LAS VEGAS, NV – At the organization’s recent annual breakfast meeting, the Southern Nevada Home Builders Association welcomed over 170 building executives, with many expressing optimism for home development in Las Vegas in 2024 while also noting that they still face significant hurdles in terms of the lack of available land to them; something that continues to usher in affordability concerns for homebuyers.
Many Las Vegas builders at the breakfast – which was held Tuesday at The Orleans Hotel and Casino – stated that the continuing development of the city’s sports and entertainment industries have contributed greatly to the construction business in recent years.
The recent boom in the Las Vegas economy as a result of new professional sporting teams transplanting themselves to the city – in addition to new entertainment venues, events, and low cost of living relative to other regions in the country – has lured numerous new inhabitants in recent months who are in need of housing options, noted Frank Wyatt, President of Pinnacle Homes.
With the Raiders, Golden Knights, Formula One, I think the ultra high-end has been most affected by what’s going on,” he said. “There are more people (who) have a lot of money that are moving to town in higher numbers than ever.”
Some of the phrases brandied about regarding the Vegas new home market by builders included “good, improving, stable, and moderating.” The market – following a slow second half of 2022 due to rising interest rates driving up development costs – saw a 22% jump in net sales in 2023.
The new home building market has seen continued growth since October amid falling interest rates – which are currently under 7% – with builders now attempting to attract buyers by offering attractive incentives.
However, Wyatt said that the lack of available land to develop has hamstrung efforts of Southern Nevada builders to address housing needs, and called upon Congress to pass a law in order to make more federal land available for that purpose.
We live and work in a land-constrained community,” Wyatt said. “It’s probably one of the most constrained in the United States. It does nothing but increase the price of the end product to the homebuyer. We pay as much for land as we can justify and the home price is based on our cost. It’s not going to get any better.”
Shelter Realty is a Real Estate and Property Management Company specializing in the areas of Henderson, Las Vegas and North Las Vegas, NV. Feel free to give us a call at 702.376.7379 so we can answer any questions you may have.
LAS VEGAS, NV – A California-based developer is planning to construct a $380 million mixed-use sports, entertainment, and retail facility in Las Vegas, with Agora Realty & Management having recently closed on financing and land purchases at the former site of two Las Vegas casinos in order to bring the project to life.
Plans for the upcoming facility including housing, retail, and the a professional-grade public ice rink, which will be managed by the NHL‘s Golden Knights, who play at the Las Vegas Strip’s T-Mobile Arena and won this year’s Stanley Cup championship.
The 73-acre project is slated to be called Hylo Park and will be located in North Las Vegas at the intersection of Rancho Road and Lake Mead Boulevard. It will be made up of 1300 residential units, a retail center anchored by a supermarket, and many sports and entertainment aspects that will be added in a number of construction phases.
The main attraction of the project – and the aspect the rest of the facility will be built around – is Champion Square, which will be a sports village and public plaza that will include the public ice rink, as well as practice facilities that can be utilized by youth and amateur hockey and skating leagues.
The idea behind the project is to capitalize on Las Vegas’ rising profile as a sports destination following the recent influx of transplanted major sports teams and events to the region, including NHL, NFL, MLB, and Formula One racing.
Agora Realty CEO Cary Lefton said in a statement that the extensive sporting attractions at Champion Square would appeal to both the local Las Vegas community as well as traveling sports teams, and stands to be a “lucrative traffic generator” for surrounding restaurants and businesses.
From our longstanding work with North Las Vegas we knew that the city needed more housing and community services for its growing population,” he said. “We also recognized an opportunity to leverage the draw of Las Vegas’ fast-growing sports industry.”
Shelter Realty is a Real Estate and Property Management Company specializing in the areas of Henderson, Las Vegas and North Las Vegas, NV. Feel free to give us a call at 702.376.7379 so we can answer any questions you may have.
LAS VEGAS, NV – A boarded-up, abandoned motel on the famed Las Vegas Strip that has been home to vagrants, feral cats, and vandalism for a number of years has been purchased by a Native American tribe with plans to demolish the structure and subsequently repurpose the property.
According to property records, the Three Affiliated Tribes of the Fort Berthold Indian Reservation in North Dakota – also known as Mandan, Hidatsa and Arikara Nation – purchased the former White Sands Motel site last week for $10.25 million.
The long-time zombie property is located on a narrow 1.1-acre parcel of land adjacent to the former Route 91 Harvest festival site and represents the latest investment on the part of the MHA Nation, which to date has purchased a total of 23 acres along the southern portion of the Strip for a total combined price of $115 million.
The motel building – originally constructed in the 1950s – is currently in a substantial state of disrepair, having been the target of vandalism and squatting by homeless people and cats for years, and according to MHA Nation Chairman Mark Fox, the plan is to completely raze the property and redevelop it.
“It definitely cannot be salvaged,” Fox said, adding that the MHA Nation will “tear it down and clean it up,” a process that he estimates will cost at least $1 million. There is currently no timeline in place for the site’s demolition.
The MHA Nation is still formulating a strategy or their real estate holdings in Las Vegas; Fox noted that they either might be used to develop a casino-resort, or just flipped to new owners for a profit.
“We’re really going to the drawing board,” Fox said.
The White Sands Motel site has been unsuccessfully put on the open market several times over the years for various asking prices. It was initially offered for $25 million in 2016, then for $18 million in 2021, and finally $12 million in spring 2022, with no takers each time.
Shelter Realty is a Real Estate and Property Management Company specializing in the areas of Henderson, Las Vegas and North Las Vegas, NV. Feel free to give us a call at 702.376.7379 so we can answer any questions you may have.
LAS VEGAS, NV – When it comes to selling your home, owners are naturally looking to get the very best price they can in return for their pricey investment. And while spring is considered by many the best time of the year to list your property, real estate experts are noting that one specific week in April – especially in Las Vegas – is typically the best time to put your house on the market.
Many experts have shown that sellers can get significantly more in return for their homes when they list them in springtime; according to reports a home that would normally fetch $187,000 in January can sell for as much as $208,273 in May.
But in 2023 real estate gurus are noting that April is looking more and more like the best time of the year to sell a home for numerous reasons, with the week of April 16 to 22 – particularly in Las Vegas –being ideal due to the fact that the rapidly changing real estate market is anticipated to reach its zenith during that specific one-week span of time, according to Sam Saltzwedel from Realtor.com.
“That’s largely because families want to move when school is out. Interest rates aren’t significantly going down yet. [They] are basically the only factor that stopped houses from continuing to skyrocket,” he said. “While it does not have the highest price or the lowest time on market, this week offers higher than average prices and lower than average time on markets while also offering a higher-than-average number of buyers.”
That ideal week, however, can change depending on which city across the country you may be examining; while April 16 to 22 is considered the target in Las Vegas and numerous other cities this year, experts say the last week of March was the time to list in Los Angeles or Chicago, whereas in Seattle the ideal listing week would be April 2 to 9.
The exact formula for determining the ideal listing week comes down to listing prices, the average number of days on the market, and online views per property; in addition, the number of other sellers in a given region that will provide competition for your listing is also a factor, with too much inventory being available in a particular market often driving down demand or prices.
Shelter Realty is a Real Estate and Property Management Company specializing in the areas of Henderson, Las Vegas and North Las Vegas, NV. Feel free to give us a call at 702.376.7379 so we can answer any questions you may have.
LAS VEGAS, NV – Las Vegas has been on the comeback trail in a variety of ways since the COVID-19 pandemic has subsided, and 2023 promises even bigger and brighter things to come. But it’s always important to learn from and reflect upon the past, and the top real estate transactions of 2022 prove that – despite some setbacks encountered along the way – the Las Vegas marketplace is once again becoming red hot.
The top five Las Vegas real estate transactions of 2022 were, in no particular order:
Houston billionaire Tilman Fertitta made some major waves when he spent a whopping $270 million in June on a 6.2-acre plot of land at Las Vegas Boulevard and Harmon Avenue that will become the home for a currently unnamed 43-story, 2,420-room hotel-casino.
Next up is Formula One, who purchased approximately 40 acres east of the Las Vegas Strip at Harmon Avenue and Koval Lane in June for $240 million, upon which they are constructing a new race track that is scheduled to debut in November 2023, at which time it will host a 50-lap Grand Prix race.
Also of note is MGM Grand and Mandalay Bay’s properties coming under the full ownership of Vici Properties, who was previously the landlord of those establishments. Vici, which had owned a 50.1 percent stake, announced that they are in the process of buying the remaining 49.9 percent from New York-based financial firm Blackstone for $1.27 billion in cash, giving them full ownership going forward.
Las Vegas’ wheeler-dealer real estate market didn’t disappoint in 2022. https://t.co/jotm0XSD5d
Next on the list is Hollywood A-lister Mark Wahlberg, who purchased 2.5 acres in Summerlin’s The Summit Club for $15.6 million in July, followed by another Summit Club residence in August for $14.5 million. The actor noted that the hefty acquisitions were not only so he could become a Nevada resident, but so that he could also use his purchases to construct movie studios in an effort to make Las Vegas “Hollywood 2.0.”
And finishing off the list is Station Casinos’ purchase of about 126 acres at Las Vegas Boulevard and Cactus Avenue for $172.4 million in July, as part of the company’s efforts to increase their foothold in Southern Nevada by 50 percent.
Shelter Realty is a Real Estate and Property Management Company specializing in the areas of Henderson, Las Vegas and North Las Vegas, NV. Feel free to give us a call at 702.376.7379 so we can answer any questions you may have.
Below are some frequently asked questions we receive. Please call us for more information. Photo credit ShutterStock.com, licensed.
Accounting Processes
Accounting – What is your fee structure?
Management Fee – 8% of Gross Monthly Rent (minimum $100)
Admin Setup Fee – Waived
Tenant Placement Fee – $200
Referral Fee – $300 paid to referring agent
Additional Requirements:
$250 Reserve Fund (used for repairs)
Accounting – What property management accounting software do you use?
Shelter Realty’s landlord, tenant, statements, banking, monthly payments… and all other secure and sensitive information is managed through the number one property management software company, Appfolio.com.
One of the benefits of Appfolio is that our tenants and landlords can login to view their accounts, receive payments and pay bills.
And more importantly, Appfolio is a security fortress that keeps everyone’s personal information totally safe and private.
Accounting – How will I get reports?
Our landlords can access their accounts at any time through our website from a secured login screen.
However, each month we will provide you with a detailed report showcasing all income and expenses for your property.
All invoices and receipts for any repaired items as well as any correspondence on your property will be included in each report.
These reports will be sent to you no later than the 15th of each month.
Owner proceeds will be disbursed by the 10th of each month by direct deposit.
A 1099 tax form will be provided at years end for all tax and accounting purposes.
Accounting – How are landlords paid every month?
Your rental income will be deposited into your bank account on or before the 10th of every month, unless the tenant pays late.
Your accounting statement will be ready by the 15th of every month by email, as well as uploaded to your secured account on our website.
Fees – Do you charge for monitoring and maintaining vacant units?
No
Fees – Do you recommend home warranty and landlord insurance?
If the rental property is 5 years or older, we will definitely recommend to our landlords to invest in a home warranty. The cost of the home warranty varies from company to company and what you want to warranty. We recommend contacting several home warranty companies to get an idea of pricing.
A landlord must have homeowner’s insurance and we require our landlords to add Shelter Realty as an additional insured on their liability insurance policy.
Tenant Screening
Tenant Screening – What sets your screening process apart from other property management companies?
Tony Sena, Broker / Owner of Shelter Realty, Inc, is a former Henderson Police Officer who has been trained in a different kind of “interview” process than most property managers have experience with.
Basically, he knows how to read people’s body language and listen to their speech patterns in order to get a good feel for their true intentions. He’s also extremely fair and objective, which comes from years of learning how to make important split second decisions.
Obviously, the background checks, credit history, income, employment, references …. and all of the other necessary procedures for ensuring the safety of your property are handled as well.
Tenant Screening – What screening methods do you use?
In addition to the background, employment, credit and residence history checks, we use a non-biased number system to asses a grade for six different categories, including:
Length Of Employment
Income Verification
Rent-to-Income Ratio
Debt-to-Income Ratio (With New Rent)
Credit (F.I.C.O)
Length Of Residence History (5yr Avg.)
Rental Payment History
If the applicant is approved, the lease is sent by the lease coordinator for the landlord’s review and approval of the terms, as well as to verify inventory accuracy.
Tenant Screening – What happens if the tenant has a recent foreclosure?
It will reflect in their credit score and we may inquire about the circumstances surrounding their foreclosure to determine whether or not there is a possibility for the tenant to break a lease in the future due to an inability to meet the monthly rental payment requirements.
Tenant Screening – What if we can’t get a referral from a previous landlord?
If the previous landlord refuses to provide us with the information, it will not be held against the applicant. If the applicant fails to provide us with accurate contact information for their previous landlord, it will affect their score.
Tenant Screening – What if the applicant is self-employed and can’t produce regular income?
Applicants are asked for their last 3 months bank statements as well as a copy of their profit/loss statement from their last filed taxes to show their average yearly income as a business owner.
Tenant Screening – Is there a typical debt-to-income ratio you’re looking for?
Yes – we have a specific formula that takes into account their monthly rental payment compared to their other monthly debt obligations. These numbers are reflected in our applicant score card.
Tenant Screening – What factors would make you reject a prospect?
We take into consideration the final grade from our unbiased score card system. However, obvious red flags for a potential renter may include items such as:
Poor referral from previous landlord or rental company
A pattern of derogatory credit payment history
High debt-to-income / rent ratio
Low or no bank reserves
There are a few items that will cause an automatic disqualification of an application.
Owing landlords or utility companies money
More than 3 legal notices served from their landlords
Open Bankruptcy
Tenant Screening – Would you accept a tenant who met your qualifications in some areas, but not others?
By using a scoring system, the applicant would need to meet our minimum scoring requirements to be approved.
Tenant Screening – Which qualifications are most important to you?
There isn’t one qualification that is more important than another. We go through the entire screening process, score the applicant and either approve or deny the applicant.
Rental Marketing
Marketing – What is the average length of time it takes to fill a vacancy?
Right now on average, our single family homes are being rented in less than 30 days and condos less than 45 days. Depending on location, the average days on market could increase or decrease.
Marketing – Is that average time getting longer or shorter?
Because there are so many people in the market for rental homes in Las Vegas, we are seeing the average time getting shorter.
Marketing – How do you market your rental units?
We’ve been building our Internet presence for Las Vegas Real Estate since 2001, which now includes several top ranking and high traffic web sites that generate between 250-300 rental inquiries a month.
This is in addition to the phone calls and emails our office receives every day from families looking for rental houses or condos in the Henderson and Las Vegas areas.
Between our online listing syndication services, single property web sites and search engine marketing, our rental properties tend to move fairly quickly, which is why we generally only have less than a dozen rentals featured on our site at any given moment.
We can provide you a copy of our lease once a property management agreement has been signed.
Management – What is your late rent policy?
Rent is due on the 1st of every month and late after the 3rd. Late fees will begin to accrue on the 4th of the month.
Management – What other rules do you set for tenants?
We do not allow smoking in any of our properties. If there is a HOA, the tenant must abide by all rules and regulations set forth by the HOA.
Management – How do your tenants contact you?
Office, Email, Phone, Cell Phones and / Contact forms from our web sites.
Management – How much notice will you give before terminating a contract?
If we decide to terminate a property management agreement with a landlord, we will give them 30 days notice.
Management – What is your phone call return policy?
All phone calls will be returned the same day unless a message was left after hours and it’s not an emergency, it will be returned the following day.
Property Maintenance
Maintenance – Can you give me an overview of your property inspection and maintenance process?
Tedious, routine and extremely comprehensive, our property inspection process for rental properties is essential in protecting landlords and tenants.
We actually check our Las Vegas rental properties every 6 months to ensure that there are no unauthorized guests or pets, that the air filters are changed regularly and that the property is in good general condition.
A written visual report is taken and uploaded to the landlord’s account or sent via email.
Inspecting a rental home is one of the more uncomfortable and stressful tasks that most landlords dread. Our managers are extremely familiar with tenant / landlord laws, we work hard to earn the trust and respect of our tenants and we’re happy to take this burden off of your back.
Maintenance – Which kinds of maintenance jobs are handled in-house?
None. All repair work is handled by licensed and insured vendors.
Maintenance – How many quotes do you get for jobs?
Usually for small repair jobs, we only get 1 estimate and if the estimate appears to be pricey, we will get a 2nd estimate. For all others, we get at least 2 estimates.
Maintenance – How expensive does a job have to be for you to contact me before doing it?
Our contract states that we will get authorization for any and all jobs over $250. But don’t be surprised if we call you about a repair that is less than $250 requesting approval.
Evictions – What percentage of tenants do you have to evict?
Usually 1%-2% of the tenants ever become an issue that requires us to begin the eviction process.
Evictions – What if my tenants are giving me hassles, can I just change the locks and throw them out?
No – There are laws that protect both the landlords and tenants which must be followed. Otherwise, you may be subject to legal or civil recourse.
Evictions – What items does the 7 Day Notice To Pay Rent Or Quit require to have on it?
This notice should inform the tenant:
When the rent became delinquent
How much money the tenant must pay
That the tenant must pay the rent or leave within 7 judicial days
That the tenant may oppose the notice by filing an Answer/Affidavit
Which court the tenant may file their Answer/Affidavit
If the landlord wishes to use the formal eviction process, the notice will not state that the tenant may oppose the notice by filing an Answer/Affidavit in which case the landlord would be required to file and serve a summons and complaint.
Evictions – What charges may a landlord evict a tenant for in a nonpayment of rent action?
“Rent” means both rent, as that term is commonly understood, and any late fees set forth in the rental agreement (NRS 118A.150), fees for dishonored checks or overdue security (NRS 40.253(9)).
A tenant may not be summarily evicted in a nonpayment of rent action for court costs, collection fees, attorney’s fees or other costs.
Evictions – May a tenant withhold rent?
Yes – A tenant may withhold rent for either:
The failure of the Landlord to supply heat, air-conditioning, running water, hot water, electricity, gas, or another essential service.
The failure of the Landlord to maintain the unit in a habitable condition.
Evictions – How does the eviction process work here? Costs to me?
Rents are due on the 1st of every month, and considered late after the 3rd. Tenants have the ability to pay at our website, mail in a payment or hand deliver it to our office during normal business hours.
A 7-Day Pay or Quit will be posted, and the eviction process started if rents are not received in a timely manner.
In the case of eviction, costs will be deducted from the security deposit which usually is less than $350.
About – How long have you been a manager in this area?
Shelter Realty manages over 600 Las Vegas residential properties for local landlords and out-of-state investors, and has been involved with property management in Nevada since 2006.
About – Can I speak with any of your current clients?
We do have a few clients that have given us permission to release their name and number to potential clients that want to ask questions about their experience with Shelter Realty.
About – Do you personally invest in real estate in this area?
How Can A VA Compromise Sale Help Underwater Las Vegas Homeowners?
If your Las Vegas property is secured by a VA loan with a mortgage balance that is higher than the appraised value, and you need to sell, then you may be eligible for a special program called a VA Compromise Sale.
Basically, a VA Compromise Sale is a program similar to a short sale transaction, which is designed to help veterans sell a property with an upside down mortgage balance without taking a huge financial loss.
In any case, if you bought a home with a VA loan back when the housing market was healthy, you probably didn’t foresee the need to sell your home in the depressed housing market of today.
The need to move overseas, divorce or or a station change are a few of the reasons that would force a VA homeowner into selling a property.
Obviously, for many veteran borrowers who are facing this scenario, taking a loss on the sale of their home could result in extreme financial difficulty.
How Can A VA Compromise Sale Help Me?
If you are selling your house and receive a purchase offer for less than what you still owe on your VA loan, you can turn in an application with the Veterans Administration for a VA Compromise Sale.
In many ways, a VA Compromise Sale is similar to a short sale with another type of mortgage program.
The good news is that if you receive approval for a VA Compromise Sale, then the VA will redeem you for the difference between what you can sell your house for and what you have left on your VA loan.
To Qualify, You Must Show Proof Of:
Financial difficulties.
The realistic market value of your house at time of sale.
A VA appraisal.
Standard closing costs.
No second lien (the VA does makes rare exceptions if the total is not significant).
The reasons why you are selling your home.
Another important component of getting approved for a VA Compromise Sale is that the total net loss should be less than if the property was taken back by the bank through foreclosure proceedings.
So basically, if it costs more to foreclose vs “short sale” the home, then there is a greater chance of getting a VA Compromise Sale approved.
On another note, if your VA loan originated before December 31, 1989 you might have to sign a promissory note as well as enter a payment plan to redeem the VA a percentage of the compromise claim payment. This sum would end up being less than what you would owe if you did not originally have a VA loan, and the payment plan itself is formulated around what you would reasonably be able to pay.
Our Short Sale team has a proven track record of successfully negotiating with banks to help homeowners sell their properties for less than they owe on their mortgages. However, with a VA Compromise Sale, most of the negotiating process is reduced to simply filling out the proper paperwork and submitting a clean and fully completed package.
Please feel free to contact us to see if your property or unique short sale scenario might be eligible for a VA Compromise Sale.
Although the market value of a property is largely determined by the comparison between similar properties in a given area, the value of a home is, in the long run, determined only by what a buyer is willing to pay.
This means that, if a seller asks $300,000 for his/her home, but the best offer received is for less than that, then the value of the home is actually less then $300,000, regardless of the studies that were done to establish the home’s fair market value at $300,000.
There are a number of factors that can influence a buyer to pay fair market value, location being among the most important of influencing factors.
Good school districts are a powerful influence on market value, and are most likely of greatest importance in considering location relevance.
Convenience to the workplace, shopping, major thoroughfares, public transportation, entertainment districts and recreational facilities offer other location factors that can have an impact upon a property’s desirability, and as a result, market value.
Condition of the home and property is another strong influencing factor in establishing a selling price. Size of the home and lot, as well as upgrades and amenities are still more influencing factors.
Interest rates, time of the year, high or low inventories of available homes, number of distressed properties in a given area, specific neighborhood conditions, proximity to beaches or mountain areas, proximity to industrial areas, high or low crime areas; any or all of these factors will positively or negatively affect home values
Certainly, it is unlikely that any particular area or neighborhood will meet all of a homebuyer’s criteria, so it is important that the homebuyer look at needs versus wants in location and neighborhood amenities, and consider those options along with affordability; home prices, property taxes, etc.
Real estate agents rate a good location as one with high dollar value and an excellent prospect for substantial appreciation. Buyers have a more complex formula for deciding if a home’s price is suitable and its location is what they are searching for.
A buyer’s real estate agent can be a valuable resource in not only finding the kinds of homes that meet the buyer’s criteria, but can be additionally helpful in obtaining data relative to the neighborhood’s school district, shopping and commuting information, crime statistics, etc.
Since location is so important in so many ways, when the potential buyer finds a property of interest he/she should look over the neighborhood BEFORE making an offer.
Drive around during the daytime and at night, during the week and on a weekend to get a good indication of the noise factor, and overall condition of the neighborhood homes. Look for the number of occupied stores as compared to empty, and check with your real estate agent as to rising or declining neighborhood home values.
Calculating the net benefit of refinancing can be a challenging task if you do not understand what to calculate. We are going to focus on the net benefits of refinancing from the standpoint of lowering your interest rate.
Although there are several reasons to refinance, lowering your mortgage rate to save on interest payments over the term of the loan is the most popular.
Calculating the actual savings can be a tricky chore unless you know the difference between cash flow savings and interest savings. If your refinance objective is to only save on the interest by lowering your rate, then the interest savings should be done with the calculations below.
Calculating Interest Savings:
(Loan Amount x Interest Rate) / Months in year = Interest paid per month
($200,000 x 6% or .06) / 12 = $1,000.00
*Remember to do the calculation in the parentheses first*
We now know that you are paying $1,000.00 per month in interest. You should take the new interest rate you are getting with your refinance and calculate what your new interest payment will be.
($200,000 x 5% or .05) / 12 = $833.34
Now we need to find out the difference between the two interest rates.
Current Interest Payment – Proposed Interest Payment = Interest Savings
$1,000.00 – $833.34 = $166.66
Now you have figured out that by dropping your interest rate 1% on $200,000 you will be saving $166.66 per month or about $2,000 per year.
Awesome!
Anyone would want to save $2,000 per year, where do I sign… right? Not so fast, you’ll want to calculate the break-even point to find out how you will benefit after your closing costs.
In other words, it will take 30 months for you to recoup the cost of your refinance. If you plan to keep your mortgage for at least 30 months then you might want to consider this deal.
Okay, now we can calculate your net benefit for refinancing with one more calculation.
(Monthly Savings * Months you plan to keep mortgage) – (Closing Costs –Escrows) = Net Savings
If you kept the mortgage for 120 months (10 years) you would save $15,000.
Okay, now you can find out where to sign.
Calculating the net benefits of a refinance is crucial in determining if it is strategic for you to refinance. Keep in mind that each mortgage is slightly different and you may need to adjust calculations accordingly.
……
Frequently Asked Questions:
Q: I heard that I should only refinance if I drop 1% on my mortgage is that true?
Some people say ½ % , 1% to never. Every mortgage is different.
For Example: A no cost loan can have a 1 month break-even point with only a .25% drop in interest rate. Now that you know how to calculate your net benefit, you are able to figure out what may be best for your situation.
Q: Why can’t I just compare my current payment to the proposed payment and figure out my net benefit?
You could just compare just the two payments if you wanted to find out your cash flow savings, but the current and proposed loans may have two different amortizations.
Let’s assume you currently have a 15 year mortgage and you’re comparing it to a 30 year mortgage. If both loans have the same interest rate and loan amount but the amortization is different, your interest savings per month would be $0. However, you are going to show a cash flow savings with the 30 year mortgage because of the longer amortization.
In addition to the basic mortgage underwriting, processing and origination fees that are charged by a lender, there are several other costs associated with purchasing a new property.
Since every player on your real estate home buying team has a stake in your transaction, it’s a good idea to know how to budget for their services.
Common Out Of Pocket Expenses To Budget For:
The items below are common to a Real Estate transaction and you may be required to pay for them up-front:
*In most Cases the estimated fees for each item have been purposely left out since each scenario is different.
Home Inspection-
This is usually money well spent since the inspector will evaluate many aspects of your new home to ensure all systems are functioning as they are intended to.
Condominium Questionnaire Fees-
This may be required by your lender, and can take up to 30 days to receive. Fees can range anywhere from $0 to $300 depending on the complex.
Well and Septic Certifications-
If your new home has either of these systems you will want to be sure that they are functioning properly.
Survey-
This document outlines the borders of your property, and the price can vary depending on the size of the lot and if it was actually staked out. A survey is not a requirement for all purchase transactions.
Appraisal –
Depending on your state, loan size, property type, loan program and lender, the appraisal may be required to be paid for up-front by the borrower. And, in some cases, more than one appraisal may be required, especially if the borrower is switching banks and using conventional financing.
A typical purchase transaction will involve some, but not necessarily all of these services. It’s important to discuss any other potential out of pocket expenses with your agent and loan officer, since some of these items may not be included on the initial Good Faith Estimate.
The important thing to realize is that the vendors providing these services will expect to get paid whether or not your transaction closes, and they may ask that you pay when services are rendered.
A combination of just a few of these fees could easily add up to over $1,000 so it is important to have the funds set aside at the start of the process.
Frequently Asked Questions:
Q: Where Does My Earnest Money Go?
An Earnest Money Deposit (EMD) is simply held by a third-party escrow company according to the terms of the executed purchase contract.
In most cases, the Earnest Money held by the escrow company is credited towards the home buyer’s down payment and/or closing costs.
*It’s important to keep in mind that the EMD may actually be cashed at the time escrow is opened, so make sure your funds are from the proper sources.
Q: Do I Have To Pay My Real Estate Agent On A Purchase Transaction?
In most cases, the buyer is not responsible for covering the costs of their real estate agent.
When a home owner hires a real estate agent to list, market and sell their property, they’re also agreeing to compensate the agent representing a buyer.
A common myth is that a buyer will get a better price on a property if the seller doesn’t have to pay the typical 3% to a buyer’s agent.
However, it’s more expensive to buy an overpriced property, not negotiating properly for the acceptable seller paid closing costs, overlooking important language in the purchase contract, missing potential commercial zoning updates on a nearby lot, or buying a home that has a lawsuit against the HOA.
Q: What Are Mortgage Points?
Mortgage points are fees charged by the lender for services and/or a lower interest rate.
One Mortgage point is equal to one percent of the loan amount. For example, on a $100,000 mortgage $1,000 would be equal to one point.
Understanding what points are and how they work can save you thousands of dollars on your mortgage.
Borrowers can pay mortgage points to reduce the interest rate charged on their mortgage.
The Borrower may also choose to raise the interest rate to reduce the closing costs. This is sometimes called buying up your interest rate. This buy-up strategy is used when the intentions of the borrower is to keep the mortgage for a short period of time.
To decide whether or not to buy-up or buy-down your interest rate you must first calculate a breakeven point.
The following formula can be used:
Cost of buy down / monthly savings = months to breakeven point. If you plan to keep the mortgage longer than the breakeven point then buying down points may be beneficial to you.
For example: $1,000 cost to buydown rate / $100 savings per month = 10 months to breakeven
In the above example if you plan to keep the mortgage for more than ten months (the breakeven point) you should buy-down the interest rate. In the above example if you kept the home for five years your savings would be $5,000.
Make sure you consider mortgage points in your strategy when getting a loan. It can save you thousands of dollars.
Q: Are Discount Points Tax Deductible?
Yes, they may be tax deductible, but make sure to speak with your tax advisor.
Q: Can I Pay More Than One Point For A Lower Rate?
Mortgage points usually are calculated in 1/8 increments. A good rule of thumb to follow on a 30 year fixed rate is for every .25% drop in interest rate it will cost you one mortgage point.
Q: Is a “No Origination Loan” or “No Cost Loan” a Form Of Buying Up A Rate?
Yes, this strategy is usually used when the borrower is planning to keep the mortgage for a shorter period of time.
Calculating an exact mortgage payment without a calculator on a loan is no small task, but there are some simple rules-of-thumb you can use to get a close estimate. With the exception of the MIT Blackjack Team, performing this type of complex math in your head often leads to frustrating rants. When coming up with a rough estimate, it is important to understand the individual components that factor into the overall monthly mortgage payment.
Yes, the thousands of dollars you send to your lender every year may cover more then just the mortgage, but referring to one simple formula will help you gauge what the new payment will be as you’re out looking for new properties that may be in your price range.
What’s In A Mortgage Payment?
A mortgage consists of 4-6 parts:
Principal – the balance of the loan
Interest – the fee paid to borrow the mortgage money
Property Taxes – based on county assessed value and residence type
Hazard Insurance – in the case of fire or property damage (may include a separate flood policy)
Most lenders use the acronym (PITI), which includes Principal, Interest, Taxes and Insurance.
And in the case where a separate Mortgage Insurance Premium is required, we add another “I” to the end of that creative series of letters.
Another monthly expense that you have to consider is the monthly dues that come with properties that have a homeowner’s association (common in condominiums and other developments). This isn’t a payment made to your lender, but you will have to qualify with that payment and it is also best practice for you to factor that in the monthly cost of your new home.
Confused yet? Don’t worry, this is slightly easier then most state bar exams.
The Mortgage Payment Cheat Sheet:
Ok, you’ve made it this far and haven’t closed your browser, so I guess that is a good thing.
Now before I reveal this top secret formula, you have to understand that it will by no means be exact.
Mortgage Payment Formula:
For every $1000 you borrower, your TOTAL monthly mortgage payment will be $8.
So, if you purchase a home for $250,000 with a $50,000 down payment – borrowing a total of $200,000, then a good estimated total monthly PITI payment would be roughly $1600.
But don’t forget to add your homeowners association dues to that monthly payment.
What If I Pay Taxes And Insurance Separately?
Well now we’re at the easy part. If you elect to pay taxes separate from your mortgage, the cheatsheet is reduced from $8 per $1000 down to $6 per $1000.
So there you have it. $8 for every $1000 borrowed.
Again, please keep in mind that this is not going to give you an EXACT payment. You may be purchasing a property with higher real estate taxes or your insurance premiums may be higher then average depending on the state you live in.
The dreaded mortgage application process isn’t so scary if you know what to expect. Here is a quick breakdown of a few questions that I address during the initial phone or office interview and mortgage application:
1. Have you spoken with any other loan officers regarding this transaction?
I like to know what a borrower has been going through prior to speaking with me. If there have been several credit reports pulled by other banks, I don’t want to contribute to possibly lowering their score by pulling another report. I also ask this question because I want to know why the borrower is talking with other loan officers. Is it a rate and closing cost thing, or did the previous banks not fulfill a certain need or expectation? It just makes more sense to find out what people want up front, so that I can focus the rest of my time serving their specific need.
2. Will this be a primary residence, second home, or investment property, and how long do you plan on keeping it?
These two questions usually start a conversation about the borrower’s intentions and real estate investment goals. Buying rates down, ARMs vs. 30 yr. fixed, FHA, conventional, seller paid closing costs….. There are several mortgage opotions to consider for each individual circumstance. It is nearly impossible to have a productive discussion about rates, programs, and closing costs until you have clearly articulated your real estate investment goals with your loan officer. It is absolutely acceptable to ask a loan officer what their rates are, however, be prepared to supply a little more information so that your loan officer can apply the best rate that fits your scenario.
3. Total monthly payment and down payment you have budgeted for?
Again, back to the needs and goals of the client. It is common for a borrower to ask a loan officer what they are approved for. However, you may be approved for more than you actually want.
Here are a couple of easy formulas that you can apply when calculating a monthly payment, down payment, and total purchase price:
Banks look at a borrower’s Debt to Income Ratio (DTI) as a factor for mortgage loan approval. 40% is a safe DTI to pay attention to for figuring out what you might be approved for. This means that your total monthly minimum payments, including the new mortgage, cannot be above 40% of your total verifiable gross monthly earnings. Credit score, down payment, and assets are compensating factors that a bank will consider for approval if your DTI is above 40%.
EX: Total monthly gross income – $2,000
%40 DTI = $800 a month in total allowable payments
A good rule of thumb for determining a total mortgage payment is by multiplying $70 for every $10,000 loan amount. I’ve found that this is a safe calculation which also includes taxes, insurance, and mortgage insurance.
So, for this scenario, the borrower would be approved for a loan amount of around $114,000. If this borrower had a $200 a month car payment, then the the loan amount would drop to $85,000.
$800 a month total @ 40% DTI
– $200 a month car payment, leaving room for a $600 a month mortgage payment.
$600 divided by 70 = 85
85 x $10,000 = $85,000 total loan amount.
*Remember, that 40% is just a good starting point. I’ve had borrowers approved up to a 65% DTI who had great credit, a significant down payment, and plenty of assets in the bank.
So, why do I ask a client what type of mortgage payment they want? Simple, if they are approved up to $900,000, but only want a $1500 a month payment with zero down, I’m going to let their agent know to stay around the $200,000 – $230,000 purchase price range.
4. Employment, residence history, income, and assets.
Just remember the number 2. A bank will need two year’s employment and residence history. As far as conditions, be prepared to bring provide the most recent two bank statements, W2s, Tax Returns, and pay stubs.
If you have all of this stuff prepared ahead of time, the application should be smooth and painless.
