Resident Resources

Select one of the articles listed to the left for helpful hints and timely topics related to real estate.  No matter whether you're buying, selling or renting there's an article here for you.  We hope you find them very informative.

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Rent vs Buy

Buying a home is a rewarding experience.  You derive a great deal of personal satisfaction from owning a home.  Homeownership allows you to build up your personal net worth over time and there are significant tax advantages to owning your own home.  Moreover, continued increases in housing prices nationwide make homeownership a relatively attractive investment.

Yet, renting also has some advantages.  In some cases, renting may be a more attractive option.  For example, if you plan to move in a year or two, you are unlikely to recover the closing costs you pay when you buy a home.  You may also need to rent if you are in uncertain financial circumstances.  In addition, finding a home to buy generally takes more time than looking for an apartment to rent.  Renting doesn't require you to make a down payment or pay for maintenance and repairs.

Tax Advantages to Home Ownership.  In addition to building up equity over time, owning a home offers significant tax breaks.  The interest expense that you pay on up to $1 million in home mortgage debt ($500,000 if you are married and filing a separate return) is tax-deductible.

Your tax savings from the mortgage interest tax deduction are greatest in the early years of a mortgage loan.  For example, on a 7%, 30-year fixed rate mortgage loan of $100,000, you pay $6,968 in interest the first year of the loan.  If you are in the 27% income tax bracket, your tax savings are $1,881.  In Year 16 of the loan, you pay $5,090 in interest, which saves you $1,374 in taxes.  In Year 24 of the loan, you pay $2,926 in interest, which saves you $790 in taxes.

When you sell your home, you can exclude up to $500,000 in capital gains if you are married and filing a joint return.  (The exclusion limit is $250,000 for other tax filers.)  You will need to pass the IRS's ownership and use tests to show that the home has been your primary residence for at least two of the past five years.  In addition to mortgage interest, you can also deduct your local property taxes on your income tax return.

As a homeowner, you can tap the equity in your home in the future with a home equity loan or line of credit.  The Interest expense that you pay on up to $100,000 in home equity debt is tax-deductible ($50,000 if you are married and filing a separate return).

Reasons to Rent.  Renting doesn't require you to make a down payment, which can easily reach $25,000 or $50,000.  A total monthly payment for rent is generally cheaper, too, when you include all the other costs of owing a home.  In addition to paying off a loan with interest, homeowners routinely pay homeowner's insurance and property taxes.  They may also be required to buy private mortgage insurance (PMI).  Finally, homeowners face maintenance and home-improvement costs that renters avoid.

In general, renting has a lower financial burden, requiring smaller monthly outlays.  With the extra cash that you save each month, you may be able to invest and earn a rate of return that compensates for missed opportunities of homeownership.

Renting may be a wiser course of action if you plan to relocate to another city soon or are in uncertain financial circumstances.  For persons fresh out of school or newly divorced, renting may be the only realistic option.

The above information is an opinion only and should not be interpreted as financial advice.  For advice that is specific to your circumstances, you should consult a mortgage lender or financial adviser.

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Choosing the Right Landlord

Choosing the right landlord is as important as choosing the right home.

One of the most important factors to consider when selecting a home to lease is the ability of your landlord to provide you with prompt, professional residential services.  Check out our services and credentials.

Benefits of Leasing from Us

We work hard to be the premier landlord in the area.  It is our job to provide our residents with a quality rental experience.

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Tips for Finding a Rental Home

  1. Eat all the chocolate you want!  The stress of house hunting causes extreme calorie leakage.
  2. Be sure to obtain a current map of the local area.  Having a map will save you time and gas from getting lost.
  3. If you have a pet, bring references for your pet.  Examples are as follows.  Letters recommending the pet from former landlords and/or realtors whom have seen the home where the pet resided.  List of obedience classes attended by the pet.  Phone numbers of former pet sitters or veterinarian.
  4. Some school district boundaries change yearly.  Be sure to check a school boundary with the local school district.  You may also want to look into the available selection of private and religious schools.
  5. The utility company may provide a 12-month cost history for an address.
  6. Ask who provides water, sewer and trash pick-up.
  7. Save a lot of time by driving past a home before making an appointment to see the home.  Many homes can quickly be eliminated.
  8. The Sunday paper is the best lace to begin looking for a home.  The classified ads also contain ads for rental web sites and property management companies.
  9. Ask about move-in specials.  Some owners will give incentives for a mid-month move in or longer leases.

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Your Credit Score

It is important to know your credit status when considering the purchase of a house.  Most lenders use a credit score called “FICO”to determine your eligibility for a loan and the interest rate you should be charged.  FICO stands for Fair Isaac & Company, and credit scores are reported by each of the three major credit bureaus:  TRW (Experian), Equifax, and Trans-Union.  The score is computed differently by each bureau since they place a slightly different emphasis on component items.  Scores range from 365 to 840.

Lenders started to take a closer look at FICO scores in the early 1990s and this is what they found out.  The chart below shows the likelihood of a ninety-day delinquency for a specific FICO score.

FICO
Score		 Odds of a
Delinquent
Account
5952.25 to 1
6004.5 to 1
6159 to 1
63018 to 1
64536 to 1
66072 to 1
680144 to 1
700288 to 1
780576 to 1

What affects FICO scores? -- How do lenders look at them?
Some of the things that affect your FICO scores are:

The credit score is actually calculated using a "scorecard"
where you receive points for certain things.
Creditors and lenders who view your credit report
do not get to see the scorecard, so they do not know exactly
how your score was calculated.  They just see the final scores.

Basic guidelines on how to view the FICO scores vary a little from lender to lender.  Usually, a score above 680 will require a very basic review of the entire loan package.  Scores between 640 and 680 require more thorough underwriting.  Once a score gets below 640, an underwriter will look at a loan application with a more cautious approach.  Many lenders will not even consider a loan with a FICO score below 600, some as high as 620.

FICO scores and interest rates

Credit scores can affect more than whether your loan gets approved or not.  They can also affect how much you pay for your loan, too.  Some lenders establish a "base price" and will reduce the points on a loan if the credit score is above a certain level.  For example, one major national lender reduces the cost of a loan by a quarter point if the FICO score is greater than 725.  If it is between 700 and 724, they will reduce the cost by one-eighth of a point.  A point is equal to one percent of the loan amount.  There are other lenders who do it in reverse.  They establish their base price, but instead of reducing the cost for good FICO scores, they "add on" costs for lower FICO scores.  The results from either method would work out to be approximately the same interest rate.  It is just that the second way "looks" better when you are quoting interest rates on a rate sheet or in an advertisement.

Factors other than FICO scores affect underwriting decisions.  Some examples of compensating factors that will make an underwriter more lenient toward lower FICO scores can be a larger down payment, low debt-to-income ratios, an excellent history of saving money, and others.  There also may be a reasonable explanation for items on the credit history that negatively impact your credit score.

They don't always make sense.  Even so, sometimes credit scores do not seem to make any sense at all. One borrower with a completely flawless credit history had a FICO score below 600.  One borrower with a foreclosure on her credit report had a FICO above 780.

Portfolio & sub-prime lenders

Finally, there are a few "portfolio" lenders who do not even look at credit scoring, at least on their portfolio loans.  A portfolio lender is usually a savings and loan institution who originates some adjustable rate mortgages that they intend to keep in their own portfolio instead of selling them in the secondary mortgage market.  They may look at home loans differently.  Some concentrate on the value of the home.  Some may concentrate more on the savings history of the borrower.  There are also "sub-prime" lenders, or "B & C paper" lenders, who will provide a home loan, but at a higher interest rate and cost.

Numerous credit reports can effect your FICO score.  Wait until you have a reasonable expectation that you will use a lender before you let them run your credit report.  Not only will you have to explain any credit inquiries in the last ninety days, but also numerous inquiries will lower your FICO score by a small amount.  This may not matter if your FICO is 780, but it would matter to you if it is 642.  Don't buy a car just before looking for a home!

When people begin to think about the possibility of buying a home, they often think about buying other big-ticket items, such as cars.  Quite often when someone asks a lender to pre-qualify them for a home loan there is a brand new car payment on the credit report.  Often, they would have qualified in their anticipated price range except that the new car payment has raised their debt-to-income ratio, lowering their maximum purchase price.

In conclusion

Your credit history is important and credit scores are important if you want to get the best interest rate available.  Protect your FICO score.

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Community Association Self-Assessment Tool

Below is a list of items that will help evaluate the health of your association.  Answer each question yes or no.  Count each yes and see the ratings for scores at the end of the list.

  1. _____The Board of Directors has clear, concise, written goals.
  2. _____The roles of each Board office and the directors is defined in writing.
  3. _____The management company's duties is defined by written contract.
  4. _____Board members receive regular training to improve association business.
  5. _____New board members receive an orientation about the governing documents, policies and critical issues.
  6. _____Each board member has a copy of an operations manual with basic need-to-know information.
  7. _____The Board has the directors required by the governing documents.
  8. _____Board avoids all conflicts of interest (no self dealing, nepotism, etc.).
  9. _____Governing documents conform to state statute and include:
    1. _____How and when notices for board meetings are made.
    2. _____How board members are elected, appointed and removed.
    3. _____What director terms limits are.
    4. _____Quorum requirement for business decisions.
  10. _____There is a written procedure for handling emergencies.
  11. _____Board members serve without compensation.
  12. _____There is a written calendar of events and meetings.
  13. _____Board meeting attendance is mandatory for all directors unless excused by the President.
  14. _____Meetings have written agendas and supporting information provided to directors in advance.
  15. _____Board Meetings are open to all owners and held in a visitor friendly location.
  16. _____Meeting minutes are recorded and promptly distributed to all owners.
  17. _____Timely monthly financial reports are prepared, reviewed by the Board and made available to owners.
  18. _____Physical assets are properly maintained.
  19. _____The association has all necessary insurance coverages:
    1. _____Directors & Officers Liability
    2. _____General Liability
    3. _____General Hazard Insurance with Guaranteed Replacement Cost
    4. _____Employee Dishonesty
    5. _____Building Ordinance & Law
    6. _____Earthquake
  20. _____Fraud prevention methods are in places to guard against embezzlement.
    1. _____Bank reconciliations are reviewed and approved by the board of directors.
    2. _____All reserve account checks require two signatures.
    3. _____Checks are issued only with properly approved invoice or check request.
    4. _____No checks are made payable to "Cash".
    5. _____No checks are presigned.
  21. _____There is a written delinquency collection policy.
  22. _____All delinquencies are pursued in a timely manner.
  23. _____All filings are current:
    1. _____Annual Registration
    2. _____Articles of Incorporation
    3. _____IRS tax filings and reports
  24. _____The association has a professionally performed reserve analysis and a long range plan for funding repairs and replacement.
  25. _____The Board conducts an annual operating and reserve budget review and formally adopts a new budget each year.
  26. _____The Board adopts an Annual Management Plan that prioritizes goals and sets timetables.
  27. _____All rules are relevant.
  28. _____Rules and policies are written.
  29. _____Rules are enforced uniformly.
  30. _____There is a violation appeal process.
  31. _____The association sends out regular and informative newsletters.

How did you score?  If you answered "Yes" to:
41-46 Questions:  EXCELLENT Still room for improvement.
36-40 Questions:  VERY GOOD You're close, but roll up your sleeves and close the gap.
31-35 Questions:  GOOD You've got serious work to do.
30 or less Questions:  DANGER

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