7 Ways to Eliminate Pet Odors Before Listing

You might be sharing your home with a furry friend or two, but those cute critters have a tendency of leaving foul odors behind. While you might not notice these smells that much, buyers will. You can be sure that any bad odors from your pets will be a huge turnoff for buyers who may otherwise have been inclined to put in an offer on your home.

Here are some ways to help you get rid of those awful scents before the first prospective buyer walks through your front door.

1. Open the Windows

One of the first things you should do to eliminate odors is open up all windows of the home and leave them open for a few hours. It only takes a minute to do and is highly effective. Letting all that foul odor out while allowing fresh air in can help circulate all those smells and refresh your indoor air. Try to make it a point of airing out your home at least once a week.

2. Wash Your Window Drapes

Bad smells have a knack for lingering on softer surfaces like fabric. Take down all those drapes hanging by your windows and throw them in the wash to rid them of any pet odors and refresh them with a renewed scent.

3. Steam Clean Your Upholstery

Not only should your drapes be laundered, so should your upholstery. Pet odors can easily linger on the surface of your sofas and chairs, especially if your furry friend has a tendency to lay on them.

Simply spraying them with cleaning solution isn’t going to do the thorough job that needs to be done. Instead, you should consider having your upholstery steam cleaned – either done yourself or by a professional – in order to eliminate any microscopic smells that surface cleaning won’t remove.

4. Shampoo Your Carpets

If you’ve got any wall-to-wall carpeting in your home, you may need to have it shampooed. But before you take this step, try deodorizing the carpeting by sprinkling some baking soda all over it and let it sit for a few hours to trap any odors. After that, vacuum it all up to get rid of the baking soda and the trapped smells along with it.

If this doesn’t do the trick, then you may have to deep-clean the carpets in the form of shampooing. You can either do this yourself by renting a carpet shampooer from your local home improvement store or hire the pros to do it for you. Shampooing your carpets can be tricky because you don’t want to use too much soap, which will make it hard to eliminate all the suds. In addition, you want to make sure the carpet is entirely dry before replacing any furniture on it.

You might also want to try using a HEPA vacuum, which is designed to trap minuscule particles that the naked eye can’t see. The filters in HEPA vacuums can remove years’ worth of pet dander and odor build-up in carpeting. Again, you can rent this piece of equipment to get the job done.

5. Clean Your Pets Toys

The surface of your pet’s toys contain all sorts of odor-producing particles after being chewed on all day long, so be sure to thoroughly wash these items as part of your overall strategy to eliminate pet odors from your home. And don’t forget to clean and wash your pet’s bowls, bed, cage, and litter box/pee pads too.

6. Change Your HEPA Filters

Ideally, your home should be outfitted with a HEPA air filtration system which is designed to traps particles like pet dander, dust mites, pollen, and even cigarette smoke. Not only are these highly effective in eliminating odors, they’re also fantastic for improving the overall air quality in a home. This makes for a much safer and pleasant interior.

That said, the filters on HEPA air filtration systems need to be replaced every so often. These filters can become inundated with debris after working so hard to clean the air. Regularly changing them can ensure that they are working properly to continue eliminating odors from your home, including those that come from your beloved pet. 

7. Repaint Your Walls

Sealing your walls can help get rid of any unwanted pet smells that are lingering around on these surfaces. You can easily seal your walls by either applying a sealant product appropriate for drywall, but also by giving your walls a fresh coat of paint. Not only will you be able to effectively rid your home of these unpleasant smells, but you’ll also be giving your home a facelift at the same time.

The Bottom Line

Before you list, it’s imperative that you take steps to prep your home for visiting buyers, and one of the tasks on your list is to ensure your home has a pleasant smell. While you don’t want to overpower your home’s interior with strong smells in an effort to mask any odors from your pets, you do want to neutral the smell and leave it smelling clean. If you’ve got a pet as part of the family, keep these tips in mind to keep any bad odors at bay.

6 Reasons Why Sellers Reject Buyer Offers

If you’ve submitted an offer on a home that you fell in love with after viewing several properties, it can be pretty disheartening to have it rejected by the seller.

Why would the seller completely take your offer off the table without even bothering to counter it? What was it about your purchase offer that prompted the seller to refuse to negotiate?

As it turns out, there are several reasons why sellers reject offers from buyers, including the following.

1. Your Offer Was Too Low

One of the more obvious reasons why the seller may have turned down your offer is because your offer price was simply too low. If the seller believes you “lowballed” them with an offer that was way below their asking price, they may have been insulted to the point that they refused to even counter the offer. It’s not uncommon for so-called lowball offers to offend homeowners who have an emotional connection to their property.

There may be different reasons why your offer was far less than the listing price. For instance, maybe the asking price was a lot higher than what the current market dictates, and your offer reflected a more accurate price point. Or perhaps the listing price was fair, but you were either unaware of this fact or simply wanted to try your hand at a much lower price to get a significant discount. Whatever the reason for your low offer, the seller may have been put off enough to throw your offer out completely.

Perhaps the seller was not offended, but simply received a higher offer from another buyer. If that’s the case, the seller has the right to reject your offer (as long as they did not sign back on it) and entertain a higher offer from another interested party.

Whatever the case may be, a low offer price is one of the most common reasons why buyers’ offers are rejected by sellers.

2. Your Earnest Money Deposit Was Too Low

Not only is the dollar figure of your offer price important, but so is your deposit. The amount of money you offer up-front in the form of an earnest money deposit has a huge influence on sellers. It tells them that you have the funds necessary to afford the home and will be more likely to get approved for a mortgage to close the deal.

It also shows sellers that you are serious about buying and are expressing this level of seriousness by offering a large portion of the purchase price right out of the gates. This is important because if the deal falls through as a result of a default on your part, you stand to lose that deposit money.

A common reason why an offer is rejected is because the buyer was only offering a small earnest money deposit. Strong earnest money deposits are those that are between  2% to 5% of the listing price, depending on the area and the current market. For instance, a deposit of $15,000 would be considered strong if the asking price for the property is $500,000 (which would make the deposit 3% of the asking price), while a $5,000 deposit for the same home would be considered weak.

A low deposit amount will tell the seller that you’re not a serious buyer or you don’t have the financial means to make the purchase (or both). As such, the seller may toss your offer out without even considering it.

3. You Included Too Many Contingencies

As a buyer, it’s strongly recommended that you include a few contingencies in your offer in an effort to protect yourself. Certain contingencies are very common, such as those that allow buyers time to secure financing, conduct a home inspection, and review HOA documents (if applicable). Without these contingencies, buyers could be left in a precarious position.

That said, it’s possible for an offer to have far too many contingencies which end up dragging out escrow as each contingency needs to be fulfilled. To a seller, a contingency represents a degree of doubt. If all the contingencies are not satisfied within the specified time frames, the deal can fall through, leaving the seller scrambling to relist the property and find another willing buyer.

If your offer is filled with contingencies, that could be a good reason why the seller may have rejected it.

4. Your Closing Date Didn’t Work For the Seller

Among other components in a purchase offer, the closing date is one that can be negotiated among buyers and sellers. If the closing date you want doesn’t work for the seller, they could reject your offer.

While the average closing date is around 60 days, there’s really no precise time frame for buying and selling a home. You could offer a very reasonable amount of time to close, but if that doesn’t work for the seller, that could be the factor that kills the deal. For instance, if the seller has already bought a home that closes in a couple of weeks, they may want a very short closing that you just can’t offer them.

Ideally, you should find out what type of closing date the seller is able to work with before even looking at the home and submitting an offer. If, for instance, the seller needs a quick closing, submitting an offer with a 60-day closing is pointless.

On the flip side, if you write an offer with an extremely long closing date that will drag escrow out for weeks, your offer may not look as attractive to the seller. Whether it’s because you still need to sell your own home or need some time to accumulate a hefty down payment, asking for more time than what is expected could be a turn-off for the seller who may have a problem with a long drawn-out escrow period.

If the timing to close isn’t desirable for the seller, you stand a chance of having your offer rejected.

5. You Were Not Pre-Approved For a Mortgage

The majority sellers prefer to work with buyers who have already taken steps to get pre-approved for a home loan. Without a pre-approval letter, your offer may not have much to stand on.

Being pre-approved shows the seller that you are serious about buying and stand a better chance of getting approved for a mortgage. In fact, you won’t truly know how much you can afford in a home purchase if you don’t get pre-approved before the house-hunting process starts. If you’re not pre-approved, sellers will likely weed you out and focus on buyers who have already taken that crucial step.

6. The Seller is Impossible to Please

You may have drafted up a solid purchase offer with a high offer price and deposit amount, and it might also come with minimal contingencies and be submitted along with a pre-approval letter. But if the seller is extremely unreasonable and tough to please, there may be little you can do about it.

Some sellers might not have realistic expectations about what the current market dictates and might want far more than what their home is worth. They may be extremely inflexible when it comes to closing dates. Whatever they’re reason for being difficult, you could be faced with a rejected offer regardless of how you draft it.

The Bottom Line

As discouraging as it is to have your offer turned down by the seller, knowing why it was rejected can help you make sense of the situation. Understanding the reasons why your offer was turned down can help you go in with a more solid offer if you choose to have another go at the same property. If not, using what you’ve learned from one offer situation can help you go into another offer better prepared.

Rent or Sell? Questions to Ask Yourself to Help Make the Right Decision

California has been in the midst of a sizzling seller’s market right now with demand for housing and tight inventory driving up prices through the roof. If you’re planning to make a move, selling would likely be a great option.

But what about renting out your home and turning it into an income property? If the numbers line up, would it be worth it for you to hang on to your home and generate some income through rent, or should you just cut your ties and sell before moving on to something else?

Before you choose which route to take, you should ask yourself a few important questions to ensure you’re making a sound decision.

Do you have unrealistic expectations about hanging onto your home?

You might want to rent out your home instead of selling it as a means of making a passive income and trying your hand at real estate investing. But you may even just want to rent rather than sell so you can hang onto your beloved home that you’ve developed an emotional attachment to. If that’s the case, be sure that your decision to rent it out is based on sound research and number-crunching just to keep your home in your possession.

The need to hold onto a home by renting it out can turn out to be a bad decision for some homeowners. Tenants may not necessarily care for your home the way you would, so if you are particular about how your home is lived in, you may be sorely disappointed if renters are hard on your home and leave it in poor shape. If you are considering renting the home just to hang onto it, be sure that you’ve carefully considered the possibility that it might have to be repaired and improved between renters.

How much is the average rent in the neighborhood?

The idea of collecting a rent check every month to cover your mortgage might sound very attractive, but make sure you can command the amount of rent you need to cover your mortgage. Before you start looking for tenants, do some research into what the average rent is in the area for a property like yours. Don’t just look at what current listings are asking, but take a look at recently leased properties to see what they’ve been rented out for.

This is where a real estate agent comes in very handy – they’re not just for buying or selling. These professionals will be able to pull a report that lists similar properties in your area that have been recently rented out and the rent price they’ve been able to command. This will give you an approximate idea of what you can potentially rent your home out for.

Will the rent (and the costs of renting) cover the mortgage payments?

Once you’ve figured out how much rent you can realistically charge, your next step is to do some math to see if the rent covers all expenses related to operating the property. Unless you’ve got a sizeable bank account that doesn’t rely on paying for the mortgage and all other expenses, you’ll want to be sure to factor in all expenses and determine whether or not the rent you charge adequately covers all related costs.

Consider the following expenses that you’ll be responsible for paying:

Mortgage (including both principal and interest)

Property taxes

Homeowner’s insurance

HOA fees (if applicable)

Landlord insurance

Advertising fees

Maintenance and repairs

Property management fees (if you’re paying someone else to manage the property)

Is there a chance that you could move back?

You might have thought about renting instead of selling because there’s a chance that you could be moving back. Maybe you’ve been temporarily transferred to another office for work or simply want a change of scenery for a little while. Whatever your situation might be, there may be a possibility that you could be moving back to the area

If that’s the case, renting may be a viable option, as it could actually be cheaper and less complicated to rent rather than go through the sales process, then have to find a new home to purchase when you return.

Are you looking to take advantage of tax deductions?

Renting out a home can offer you some tax deductions that can help to offset the costs associated with carrying an investment property. In the majority of cases, you can claim deductions on any depreciation related to the home.

In the simplest of calculations, your annual depreciation would be the price paid for the home and whatever you spent on improving it (not including land value) divided by 27.5 years. So, if the home cost you $400,000, less $50,000 for land value, your annual depreciation would be about $12,727 ($350,000 ÷ 27.5 years). You can also deduct any repairs and property taxes related to the investment property. These deductions can go a long way in reducing your overall expenses.

Will housing prices continue to increase over the near future?

If you believe housing prices will continue to increase at a rapid pace over the next few years, it might make sense to hang onto the home in order to sell at a much higher price point and make an even bigger profit, if you can carry an additional mortgage.

However, if you wait too long to sell, you could be faced with capital gains taxes, which brings us to our next question.

Have you considered capital gains taxes if you sell?

If you sell a home that’s not your primary residence, you will be required to pay capital gains taxes. The property would be considered your primary residence if you live in it for two out of the five years before you sell it. But if you sell after renting for more than three years, that home won’t be considered your primary residence anymore, which means you’d be faced with a potentially hefty capital gains tax bill when you sell.

If you’re planning to rent out your home, make sure you understand how much you might possibly have to pay in capital gains taxes. You may even want to move back into your home in order to make sure the home qualifies as your primary residence before selling.

Can you buy another home without the proceeds of selling your current property?

The majority of repeat homebuyers tend to use the proceeds of the sale of their homes to be put towards a new home purchase. Considering how expensive a home purchase is, any amount of money that can be tapped into is a great help.

If you need the equity in your current home to be used as a down payment for a new home, then selling might be your best bet. On the other hand, if you can manage buying a new home without depending on the proceeds of your current property, then renting might be financially possible for you.

Are you prepared to become a landlord?

Even if the numbers make sense to rent, have you considered what being a landlord would be like? In a perfect world, you’d be able to find an awesome tenant right away who will pay rent on time every month and take great care of your property. But that’s not always the case.

You’ll need to be prepared to market the property for rent, schedule showings, take calls from your tenants, collect rent checks, maintain the property and make repairs, and deal with complaints. This can be aggravating and can take up a lot of your time. And if you don’t live very close to the home, that can make the job of a landlord even more difficult.

Of course, you can always hire a property management company to handle these tasks for you, but you’ll have to pay them. Just make sure this added expense doesn’t eat too much into your profits.

Are you educated on tenant and landlord rights?

You can get yourself into real trouble if you make a move that violates the landlord-tenant laws in your jurisdiction. These rules dictate how you conduct yourself as a landlord, including how much you can increase the rent and how you’re allowed to evict renters. Make sure you’ve familiarized yourself with these rules and regulations to avoid landing in legal hot water.

The Bottom Line

If it’s time to move, selling is always the more obvious choice. But if you have valid reasons for holding onto your home and have crunched the numbers, renting might be a financially viable alternative. Before you make your decision, be sure to consult with a real estate professional who has experience dealing with both sales and rentals in your area to find out which option is best suited for your situation.

6 Mistakes Buyers Make at Open Houses

Sellers typically have open houses as a means to attract as many interested buyers as possible and hopefully impress one (or more) enough to submit an offer shortly thereafter. But an open house also provides buyers with the perfect opportunity to scope out a property in detail without having to make formal private showings.

If you’re serious about buying, you should use an open house to your advantage to see if a particular property has what it takes to warrant another showing and perhaps a bonafide offer. To make the most of an open house as a buyer, make sure to avoid making any one of the following blunders.

1. Letting Decorative Details Get in the Way

If you plan on visiting several homes on the market, the odds of you coming across hideous wallpaper, carpeting, and clutter at some point are pretty high. Of course, sellers should take the time to get their homes properly staged before listing their properties and allowing buyers to visit, but that doesn’t always happen.

But if you visit an open house and are greeted with decor that’s not exactly your taste, don’t let that cloud your perception of what the home has to offer. Instead, try to see past the decorative disasters and focus on components that really matter, like the layout, size, number of bedrooms and bathrooms, and the overall condition of the home.

2. Going to Too Many Open Houses in a Short Time Period

While it’s certainly helpful and even suggested that you use your weekends to visit a couple of open houses if you’re on the prowl for a new home, it’s not advised to go to too many properties all in one afternoon. Seeing too many properties in a short time frame can overwhelm you and make it tough for you to remember which features you saw in which home. All those homes will just end up mixing together in your mind.

Instead, try to stick to just a couple of open houses per day. Not only will this help you distinguish the properties you’ve visited, it also gives you more time to spend at each home to determine whether they’re worth booking a private showing.

3. Giving Out Too Much Information to the Listing Agent/Seller

The listing agent will be hosting the open house and will likely be keeping tabs on all buyers who visit. Considering the fact that the agent will be within earshot, you might want to keep certain information on the down-low in order to keep maintain some level of negotiating power.

For instance, letting the listing agent know that you’re totally in love with the home or are in a rush to buy a place because of a job transfer could put the ball in the seller’s court as far as negotiating is concerned. Keep those details between you and your agent until the time is right.

4. Not Paying Attention to the Neighborhood

Making sure that the house itself is suitable for your lifestyle and worthy of an offer is obviously important, but what about the surrounding area? Don’t make the mistake of paying too much attention to the actual structure to the point that you forget to scope out the actual community that the house is located in.

You’ll want to know what the neighbors are like, what the crime rate is, what type of amenities are close by, what the school district rating is, how close you are to transportation routes and public transit, and so forth. All these details will play a key role in how much you enjoy living in your new home, so don’t neglect to give them the attention they deserve.

5. Not Asking Questions

Make the most of your time spent at an open house and ask the listing agent all the questions you want answered. In fact, attend open houses armed with a list of questions you’ve written down before you go.

From the condition of the roof, to the age of the air conditioner unit, to the monthly cost of utilities, there’s no shortage of questions that you can ask at an open house. More answers will help give you a better idea of whether or not to put an offer on the place.

6. Not Bringing an Agent

If you’ve already secured an agent, why not bring this professional with you? Agents are trained and experienced at visiting open houses, so they’ll ensure that you use your time wisely. They may also be able to ask all the pertinent questions for you and will know exactly what to look for. Why go it alone when you can bring a support system with you?

The Bottom Line

Open houses are meant to make it easy for buyers to visit homes for sale and check them out in great detail before committing to a private showing. It makes sense to spend that time wisely to help make the house hunting process a success. To ensure you use open houses to your advantage, avoid making the above mistakes. At the very least, your agent will help keep you on the right path.

7 Reasons Your Credit Score Dropped

Your credit score is a critical component of your financial health, so you want to make sure it’s as high as it can be. If it’s in bad shape, you’ll find it difficult to get approved for a mortgage, auto loan, and other loans on credit.

But if you think all is well with your finances, it can be rather disheartening to find out that your credit score dropped from one month to the next. The question is, how and why would this happen?

There are plenty of reasons, including the following.

1. Your Payment is Over 30 Days Late

One of the biggest reasons why a credit score plummets is because of missed a payment that is at least 30 days overdue. If you were a couple of days late on a payment, you won’t notice a difference in your credit score. But once it’s past due by at least 30 days, it will be reported to the credit bureaus. When the credit bureaus get wind of your overdue payment, your credit score will suffer.

Your payment history accounts for 35% of your credit score, so you can be sure that a missed payment will have a major impact. Even just one missed payment can make a big difference. Not only will your credit be dinged, you’ll also be stuck with a late payment fee from the creditor you owe.

2. You Maxed Out Your Credit Card

It’s recommended that you stay well under your credit limit on your credit card if you don’t want your credit score to be affected. Your credit utilization plays a big role in the health of your credit score, so you don’t want to spend so much on your credit card that you have little or no available credit left.

If you make a large purchase on your credit card one month, your lender might think that you depend too much on your credit to make purchases, which they’ll view unfavorably. As such, you might notice a drop in your score even if you pay off the entire balance in full and on time.

3. You Applied For a Few New Credit Accounts

Too many new accounts opened within a short period of time can be a bad thing for your credit score. Every time you apply for another credit account, the creditor will pull a “hard inquiry” on your credit to verify your financial health and check out your payment history.

Creditors aren’t usually in the habit of extending credit to those with a bad track record of late or missed payments, so checking your credit is a crucial way for them to make sure you’re a low-risk borrower.

But every time they check your credit, your credit score can drop a few points. And the more accounts you open, the more inquiries will be made, which means your credit can be significantly affected as all those hard inquiries add up.

4. You Recently Closed an Old Account

Old credit can actually be beneficial for your credit score, even if you don’t use it. Financial advisors will often recommend keeping old credit accounts open in an effort to improve credit scores, so closing them can actually have the opposite effect on your score. If you’ve recently closed an old account, your credit score might drop.

5. You Paid Off One of Your Loans

Paying down your debt is typically viewed as a positive thing for a person’s financial health, but sometimes paying off a loan can be a bad thing for your credit score initially. After your loan has been paid off and the account has been closed, you’ll have one less account on your books, which can impact your score.

That’s because having a mix of different types of credit helps establish and maintain a sound credit history, which is therefore good for your score. If you take one account out of the mix, your credit score could decrease.

6. Your Name is on Someone Else’s Delinquent Account

If you co-signed for someone else’s loan, you take on a huge risk if they happen to default on their payments. Some people may not be able to get approved for a loan on their own without someone else’s help, which is why they would need a co-signer to get the loan they require.

If the borrower happens to be very good at making their payments in full and on time each month, your credit score can actually get a boost. But the opposite is also true: if the individual is delinquent on the loan, your credit score can suffer.

7. There’s a Mistake on Your Credit Report

Sometimes a drop in your credit score might not necessarily be your fault. It’s possible that there’s a mistake on your credit report that’s pulling your score down. To find out for sure, you’d have to pull your report (which you can do for free once a year) and review it to see if there are any errors.

If you find any, that could explain the sudden drop in your score. In that case, you should have it investigated and resolved to help bring your score back up to where it should be.

The Bottom Line

There are all sorts of reasons why you may have noticed a drop in your credit score. The key is to identify the exact reason why your score changed for the worse and take steps to rectify it. You can also get in touch with a financial advisor or credit counselor who can guide you on the path to a solid credit score.

INFOGRAPHIC: Housing Outlook For 2018

Self-Employed? Here’s How to Boost the Odds of Mortgage Approval

When it comes to getting a mortgage, borrowers are typically asked to present several pieces of documentation. Some of the more important paperwork includes a letter of employment from your employer as well as statements of income verifying how much you make on a regular basis.

But if you’re self-employed, you don’t have an employer, nor do you collect any paystubs that show your regular income. This can be a problem in terms of applying for a mortgage. Some lenders might be worried that your income isn’t steady enough to allow you to handle monthly mortgage payments. Others just might not want the hassle of dealing with more documentation that’s often required to scope out a self-employed individual before approving a home loan.

That said, you don’t have to toss out your dreams of buying a home and getting a mortgage just because you work for yourself. If you are confident that you can handle a mortgage, there are several things you can do to increase the chances of getting approved for a home loan.

Gather a Sizable Down Payment

The more money you have to use as a down payment towards a home purchase, the better your odds of getting approved for a mortgage. That’s because a larger down payment will essentially reduce the amount of money borrowed, which will reduce your loan-to-value ratio (LTV). A lower LTV is perceived as less of a risk to most lenders, thereby increasing the odds of home loan approval.

Not only that, a higher down payment will also afford you with a lower interest rate. While a high LTV doesn’t necessarily mean your mortgage application will be denied, it could make it more difficult to get approved for a home loan at a decent rate.

Show Proof of a Large Savings Account

In addition to a large down payment, a healthy savings account will please lenders and give them some assurance that you have enough money in an emergency fund to prevent any missed payments should you have a bad month or two with your business. The more money you have saved up for a rainy day, the better your chances of an approved home loan application.

Work on Your Credit Score

Your credit score plays a key role in your mortgage application. A high score shows lenders that you’re capable of making your debt payments on time and in full each month and are serious and responsible about paying down your debt. A lower score, on the other hand, has the opposite effect.

If your score could use some improvement, take the time to increase it before applying for a mortgage. Don’t miss any bill payments, minimize the amount you spend on your credit card, and avoid taking out new credit accounts. Improving your score will make you a good candidate for mortgage approval in the eyes of your lender, and it may also help you get a lower interest rate too.

Have All Your Business-Related Information Readily Available

As a self-employed individual, you’ll have to come up with plenty of documentation to prove you’re financially sound. Typically, lenders want the following documents from applicants who run their own businesses:

  • Minimum of two years’ worth of tax returns (including all associated schedules)
  • Profit and loss statements
  • Balance sheets

The more documentation associated with your business’s income that you can supply, the better your chances of qualifying for a mortgage.

Don’t Write Off Too Much

As a business owner, you probably try to write off as much as you can to save money at tax time. However, it’s important to keep in mind that deducting from your taxes lowers your qualifying net income, which can therefore make it more challenging to get approved for a home loan.

Lenders will be looking at your net income over the past two years, and if you deduct too much from your gross income, your debt-to-income ratio (DTI) will suffer. While it’s beneficial to save some money by deducting business expenses from your taxes, you don’t want to write off too much to the point that your income won’t appear adequate enough to sustain a mortgage.

Pay Down as Much Debt as Possible

Too much debt will throw off your debt-to-income ratio and will make you seem like a risky borrower to lenders. The more you’re able to pay down your debt, the lower your DTI will be and the better your odds of getting approved for a mortgage. Not only that, but making your mortgage payments will be easier for you if you’re not drowning in debt.

Have Separate Personal and Business Accounts

Lenders will have to verify that the money being used for your down payments won’t negatively impact your business’s cash flow. This process of verification can be complicated if the money you use comes from one account that is used for both personal and business purposes. For this reason, it can be helpful if you separate your money into personal versus business accounts to make the process less cumbersome for everyone involved.

Keep Detailed and Up-to-Date Records

You may be required to submit a profit and loss statement, so properly classifying your income and expenses in great detail is very helpful. Maintaining good records can reduce any headaches when it comes time to provide the information your lender requests.

Wait Until You’ve Got a Solid Self-Employment History

It might be worth it to wait a couple of years to apply for a mortgage if you’re just starting a business or if the past few years haven’t been too successful. If you’re able to prove to your lender that your business is on solid ground by showing at least two years of solid self-employment history, you may be able to boost your odds of mortgage approval.

The Bottom Line

Being self-employed might require you to submit a few extra types of paperwork compared to a W-2 wage earner, but that doesn’t mean getting approved for a mortgage should be an impossible feat.

Understand what is required of a self-employed individual well in advance of applying for a mortgage and go into the process prepared. Speak with a mortgage specialist long before you decide to buy a home to find out exactly what you need and what you should do to put yourself in the position for mortgage approval when the time comes to apply.

7 Lessons First-Time Buyers Learn When Purchasing a Home

Buying a home for the first time comes with its own set of lessons to be learned and potential mistakes to be made. But while you can always learn through trial and error, you’ll be better off learning from the mistakes of others, especially when you’re talking about something as significant as a home purchase.

Here are some of the more common lessons first-time homebuyers have learned from their own experiences that you may want to take into consideration.

1. Your Pre-Approved Amount is Your Absolute Max

One of the first things you should do before you begin your house hunting process is get pre-approved for a mortgage. That way you’ll be able to determine how much you’ll be able to afford and focus your attention on properties that fall within your budget. Not only that, you’ll be perceived as a serious buyer to sellers, which can go a long way if you’re looking to buy in the middle of a hot seller’s market.

But just because you’re pre-approved for a specific amount does not mean that you should necessarily look at properties in the upper range. Doing so could potentially leave you with little money left over to pay for other expenses, such as utilities, groceries, and your retirement savings. Rather than become “house poor,” you’d be better off spending a lot less than what your mortgage broker says you may be able to get approved for.

2. Start Saving Up Well in Advance

Buying a house is a big deal, obviously. It’s probably going to be the most expensive purchase you ever make in your entire life and will require significant financial savings.

More specifically, you’ll need a decent-sized down payment to get approved for a mortgage. The more expensive the home, the higher this down payment will likely be. The more you can save up in advance, the less you will have to borrow to finance your home purchase.

If you’re able to come up with at least 20% down, you could save yourself on Private Mortgage Insurance (PMI) payments, which is applied to home loans that are more than 80% of the purchase price of a property. While this might sound like an astronomical amount (which it often is), it can be a lot easier to achieve if you start saving early.

At the very least, saving well in advance of your home purchase will increase the chances of getting approved for a mortgage with reasonable terms. Putting away a few dollars every month starting at an early age can turn into a sizable amount when you’re finally ready to buy.

3. Be Realistic About Your Needs and Wants

Every buyer has their own set of desires for the home they plan to purchase in the future and should keep this list handy when they visit homes on the market. However, it’s important to be realistic about the traits on this list relative to what your budget is. You might not necessarily be able to get everything on your wish list of your budget is rather tight.

Try to separate your “wants” versus your “needs” when visiting homes, and make sure you pay attention to the types of homes and the features they have within your price range. Doing so will give you a good idea of what you can expect to find with the money you have to spend. Just remember that when you’re on a budget, you might not necessarily be able to get everything you want. The sooner you accept this fact, the lower the odds of you getting disappointed.

4. Use a Mortgage Specialist to Shop Around For You

Rather than heading straight for the local bank for a mortgage, speaking with different lenders could land you a much better rate. Much like you would shop around to find the best price on any other type of product, you’ll want to compare rates with various lenders. A lower interest rate can potentially save you thousands of dollars over the term of your mortgage, so it’s worth it to take the time to shop around for the best home loan package.

While you can certainly do this yourself, you can save a lot of time by having a mortgage broker do this for you. Brokers don’t work for banks; instead, they work for you, and as such, they have your best interests in mind. This could translate into a lot of money saved.

5. Budget For Unexpected Expenses When You Close

Closing costs can really add up, and a lot of newbie buyers may assume that the spending stops after the house has been financed and the real estate commissions have been paid. Unfortunately, the costs associated with buying a home continue after you close.

There are PMI payments (if applicable), homeowner’s insurance, property taxes, maintenance, utilities, appraisal fees, moving fees, and even expenses related to furnishing the home. Be sure to tally up the potential costs associated with each and budget accordingly so that you’ve got enough money to cover these closing costs.

6. Attend Your Home Inspection

A home inspection is a crucial contingency to include in your offer. It essentially gives you a chance to have a licensed professional inspect the property and ensure it is in proper condition before you take possession. But just because you schedule an inspection doesn’t mean you shouldn’t be there.

In fact, it’s recommended that buyers attend the home inspection. This will provide them with the opportunity to ask as many questions as possible and get educated on the systems and components of the home while your inspector is still there. You’d be amazed at how much you can learn from a couple of hours of scoping out all components of the home with a professional inspector.

7. Don’t Forgo the Help of a Real Estate Professional

As a buyer, there’s no reason not to hire a real estate agent to help you find the right home and negotiate a deal on your behalf. Typically, buyers don’t pay commissions anyway – usually the seller does, though this can be different in some cases.

Your agent will help you find homes that meet your criteria, negotiate with the seller to get the best price possible, and even help you after you take possession. Before you start your home search, make sure you’ve teamed up with a professional real estate agent who has your back. They’ll do their best to make the home buying process as seamless as possible.

The Bottom Line

Buying your first home may be an incredibly exciting time, but it can also be filled with unknowns that could cause you to make a few mistakes along the way. Rather than learn the hard way, consider learning from those who’ve already been in your shoes. And as always, partner up with a seasoned real estate agent who will help guide you and steer you in the right direction.

How to Buy and Sell at the Same Time

Listing your current home for sale while purchasing a new property can be a real challenge if you don’t have all your ducks in a row. Unless the closing dates between the two deals coincide perfectly, there’s always the chance of either carrying two mortgages or being stuck without a place to live until the deal on your new home purchase closes.

To ensure everything runs seamlessly, a few steps should be taken. Here are some factors to consider when buying and selling a home simultaneously.

Understand Your Market

Your real estate agent is a critical ally when entering the real estate market and will help you gain a full understanding of the current market you’re dealing with. Knowing the climate of the market is essential before buying or selling and will help arm you with important information needed to make sound purchasing and selling decisions.

More specifically, it’s crucial to determine whether or not you’re working in a buyer’s or seller’s market, as either will determine how you should approach your purchase and sale tactics. Your strategy will depend on who has the upper hand in the market, and in many centers across California, the power has been with sellers over the recent past.

From a seller’s standpoint, this is good news for you. But as a buyer, you may need to take extra steps to ensure you come out on top when competing against other buyers. One way to do this is to consider a few different properties to put an offer on in case you lose out on a bidding war. That way, you’ll minimize the odds of being left without any options after your current home has sold.

Try to Coordinate Closing Dates

This might sound obvious, but trying your absolute best to coordinate the closing dates between your current home and your new purchase will make things a lot easier for you. The closing date of your current home should ideally come shortly after your new home. Lining up the buying and selling closing dates can be a more realistic feat if you are active in both the buying and selling process at the same time.

For instance, it’s essential to start preparing to purchase a new home while being active in the sales process of your current home. Put yourself in the position to be ready to purchase by keeping your finances in order, ensuring your credit score is in good standing, and speaking with a mortgage specialist to prepare for your new purchase.

Meanwhile, you should also take steps to keep your home clean and clutter-free, and perhaps have your home professionally staged to ensure that it stands out in a positive light to prospective buyers looking in your neighborhood. In the meantime, your real estate agent will be working hard to market your property to make sure it doesn’t take any longer than necessary to find the right buyer.

Make Your Offer Contingent on the Sale of Your Home

You could consider inserting a contingency in your purchase offer that makes the deal conditional upon the sale of your current home. If you happen to find a home to purchase before you sell your existing home, this contingency will give you the chance to find a buyer for your property before the deal on your new home purchase closes. This is usually an option to consider if you feel that you’re much more likely to find a new place a lot quicker than finding a buyer for your existing home.

But while this might sound good in theory, it often does not work out, especially in competitive seller’s markets. Sellers are typically not fond of these types of contingencies as they can drag out deals. In the meantime, sellers may be missing out on other potential buyers that may be interested in buying their home. Speak with your real estate agent first before considering this option.

Consider a Rent-Back Agreement

Aligning both closing dates together is an ideal scenario, but it doesn’t always work out that way. If you happen to sell first without having solidified a deal on a home purchase, you could be left scrambling to find someplace to stay in the meantime.

As a backup plan, consider a rent-back agreement whereby the buyer rents out your existing home to you for a specific time period after you sell. In exchange for allowing you to stay in the home until the closing date of your new home, you pay the buyer rent until you’re finally ready to move into your new place. With this type of arrangement, you won’t have to worry about staying in a hotel, renting another place, or asking family or friends if you can stay at their home until your new place is ready.

Come Up With Financial Backup Plans

A rent-back agreement could be an option if you sell your home before finding a new one. But on the other side of the coin whereby you find and buy a new home before selling your current property, you would be stuck with two homes, carrying a mortgage for each. In this case, you will need to have a financial plan in place.

One of the most common options for buyers is a bridge loan, which is short-term loan that’s used to cover the gap between the purchase of a new home and the sale of an existing property. This can help you avoid holding two full mortgages at the same time, which can easily happen if your existing home doesn’t sell in time for your new home purchase to close. A bridge loan is secured to your current home, and the funds from the loan are put towards a down payment on your next property.

It should be noted that not all lenders offer bridge loans. You will have to speak with your lender to see if a bridge loan is an option for you in the event that your home doesn’t sell before your new purchase closes.

Another popular option to reduce the financial burden of carrying two properties is taking out a home equity line of credit, or HELOC. With this option, your lender agrees to lend a certain amount of money within a specified term, after which that money can be used towards your new home purchase. In this case, the loan is secured against the equity in your home, which is somewhat like having a second mortgage taken out.

However, a HELOC may not be possible if your home is on the market, as most lenders won’t loan out HELOCs in this case.

Whichever option you choose, be sure to speak with a mortgage specialist and your real estate agent about ways to lessen any financial risk and strain associated with buying first before selling.

The Bottom Line

Dealing with the sale of your current home with the purchase of a new property can be a real juggling act. Such a scenario certainly requires plenty of careful planning well in advance of making any decisions. Before engaging in a purchase and sale, you’d be well-advised to team up with a seasoned real estate professional who will be able to guide you in the right direction. Only after sound collaboration with your realtor should any financial decisions be made.