Hey, Buyers: These Home Appraisal Tips Are for You

What to expect, when to negotiate, and how to deal when things don’t go your way.

Home appraisal illustration
Image: HouseLogic

Most people have deeply personal reasons for wanting to buy a home. Maybe it’s the bathroom that feels like a dreamy, modern spa. Or that two-tiered deck just made for parties.

Your lender doesn’t care about the freestanding tub. Or the built-in outdoor fire pit. Their only concern is that the house you buy is worth as much as the value of your mortgage.

To them, a house isn’t a home. It’s collateral. (Harsh, but true.) If someday, for some reason, you can’t make your mortgage payments, the lender can foreclose on the home and sell it to recoup all or some of its costs. (Even harsher, but also true.)

For that reason, a home must be valued at, or above, the agreed-upon purchase price, and this has to happen before you can close on a house. That’s where a home appraiser comes in. 

A Home Appraiser Is Neutral (Like Switzerland)

After you sign a home purchase agreement (the contract between you and the seller about the terms of the pending sale), and before your lender approves your loan, the home you’re buying must pass an appraisal — an assessment of the property’s value by an unbiased third party: the appraiser.

Does the Appraiser Have the Big Picture?

Agents should make sure the appraiser has details on everything from the home’s major upgrades, like an addition, to the age of major systems and structures, like the roof and HVAC.

An appraiser is a state-licensed or -certified professional. Their job is to assess an opinion of value — how much a house is worth. The appraiser is on no one’s side. They don’t represent you or the seller; instead, this person is a contractor chosen by your lender through an appraisal management company (AMC), a separate, neutral entity that maintains a roster of appraisers.

Appraisers survey a house in person, using five main criteria to determine the value of a home:

  • Location
  • Age
  • Condition
  • Additions or renovations
  • Recent sales of comparable homes

Be Prepared to Pay for the Appraisal — or to Negotiate

Generally speaking, the home buyer is responsible for paying for the appraisal — and the fee is typically wrapped into your closing costs. However, who pays for appraisal is negotiable. It never hurts to see if the seller is willing to cover it.

Not All Square Footage Is Equal

If the home you want has a finished basement, don’t assume it’ll appraise for more because of it. Below-ground space is valued at less per square foot than space above.

How much money are we talking about? The average professional home appraisal will run between $287 and $373, according to estimates by the home-professionals resource HomeAdvisor.com. Costs can vary depending on the square footage and quirks of the house, with higher appraisal prices for larger or more unique homes.

Appraisals Take a While, So Be Patient

Typically, a purchase agreement has a “home appraisal contingency” requiring that the appraisal be completed within 14 days of the sales contract being signed. Because it takes appraisers some time to visit your house and write a report — up to a week, or longer in a busy housing market — your lender will order the appraisal immediately after you sign the purchase agreement.

So, You Have a Valuation. Here’s What It Means — and What to Do Next

When the appraisal is finished, the appraiser issues a written report with his or her opinion of the value of the home. To produce the report, they use their analysis of the property and data from comparable homes, as well as review the purchase offer. The report will outline their methodology and also include photographs that they’ve taken of the property, inside and out.

You and your lender will both receive a copy of the report. Three things could happen next: 

  1. If the appraiser’s valuation matches the price you and the seller agreed to for the home: Your lender will proceed to underwrite your loan. Great news: This is the final step in your loan-getting process!
  2. If the appraiser’s valuation is higher than what you’re paying for the home: Congratulations! You’ve gained immediate equity. How, you ask? Let’s say, for example, you’re paying $200,000 for the house. If the appraiser says it’s worth $250,000 — jackpot. That’s an instant $50,000 in equity. (Keep in mind, this is very rare.)
  3. If the appraisal is lower than what you’ve agreed to pay for the home: Your lender won’t give you a loan for more than the appraised value. If you and the seller agreed on $200,000, for example, but the appraisal is $190,000, that creates a $10,000 shortfall. So what happens next?

Don’t despair — not yet. If you’re faced with a low appraisal, there are several ways the deal can still go through.

If an Appraisal Is Low, You Can Still Make It Work

Before we talk strategy, some reasons why appraisals come in lower than expected:

Pinpointing Comps

An appraiser should be very familiar with the area the home is in, given that markets can vary within blocks. A good comp rule of thumb to avoid incorrect valuations: Would a buyer likely purchase the comp if the subject property wasn’t available?

  • The seller overvalued the price of the home. 
  • The appraiser isn’t familiar with the neighborhood.
  • The appraiser overlooked pending sales data.
  • The appraiser had trouble finding comparable homes, or missed comparable homes, so they compared your home with properties outside the neighborhood.
  • Home prices in the area are changing so fast that the listing agent’s price no longer reflects the market.
  • The appraiser rushed the job.

If the appraisal comes in low, your agent will offer recommendations about how to proceed. In general, your best strategy is to persuade the seller to lower the sales price, or to split the difference between the home’s appraised value and the price with you. This is when you can rely on your agent — and their negotiating skills — to go to bat for you.

You can also appeal the appraisal assessment. You’ll work with your agent to research comparable homes that support the sales price you agreed upon with the seller and present this information to your lender, who will forward it to the appraiser for a re-evaluation of the home’s value. Ultimately, though, it’s up to the appraiser to decide whether to revise their valuation of the property.

Alternately, you can ask your lender for a second appraisal, though there are caveats:

  • You’ll have to pay for it out of pocket (or persuade the seller to foot the bill).
  • You’re more likely able to challenge an appraisal for a conventional loan than a government loan. And you’d need solid facts to back it up in either case.
  • There’s no guarantee that it will be higher and meet the sales price.

The last option: You can come up with the cash yourself to cover the difference between the home’s price and the appraised value. 

If you don’t want to take that route (and who could blame you?), a purchase agreement’s home appraisal contingency gives you the ability to walk away from the deal scot-free, and with your earnest money deposit in hand.

But today, let’s assume it all works out. With the appraisal behind you, you’ll be one step closer to closing on that house.

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HOUSELOGIC

HouseLogic helps consumers make smart, confident decisions about all aspects of home ownership. Made possible by REALTORS®, the site helps owners get the most value and enjoyment from their existing home and helps buyers and sellers make the best deal possible. 

4 To-Dos for July to Save Money; Get Ready for Fall

Now’s the time to stock up on paint.

Getting ready for fall illustration with wristwatch
Image: Simone Golob/Offset

When it’s hot outside, smart homeowners focus their energies inside on these four tasks.

You know: Like taking advantage of your nice, cool basement.

#1 Organize the Basement

Wall of organizers in a home basement
Image: Simplified By Simi

The two most common types of clutter? Old clothes and seasonal items. Just the kind of stuff that winds up in the basement. So this month, face your messy basement head on. Not only will you regain space, but you’ll also save time and could even knock back clutter-related depression. (Yeah, that’s a thing.)

Now that you’ve got it organized, maybe it’s a good time to consider this next project:

#2 Finish the Basement

Redone basement
Image: Barnes Custom Builders

The solution to a cramped house could be right under your feet. Transforming an unfinished basement into a media room, home office — or even a rentable space — builds equity, upping your home’s resale value. Start this project now, and you can kick back and enjoy your new space all winter long.

#3 Buy Paint on Sale

Paint purchased at a discount
Image: Eman Jamal/Getty

July. Not really the time of year you think of painting, right? It’s usually too hot and humid. Probably why so many places put paint on sale this month. Stock up now, and you’ll be ready for that painting project on your fall to-do list. (P.S. Latex and acrylic paint can last up to 10 years; oil-based, up to 15.)

#4 Hit Up Recycling Centers

Upcycled carved wooden mantel to get ready for fall
Image: Windy Hill Farmhouse

Summer is home improvement season. That also makes it the savvy buyer’s time to seek out deals at recycling centers and home improvement resale stores. Since this is project time — not to mention moving season — lots of folks are ditching their old stuff. Take advantage, and grab it up at super-low prices.

Kelly Walters headshot

KELLEY WALTERS

Kelley Waltersis a Southern writer and editor. She focuses on interior design and home improvement at outlets from HGTV to Paintzen. She lives in Italy a month every year, drinking Negronis and writing in internet cafes. 

 

© Copyright 2021 NATIONAL ASSOCIATION OF REALTORS®

See Your Property Value Soar with These High ROI Improvements

A small patio with furniture and string lights
Image: Mr. Interior/Shutterstock

It’s a seller’s market and that means if you’ve wanted to sell your home, now’s the time to do it. These high ROI improvements can increase your property’s value.

Calling all homeowners – if you’ve been putting off selling your home because of the pandemic, now is a pretty good time to consider pulling the trigger and contacting a real estate agent. There’s a lot of buyers taking advantage of the low interest rates and they’re buying houses faster than seller’s putting their homes up for sale. That means you have the potential to sell your home quickly and if you tackle these popular upgrades with a high return on investment, you could walk away with a pretty penny in your pocket.

Let’s take a look at some insights from top agents where they share what upgrades are the most in-demand but will also increase your home’s value. 

Upgrading the bathroom

Upgrading the bathroom has always been one of those renovation projects that people tackle first (or look for when shopping for a house). An upgraded bathroom is so desirable because it’s nice to be able to have some “you time” in a space that’s relaxing, functional, and looks amazing. 

The top components of an upgraded bathroom that appeals to buyers includes double vanity sinks, luxury shower heads, a large linen closet, new light fixtures and maybe even custom tile work. 

Hiring a professional landscaper

Unless you yourself are a landscaper, you can tell which yards have a professional landscaper come by and take care of the yard. Professional landscapers can work their magic and turn a brown yard, overgrown shrubs, flower beds with weeds, and overgrown shrubs into enviable features. Landscapers who are also hardscapers can create masonry retaining walls, water features, and create customized walkways – all of which only help to improve your property’s curb appeal. 

Improving or building a patio or deck

When you’re working on your curb appeal, you don’t want to forget the backyard – namely improving an existing deck/patio or creating a new one. Buyers and homeowners alike want a space outside where they can sit outside and enjoy the weather or entertain. If you have enough space for a large deck/patio, you could build a built-in grilling station, a lounging area and a dining area. 

Upgrading the kitchen

The bathroom may be a big point of interest when it comes to home improvements, but so is an upgraded kitchen. We tend to spend a lot of time in the kitchen so it would make sense that kitchen upgrades are as functional as they are stylish. Features buyers want include a central kitchen island, more cabinet space, enough counter space (with granite counters) to prepare meals, and stainless steel appliances.

Create a welcoming front porch

It doesn’t matter if you’re interested in selling your home or if you just want to improve the overall look of your home, your front porch should make a statement. You can do this by creating a welcoming seating arrangement with seasonal decor. You can use different materials than the rest of the house to turn your front entryway into a focal point. You can even paint your door a complementary color to the rest of the house. 

High ROI home improvement projects are worth the investment

Your home is your sanctuary and of course you’re going to want to make it look it’s best, regardless if you’re trying to sell it or not. When you invest in your home, it increases the value and it gives you a sense of pride because your home looks great. If you need to stick to a budget, you could always ask a real estate agent for advice regarding what buyers really want and what upgrades sell houses the quickest. 

Sharp Homeowners Know June Is the Best Time to Do These 5 Things

Like cleaning your siding — just be sure to start from the bottom and go up.

Do This Now illustration arm with watch
Image: Simone Golob/Offset

Could it really be summer?!

Tackle these five summer maintenance tasks during June’s longer days and better weather — and save yourself time and money this winter.

#1 Update Outdoor Lighting

Outdoor stone steps lit with pathway lighting
Image: Rosann M. Kelley, photo/ Outdoor Artisan, Inc., design

In June, winter nights are probably the last thing on your mind. But early summer is the perfect time to plan for those “OMG it’s only 4:30, and it’s already dark ” moments by adding or updating landscape lighting.

The most energy-efficient, easy-to-install option is solar lighting, but it won’t perform as well on dark or snowy days. For light no matter the weather, install electric.

LED bulbs last up to five times longer and also use less energy than comparable bulbs.

#2 Clean Your House’s Siding

Home with bright green painted siding
Image: Kristin Diehl

With a bit of preventative maintenance, your home’s siding will stay clean and trouble-free for up to 50 years. Fifty years! Clean it this month with a soft cloth or a long-handled, soft-bristled brush to guarantee that longevity.

Start at the bottom of the house and work up, rinsing completely before it dries. That’s how you avoid streaks.

#3 Focus on Your Foundation

Brick exterior wall with damage
Image: Martb/Getty

There’s no better time for inspecting your foundation than warm, dry June. Eyeball it for crumbling mortar, cracks in the stucco, or persistently damp spots (especially under faucets). Then call a pro to fix any outstanding issues now, before it becomes an emergency later.

#4 Seal Your Driveway Asphalt

Sealed asphalt driveway at pink house
Image: Cveltri/Getty

Your driveway takes a daily beating. Weather, sunlight, cars, bikes, and foot traffic – all of these deteriorate the asphalt. Help it last by sealing it. Tip: The temperature must be 50 degrees or higher for the sealer to stick, making June a good month for this easy, cost-effective job.

#5 Buy Tools

Lawn tools hanging in a garage
Image: Jo Facer, The Edible Flower

Thanks to Father’s Day, June is the month everyone can get a deal on tools, tool bags, and that multitool you’ve had your eye on. If it’s time to replace a bunch of tools, or you’re starting from scratch, look for package deals that offer several at once. These can pack a savings wallop, offering 30% off or more over buying the tools individually.

Kelly Walters headshot

KELLEY WALTERS

Kelley Waltersis a Southern writer and editor. She focuses on interior design and home improvement at outlets from HGTV to Paintzen. She lives in Italy a month every year, drinking Negronis and writing in internet cafes. 

Make an Offer Like a Boss

These 10 money- and time-saving steps can help you craft a winning bid.

Tips on making an offer on a house illustration
Image: HouseLogic

Ah, the offer!

Know Your Limits | Learn to Speak “Contract” | Set Your Price | Figure Out Your Down Payment | Make an Earnest Money Deposit | Review Contingency Plans | Read the Fine Print | Make a Date to Settle |  Write a Fan Letter to the Seller |  Brace Yourself for a Counteroffer

Cinematically speaking, this is the iconic moment — we’d forgive you if you imagined, say, putting a hand on your agent’s shoulder and whispering (in your best Vito Corleone) that you’re going to make them an offer they can’t refuse.

Think Before Making Unreasonable Demands

People like to do business with people they trust. Don’t nitpick over small items like a torn window screen or a $50 valve on a hot water heater. That will just anger the seller.

In reality, it’s not that simple (or dramatic). Your offer marks the beginning of a back-and-forth between you and the seller, typically with real estate agents advising you both.

The more intentional you are about your offer, the better your chances of making a successful bid. Follow these 10 steps, and you’ll be well prepared — that’s a true story. (“The Godfather” again. We couldn’t resist.)

#1 Know Your Limits

Your agent will help you craft a winning offer. You can trust your agent’s advice on price, contingencies, and other terms of the deal: It’s a mutually beneficial relationship. The more collaborative you are with your agent, the more quickly you’ll be able to move.

But ultimately, it’s you who decides what the offer will be — and you who knows what your financial and lifestyle limits are. Buying a home means mixing strong emotions with business savvy, so now is also a good time to reflect on your “musts.”

HOAs Mean Business

Don’t fudge Fido’s weight if there’s a weight restriction where you’re buying. If you move in based on a fib, the condo or homeowners association can make you get rid of your dog or move. Really.

  • Have a top limit to your offer price because you’re also saving for retirement and love beach vacations? Stick to it. 
  • Want a vegetable garden or to paint your home’s exterior purple? Make sure your homeowners association rules permit it. 
  • Besides reading HOA rules, find out how much the HOA has in reserves to cover common area repairs. You don’t want to be slapped unexpectedly with a special assessment. 
  • Want a dog-friendly community? Make sure there are no pet weight limits preventing you from cohabitating with your (extra-large) canine bestie.

#2 Learn to Speak “Contract”

Essentially, an offer is a contract. The documents and wording vary across the country.

In the spirit of due diligence, take time to review sample offer forms before you’ve found a house (LawDepot.com has purchase agreements for each state). If you’re high-maintenance, a real estate attorney can explain the documents to you so you’re familiar with their vocabulary when you’re ready to pull the trigger on an offer with your agent. Your agent will have offer forms for your state. 

#3 Set Your Price

Homes always have a listing price. Think of it as the seller’s opening bid in your negotiation to buy a home.

As the buyer, your offer will include an offer price. This is the first thing home sellers look at when they receive a bid.

Your agent will help you determine whether the seller’s listing price is fair by running comps (or comparables), a process that involves comparing the house you’re bidding on to similar properties that recently sold in the neighborhood.

Several factors can also affect your bargaining position and offer price. For example, if the home has been sitting on the market for a while, or you’re in a buyer’s market where supply exceeds demand, the seller may be willing to accept an offer that’s below the list price. Or if the seller has already received another offer on the home, that may impact the price you’re willing to offer. Your agent will help you understand the context here.

#4 Figure Out Your Down Payment

To get a mortgage, you have to make a down payment on your loan. For conventional loans (as opposed to government loans), making a 20% down payment enables borrowers to avoid having to pay private mortgage insurance (PMI), a monthly premium that protects the lender in case the borrower defaults on the loan.

But 20% isn’t always feasible — or even necessary. In fact, the median down payment in 2019 for buyers overall was 16 percent, and 6 percent for first-time buyers, according to the National Association of REALTORS®. Your lender will help you determine what the best down payment amount is for your finances. Depending on the type of loan you get, you may even be able to put down as little as 0% on your mortgage.

You might qualify for one of the more than 2,400 down payment assistance programs nationwide. Many of them make funds available to households earning as much as 175% of area median income. In other words, middle-income households. And the savings can be substantial: Home buyers who use down payment assistance programs save an average of $17,766 over the life of their loan, according to real estate resource RealtyTrac. Find out more about down payment assistance programs in your state.

You can use an online mortgage calculator to see how different down payments would affect your mortgage premiums and how much you’ll pay in interest.

#5 Show the Seller You’re Serious: Make a Deposit

An EMD — short for earnest money deposit — is the sum of money you put down as evidence to the seller that you’re serious (read: earnest) about buying the house. If the seller accepts your offer, the earnest money will go toward your down payment at closing. However, if you try to back out of the deal, you might have to forfeit the cash to the seller.

A standard EMD is 1% to 3% of the sales price of the home (so, that would be $2,000 to $6,000 on a $200,000 loan). But depending on how hot the market is where you live, you may want to put down more earnest money to compete with other offers. 

In most cases, the title company is responsible for holding the earnest money in an escrow account. In the event the deal falls through, the title company will disperse the funds appropriately based on the terms of the sales contract. Title companies also check for defects or liens on a seller’s title to make sure it can be transferred cleanly to you.

#6 Review the Contingency Plans

Most real estate offers include contingencies — provisions that must be met before the transaction can go through, or the buyer is entitled to walk away from the deal with their EMD.

For example, if an offer says, “This contract is contingent upon a home inspection,” the buyer has a set number of days after the offer is accepted to do an inspection of the property with a licensed or certified home inspector.

If something is wrong with the house, the buyer can request the seller to make repairs. But most repairs are negotiable; the seller may agree to some, but say no to others. Or the seller can offer a price reduction, or a credit at closing, based on the cost of the repairs. This is where your real estate agent can offer real value and counsel on what you should ask the seller to fix.

Just remember to keep your eye on the big picture. If you and the seller are bickering over a $500 repair to the hardwood floors, keep in mind that’s a drop in the bucket in relation to the size of the bid.

In addition to the aforementioned home inspection contingency, other common contingencies include:

  • financing contingency, which gives home buyers a specified amount of time to get a loan that will cover the mortgage.
  • An appraisal contingency, where a third-party appraiser hired by the lender evaluates the fair-market value of the home to ensure the home is worth enough money to serve as collateral for the value of the mortgage.
  • clear title contingency, where the buyer’s title company verifies that the seller is the sole owner of the property and can legally convey ownership to the buyer.
  • home sale contingency, where the transaction is dependent on the sale of the buyer’s current home.

Although contingencies can offer protection to buyers, they can also make offers less appealing to the seller because they give buyers legal ways to back out of the sale without any financial repercussions. So, if you’re going up against multiple offers, making an offer with fewer contingencies can potentially give you an edge over the competition.

In other words: A chill offer is an attractive offer. But keep in mind you have to be comfortable with the risks that come with this strategy. If you don’t have a financing contingency, for example, and you can’t get a mortgage, you’d likely lose your earnest money deposit since you’re on the hook. (An outcome that’s decidedly un-chill for you.)

#7 Read the Fine Print About the Property

The sales contract states key information about the property, such as the address, tax ID, and the types of utilities: public water or private well, gas or electric heating, and so on. It also includes a section that specifies what personal property and fixtures the seller agrees to leave behind, like appliances, lighting fixtures, and window shades. The seller provides prospective buyers with a list of these items before they submit an offer. This can be another area of negotiation.

Carefully reviewing the property description also helps you know, for example, if the seller plans to take that unattached kitchen island with them when they move. (Stranger things have happened.)

#8 Make a Date to Settle

The sales contract you submit to the seller must include a proposed settlement date, which confirms when the transaction will be finalized. The clock starts as soon as the purchase agreement is signed. If you don’t close on time, the party that’s responsible for the delay may have to pay the other party compensation in the form of “penalty interest” at a predetermined rate.

A 30- to 60-day settlement period is common because it gives the typical home buyer time to complete a title search and obtain mortgage approval, but settlement periods can vary. Some sellers, for example, prefer a longer period so they have more time to move or look for their next house. Being flexible, with respect to the closing date, could give you more negotiating power in another area of the deal.

One thing that’s the same no matter where you live is that you’ll have a three-day period prior to settlement to review the Closing Disclosure, or CD — a five-page form that states your final loan terms and closing costs.

Once the sales contract is signed, the parties can change the settlement date if they both sign an addendum specifying the new day.

#9 Write a Fan Letter to the Seller

Want to make a truly compelling offer? Pull on the seller’s heartstrings by attaching a personal letter to the bid documents. Tell a compelling story about your family and your connection to the area. Get deep about your roots.

Also, sincere flattery can go a long way. Compliment the seller on how their kitchen renovation looks Apartment Therapy–worthy, for instance, or how the succulents in their landscaping remind you of a resort in Palm Springs.

Your agent can help you gather background on the sellers (e.g., are they crazy about their labradoodle, like you are about yours? Did they run a small business from the home, like you dream of doing?). And you should — of course — refer to information you gleaned during the open house or private showing. Use this intel to write a message that really speaks to the seller, and it may very well seal the deal.

#10 Brace Yourself for a Counteroffer

If you’re making a lowball bid or going up against multiple offers, the seller may decide to make you a counteroffer — a purchase agreement with new terms, such as a higher sales price or fewer contingencies.

At that point, it’s up to you to accept the new contract, make your own counteroffer to the sellers, or walk away.

HOUSELOGIC

HouseLogic helps consumers make smart, confident decisions about all aspects of home ownership. Made possible by REALTORS®, the site helps owners get the most value and enjoyment from their existing home and helps buyers and sellers make the best deal possible. 

Are Closing Costs Tax Deductible?

Here’s the scoop on what’s tax deductible when buying a house.

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Image: tigerstrawberry/Getty

Note: In light of COVID-19 crisis, the IRS has extended the income tax payment and filing deadline for individual and business returns from April 15, 2021, until May 17, 2021. This relief does not apply to estimated tax payments for tax year 2021 that are due on April 15, 2021. You don’t need to file additional forms to qualify for this extension.

The answer to whether closing costs are tax deductible — or mortgage interest and property taxes for that matter — is often maddeningly, “It depends.”

Basically, you’ll want to itemize if you have deductions totaling more than the standard deduction, which for 2021 is $12,550 for single people and $25,100 for married couples filing jointly. Every taxpayer gets this deduction, homeowner or not. And most people take it because their actual itemized deductions are less than the standard amount.

Closing Costs

Most Popular in Taxes

The one-time home purchase costs that are tax deductible as closing costs are real estate taxes charged to you when you closed, mortgage interest paid when you settled, and some loan origination fees (a.k.a. points) applicable to a mortgage of $750,000 or less.

But you’ll only be able to benefit from them if all your deductions total more than the standard deduction.

Costs of closing on a home that aren’t tax deductible include:

  • Real estate commissions
  • Appraisals
  • Home inspections
  • Attorney fees
  • Title fees
  • Transfer taxes
  • Mortgage refi fees

Mortgage interest and property taxes are annual expenses of owning a home that may or may not be deductible. Continue reading to learn more about those.

Mortgage Interest

Yearly, you can write off the interest you pay on up to $750,000 of mortgage debt. Most homeowners don’t have mortgages large enough to hit the cap, says Evan Liddiard, CPA, director of federal tax policy for the NATIONAL ASSOCIATION OF REALTORS®. But people who live in pricey places like San Francisco and Manhattan, or homeowners anywhere with hefty mortgages, will likely reach the maximum mortgage interest deduction.

Note: The $750,000 cap affects loans taken out after Dec. 16, 2017. If you have a loan older than that and you itemize, you can keep deducting your mortgage interest on debt up to $1 million. But if you refi that loan, you can only deduct the interest on the amount up to the balance on the day you refinanced – you can’t take extra cash and deduct the interest on the excess.

Home Equity Loan Interest

You can deduct the interest on a home equity loan or a second mortgage. But — and this is a big but — only if you use the proceeds to substantially improve your house, and only if the loan, combined with your first mortgage, doesn’t add up to more than the magic number of $750,000 (or $1 million if the loans were existing as of Dec. 15, 2017).

If you use a home equity loan to pay medical bills, go to Paris, or for anything but home improvement, you can’t deduct the interest.

State and Local Taxes

You can deduct state and local taxes you paid, including property and income taxes (or sales taxes in states where there is no income tax), up to $10,000. That’s a low cap for people who live in places where state and local taxes are high, says Liddiard. To give you an idea of how low: The average amount New Yorkers have taken in state and local tax deductions in past years is about $22,000.

Loss From a Disaster

You can write off the cost of damage to your home if it’s caused by an event in a federally declared disaster zone, like areas in Florida after Hurricane Michael or Shasta County, Calif., after a rash of wildfires.

This means standard-variety disasters like a busted water pipe while you’re on vacation or a fire caused because you left the toaster on aren’t deductible.

Moving Expenses

This deduction is also only for some. You can deduct moving expenses if you’re an active member of the armed forces moving to a new station.

And by the way, no matter who you are, if your employer pays your moving expenses, you’ll have to pay taxes on the reimbursement. “This will be a real hardship to many because it’s non-cash income,” says Liddiard.  Some employers may gross up the reimbursement amount to provide cash to pay the tax, but many likely will not.

Home Office

This is a deduction you don’t have to itemize. You can take it on top of the standard deduction, but only if you’re self-employed. If you are an employee and are working from home during the pandemic, you can no longer write off home office expenses. You claim the deduction on Schedule C.

Student Loans

Anyone paying a mortgage and a student loan payment will be happy to hear that the interest on your education loan is tax deductible on top of the standard deduction (no need to itemize). And you can deduct as much as $2,500 in interest per year, depending on your modified adjusted gross income.

Ways to Increase Your Eligible Deductions

There are some other costs that can be itemized not related to being a homeowner that could bump you up over the standard deduction. This might allow you to write off your mortgage interest. Charitable contributions and some medical expenses can be itemized, although medical expenses must exceed 7.5% of your adjusted gross income.

So if you’ve had a hospital stay or are generous, you could be in itemized-deduction land.

Also, if you’re a single homeowner, it could be easier for you to exceed the standard deduction, Liddiard says. The itemized deductions on your house will probably more quickly break the $12,550 standard deduction threshold than a couple’s similar house will break their $25,100 threshold.

Tax-Savvy Home-Buying Ideas

If you’re a prospective homeowner with an eye to making the most efficient use of your tax benefits, here are a few ways to buy smart:

  • Especially in expensive areas, buy a less expensive home so you don’t hit the cap on mortgage debt and local and property taxes, says Lisa Greene-Lewis, a CPA and tax expert for TurboTax.
  • If you’re buying a higher price home, make a bigger down payment so your original mortgage doesn’t exceed the $750,000 cap.

How to Decide If You Can Itemize

To see whether you have enough deduction to itemize, plug your numbers into this clever tool from TurboTax, and you’ll get their recommendation in just a few seconds.

Though every homeowner’s tax benefits will be a little different, in the end, you’re building equity, you’ll likely make money when you sell, and you have the freedom to paint your walls any color you want and get a dog.

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LEANNE POTTS

Leanne Pottsis an Atlanta-based journalist and serial home remodeler. She’s tackled five fixer-uppers and is working on a sixth. She’s written about everything from forest fires to dog-friendly decor and spent a decade leading the digital staff of HGTV.

The Everything Guide to Selling Your First Home

How to figure out exactly what you want, and how to work with the experts who’ll help you get it.

First-Time Home Seller's Guide illustration
Image: HouseLogic

Selling, a famous salesman once said, is essentially a transfer of feelings.

You love and cherish your home. You want the next owner to fall in love with it, too — through photos, through words, and through the experience of walking through your front door. But, perhaps most, you want to get the price you want.

This isn’t a small task. Selling a home requires work. It requires time. The journey isn’t always easy. There will be frustrations. But when you seal the deal and move on to your next chapter  — wow, what a blissful, boss feeling.

Below, we preview and link to each step in your journey.  We’ll discuss how to know what you want (and what your partner wants, if you’re selling together). How to understand the market, and ways to make a plan. And most importantly? How to create relationships with experts and trust them to help you get the job done.

Now, let’s talk about selling your house.

Know, Exactly, What You Want

First things first: You need to know what you want (and what your partner wants) in order to sell your home with minimum frustration. Why are you moving? What do you expect from the process? When, exactly, should you put that For Sale sign in the yard? We can help you get your thoughts in order with this home selling worksheet.

Do Your Research

Unless you bought your home last week, the housing market changed since you became a homeowner. Mortgage rates fluctuate, inventory shifts over time — these are just a few of the factors that affect the state of the market, and every market is unique. Educate yourself on what to expect. Start with our study guide on the market. 

Interview and Select an Agent

This is the most important relationship you’ll form on your home selling journey. Pick the right agent and you’ll likely get a better sales price for your house. Here’s how to find and select the expert who’s right for you.

Price Your Home

How much is your home worth? That’s the … $300,000 question. Whatever the number, you need to know it. This is how your agent will help you pinpoint the price.

Prep Your Home for Sale

Today, home buyers have unfettered access to property listings online, so you have to make a great first impression — on the internet and IRL. That means you’ll have to declutter all the stuff you’ve accumulated over the years, make any necessary repairs, and get your home in swoon-worthy condition. Here’s how to stage your home. 

Market Your Home

Home buyers look at countless listings online. The best-marketed homes have beautiful photos and compelling property descriptions, so they can get likes — which can amount to buyer interest — on social media. Agents may also use videos, virtual tours, texts, and audio messages. It’s time to consider how to promote your property.

Showcase Your Home

Your agent will help you get your home in show-ready condition, emphasizing its assets and helping buyers envision themselves there. The agent will disinfect your home before and after a showing to ensure that you and any visitors are safe. To help keep sellers safe, agents are also using virtual showings, relying on Zoom or Facetime to walk a buyer through your home.

Receive Offers

Yes, you might get offers plural, depending on your market. Assuming you’ve collaborated with your agent, you’ve likely positioned yourself to receive attractive bids. Your agent will review each offer with you to determine which is best for you. (Read: The offer price isn’t the only factor to consider: Here’s why.)

Negotiate With the Buyer

To get the best deal for you, you’ll likely have to do some negotiating. Your agent will help you craft a strategic counteroffer to the buyer’s offer, factoring in not only money, but contingencies, etc. Let’s talk about how to ask for what you want.

Negotiate Home Inspection Repairs

Ah, the home inspection. It’s as much a source of anxiety for buyers as it is for sellers. Nonetheless, most purchase agreements are contingent on a home inspection (plus an appraisal, which will be managed by the buyer’s lender). This gives the buyer the ability to inspect the home from top to bottom and request repairs — some even could be required per building codes. The upshot: You have some room to negotiate, including about certain repairs. Once again, your agent will be there to help you effectively communicate with the buyer.

Close the Sale

Settlement, or closing, is the last step in the home selling process. This is where you sign the final paperwork, make this whole thing official, and collect your check. Before that can happen though, you’ll have to prepare your home for the buyer’s final walk-through and troubleshoot any last-minute issues. We’ve got you covered with this closing checklist

Make an Offer Like a Boss

These 10 money- and time-saving steps can help you craft a winning bid.

Tips on making an offer on a house illustration
Image: HouseLogic

Ah, the offer!

Know Your Limits | Learn to Speak “Contract” | Set Your Price | Figure Out Your Down Payment | Make an Earnest Money Deposit | Review Contingency Plans | Read the Fine Print | Make a Date to Settle |  Write a Fan Letter to the Seller |  Brace Yourself for a Counteroffer

Cinematically speaking, this is the iconic moment — we’d forgive you if you imagined, say, putting a hand on your agent’s shoulder and whispering (in your best Vito Corleone) that you’re going to make them an offer they can’t refuse.

Think Before Making Unreasonable Demands

People like to do business with people they trust. Don’t nitpick over small items like a torn window screen or a $50 valve on a hot water heater. That will just anger the seller.

In reality, it’s not that simple (or dramatic). Your offer marks the beginning of a back-and-forth between you and the seller, typically with real estate agents advising you both.

#1 Know Your Limits

Your agent will help you craft a winning offer. You can trust your agent’s advice on price, contingencies, and other terms of the deal: It’s a mutually beneficial relationship. The more collaborative you are with your agent, the more quickly you’ll be able to move.

But ultimately, it’s you who decides what the offer will be — and you who knows what your financial and lifestyle limits are. Buying a home means mixing strong emotions with business savvy, so now is also a good time to reflect on your “musts.”

HOAs Mean Business

Don’t fudge Fido’s weight if there’s a weight restriction where you’re buying. If you move in based on a fib, the condo or homeowners association can make you get rid of your dog or move. Really.

  • Have a top limit to your offer price because you’re also saving for retirement and love beach vacations? Stick to it. 
  • Want a vegetable garden or to paint your home’s exterior purple? Make sure your homeowners association rules permit it. 
  • Besides reading HOA rules, find out how much the HOA has in reserves to cover common area repairs. You don’t want to be slapped unexpectedly with a special assessment. 
  • Want a dog-friendly community? Make sure there are no pet weight limits preventing you from cohabitating with your (extra-large) canine bestie.

#2 Learn to Speak “Contract”

Essentially, an offer is a contract. The documents and wording vary across the country.

In the spirit of due diligence, take time to review sample offer forms before you’ve found a house (LawDepot.com has purchase agreements for each state). If you’re high-maintenance, a real estate attorney can explain the documents to you so you’re familiar with their vocabulary when you’re ready to pull the trigger on an offer with your agent. Your agent will have offer forms for your state. 

#3 Set Your Price

Homes always have a listing price. Think of it as the seller’s opening bid in your negotiation to buy a home.

As the buyer, your offer will include an offer price. This is the first thing home sellers look at when they receive a bid.

Your agent will help you determine whether the seller’s listing price is fair by running comps (or comparables), a process that involves comparing the house you’re bidding on to similar properties that recently sold in the neighborhood.

Several factors can also affect your bargaining position and offer price. For example, if the home has been sitting on the market for a while, or you’re in a buyer’s market where supply exceeds demand, the seller may be willing to accept an offer that’s below the list price. Or if the seller has already received another offer on the home, that may impact the price you’re willing to offer. Your agent will help you understand the context here.

#4 Figure Out Your Down Payment

To get a mortgage, you have to make a down payment on your loan. For conventional loans (as opposed to government loans), making a 20% down payment enables borrowers to avoid having to pay private mortgage insurance (PMI), a monthly premium that protects the lender in case the borrower defaults on the loan.

But 20% isn’t always feasible — or even necessary. In fact, the median down payment in 2019 for buyers overall was 16 percent, and 6 percent for first-time buyers, according to the National Association of REALTORS®. Your lender will help you determine what the best down payment amount is for your finances. Depending on the type of loan you get, you may even be able to put down as little as 0% on your mortgage.

You might qualify for one of the more than 2,400 down payment assistance programs nationwide. Many of them make funds available to households earning as much as 175% of area median income. In other words, middle-income households. And the savings can be substantial: Home buyers who use down payment assistance programs save an average of $17,766 over the life of their loan, according to real estate resource RealtyTrac. Find out more about down payment assistance programs in your state.

You can use an online mortgage calculator to see how different down payments would affect your mortgage premiums and how much you’ll pay in interest.

#5 Show the Seller You’re Serious: Make a Deposit

An EMD — short for earnest money deposit — is the sum of money you put down as evidence to the seller that you’re serious (read: earnest) about buying the house. If the seller accepts your offer, the earnest money will go toward your down payment at closing. However, if you try to back out of the deal, you might have to forfeit the cash to the seller.

A standard EMD is 1% to 3% of the sales price of the home (so, that would be $2,000 to $6,000 on a $200,000 loan). But depending on how hot the market is where you live, you may want to put down more earnest money to compete with other offers. 

In most cases, the title company is responsible for holding the earnest money in an escrow account. In the event the deal falls through, the title company will disperse the funds appropriately based on the terms of the sales contract. Title companies also check for defects or liens on a seller’s title to make sure it can be transferred cleanly to you.

#6 Review the Contingency Plans

Most real estate offers include contingencies — provisions that must be met before the transaction can go through, or the buyer is entitled to walk away from the deal with their EMD.

For example, if an offer says, “This contract is contingent upon a home inspection,” the buyer has a set number of days after the offer is accepted to do an inspection of the property with a licensed or certified home inspector.

If something is wrong with the house, the buyer can request the seller to make repairs. But most repairs are negotiable; the seller may agree to some, but say no to others. Or the seller can offer a price reduction, or a credit at closing, based on the cost of the repairs. This is where your real estate agent can offer real value and counsel on what you should ask the seller to fix.

Just remember to keep your eye on the big picture. If you and the seller are bickering over a $500 repair to the hardwood floors, keep in mind that’s a drop in the bucket in relation to the size of the bid.

In addition to the aforementioned home inspection contingency, other common contingencies include:

  • financing contingency, which gives home buyers a specified amount of time to get a loan that will cover the mortgage.
  • An appraisal contingency, where a third-party appraiser hired by the lender evaluates the fair-market value of the home to ensure the home is worth enough money to serve as collateral for the value of the mortgage.
  • clear title contingency, where the buyer’s title company verifies that the seller is the sole owner of the property and can legally convey ownership to the buyer.
  • home sale contingency, where the transaction is dependent on the sale of the buyer’s current home.

Although contingencies can offer protection to buyers, they can also make offers less appealing to the seller because they give buyers legal ways to back out of the sale without any financial repercussions. So, if you’re going up against multiple offers, making an offer with fewer contingencies can potentially give you an edge over the competition.

In other words: A chill offer is an attractive offer. But keep in mind you have to be comfortable with the risks that come with this strategy. If you don’t have a financing contingency, for example, and you can’t get a mortgage, you’d likely lose your earnest money deposit since you’re on the hook. (An outcome that’s decidedly un-chill for you.)

#7 Read the Fine Print About the Property

The sales contract states key information about the property, such as the address, tax ID, and the types of utilities: public water or private well, gas or electric heating, and so on. It also includes a section that specifies what personal property and fixtures the seller agrees to leave behind, like appliances, lighting fixtures, and window shades. The seller provides prospective buyers with a list of these items before they submit an offer. This can be another area of negotiation.

Carefully reviewing the property description also helps you know, for example, if the seller plans to take that unattached kitchen island with them when they move. (Stranger things have happened.)

#8 Make a Date to Settle

The sales contract you submit to the seller must include a proposed settlement date, which confirms when the transaction will be finalized. The clock starts as soon as the purchase agreement is signed. If you don’t close on time, the party that’s responsible for the delay may have to pay the other party compensation in the form of “penalty interest” at a predetermined rate.

A 30- to 60-day settlement period is common because it gives the typical home buyer time to complete a title search and obtain mortgage approval, but settlement periods can vary. Some sellers, for example, prefer a longer period so they have more time to move or look for their next house. Being flexible, with respect to the closing date, could give you more negotiating power in another area of the deal.

One thing that’s the same no matter where you live is that you’ll have a three-day period prior to settlement to review the Closing Disclosure, or CD — a five-page form that states your final loan terms and closing costs.

Once the sales contract is signed, the parties can change the settlement date if they both sign an addendum specifying the new day.

#9 Write a Fan Letter to the Seller

Want to make a truly compelling offer? Pull on the seller’s heartstrings by attaching a personal letter to the bid documents. Tell a compelling story about your family and your connection to the area. Get deep about your roots.

Also, sincere flattery can go a long way. Compliment the seller on how their kitchen renovation looks Apartment Therapy–worthy, for instance, or how the succulents in their landscaping remind you of a resort in Palm Springs.

Your agent can help you gather background on the sellers (e.g., are they crazy about their labradoodle, like you are about yours? Did they run a small business from the home, like you dream of doing?). And you should — of course — refer to information you gleaned during the open house or private showing. Use this intel to write a message that really speaks to the seller, and it may very well seal the deal.

#10 Brace Yourself for a Counteroffer

If you’re making a lowball bid or going up against multiple offers, the seller may decide to make you a counteroffer — a purchase agreement with new terms, such as a higher sales price or fewer contingencies.

At that point, it’s up to you to accept the new contract, make your own counteroffer to the sellers, or walk away.

Don’t panic: The next part of our guide walks you through the counteroffer process, and it offers strategies to give you more negotiating power.

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HOUSELOGIC

HouseLogic helps consumers make smart, confident decisions about all aspects of home ownership. Made possible by REALTORS®, the site helps owners get the most value and enjoyment from their existing home and helps buyers and sellers make the best deal possible. 

 

© Copyright 2021 NATIONAL ASSOCIATION OF REALTORS®

Your Stress-Free Guide to Shopping for Home Loans

With this super-simple breakdown of loan types, you won’t get overwhelmed — you’ll find the right mortgage.

How to choose a mortgage when buying a house
Image: HouseLogic

When it comes to buying a house, most people know what they prefer: a bungalow or a condo, a hot neighborhood or a sleepy street.

Mortgages, too, come in many styles — and recognizing which type you should choose is just slightly more involved than, say, knowing that you prefer hardwood floors over wall-to-wall carpeting.

First things first: To pick the best loan for your situation, you need to know what your situation is, exactly. Will you be staying in this home for years? Decades? Are you feeling financially comfortable? Are you anxious about changing loan rates? Consider these questions and your answers before you start talking to lenders. (And before you choose a lender, read this.)

Next: You’ll want to have an understanding of the different loans that are out there. There are lots of options, and it can get a little complicated — but you got this. Here we go.

Mortgages Are Fixed-Rate or Adjustable, and One Type Is Better for You

Let’s start with the most common type of mortgage, that workhorse of home loans — the fixed-rate mortgage.

A fixed-rate mortgage:

  • Lets you lock in an interest rate for 15 or 30 years. (You can get 20-year loans, too.) That means your monthly payment will stay the same over the life of the loan. (That said, your property taxes and insurance premiums will likely change over time.)

It’s ideal when: You want long-term stability and plan to stay put.

Here’s what else you need to know about fixed-rate mortgages:

  • 30-year fixed-rate mortgage offers a lower monthly payment for the loan amount (for this reason, it’s more popular than the other option, the 15-year).
  • 15-year fixed-rate mortgage typically offers a lower interest rate but a higher monthly payment because you’re paying off the loan amount faster.

Now let’s get into adjustable-rate, the other type of mortgage you’ll be looking at. 

An adjustable-rate mortgage (ARM): 

  • Offers a lower interest rate than a fixed-rate mortgage for an initial period of time — say, five or seven years — but the rate can fluctuate after the introductory period is over, depending on changes in interest rate conditions. And that can make it difficult to budget.
  • Has caps that protect how high the rate can go.

It’s ideal when: You plan to live in a home for a short time or you expect your income to go up to offset potentially higher future rates.

Here’s what else you need to know about adjustable-rate mortgages:

  • Different lenders may offer the same initial interest rate but different rate caps. It’s important to compare rate caps when shopping around for an ARM. 
  • Adjustable-rate mortgages have a reputation for being complicated. As the Consumer Financial Protection Bureau advises, make sure to read the fine print.

A general rule of thumb: When comparing adjustable-rate loans, ask the prospective lender to calculate the highest payment you may ever have to make. You don’t want any surprises.

Conventional Loan or Government Loan? Your Life Answers the Question

Which fixed-rate or adjustable-rate mortgage you qualify for introduces a whole host of other categories, and they fall under two umbrellas: conventional loans and government loans. 

Conventional loans: 

  • Offer some of the most competitive interest rates, which means you’ll likely pay less in interest over the period of the loan.
  • Typically you can get one more quickly than a government loan because there’s less paperwork.

Who qualifies? Typically, you need at least a credit score of 620 or above and a 5% down payment to qualify for a conventional loan.

Here’s what else you need to know about conventional loans:

  • If you put less than 20% down for a conventional loan, you’ll be required to pay private mortgage insurance (PMI), an extra monthly fee designed to mitigate the risk to the lender that a borrower could default on a loan. (PMI ranges from about 0.3% to 1.15% of your home loan.) The upshot: The lender has to cancel PMI when you reach 22% equity in your home, and you can request to have it canceled once you hit 20% equity.
  • Most conventional loans also have a maximum 43% debt-to-income (DTI) ratio, which compares how much money you owe (on student loans, credit cards, car loans, and other debts) to your income — expressed as a percentage.

Fannie Mae and Freddie Mac set limits on how much money you can borrow for a conventional loan. A home loan that conforms to these limits is called a conforming loan: 

  • In most cities, the maximum amount for a conforming loan is $453,100. 
  • In high-cost areas, such as New York City and San Francisco, the limit is $679,650.
  • Limits are revisited annually and are subject to change based on each area’s average home price.

A home loan that exceeds these limits is called a jumbo loan:

  • Jumbo loans typically require a higher down payment (up to 30% for some lenders) and a credit score of at least 720. Some borrowers can qualify while putting down 20%, but their credit score has to be higher. 
  • They also tend to have stricter debt-to-income requirements, generally allowing for a maximum DTI ratio of 38%.

There are practical considerations to take into account before getting a jumbo loan too, mainly: Are you comfortable carrying that much debt? The answer depends on your current financial situation and long-term financial goals. 

Government loans:

  • Include loans secured by the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), and the U.S. Department of Agriculture (USDA) Rural Development.
  • Are meant to stimulate the housing market and enable folks who may be unable to qualify for conventional loans to still become homeowners.

Who qualifies? That depends on which government loan you’re looking at.

If you’ve had trouble qualifying for a mortgage because of income limitations or credit: 

FHA loans are used by a broad swath of people, including those with lower credit scores and income. 

  • You can get an FHA loan with a down payment of 3.5% if you have a minimum credit score of 580. You can still qualify with a credit score below 580 — even with no credit score — but the down payment and other requirements will be much higher.
  • FHA loans conform to loan limits set by county; these limits typically range from $294,515 to $679,650 in high-cost areas. You can view the FHA mortgage caps for your county at hud.gov.
  • If you get an FHA loan, you must pay an upfront mortgage insurance premium (MIP) and an annual premium of 0.85%. Currently, the MIP is 1.75% of the loan amount — so, $1,750 for a $100,000 loan. This premium can be paid upfront at the mortgage closing, or it can be rolled into the monthly mortgage payment. 

Also, a heads-up — the date an FHA loan was issued affects the MIP. 

  • If you received an FHA loan on or before June 3, 2013: You’re eligible for canceling MIP after five years, but you must have 22% equity in your home and have made all payments on time.
  •  If you received an FHA loan after June 3, 2013: To stop paying MIP, you’d have to refinance into a conventional loan and have a current loan-to-value of at least 80%.

If you’re in the military, a veteran, or a veteran’s spouse:

  • VA loans offer active or retired military (or a veteran’s surviving spouse) a mortgage with a 0% down payment. 
  • VA loans also can have more lenient credit requirements — typically around a minimum 620 credit score — and lower DTI requirements.
  • The VA only allows lenders to charge 1% maximum to cover the costs of originating and underwriting the loan, so you save money at closing. There is, however, an additional upfront, one-time funding fee of 2.15%. 

VA loans also don’t charge borrowers mortgage insurance — potentially helping you save a significant chunk of cash on your monthly payment.

Given the benefits, a VA loan is often the best mortgage option for people who qualify.

If your income is limited and you live in a small or rural town:

USDA loans are mortgages for limited-income home buyers in towns with populations of 10,000 or less, or that are “rural in character,” meaning that some areas that now have bigger populations are grandfathered in. You can see whether your town is eligible on the USDA’s website

  • USDA loans typically have lower interest rates than non-USDA loans.
  • Down payments can be as low as 0%. 
  • USDA mortgages also have more lenient credit score requirements than conventional loans. 
  • Income limits to qualify depend on location and household size. 
  • USDA loans charge an upfront mortgage insurance fee of 1% of the loan amount and annual mortgage insurance premium of 0.35%. 
  • And USDA loan borrowers must buy a “modest home” — a property with a market value deemed reasonable for the area, though the USDA does not set specific price limitations.

Only a select number of lenders offer USDA loans; here’s a list of USDA-approved lenders nationwide

If your job is to help people:

Niche programs, like the Neighbor Next Door from HUD, allows teachers, law enforcement officers, first responders, and government workers — as much as 50% on eligible homes in revitalization districts. 

Note: Down payment assistance programs offer qualified buyers such things as grants and interest-free loans. Start with your state’s housing finance agency to find options.

Now You Know the Basics. It’s Time to Call for Backup

Speaking of your lender: Ultimately, you’ll be working with your loan officer or broker to narrow down these choices, and to find a loan that works for you and your finances. (Just another reason why it’s important to choose a lender you’re comfortable with.)

Your real estate agent should be able to offer some insight, too. And because they don’t earn a paycheck from your loan selection, their advice about mortgages should be impartial.

You know your stuff. And you know whom to ask for help. Who’s overwhelmed? Not you. 

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HOUSELOGIC

HouseLogic helps consumers make smart, confident decisions about all aspects of home ownership. Made possible by REALTORS®, the site helps owners get the most value and enjoyment from their existing home and helps buyers and sellers make the best deal possible. 

 

What You Should Really Know About Browsing for Homes Online

It’s fun! It’s exciting! It’s important to take everything with a grain of salt!

Shopping for houses online illustration
Image: HouseLogic

Oh, let’s just admit it, shall we? Browsing for homes online is a window shopper’s Shangri-La. The elegantly decorated rooms, the sculpted gardens, the colorful front doors that just pop with those “come hither” hues.

Browser beware, though: Those listings may be seductive, but they might not be giving you the complete picture.

That perfect split-level ranch? Might be too close to a loud, traffic-choked street. That handsome colonial with the light-filled photos? Might be hiding some super icky plumbing problems. That attractively priced condo? Miiiight not actually be for sale. Imagine your despair when, after driving across town to see your dream home, you realize it was sold. 

So let’s practice some self-care, shall we, and set our expectations appropriately. 

  • Step one, fill out our home buyer’s worksheet. The worksheet helps you understand what you’re looking for. 
  • Step two, with that worksheet and knowledge in hand, start browsing for homes. As you do, keep in mind exactly what that tool can, and can’t, do. Here’s how.

You Keep Current. Your Property Site Should, Too

First things first: You wouldn’t read last month’s Vanity Fair for the latest cafe society gossip, right? So you shouldn’t browse property sites that show old listings.

Get the latest listings from realtor.com®, which pulls its information every 15 minutes from the Multiple Listing Service (MLS), regional databases where real estate agents post listings for sale. That means that realtor.com®’s listings are more accurate than some others, like Zillow and Trulia, which may update less often. You wouldn’t want to get your heart a flutter for a house that’s already off the market.

BTW, there are other property listing sites as well, including Redfin, which is a brokerage and therefore also relies on relationships with brokers and MLSs for listings.

The Best Properties Aren’t Always the Best Looking

A picture, they say, is worth a thousand words. But what they don’t say is a picture can also hide a thousand cracked floorboards, busted boilers, and leaky pipes. So while it’s natural to focus on photos while browsing, make sure to also consider the property description and other key features.

Each realtor.com® listing, for example, has a “property details” section that may specify important information such as the year the home was built, price per square foot, and how many days the property has been on the market.

Ultimately though, ask your real estate agent to help you interpret what you find. The best agents have hyper-local knowledge of the market and may even know details and histories of some properties. If a listing seems too good to be true, your agent will likely know why.

Treat Your Agent Like Your Bestie

At the end of the day, property sites are like CliffsNotes for a neighborhood: They show you active listings, sold properties, home prices, and sales histories. All that data will give you a working knowledge, but it won’t be exhaustive.

To assess all of this information — and gather facts about any home you’re eyeing, like how far the local elementary school is from the house or where the closest Soul Cycle is — talk to your real estate agent. An agent who can paint a picture of the neighborhood is an asset.

An agent who can go beyond that and deliver the dish on specific properties is a true friend indeed, more likely to guide you away from homes with hidden problems, and more likely to save you the time of visiting a random listing (when you could otherwise be in the park playing with your canine bestie).

Want to go deeper? Consider these sites and sources:

Just remember: You’re probably not going to find that “perfect home” while browsing listings on your smartphone. Instead, consider the online shopping experience to be an amuse bouche to the home-buying entree — a good way for you to get a taste of the different types of homes that are available and a general idea of what else is out there. 

Once you’ve spent that time online, you’ll be ready to share what you’ve learned with an agent.

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HOUSELOGIC

HouseLogic helps consumers make smart, confident decisions about all aspects of home ownership. Made possible by REALTORS®, the site helps owners get the most value and enjoyment from their existing home and helps buyers and sellers make the best deal possible.