Are you tired of living in your parents' basement, noisy neighbors, or upstairs? For whatever reason, you want to own your home. It can be both daunting and exciting to take this leap. All expenses that the landlord has been paying becomes your responsibility now including; taxes, maintenance, and repairs, utilities, taxes, water, garbage, and insurance, among others. If you are ready to buy a home, here is an exclusive look at the top ten home buying tips.
1. Get ready
You cannot just jump into buying a home on a whim. This is a financial process involving inspections, insurance, contracts, and mortgages that will affect your financial health and credit score. Before getting to purchase a home, you need to get your finances ready and yourself too. Some of the things that you should do include;
Look out for errors in your credit score.
Find the things that will improve your credit score because a high credit score gives you a low-interest rate.
Find ways to reduce your spending.
Prepare a budget to get the impression of your monthly spending.
Avoid spending big and taking new debts.
Begin to save for the moving cost, down payment, and closing costs.
2. Check if you can afford
It is essential that you get to know the home that you can afford. This can be done by pre-submitting your financial information to the lender for them to calculate the affordable mortgage payments you can afford. Getting a pre-approval provides you with a price range and guarantees the seller you can afford the sale. As you shop for a loan, directly go for the mortgage brokers other than falling for online scams and low-interest rate ads. Mortgage brokers will help you establish the perfect payment options and loan type.
3. Be organized
Prepare a list of significant things to you and divide it into two; 'like to haves" and 'must haves." The list will help you concentrate on what is most important. More so, have a checklist on the documents needed and things you need to do. The real estate agent and the internet can help you determine what should be on the list.
4. Have a real estate agent
A real estate agent has a better understanding of the processes involved in buying a mortgage. You should hence, hire an agent with excellent local knowledge and some years of experience in purchasing homes. Most people find real estate agents through their acquaintances, which is why you need to conduct some research before signing an agreement.
5. Begin hunting for a home
This is the best and fun part of purchasing a home. You can opt to begin your search online to get a rough idea of the homes available in your price range. Place listing sheets in a folder and start hunting a home. When attending open houses and viewing houses, you should print out the listing pages and put down some notes of your impressions and thoughts for each house. This will help you in later analyses when making the final decision.
6. Do your assignment
While you hunt for a house, put together the needed paperwork such as tax returns, pay stubs, residence history, retirement account statements, W-2 forms, and bank and credit statements. After you decided on the location, you want to settle and have narrowed down your choices to several houses, conduct some research with the help of a real estate agent. Explore the area on different times and days, examine the neighborhood, including public transportation, taxes, crime, schools, and amenities.
7. Move smart and fast
After you are through with your homework and have liked a home, it is time to move fast. However, if you have some reservation about the house, you should not succumb to pressure into completing a sale. Keep in mind that once you purchase, you will have to live with the decision.
8. Always negotiate
Your real estate agent will help you in the best way to achieve what you want. You should negotiate almost everything from inspections, fees, price, repairs, conditions, deadlines, personal property to contingencies.
9. Place your best offer first
Having completed your assignment, obtained a pre-approval letter, and put your finances right, you are in an excellent position to make your best offer first. The agent will help you determine the best offer by checking at similar homes in the area.
10. Ensure to do a home inspection
It can turn to be costly to skip a home inspection after you have already made the purchase. The home may have hidden defects, which can cost you a considerable chunk after purchase.
It is critical for you to have a thorough understanding of the processes in buying a home to avoid being shortchanged. Always remember that a real estate agent is your partner, guide, and advocate through the whole process. Download our buyer checklist today to learn more as you move towards achieving your dream.
Ed Kaminsky [00:00:06] Well good day everybody. This is Ed Kaminsky with the Kaminsky Real Estate Group and SportStar Relocation. We're excited to be here today. We're at our new offices in Hermosa Beach. Matter of fact our workers are still here so if you hear noise in the background that's what it is. And, I'm excited to be sitting here with a great local businessman, wealth manager and author sitting here with Michael Ernst of Ernst and Company Wealth Management. A gentleman who's just finished writing a book and he's in the wealth management business. And I love sitting down with these guys that are in wealth management really for two reasons one 1 one they're around wealthy people and they're advising wealthy people so there has got to be a lot of knowledge in their brains about how to either one get wealthy or two how to protect your wealth. I would love to uncover a little bit with that with you today.
Michael Ernst [00:01:09] It's great to be here by the way. Thanks for having me.
Ed Kaminsky [00:01:10] And you know you said something to me on the phone the other day and said Hey can I ask questions about you. So it's going to be I think a fun little exchange awesome I thought was a great idea because I'm usually interviewing the guests or coming into the office and this time we're going to reverse it and go both directions. But why don't we start with you I know you had some questions and we'll start there and in perfect we'll see how it goes.
Michael Ernst [00:01:33] Perfect well thanks again it's great to be here. And coming in and setting up the office is beautiful by the way and I don't know if that camera shot can see this but there is a shoe here and I was wondering if that's an actual shoe
Ed Kaminsky [00:01:48] You know thats really Shaquel O' Niel's and people are 100 percent convinced it is not real when they come in they said well it's a joke it's not real. I believe it is wider than my desk almost. So to me it's unbelievable.
Michael Ernst [00:02:01] I can't believe a human being wears that shoe. So anyway. Great to be here. Well thanks again for having me. I've seen you around for a lot of years. And real estate is on the minds of everyone you know here in Manhattan Beach in the South Bay. Property values seem to largely always be going up. How do you advise clients how do you best.
Ed Kaminsky [00:02:21] Well interesting question because it does feel like real estate prices do always go up but they don't. There are times when they don't. So ultimately what I want to do with each and every client is really understand what their short and long term goals are. Once I understand what their short and long term goals are then I can advise them what direction to go. For example I can have athlete come into L.A. and join the Lakers and he's on a one year contract. He wants to know if he should buy or sell or buy or rent rather short term after we just had a long run up in a boom real estate market and stock market like we have. You've got to go caution. Interesting. Exercise caution.
Michael Ernst [00:03:06] So add in that type of a scenario would you advise that client to rent or are you still looking for a purchase.
Ed Kaminsky [00:03:12] itdepends upon their move or it depends on what they think they want after one year. Right so it's not the same for every client so if they say hey I'm in L.A. for one year and I'm out of here and I'm going to Dallas I'm going to Miami whatever it is and I will never be back again. I might tell them one thing if he says hey if L.A. grows on me and I want to stay here long term I may have a different answer if I make sense.
Michael Ernst [00:03:34] So it seems like it's very consultative.
Ed Kaminsky [00:03:36] It is yeah it's a bespoke kind of conversation that goes on trying to and it identify the nuances of each and every client.
Michael Ernst [00:03:44] That's not a lot different from wealth management. I mean you can really see how your guidance can help out you know 31 years in the business. Yeah. Makes a difference.
Ed Kaminsky [00:03:51] Oh it does. I mean you just you know I see people in our industry and others that are quickly advising clients based on what they think. But it's not what you think or now it's based on what that person's needs are and where they are going to be in a year or five years from now and you got to think ahead for them. It's critical.
Michael Ernst [00:04:11] That makes perfect sense. I think that there's so many changes that take place in the economy and therefore real estate and I see a lot of changes taking place. What would you say in your 31 years in the business. What types of changes have you seen and where are we now and as we reflect there's a lot of changes in the real estate market.
Ed Kaminsky [00:04:30] I think just the information flow that is out on this on the and available to consumers today is dramatically different than when I started when I started we used the local daily paper The Daily Breeze to market a property we put a two line ad in for twenty nine dollars and that's all a client knew about a property it was three bedrooms two bars fifteen hundred and twelve square feet four to ninety nine and that's all they know.
Ed Kaminsky [00:04:58] They know how long it was for sale they didn't have a garage. I mean nothing right. Today everything you want to know about that house is online.
Ed Kaminsky [00:05:07] The neighbor's house is online with the neighbor sold for with average prices are etc. So the information that flows to consumers is good and bad in some ways and I'll explain because there's so much information they think they know everything that they can make mistakes with that information. There are other nuances that you'll never find online for example I've sold homes literally one million dollars difference in price. Exact same builder exact same floor plan. One block apart.
Michael Ernst [00:05:43] Interesting. Wow.
Ed Kaminsky [00:05:45] But one block can sell for dramatically more than another block. You'll never forget that computer.
Michael Ernst [00:05:51] Well I wasn't asking that specifically so what kind of information or changes would exist that would justify that type of a change a block apart. A million dollars is a big number.
Ed Kaminsky [00:06:02] Well certain blocks earn a certain reputation and it can be based on the lot sizes that are slightly different in one neighborhood. It could be that.
Ed Kaminsky [00:06:15] In that particular case what it was was on one street. You have this beautiful row of these eucalyptus trees with gas lamps that just create this unbelievable storybook setting right. Well the other street half of the street is an alley. The other half is a house is the drive right for your homes. So you're looking at the back of other homes as the front of other homes. That slight differential created a million dollar gap.
Michael Ernst [00:06:47] Well when you put it that way I can see that make a big different. Yeah for sure. Well as a wealth manager obviously I deal with people and their money and their goals and they want to protect their assets. They want to grow their assets as a real estate professional. What kind of advice can you provide for your listeners and my clients interested in real estate for an investment.
Ed Kaminsky [00:07:08] Well I usually suggest they take all their money out of wealth management and put it not.
Ed Kaminsky [00:07:13] No, I think what it comes down to and I'm sure you discuss this with your clients is asset allocation.
Michael Ernst [00:07:23] Right.
Ed Kaminsky [00:07:23] And how much they should be invested in riskier investments versus safer investments. So when I'm with a client it's similar right there make a decision how much they want in real estate either based on them knowing already or a discussion with their personal wealth manager about what's safe to put in a real estate investment side. So once they decided what that amount is we have the same nuances in the sense that if you're going to invest in investment property for example.
Michael Ernst [00:07:54] Right.
Ed Kaminsky [00:07:54] You can invest in an area that has incredible appreciation. Areas like Manhattan Beach Hermosa Beach Beverly Hills those kind of communities where the appreciation is just outperforming.
Michael Ernst [00:08:09] Its almost almost breathtaking.
Michael Ernst [00:08:10] Yeah it outperforms almost any asset class but your income from rent and owning those properties can be extremely low in comparison to the purchase price.
Michael Ernst [00:08:21] Interesting.
Ed Kaminsky [00:08:21] You may have to put 50 percent down or 60 percent down just to break even. But you're making money on appreciation not monthly cash flow whereas you can look at something in an inland. Right. You go into Los Angeles or any inner city community anywhere in the country. Right. And you get two or three times the amount of monthly cash flow on a property but expect no appreciation.
Michael Ernst [00:08:46] So the multiplier.
Ed Kaminsky [00:08:48] Yeah. So I would make that in the stock world of which you know better than I do. Maybe some companies pay high dividends but they don't unduly go up in value very much as others.
Michael Ernst [00:08:59] High dividend companies generally are not considered growth companies. Right. Interesting. Well you know being a local resident homeowner Manhattan Beach I think myself and all of us really love to see the property values go up. Yeah. And the clients and friends and I speak with say wow what a great investment right. And so from a purely technical wealth management point of view on the balance sheet house a home is a liability. Right. It's an expense. So how do you how do you justify that with clients as that conversation come up and when we all the wealth effect as powerful as appreciation continues. We all feel more wealthy it feels much better when prices are going out versus going down. But how do you advise your clients. .
Ed Kaminsky [00:09:45] You know I, whenever possible I do recommend people to stay as conservative as comfortable on their personal residence because the more liquidity and assets they have outside of their personal residence the better they can invest for the future. And whether it's giving it to a wealth manager to to protect grow it or it's putting it in real estate investment assets like income property duplexes triplex is 50 unit buildings whatever it might be. Their wealth is going to grow at a much higher rate in investment vehicles like that than in our personal residence. But they're you know consumers buyers are clients. They work hard right. Anybody who is making this kind of money live in a community like this. They worked their butt off. And they want to be rewarded. And part of that reward is showing off their hard work with their personal resonance because they're entertaining friends and family and everything else and they can't help themselves but to show off what they've done. You know I'm one of them I've always had a nice house. And I guarantee you that if I stay.
Michael Ernst [00:10:52] Whens the pool party.
Ed Kaminsky [00:10:54] If I stayed a conservative word to the wise and just bought a small little house 30 years ago and never upgraded. I'd be worth three times what I am today.
Michael Ernst [00:11:06] So worn out Buffett is famous for living in the same place for I don't know 50 years. Somebody extraordinarily long. Absolutely. He's not a big.
Ed Kaminsky [00:11:14] Yeah. Because every dollar he had that he didn't spend on himself he put it into investment vehicles that you know profited over and over again. So interesting.
Michael Ernst [00:11:26] Very very good stuff. Well you know also in my business I watch the economy very closely. That includes lots of different variables and lots of different components. One of the important ones is interest rates and understand interest rates can be one of the factors that have an effect on home values as we've had so many things happening. The market has stretched both the bond and stock markets real estate values. What's your assessment how do you see that the real estate market today.
Ed Kaminsky [00:11:56] Well today it's interesting. I'm going to go back to 2018. The last quarter 2018 showed some really signs of weakening in the real estate market. We saw a slowdown of sales we saw a increase of days on market and this is on a national level as well as local. So we all walked into 2019 thinking hey this is it that that run up is done and we're going to see another decline in 2019. But the Fed's got. A little bit nervous about where interest rates were going for. For whatever reasons they have you pray you understand that better than I do and they pull them back. So brought interest rates back down again and slowed that increase in interest rates. That is spurred on activity in the marketplace. Most of our buyers today are buying based on their payment not based on the price of the house. Right. So the interest rates drive what their payment will be and their affordability. So with the lower interest rates we have us pretty safe. I think market right now locally is not the same nationally but in Southern California we're seeing some strength. We do believe though in 2020 with an election year coming right that we could see you know some cause for pause for for many buyers there they're always waiting who's going to get elected. How is it gonna affect my life. And you'll see a little bit of a slowdown. So I would expect prices to be relatively flat in 2020. I've continued to ask the big question When's the crash when real estate prices don'.
Michael Ernst [00:13:40] You took the words right out of my mouth. .
Ed Kaminsky [00:13:42] When is it when's it coming. Well if you ask anybody smarter than me who studies the economy which is most everybody they're saying they can't identify the one thing yet that's going to create a real estate crash. We do not have the same circumstances going on right now that have caused the previous crash crashes. The most recent one of course was just the over extended credit to consumers and homebuyers still pretty fresh in a lot of people's mind. Yeah and that doesn't exist right now. You can't buy a home with no money down. You have to actually have income to qualify.
Michael Ernst [00:14:22] But can you repeat that. You have income to buy a home, go figure.
Ed Kaminsky [00:14:27] So it's changed so people do have equity so not be as quick to run from their house if they're having a little bit of trouble because they're going to try to protect their equity position. Back in 2008 they didn't have equity. So there was nothing to protect if they walked away. The worst thing that can happen to them is the bank says I want your house. They didn't want the house. You can't afford it. You're like Oh well thank you. Right. Right. Different market today.
Michael Ernst [00:14:55] So that's another one of the things that you hear a lot on Wall Street it's different this time. Right. And maybe it is. But you mentioned interest rate and that continues to be an interesting conversation or topic of conversation for me and my clients. I think there's a direct correlation to all of the investment vehicles and instruments right whether stocks bonds futures contracts and certainly housing. We reflected for a minute on the crash and not the crash. I guess it could be seen as a serious correction. I think it did go down almost 20 percent but a lot of people view that as a point in time when the Fed was tightening they did initiate their first quarter point rate hike. Right. And they talked about a systematic increase in rates throughout the year and the market didn't like it. You know we did see a softening in real estate certainly according to you and your research we saw the markets draw down pretty seriously a cost and trepidations and it appears to me as though the Fed really backed off. Right. And I think they're watching the markets very very closely. Why do you foresee that playing out. I mean is that maybe this is outside of the the parameters of what you do on a daily basis but is the Fed trapped. You know if they do raise rates at some point in time maybe in 2020 it think they're going to ask for the year does that have an effect on housing.
Ed Kaminsky [00:16:13] One hundred percent. There's there's no question that affordability is the biggest influence of real estate prices. And if you watch the history of affordability as it moves up and down you'll see that the prices of real estate changes during price times. So the second they start pushing interest rates up and change affordability you'll start to see a tightening of prices 100 percent.
Michael Ernst [00:16:38] Well I think the way you described it just a few moments ago is the payment rate homebuyers buy a payment not a not a on a price. And so as rates increase the cost of that mortgage is going increase. How do you guide clients through that scenario. I mean if you have a buyer that's coming out to you now.
Ed Kaminsky [00:16:55] Well first of all I'm advising clients to look at their payment. That's that's how they buy it right. So I'm suggesting they remain extremely conservative in their purchase.
Ed Kaminsky [00:17:08] There are buyers that want to be a little bit more aggressive there 34 years old they're beginning of a great career and they know their income is going to double and triple and quadruple over the next 10 years.
Ed Kaminsky [00:17:22] They can be a little bit more aggressive but those that has had more maintained steady income and don't expect massive rises than I say stay conservative stay within your ratios your ratios are these are the secret number.
Michael Ernst [00:17:38] All right hold on. Let me get my pen.
Ed Kaminsky [00:17:40] So how do you have to be a math I'm a genius to figure this out but the most conservative ratio to look at and what you should spend on housing is 28 percent of your gross income. OK should be your mortgage payment.
Ed Kaminsky [00:17:55] Eight percent. You can go up to 36 percent if you add your revolving debt. So you have credit card debt car payments et cetera or student loans. Then if you don't go over 36 percent you are in a very conservative payment ratio.
Ed Kaminsky [00:18:12] Interesting.
Michael Ernst [00:18:13] So you would talk to your lender about how to figure that out if you don't know how to figure it out. There's many many buyers that go into the 40s and even as high as 50 percent of their gross income towards their mortgage payment and debt. It's a little bit risky and that's where people tend to get hurt. But people have done it.
Michael Ernst [00:18:30] People have done it. Yes. Is that number standardized. Those ratios can network across different demography.
Ed Kaminsky [00:18:37] yeah I mean the 28 over 36 percent ratio was the first number I learned 30 some years ago and banks still look at that today but they've been more aggressive the banks have been more aggressive and lending way over those ratios.
Michael Ernst [00:18:50] Are lending standards easing right now.
Ed Kaminsky [00:18:53] No, you know then they're not easing but over the course of 31 years I'm talking about. But over the course of the last 10 years now they have they've tightened. They've remained tight. You see a couple guidelines loosening here and there but for the most part no they've they're fearful of what happened in 2008.
Ed Kaminsky [00:19:15] Do the all the really ridiculous lending from 2002 to 2006.
Michael Ernst [00:19:20] As we're talking about interest rates and different ratios how can we prepare. How do you prepare buyers right if someone's coming into the market and you have those ratios maybe 25 percent to 40 number one I. Do they get. It's a little frothy.
Michael Ernst [00:19:36] Are they reaching out over their skis and how do you prepare people to really qualify?
Ed Kaminsky [00:19:40] I remember we said these five and dime store is back when we were little of what they call him today. But 99 cent store. Yeah I say think five or thing 10 if you think in increments of five years or 10 years of where you're going to be.
Ed Kaminsky [00:19:58] Then your decision should be a bit easier. If you feel you can afford this home for the next five years based on where the payments are you're pretty safe. OK if you think in increments of ten years it doesn't matter what the market's doing if it's going down or going up because we in every single real estate market we've ever seen it's come in and out of any price point within a ten year period time. Southern California is not there's not global. You can go to communities like I don't know about.
Michael Ernst [00:20:36] Vegas.
Ed Kaminsky [00:20:37] Vegas the middle of the US you know areas where it got quite depressed and just never fully recovered. But in southern California where we're sitting today everything is always recovered over a period of 10 years. So you're sitting on a fence thing oh maybe I should buy a house because prices are going to go down next year. Honestly it doesn't matter if you can hold it for 10 years because you're locking in what I consider still the best interest rates you're going to be able to get super low. Certainly in the near future. So if you're locking in a rate in the 3s the high 3s right now. And you stay in his home for 10 years it doesn't matter if prices go down 10 or 20 percent in the next two years. Right. It's going to recover and come back. But you were smart because you've locked in that low interest rate and kept yourself protected.
Michael Ernst [00:21:25] Interesting. Is it common for you to come across a buyers that are trying to wait out the market you know wait for a point in time to get into the most people figure they need a house they want a house they can qualify now's the time.
Ed Kaminsky [00:21:37] Well there's there are two groups of buyers. There are buyers and sellers that are selling or buying because of something that happened in their life. They're getting married getting divorced.
Ed Kaminsky [00:21:49] They're empty nesters there have new babies they been relocated so there's always people that need to move for one reason or another and they're not going to be a renter. So though that's a section of the consumers and buyers that are always going to be moving. Yeah. The other part that are trying to time the market. There's always a large group of people that think they can time the market perfect. Right. And so you know that does drive the market to go up or down because if you have a large group of buyers saying hey timing is not now I'm not doing anything. That's when we see those slowdowns.
Michael Ernst [00:22:26] Interesting. That's really valuable information. Very informative. I want to ask you the same question for sellers. I mean how do you best prepare a seller. How can a seller best prepare themselves to get house on the market.
Ed Kaminsky [00:22:38] Well I think when I when I discuss things with sellers it's about preparing the home and their mindset for if if maximizing price is important. Right. For some sellers it may not be the case.
Michael Ernst [00:22:53] Profit motive had we got to wait. We've got to maximize profits.
Ed Kaminsky [00:22:57] Well I would say 90 percent decline to sit down with. If I ask them what's the most important thing they say show me the money.
Michael Ernst [00:23:03] Is staging a thing.
Michael Ernst [00:23:05] Is that a real thing. It is that. Does that add value.
Ed Kaminsky [00:23:08] You know what it does it does it. It's tremendous. But if you live in the home staging it is different than if you don't live in the home. So if you have a vacant home staging it is a big deal and getting furniture in there. When we stage a home it's occupied I call a little bit different is sort of re readjusting what you have in there. Eliminating a lot of personal things that make the home personal probably the biggest word of advice I would give is do you have a third party look at the home and see it from their eyes and talk to you about what they see. Because when you look at your own home you see something completely different than the rest of the world sees. So preparing that home and making it look as if it's not your home. Right. Meaning the buyer walks in there saying oh I could live here.
Michael Ernst [00:23:55] They can visualize them.
Ed Kaminsky [00:23:57] Visualize themselves living right sitting in that chair and living there.
Ed Kaminsky [00:24:00] So the more you can get the home to look like that the better those emotions are going to arise in those buyers eyes and minds. And that's going to get them right the bigger check.
Michael Ernst [00:24:10] Make sense.
Michael Ernst [00:24:12] That makes sense. So when I first walked in the office I know I think it's off camera but you've got a lot of hockey sticks you've got basketballs you've got this is that a real Stanley Cup that you got the Stanley Cup in Hampshire. Im sure that's not real.
Michael Ernst [00:24:25] Most impressive was the shoe that apparently belongs to a real human. Shaquille O'Neal is unbelievably huge. So my understanding is that you have another armed your business one that serves professional athletes and relocation. I'm fascinated by that.
Michael Ernst [00:24:38] Can you tell.
Ed Kaminsky [00:24:38] Yeah we've been working with athletes for a couple of decades now and we have that arm of the business called sports star relocation sports or relocation we relocate athletes when they're drafted they're traded they become a free agent. We all think they all make a lot of money and they do certainly a lot of them but their lives are just ripped apart when they get traded because the kids already in school just my friends or wives got relationships and friends out there but they're you know hair hairdresser and everything else that goes on and they say hey we got to move tomorrow.
Ed Kaminsky [00:25:15] So we step in we try to make that move a little bit less stressful. I have someone on the streets and every major sports city that can help them with getting their items packed and moved their cars re-allocated selling existing home finding their their new home. And so we help with that entire process for me A to Z.
Michael Ernst [00:25:35] Wow that's fascinating. How long have you been in that business. I know you've been around here locally for 31 years plus.
Ed Kaminsky [00:25:41] Yeah I think it was probably the early 90s when I started working on my first athlete. Wow. And I didn't have. Do you remember your first client. I did. It is a recognizable name.
Ed Kaminsky [00:25:54] Can you say I was that I wasn't recognizable as a young hockey player and I remember his name is Bob Codellski.
Michael Ernst [00:26:03] Sounds like a hockey player.
Ed Kaminsky [00:26:06] So that was the early 90s L.A. when they were liking players some many many.
Michael Ernst [00:26:11] Yeah. Fantastic.
Michael Ernst [00:26:13] So I don't know we covered a lot of really interesting points. What do you see on the horizon. I mean how do you guide your clients through the period the point in time we are now and what do you see?
Ed Kaminsky [00:26:23] I Think the most important thing is a sit down with their own family and discuss what is important to them get really really clear you know isn't owning a home is it buying investment properties of building your wealth is it just being financially comfortable where do you see yourself three years from now five years from now and ten years from now get really really clear at home what that is. Then sit down with your wealth manager sit down with a great real estate agent and discuss what those goals are and and then move forward. But don't don't jump first and think second.
Michael Ernst [00:26:58] Right.
Ed Kaminsky [00:26:58] Think first then jump. And Michael you just shared with me a few months ago a great book that you wrote. Thanks for sending that to me. I'm going to start with that what what inspired you to write a book the book.
Michael Ernst [00:27:14] What inspired me to write the book. You know I feel like I just had a lot to say and I've always wanted to write a book and it was a great point in time for me to do that. And one of the biggest challenges I see for investors is themselves. You know most investors allow emotions to drive their investment decisions and that's a big mistake. Right. So the book focuses a lot on the core economic components that drive markets. So I discuss that a little bit. It's a little bit wonky. But largely the book is a discussion on how to really get a handle on our emotions as investors and how to construct a portfolio that really removes the volatility and emotion from investing.
Ed Kaminsky [00:27:56] Interesting. You know as I think about real estate and I do find that buyers do buy emotionally because they're going to live at home and I'm going to show it to people and things like that. I imagine investors are feeling the same way they want to show off the genius ideas and strategies that they had themselves right.
Michael Ernst [00:28:13] It's true it's very true and we all love the feeling when we have assets that appreciate when when our wealth is appreciating. That's called the wealth effect. It's the thing I mean it feels much better when when prices are going up versus going down there is a dynamic psychological dynamic which is greed and fear and there's pain and pleasure. And those are real. That's the thing. And so when when markets do adjust or correct or start to go down it's harder for folks. And I think we've all been educated most investors have been educated over time to look at the markets in a long term perspective. But when markets really start to get dicey emotions get tested.
Ed Kaminsky [00:28:52] So how do you deal with that as a wealth manager you know people are dealing with greed and fear right. And I imagine you know exactly what you think a specific client should do. Yet they're going to voice opinion on what they want to do either based on greed or fear. How do you do that?
Michael Ernst [00:29:11] Well I advise my clients to begin with to look at the markets with a long term perspective. Right now it's a long term game. You want to look at it in years versus minutes and even decades versus days. And so is as successful as I may be in setting that tone and that expectation when markets are going down. People really do get tested. And so one of my primary jobs is to protect investors from themselves. Right. So we want to prevent people from selling you know when the market is choppier dicey. Oftentimes that reflects oftentimes that represents a great opportunity to buy. We always want to look at the underlying fundamentals of the market and any individual positions. But I don't know in the book I talk about that specifically and it's very similar to going out to buy a car for example or a house right. Your case and if if you see a car for example that's 10 percent off you know you're not going to right and right and we're not going to have to wait so that's up 15 and I'm jumping in. Right. So we want to look for value we want to take a long term approach and the topic in the book does really describe how to remove that kind of volatility right. So if we can construct a portfolio if I can construct a portfolio for clients that removes volatility it removes some of that emotion. Right. So,.
Ed Kaminsky [00:30:23] It makes alot of sense.
Michael Ernst [00:30:23] And it makes a lot of sense and you know the wealth management space there's a very heated topic on active versus passive investing and both have their merits. Right there's a lot of good solid academic research to support both in a lot of Nobel laureates who have won prizes for their work on passive investing.
Ed Kaminsky [00:30:42] I have to ask you because I had the same conversation real estate about active and passive marketing.
Ed Kaminsky [00:30:49] I will go into a yet that is active investing or passive investing better? You answer that question.
Michael Ernst [00:30:57] You know that's a good question.
Michael Ernst [00:30:59] So it really if people dig in on that topic and you do find camps that are that are clearly in one versus the other. And again that's a topic in the book I don't really think that you need to pick both. Right?
Ed Kaminsky [00:31:10] Right.
Michael Ernst [00:31:10] You want to look long term you want to buy good high quality blue chip stocks for the long term. Right. You want to diversify you want to asset allocate those are super important pieces but one of the questions I ask clients when we first sit down to meet is would they like to have a portion of their portfolios out of the market during serious market drawdowns or increased volatility.
Ed Kaminsky [00:31:29] Sure.
Michael Ernst [00:31:29] And one hundred percent of respondents say yes.
Ed Kaminsky [00:31:33] Got it.
Michael Ernst [00:31:33] Right. So we do have a section a portion of the portfolios that will go to cash or even get short the market. And that's certainly an active approach to it. So it's not one or the other. In my view you can really pick the best of both in and build the portfolio for the long term.
Ed Kaminsky [00:31:50] When a client first comes to you work out what can they expect when they sit down with you.
Michael Ernst [00:31:54] Well that's a great question and it's one of the areas where I really think that I distinguish myself sitting down with a client is a really personal first step. I want to spend that time to get to know that climate that prospective client and vice versa you know to get to know each other point of time. But it's also the very start of the discovery process and the discovery process is comprised of a couple of different steps. There is a questionnaire where we kind of get a formal numeric number on the rise profile but the real important stuff is through conversation. You know drilling into you know concerns about the future the present anything financial right that is affecting their peace of mind. You know we focus on peace of mind and also the goals right. So it's time horizon goals objectives and risk profile so that first client interaction is really really important and it's the first step in constructing that's specific and unique.
Ed Kaminsky [00:32:49] Two part question here. One really more personally I'm always curious how you guys think from my business side. And one more for your consumer but I imagine you look at a person's entire asset allocation and you have to talk to them about how you divide their assets in the things that you know and understand in the stock market and all those different areas. You have to discuss insurance I assume.
Michael Ernst [00:33:21] True. Yep.
Ed Kaminsky [00:33:22] Do you advise clients on how much insurance they should have or shouldn't have.
Michael Ernst [00:33:26] I don't. I don't get into insurance specifically. We have broad discussions and conversations about it. You know once we have that initial client meeting and that interaction it's the beginning step towards a comprehensive financial plan. So the comprehensive financial plan is really a central repository for all of this data. Right. Whether they're assets that I'm going to hold and invest for that client or they're holding it abroad or out at another firm. Or another firm. But certainly that would include you know insurance. Sure of all kinds.
Ed Kaminsky [00:33:59] And they get back to the personal side how do you advise people as far as how to divide assets between what you do and real estate.
Michael Ernst [00:34:11] You know that's that's an interesting question that I've got to really tread lightly here.
Michael Ernst [00:34:17] All stocks, all the time. No no.
Michael Ernst [00:34:19] Well most of my clients are high net worth investors high net worth individuals so real estate is an important position of almost everyone's portfolio. Right. And we do look at it as an asset right as a liability technically but everyone most people have a lot of appreciation and equity in their homes. Some of my clients are really really serious. You know apartment portfolio real estate investors. So again back to the initial meeting having a really deep understanding of their personal risk profile their goals and objectives would provide the information that helps me do that analysis.
Ed Kaminsky [00:34:55] I mean no great sense. How would you say you add value to your clients.
Michael Ernst [00:35:01] That's a good question there's a lot of choices out there when it comes to investment advisors and I constructed my firm as a boutique firm that really offers white glove consular level service to my clients and I keep a pretty small roster of high networth clients and really give them all the attention they need. Some people don't need much and some people need a lot and it's always my pleasure. So I maintain really close working relationships and really provide a level of service and attention that larger firms just can't provide.
Ed Kaminsky [00:35:30] You know I I've learned in life. We all make mistakes and you learn from them. Hopefully right and it's positive. But what would you say is the most common mistake your clients make.
Michael Ernst [00:35:42] Well we touched upon that a little bit earlier. I think the most the single most common mistake is investors that allow their emotions to drive their investment decisions you know in a perfect world. All investors all of us would buy low and sell high but it's just not that simple. Markets are very complex and human beings are very complex and you know right now everyone has access to a smartphone and instant information. People just aren't built to look at the value of their investment portfolio go up and down on a minute by minute basis. So it really comes down to understanding and managing you know client needs and risk profile and building something that comfortable.
Ed Kaminsky [00:36:20] That makes perfect sense.
Ed Kaminsky [00:36:22] You know we do this fortunately in the South Bay which is great. Yeah. What do you love about the South Bay.
Michael Ernst [00:36:28] What don't I love about the South Bay. I mean it's really an amazing place. I've traveled all over the world. I've been a lot of different places some very exotic. And I think the South Bay offers something for everyone. You know the beaches are beautiful there's great restaurants it's safe it's clean. I've got two young boys that go to Grandview Elementary School and it's a great school. A blue ribbon school. And so and I fell in love here. Yeah. You know my offices is close to my home. It's about a mile and I just really love it has a lot to offer. And I'll tell you something else said if you haven't had the French onion soup at the kettle you're missing out on some real special.
Ed Kaminsky [00:37:04] I think I've had enough. Yeah it's awesome.
Ed Kaminsky [00:37:07] And then just a little bit more personal. What would you say is the most rewarding thing about what you do every day.
Michael Ernst [00:37:13] You know I love. I love the markets and I love. I love what I do and I feel very fortunate that I've chosen this as a career path. But there's nothing more rewarding than when a client expresses their satisfaction and happiness with my work and the results. And it's really something I take personally I put a lot into it. And that definitely is the most rewarding aspect.
Ed Kaminsky [00:37:34] Well excellent. Michael is great. I love hearing from you and learning you know what goes on in these management offices is really fun to just watch and see what you're around excited about this book and be able to talk about it for you. For those that want to know what it's called it's The Adaptive Investment Portfolio by Michael Ernst. I have to ask I've heard of another company with a similar last name is that unrelated to you.
Michael Ernst [00:38:02] I get that all the time. I wish it was but it's not. No no no connection.
Ed Kaminsky [00:38:06] Very good. And if someone wants to reach you directly what's the best way to do that.
Michael Ernst [00:38:10] I can be reached on my cell phone at 3 1 0 6 2 5 5 8 0 3. And I appreciate it mentioned in the book for our local residents that's available at Page's bookstore and it's also on Amazon. Excellent. What's the best way for clients to get a hold of you or prospective folks that want to buy home or move to the Lakers whatever. Yeah.
Ed Kaminsky [00:38:29] Well I appreciate that they want to reach me direct on my cell they can it's 3 1 0 4 2 7 2 4 1 4 and they can also go to my Web site. ItzSold.com Michael thank you for the great quote My pleasure.
Michael Ernst [00:38:48] So nice to be with you. Thank you very much.
Ed Kaminsky [00:38:50] Thank you for watching. This is Ed Kaminsky with the Kaminsky roasting a group on location here in Hermosa Beach. And thank you to Michael Ernst of Ernst and Company Wealth Management. We appreciate you listening. We'll see you again soon.
Why Shopping Around for your Mortgage Makes a Huge Difference Shopping around for a mortgage?
Sometimes it can be daunting because of all the application paperwork. So, that begs the question: Who would want to go through the process multiple times? The fact is, if you don’t shop around for your mortgage you’re doing yourself a huge disservice. Here, Forbes lays out the benefits of being a discerning consumer.
Rates are always changing
You’ve probably heard that interest rates are rising, but you also may have heard that rates still are at historic lows. While both of these statements are true, if it seems like the news of mortgage interest rates is constantly changing, that’s because it is. Mortgage interest rates change daily depending on the strength of the economy. In strong economies, where people are more likely to buy a home, it costs both you and the bank more to borrow money. In weaker economies, rates dive lower to provide an incentive for people to borrow. When you buy, your aim should be to borrow at the lowest possible interest rate to save money during the life of your loan. Shopping around for a mortgage will give you a chance to keep an eye out for the best rates, as they fluctuate daily.
Interest rates add up
\Although mortgage interest rates have a tendency to fluctuate, they rarely go up or down by more than a fraction of a percentage point. Unfortunately, that small of a movement leads many buyers—especially first-timers—to get complacent because they’re unaware of how much of a difference just a fraction of a percentage point can make. The reality is, a difference of half a point (or even less) can add up to thousands of extra dollars spent during the term of the loan. For example, if you bought a $200,000 house and put 20 percent down on a 30-year loan, with an interest rate of 3.5 percent your monthly payment would be about $719 dollars. However, if that interest rate was to jump to 4.5 percent, your new payment would be around $810. A difference of $100 a month may not seem to make that big of an impact on your monthly budget, but those numbers add up over the long term. For a one-point difference, you’ll end up paying more than $35,000 in added interest during the course of the 30-year loan.
It won’t impact your credit
Buyers often are hesitant to shop around for a mortgage rate because they worry it will negatively impact their credit. While this used to be true, fortunately, it no longer is the case. These days, the major credit bureaus have agreed to treat all mortgage inquiries as one, as long as all of the inquiries occur within the same period of time. The catch: an acceptable period of time varies. It lasts between 30-45 days, depending on the credit bureau. With that in mind, while you can shop around as much as you’d like during that time, it’s best to stick closer to the 30-day mark so that you know you’re covered.
Everyone’s fees are different
Most loans come with origination fees and points. Origination fees are used to cover the costs associated with closing the loan, including compensating the loan officer, while points are an additional fee that you can pay to the mortgage company in exchange for a lower interest rate. As with any other industry, each lender will have their own fee structure. Points often are optional, and in some cases, you can negotiate with the lender to have certain fees waived or discounted. Shopping around for a mortgage will allow you to find the fee structure that works best for you and your wallet.
For nearly a decade Los Angeles has been a seller's market. Since the market collapse in 2007 home values have rapidly increased. The fierce competition among buyers has contributed to the rapid property value ascent.
Analysts and real estate agents are already reporting a "leveling-off" trend. The number of overall sales is below the historical average and homes are spending a little bit more time on the market than what we have been accustomed to.
Why 2019 Is The Year For A Housing Market Shift
Many people would point to the millennial buyer pool hitting its peaked, saying that the potential would be buyers have already purchased. However if you look at the average household income for 20-30 years of age you will see that they are priced out of being able to purchase a home.
The speedy increase in home values has out paced wage increases in Los Angeles. This has caused housing affordability to hit a 10 year low, with the cost of a mortgage payment totaling nearly 75% of the median income in Los Angeles. Mortgage rates have been on the rise show no sign of slowing down.
Currently just 17.2% of homes in the Los Angeles metro area are affordable to buyers who earn the median income. The project interest rate hike between 5-5.25% is going to further effect the already small buyer pool.
Buyers With Larger Budgets
Buyers with bigger budgets will see many advantages of this shifting market. This small pool of buyers will force luxury high end sellers to rethink their asking prices if the home is not in top condition. If your home is top condition, it still very much is a sellers market as these homes fetch a premium. If your home needs some work it might be worth investing in touch up or a lower asking price to drive interest to your home and increase the final sales price.
In conclusion, timing the market rarely works out. A home is an investment and the future isn't certain.
Drive through a neighborhood or do a quick online search and you will that some homes sell and some homes don't. From one block to the next there is a home that sold for over asking and one that has been on the market for over 100 days.
All homes that get listed for sale have one thing in common, they need to create demand for the property. A Real Estate Agent's primary objective should be to create a lot of demand for the property with the goal being to sell the home and for the best terms for the seller (price, contingence dates, etc...).
In order to create demand for a property the listing agent needs to have a custom tailored plan to market that property. A "one size fits all" approach is ineffective, it relies on luck to generate an offer. With the different classes of property, different conditions, and various locations cause certain buyers to be "real buyers" and others to be window shoppers looking at homes that they are not really interested in. Simply putting your home on the MLS and syndicating out to the major real estate listing websites is not enough.
If there is not a clear and well thought out marketing plan in place then you will not be in front of the buyers that are interested in your home. This in turn will cause the listing agent to ask for a price reduction because he was not able to get in front of your home's target demographic. Lowering the price does generate more interest, usually by increasing the pool of potential buyers, but its at the cost of the seller's bottom line. A marketing plan solely based on factors such as price, syndicating to Zillow, and a few open houses is not a complete marketing plan. Selling a home for the highest possible price requires an agent with a proven track history and a well thought out marketing plan.
If you are interviewing agents or considering selling here are 3 points to consider.
Overpricing a home is the most common mistake. By over pricing your home you often putting it against homes that offer more for the same price, making the other home a better value. Your goal is to compete with similar homes in your market.
The condition of your home drives the marketing efforts. If your home needs a little TLC the buyer will leverage that in negotiations. Putting a little time and effort to give your home a cosmetic facelift will go a long way (even in the photos which is what the buyer first sees).
Good marketing drives demand and more demand means higher prices (as well as not sitting on the market). Think of your home as a product, do your best to make it the most desirable home in the neighborhood (by condition, price, and hiring the right realtor).
The United States stock market has showed some volatility in 2018 causing mortgage rates to slow. Freddie Mac just revealed that mortgage rates actually drop to 4.75%. So how does this affect the real estate market?
Every indication is that mortgage rate increases are going to slow through 2019. Making the present the best time to buy a house.
Both pending and home sales closed has slightly dropped in the past few months. The primary reason from polled buyer is that the increasing interest rates that were nearing 5% wasn't attractive to a home buyer. The regression to 4.75% should bring out a larger buyer pool to stimulate sales in the South Bay housing market.
Industry experts project that these lower and slowed rate hikes will create an attractive landscape for buyers. Especially at the start of the year in Q1, as a rate hike could be coming in Q2. If you are a home buyer you will want to purchase in the first 90 days.
Home sellers will want to price their homes properly as buyers have been moving inland from the coast because of their high asking prices. A well priced home will draw a lot of attention from buyers, multiple offers will start to drive the price back upwards on competitively priced homes.
We are expecting a huge buyer pool to start the year. They will be bound by the constraints of their loans in luxury markets potentially causing them to overlook overpriced homes. Sellers should price aggressively to drive the sales price upwards while negotiating, listing high and staying at a high listing price has caused several homes to sit on the market in 2018. We expect home values to steadily rise through out the course of the year.
As soon as October draws to a close, many sellers will take their houses off the market for the holidays. Buyers also tend to take a seasonal pause. Historically, the slowest stretch for home sales is November through February before sales pick up again in March. But, if you need to sell your home right away—for a job relocation, for example—there are some encouraging factors. Buyers who stick around during the winter tend to be very serious and ready to commit. There also are not as many homes on the market to compete against. Here, USA Today offers tips for making a warm impression during these colder months.
Get The Best Photos
Although it’s winter, you don’t want the outside pictures of your home to look barren because buyers won’t see a well-landscaped lawn. Plan ahead and take exterior pictures before the leaves fall, even if it’s a month or two before you actually list the house. If you have a swimming pool or hot tub, find an old picture that shows the feature during the summertime.
Maintain The Outside
Keep up with lawn maintenance, even if it’s not growing season. Rake dead leaves, and edge and weed if necessary. Trim hardy evergreens if they get too unwieldy. Add new mulch to any landscaped beds. Make sure driveways and walkways are well-lit because there is less daylight during the winter.
Cozy Up Inside
Buyers will spend more time on the inside when it’s cold outside, so make sure they’re comfortable. Set the temperature between 68 and 70 degrees. Address any drafts from windows or doors before having an open house. Good lighting also is key at this time of year when it gets dark earlier, so don’t skimp on lighting. Replace tired table lamps and chandeliers with updated models. Use higher wattage bulbs to bathe the house in light. Make sure windows are cleaned to maximize sunlight. Enhance the coziness of your house with the smell of freshly baked cookies, serve hot apple cider or hot chocolate for guests, and turn on any gas fireplaces for added ambience.
You can still decorate for the holidays, but keep it muted. Use reds, winter white, silver and clear blue decorations along with natural elements such as pine cones and evergreen branches to celebrate the season without going over the top with kitschy themes. Add a splash of color on the outside with an elegant wreath, which will keep your home from looking drab in these gray months. Think seasonal; you don’t want your listing pictures to have out-of-season décor in January, signaling that your house has been on the market for a while.
• Price It Right
Be realistic about the market conditions in your area, especially if buying activity cooled off even before the weather did. Price competitively and be open to buyer incentives, such as funding a home repair or offering money toward closing costs to make a deal.
• Vacant Homes
If you have already moved to another location, make sure to winterize your home before showing it. That means hiring a plumber to blow out pipes and put antifreeze in them. If the furnace goes out and the water pipes freeze, then you’ll have a big problem.
• House size
The market for condos, townhomes and smaller, entry-level homes doesn’t wane nearly as much in the winter than for larger homes. People often get engaged during the holidays, so these couples often start looking for a home in the winter. For larger homes with four-bedrooms, you might want to wait until after Feb. 1 to put your home on the market.
• All homes
No matter when you sell your home, make it look its best. Have your home professionally cleaned and repainted with current colors. Declutter throughout, and organize closets and pantries to highlight ample storage. Limit the amount of furniture to improve walkability and showcase space.
Properly priced homes get more attention, under priced homes get every qualified buyer & investor’s attention. Price it right and you will be stampeded with multiple offers, causing a bidding frenzy that will drive the value back up. This method takes a good amount of courage but when executed properly this is one of the best strategies to sell a home in any market
Secret #9: Show Off All Your Space
Its easier for a buyer to visualize how they would use the space when it’s a some what blank canvas. Having ample storage space is a top request, but it is hard to visualize where a buyer will put all their knick-knacks if they cant see past your personal possessions.
Bonus Tip: Show the closest space buy keeping them tidy and half full.
Secret #8: Natural Light
Do what you have to do to make your house bright and cheery, it will makes it more sellable. Every buyer wants there how to be well lite. To get more natural light take down the drapes, clean the windows and trim the hedges around your windows to get the most light possible!
Bonus Tip: Use higher wattage light bulb and different lampshades to get better artificial light.
Not all agents, brokers, and sales teams are created equal. Ask them questions about their past sales, the home down the street and where the best place to get a bite to eat locally is. These questions will help you find out who the local expert is. You want them to be able to tell you what your neighbors house sold for and to sell the area as much as the home.
Bonus Tip: Find a broker who embraces technology – a tech-savvy one has many tools to get your house sold and 83% of buyers first see the home on the internet.
Secret #6: Hide Your Pets
While your pet might be a heart stealer not everybody is a dog- or cat-lover. The bowl of dog food, the smell of a litter box, pet hair in the carpet, etc... Could give buyers the impression that your house is not clean. If you’re planning an open house, send the critters to a pet hotel for the day.
Secret #5: Go Easy On The Upgrades
If its a small quick fix then go ahead and complete it, patching up nail holes, new switch faceplates and other small tasks will show pride of ownership and that your property has been well maintained. Restructuring the floor plan? You might want to reconsider, these types of renovations could pay off if done right but not every house will get value from these colossal projects. Instead, keep it simple. Some of these smaller tasks can generate higher offers as well as more offers: clean the grout, freshen the paint, new cabinet hardware, fixing that leaky faucet.
Secret #4: The Future Homeowner Mind Trick
The home will soon no longer be yours so start to depersonalize it ASAP. The more personal stuff in your house, the less potential buyers can imagine themselves living there. Give them a little guidance on how you used the room (or the way you always wished you had) with your large furniture (the things that are hardest to move). Things such as keepsakes, family photos and collectibles should be tidily packed and put in storage (you will be moving soon and glad that you got a head start anyway).
Bonus Tip: Call a Home Stager. Many times they will be glad to give you a consultation on how to use your existing furniture to create the best first impression.
Secret #3: You Are Really Selling The Kitchen
What is the most important room in your home? 99 times out of 100 its going to be the kitchen. Trust us it really is that important! Remodeling a kitchen offers huge upside. New counter tops will cost a couple thousand dollars but a buyer could knock ten thousand dollars off of your asking price because the current ones are dated. Some off the simpler tasks such as paint and new cabinet hardware should always been done - try to stay neutral and not too stylized as you want to appeal to the masses.
Selling Secret #2: Its Showtime!
You should try to be show ready at anytime. The best real estate agents have a good memory and probably saw your home a broker's open house and meet a ton of people. You never know when your agent is going to have a hot and ready buyer that needs to see the home immediately. So, always try to keep the dishes washed, the bathrooms clean and the floors swept. Its a little bit of an inconvenience but it helps get your house sold!
Selling Secret #1: You Only Get One Chance At A First Impression.
You never have a second chance to make a first impression. Curb appeal is huge factor for every buyer and the first thing they see about your home. So, it’s important to make people feel warm, welcome and safe as they approach the house. Spruce up your home’s exterior with inexpensive shrubs and brightly colored flowers. You can typically get a 100-percent return on the money you put into your home’s curb appeal. Entryways are also important. You use it as a utility space for your coat and keys. But, when you’re selling, make it welcoming by putting in a small bench, a vase of fresh-cut flowers or even some cookies.
Buying a home is one of the biggest financial decisions anyone can make. And if a home buyer isn't paying cash, then they will usually obtain a mortgage to pay for the home. One popular mortgage for those who can obtain it is the VA loan. The VA loan is one of the benefits provided for veterans and active duty military personnel. This type of loan makes home buying easier for many service men and women who would like to see their dream of owning a home realized. Understanding the VA loan, the way it works and how it compares to other loans can help home buyers decide if the VA loan is the right loan for them.
What is a VA Loan?
The VA loan is a loan that has been backed by the U.S. Department of Veterans Affairs. The VA does not issue the loans directly, but provides a guarantee to approved mortgage lenders. Service people who want to get a VA loan can do so by contacting a qualified lender, and not by contacting the VA itself.
What Are the Benefits of VA Loans?
There are many benefits of VA loans. These benefits make home buying easier for service men and women. One of the most attractive benefits of VA loans is that they require no money down to buy a home. In addition, VA loans have no mortgage insurance requirements. This can save qualifying active military and veterans a lot of money when the time comes to buy a home.
How Does the VA Loan Work?
To qualify for a VA loan, the home buyer begins by getting pre-qualified. This is a quick process that involves answering just a few questions about credit history, salary, assets and other financial information. At the end of the pre-qualification process, the potential home buyer is told how much money they are approved to borrow.
Once the home buyer is pre-qualified, he or she must get pre-approved. Pre-approval is a much more involved process than pre-qualification. To be pre-approved, the home buyer must turn in financial documents that support the information provided when the buyer got pre-qualified. Pre-approval is a long and involved process, but when the pre-approval is finished, the buyer can make competitive offers on homes with confidence that their loan will be approved at the close of escrow.
Once the loan funds, the home buyer must pay a fee to the VA to fund the program and keep the loans going. This fee can be rolled up into the loan, to lessen the burden on the home buyer.
How Do VA Loans Compare to Other Loans?
Nearly all other types of loans require the home buyer to make a down payment. Some loans (like FHA loans) require low down payments around 3.5 percent. Conventional loans may require the home buyer to make a down payment of 20 percent or more. For home buyers on a budget, the down payment is a major hurdle that can prevent some people from buying a home. Therefore, the VA loan's requirement of no down payment is an very appreciated bonus.
Many loans that require a low down payment (like the FHA loan) also require the home buyer to pay for mortgage insurance. The VA loan is different because it does not have this requirement. This can save home buyers thousands of dollars over the life of the loan.
A VA loan does not impose a maximum amount that an eligible veteran may borrow to buy a home using a VA loan. However, the VA loan program does limit the VA's liability by capping the guaranty amount to $453,100 in 2018 for most loans. This maximum limit effectively limits what most banks or lenders are willing to lend to lend without requiring a down payment.
Who is Eligible for a VA Loan?
The VA home loan is for active military, surviving military spouses and veterans. In most cases, to be eligible, the home buyer must serve 181 days on active duty during a time of peace, or must serve 90 days active duty during a time of war. Home buyers who have served six years in the National Guard or Reserves are also eligible. Veterans, active military and surviving military spouses who want to know whether or not they are eligible for a VA loan can find out by contacting their VA office.
Even borrowers who have a history of foreclosure or bankruptcy are still eligible for a VA loan. However, the VA loan is not provided to buyers who are trying to purchase a second property. The VA loan is only given to people who want to purchase a primary residence.
How Can You Get Started?
Home buyers who would like to get started with a VA loan should first contact a qualified lender to find out what kind of paperwork they'll need to provide in order to be pre-approved. It also helps to look at homes in the area where the home will be purchased. This can help home buyers find out where they want to buy and what their budget will be. Finally, home buyers who would like to get started with a VA loan can work with a qualified real estate professional. Working with a good real estate professional can help you get the home you want at a price you can afford.
In this week’s EdZone, Ed Kaminsky interviews investment expert Chris James who has had some massive gains in real estate investing. Chris has found great success in the South Bay real estate market with investments in commercial real estate and residential homes.By integrating more verticals, such as luxury homes and commercial properties, into liquid investment portfolios Chris has turned profits of up to 20% for his clients.
Ed Kaminsky and Chris James came to meet through a rather bold real estate acquisition at auction.Chris purchased a commercial real estate property totaling around 320,000sqft with dismal occupancy rates. Kaminsky was a tenant of the building while waiting for construction of his recent commercial space to complete, the future home of SportStar Relocation and Kaminksy Real Estate Group. Ed was in awe of what Chris James’ company paid for the building. As Chris will tell you, this asset was the perfect storm for a real estate investment acquisition in the thriving Manhattan Beach real estate market.
What many thought was a crazy purchase turned out to be a massively lucrative investment. If you are considering purchasing a real investment property fill out the submission form below to have one of real estate advisors contact you. Our experts are versed in commercial and residential investment properties all over the nation. Whether looking to acquire a property of sell one and get a tax deferment we can help advise on the transaction.
Also, in this podcast Chris dives into luxury homes, where massive returns on your capital can be realized. With a focus on strong coastal markets that hold value the company has been finding older and unfinished houses for remodeling and flipping, view Palos Verdes Home Values to see some of the prices Chris and his company are achieving. Chris has recently entrusted Ed & Kaminksy Real Estate group to put a Manhattan Beach home for sale, a funky Santa Fe style home that didn’t fit in the Manhattan Beach real estate market. The construction and marketing of preliminary design plans has lead to offers before the home has even hit the market, let alone start construction. Please be sure to follow the EdZone to get updates on more Real Estate advice and News.