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There are a number of preconceived notions about life in the south. Not everyone in Texas wears cowboy boots and hats and rides a horse. Not does everyone in the South have a gun and a truck.  There are some surprises, however: parts of the south get snow and you’ll find skiers and hockey fans. Not what you thought?  So what can you expect if you’re moving to the south?

It’s hotter in summer

The heat and humidity will be out in full force during the summer months. But southerners have a plan for that. Most homes and businesses have central AC. This will allow you some relief from what may feel – at first – like sweltering heat. Many apartment complexes will also have a pool as one of the amenities. Some will even offer covered parking.  The flip side, of course, is that you’ll rarely suffer in winter, and you’ll have four mostly-mild seasons.

Related article: South tops the list of fastest-growing cities

Related article: Walking to work from your apartment

Are you ready for some football?

Whether you’re in Texas, Alabama, Georgia or another southern state, southerners love their college football. It really is a part of the culture. Life in the South during the autumn is full of football. Fierce but fun rivalries dominate conversations, clothing and even front yards and porches. When you hear your normally mild-mannered neighbor yelling at the TV, it’s probably football season.

Southern culture

Once you cross over the Mason-Dixon line, there is a cultural shift. People in the South are known for their hospitality. They’re known for their friendliness as well. This is not to say people from the North are unfriendly, or not nice. Northern culture is simply more reserved. Southerners will engage you in conversation at the grocery store, the mall, or any public place. Your neighbors will be interested in getting to know you. Common outdoor spaces will make this a natural occurrence.

The food

Cornbread, southern fried steak, barbecue and collard greens are all part of Southern cuisine. Expect dishes to be spicier than northern cuisine, too. Southern food is influenced by Spanish and African flavor profiles. So, when you’re checking out that hot new restaurant in town, you might want a glass of milk with your meal, to help you handle the heat.

Iced tea will likely be sweet (heavy on the sugar) unless you order an “unsweet.” A meat-and-three is a restaurant which serves comfort-style entrees like meatloaf or fried chicken, with your choice of southern veggies (which might include apple sauce and mac-n-cheese, y’all). You’ll meet plenty of bourbon drinkers, but the craft beer craze has very much spread across the South.

Related article: Community gardens influence neighborhood choice

Hey Y’all

Southern dialects are distinctly different from those of the North. Keep in mind that the accents do vary depending on the region. Northern Alabama accents are different from Southern Alabama accents. Louisiana accents are very different from Georgia or Texas accents. Coastal Carolina has a distinctly different sound than mountain Carolina dialects. You’ll have fun learning the difference.

Public transportation

If you’re used to metros with lots of trains or rail service, you may be in for a bit of a shock when you move. Southerners rely heavily on their cars. Atlanta, Charlotte and Dallas have rail service for commuters, but do some research on neighborhoods before you sign a lease, if you’re hoping for public transport options. You may be looking at the city bus.

If you’re tired of the snow and bitter cold, by all means, consider moving to the South. The culture is friendly and the food is good. Get yourself a glass of sweet tea and meet your neighbors down by the pool.

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Have you ever gone looking for a home to buy in an up and coming market neighborhood and noticed a home hideous enough to rival the infamous Neibolt House from Stephen King’s classic, It? You blink in disbelief, half expecting Pennywise to lunge from an untrimmed hedge at any moment. Who would want to buy that fixer upper, you may wonder? Well, you’d be surprised!

Other homes may appear gorgeous, with their fancy manicured lawns, symmetrically placed light fixtures and intact windows. But what if you took a peek inside and saw potential in this ugly duckling? What if an architectural gem was hiding beneath the chipped paint, cracked floorboards, and giant portrait of Barry Manilow on the bathroom wall? The truth is that buying a fixer upper can help you save big time … if you know what to look for. Take a look below to find out how you’ll be laughing all the way to the bank when you turn your dowdy step-sister into the Cinderella of the street.

Don’t Judge the Cover, Judge the Content

All that glitters is definitely not gold. This is especially true with staged homes, which according to the Real Estate Staging Association sells 72 percent faster than non-staged ones. Staging is basically an on-the-surface alternative to renovating where hired stagers create real live-in scenarios with exquisite furniture, artwork, and accessories. In essence, it’s a form of embellishment. But while it’s true that staging plays a fundamental role in marketing a property, not everyone is good at it. A home you might drool over with proper staging may look like an eyesore with zero or little staging.

In fact, one of the great perils of home buying is to judge a book by its cover. What if the seller chose not to hire a stager, or what if the stager was all willy-nilly and cattywampus in presenting the home in the best possible light? Just because the home wasn’t presented with all the bells and whistles, doesn’t mean it cannot be amazing with all that sweet modern furniture you just bought with the money you saved selling with Homie. It’s therefore vital to peek beneath the surface and envision what the fixer upper would look like with a bit of elbow grease and improvements.

Alternatively, if a home is impeccably staged, it does not automatically mean that you’ve discovered a great buy either. You may still need to investigate for potential red flags. Now, we’re not saying you should invest in a giant magnifying glass and deerstalker cap (although that is a mighty allurin’ look) but you do need to scratch the surface luster to see what lies beneath. Here’s a list of some vital areas to focus on before you allow yourself to be seduced by those gleaming door knobs and that “chef-grade” percolator.

Checking the Plumbing, Foundation, and Electrical Outlets

For plumbing, be sure to check the main sewer line. You wouldn’t want to experience clogging in that region if lines need repairing or replacing. Sewer clogs are a bad deal. Maybe write that down.

If you discover a damaged line and still want the ugly house, make provisions in your budget for plumbing repairs or use that as a negotiating point. You should also check for toilet leaks and the condition of the water heater tank. Remember, a geyser lasts about a decade, so take that into account when budgeting for potential replacements.

Have an electrician or property inspector check the wiring and signs of overloaded circuits. Also check the electrical outlets for any physical defects. You could check the foundation by looking for poor drainage, mold, and moisture. Be on the lookout for fissures and cracks in the foundation.

Are there vertical cracks along the walls or does the stairway have zigzag slits? Horizontal cracks on a foundation wall are a definite red flag, as well as chipping or crumbling concrete. The best way to decipher any foundation damage is to hire a professional. Don’t know where to find one? No worries, as you can hire one of our super-efficient inspectors by clicking on our service provider marketplace. Our trained inspectors will also inspect your plumbing and electrical outlets. All providers charge a service fee but it’s well worth the investment.

Checking Location, Noise Levels, Traffic, and Schools

Location is definitely a deal breaker here. If your ugly house is in an upscale neighborhood, you may have hit the jackpot, as this would increase your updated home’s value. Be careful of ‘big home envy’ though. Remember that if you buy small in an upmarket neighborhood, your Phoenix real estate fixer upper could score you more pennies when you sell.

It’s also great if the direction of your home lets you experience the full effect of the sun, as this would keep your home warmer during winter. Also check for noise levels and whether traffic volumes are tolerable. It’s always a good idea to check the crime statistics from Statista. You could also check if the area has good schools and whether you’ll be central to major arterial roads.

Buying Ugly Could Work to Your Financial Advantage

Bear in mind that because the house is freaking ugly, the owner wants to flush the whole thing out, like yesterday. They may even be over zealous in sealing the deal. Heck, even the neighbors may treat you like a celebrity, especially when the ugly duckling becomes a swan. You may even get a fancy gift basket (remember to share).

Sellers may price these homes lower than the market average and fast track negotiations so they can secure a contract sooner rather than later. They’re also more willing to accept a re-negotiated offer. Also, other buyers may turn up their noses with one glance at the fixer upper, removing all competition, and placing the seller at the sole mercy of your offer. And if your offer is good, you may include accepting credits. This will lower your closing costs. And remember, if you buy via Homie, you’ll get a credit of up to a $2,500 as part of the Buyers Agent Commission. You can use this to cover moving expenses, do some renovations, or simply plan an awesome vacation after you’re all moved in!

Did you know that most banks are stingy when it comes to financing a decrepit house? Your seller knows this, and may extend some leniency by applying for the finance themselves, and charging you interest. Eradicate the stress of not knowing whether you can afford the house, by using Homie Loans, our sister home-financing company. We’ll get you pre-qualified and pre-approved in record time, so you can negotiate with a gleam in your eye.

Make the buying process as smooth as a private jet ride when you select Homie as your agent. Our agents will help you understand all the fine detail of your buyer’s agreement contract, collaborate with your seller, relay vital information to you, and assist with any renegotiation.

Okay, So Your Diamond in the Rough May Need Some Polishing

Remember that your work does not end once you’ve signed on the dotted line. You have yet to transform your home from a diamond in the rough to a perfectly cut and gleaming rock that Liberace would have been proud to wear. If you’ve conducted a home inspection with us, you’ll be given a detailed report of the necessary repair work. Prior to settling, it’s a solid idea to include all these costs into your budget and use this as a negotiation tool to get the seller to lower the sale price. Repair work should include anything from paint work to repairs.

One advantage of buying an older house is that existing landscaping like plants and trees could bolster your curbside appeal and home value. You could even add to the aesthetic by creating new features like a fountain or some pathways. Painting, additional landscaping, and customized remodeling also gives you the chance to make the home your own. Unkempt historic homes may also have hidden architectural gems like high-profile moldings, stained glass windows, or meandering stairwells. Imagine unraveling all of that underneath tons of dust and grime? Sweet, right?

Convert Your Ugly Into a Lovely

Not all sellers are great at staging an ugly home. The seller may even feel that the ugly duckling isn’t worth the effort. This leaves a nifty little gap for an astute buyer to see that diamond in the rough.

Keep an eye out for foundation, plumbing, and electrical issues. You could use a repair budget as a negotiation tool when making your offer. Negotiations should also be pretty easy here, since the home has probably turned off all your competition. And if you use Homie agents, negotiation will be even more streamlined. Just draft your offer via our digital platform and a Homie agent will call you to review your offer. We’ll then submit your offer to a listing agent and oversee all your paperwork, from negotiation through to final sale. We make it easy!

Sign up with Homie today and you can keep up to 50% of our commission* to help make your new fixer upper like new!
 

*Subject to terms and conditions outlined in the Buyer Broker Agreement.

Source: homie.com

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As a renter, your landlord may require purchasing renters insurance as part of your contract. But even if not required, a renters policy can provide an extra layer of protection for your personal belongings, as well as financial liability if someone is hurt in your home. To make renters insurance work for you, learn how much renters insurance you need and what coverage options are available.

How much renters insurance do I need?

Experts recommend purchasing enough renters insurance to help you replace all of your personal possessions if they are stolen, lost or damaged.

A good way to figure out the value of everything you have is to create a list, or inventory, of all of your possessions and include dates of purchase, serial numbers, appraisal documents and any receipts. Use your cell phone or an app to take photos and save your inventory so that you can add to it if you make any new purchases. Include all expensive items and electronics, including computers, devices, home security systems, jewelry, instruments and any appliances you’ve purchased. Use the internet to identify what it would cost to replace those items, and then use that result to decide the minimum amount of renters insurance coverage you need.

If you have a large dog or a specific dog breed, you may need to purchase additional liability insurance.

How much does renters insurance cost?

According to the latest data available from the Insurance Information Institute (Triple-I) the average cost of renters insurance is $174 per year, or about $15 per month.

What affects the cost of renters insurance

While the annual cost of renters insurance may be relatively low , several factors will ultimately determine how much your renters insurance policy costs. These include considerations for:

  • ZIP code
  • Credit score
  • Home inventory
  • Deductible
  • Rental size
  • Actual cash value (ACV) vs. replacement cost value (RCV)
  • Security and fire systems
  • Pets
  • Discounts

There may also be other factors that influence your rate, such as the insurer you choose and amount of liability you opt for. By considering factors such as these, you could begin receiving quotes based on your personal selections for a personalized rate.

Is renters insurance worth it?

What does renters insurance cover that makes it worth the cost? It typically includes personal liability protection to pay for attorney fees and damages or medical treatment for someone who is hurt in your rented home, apartment or condo. The liability protection will likely include no-fault medical coverage so that if someone is hurt on your premises, they can submit their medical bills and expenses to your insurance company and you can prevent a lawsuit.

Renters insurance also covers your personal possessions if they are damaged in a covered natural disaster or stolen. It may also reimburse you for items that are lost and stolen from your car or when you are away from home.

While some people may assume that their personal belongings are not worth an additional monthly cost, it may be worthwhile considering the cost of replacing those items in unplanned circumstances that cause damage. You might own a small wardrobe and a few decorative items, for instance, but a theft could cost you upwards of $1,000 for your home office set-up between your television and electronics. This and similar scenarios are why insurance experts recommend insuring your personal property. Renters insurance also generally covers additional living expenses in case you are displaced by a fire or another covered scenario that makes your rental unlivable.

How do I calculate renters insurance coverage?

Determine your desired deductible

The deductible of your renters insurance policy is that amount that you would be responsible for paying before the insurance company covers the rest of the cost. For example, if you have a $500 deductible and you filed a claim for damage from a fire, you would pay $500 towards the repair and the insurance company would pay the remaining cost. The higher the deductible, the lower your insurance premium, but make sure that it’s an amount you’d be comfortable paying out-of-pocket at any time.

Decide if you intend to purchase additional coverage

You can check whether your financial and personal possessions are sufficiently covered if you are affected by a disaster or involved in a lawsuit. If you do not think you have enough coverage on your renters insurance policy, you can also purchase an umbrella policy. This is an additional liability insurance policy that covers you when you reach the limit on your renters or auto insurance policies, and it also covers you for libel and slander.

Off-premises coverage for travelers

If you travel, it might be worth checking that you have off-premises coverage to insure possessions (such as a laptop or cell phone) that you take with you when you travel with the same coverage that you would have if you were using them at home.

Consider adding a floater

If you have expensive items or one-of-a-kind, collectible items like sports memorabilia, original artwork, antiques, expensive jewelry or furs, consider adding a floater to your renters policy. The floater adds additional coverage for more expensive items if they’re lost, damaged or stolen.

Double check your policy for additional living expense coverage

If you live in an area where there are natural disasters like fires or severe thunderstorms, it could be important that your policy includes enough insurance for Additional Living Expenses (ALE). Additional living expenses include paying for a hotel, eating at restaurants and other expenses from having to live away from your rental home while it is being repaired.

Insurers will pay the difference between your regular living expenses and your added living expenses from being displaced after a covered event, but they may only do so for a limited time. Read the fine print to make sure you have enough coverage for any anticipated future disaster. Also, consider checking that your insurance covers things like floods because not all policies cover every type of natural disaster. Flood damage is usually excluded from standard renters insurance policies, but may be purchased either through your provider or directly from the National Flood Insurance Program (NFIP).

Source: thesimpledollar.com

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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Breaking a lease won’t hurt your credit if all debts are paid. However, if you leave debts unpaid, breaking your lease early can cause your credit to take a hit.

Breaking a lease is relatively common and can happen for a number of reasons. Oftentimes, a new job can require you to move midway through a lease. Other times, personal issues arise that can force you to cut your lease short.

As a result, it’s rather common for tenants to leave leases early, and it doesn’t make you a bad or unreliable tenant if you must. However, landlords will still expect full payment for the entire lease term, even if you’re moving out months in advance.

If you do have to your break your lease, it’s crucial you’re not indebted to your landlord. When tenants owe landlords money, landlords will sometimes hire collection agencies to collect debts, introducing a whole new set of problems—one of which can be a hit to your credit score.

Maintaining a good credit score is important for a number of reasons. A good credit score can:

  • Give you more housing options
  • Help you qualify for low-interest credit cards
  • Save on insurance
  • Make you a stronger job candidate

Your credit score follows you around wherever you go. Therefore, when your score goes down, it can be a tremendous setback—and can take you years to reconcile.

As a result, protecting your credit is one of the most important things you can do—and breaking a lease shouldn’t have to jeopardize it . Keep reading as we explain how breaking a lease early can affect your credit and ways you can break a lease while protecting your credit.

Does breaking a lease early affect your credit?

Breaking a lease doesn’t directly show up on your credit report, but the consequences of breaking a lease, if you’re indebted to your landlord, can have compounding effects that sometimes result in a knock to your credit.

If you leave debts unpaid after breaking your lease, your landlord will likely use a collection agency to reclaim your debts. Your landlord probably won’t report the debt to a credit bureau, but the collection agency likely will.

If this happens, your credit will suffer, which can greatly affect you down the road.

Ways breaking your lease can hurt your credit

Like we said, breaking your lease doesn’t directly affect your credit, but the fallout often can. If you break a lease and don’t pay outstanding debts, your landlord may handle it in a couple different ways. A few possibilities include:

  • Your landlord may involve a collection agency: As we mentioned earlier, a landlord will sometimes bring in a debt collector if you don’t pay your remaining rent. If this occurs. the collection agency will likely report you to a credit bureau.
  • You may have trouble renting again: If your credit takes a hit, it will likely affect your ability to rent in the future. A 620 or higher is the usual score needed to rent an apartment. Most landlords run credit checks prior to renting to a tenant.

How to break a lease and protect your credit

The lesson here is that it’s best to proceed with caution when breaking your lease. Use our tips below to ensure you leave your lease with peace of mind.

Review the lease contract

Knowing your rights as a tenant is the first matter to address when breaking a lease—and the lease contract is the place to start. Sometimes, the contract will give you an easy out, like paying a small fee or allowing subletting. However, it’s pivotal you review the intricacies of the contract before beginning the process of breaking the lease, so as to be aware of your rights as a tenant.

Be transparent with your landlord

Having a one-on-one conversation with your landlord is a must if you plan on breaking your lease. If you’re transparent with your landlord about why you’re breaking the lease, they’ll most likely work with you to reach a solution that benefits everyone. 

Keeping your landlord in the loop is a great way to create a line of communication and ensure they don’t take any negative action against you.

Look for a subletter

Subletting isn’t allowed in all lease contracts, but if it is, it can give you peace of mind in breaking your lease. Subletting, by definition, means finding someone else to take over the remainder of your lease. If you elect to sublet, it’s essential to check with your landlord first to ensure them you’re subletting to a reliable tenant.

Since your name will remain on the lease, you’ll ultimately be responsible for any issues with the subletter. As a result, it’s important to screen whoever is taking over the remainder of the lease. 

Pay outstanding rent up-front

If you’re able, paying your outstanding rent balance at the time you break the lease is typically a foolproof way to ensure the landlord doesn’t take any negative action against you.

While there may be more intricacies within the lease agreement when it comes to breaking the lease, settling outstanding debts eliminates the possibility of the landlord bringing a collection agency into the picture. And in almost all cases, disputes over breaking a lease boil down to outstanding debts.

Situations when you can break a lease without repercussions

There are certain situations where tenants are protected by law when breaking a lease; therefore, it’s essential to know when you can break a lease without repercussions. The examples below vary from state to state and can require that some specific notifications are made to the owner of the property before exercising your right to break the lease. It is important to know your responsibilities under your state law before breaking your lease.

  • The unit is uninhabitable/doesn’t comply with housing codes: If you believe that your residency isn’t complying with health codes, look into state laws to confirm your suspicion. States have certain health codes that rental units have to adhere to. If your rental isn’t complying, you can terminate your lease without repercussion.
  • Tenant rights were violated: While some tenant rights differ from state to state, federal rights like anti-discrimination laws, privacy laws and the right to a habitable home protect tenants on the national level.
  • You’re active military: Tenants who are active duty military can break a lease without repercussions. The Servicemember’s Civil Relief Act allows military members to break leases due to their service.
  • Breach of quiet enjoyment was violated: The Covenant of Quiet Enjoyment guarantees that the tenant will get a peaceful environment. This is implied in lease agreements and, if violated, allows you to break a lease without repercussion.
  • The lease has a termination clause: Some leases include a termination clause that just involves paying a small fee. Make sure you review the lease contract before telling your landlord that you’re breaking the lease to see if a termination clause is included.

Frequently asked questions

Navigating the legalities of a lease contract can be difficult for tenants. As a result, other questions often arise when breaking a lease. Some common questions tend to be:

How long does a broken lease stay on your credit report?

The broken lease itself will not appear on your credit report, but any unpaid rent or other fees can stay on your credit report for up to seven years.

Does paying rent build credit?

Paying rent won’t build credit unless you report your payments to a credit bureau each month. In order to do this, you’ll need to sign up for a subscription service that reports rent payments for you. Your landlord will also need to sign up for the subscription in order to receive the payments through the service.

Keep in mind that it may be unlikely that your landlord will want to participate in this system, since they likely have their own system for collecting rent payments.

Rent-to-own, which involves renting a home with the intent to purchase it at the end of the lease contract, does not directly affect your credit either. Unlike mortgage payments, rent-to-own payments are not reported to credit bureaus.

Can you get debts from breaking a lease removed from your credit report?

In general, no. Unless the debt is truly inaccurate, it’ll remain on your report for seven years.

However, if you pay the debt after the judgment is already added to your credit report, you can work with the creditor to have the debt marked as “paid” instead of “open” on your report. This can improve creditworthiness and give you a better chance of receiving loans and renting in the future.

Leave your lease with peace of mind

When you break a lease, it’s best to leave no shadow of a doubt that your credit will be protected. Whether this means having a candid conversation with your landlord, paying your outstanding rent amount or finding a subletter, there are best practices you can put into action to avoid having to fix poor credit down the road.

Finding ways to fix your credit can be difficult, and often requires the help of a professional. Lexington Law’s credit repair services could help you get back on track. Get a free credit assessment today.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Reviewed By

Nature Lewis

Associate Attorney

Before joining Lexington Law as an Associate Attorney, Nature Lewis managed a successful practice representing tenants in Maricopa County.

Through her representation of tenants, Nature gained experience in Federal law, Family law, Probate, Consumer protection and Civil law. She received numerous accolades for her dedication to Tenant Protection in Arizona, including, John P. Frank Advocate for Justice Award in 2016, Top 50 Pro Bono Attorney of 2015, New Tenant Attorney of the Year in 2015 and Maricopa County Attorney of the Month in March 2015. Nature continued her dedication to pro bono work while volunteering at Community Legal Services’ Volunteer Lawyer’s Program and assisting victims of Domestic Violence at the local shelter. Nature is passionate about providing free knowledge to the underserved community and continues to hold free seminars about tenant rights and plans to incorporate consumer rights in her free seminars. Nature is a wife and mother of 5 children. She and her husband have been married for 24 years and enjoy traveling internationally, watching movies and promoting their indie published comic books!

Source: lexingtonlaw.com

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While not all healthcare providers will report unpaid debt to credit bureaus, medical debt that ends up on your credit report could damage your credit score in the long run. That said, there’s a little sigh of relief for consumers where medical debt reporting is concerned.

In a process that started in July 2022, the three major credit bureaus, TransUnion, Experian, and Equifax, introduced the first stage of changes to medical debt reporting. This included extending the time period before unpaid medical collections appear on credit reports from six months to one year. 

Additionally, paid medical bills are no longer included in credit reports, meaning they will not impact credit scores.

Further, with effect from April, 2023, medical debt for consumers who initially owed less than $500 has been removed from consumer credit reports. 

These changes will benefit you in the following ways:

Time to Renegotiate the Bill with the Hospital

If a medical bill was initially reported but is later removed from your credit report, you have a full year which you can use to renegotiate, dispute, or work up payment plan with the hospital or healthcare provider before the bill can be re-added to the credit report.

This eases the strain and stress of debt payment, consequently, reducing the chances of getting a low credit score.

Opportunity to Consolidate Multiple Medical Bills

There are various ways to consolidate your medical debts. For example, you can pay it off with a zero-interest credit card and then pay off the credit card balance over time. Many credit cards offer promotional periods with zero interest rates for a certain period of time, typically between 12 to 18 months. 

Other ways to consolidate your medical debts include taking a personal loan, taking a home equity loan, and enrolling for a debt management program.

How Changes in Medical Debt Reporting Impact Credit Scores

For starters, a longer grace period increases your chances of preventing your medical debt from ending up on credit reports.

Initially, like all other debt, paid medical debt would still reflect on your credit report for seven years. With negative information on your credit report, your credit scores continue taking a hit. 

The removal of paid medical debts and the exemption of debts of $500 and below from credit reporting, therefore, gives your credit scores a great boost. 

There are significant benefits of higher credit scores:

Better Loan Terms

Lenders view consumers with low credit scores as high-risk and will likely either turn you down or offer less favorable loan terms. Higher credit scores can provide you with greater financial flexibility and potentially save you money on interest charges. This is because lenders see you as a responsible borrower, making you more likely to be approved for loans, mortgages, and car leases.

You may also get lower interest rates, longer repayment periods, or larger loan amounts.

Increase in the Pool of Credit Cards you Can Qualify

A higher credit score can increase your chances of qualifying for credit cards with better terms. Credit card issuers use credit scores to work out your creditworthiness, and with a higher score, you may qualify for credit cards with better rewards programs, favorable interest rates, and higher credit limits. 

Having a wider range of credit card options could allow you to choose a card that better fits your spending habits and financial goals. That said, it’s important to use credit cards responsibly and to avoid taking on too much debt, which could harm your credit score in the long run.

The Take Away

No one plans to have a medical debt, as it may come as an emergency. However, even with insurance coverage, not all expenses may be fully covered. This can put pressure on your finances in addition to your health. The  changes in medical debt credit reporting is predicted to help more than 70% of consumers to not only have more time to manage their medical debt but also do the same with the least negative impact on their credit health. 

Finally, it is advisable to regularly check your credit report to ascertain the implementation of the changes.

Source: creditabsolute.com

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A few years back, home prices were on the decline, big time. The bubble had finally burst and the housing crisis was in full swing.

To put it mildly, prices just moved too high too quickly, and had to fall back down to earth.

Meanwhile, distressed sales, such as foreclosures and short sales, put even more downward pressure on prices.

All in all, this made it difficult for appraisers to please their borrowers. And by please, I mean manage to get properties to come in at value so they could be financed.

Fast forward to today, and home prices are shooting higher and higher every month, so much so that there are talks of another bubble. Or at least a bubble within a bust…whatever the heck that means.

In California, home prices increased 8.3% in March from February, and were up a staggering 24.7% from a year earlier, per the latest report from DataQuick.

This is pushing many homeowners above water, thereby eliminating the need for a short sale, and also allowing others to tap into their home equity. Even the cash-out refinance is back. Hooray!

While this is all great news for existing homeowners, the quick increase in prices may present new issues to appraisers and prospective buyers.

Homes Selling Above Value

These days, one could reasonably argue that some (most?) properties are selling above their fair market value.

After all, many headlines nowadays focus on “bidding wars” and a lack of inventory, which has surely led to higher prices.

But is it getting out of hand? Are today’s buyers overpaying for the homes they so desperately think they need to buy right this instant?

Assuming they are, appraisers may be under even more pressure to “find that right value,” even if it’s stretching things a whole lot.

This is especially tricky today because appraisal standards have tightened since the crisis, just like lending standards.

Additionally, comparable sales include foreclosures and short sales, many of which took months to close.

For example, a short sale could have been in contract for close to a year before selling and being included as a recent comp.

As a result, the property may not appraise for the hefty final price agreed upon after 20 offers came streaming through the door.

Why Cash Investors Win

Now this may not be an issue for those paying with cash, seeing that they’re willing to forego appraisal and loan contingencies.

They also seem prepared to throw competitive offers at sellers, even when paying with all cash.

This makes it extremely difficult to compete if you can’t pay for a property out of your own pocket.

To play, you’ll either need to come up with a sizable down payment and higher offer, or waive contingencies.

In all those instances, there is a decent amount of risk. You’re essentially banking on appreciation down the road, and accepting to pay a higher price than the bank/lender values the property.

But for those who need to finance the property, there’s not much way around it. Just be sure to cover all your bases.

Dealing with a Low Appraisal

If the appraisal happens to come in lower than the purchase price, the bank will only lend based on the appraised value.

As noted earlier, this is how they “value” the property. They don’t care that you are willing to pay more.

For example, if the agreed upon sales price is $400,000, and the property appraises for $375,000, your loan will be based on the lower amount.

If you want to stay at say 80% loan-to-value (LTV), the loan amount would need to drop to $300,000, as opposed to $320,000.

This means your down payment would rise from $80,000 to $100,000, which could put the deal in jeopardy if you don’t have the cash.

If you’re putting a lot more down, say 30-40%, it may be easier to change the loan terms without coming out of pocket, though your mortgage rate may rise.

Of course, you may be able to renegotiate the purchase price if the appraised value comes in low, but the seller must be willing to budge.

These days, there’s a good chance they won’t want to lower their sales price, even if the property doesn’t appraise.

So if you are competing with all-cash buyers, showing the seller you have extra funds in the case of a low appraisal may be helpful.

Unfortunately, you may not even get a chance to take a crack at it if the seller doesn’t believe your high offer will come close to appraising.

They may just want to take a slightly lower cash offer and avoid any unwelcome surprises.

In other words, it’s a bad time to buy a house in many areas of the country, as I mentioned a week or so ago. Bad because EVERYONE wants to buy at the same time.

A good time to buy a house is when no one else is.

Source: thetruthaboutmortgage.com

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When you take out a mortgage, whether it’s for a purchase or a refinance, you must pay “closing costs,” which can vary considerably from transaction to transaction.

There are fees that must be paid to the bank/lender, along with optional ones, such as mortgage discount points, and fees that must be paid to third parties, such as title/escrow and insurance.

Whether you pay these fees out-of-pocket is another question, but either way there will be a cost, and you must pay it in one way or another.

How Much Are Closing Costs on a Mortgage?

  • There is no set amount that everyone pays in mortgage closing costs
  • It can vary substantially based on the loan amount and loan type
  • Along with the lender you choose to work with
  • And the time of the month you close your home loan

It depends on your loan amount, the way you structure your loan, which lender you use, and when you close during a given month.

For example, if the lender you work with charges a flat 1% loan origination fee, that’ll cost $10,000 on a $1 million purchase and $5,000 on a $500,000 purchase.

Further complicating this is the fact that not all lenders charge origination fees directly. Additionally, some may charge processing and underwriting fees, while others may not.

Next, you need to determine if you’re paying discount points to obtain a lower mortgage rate, or if you’re simply taking the par rate offered. This can greatly affect total closing costs too.

Then there are third-party fees, such as title/escrow and appraisal fees, which can vary tremendously as well. And in some regions of the country they might be paid by the seller or the buyer, assuming it’s a home purchase.

Additionally, you need to consider prepaid items like property taxes, homeowners insurance, and interest, which could amount to a big sum if there are impounds on your loan and you need to set up an escrow account.

When you close in the month can also have a big impact on closing costs. Those who close late in the month can reduce per diem interest, whereas someone who closes early in the month could pay nearly a month’s worth of interest at loan closing.

Two Types of Closing Costs – Recurring and Non-Recurring

There are two main types of closing costs, including “recurring closing costs” and “non-recurring closing costs.”

Recurring closing costs are those that will be charged more than once, whereas non-recurring closing costs are charged just once.

Some examples of recurring closing costs (paid more than once):

– Homeowner’s insurance
– Mortgage insurance
– Flood insurance
– Property taxes
– Interest
– HOA dues

*Note that not all fees are necessarily applicable depending on the property, location, loan type, etc.

Some examples of non-recurring closing costs (one-time fees):

– Lender fees (underwriting, processing)
– Loan origination fee
– Mortgage discount points
– Credit report fee
– Appraisal fee
– Home inspection fee
– Termite inspection fee
– Building record fees
– Title and escrow fees
– Doc prep fees
– Recording and wire fees
– Notary and messenger fees
– Transfer taxes

As you can see, there are quite a few costs associated with obtaining a mortgage, and not everyone has the cash on hand to pay for all these fees. There are also those who like to hang onto their cash and put it elsewhere.

If you want to reduce your closing costs, there are number of strategies to do so.

Use Seller Contributions to Cover Closing Costs

  • If it’s a home purchase you can ask the seller to chip in money toward the closing costs
  • Either in exchange for a higher purchase price or just via negotiation
  • Or receive a credit as a result of repairs found during the inspection

One of the most common ways to reduce your out-of-pocket closing costs is to get a contribution from the seller (if it’s a purchase transaction).

These so-called “seller contributions” or interested party contributions (IPCs) can be used toward the closing costs mentioned above, but cannot be used for the down payment or reserves, nor can they wind up in the buyer’s pocket.

Note that while seller credit can’t be used for down payment or reserves, it can free up your own cash to use toward down payment and/or reserves that may have otherwise gone toward closing costs.

When negotiating a sales price, the buyer and seller can discuss these contributions, and their presence will likely lead to a higher contract price.

As a result, the buyer still pays the closing costs by accepting a higher loan amount associated with a higher purchase price. However, the costs aren’t paid at settlement, so it’s easier for the buyer short on cash.

It’s also possible to get a seller credit for repairs that come up during the inspection, which is why it’s so important to take the inspection seriously. If you’re buying a home, you may actually conduct 3-5 different inspections for separate items like the pool/spa, roof, termite, chimney, and so on.

This is your chance to get money for the many things that might be wrong with the house. Once you present the seller with a request for repairs, they’ll likely offer a credit that you can use toward closing costs or to lower the purchase price. Or both.

The maximum amount of seller contributions allowed will vary based on the type of loan (conventional vs. FHA), the property type, and the LTV ratio. The lowest amount allowed is 2% of the purchase price, and the highest allowed is 9%.

Get a Lender Credit to Offset Closing Costs

  • In exchange for a higher mortgage rate
  • You can get a credit from the lender to cover closing costs
  • So they won’t need to be paid out-of-pocket
  • But instead via higher monthly mortgage payments

Another way to reduce or eliminate your out-of-pocket closing costs is via a lender credit, which is essentially agreeing to take a higher mortgage rate in exchange for lower settlement costs. This works on both purchases and refinances.

For example, a lender might tell you that you can secure an mortgage interest rate of 4.25% paying $5,000 in closing costs, or give you the option of taking a slightly higher rate, say 4.5%, with a $3,500 credit back to you.

If all your costs are paid via a higher rate, it’s a no cost loan, though sometimes this definition only covers lender fees, not third party fees.

Either way, you’ll pay a bit more each month when making your mortgage payment, but you won’t need to come up with all the money for the required closing costs.

Again, your out-of-pocket costs are reduced here, but you pay more throughout the life of the loan via that higher mortgage rate. That’s the tradeoff.

Ask for a Credit from Your Real Estate Agent

  • Hello controversy!
  • While it’s frowned upon by some real estate agents
  • It’s perfectly acceptable to ask for a credit from your agent
  • Though they can decline your request

Another way to reduce your closing costs (not just out-of-pocket) is to ask your real estate agent to give you a credit toward closing costs.

If they want your business, or just want the transaction to close, they might be willing to part with some of their commission to help you with closing costs.

For example, if they’re earning 2.5% to close the deal, they might be willing to give you 0.25% of that to help with your closing costs. Sometimes both agents will get together and give a small portion of both commissions to the buyer to get the job done.

And this will actually reduce what you pay, as you won’t take on a higher interest rate or pay for the costs via the loan.

Just be careful when combining credits to ensure they don’t exceed the maximum allowed by the lender. Assuming you find that you’re leaving money on the table, consider using the excess to buy down your mortgage rate or to cover prepaid items like escrows.

Negotiate and Shop Your Closing Costs

  • Like mortgage rates
  • You can negotiate your closing costs
  • Which can vary considerably from lender to lender
  • You may also be able to shop certain third-party costs

It’s also possible to shop around for certain settlement costs, instead of just blindly using the companies your real estate agent recommends.

For example, you can comparison shop for title insurance and/or your homeowner’s insurance and save on costs there. The same goes for your home inspection.

If refinancing your mortgage, ask for the “reissue rate” or “substitution rate” when purchasing the lender’s title insurance policy.

There is no reason you should have to pay full price again for a title search when you’ve been the only person living in the property.  This could save you a significant amount of money on closing costs with as much as a phone call to the title company.

Similarly, when looking for a bank to work with, be sure to look closely at the fees they charge. They don’t all charge the same fees or the same amounts, so finding a lender with a low rate and low fees could save you big.

Also watch out for unnecessary junk fees, which can really add up. But remember that certain closing costs just aren’t negotiable, like property taxes.

What Else Should I Know About Closing Costs?

  • Closing at the end of the month is one way to cut down on closing costs
  • Because you can reduce per diem interest
  • But your first mortgage payment may be due sooner
  • If refinancing you might be able to roll closing costs into loan
  • Also look out for closing cost specials

There are a few other ways to cut down on closing costs. Prepaid interest, which is the per diem interest due between the time you close and your first mortgage payment, can be costly depending on the size of your loan and when you close.

If you close near the end of the month, you can greatly reduce the number of days of per diem interest due at closing. This can significantly reduce your closing costs.

However, the tradeoff is that it’s a very busy time for lenders, and they might not close in time.

For those refinancing, it may also be possible to roll closing costs into the new loan, instead of paying them out-of-pocket.

Again, the implication here is that you’ll be paying interest on those closing costs for as long as you hold your mortgage, as opposed to just paying them at face value upfront.

But it’s worth consideration, especially if you don’t plan to stay in your home, or with the mortgage very long. There’s also a thing called inflation that makes today’s dollars less valuable over time.

Lastly, check out special programs like HomePath and HomeSteps, which offer closing cost assistance if you take part in homeownership education courses. And be sure to look into state programs that offer incentives to first-time home buyers.

Source: thetruthaboutmortgage.com

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Today, RE/MAX Holdings announced the launch of a new one-of-a-kind franchised mortgage brokerage known as Motto Mortgage.

In a nutshell, the plan is to create a one-stop shop where home buyers can work with real estate agents and mortgage lenders all in one place.

The hope is to create a more seamless home buying experience by putting loan originators in real estate offices nationwide. Well, they say in close proximity to real estate offices.

But instead of pairing agents with loan officers from Bank X, they’ll have access to a wide variety of loan products because they’ll be working for mortgage brokerages.

Motto Mortgage Wants to Disrupt and Innovate the Industry

  • RE/MAX is launching the very first mortgage brokerage franchise model in the U.S.
  • Plan is to create a one-stop shop for home buyers
  • Where they can search for a home and a mortgage in one place
  • And get financing options beyond just one lender partner

The company claims its mortgage brokerage franchise model is the first of its kind here in the United States, and hopes to “disrupt and innovate the industry.”

They say they’re a “different kind of mortgage company,” presumably because they’re combining a franchise model with a mortgage brokerage.

Generally, mortgage brokers are smaller independent shops that don’t have a nationwide presence so I suppose it’s unique in that sense. The franchise model is also apparently new. As such, each location will be independently owned and operated.

RE/MAX CEO, Chairman and Co-Founder Dave Liniger noted in a release that the mortgage broker share of mortgage originations has plummeted since the housing crisis.

According to their numbers, it hit a high of 35% in 2006, around the same time the housing market peaked, before falling to just 10% in 2015. It was actually even lower than that in some preceding years.

In any case, it’s still well below the 15-year average of 22%, and Motto Mortgage wants to change that.

Liniger highlighted some of the pros to working with a mortgage broker, including the fact that they have many more loan choices than a single bank.

For example, one broker can shop your loan with dozens of different banks to find the right fit.

If they need to close especially quickly, they might choose Bank A. If they need to close a particularly tricky loan, they might choose Bank C instead.

They also expect customer service to be better with loan originators arranging financing in the very same offices where the real estate agents work.

Or it can all go horribly wrong…just kidding.

Real Estate Agents Often Determine Your Financing Options

  • This is a pretty significant move by RE/MAX
  • Seeing that real estate agents often dictate mortgage decisions on behalf of their home buyer clients
  • Could be seen as a defensive move to combat other tech-heavy players such as Redfin and Zillow
  • And a desire to provide an all-encompassing experience for clients

A while back I pointed out that real estate agents have a big influence on who a home buyer will use for financing.

In fact, nearly half of home buyer decisions seem to be dictated by the real estate agent and their “preferred lender.”

This means buyers tend to go with whomever their agent recommends. This usually begins with the urging of a pre-approval from said lender, and eventually financing.

Of course, you are under no obligation to use their lender, and you’d be doing yourself a disservice to not shop around and look at other options.

That is perhaps the downside to this setup. If home buyers don’t look beyond their real estate agent’s recommendation, they won’t know what else is out there. Perhaps a lower rate and fewer fees.

However, the fact that Motto Mortgage will operate as a mortgage broker means the borrower will still have more choice than if they work with a single bank or lender.

The question is what happens to the existing mortgage broker partnerships at RE/MAX offices. They might be the collateral damage unless they choose to link up with Motto Mortgage.

For the record, RE/MAX was founded in 1973 in Denver, Colorado and has more than 100,000 agents in more than 100 countries worldwide.

On October 3rd, 2018, the company announced the sale of its 100th Motto Mortgage franchise, just 23 months after its initial launch.

Source: thetruthaboutmortgage.com

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Buying an investment property before your first home can be an interesting and financially sound plan. There are clear advantages — generating cash flow or building equity in your asset could benefit you and your family for years to come. You may be able to qualify as a first-time home buyer and take advantage of programs that allow you to buy a multi-family property. You may also be able to produce a strong enough income for the unit to pay for itself.

Yet, there can be significant sacrifices you may need to contemplate in order to make this dream happen. Here, learn what needs to happen if you’re planning on buying an investment property before your first home, including:

•   Is buying an investment property before your first home a good idea?

•   What are the steps for buying a house to rent?

•   What are the benefits of buying a house as an investment while still renting?

Purchasing an Investment Property 101

Purchasing an investment or rental property is similar to a regular home purchase. When you’re looking at buying an investment property for which you qualify as a first-time home buyer, however, there are some special considerations. Here is a guide:

Step 1: Decide if you’re going to live in a part of the investment property.
One of the first things you should decide when purchasing a rental property is if you’re going to live in a part of the investment property. This decision will affect what types of properties you’re going to look at, how you’re able to finance the property, and how much down payment you’ll need to come up with.

For example, if you can buy a house to rent with two to four units and live in one yourself, you may be able to finance the purchase as an owner-occupied property. This may qualify you for lower interest rates, lower down payment options, and more favorable loan options. However, you do have to live on the property. You cannot finance a property with an owner-occupied loan without living on the property as this is considered a type of mortgage fraud.

Here’s a quick summary of the difference between owner-occupied and non-owner-occupied rental properties.

Owner-Occupied Non-Owner-Occupied
Down payment options from 3.5% Down payment typically around 15%
Lower interest rates by about half a basis point Interest rates higher by about half a basis point

Step 2: Get preapproved for a loan.
Before you go shopping, make sure a lender is willing to give you a mortgage. Qualifying as a first-time homebuyer has some positives. On the one hand, you may have a better debt-to-income ratio since you don’t own a home yet. However, you may have a shorter credit history or a smaller down payment. Whatever the case, it’s helpful to get some numbers from your lender to assist with your investment.

Factors your lender will take into account when deciding what to lend to you include:

•   Amount of your down payment

•   Owner occupied status

•   Credit score

•   Debt-to-income ratio

•   Employment history.

Your lender will also take into account what programs you qualify for. Financing options for an investment property are wide. Some may include:

•   FHA

•   VA

•   USDA

•   Conventional

•   Private lending

•   Seller financing

Quick note: If you do decide to purchase a rental property and live in part of your investment property, your lender may be able to use the potential rent from that to qualify you for a mortgage.

Step 3: Find a property that meets your criteria
Now that you have your budget and parameters set, you’re ready to find a property. You may want to enlist the help of a real estate agent who can serve as your first-time homebuyer guide, especially since you want to buy an investment property right off the bat.

Your agent can help you write an offer while your lender may be able to help you apply for a mortgage online. You’re well on your way to buying a house to rent at this stage.

Step 4: Start your rental business.
Be sure to check local ordinances and business requirements for becoming a landlord. If you’ve got a plan and do your research, you may see success. Just don’t believe what you may see on TV, which makes owning a rental property look easy. Landlording is a tough job, and there’s a lot you need to know about the business before you start. Buying a house while renting is an endeavor that takes time and effort.

Buying a House While Still Renting

The benefit to buying an investment property before your first home is that your debt-to-income may be more favorable than for someone who has a mortgage. What this means is it’s possible you don’t have too much debt to qualify for a rental property.

The possible downsides are that you may not have the cash reserves to protect yourself from the risks of being a landlord. There’s always something that needs to be repaired or replaced.

What to Know As a New Landlord

Unlike what you may have heard or imagined, becoming a landlord can be anything but passive. You’ll also want to research all you can and put proper systems in place. Here’s a little of what you can expect to encounter as a new landlord.

•   Learn local housing laws. Housing laws can make or break you. Are short-term rentals allowed (if that’s what you’re planning)? What rights does your tenant have? If you need to evict a tenant, what does the process look like? Will you benefit by putting your property in an LLC?

There’s a lot to navigate, and you may want to consider hiring a property management company that specializes in this.

•   Determine how much to charge for rent. You’ll want to look at what other properties in the area are charging for rent and position yourself competitively. Also, consider what other landlords are allowing and charging when it comes to pets.

•   Prescreening is key. The reliability of your tenant is so important. It’s incredibly stressful when you’re not paid rent. Don’t rent to someone who “feels” like they would be a good tenant. Do your due diligence. Check credit and their background, and call references.

•   Create a plan for home maintenance, repairs, and other issues. If you’re hiring a property management company, plan for the expense. If you’re doing it yourself, make a list of contacts to call for the different issues that come up (electrical, plumbing, locks, handyman, etc.).

•   Have procedures in place for unit turnover. It’s an incredibly intense time when a tenant leaves and another needs to move in. How are you going to handle inspections? Cleaning? Deposits? You will need a system for logging such events and being prepared for turnover.

Recommended: Fixed-Rate vs. Adjustable-Rate Mortgages

The Takeaway

While landlording has a lot of responsibilities and risk, there can also be a lot of reward. If you’re really interested in buying a house while renting, you’ll find a way to make it work.

If you’re starting to shop for a new home and need a partner to help with your lending needs, see what SoFi has to offer. With a wide range of loans to choose from, low down payment options, and competitive interest rates, SoFi Mortgage Loans can be a great fit.

A SoFi Mortgage: Smart, simple, and flexible.

FAQ

How much profit should you make on a rental property?

There’s no easy answer for how much profit you should make on a rental property. Some investors buy property for the appreciation alone. There are also a number of methods for determining how much profit investors want to make on an investment property, such as cash flow, the 1% rule, gross rent multiplier, cash on cash return, cap rate, or internal rate of return. Those can help provide guidelines.

Should I buy an investment property and live in it?

If you’re able to live in your investment property, you can qualify for owner-occupied financing, which means lower down payments and better interest rates. But it also depends on your plans. If you want to renovate an investment property, living in it during renovations could be challenging.

Is rental property a good investment in 2023?

Rental demand is strong in 2023, but buying property is more dependent on your individual situation rather than market conditions.

Photo credit: iStock/luismmolina

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