Andy Weiser Fort Lauderdale Realtor Blog

Self Employed Buyer Facts to Know

You may be aware that buying a home if you are self-employed may be a bit more challenging. A self-employed person will have to jump through a few more hoops than someone that is a W-2 employee as you validate income and work history but it is all worth it in the end. Here is a closer look at what is required. 

Mortgage qualification

Everyone who buys a home that needs a loan will have to go through a mortgage qualification process. These lenders will look at your debt-to-income ratios along with your credit to assess your overall financial profile. However, those who are self-employed tend to have more fluctuating incomes so there typically will be more questions or documentation required to research the stability of the business. 

Lender requirements

Most lenders will insist on a paper trail to prove a two-year history of employment. This will be in the form of tax returns for the past two years to show proven income. Depending on how your business operates a statement may be asked of your accountant proving income as well as recent bank statements. 

Application process

The time needed to process the application for a self-employed person should typically be about the same as a traditional borrower, but sometimes collecting all of the necessary and additional documentation can drag things out just a bit. 

Income eligibility

Whatever you collect for money is looked at whether it’s regular checks or tips. What lenders want to know is what your typical income is and how stable it is.

How lenders view your income

Lenders will look at your net income rather than the gross income of a W-2 worker. The reason is because generally those who are self-employed will sometimes take advantage of strategic tax breaks to show a lower income resulting in lower taxes they have to pay. However, this can be a trade off when it comes time to qualify for a mortgage. If you know you are planning on buying soon, consult with your accountant on best practices. 

What if you are not approved

There are many reasons why anyone can get turned down, not just those who are self-employed. It could be from bad credit, a high debt-to-income ratio or inconsistent income. You can either wait until your situation improves or you could apply for a bank statement loan. This type of loan uses an average of deposits instead of the usual tax return calculation. Just note these loans don’t have any of Fannie Mae or Freddie Mac’s guardrails. Rates can be higher along with other less than appealing features so this may be a last resort option.

Three Things That Are Good For Today’s Buyers

Despite the recent changes with mortgage rates rising there are some positive things occurring out in the market that is good news for today’s buyers. Let’s not forget that the market had been going strong for years but primarily in the favor of sellers. With the recent cooling there are now some benefits for buyers looking to purchase their next home. Here they are. 

More Homes On The Market

When the pandemic hit we experienced extremely low housing supply while buyer demand had increased even more. This caused the perfect storm of making buying even more difficult. Now that has changed. According to a statistic shared by Calculated Risk, inventory levels have increased by nearly 40% for the last week in October compared to the same period last year. While it still is more of a seller’s market, this helps when looking for your new home.

Bidding Wars Have Cooled

We all know the stories of how challenging it was to purchase a home with competing offers and waiving of inspections and the like in the past couple of years. However, today the temperature has cooled. With more options available to buyers that has eased the competition making it easier to be the winning bidder. 

More Negotiating Power

Adding to the less competition benefit, this also means buyers will have more negotiating power. This will help with the obvious things like an agreed upon purchase price, but this also means fewer buyers will skip the important steps in the home buying process like inspections or other important contingencies. In fact, a recent survey from realtor.com confirms more sellers are accepting offers that include contingencies these days. According to that report, 95% of sellers said buyers requested a home inspection, and 67% negotiated with buyers on repairs as a result of the inspection findings.

In the end buyers will still face some challenges these days but at the same time some of the challenges that had been troubling in recent years have been easing. Contact me today if you are looking to begin your home search and allow me to help!

A Forever Home vs. Something For Now

Most people today will buy a home that fits their current needs and their current lifestyle. While you may think you will find the perfect home for the long term, it doesn’t always work out that way. Sometimes your longer term needs may not be something your present circumstances can accommodate. Here is a closer look at the subject. 

The Difference 

If you are buying a home that fits your current needs that you plan on for just now, you are probably thinking about what your current lifestyle is and how much you can comfortably afford these days. You also will need to think about how much you may need to save each month going forward towards the home you will eventually trade up to. If you are looking for your forever home you will need to consider other things like anticipation of future needs. For example if you expect a growing family, you may need to focus on space first and updates second as they can be done in time.

When to Buy a Forever Home

A few things need to be considered when looking to buy a forever home. While you need to be sure it is affordable with comfortable payments, you will also need to assess future needs. Is this in a location that will serve you well for a long time? Will it give you enough space? Or will it be too much space for you eventually to take care of? Give thought to your future lifestyle to help audit your longer term needs.

When to Buy a Home For Now

Just like a forever home, a home for your current needs should also be assessed. For example, maybe you know you aren’t ready to settle down just yet. Perhaps you know you may want to make a job change that may come with a relocation. Or maybe you want to own your own place but don’t have the money just yet to afford the home you ultimately want to live in someday. So starting in a smaller, more affordable one is better for you now.

How to Decide

The good news is there are not any wrong answers. Ultimately it comes down to what you are comfortable with and most of that has to do with your current budget. Seeing what you can afford and what is out there for inventory will help you decide on what type of place you can buy these days. The bottom line is both are great options for ways to get into the homeownership game. I am happy to help assist you as you try to decide on which way to go!

Top 15 Real Estate Terms for You to Know

If you are new to buying or selling real estate or it has been a while since your last transaction, you will hear many terms spoken throughout the transfer of property and you may not know what they all mean. Here are 15 of the top terms that may be less obvious that you will hear and may wish to have defined. 

Approved for short sale 

This essentially means that the current homeowner’s bank has approved a lowered price for the home and it is ready to be sold.

Back-end ratio

This is one of the procedures that a lender uses to qualify a homeowner’s qualification for a loan. This uses the monthly debt payments including the forecasted housing costs, any auto or loan payments, child support etc. and weighs it against the gross income.

Capacity

This is the total amount of money a buyer can afford to take out for a loan.

Cash-value policy

This is the insurance policy that pays for the replacement cost of a home minus depreciation if any damage happens to the property.

Closing disclosure (CD)

This is the document that is given to the buyer a few days before closing. This covers the terms of the loan including the rate, monthly payment, mortgage insurance escrow amount on a monthly basis as well as all closing costs.

Compliance agreement

This document is signed by the buyer at closing which explains that they agree to cooperate should the lender need to correct any mistakes within the loan documents. 

Conventional loan

A conventional loan is one that is not guaranteed or backed by a government agency like FHA or VA.

Earnest money

This is the security deposit provided by the buyer to show intent to purchase.

Federal Housing Administration (FHA)

This is a government agency that insures and backs loans made by private lenders. 

Housing ratio

This is one of two debt-to-income ratios that a lender will utilize to identify a buyer’s eligibility for a home mortgage that compares the total housing costs to the gross income. 

Jumbo loan

This is a loan that exceeds the Fannie Mae/Freddie Mac limits which is usually $425,100 in most areas in the United States.

Mechanic’s lien

This is a lien or hold against a property that was filed in the county by an individual or company who had done work on a home but was not paid. Should the homeowner refuse to pay it, the lien allows for a foreclosure.

Origination fee

This fee is charged by the mortgage broker or lender to begin and complete the loan application process.

Principal, interest, property taxes and homeowners insurance (PITI)

These are the primary components that make up your monthly mortgage payment. 

VantageScore

This is a model some lenders use to make their qualifying decisions for lending. The borrower’s score is based on things like bill paying pattern, outlying debt balances, credit accounts, number of inquiries on credit reports and age.

 

10 Important Ways to Protect Your New Home

The real estate market in the past few years has certainly been busy with many people making moves to new homes. If you were among one of these new homeowners, you may be interested in ways to protect your new most valuable possession. Here are some helpful tips.

New Locks
No matter how secure you feel in your new home, changing the locks is always a great idea. You never know who the previous owner lent keys out to or how many copies are out there. These days you can consider a smart lock where you can control them remotely or even provide temporary codes for access. 

Video Doorbell

These have become very popular and help not only with security but also add great convenience to see who is at your door each time the bell rings. You can be miles away and answer a live feed of who is there.

New Blinds

Blinds offer a few benefits. Clearly privacy for when you are at home, but also they can keep things out of sight for potential thieves. Additionally, they can help insulate the home from weather, keeping your energy costs lower. Today there are smart blinds as well that can be controlled by your smart device either manually or programmable.

Smart Thermostat

A smart thermostat takes a programmable one to the next level. Models today can be programmed, controlled remotely and can also sense whether one is home or not and adjust accordingly. These add great convenience and efficiency to your life.

Fire Extinguisher

Sometimes we can get focused on all of the higher tech items to have in your home and forget about some of the basics. Be sure to have a fire extinguisher handy around the home. For larger homes, consider multiples so they are nearby in case you need one.

Smart Smoke Alarm

Smart smoke alarms alert everyone at once and can also contact the authorities asap. Where these are connected to an app you will see exactly where the danger zone is so you can escape accordingly. 

First-Aid Kit

Have one of these on hand ideally even before you start unpacking. With all of the moving around and lifting of heavy objects simple cuts and bruises can happen early on!

Motion Sensor Lights

These are great for security and convenience. Whether for yourself when you come home in the dark or take the trash out at night and need light or if someone is trespassing you will then see them. Couple these with a video camera if you want to increase the security factor.

Outdoor Storage Protection

Today there are options for your outdoor belongings too. Specialized outdoor contact sensors work with your home security system and can attach to things like a gate, shed door, grill etc. In the event of movement, they send you an alert.

Home Security System

Home security systems these days do many of the above things but can do more. There are the sensors for your doors and windows, cameras and alerts but there are also smart water valves that can manage shutdown measures to protect against leaks as well!

 

Tips For Updating Security in Your New Home

Once you have finally closed on your new home and have begun moving in and getting settled, it may be time to consider the subject of security. You may have selected a great neighborhood within a great city but you want to make sure you take the extra steps to keep yourself and family safe and sound. Here are some helpful tips on where to start.

Meet the neighbors

The first thing to do, which is free, is to get to know the neighbors. Introduce yourself, exchange contact information and make sure they know who all is living in your house so they are aware of who typically is coming and going. This can help sort out any suspicious activity and any does seem to occur, they have the means to contact you.

Install a smart lock

Smart locks are a brilliant way to control who has access to your home and when. When moving into a new home it is always a good idea to change the locks so why not take the opportunity to invest in a smart lock system. Now you no longer have to give out keys or worry about any outlying copies. Simply give access via your smartphone or provide someone with a unique and temporary code. These locks can also help prevent any lockouts for yourself too!

Install a security system

Another great idea is to consider installing a security system. Many of these systems these days are fairly easy to install and also have cameras for regular monitoring. These can come at various different levels and budgets and in some cases can potentially lower your insurance rates as well. Consult with your insurance agent first to see what your options may be.

Window tinting

Another idea for keeping things out of sight, out of mind is window tinting. This makes it harder for burglars to be able to see inside while giving you an extra layer of privacy. With recent advances in window film technology, this process has become easier to do and implement.