Most mortgage lenders use some variation of the “Uniform Residential Loan Application,” a document drawn up by Fannie Mae and Freddie Mac, two huge government-backed corporations that buy mortgages from lenders. The uniform application divides loan applicants’ assets into two categories: liquid and non-liquid. Liquid assets are those held in cash or easily converted to cash, including checking and savings accounts; stocks, bonds and other securities; and life insurance policies with a cash value. Non-liquid assets are harder to convert into cash but are still valuable. They include real estate, cars, assets in retirement plans, businesses owned by the applicant and any other item of material value. (Got a rare stamp collection? List it under “other.”)
You may be surprised to hear me say this, but odds are it is!
Your residence is a liability as long as it costs you money to live there; but once it is paid for, your home becomes an income producing asset, because it will appreciate more rapidly than almost any other asset.
Investing in a personal residence is the very best investment a person can make. Not only does it provide shelter, it also functions as a ‘forced’ savings program and protects your investment against inflation!
Remember, you can purchase your own home or you can purchase a home for the landlord, the choice is yours!
This lovely cabin on 15 acres of privately owned Patented mining claim has 400 feet of river frontage, solar power, hot and cold running water and the owner will even throw in the wood for your first sauna in paradise! A short drive from downtown Nome will bring you to this haven that is a world away from the day to day!
1 – Purchase a home for yourself or purchase a home for your landlord! What you spend on shelter each month is paying for SOMEONE to own a home….let that someone be YOU!
2- A home acts a forced savings program; each payment builds equity; every improvements increases how much profit you will make when you sell. It takes a lot of discipline to put away $500 a month for retirement on top of paying rent!
3- Mortgage interest deduction is an incredible tax deduction.
4- Current interest rates remain low; that means your monthly payment to own a home will in many cases be much less than what it would cost to rent a similar property.
5- You can earn up to $250,000 on the sale of your primary residence and pay no taxes!
6- Protection against inflation, real estate and gold typically have kept pace with the rate of inflation,
7- Home prices in Nome have an average appreciation of 2.5% annually. A much better rate of return than a savings account!
Qualified mortgages require debt-to-income ratios of no more than 43 percent.
The debt-to-income ratio is a method for a lender to measure a borrower’s ability to manage the payments made every month in order to repay the money borrowed. To calculate a debt-to-income ratio, a lender will add up all of a borrower’s monthly debt payments and divide that number by the borrower’s gross monthly income. Gross monthly income is the amount of money a borrower earns before taxes and other deductions are removed.
If you find that your debt to income ratio is too high, you could:
- Use a larger downpayment to reduce the loan amount.
- look for a lower priced home
- Pay off the balances on your existing debt
- increase your monthly income
Anyone in Nome who hasn’t thought about being a landlord should seriously think about this option. The current rental market is the strongest I have seen in over 15 years, and the proposed port project will inflate rents even higher, with a guaranteed flow of tenants for the next several years. Interest rates are low, so monthly payments on your rental will be relatively low.
Do you own a home? Has it been a good investment? Now imagine owning 10 more homes, each one bringing in an additional $6k-$10k each year…. would that affect your lifestyle? Now imagine those 10 homes paid off (because they will eventually pay themselves off so that you own them free and clear) and now those same properties are earning $12k-$20k each year!!!!!
We have a property listed today that is priced at $149k. The yearly gross is $50k. Is it a beautiful building? No but its been maintained and is simple and solid, with long term renters. The boiler, roof, and foundation are all less than 8 years old. Click here for more details about this property, or take a look at some of the other income properties currently on the market.
Concerned about the ‘landlord’ issue? Nome Sweet Homes does property management now, so we are available to handle all the maintenance, rent collections, tenant screening, and eviction if necessary. Feel free to give me a call or email if you have any questions about owning an investment property, I can be reached at 907-443-7368 or 907-443-RENT
A Buyer Representation Agreement is an employment contract that spells out the duties and responsibilities of the REALTOR® to the prospective buyer, and vice versa. It obligates the REALTOR® to be vigilant in showing or making these homes known to the buyer.
Signing the Buyer Representation Agreement does not mean that the buyer has to buy … but it does indicate a commitment that the buyer is not frivolously asking to be shown around town. The Buyer can always change their search criteria. Buyers who do not have a Buyer Representation Agreement may not get first call on new listings, and in the Nome market 2 of 5 homes are sold BEFORE they ever appear on the website!
Typically the fee will actually be paid by the listing agent, so that the buyer may only be paying a small amount or none at all. For example, if the Buyer Representation Agreement states that the Realtor expects to receive 3% commission, and the listing agent is offering 3% commission to the buyer’s agent, the buyer actually PAYS NOTHING even though he/she has signed a Buyer Representation Agreement. However, if the listing agent is only offering 2% commission, for example, then, the Buyer MAY be asked to pay the difference of 1% to his/her Realtor (the buyer agent) depending on how the agent works.
Be aware that from the Realtor perspective, they are also actively making a choice as to which buyers they want to work with. By having your agent agree to a buyer’s agency agreement you are cementing his or her fiduciary duty to you!
Your assets are the things you own. Before they will approve you for a loan, mortgage lenders typically require that you have a job or some steady source of income that will allow you to make the payments. But they also recognize that people can lose their jobs, and other income sources can dry up. That’s why they like to see applicants with other assets that they can convert to cash, if necessary, to keep up with their house payments.