Buying a Home with Emotion Rather than Reality

 Buying Based on Emotion Rather than Reality

People see a house they love, and the planned budget goes out the window. Or, even if the house remains within their budgeted price, they don’t think about all the extras that may come along with it. A pool needs to be maintained; a huge lawn must be mowed; and a homeowners association will not only demand annual fees, but also your undying loyalty to their bylaws.

Before buying a house, ask yourself these questions to make sure your purchase is a rational decision:

• Can I comfortably afford this house?
• Can I comfortably afford the taxes on this house?
• Can I comfortably afford to maintain, heat and cool this house?
• Can I pay for renovations if needed? Will my desired additions and improvements be allowed by the HOA or local zoning ordinance?
• How long do I envision living in this house?
• Is there anything outside my control that could negatively impact the resale value of this house?
• Do the rooms and layout make sense for our family?
• A [hot tub, outdoor kitchen, fill-in-the-blank] is a great feature, but realistically, will my family use it?

I will make the home buying process smooth for you, explaining all the answers to your questions, prepare you each step of the way, so you can make the most practical decision about buying a home!! 

Click here to contact me, or email me, about the home buying process!! 

Heidi Buchberger RE/MAX Realty Center Oconomowoc, WI 53066

262-443-2672

13 Steps to Hiring a Contractor Who Won’t Rip You Off

By Marilyn Lewis on March 27, 2015

Photo (cc) by MTV General Contractors, Inc.

Now that the economy is improving and spring’s around the corner, homeowners who spent the recession watching home remodeling on TV may now be ready to do some real-life work on their homes.

That can mean wading into a world both alien and expensive. The contractor you hire will make all the difference to the success and affordability of your project.

Rip-off artists and incompetents aren’t in the majority, but they are common enough that Spike TV has built a reality show, “Catch a Contractor” around homeowners’ complaints of botched home construction and remodeling jobs.

1. Get recommendations

The absolute best way to find a reputable and competent contractor is to ask friends, colleagues and family for the names of contractors with whom they’ve had a great experience. Send your network an email: describe your project, perhaps including your price range, and outline what you hope for in a contractor. Or just phone friends or ask people for recommendations as you run into them.

Assemble a list of the most-promising names you’ve received. Chat a bit with those who made the recommendations to find out:

• Why do you recommend this contractor?
• How did you meet him or her?
• What kind of work did you have done (to eliminate high-end specialists, for example, if you are working on a rock-hard budget)?
• Did the contractor finish on time and on budget?
• Tell me about any problems you ran into with this contractor.

2. Verify licenses

When you have narrowed your list to two or three contractors, ask to see their business licenses. Make photocopies and verify they are current by contacting the board or agency that licenses contractors in your state.

Resources:

• Find your state’s licensing agency on its website at USA.gov.
• The National Association of State Contractors Licensing Agencies lists licensing agencies for most states.

3. Track down complaints and disciplinary actions

When calling your state’s licensing agency, ask how to find complaints and government disciplinary actions against contractors.

“What You Should Know Before You Hire a Contractor,” a consumer publication by the Virginia Board for Contractors, has plenty of information for homeowners everywhere. In some states you can check a contractor’s status online. Washington state, for example, lets you verify that a contractor’s workers’ compensation insurance is paid up and find out if the contractor is registered, bonded and insured or has state licensing infractions.

4. Screen for legal problems

Look for lawsuits involving a contractor:

• Check at your county’s district court for lawsuits naming the contractor or business you are considering using.
• Search online for mentions of a contractor’s name and the business name.

5. Verify insurance

Contractors need two types of insurance:

• Liability coverage compensates the homeowner in case the work fails.
• Workers’ compensation insurance (or industrial insurance) covers workers injured at your job site.

Regardless what a paper policy says, call the agent or state agency to confirm that the premiums are paid up and the policy is in force. If industrial insurance is not paid up, depending on your state’s laws, you could be liable for the unpaid premiums in case of an accident.

Ask each contractor you are considering for a copy of evidence of his or her liability insurance, including the phone number of the agent who sold the policy.

6. Conduct interviews

Sit down for a half-hour or more with each contractor you consider. Talk over the job, the problems, their expectations, their credentials and experience. The Federal Trade Commission has a detailed list of questions to ask.

7. Turn your back on temptation

It’s terribly tempting to hire unlicensed or uninsured contractors. Doing things by the book costs money, and contractors who skip the formalities can charge less.

 From our Solutions Center: Click here to effortlessly track your expenses, free

You might get away unscathed if you hire an unlicensed business. Many homeowners do. But here are a few of the risks:

• You’ll get no state help pursuing a bad contractor. In Virginia, for example, using unlicensed contractors makes you ineligible for monetary compensation from a state fund in case of improper or dishonest conduct.
• You could be held responsible as the de facto general contractor and thus responsible for any defective work on your home for many years after you’ve sold it to someone else.
• You could be on the hook financially for injuries on your job site. Your obligation to pay an injured worker’s medical bills could last for years.

8. Check references

Ask each contractor you’re considering for three references; take the time to check them, confirming that the contractor really did do the jobs he claims he did. Find out when the work was done, how long it took and if it was finished on time. You can learn plenty by also asking open-ended questions like, “What was it like to work with Linda and her crew?”

9. View work they’ve done

Building trades contractors often carry photos to show the quality of their workmanship. It’s fun to see them, but also ask the contractor’s references if you can see the work. An in-person look affords the chance to confirm quality in a way you cannot with photos.

10. Sign a contract

Make sure that you and your contractor have the same understanding of the work to be done. Ideally, you or the contractor should write a detailed list of each task with steps to be completed and dates for milestones. HouseLogic explains how to draw up the contract and what to include.

11. Be careful with upfront payments

Your contractor may ask for a portion of the payment upfront. That’s potentially reasonable. But agreeing on too large an upfront payment presents a risk for you. If you are asked to cover the cost of materials, see if you can pay the supplier directly. This keeps you in control of the money and lets you know if the contractor is sharing any discount with you or charging you a mark-up on materials.

Contact consumer protection authorities in your state to find out about any restrictions or rules contractors must abide by. Some states regulate what a contractor may charge upfront. In California, for instance, it’s no more than 10 percent, according to US News.

A payment schedule of 30 percent at the start, 30 percent in the middle and 30 percent upon completion is not unusual. However, it is safest for you to link payments to milestones of work completed.

HouseLogic offers these guidelines:

• First payment should be no more than 10 percent of the total job.
• Final payment should be enough money — up to one-third of the total cost of the project — to make sure the contractor returns to correct unfinished details.

12. Beware of low-ball bids

When asking several contractors to make competitive bids, be wary of any that come in far lower than the rest. A little lower is fine, but the “too-good-to-be-true” rule applies here: There’s probably something wrong with a radically lower bid. It often means there will be expensive surprises later in the project.

13. Protect against tail-dragging

It’s not unreasonable for a contractor to juggle more than one project at a time. But this can get out of hand, leaving homeowners waiting and waiting for their job to be completed.

To ensure prompt completion of your job, build a penalty for late completion into your contract. In fact, you might add an incentive payment for an early wrap-up.

Contact me for recommendations for my most valued and reliable network of general contractors. 

Highly trusted by my clients and myself, Heidi Buchberger RE/MAX Realty Center

262-443-2672

heidi.buchberger03@gmail.com

www.heidibuchberger.com 

Wealth Building Loan to Help Low-Income and First Time Home Buyers

Wealth Building Home Loan to Help Low-Income and First-Time Home Buyers

MYBANKTRACKER.COM Jeff Yoncich/Jan 20, 2015

Claire Tak in Mortgages and Buying a Home

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An innovative new mortgage program is getting a lot of favorable media, as it is designed to help low-income borrowers and first-time buyers get into the housing market and stay there. It’s called Wealth Building Home Loan and it is a 15-year mortgage which allows home buyers to build equity much faster than they would with a standard 30-year loan. Until now, the typical loan people think of when considering a first-time mortgage is an FHA, or U.S. Federal Housing Administration mortgage insurance- backed mortgage loan.

Flickr | http://www.flickr.com/photos/106574022@N04/11705392445/in/photolist

Typical home loan borrowing

Traditionally, payment affordability leads most first-time buyers to choose 30-year fixed-rate mortgages. You can buy a lot more home and there aren’t many surprises. The problem is, it generally takes 30 years until a 30-year fixed mortgage is paid off. In the meantime, you pay mostly interest for the first 10 to 20 years, and it’s not until late in the amortization period that payments go primarily toward principal. So, you don’t really start owning much of your home until very late in the loan.

This can create problems down the road, especially for those who put little down on their home purchase. If borrowers fall behind on payments, and have little home equity at risk, lenders don’t have much security for their investment. Borrowers can simply walk away if things go wrong.

But the alternative — traditional 15-year fixed rate mortgages — aren’t cheap. The borrower has half the amount of time to pay off roughly the same amount borrowed, so the monthly payments on 15-year loans are much higher.

An FHA alternative?

Providing an FHA alternative was in fact much of the inspiration for the new loan. Its creators claim the FHA overcharges borrowers and sticks them with costly mortgage insurance premiums. And, until now, low-income borrowers and first-time buyers haven’t had many other options to an FHA loan for buying a home.

With a Wealth Building Home Loan, borrowers will get more than 90 percent of the purchasing power they’d normally get with the FHA program with the standard 30-year fixed loan at three percent down, according to proponents.

Much of the problem associated with the FHA model is due to trying to make them more affordable at the expense of building borrower equity and wealth. In the beginning, the Federal Housing Administration insured mostly shorter-term, 15- to 25-year mortgages, and required 20 percent down payments, as well as a careful review of a borrower’s household budget, and rigorous appraisal standards.

But, beginning in the late 1950s, government housing policy shifted, and lenders began using looser underwriting standards. And, more recently, low-income borrowers and first-time buyers were coaxed into the market by making monthly payments more affordable. The result has been saddling these buyers with overwhelmingly high-risk loans. Once something goes wrong — a job loss, major illness, or divorce — there is little or no equity acting as insurance.

Details of Wealth Building Home Loan

The opportunity to build ownership far more rapidly by spending a little more each month is the primary purpose of the Wealth Building Home Loan. The happy consequence of doing so, proponents contend, is the quick creation of an equity cushion to fall back on, should home prices go south soon after buying. This equity stake greatly reduces the chances of going into foreclosure.

To make the payments more affordable, the loan is offered at an interest rate about three-quarters of a point below the 30-year FHA rate. If borrowers wish, they can buy down the rate even further. For every 1 percent of the loan amount the borrower puts up as a down payment, the interest rate will be lowered by half a percentage point, which is twice as much as usual. So, a $6,000 down payment on a $100,000 mortgage at 3 percent would bring the rate down to zero, meaning that every penny spent on the monthly payment would go to the principal (the amount borrowed or the amount still owed on a loan, separate from interest).

In the first three years of the Wealth Building Home Loan, 77 percent of the monthly payments go to paying off the loan’s principal, whereas 68 percent of the payments of a standard 30-year mortgage are interest to the lender.

So, with this program, low-income borrowers and first-time buyers pay down their mortgages faster without having to pay a lot more and they build more home equity in a shorter period of time. Compare this to the latest mortgage rates are in your area.

The lenders benefit as well by facing less exposure to the credit risks of high loan-to-value financing.

This is assured by underwriters who will make sure you have enough money left over after you make your house payment to cover all your other monthly expenses. That way, should you have a financial setback, there will be enough money coming in that you can still make your payments and won’t fall into foreclosure.

Doubts from FHA supporters

There are definitely doubters and critics, however, of the Wealth Building Home Loan concept. They complain it is not a logical replacement for the FHA loan program. They point out, if borrowers use their limited money to buy down their interest rate rather than make a down payment, they deprive themselves of a quick equity stake.

They also complain that these loans, with zero down, no mortgage insurance, and a low interest rate, will have to be held on to by the lenders, instead of being sold on the secondary market. This is likely to severely limit their availability. Even if the new loans could be offered on a large scale, they claim, it’s still questionable whether subsidizing the program would be a better use of government dollars than government support of the FHA program.

What can’t be denied, however, is the hope this program offers of owning a home free and clear in 15 years. Think of the freedom the resulting extra cash and credit standing will bring a homeowner when that house payment becomes a memory.

Initially, the Wealth Building Home Loan will be made available through the 37 offices of the Neighborhood Assistance Corporation of America. NACA will act as mortgage originator for Bank of America under a $10-billion contract. Some 10 other institutions are also involved in startup talks.

What’s more, there’s word of a similar financing tool designed for middle-income borrowers in the works.

This will be a developing story over the many months and even years it may take for the concept to become established. We will, of course, follow it closely for you.

I work as a Realtor with our Milwaukee NACA office, contact me for more information about this home buying program! 

HEIDI BUCHBERGER

RE/MAX REALTY CENTER

262-443-2672

HEIDI.BUCHBERGER03@GMAIL.COM

Capitalize on Home Ownership Tax Benefits With These Deductions

Capitalize on Home Ownership Tax Benefits With These Deductions

MYBANKTRACKER.COM Jeff Yoncich/Jan 26, 2015

Claire Tak in Mortgages and Buying a Home

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If you purchased your first home in 2014 you’ll soon be enjoying one of the true joys of home ownership. Tax season is here and it’s time to celebrate the home ownership tax benefits granted by Uncle Sam — and we’re not just talking about the tax deduction for mortgage interest.

Let’s take a look at how to maximize the tax advantages of deductible home-related expenses — including some you may not be aware of — and the ones that aren’t deductible.

Flickr | http://www.flickr.com/photos/kellinahandbasket/468698917/in/photolist

You can deduct: Mortgage interest

Financing your home purchase offers the biggest tax break. For most home owners, the biggest part of the monthly house payment goes toward interest. And, unless your loan is more than a million dollars, all of the interest is deductible. If your loan was over a million, it limits your deductible interest.

Interest tax breaks don’t end with your home’s first mortgage. Refinancing, a home equity line of credit and most equity debts of $100,000 or less are also fully deductible. Mortgage interest also is fully deductible on a second home — even a boat or RV — as long as they have cooking, sleeping and bathroom facilities.

You can deduct: Paid points

If you paid points to get a better rate on your home loans, they qualify for a tax break, too. The question is when you want to claim them.

You can deduct points in the year you paid them if, among other things, the loan is to purchase or build your primary residence, payment of points is an established practice in your area and the points were within the usual range. Make sure your loan meets all the qualification requirements so that you can deduct points all at once.

A homeowner who pays points on a refinanced loan is also eligible for this tax break, but in most cases, the points must be deducted over the life of the loan. The same rule applies to home equity loans or lines of credit.

And points paid on a loan secured by a second home or vacation residence, regardless of how the cash is used, are spread over the life of the loan.

There are more tax advantages to home ownership than just the tax deduction for mortgage interest.

You can deduct: Property taxes

Another major deduction in connection with your home is property taxes. When the property was transferred from the seller to you, the year’s tax payments were divided and your share of these taxes is also fully deductible.

These taxes are usually collected with monthly payments and held in an escrow account for payment once a year. The amount should be included on the annual statement you get from your lender, along with your loan interest information.

If you are going to sell your home, you can deduct: Taxes on the home sale

When you decide to move on to another home, or if you are considering moving soon, you’ll be able to avoid some taxes on the profit you make. Up to $250,000 in sales gain ($500,000 for married, filing jointly) is tax-free as long as you owned the property for two years and lived in it for two of the five years before the sale.

If you sell before meeting the ownership and residency requirements, you owe tax on any profit. The Feds allow prorated tax relief if the sale is because of a change in the owner’s health, employment or unforeseen circumstances like death, divorce, job loss or changes, multiple births from the same pregnancy.

A partial exclusion can be claimed if the sale was prompted by residential damage from a natural or man-made disaster or the property was taken by a local government under eminent domain law.

Second home sales also can provide some tax benefits, but you’ll owe tax on part of the sale profits based on how long the house was used as a second residence.

What’s not tax deductible

Simply because you’re required to pay mortgage insurance doesn’t mean you can deduct PMI (Private Mortgage Insurance) premiums. To qualify for a deduction, your mortgage must be for your primary residence or a second home that’s not a rental property, the loan was originated in 2007 or later, and your annual income is no more than $109,000.

Speaking of insurance, property or hazard insurance premiums are not deductible, even though the coverage generally is required for the home loan and is often collected with your monthly payment.

Other nondeductible residential expenses include:

– Homeowners association dues

– Any additional principal payments you make

– Depreciation of your home

– General closing costs and local assessments to increase the value of your neighborhood, such as construction of new sidewalks or utility connections and the repairs and upgrades you do on the home.

But hold on to the records and receipts of property improvements —  when you sell they could help reduce your taxable profit.

Be sure to follow our advice on how to benefit from all the available deductions for home-related expenses. You’ll find the tax deduction for mortgage interest expense is only one of the tax advantages of home ownership.

Contact me to answer questions about your tax benefits as a home owner!

HEIDI BUCHBERGER 

RE/MAX REALTY CENTER

HEIDI.BUCHBERGER03@GMAIL.COM

262-443-2672