Friday, August 28, 2009
Thursday, August 27, 2009
Choosing The Right Mortgage
When you buy a house it will be one of the most important purchases you make in your lifetime. This purchase will be with you for 15 to 30 years. The mortgage you choose needs to be the right mortgage and you need to understand the complexity of the endeavor. Your home loan could cost you as much as 25 to 40 percent of your gross income so do your homework before applying for a home loan.
Mortgage Loan Originator for Regions bank, Allison Bird shared her knowledge of lending with me. There are many different types of home loans and things a consumer should look for when buying or building a home.
Know your FICO Score
First, know your FICO score. Developed by Fair, Isaac & Co., a FICO score is a credit score which is extremely important to your loan. This score was pioneered in the late 1950’s and has become used by all lending agencies in determining your loan rate. The score tallies the borrower’s credit history into a single number. Good credit can get you a lower rate saving you thousands of dollars over the life of the loan. According to Ms. Bird, “Credit scores can affect the rate in many cases, on a conventional mortgage there maybe a slight increase for scores below 720 and increase slightly with every 20 point drop. FHA rates increase when a credit score falls below 620.”
Next, get pre-approved or pre-qualified for your home loan. This benefits both the buyer and the seller. You will know how much you can afford and what your payments will be and the seller may take your offer quicker if they know it is a done deal. So what is the difference in Pre-qualified and Pre-approved?
Pre-qualified
Pre-qualified happens when a buyer meets with a mortgage lender and gives them all of their information like income, expenses, assets and liabilities and the broker will give them a letter stating an opinion of what the buyer can afford.
Pre-approved
Pre-approved happens when there has been written evidence of all of your income, expenses, assets and liabilities. Your credit has been checked and approved from the lender. The buyer can close easily as it has all been pre-approved.
Should you lock in your rate?
Rates can change daily so you need to know if rates are going up or down. If they are going up you want to lock in your rate. This means when you close your rate will not change. The average time for a locked rate is 30 days but you will find some are from 15 to 60 days. Once you lock your rate make sure you close before the contract expires. If rates may go down you may not want to lock in your rate but some lenders offer what they call a “float down” which is an option that will give you a lower rate if the rate falls. If you do have a floating lock be sure and watch the market to see if the rate has lowered.
Money Down
The minimum down payment for a new home loan or construction loan will be between 3% - 5%. Know how much house you can afford before building or buying.
Insurance
All mortgage lenders will make you provide insurance for the home and the amount of your home loan. Shop for home insurance before you are ready to close. If you wait until the last minute you will not have time to shop around and may end up paying more than you have to.
Points
What is a point and what does it have to do with my mortgage?
Well consumers can buy points to lower their interest rate. You need to do your homework to see if it is the right economical thing to do for your loan.
Discount points are fees paid to a lender at the closing and the cost of each point is equal to one percent of the loan amount. For example, for a $100,000 loan, a discount point will equal $1,000. Each discount point on a 30 year loan usually lowers the interest rate by 0.125 percent. If your rate is 6.5 percent by purchasing one point it would be lowered to 6.375 percent.
Mortgages
The safest mortgage for consumers is the traditional fixed rate mortgage. This type of mortgage has a fixed rate that will not change over the life of the loan. The fixed rate you received for the life of your loan is determined by the mortgage industry. Rates can change daily, so Ms. Bird advises, “The best way to find the going rate is to contact local mortgage lenders and ask.”
The Perfect Home Starts with The Perfect House Plans!
One of the most important steps a consumer can take when it comes to building a new home is picking out the right house plans. Finding the right plan for you and your family may be a daunting task but trust me, it’s worth the time when you move in and everything about your home fits your family’s lifestyle.
First, before starting to look at plans you must know about the lot or land you are going to build on. The house plan must be suitable for the location you are building on. The size of the lot is important, keep in mind areas for landscaping, a pool or easements will reduce the amount of space that you can use when building a new home. For example, if you want an L shaped garage you may need a corner lot. Two story homes don’t need as much space as a large ranch style home and you may not want to build a log cabin type of home in a city subdivision.
Once you know how much space you have for your home on your lot , there are a few questions you need to ask yourself before choosing your plans.
1. How many bedrooms do you want and need? Do you want a guest bedroom or living quarters?
2. How many bathrooms are necessary for your family’s day to day needs? Do I want any half baths?
3. Will you be working from home? If so, how much office space or a work area will you need?
4. How often do you entertain? Do you entertain outdoors? Do you want a large kitchen or maybe an outdoor kitchen?
5. Do you need extra parking?
6. Do you want a formal room and a casual room?
7. Do you want a formal dining room?
8. Do you want a separate laundry room and if so, where do you want it located?
9. Do you want to build eco-friendly? If so, do your homework on eco-friendly products. There are numerous products presently on the market including icf blocks(you will need to modify your plans for thicker walls if you build icf), tank-less hot water heaters, geo-thermal heating and cooling units and eco-friendly building materials.
10. Do you want a fireplace? If so, where?
11. Do I want to build a low maintenance home? If so, you may consider looking at plans that use brick or a vinyl siding.
12. Am I going to keep my furniture or buy new furniture? If you keep your old furniture you need to make sure you have ample space for your furniture and that it fits the style of the home.
13. Do I want a 2-story or single story home?
Next, think about the time you presently spend in certain rooms of your home and why. I love being in my kitchen and cooking so the focal point for my family gatherings is my kitchen. I have a large kitchen with an open den and it fits my needs perfectly. Others like to entertain in a family room with lots of roomy sofas and a fireplace. Write down your needs and look for plans that fulfill them.
Also think about privacy. If you have children do you want your master bedroom close to their bedrooms or would you prefer being on the other side of the house? If you have a 2-story home do you want your bedroom on the first floor and children on the 2nd?
Do you need privacy in a home office space area?
What about neighbors and privacy? If privacy is important to you and you live in a busy neighborhood, you may consider an L or U shaped house.
After you have asked yourself all of these questions, make notes and then start looking at plans that fit your needs.
You may chose to consult with an Architect for personal plans. If you do bring all your notes so your dream home can be created just for you. You can also shop online for plans from ecommerce sites like eplans.com and dreamhomesource.com
Mark Wilkin, Director of Marketing for www.eplans.com says blueprints online cost around $1000.
I bought my new house plans online but beware of online plans and square footage. Online my plans said it was 4500 sq. feet but when I received them it had over 5500 sq. Make sure you don't just look at heated and cooled sq. feet garages and porches and patios add to the sq. footage and cost of your home. I hired a local design firm to modify my plans for a small fee. If you do buy plans on line, a few simple changes can turn someone else’s design into your dream home.
Cost
Wilkin reminds consumers to make sure they can afford the square footage before you buy your plans. "A customized cost-to-build report is a worthwhile investment that takes into account materials and labor costs in your area as well as the grade of your cabinets, countertops, flooring and
exterior material choices," says Wilkin.
Once I received my final plans, it was several months before we started building. While the excitement almost overwhelmed me and I wanted to get started as soon as possible, it was also a great time to live in my new home before building. I would close my eyes and visualize the house and walk from one room to another. It was perfect. It took another 12 months before my home was complete but when I walked through the doors it immediately felt like home.
Finding the Perfect Plan can give you the Perfect Home.
Layered Brownies w/ White Chocolate Carmel
Candied pecans:
Brownies:
White-chocolate caramel:
Bittersweet-chocolate ganache:
- 1/2 cup sugar
- 1/4 cup water
- 1 cup pecan halves, toasted
Brownies:
- 1/2 cup (1 stick) unsalted butter
- 2 ounces bittersweet chocolate (54% to 60% cacao), chopped
- 1/4 cup plus 1 teaspoon natural unsweetened cocoa powder
- 2 1/2 tablespoons all purpose flour
- 1/8 teaspoon salt
- 1/2 cup plus 1 tablespoon sugar
- 2 large eggs
- 1/2 teaspoon vanilla extract
White-chocolate caramel:
- 3 tablespoons water, divided
- 3/4 teaspoon unflavored gelatin
- 4 1/2 tablespoons sugar
- Pinch of salt
- 6 tablespoons heavy whipping cream
- 4 ounces high-quality white chocolate (such as Lindt or Perugina), finely chopped
- 1 1/2 tablespoons unsalted butter, diced, room temperature
Bittersweet-chocolate ganache:
- 2/3 cup heavy whipping cream
- 6 ounces bittersweet chocolate (54% to 60% cacao), chopped
- Cacao Nib Gelato
- Special equipment: 8x8x2-inch metal baking pan
Wednesday, August 26, 2009
Terms You Need To Know Before You Build
When I began my research process on building my new home I came across a few terms that I’d no idea of their meaning. They are important to understand if you are going to hire a contractor to build or remodel.
Mechanics Lien
A Mechanics Lien is a legal claim placed on your property by someone who is owed money for labor, services or supplies for contributing to the building or remodeling of your home. General Contractors, subcontractors and suppliers of building materials are typically the lien claimants. A mechanic’s lien claimant can sue to have your property sold at auction and recover the debt from the proceeds. This law is in place to make sure everyone hired to build your home gets paid. But you also need to make sure you hire a reputable contractor as you can pay him for the supplies or subcontractors work but if he does not pay them, they can still put a Mechanics Lien against your home. It doesn’t’ sound very fair to me but that is how it works.
Cost Plus
This term means the contractor agrees to supply labor and materials for "x" amount of dollars, plus any extras on top of that. This type of agreement leaves the price open to circumstances encountered by the builder. I did this type of contract and I do not recommend it. This type of contract is risky because materials may skyrocket before you need them and you will get a bill for potentially much more than you budgeted for. In the end your home may end up costing way more than you prepared for. With this type of contract it is almost impossible to know what the end cost will be until the project is complete.
Contractors do prefer this type of contract as it relieves them from losing any money if prices for supplies or subcontractors go up. This also means he will not be 100% accurate in his bid because all extras are passed directly to you.
Fixed Cost
I prefer the fixed cost contract which means the contractor will supply all labor and materials for "x" amount of dollars. If the contractor misses something on the plans and it ends up costing more, he has to pay the extra cost, not you. This puts more responsibility on the contractor to be right on target with his bidding, Missed or miss calculated cost will be the contractors problem as he will not be able to charge you more because prices rose or he missed something on your plans.
Change Order
Everyone changes there mind at some point in time when building or remodeling. You may decide to change a color of a room or move a wall a few feet. Make sure each of the changes are put into writing and signed by both parties with documentation of the changes and how much more the change will cost. What may appear as a minor changes can cost you time and money and a lot of small changes can add up to a lot of extra charges. Get everything in writing before the changes are made so you know the cost and there are no surprises when the job is complete.
Eco-friendly “Green” Products
More and more consumers are looking to save money when they build. Eco-friendly “green” products are becoming extremely popular as they are environmentally friendly and can save money. I added bamboo flooring, tankless water heaters and a geo-thermal heating and cooling system to my new home. The upfront costs are more but what you save monthly on your energy bills more than pays for the eco-friendly products in approximately two years. There are numerous eco-friendly products on the market now including solar panels and numerous recycled products.
Building or remodeling can be stressful. Do your homework, do your research and know your terms!
Tuesday, August 25, 2009
Build Energy Efficient & Storm Proof
When my husband and I decided to build our new home, I wanted two things: I wanted my home to be energy efficient and to be a safe house for my family from any type of storm. So we decided to build our 5500 sq. foot dream home out of Insulated Concrete Forms.
If you have no idea what an insulated concrete form is, think about it this way: ICF forms look a lot like a big Lego block made of Expanded Polystyrene. There are several form manufacturers who offer different brands and sizes. I used Tritex products for my house. The form I built with was 9.25” wide, 5.5” deep, and 48” long, and 16” high. Although all forms are unique, I chose a Tritex form because it’s a good product and less expensive than other brands, but still has all of the advantages of the more expensive forms. “Tritex forms are a cost competitive, energy efficient, storm resistant material that is contractor friendly and beneficial to the consumer. It delivers performance, efficiency, and durability at a lower cost,” says Thad Tobaben, General Manager of Tritex.
Energy Efficient:
According to the Insulating Concrete Form Association, houses built with concrete forms require 44% less energy to heat and 32% less energy to cool than a conventional stick frame home. ICF homes also use smaller heating and cooling equipment because they are so energy efficient. So where does the savings come from? Well, ICF walls are R-32+. Conventional wood frame homes are usually R-9 to R-15. R-value is the resistance to thermal mass and the higher the r-value the higher resistance to thermal mass. Thermal mass of a space refers to the materials in the space which absorb the heat from the air then return it to the air as the space cools.
ICF walls use polystyrene foam, which helps cut the conduction losses through the foundation and the above grade walls by 50%. The 6-10” concrete center also takes up to 6 hours to change temperatures, so heating and cooling equipment doesn’t run as much as in a conventional wood frame home.
We have only been in our new home for about 4 months, but my husband and I have been amazed at how much we are saving on utility bills in our new ICF home. Our previous home was around 3500 sq. feet. Our bills now are running close to 40% lower in a home that is almost twice the size of our previous home. By building with Insulated Concrete Forms it’s possible to save hundreds of dollars per year in energy costs.
Safety First:
I would have never thought living in Alabama, over 300 miles from the coast that I would need to be prepared for hurricane force winds. Hurricane Ivan proved me wrong. Some members of my community lost their homes and all of their memorable belongings. Then, recently, America watched as Tornados hit Enterprise High School. My heart broke for the families that lost their children in the storm. We need to be prepared no matter where we live.
Any building constructed with ICF’s are a safe house during a storm. With proper reinforcements, concrete construction cuts shifting and vibrations and is superior to wood frames during high force winds. When it comes to hurricanes and tornados, ICF homes can withstand up to 225 mile an hour winds: that’s a category 5 hurricane or an F5 tornado.
Concrete is also fire and heat resistant.
Economical:
The blocks are easy to put together and lightweight, reducing the labor requirement but materials can cost more due to the amount of concrete used in the construction process. “Building with ICF can cost up to 10-15% more than building a stick frame house, but because of the increased energy efficiency you get with ICF, those costs can be recouped in only 2 to 4 years,” says Tobaben.
Finding a Contractor:
The hard part wasn’t deciding to build with ICF, but finding a contractor in Fort Deposit. I called and wrote several organizations and everyone seemed eager to lend a hand. After weeks on the telephone and meeting with several block companies, Tritex stepped up to the plate and worked with a local builder to make my dream home become a reality. Tritex brought in a crew from north Alabama, built my walls and trained my contractor. It took about 11 months to build but my house but it was worth the wait. I am deeply appreciative for Tritex without them going above and beyond the call of duty I would not have my concrete home. You can visit their website to find out more about the construction process at www.tritexicf.com.
Plus:
Did I mention that I have two teenage sons? My 18 year old, Cory, plays the electric guitar and my 15 year old, Aaron, plays the drums. We decided to put ICF walls around their music room, because concrete walls act as a noise buffer, as well as providing wonderful peace and quiet inside my home! ICF is soundproof, so they can play all night long and we can enjoy our peace.
Here’s the bottom line: if you are considering building a new home, look into building with ICF’s. Your dream home will not only become a reality, but it will be there for an eternity and you can afford to pay your energy bills even after retirement. My husband says he built me “my castle,” and that’s exactly what it is, a fortress that will withstand the test of time.
Monday, August 24, 2009
Location Location Location: Chosing the Right Homesite
There are so many things to consider before you build your dream home. One of the most important decisions you’ll make will be where you chose to build. The land your new home will reside on can dictate so many factors of your life. Some homeowners love the country and want lots of land for animals and outdoor activities while others have to be in pizza delivery range and could not image living anywhere but inside the busy city limits.
Pro’s
Land is less expensive in rural areas and usually the farther you get from the city, the cheaper the land. In rural areas you can build any style and any kind of home that you desire. No one and no community organization dictates what you can or can not do on your property including extra buildings or design styles.
Pro’s
Con’s
Make sure the property has access to a public water source or add to your budget a deep private well.
Check to see if a sewer hook-up is available for this property or add to your budget an installed septic system. The number of tanks needed will be determined by how many bathrooms your home will have. If you do need to install a septic system a perk test will also be necessary before a septic field can be installed. This test is extremely important because if the property cannot pass a perk test your next option is to install an engineered field, if allowed in your county. This type of system can be significantly more costly.
Make sure you have a survey of your land to determine the boundary lines of your property. I also recommend keeping some type of marker on the corners of your property for future references.
If the property is on a flood plain build accordingly and make sure you purchase flood insurance.
Check with the neighborhood association to see if there are rules for your community. There may be restrictions on the type of house you can build, if storage buildings are allowed in the yard and what type of driveway you create. Some communities even restrict pets.
Check to see if your property is on a public road that is maintained by the city or county. It’s always a good idea to know who and where to call in case you have problems with access to your home.
Zoning
Check your local zoning laws and make sure the land allows for a residential home.
Make sure you are not hearing a manufacturing plant or a bus stop nearby or smelling a poultry farm down the road.
Know Your Budget Before You Build!
Creating a budget for your new home may be a little more complicated than you realize. There are numerous factors to consider and getting into the building project is not the time to figure out you won’t be able to afford your home.
Whenever I need economic advice, I go to Dr. Keivan Deravi. Dr. Deravi is a distinguished Economics professor at Auburn University of Montgomery and is responsible for the Economic forecast for the state of Alabama. Dr. Deravi knows economics, budgets and is always gracious with his knowledge. He shared several tips and ideas with me on creating a budget.
Income & Budget
Calculate your take home pay for your household. Your mortgage payment should never exceed 27% of your net income. Taxes, utilities, insurance, maintenance and incidentals will then take up another 10-11%. So your total housing expense will be around 37% of your income.
Spending Plan
If you don’t already have a budget for your home, you should. Your budget should always include a spending plan.
Clothing 5% Cars & Repair 15% Groceries 12%
Savings 5% Debt Repayment 5% Medical Expenses 5%
Life & Disability Insurance 5% Entertainment 5%
Miscellaneous 5%
Construction Costs
Now that you know how much you can afford, you need to know how much house you can afford. It is truly aggravating loving a house plan and then getting estimates to find out it is not in your price range.
Get a “guestimate”
Contact local builders who are building the size and style home you would like to build and ask them how much they charged per square foot. Don’t forget to ask them about pricing on garages, patios and decks as the price will be slightly lower but it needs to be added to your construction cost. Too many times consumers buy house plans and the square footage stated is only for the heated and cooled space and there home ends up costing thousands more because of added areas not calculated on the house plans. Make sure you add all areas to get a good “guestimate” of what your home will cost.
You can also visit new homes for sale that are similar to your style and size. Take the price of the home and deduct the price of the land and divide that amount by the square footage of the home. This will give you the construction cost per square foot.
All of the below items need to be added to your per square foot cost.
Land
Private Septic or Public Sewer
Private Well or Public Water
Electrical Service set up
Gas Service
Drawings & Specifications Development
Permits & Fees from Building Departments
Site Access: Street Culvert & Driveway
Excavation: Backfield & Grade
Foundation Slab or Wood
Patios & Sidewalks
Decks Porches & Veranda
Fireplace
Landscaping
Always leave 5-10% of your purchase price unbudgeted for changes that you may make during the building process. This is such and important tip. Trust me when I say that changes will be made and you will need the extra money to pay for the changes. The finished cost of a home is almost always more than the original price.
Down Payment
A good down payment is 20% of the contracted price. Some lenders may want you to take out mortgage insurance if you don’t have the 20% down payment. This is a guaranty that insures lenders against the loss in the event the borrower defaults on a mortgage. Save your 20% so you can avoid mortgage insurance premiums as this could be a large and unnecessary financial burden.
Future Cost & Future Building
Put a little money back for the future as every 10 years you will have repair expenses that will equal one year of your mortgage payments. And if you are just thinking about building and you are in the planning stage, remember the cost of building usually increases 3%-6% per year. Be sure and include this into your cost estimate if you will be building a year or so away.
Knowing your construction cost and how much house you can afford will make your building process less stressful and will help you maintain your budget for years to come.
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