienced a simpler mortgage application process but also paid a higher interest rate. The average 30-year fixed-rate mortgage was 8.12 percent in the 1990s and 6.29 percent in the 2000s.

Important Documents to Save

The busyness of life can quickly cause things in our lives to pile up— especially when it comes to mail, statements, and other important documentation. Although it may be tempting to just throw all of this clutter out, there are important mortgage documents you should hold on to, rather than toss out.

Mortgage Statements

A mortgage statement is a document prepared by your mortgage holder. It’s then provided to you with the current status of your loan. You’ll receive these on a monthly basis after you close your loan. You’ll want to hold on to these statements for the life of the loan, at the very least.

Deed

Your deed is the document you need to prove you have a claim to your property. It’s recommended that you keep this document for as long as you own your home. Even though most municipalities keep online land records with a virtual deed, you should still hold on to your personal paper copy in case you need to quickly prove ownership of your home.

Purchase Contract & Seller Disclosures

A real estate purchase contract is a binding agreement between two parties for the transfer of a home or other property. Equally important is the seller disclosure, which is a set of documents completed by the seller of the home that lists any known issues with the property during the time of ownership.

Both of these documents provide the new owner with written evidence of the home’s condition in case a problem is discovered that was not originally disclosed by the seller. Keep these documents for as long as you own your home.

Home Warranty

In the unfortunate event that you need to replace or repair a portion of your house, the home warranty will include all the information you need. This form can be thought of as a written record of protection. Keep this document for as long as you own your home.

Final Settlement Statement

After closing a buyer (and seller) will receive a copy of their final settlement statement. It’s a good idea to keep this document since it lists out the distribution of all the fees and who paid for what, as well as confirms the official settlement date.

 

Do you still have questions about getting a mortgage? Contact The Polder Group at Summit Funding To Learn More.

DO CREDIT PULLS LOWER MY SCORE?

It’s a common misconception among borrowers that multiple credit pulls will drop their credit score. However, the three big credit bureaus (Experian, TransUnion, and Equifax) state it plainly: a borrower’s score will not drop when a mortgage lender pulls their credit more than once in a two-week period. So, why is this the case?

Not all credit checks are weighted equally. A credit card application carries more weight on credit than a mortgage loan. Credit card debts have a tendency to increase over time, make for larger risk which lowers credit. Mortgage debt, by contrast, eventually pays down to $0, so mortgage loan checks don’t have as much weight on overall credit score.

Soft Inquiries

Soft credit inquiries usually happen when a person who is not a potential lender, looks at someone’s credit score. This happens when you check your own credit score, an employer looks at your credit for a background check, or a lender pre-approves you for a credit card or loan offers. However, there may be instances where your lender will need to do a soft inquiry at the end of your loan transaction. (Ask your lender for more information about this.)

These credit checks can be done without permission and are not customer driven so they will not affect the credit score.

Hard Inquiries

A hard credit inquiry is when a financial institution, such as a lender or credit card company checks a person’s credit while deciding whether or not to extend an offer of credit. They most often take place when a person is making a large financial decision such as applying for a mortgage, loan, or credit card.

Typically, a person must authorize the third party to do this, so you should always be aware of any record of hard inquiry on your credit report. Hard inquiries can lower a credit score and can remain on the credit report for two years. But with time, the damage to the credit score decreases or disappears altogether.

A hard inquiry will happen when you apply for:

A mortgage

Credit cards

Auto loans

Student loans

Business loans

If you’re going through the home buying process, but still shopping around for the right lender for you, avoid hard inquiries at all costs. You’ll want your credit to be as high as possible when you decide on your lender, and credit inquiries make up 10% of your credit score.

It’s also important to sort out your mortgage shopping within a 14-day timeframe. If the inquiries are properly managed, the credit bureaus will acknowledge the first credit pull but will ignore each following check.

Another Credit Myth

Credit pulls aren’t the only misconception when it comes to how your credit score impacts your home loan. Some borrowers assume they won’t qualify for a home loan if they don’t have an outstanding score. Although your score is a factor in the approval process, there are loan options specifically for homebuyers with a lower credit score.

The truth is this, you might have more loan options than you think. Each person’s financial situation is different, so it’s important to speak with a Mortgage Advisor about your specific needs. However, The Polder Group at Summit Funding has multiple resources that can help get you started on your journey toward homeownership.

Let’s start with the minimum FICO credit score needed for our low credit score loans:

FHA Loan: 580

USDA Loan*: 600

VA Loan: 580

Government-backed loans remove the risk of default off of the mortgage company because the government insures or guarantees the loan, which in turn allows the minimum credit score to be lower.

Now, what about your down payment? Chances are, if you’re working toward paying off debt, you don’t want to front the traditional down payment amount. Thankfully, loan options that require a lower credit score usually require a lower down payment as well.

FHA Loan: minimum 3.5% down payment required

USDA Loan*: 100% financing

VA Loan: 100% financing

The opportunity to buy a home, despite a low credit score, is a dream come true for many homebuyers. At TPG, our Mortgage Advisors are here to make this dream a reality.

Contact us today to learn more.

Benefits Of Selling During The Holiday

Each year, the holiday season seems to arrive quicker and quicker. Now that we’re officially in October, it’s time to start thinking about what the holiday market looks like.

Are you considering selling your home soon? There’s no denying that spring is one of the best times to sell your home, but there are also benefits to selling during an off-peak season. Let’s break down the benefits of selling in the last few months of the year and look at tips to get your home off the market faster.

The Benefits

Shopping, and baking, and houseguests… oh my. As busy as your holiday season can be, it may be worth it to take a year off from decking the halls to sell your home.

There’s less competition is cooler months. A large reason for seller success in the springtime is due to the warming temperatures and longer days. Both of these benefits actually create a very competitive market, so sellers listing in the cooler months will find fewer homes to compete with.

Buyers are more serious. In the spring and summer, buyers tend to shop without a clear plan to purchase because they know their options are plentiful. During the holidays, on the other hand, buyers are less likely to waste their already limited time browsing multiple homes.

Transfers are looking for housing. As the end of the year draws near, employees who need to transfer to a new city, or even a new state, will be home shopping through the holidays. These homebuyers don’t have time to wait until the spring, so time is on your side in this scenario.

Your neighborhood is decorated. With Thanksgiving just a few weeks away and Christmas shortly after that, homes in your neighborhood will be adorned with plenty of pumpkins, and later, Christmas lights or decorations. As buyers drive by, they will have the chance to experience what their own holiday festivities will look like in the upcoming year. You can also make your home festive on the inside with warm scents and colors that are welcoming to visitors.

Holiday Selling Tips

Are you ready to take the leap and sell your home? Selling in the last few months of the year can be tricky, but we have a few tips to make the process easier.

 Get your finances in order. No matter what time of the year you sell, you’ll need a trusted lender to guide you through the home loan process.

Hire a reliable real estate agent. Your agent will be just as busy, if not busier than you are as they juggle the holidays on top of selling your home. Ask around, read online reviews, or ask your Mortgage Advisor to recommend an agent that will take the time you need to sell your home. We know all the top agents in Tucson.

Seek out, motivated buyers. Request that your Realtor find buyers or investors on specific deadlines to buy if you’re also on a deadline to sell. College students and military personnel are two more recommended groups that sellers target during October through December.

It might also be beneficial to price your home to sell, right off the bat. Rather than slowly dropping the price, list your home at a reasonable price from the get-go.

Decorate… to an extent. Curb appeal should be a top priority of buyers during winter months. This means clearing out dead plants, raking leaves, and keeping gutters cleaned out. On top of yard maintenance, minimal outdoor decorations are welcome. For example, single-colored string lights and door wreaths. Large blow-up displays or overwhelming lights could distract buyers from the house itself.

This rule goes for inside the home as well. By all means, embrace the holiday spirit and decorate, but don’t clutter shelves and walls past the point of enjoyment for potential buyers. Their main focus should still be on the home, rather than your festive display.

Have photos taken of your home? When the cold winds start blowing, no one wants to begin their home shopping journey outside. Listing your home with professional photos will allow buyers to get a good idea of what your home features before ever stepping inside.

Could this holiday season be the time you decide to sell? Contact The Polder Group at Summit Funding Your Real Estate Experts to learn more.

What The Heck Is Homeowners Insurance?

The journey to homeownership is no easy trek. There will be an endless list of new terms and information that come up during the loan process, and even afterward. An important part of being a homeowner is knowing the ins and outs of homeowners insurance.

A standard homeowners insurance policy will provide you with financial protection in the event of a disaster or accident involving your home’s structure and belongings inside. Let’s look at some common questions about homeowners insurance and break it down together.

Is homeowners insurance required?

Technically, homeowners insurance is not required by law. However, most lenders will require you to have at least some form of basic insurance to fund a loan. Once you pay off your mortgage and you own the home outright, you don’t have to keep your insurance. But there are plenty of reasons to keep it.

What does homeowners insurance cover?

Your homeowner’s insurance will reimburse you for living expenses if you’re forced to live outside of your home during repairs, in addition to the home and personal property coverage. (Given the cause of damage is a covered peril in your policy.)

 

A named-peril policy will only cover the perils specifically outlined in your policy. An open peril policy will cover everything except the hazards specifically listed in your policy.

There are eight different forms of homeowners insurance, but there are five options for basic homeownership (not a condo or mobile home, etc):

HO1: Basic Form (Limited Coverage Policy)

This form of homeowners insurance offers the most limited coverage. Because it’s a named peril policy, only the perils outlined in your policy are covered. Perils:

Fire/Lightning

Windstorm/Hail

Vandalism

Malicious mischief

Vehicles

Aircraft

Explosions/Riots

Glass breakage

Smoke

Volcanic eruption

Personal liability

HO2: Broad Form (Basic Policy)

All perils listed under HO1 are included in this form, in addition to:

Falling objects

Weight of ice, snow, and sleet

Accidental discharge or overflow of water/steam

Sudden and accidental tearing apart, cracking, burning, bulging

Freezing

Sudden, accidental damage from artificially generated electrical current

HO3: Special Form (Most Common Policy)

This is considered the most common type of homeowners insurance because of its broad range of coverage, and the fact that it’s generally still affordable for homeowners. HO3 is an open peril policy. Some common exclusions you will see on an open peril policy include:

Earth Movement

Ordinance of law

Power failure

War

Nuclear hazard

Government action

More

HO5: Comprehensive Form

An HO5 policy will cover more perils than the previous types listed. Similar to an HO3, an HO5 is an open peril policy. Whereas an HO3 policy has named perils for personal property, HO5 policies are open peril for both the dwelling and personal property.

HO8: Older Home Form

This form of homeowners insurance is designed for homes built more than 40 years ago and don’t meet all of the structural update requirements found in HO3 policies. HO8 policies are peril plans that provide the same basic coverage as HO1 policies.

Most basic forms of homeowners insurance will not cover flood or earthquake damage. A standalone policy may be needed for your home if you live in areas prone to these types of damage.

How much does homeowners insurance cost?

The average premium for homeowners insurance in 2016 was about $100/month ($1,192 annually.) However, your cost will vary on location, provider, and extensiveness of the policy.

It’s important that you don’t confuse homeowners insurance and mortgage insurance. Homeowners insurance exists to protect the homeowner in the event of damage to your home. Whereas mortgage insurance exists to protect the lender in the event that you (the borrower) cannot repay your loan.

How do I buy homeowners insurance?

When it comes time to buy insurance, there are a few important steps you have to take before you go shopping. First, you’ll need to get a replacement cost estimate of your home from a certified appraiser. This estimate will help ensure you get the most from your insurance policy.

Next, you should take inventory of your personal items, including any valuables you may need coverage for. To understand just how much coverage you’ll need, combine your total assets.

It’s no secret that you should never go with the first company you find. So, take time to do your research, and ask people you know for recommendations. You should also get multiple quotes and check for possible discounts.

Are you ready to begin the homeownership journey? Contact Your Home Loan Experts, The Polder Group at Summit Funding.

 

Refinancing Before and After Divorce

Divorce rates across the United States have seen an 8% drop over the past ten years. However, the likelihood of divorce is still between 40-50% for American couples in their first marriage.

The thing to remember is no one gets married with the intention of getting divorced, but life happens. It’s important for you and your partner to be on the same page financially in case divorce were to ever become a reality.

Refinancing Before Divorce

Contrary to popular belief, if you were to split from your spouse, their name is not removed from the mortgage, even if the divorce decree awards the home (and the mortgage) to one spouse. In order to remove someone from the mortgage, you will usually need to refinance the mortgage with the spouse who will be in sole possession of the home.

If you and your soon-to-be ex-spouse are still on good speaking terms, refinancing before getting a divorce could be the best option for both of you.

Better Chance at Qualification

When you apply for a refinance as a joint couple, your finances reflect two salaries and two credit scores. Lenders will have more records to take into consideration when deciding whether or not to grant the loan.

Lock in a Low-Interest Rate

The Federal Reserve recently cut rates for the first time in ten years, so right now could be the best time to refinance. Sometimes a divorce will not finalize for a year or more, depending on the circumstances. As a couple, you may decide that a refi now would save you both thousands of dollars in the long-run.

Refinancing After Divorce

It’s important to remember that your ability to refinance will be based on a number of factors that might change after you get divorced. For example, your credit score will not be directly affected by the split, but there are circumstances that could cause your score to drop, which could also increase your interest rate.

Debt-to-Income Ratio

Lenders take your debt-to-income (DTI) ratio into consideration when approving you for a home loan. If you’re married, the salary of both you and your spouse are evaluated. Once your spouse’s salary is taken out of this equation, it might be more difficult for you to refinance.

Joint Accounts

There’s always a chance that you may be required to close joint credit accounts with your ex-spouse. As a result, this would lower your total available credit. You may also run into trouble if your former partner is unwilling to pay off balances due on joint accounts. This is where your credit score will begin to take a hit.

If most of your financial accounts were in another person’s name, you might also have a limited credit history.

Potential Benefits

Although your chances of qualifying for a refinance are potentially higher as a couple, there are still benefits to waiting until after your divorce is finalized to refi.

Your ex-spouse won’t be on the new mortgage

You will be in charge of your own financial decisions

Liquidity could be used to buy your former spouse out of their portion of the home

Because your home is likely the most valuable asset you and your spouse purchased together, it’s important to know what your options are before and after a divorce. Speak with your home loan experts today at The Polder Group, with Summit Funding to hold your hand through the process.

SECOND HOME FOR COLLEGE STUDENTS

They grow up so fast. It seems like just yesterday they were learning how to crawl, and now your child is packing up for college. With all the overwhelming emotions you must be feeling, there’s no doubt you’re also feeling the sticker shock of paying for their education. From tuition and books to parking passes and meal plans, college is a pricey investment.

There are some costs that are just unavoidable, but there is one area of spending that could create long-term wealth for both you and your student. Have you considered buying a second home for your college student?

Before you panic at the thought of a second mortgage, let’s look at the long-term benefits of a second home, rather than paying for university housing.

Investment Strategy

When it comes to planning for your future (and your child’s) it never hurts to have a backup plan. By investing in a different market of real estate, outside of your primary residence, you have the potential to increase your investments. Owning a second home also opens up the options for your living situation after retirement.

Owning, rather than renting, a home will also allow the home to build equity. MyCollegeGuide recently said students at public universities can expect to pay an average of $8,887 each year for room and board, and those at private universities are likely to pay closer to $10,089 per year. Why not put this money toward a home that has the potential to keep making money, long after your student moves out?

Tax Benefits

As long as you use the property as a second home, and do not rent it out, you can deduct mortgage interest the same way you do on your primary residence. As a homeowner, you can deduct up to 100% of the interest you pay up to $750,000 of the total debt that is secured by both the primary home and the second home. (Note: $750,000 is the total debt between the two houses, not $750,000 each.)

When deciding on whether or not to rent out your property to another individual for the time you’re not using it, speak with a financial advisorCertain tax breaks will or will not apply, based on your specific situation.

Appreciation

College towns are perfect for property appreciation. Because new students will always be moving through, homes in the area will always be in high demand. Even after your college-aged kid moves out, you could consider renting it out to other students. Or, if you have multiple kids going to the same school, rent the property out during the years it’s being unused. (If you do this, be aware of how it will affect your taxes.)

Stability

Avoid the stress of finding a new living space each year by owning a home your child can live in for all four years of college. No move-in dates, security deposits, or storage fees.

Additional Tips

If you’re considering purchasing a second home, rather than paying sky-high prices for university housing, consider these additional tips: 

Remember all the expenses. Taking care of a home is an expensive task. From lawn care to appliance upkeep, you’ll need to factor in all of the costs of buying the home, besides just the mortgage.

Look in advance. Even if your kids are a few years away from picking a college, consider the benefits of different markets. Buying a home in one state versus another might be a deal-breaker. You’ll also need to be in good financial standing when you apply for a home loan. (Know your loan options.)

Understand scholarship requirements. If your child is awarded a scholarship through the university, living on-campus might be a requirement. Consider all the possibilities with your child in advance and stay on top of potential requirements. (Some universities will require freshman to also live on campus, no matter what.)

Help your child establish credit. If you decide to have your soon-to-be-student listed on the mortgage and deed, they will need to have some established credit before applying. Consider applying for a low-limit credit card in the student’s name or have a small car loan in their name to help with their credit rating.

Do you have more questions? Give our team of loan experts a call. 520-495-0222