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PURCHASE

Should You Buy or Sell First?

So you’re ready to move, but should you buy or sell first?

It’s time. Your family’s getting bigger and you need more space, or maybe you’ve got an awesome job opportunity somewhere else. No matter what’s causing you to consider moving, there’s always going to be that one tricky question. Should I buy a new home, or sell this one first? It’s a common problem. Managing the sale and purchase of two homes at once takes a lot of planning. Unless everything turns out perfectly, there’s likely going to be a time in the process where you either don’t own any houses, or you own two at once. So, which one is better?

The pros and cons of selling your home first

Pro: Fewer mortgage payments

One of the biggest perks of selling first is that you won’t be responsible for two mortgages at once. That relieves some of the pressure to lower the price of your home or sell it quicker than you wanted to. Selling your home allows you to access the equity you’ve built, which can come in handy when you’re looking for a place to stay or store your things in the meantime. You can even put it toward a down payment on your new home.

Most of us don’t have the money to make a down payment on a new house or the income to keep up with two mortgage payments indefinitely, so selling first may seem like the obvious choice. But even though you won’t be paying two mortgages, you’ll still be spending your money on the things we just mentioned.

Con: Finding housing during the transition

Finding a place to stay and store your things can be expensive. If you have friends or family you could stay with for an extended period of time, that may be your best bet. The downside is you’ll essentially be moving twice, and it puts pressure on you to find a new house as soon as possible. But if those aren’t problems for you, selling first may be in your best interest.

The pros and cons of buying your home first

Pro: Flexibility of contingent offers

If you want to move directly into your new home without a pit stop in between, you’re going to want to buy first. It may not seem ideal unless you’re sitting on a mountain of cash, but there are ways to make it work, even if your bank account is a little more down to earth.

Your best bet if you’re trying to buy before you sell is to make a contingent offer on your new home. What this means is that you’ll enter into a contract to buy the new home if and when you sell your current one. The contract will have an expiration date, so you can’t promise to buy your new home, then take your sweet time selling your old one.

Con: Contingent offers don’t always carry weight in a hot market

If the house you’re looking to buy is in high demand, a contingent offer may not get much consideration from sellers. A seller is already worried about selling their own home, and with a contingent offer, you’re asking them to worry about you selling yours, too. Contingent offers also take away most of your ability to negotiate. The asking price will likely be the floor, not the ceiling, of your offer. It’s important to talk to your real estate agent about whether a contingent offer makes sense in the market you’re looking to buy in.

Pro: Bridge loans.

If the conditions aren’t right for a contingent offer, all hope isn’t lost! Assuming you’ve built up some equity, you can use your current home to finance your next one. Bridge loans are short-term loans designed to help bridge the gap between buying and selling. You can get bridge loans to either pay off your existing mortgage and provide a down payment on your new home, or you can get one just for the down payment. Be careful though. Bridge loans are considered high-risk, so they’re harder to get and usually come with a higher interest rate.

So, should I buy or sell my home first?

The right choice for you is dependent on your financial situation and the conditions of the local market. In a buyer’s market, you’ll have more leverage as a buyer so a contingent offer may be the way to go. In a seller’s market, selling your home first may be the strategic choice. Our advice? There’s safety in numbers. Give our mortgage calculator a spin to see what’s possible.

Only you can answer the question of buying or selling your home first. But we can certainly offer some expert advice to help make your choice clearer.

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PURCHASE

Smart Home Upgrades: How to Renovate for the Future

Boost your property value with these smart home upgrades.

When you make the decision to renovate, the end goal is to increase your home’s value when it’s time to sell. Back in the day, a fresh coat of paint, trimmed shrubbery, and new light fixtures might have done the trick. Those are still a great place to start, but in a competitive market, you might need to add some modern innovations to those renovation staples.

Smart home upgrades to try in 2022

  • Update your thermostat
  • Improve home security
  • Install smart lighting systems
  • Connect it all with voice control

Update your thermostat

As a homeowner, you’re probably starting to understand your dad’s obsession with leaving the thermostat alone. Those energy bills tend to get higher no matter how you conserve, but there’s no need to sweat in silence. A smart thermostat won’t just save you time, money, and energy—it also makes your home that much more attractive to potential buyers when it’s time to sell. Most smart thermostats provide helpful features like voice controls and geofencing without breaking the bank. If you’re on the fence about smart technology in your home, thermostats are a great way to ease into it.

Improve home security

Smart technology has completely transformed the way we make our homes safe. Interior and exterior cameras, video doorbells, and smart locks have all become hot commodities for homeowners across the country and home values have continued to rise as a result. Not only that, but installing a smart security system could help you (and future buyers) save on home insurance.

Install smart lighting systems

There are plenty of smart lighting starter kit options for people who are thinking of trying it out. All it takes is simply swapping your old bulbs for the smart LEDs and connecting them to the internet. Installing smart lighting technology is an energy-efficient and cost-effective way to increase your home’s appeal to future buyers.

Connect it all with voice control

Once you’ve got a few elements for your smart home, it’s time to tie it all together. Smart speakers act as a hub for the rest of your tech, allowing you to control them all with your voice. Voice control doesn’t just make day-to-day tasks easier. It also makes your home more accessible for those with vision impairment, mobility issues, or other disabilities.

Are there any other smart home upgrade trends I should consider?

With technology changing so rapidly, it can be hard to prioritize which smart home upgrades will stand the test of time. Ultimately, it comes down to your budget and what you’re comfortable with. Not everyone wants every aspect of their home to be online, and that’s understandable (we saw that streaming show, too). If you’re not sure where to start, ask yourself the following questions:

  • Can I afford it?
  • Will it appeal to or alienate buyers when it’s time to sell?
  • Does it simplify the homeownership experience or make it more complicated? Does it fit the style of my home? The latest gadgets may look a bit out of place in that charming Victorian villa.

Bottom line, if you don’t like it, don’t spend money on it. As important as it is to consider resale value, you’re the one who has to live there now. Enjoy it!

Doorbells and thermostats are two easy smart swaps you can make to boost value and improve the homeownership experience.

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PURCHASE

House Bidding Wars: What to Expect and How to Win

Buying a house these days can feel a bit like the frenzy of Black Friday shopping—minus the low prices. While these might not be ideal conditions, life doesn’t wait for the market to change. When you need a house, you need a house. So, let’s dig into some helpful house bidding war strategies to help make your purchase process as smooth as possible.

Top 5 House Bidding War Strategies

  • Get pre-approved
  • Lower contingencies
  • Include an escalation clause
  • Stay flexible
  • Don’t give up if your first offer isn’t accepted

Get Pre-Approved

As you’ve started researching your home purchase, you may have heard of pre-qualification and pre-approval. Both are good to have, but only pre-approval will help you sweeten the deal with your seller.

Pre-approval is a preliminary loan offer made after a full review of your financial information. It’s good for up to 60 days, and it essentially lets sellers know that if they accept your offer, you already have financing lined up. If 60 days pass without an accepted offer, don’t worry. You can always renew your pre-approval, but keep in mind that rates change frequently. So, the amount you get pre-approved for when you renew could be different from the original estimate.

Lower Contingencies

Contingency clauses in your offer allow you to walk away with your earnest money* if the seller doesn’t meet the outlined conditions. Some common contingencies include selling your current home before buying the new one, walking away if the appraisal comes back lower than expected, and requesting repairs. While it’s good to protect your interests as the buyer, sellers tend to (understandably) favor offers with limited contingencies. If you’re having trouble prioritizing, ask yourself which contingencies are essential to staying within your budget.

*Earnest money is a deposit made to the seller that assures the purchase agreement is reliable. Usually, it’s 1–3% of the purchase price. This deposit will count toward your down payment and/or closing costs.

Include an Escalation Clause

When you bid on a house, consider leaving some wiggle room in your budget for an escalation clause. This clause sets the baseline amount you’re offering, but also includes the highest amount you’re willing to pay if someone bids above your offer. Keep in mind that house bidding wars aren’t like an auction with real-time back and forth. You just have to submit your best offer and hope nobody’s submitted a better one. An escalation clause can help you make a stronger offer, and you’ll only have to pay that higher amount if the seller proves there was a competing bid above your baseline amount.

Stay Flexible

In a big financial decision like a home purchase, it can be hard to stay flexible and still meet all your needs. But the more you’re able to accommodate your seller, the better your chances of winning when you bid on a house. Usually, that means being open to later closing dates to allow the seller more time to move out. After all, they’re just a person who is likely going through the same purchase process as you are for their next home. Remember the Golden Rule you learned in kindergarten? Treat others the way you want to be treated. Unlike in kindergarten, now it might just be the difference between buying the home you want or starting over.

Don’t Give Up

Speaking of starting over, there’s always a chance your bid won’t win in spite of your best efforts. Don’t let it get you down, though! It happens to the best of us, and all you can do is figure out what went wrong and do your best to fix it for your next offer. The right real estate agent can help you strategize ways to improve. Some common fixes include:

Any other tips for winning house bidding wars?

  • Maybe the real win in a house bidding war was the friends you made along the way. Actually, it’s how much you learn from each offer. Even when you lose, knowing what doesn’t work gets you that much closer to knowing what does. Through it all, let an accurate budget be your compass. Calculate how much home you can afford, the easy way, with our affordability calculator.

    And don’t forget the training montage music. It helps, trust us.

House bidding wars are competitive, but we’ve got tips to help you nail your game plan. First up: Get pre-approved.

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PURCHASE

Tax Proration: How to Pay Property Taxes Like a Pro

Barring very special circumstances, taxes are a fact of life for the vast majority of people. Sales tax, income tax, and for home buyers and owners alike, property tax. By now, you’ve probably already paid property tax on your vehicle. But paying property tax on a home? That hits different.

Depending on the date of closing, the amount of property tax that a home buyer and seller are responsible for will vary. The process of figuring out who pays how much is called tax proration, and it’s one cost that many home buyers overlook when calculating their cash to close.

What Is “Tax Proration”?

Simply put: Tax proration helps level the playing field. Property taxes on homes are billed at the beginning of the calendar year for the year prior. So in 2023, you’d get a property tax bill for 2022. Let’s say you bought and closed on a home in November. Should you be responsible for the property taxes owed on that home for the months before closing? Didn’t think so. Proration involves a bit of math (don’t worry, nothing you need to worry about) to figure out how much of the bill each party is responsible for.

Tax proration /ˈtaks prō-​ˈrā-​shən/ n. When property taxes are fairly divided between buyer and seller based on date of ownership transfer or closing.

Here’s where it gets a little headache-y: Homeowners (or the sellers) don’t typically pay their part of the property tax bill directly. Depending on the date of closing, or the particular situation, there are a couple of options to consider: 

Escrow

Credit

In this situation, the sellers place their payment for the property tax bill in an escrow account. The buyers would do the same, and the bill would be paid from that escrow account when it’s due. 

This process could be continued even after the buyers take the keys for the next annual property tax bill. Part of their monthly mortgage payment would go into the escrow account, accumulate over the year, and be used to pay the property tax bill on time. 

Nope, not a line of credit. In this situation, the sellers issue a “credit” to the buyers at closing. 

This doesn’t lower the home’s price directly, but it’s a similar mechanic. It’s essentially a discount on the closing costs, which would require the buyers to bring less cash to close — allowing them to use that “extra” cash to help pay the annual property tax bill. 

Three Proration Pro-Tips

Before you walk into closing, keep these three tips in mind:

  1. Leverage
    Depending on the market, the property tax bill could be used as leverage. In a seller’s market, where there are tons of competing bids, motivated buyers might offer to pay the seller’s portion of property taxes to get a leg up on the competition or expedite the sale. In a buyer’s market, the seller might offer to “pay” the entire property tax bill in exchange for coverage of other closing costs.
  2. Exemptions
    Age and disability status could come with tax implications, for yourself or the sellers. Those implications affect tax responsibility. For example, perhaps the seller is a disabled senior citizen. Local laws might have provided relief for that person — relief that is unlikely to be passed on to the buyer. Communicate with your team to determine potential roadblocks.
  3. Projects
    New builds, rehabilitation, and renovations will result in different tax assessments. New builds may not have received a tax assessment at the time of closing, and since there was no previous owner, the buyer would be responsible for an entire year’s worth of taxes. Rehab and renovation projects increase a home’s value, which could result in an increased tax bill. Make sure your assessment is up-to-date to avoid any surprises.

Coming Full Circle

After figuring out your initial prorated tax bill, new homeowners will be responsible for state and local property taxes for as long as they own the home. If that seems like a dim future, we’ve got some light: You may be able to deduct those property taxes (up to a certain amount) when it comes time to file your tax returns. Individually, you can deduct up to $5,000 in property taxes. Filing jointly? Double that figure and enjoy a $10,000 deduction.

But hey, we’re a mortgage company talking taxes here. Consult a tax professional to confirm your eligibility.

Now that you’ve got more detail on property tax proration, you’re prepared to close with confidence. But have you considered the elements of purchasing a home? Are you pre-approved? Do you know what goes into a down payment? We can help with those, too — it’s all part of our goal to give you the tools you need to feel better about borrowing.

Simply put: Tax proration helps level the playing field.

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PURCHASE

Questions Every Borrower Should Ask When Qualifying for a Mortgage

When you’re qualifying for a mortgage, everything seems important. How do you know what’s worth your time and attention? You’re in luck, because we’ve got answers to some of the most important questions people ask when they’re in the process of qualifying for a mortgage.

Do I really need a 20% down payment?

The short answer is no. At one time, 20% down was the requirement for most, if not all, loan products. But today, that’s closer to 3–5%. Rarely do borrowers put down 20%, but if you’re able, it’s not a bad idea. That’s because if you put down 20%, you won’t need to take out mortgage insurance. So while it’s not a requirement (and that’s good news for home buyers) there is a benefit to putting down the 20% if you have it.

Here’s something to keep in mind, though: down payment isn’t everything. Even though it gets a lot of attention, it’s only part of the mortgage equation. There are so many other factors that contribute to what you’ll pay up front and over the life of your loan, like interest rate, fees, closing costs, the length of your loan term, and more.

How important is my interest rate?

Like I said, the interest rate is another factor that contributes to the overall cost to buy. But is it everything? When it comes to qualifying for a mortgage, it seems like all people talk about (aside from down payment) is interest rates. And for good reason, because your interest rate is a major player in how much you pay. However, if you’re looking to make home buying more affordable, there are other ways to do it.

First, you should know your loan’s APR—annual percentage rate. That’s the total cost to borrow expressed as a percentage and it gives you the full picture of buying so you can compare loans as you shop. To make home buying more affordable, you could ask what fees are associated with your mortgage. Some may be eligible to be waived depending on the loan program or promotion. You could also consider paying points on your mortgage to save money over the life of your loan. Lastly, even if you don’t get the rate you’d like now, you can always refinance later for a lower rate or shorter term.

Can I get today’s rate even if I haven’t found the right house?

With interest rates on the rise, and the housing market as competitive as it has been, you might be wondering if you can hold onto the current interest rate while you shop. We thought about this, that’s why we came up with Rate Protect—our promise to let you lock today’s low rate while you house hunt. Rates won’t wait for you to find the perfect home. So, if house hunting is taking longer than you expected, talk to one of our loan originators about Rate Protect.

Rates won’t wait for you to find the perfect home. So if you love it, lock it with Rate Protect.

Is there anything I can do to increase my credit score?

It goes without saying, but I’ll say it anyway: your credit score plays an important part in qualifying for a mortgage. It’s a snapshot of your credit history expressed as a number, and it’s important because it tells your lender if you have a history of paying off debt. And, to put it plainly, you’re not likely to get a mortgage without demonstrating an ability to repay.

Take a deep breath, because there’s good news. Far too many people stress out over their credit score and shouldn’t because there is actually a lot you can do to increase it. If you’re worried about speaking with a loan originator just to find out your credit’s not up to snuff, that’s OK because they will tell you there are practical ways you can take control and improve it.

We can’t tell you how to live your life, but there are some choices you can make that could negatively impact your mortgage approval. For example, try to avoid opening any new financial accounts or credit cards, changing jobs, or making any large purchases (e.g., furniture), but be sure to pay down debt wherever you can. Following these tips during the mortgage process can have a positive effect on your credit score.

Are pre-qualification and pre-approval the same thing?

Again, the short answer is no. But if you’re looking for the long answer, here goes. Pre-qualification is a short, informal process in which a loan originator will ask you a few basic questions and then come up with an estimated loan amount you could be approved for. All you’re really doing is getting the conversation started with your lender and having a high-level discussion about your finances and intentions to buy a house.

Pre-approval, on the other hand, is more official. When you get pre-approved for a mortgage, we’ll check your credit, conduct a detailed review of your finances, and factor in your employment history. The end result is a certified pre-approval letter that states how much home you can afford. When you’re qualifying for a mortgage, the pre-approval is like your golden ticket. It takes a little more time and effort than getting pre-qualified, but it carries a lot more weight. With a pre-approval in hand, you prove to sellers that you’re a serious buyer, and you have a better chance of winning the bidding war.

Is there anything I can do to speed up the process?

Yes! A common misconception is that your lender takes care of everything and you just sit back and wait. That’s only partly true. A more accurate way to look at the mortgage process is like a volley. We work together to get you to the closing table. While the time it takes to underwrite your loan varies, gathering and sending your pay stubs, bank statements, tax documents, etc., ahead of time goes a long way in speeding up the process. Don’t worry, your loan originator will tell you everything you need to do or submit up front so that you’re set up for success.

But that’s not all. When you take out a mortgage with us, you get 24/7 access to our home loan platform, Octane. Octane lets you see your loan’s details and status updates in real time so you always know where you are in the process and what you need to do to keep things moving.

What’s a good way to keep tabs on the housing market?

The market is hot right now, but it changes on a daily basis. And there’s so much information it’s impossible to know what to care about if you don’t live and breathe mortgages. Well, good thing we do. That’s why we started a newsletter—to make it easy for everyday people to know what’s going on in the housing market. Subscribe today and get only the most important information about housing and mortgages. It’ll be the easiest thing you do all day!