Tuesday, October 25, 2011

10.5 Ways to Winterize Your Home

Winter is fast approaching and with it comes the task of preparing your home for winter's icy chill.  Tonight, Northern Colorado is expecting 4-8 inches of snow and temperatures dipping well into the teens.  Take a look at the following tips and tricks on what you can do to winterize.  Are you prepared?  It could be a long winter...

1.  Clean Those Gutters
Autumn means gorgeous colors and leaves galore.  Many of those leaves can end up in your gutters in the form of a wet, leafy clog.  Come winter, those clogs will suspend water, causing ice damns that could cause severe damage.  Do a quick check to make sure you're spouts will be flowing.

2.  Block Those Leaks
Fill in the gaps around your windows with caulk to prevent drafts.  Buy door sweeps or find creative ways to prevent the cool air from rushing in beneath your doors.  If you have noticeable cracks in your bricks, use exterior caulk to prevent cool air from penetrating.

3.  Insulate Yourself
Adding insulation in your attic won't only keep you more comfortable, it'll also keep your heating bills lower.  12 inches of insulation will do the trick, and you can even go thicker.  Make sure when adding insulation that you buy non-backed insulation to avoid creating an inappropriate vapor barrier.

4.  Check Your Furnace. 
Before you actually need the heat, check your furnace to make sure it's still in good working condition.  If a strong dusty smell persists for more than an hour or two, it might be a good idea to call an inspector to make sure everything is working correctly.

5.  Check Your Ducts
If you have accessible ducts running through non-heated spaces, make sure they're insulated to prevent heat loss along the duct.  Check the connections for leaks or obstructions.

6.  Prepare Your Windows
Obviously, winter will force you to take down your screens and put up your storm windows.  If you have a problem area or window that just always feels drafty no matter what you do with it, budget to replace them.  If that isn't in your budget, go to your local home improvement store and buy some plastic to create an additional air space inside the window.  It's easy to do and is an effective alternative.

7.  Check The Chimney
Your chimney is often forgotten.  It doesn't need to be cleaned yearly, but if it gets a lot of use, it is a good idea to get it inspected.  Keep the damper closed while not in use to prevent drafts.

8.  Reverse the Fans
If you've enjoyed the relaxing breeze from a ceiling fan all summer long, make sure you flip the switch and help force warm air downwards.  A few degrees can really make a difference with comfort and heating bills.

9.  Mind Your Pipes
Make sure that water to your hose bib is shut off before freezing temps begin.  If leaving on Thanksgiving or Christmas vacation, it is a good idea to set your faucets to drip and keep the ambient temperature of your home above 60 degrees to prevent pipes from freezing and bursting.

10.  Blowout Your Sprinklers
Just like any other pipe, don't forget about your sprinkler system.  Trapped water in your system can freeze, expand and really give you a headache.  Every autumn, use compressed air to blow the remaining water in your sprinkler system out to prevent any issues.  You'll thank yourself in the springtime.

10.5  Check the Alarms
For a little added safety over the winter months, check the alarms throughout your home.  Smoke detectors and Carbon Monoxide detectors could use replacement batteries.  Instead of pushing the test button alone, hold a match up to your smoke detectors to see if they work properly.  Replace the detector entirely if it is over 10 years old. 

With these tips you should be set for a warm, comfortable and enjoyable winter.

Tuesday, October 18, 2011

3 Ways to Pay Your Home Off Sooner

Alright homeowners, are you ready to hear how you could potentially save tens or even hundreds of thousands of dollars over the next 30 years?  Depending on the value of your home, you could see some HUGE savings with very little effort or stress on your part.  I'm talking about paying off your mortgage sooner, which will give you peace of mind, control, and a little extra money in your pocket down the road.  For all of you homeowners out there, I'm assuming you could use all the help you can get.  For all the calculations and comparisons provided, we'll assume a $225,000, 30 year fixed mortgage at 4.25%.  Let's see how the numbers stack up.

Pay Bi-Weekly
The current mortgage system is set up for 12 monthly payments over the course of each year.  A great way to pay your mortgage off sooner is to set up "bi-weekly" payments, meaning that you pay one-half of your mortgage payment every two weeks.  Now it might not seem like much, but consider this,  over the course of a year, you end up paying the equivalent of 13 payments without it feeling like you made that extra payment.  That's the beauty of this method. 
Bi-Weekly Payments Total Savings:  $29,373.08 - Mortgage paid off after 25 years

Refinance to a Shorter Term Mortgage
If you have a higher interest rate, right now is a great time to refinance.  Beyond refinancing to lock in a great interest rate, consider refinancing to a short term mortgage like a 15 year mortgage.  Obviously, amoritizing payments over a shorter term will increase the monthly payment, but that's exactly the point--you want to pay off your mortgage sooner.  Be sure you are financially stable enough to afford the higher monthly payments.  It doesn't have to be a 15 year mortgage, some lenders have different terms available, just ask them what products they have to help you.  There are closing costs, just like any other loan, so keep that in mind.  (For a little extra kick, refinance to a 15 year mortgage and make bi-weekly payments...)
15 Year Mortgage Refinance Total Savings: $93,798.55 - Mortgage paid off after 15 years
15 Year Mortgage (w/ Bi-Weekly Payments) Total Savings: $103,373.60 - Mortgage paid off after 13 years

Just Pay Extra
To avoid the refinance charges, simply pay as if you had a 15 year mortgage each month.  That way you get the benefits of a 15 year mortgage without the stress of being locked in to a higher monthly payment.  Another way to pay off your principal is to round payments off.  In the example, your monthly payments would be $1,106.86 per month.  Try rounding up to $1110.00.  Simple additions can really add up because when you pay a little extra towards your principal you get an added bonus, each future payment will have more of your payment going towards the principal than the interest and your loan gets paid off sooner.  Get a raise or a bonus?  Apply that extra income to your loan.  Get creative, it'll pay off huge.

Drawbacks of Paying off Your Mortgage Sooner
Paying off your mortgage early saves you money, saves you time, and is very safe and conservative.  There are certain situations where paying your mortgage off early, or paying extra every month won't work well for you.  First, above all else, before you pre-pay or get fancy, check your mortgage contract for a pre-payment penalty clause.  Make sure your lender allows you to pay down your mortgage faster.  Also, if and when you are able to add extra payments, make sure all your extra payments are applied towards the principal, not the interest.  Some lenders will simply apply them to the next months payment, which won't help you at all.  Finally, if you don't see yourself staying in your home for the long haul, don't pay down your mortgage sooner.  You won't see the long term effects of your work and your extra payments might be better used elsewhere, such as a down payment on a bigger and better home, alternative investments, life insurance, etc.  When you put extra money into your mortgage, that money is tied up in the home and is much less liquid than a typical savings account, and its rate of return is 0%.  Keep that in mind before you whip out your checkbook and go wild.  Paying down your mortgage is a very reasonable and effective strategy for those with the financial means to pay extra each month with the intent of living mortgage free, and stress free in the future.

Tuesday, October 11, 2011

3 Issues that Will Kill Your Home Purchase

Deals come and go, some are tougher than others, and some run smoothly.  Ask any agent, no particular deal is exactly the same, whether it be different terms, buyer/seller issues, loan problems, etc...There are always problems to be sorted out and dealt with in any transaction. But what issues are the biggest?  What can kill your deal?  Below are three issues that can and will kill your deal, unless you know how to avoid them.

Condition of the Home
Believe it or not, the condition of the home is a huge reason why some lenders will REFUSE to loan you money to buy the home.  Crazy right?  Well, after the wave of distressed properties (short sales and foreclosures) a lot of homes were left in pretty bad shape.  Some had missing sinks, appliances and systems; others had chipped and peeling paint, wood rot, and dangerous electrical hazards.  Think about it, if you were lending money to someone to purchase the home, and the home was your collateral, would you at least expect it to be in good enough condition so that if your borrower defaulted, you would be left with a live-able or at least sell-able home?  That's exactly what the bank feels.  For FHA and VA loans, the home will need to be in a good condition for you to receive a mortgage.  When a bank owned foreclosure mentions that the home is "as-is" it really means it.  Don't expect the bank or asset manager to do any repairs, so make an offer accordingly.

Loan Approval
Typically when writing your contract to purchase a home, your agent will put a contingency in the agreement that says if you can't obtain financing, the purchase will be terminated and your earnest money will be refunded.  The only problem with this contingency is if your bank (or lender) drags out the process and you aren't sure if you are going to be financed or not.  Getting pre-approved is just the first step in the entire lending process.  Sometimes you'll get pre-approved for your loan months before your offer is accepted on your home, and you'll need to provide proof to your lender that your situation is similar to your situation at pre-approval.  The best thing to do at the time of pre-approval is to ask your lender/broker/bank what documents are going to be required for underwriting.  They typically have a checklist.  Use this checklist and immediately start collecting all the documents that are required.  When your loan is being processed, they will ask for these documents, sometimes multiple times, so be prepared to send them redundant information without delay.  The faster you are in getting everything to the lender, the quicker they will move.

Low Appraisal
What might seem like the best thing ever could kill your deal.  We're talking about a low appraisal.  What this means is that a professional appraiser values the property for less than you offered.  Your bank will not lend you money towards something that is worth less than what you're offering.  If the difference in the appraisal and the offer is only a few thousand dollars, usually the seller will concede and you'll get just a little bit better deal than what you offered, which is great for you.  If the difference is too much and the seller can't afford to take that much off the price, the deal may fall through and the seller may be forced to stay put.  This is bad for you.  Your dream home is gone for now.  There are ways to avoid the low appraisal, some you can control, some you can't.  First, even though you may really, really want a home, don't offer strangely above what the comparable properties in the area are valued at.  Before your offer, your agent should give you a list of comparable properties in which to base your offer off of.  Don't get crazy.  Another issue is when an inexperienced appraiser, or an appraiser not largely familiar with your area inadvertently appraises the home too low.  This can be tough to avoid as your lender is in charge of who appraises the property.  The best way to get an appraiser familiar with your area is to use a local mortgage broker who has a smaller pool of local, qualified and knowledgeable appraisers rather than a large bank who is lucky to get an appraiser from the region to appraise the property.

There you have it!  Now, you're armed with some tools to help you navigate the market out there.  Remember, I'm always here to answer any questions you have.