The difference between available mortgage types

When you’re about to apply for your first mortgage, you may wonder what to expect as far as your mortgage options. The first order of business when buying a home is to look at the financing and your mortgage options. It’s helpful to know what to expect before you go into that office of potential lenders so that you aren’t hearing everything for the first time from them.

Being educated on the different loan types will help you get the best possible mortgage for your family and your situation. The team at Redzone Realty Group should be able to help, but just so you can study up before meeting with them, here is a look at everything from basic home mortgages to balloon mortgages, and everything in-between.

Basic home mortgage options

For those that go with the basic home mortgage, you’ll be able to choose between a fixed rate and an adjustable option. A fixed rate mortgage is one in which the interest rate is set and won’t change for the entirety of the loan. You’ll be able to count on a consistent payment amount each month on your mortgage, regardless of the market. This is what the majority of homeowners choose because of its stability due to the locked in an interest rate that doesn’t change.

When you go with an adjustable rate, another popular option, you’ll have an interest rate that is tied to the index. This will fluctuate depending on what the market is doing, giving you the opportunity to save money some months, but also the risk of paying more than usual in other months. There are typically caps placed on the number of rate changes each period to limit rate increases over the life of the loan.

mortgage types.jpg

Interest-only mortgages

In some cases, an interest-only mortgage is applied in which a borrower pays only the interest on the loan for a certain amount of time. Your loan’s principal amount would not be paid down at all during this period, which gives you a smaller payment in the short term.

At the end of this period, your payments would increase though, including repayment of the principle in what is now a shorter time frame. It’s inexpensive at first and very expensive later on, depending on how long the interest-only period is.

Balloon mortgages

If you’ve never heard of a balloon mortgage, this is another option you may want to consider if you don’t want to be paying on the loan for a long time. It’s set up like a typical 30-year fixed rate loan, except that the term is shorter. It’s only 5-7 years of a term and at the end of the term, whatever balance is left would be due in one lump sum. You can either pay it or refinance the home at that time.

Government loan

If you are a first time home buyer with low income, you may be interested in a fixed rate mortgage through an FHA loan. This is a government loan through the Federal Housing Administration that allows you to qualify for a traditional fixed rate mortgage with a smaller down payment. You’ll also enjoy the perk of a lower interest rate and access to programs for the purchase of a single-family or multi-family home. You can also try a VA loan or USDA Rural Development Guaranteed Housing Loan through the government if you are lower income.

Biweekly or bimonthly mortgages

Lastly, be sure to understand your options for a bimonthly or bi-weekly mortgage. These loans work in which the borrower makes a payment every two weeks or two months, rather than the standard monthly payment arrangement.

For the biweekly option, you’ll have a much short repayment term at 26 payments a year rather than just 12. For the bimonthly mortgage, you won’t be required to make extra payments, you’ll save slightly on interest when you advance the payment by half the month, and they tend to shorten the loan by a month if you choose a 30-year mortgage.

Understanding the mortgage types is half the battle. Go in to see your lender with a heads up on the different options so that you aren’t making any rash decisions in the moment. Once you've determined what type of loan you need, perhaps you should checkout our post "The First Time Homebuyers Guide to the Closing Process".

Hurricane safety options for your Jacksonville home

Hurricane season is wrapping up in Florida but for those just moving to the area, it’s important to understand what kind of preparations are needed well in advance. With the devastation of Hurricane Irma to other parts of Florida and surrounding islands, Jacksonville has hurricane safety preparations on the mind more than ever before.

Those that live in those areas know what worked and what didn’t, and this guide will help you to get a better understanding of what precautions you should take each hurricane season to protect your Jacksonville home. Take a look at this guide for hurricane and severe weather safety options for your Jacksonville home.

Knowledge is power

The best place to start is to get access to the sources of storm tracking in your area. Since storms can change in minutes or hours, you need to know if they are changing in intensity. After you’ve learned what channels on the radio or TV give you weather news, you can then get connected with sources like Stormpulse or the National Weather Service.

You can get online to get updates from them or download an app to your devices from MyRadar that will let you know the current rainfall, storm intensity, and duration in the area. These sources can also tell you if you’re in an evacuation zone.

Don’t forget that sometimes these storms can take out your power and internet connection. You’ll want to have a battery-operated NOAA Weather Radio to get alerts without cell service or Wi-Fi.

Work on the exterior of your home

You’ll want to start your preparations by protecting the outside of your home. Start by moving simple items like the trash cans, patio furniture, potted plants, and toys. You’ll need to move your grill inside and keep an eye out for loose branches that could blow off with the right amount of wind. Clear the gutters to help with drainage and go up on the roof to check that it’s secured and sealed.

Now you’ll be ready to work on your windows, doors, and garage. On doors with multiple locking mechanisms, just go ahead and lock them all to avoid something coming open. Get storm shutters on the windows or boards that can be secured on the outside. Masking tape won’t cut it; you’ll need to secure with actual boards or shutters.

The garage door is an area that is more susceptible to the high winds, but you can reinforce it with a brace kit if it’s not rated for wind or pressure, and you can even use your car as an extra brace. Your car will need to be prepped too; fill it with gas, replace the wipers, check the tire pressure, seal the windows, and stock it with an emergency bag like phone chargers, maps, and your insurance paperwork.

importance of storm shutters.jpg

Protect yourself and pets

Once you’ve protected your home, you’ll need to think about how your family will fare during a storm. You’ll want to stay away from windows, skylights, and glass doors, and stay in an interior room or closet on a lower level during the storm.

Move your items to a higher level in case of floodings, like important documents and electronics, and be sure to have backup locations ready in case you need to evacuate. Your alternate lodging should be a pet-friendly location to bring the pets, especially knowing that most Red Cross disaster shelters won’t take pets. You’ll want to be sure your pet is up-to-date on vaccines and tags and consider microchipping.

In addition to updating your pet records, be sure to get flood insurance added to your policy and find out if temporary housing is covered in the event that your home is uninhabitable after a storm. You’ll want to stock the home with storm essentials, including food, water, batteries, and a generator. Keep cell phones charged and containers ready if you need to evacuate quickly.

If you’re new to severe weather and hurricanes, you’ll want to make sure you are informed of the hurricane season in Jacksonville. Use these tips to get started on hurricane safety and be sure to do plenty of research on everything you’ll need to do to protect your home and your family.

Home Financing Lingo: The Basics of Escrow Accounts

Do you ever feel overwhelmed by home financing lingo used by your bank or real estate agent? When it’s a new process for you, the last thing you need is unfamiliar lingo confusing you or making you have to do extra work to understand what’s going on.

When you read below, you’ll be able to understand the basics of escrow accounts so that those home financing terms don’t throw you for a loop. Take a look at this guide for the basics so that you are prepared for your upcoming home financing needs.

What is escrow?

Starting from the beginning, you’ll want to learn what escrow is, how to manage it, and how it will affect your monthly payment. You’ll pay into an escrow account each month, which allows the lender to pay the required insurance or taxes on your property on your behalf.

You’ll pay part of the taxes and insurance premiums in your monthly mortgage payment, but when taxes and premiums are due to your lenders will pay them on your behalf from the account. The rest of your mortgage payment goes to pay your principal and interest.

what is escrow.jpg

Why do I need escrow?

The escrow account is handy because it helps you when budgeting for a large expense, such as those annual property taxes. You don’t have to worry about coming up with the money because your lender handles it from your escrow account for you.

Escrow is perfect for having a special account for your fire and hazard insurance, your mortgage insurance premiums, property taxes, and more. The account means that you won’t have to worry about things getting paid on time and there will always be enough money to pay the bills when they are due.

You don’t have to risk tardiness or a lapse in coverage. With several upcoming large payment sums due at different times, it’s easier to have an escrow account to have your back for you on time paid in full.

How to manage the account

What happens if you are short money or there is a change in cost? Your escrow account is managed by your lender and they will typically cover shortfalls until they can just adjust your monthly payment. That will make up for a tax hike or premium increase, since your mortgage payment may fluctuate each year. The lender will project what is needed each year based on the amount of taxes you paid, insurance you paid, and other factors.

Do I really need escrow?

You can technically avoid escrow if you are working with a lender that will allow you to pay your own property taxes or home insurance premiums, but you typically have to qualify for this. If your loan-to-value ratio is under 80%, it will be more likely that they will allow you to forego an escrow account. The lender may then boost your interest rate since they would be taking on additional risk without escrow.

If it is required of you and put into place, it will be difficult to get the lender to cancel it.

This is a look at the basics behind escrow so that you don’t have to wonder what all of the lingo is about that your lender and agent use in the conversation!

Home Financing Lingo: What is Earnest Money?

Has your realtor or lender talked to you about your home finance and mentioned the term “earnest money?” This may be one of those terms tossed around that you’ve never heard of, which can make you feel less educated about your own home financing experience.

You’ve found the perfect house and it’s time to put down an offer, but someone will tell you that you’re going to need to make an earnest money deposit, and you may not be sure what that means. Take a look at this guide explaining what earnest money means in the real estate world, and how it will apply to you.

What is earnest money?

Making an earnest money deposit is just like making a “good faith deposit” in real estate. It’s the money you would pay within a couple of days after your offer was accepted by the seller. You would need to put down between 1-3% of the sale price of the home after the seller accepted your offer, although in some areas it’s a fixed amount.

You can pay this by a wire transfer, a cashier’s check, or a personal check, which will be deposited into the escrow account, to the listing agent, to the title company, or to the broker. Don’t worry, because this money will count towards your closing costs later.

dollar-227745_960_720.jpg

Is this legal and what about disputes?

It’s not a legal requirement of buying a home, but it does often prevent a buyer from changing their mind after the verbal agreement. It’s easy to get buyer’s remorse at the beginning of the process, but when money has been put down, it’s easier to be put at ease on your end and to put the seller at ease about agreeing to sell to you.

If a dispute comes up where the deposit is being held in escrow, you’ll want to talk to your agent about how to handle these types of disputes. Often times you’d need to go to small claims court to resolve the disputes, but that itself isn’t always worth it with the high price to do so.

What about new construction or the need to forfeit it?

In the case that you are buying a new construction home, you’ll actually end up paying a much higher percentage for the earnest deposit. You could pay as high as 50% of the purchase price to the developer, but this is because they may be fronting the construction costs from the bank themselves and will have to prove the unit is sold to a qualified buyer. It’s too easy for a buyer to walk away in this scenario despite this being built to their specific tastes, which makes the 50% earnest deposit so important to a developer.

If you’ve placed an earnest money deposit and feel the need to get out of the deal, you may be wondering if it’s possible to get it back. Backing out of the agreement for reasons that are different from your contingencies will result in losing your deposit, or at least a cancellation fee, but it may be in your best interest to stop the deal from going through. This money would likely cover the seller’s lost time in selling to someone else, or money spent on renting another place and storing their items for your upcoming move into the house. Whoever holds the deposit will determine if you should get it back.

Sometimes real estate lingo gets thrown around that you just don’t understand. This is a look at what earnest money means and why you’ll need to provide it before close.

What you need to know about HOAs and CDD fees

Are you wondering what it’s going to be like to now have an HOA fee and CDD fee at your new home? These fees are very common and once you learn about them, it won’t take much thought to maintain them.

When you choose a gated community or community with amenities like golf and a clubhouse, you’ll likely have an HOA and CDD fee which allows these amenities to be well maintained for you. The CDD is the Community Development District and the HOA is the Homeowners Association that will make life easier in your new neighborhood. Take a look at their fees and what they cover for you.

DSC_9255edt.jpg

What is the CDD?

Your Community Development District is going to require CDD fees that help with things you use on a daily basis. They are a type of government entity that is going to take care of the roads you use, the amenities for a planned unit development, and the utilities. If your new neighborhood has a CDD, which means this community is going to have wonderful amenities, and possibly community events or an active staff to help you with whatever you need.

The CDD works with a planned community developer to help fund the expense like a loan which is later repaid by homeowners in the community through the fee. Your fee will go towards the actual bond repayment costs and partially towards the continued maintenance of the community you live in. The bond will have an end date and you can always ask when the bond will be paid off knowing that you’ll only then be required to help with the operations and maintenance portion.

What does the HOA do?

Next, comes the Homeowners Association fee that you’ll likely have in your new community. The HOA fee will vary for each subdivision, but it’s typically a set fee that you’ll owe each year or each month to help with the community you live in. the HOA does great work for homeowners, offering a highly desirable lifestyle in the neighborhood. They will help to keep everyone in line with the rules, put on community events, make sure the landscaping is pristine, and cover things like a security gate, cable TV, and recreational facility upkeep.

They will have authority over architectural control ground maintenance, handling landscaping, cleaning and repainting, and more. They will also give their homeowners a chance to vote on issues and a chance to get involved with the community. It’s a great way to live in a community that you know they are keeping looking pristine and you won’t have to worry about your neighbors doing anything that may offend since there are rules that everyone must agree to.

If you have a home with both a CDD and an HOA, your HOA will deal more with your neighborhood condition and be making sure things are falling within the community covenants while your CDD work more on the infrastructure, amenities, and utilities. In a community with only an HOA, you’ll likely see them as a part of the community to maintain things like the community pool, playground, and common areas. In either case, you could be fined from your HOA if you don’t abide by the rules.

When you buy a home, make sure to ask if there is a CDD and HOA, because the fees for these programs will be added onto your monthly mortgage payment.

How to boost sales potential with home staging and photography

If you were on the fence about home staging and having professional photos taken for your listing, it’s time to make this part of the process a top priority. Not only is it a must if you want to sell your home, but it’s actually been proven to boost sales when done right.

DSC_6961-Copyedt.jpg

Your home’s appearance means a great deal to a potential buyer, and you can’t skimp on showing home buyers what your house looks like in its best light. You’ll even find that your home can sell in less time when you spend adequate time staging and photographing the home. Take a look at why home sales are boosted for sellers that stage and photograph professionally.

How to go about staging and photographing

There are many steps involved in getting your home staged and shining on your listing. First, you’ll need to prepare, clean, and declutter.

Preparing means that you should write out a plan for the vision for each room with a professional stager, including what furniture really highlights the room and what items really need to go. This will help you to decide what furniture may need to be placed in storage before photographing the house, and which items accentuate the room.  If there are any pieces you no longer want, now is a great time to host a garage sale.

Next, you’ll need to clean and declutter the house. Remove any items your stager says does not benefit the room in staging, and start packing up any items that are personal to you and inappropriate for a listing. For example, all of your family photos, documents, children’s toys, and dog items should be removed from a listing.

As you declutter any personal items that a buyer could see and feel a sense that they are a guest in someone else’s home, you’ll also want to make sure you don’t use any offensive cleaning products, bold paint colors, or offensive décor and stick to options that are neutral.

The staging process

Now is the time to get creative with your professional stager by finding ways to make each room in your own look its best. While it may be comfortable to you to have the couch in its usual spot, perhaps it would look more pleasant to a potential buyer to put it near the window with the natural light coming in? While you may love a large sofa for the whole family to share, your buyers may love a non-intrusive loveseat with accompanying chairs for better conversation over tea.

DSC_2902edt.jpg

Once you’ve designed your furniture around a buyer’s eye, add elements to bring an impact into the room that doesn’t distract, such as a beautiful rug, framed art, or a lamp. It will be easy to design once you’ve arranged your large pieces of furniture first. Lastly, work on the lighting and smells that potential buyers will notice in the room.

Homes are selling much faster when they are staged compare to those that aren’t, and that’s because people are shopping online in advance and looking to see how yours compared to all of the others. Don’t miss out on your chance to sell quicker by staging professionally and making your house shine its best light. You’ll find that with staging, your home will appear more valuable and you could find yourself with a bidding war that puts you in the winner circle.

First Time Home Buyer's Guide to the Closing Process

As a first-time home buyer, there are many new changes about to happen in your life and with that comes many new learning experiences. One of the biggest unknowns you may be experiencing is preparing for the closing day and wondering how that process will work.

You know it’s the day where you’ll be spending some money and signing paperwork, but what exactly should you expect for the close? Take a look at this guide to make sure you have a better understanding of the closing process well before you experience it.

The goal behind closing day

This is actually the most exciting day of the home buying process and one you should look forward to most. It means that your hard work has paid off and you are becoming the official owner of your new dream home.

Closing day is when all of the talks finally gets put down on payment and your dream becomes reality. There are many details in the process, but the goal behind the closing day is to pay off final costs, to sign the paperwork, and to finalize everything once and for all.

first time home buyer closing day documents.jpg

What to expect leading to closing

You’ll actually need to be preparing for closing the day before closing. This is the time to be gathering all of the paperwork that you’ve gathered during the entire process because you may need to reference these on closing day. This could include anything from your loan estimate to your inspections reports, as well as proof of title search and the closing disclosure.

Next, you’ll want to take the 24 hours before closing that you are entitled to in your contract to do a walk-through inspection. If it appears the seller hasn’t vacated or things aren’t in the condition discussed, this is the time to speak up.

Any problems that were to come up would then delay closing so that they can be addressed. You can also request that the seller deposit money into the escrow account if you are going to have to make the repairs.

Closing day

Now that you’ve arrived at closing day, you’ll have to sign the paperwork and pay final expenses. First, you’ll sign legal documents including the agreement between you and the lender, followed by the agreement between you and the seller as you transfer ownership.

Closing costs and escrow items will then need to be paid, typically by bringing a check with you, as far as costs that aren’t going to be added to the loan balance. The typical closing costs would be for line items such as the home inspection, appraisals, title search, surveys, and credit report.

A few people will be present at the closing including the real estate professionals on behalf of the buyer and seller, the builder representative if it was a brand new home, the buyer and seller attorneys if applicable, the closing agent, and a notary.

In some cases, the seller may be present, but it is not typical. You’ll have to sign plenty of paperwork including the closing disclosure, the mortgage, and the promissory note. Be sure to bring your checks to the closing, which can be prepared in advance, as well as your ID.

If you’re feeling overwhelmed by all of the new learning experiences as a first-time home buyer, this guide should help you understand what to expect on your upcoming closing day.

How to Decide How Much You Can Afford for a Home

Are you torn between your dream home and something that will fit your budget? The best thing you can do at this point in the home search process is to take the time to seriously determine your budget and what you can afford for a home.

Jacksonville Dream Home.jpg

It’s easy to get bigger eyes than your wallet can afford, and it’s important to learn now that you have to stay within the budget that you can afford in order to get approved, to afford your monthly payments, and to be able to handle the other expenses that come with homeownership.

In order to determine how much you can afford for a home, you’ll need to find a home affordability calculator that can calculate your family’s personal financial picture. Take a look at what an affordability calculator will need to look at in order to determine what you can afford.

Annual income

The first number you’ll need to determine if your annual income. This would be the combined annual income for anyone on the application, whether it’s just a single borrower or a borrower with their co-borrower. This will include income before taxes and to include commissions, bonuses, tips, and other income like rental income or alimony.

Outgoing expenses each month

Next, you’ll need to know what you spend each month on bills and debts. Between you and your co-borrower, what do you pay each month on your car payment, student loans, child support, and credit cards? Don’t forget recurring payments you make each month such as your utilities, subscriptions, and groceries.

Loan type, term, and interest

Once you’ve determined these numbers, you’ll want to look at the loan type you are seeking, along with the term and interest rate options. There are a variety of loan type options, including fixed-rate loans and adjustable-rate loans. Do you want to pay the same monthly payment each month or do you want the option of an adjustable rate that can give you the opportunity of a lower interest rate at first?

What type of loan term do you want? Do you want a longer-term loan that will give you lower payments at a higher interest rate or do you want to pay it off faster with a lower rate? A lender will help you decide this, but it will affect what you can afford.

Taxes

Income taxes and property taxes will play a factor in your affordability. Your mortgage payment calculator will need to look at your property taxes, as well as your income taxes since income taxes reduce your actual income, and property taxes will add another bill to your annual expenses.

Insurance

The calculator will also need to factor the homeowner's insurance cost that a lender will require of you, as well as your mortgage insurance costs, which is often required of borrowers that put down less than 20% of a down payment.

Down payment

In most cases, a down payment will be needed for a home. The more you can put down, the less you’ll owe on the home and the increased likelihood of getting a more expensive home. The goal is to put down 20% of the home’s price, but you can technically go as low as 3.5% with some lenders. For some, putting a larger down payment down simply allows for a lower mortgage payment each month, rather than as a way to spend more on the home.

Monthly mortgage

The affordability calculator will want to look at what you can spend each month on your mortgage based on what you make, what you already spend, and what other expenses will be required, like your HOA fees or homeowners insurance.

Credit score and financial statements

Don’t forget your credit score and financial statements. Determining what you can afford also requires a look at your credit score and financial statements, which may show that you have a low score and only qualify for a higher interest rate, or financial documents showing that you have assets like stocks or bonds that could help your financial picture.

Be sure to look up a mortgage affordability calculator and have these figures ready to go to find out what your family should be spending on a home.