Depending on the date of closing, the amount of property tax that a homebuyer and seller are responsible for will vary. The process of figuring out who pays how much is called tax proration, and it’s one cost that many buyers overlook when calculating their cash to close.

What is tax proration?

Tax proration is when property taxes are fairly divided between buyer and seller based on the date of ownership transfer or closing.

Simply put: Tax proration helps level the playing field. Property taxes on homes are often billed at the beginning of the calendar year for the year prior. So in 2024, you’d get a property tax bill for 2023. Let’s say you bought and closed on a home in November 2023. Should you be responsible for the property taxes owed on that home for the months before closing? Didn’t think so. Enter tax proration. 

Tax proration involves a bit of math to figure out how much of the bill each party is responsible for. Here’s where it gets more complicated: Homeowners (or the sellers) don’t typically pay their part of the property tax bill directly. Depending on the date of closing, or the particular situation, you have a couple of payment options to consider.

How to pay property taxes with tax proration

Tax proration pro-tips

Before you close on your home, keep these three tips in mind.

• Leverage: Depending on the market, the property tax bill could be used as leverage. In a seller’s market, where there are tons of competing bids, motivated buyers might offer to pay the seller’s portion of property taxes to get a leg up on the competition or expedite the sale. In a buyer’s market, the seller might offer to pay the entire property tax bill in exchange for coverage of other closing costs.
• Exemptions: Age and disability status could come with tax implications, for yourself or the sellers. Those implications affect tax responsibility. For example, perhaps the seller is a disabled senior citizen. Local laws might have provided relief for that person—relief that is unlikely to be passed on to the buyer. Communicate with your team to determine potential roadblocks.
• Projects: New builds, rehabilitation, and renovations will result in different tax assessments. New builds may not have received a tax assessment at the time of closing, and since there was no previous owner, the buyer would be responsible for an entire year’s worth of taxes. Rehab and renovation projects increase a home’s value, which could result in an increased tax bill. Make sure your assessment is up-to-date to avoid any surprises.

How to pay property taxes post-proration

After you’ve calculated and paid your initial prorated tax bill, you’re responsible for annual state and local property taxes for as long as you own the home. You may be able to deduct those property taxes (up to a certain amount) when it comes time to file your tax returns. Individually, you can deduct up to $5,000 in property taxes. Filing jointly? Double that figure and enjoy a $10,000 deduction.

Keep in mind that property taxes vary depending on where you live and other factors, so there’s no single correct way to go about it. Consult a tax professional, do your research, and don’t take shortcuts as you take on this part of homeownership. Ok, now that we got the serious part out of the way: Deep breath. You’ve got this!

This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before making the decision to buy or refinance a home.

The post Tax Proration: How to Pay Property Taxes Like a Pro appeared first on Cardinal Financial.

7 Tips for Buying a House in Fall

• Understand your credit score
• Prepare for your down payment
• Get your paperwork in order
• Budget for renovations
• Hold off on the holiday shopping
• Stay flexible
• Get a head start on tax season

1. Understand your credit score

These days, there are more loan options than ever that offer flexible credit requirements. A higher credit score typically means lower rates, though. So while a perfect score isn’t necessary, it’s important to understand what you can do to keep your credit healthy and lower your homeownership costs.

The best way to get the full picture of your credit score is to pull a copy of your credit report from one of the three major reporting agencies (Equifax, Experian, or TransUnion). You can do this by visiting AnnualCreditReport.com. Each reporting agency calculates your score differently, and not all creditors report to all three bureaus. While they may vary slightly, they all consider factors like account age, payment history, balances, and number of accounts.

Pro Tip: Try these tips to get your credit where you want it.

2. Prepare for your down payment

Did you hear the one about putting 20% down? It’s a myth. Realistically, the average home buyer just doesn’t have 20% of their home’s purchase price readily available. Some loan types have down payment requirements as low as 3%. Some, like VA and USDA loans, require no down payment at all. Still, there’s no denying that putting down more upfront can help you qualify for better loan terms. As you get ready to buy a house in fall, crunch the numbers to determine how much down payment is realistic for you. Try to aim for at least 10% down if your credit score is below 580.

Pro Tip: Get the full explainer on down payments with our free guide.

3. Get your paperwork in order

Buying a house in any season means paperwork. Most lenders will ask for documentation covering your income, taxes, and more when you apply for financing. Getting all that information together before starting the application process will save you a lot of time and stress. 

Plus, you can use that documentation to get pre-approved and make a stronger offer on your home.

4. Budget for renovations

In today’s market, you’re unlikely to find a home in your budget that meets all of your expectations perfectly. Renovations are almost a given for most people who buy a house in fall. And with colder weather already rolling in, you may not be able to delay home projects like HVAC repairs, new windows, or updated plumbing. So, if you plan to buy a house in the colder months, make sure your budget allows for renovations that need to be addressed immediately.

5. Hold off on the holiday shopping

Good news: You officially have an excuse to put off holiday shopping until the last minute. Why? Big purchases can impact your credit score and debt-to-income ratio (DTI).* Those numbers help determine your loan terms. So, if you apply for home financing and then make a big purchase before closing, your lender will likely need to update your application with your updated finances.

*DTI is the percentage of your gross monthly income spent on debt payments. Mortgage lenders add current debts to projected mortgage payments to help determine loan qualification and usually like to see the debt percentage below 40%. 

6. Stay flexible

Fall weather can be unpredictable. From showings to moving day, your plans may have to change on short notice. As with any home purchase, it’s important to stay flexible and keep your eye on the prize: A place to call home for the holidays.

7. Get a head start on tax season

One of the biggest perks of homeownership is the tax deductions* you may qualify for. To make sure you don’t miss out on any write-offs, get everything you’ll need in order as you’re finalizing your home purchase and moving in. With your mortgage fresh on your mind, you’re a lot less likely to miss important details or lose track of necessary documentation. Plus, if you have any questions about filing taxes as a homeowner, your real estate agent and lender might have tips.

*This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before making the decision to buy or refinance a home.

If you buy a house in fall, make sure you understand your credit score, budget for renovations, and avoid big holiday purchases until after closing.

The post Buying a House in Fall: 7 Tips to Keep it Simple appeared first on Cardinal Financial.

Is fall a good time to buy a house? Six reasons we say “yes”

• Fewer competing offers
• More motivated sellers
• More flexible mover availability
• Changing weather
• Potential tax breaks
• Save on home goods

1. Fewer competing offers

The warm months are the busiest time of year for buying a home. Especially in a seller’s market, this means you’ll be bidding against more offers. In the fall, you’ll have less competition. Plus, your real estate agent will likely have fewer obligations to other clients when summer is over. That means more time to devote to your home search.

Pro Tip: If you do find yourself in a bidding war, our bidding breakdown can help you win.

2. More motivated sellers

By fall, peak selling season is over. With fewer offers on the table, sellers are usually more motivated to accept yours to get the listing off the market before the holidays. This situation gives you an edge to negotiate a better price.

3. More flexible availability for movers and other involved parties

Post-summer is the slow season for moving companies, too, so you may be able to get settled into your new home with more flexibility and lower costs. Your lender will also likely have fewer loans on their plate in the fall. That means you may be able to get through the mortgage process and close on your home faster than you would in busier seasons.

4. Changing weather

Fall is also a good time to buy a house because the weather is less predictable. This gives you the opportunity to see potential homes in less-than-ideal conditions. Not only can this help you negotiate terms with the seller, but you’ll also have a clearer picture of what you can expect from the home year-round.

5. Potential tax breaks

While you can’t avoid paying taxes, becoming a homeowner can qualify you for more deductions.* Even if you close on your home as late as December 31, you could be able to deduct:

• Mortgage interest (applies to the interest paid on the first $750,000 of your home loan)
• Discount points (pre-paid interest on your mortgage)
• Property taxes (exact amount depends on where you live)

Depending on your unique circumstances, more deductions may also be available.

6. Save on home goods

If you’re like most people, you probably got rid of a lot of belongings before your move. Now, it’s time to replace them and make your new house a home. Fall can be a great time to buy a house because it’s followed by seasonal sales like Black Friday, Cyber Monday, and end-of-year warehouse clearances. Once you’re moved in, you can find decor, furniture, appliances, and more for lower prices than you might in the spring or summer. It’s no secret that buying a home can cost quite a bit upfront, so any opportunity to save can make a big difference in your finances as you head into the new year.

So, is fall a good time to buy a house?

There are a lot of reasons to buy a house in the fall, but there’s no such thing as perfect timing. A cold-weather home purchase typically means fewer available listings, the risk of weather hazards on move-in day, and less time to get settled before the holidays hit. And if you have kids, moving during the school year can be a difficult transition. The right time to buy a house is different for everyone, so don’t feel pressured to make it happen on anyone’s timeline but yours. Whenever you’re ready, we’re here to help.

*This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before making the decision to buy or refinance a home.

A fall home purchase means less competition, more motivated sellers, and potential deals on home goods for your new space.

The post 6 Reasons Why Fall Is a Good Time to Buy a House appeared first on Cardinal Financial.

What young home buyers want: 7 must-have home features

• Outdoor space
• Smart home features
• Home offices
• Stylish bathrooms
• Convenient storage
• Closed floor plans
• Eco-friendly design

1. Outdoor space

Raise your hand if you were living in an apartment during the 2020 Covid lockdowns. Anyone who experienced that knows having access to your own outdoor space is no longer something to risk going without. That doesn’t mean you need to spend thousands of dollars turning your backyard into a botanical garden, though. A fence around the yard for privacy or even a home location that offers easy access to local parks and trails is enough to fit what most young home buyers want.

2. Smart home features

Like it or not, technology is here to stay. Gen Z especially has grown up with technology as an essential part of life, so it’s only natural that their homes should reflect that. Some of the more popular smart home features for young buyers include thermostats, doorbells, and security systems.

3. Home offices

If there’s one thing Gen Z is going to do, it’s disrupt tradition—and the workplace is no exception. The old model of sitting in an office from 9 to 5 has lost its appeal for most young home buyers. With more and more Gen Z employees earning their income from home, a designated space to take care of business is a must if you’re selling to this generation.

4. Stylish bathrooms

Nobody wants to film a get-ready-with-me video in a boring bathroom. And on a more serious note, an outdated bathroom means a lot of money spent on renovations. While Gen Z actually tends to prefer more retro, classic home styles than the modern trends Millennials embraced, that doesn’t extend to the plumbing.

5. Storage space

Sorry, storage unit industry, but you’d be hard-pressed to find a young home buyer who considers remote storage a viable option. For one thing, why pay for storage that isn’t easily accessible? Your home is where your life is, so your stuff should be there, too. If there’s not enough storage space, Gen Z is likely to ditch belongings for the move. For a generation who typically makes more intentional purchases, that’s a big turn-off in a potential home.

6. Closed floor plans

Good news! There’s no need to knock down walls before you sell your home. Open floor plans had their moment, but what young home buyers want now are more traditional layouts. Whether it’s with friends, partners, or roommates, in the current housing market Gen Z isn’t likely to buy a home by themselves. With multiple occupants, the privacy and personalization that closed floor plans offer are a must.

7. Eco-friendly design

Gen Z cares deeply about the environment, so it’s no surprise that homes with eco-friendly features are a priority for them. While some factors (like your city’s recycling program) may be out of your control, there are still a few ways you can make your home greener—solar panels, LED lights, and water-conserving appliances to name a few.

The simplest way to make sure your home is energy efficient, though, is to keep up with repairs and maintenance. Proper insulation, clean HVAC systems, and correctly-fitted windows and doors all help minimize energy consumption and utility bills.

What young home buyers want: Bonus tips

Before you take this list of home features and run with it, it’s important to understand not just what Gen Z looks for in a home, but how they look for it. If you want to sell to Gen Z, you need to meet them where they are: Online. We’re not saying you have to become an influencer, but your home’s digital presence matters. Your listing should be verified on trusted sites, have high-quality photos, and provide enough detail that potential buyers don’t have to call you for more information. It’s also a good idea to work with a real estate agent who knows how to market your home on social media.

At the end of the day, don’t overthink what young home buyers want. They’re a different generation, not a different species. If you can provide a safe space to call home, you’re well on your way to a successful home sale with any buyer.

If you want to sell to Gen Z home buyers, you need to meet them where they are: Online.

The post What Young Home Buyers Want: 7 Must-Have Home Features appeared first on Cardinal Financial.

The Essential 7-Step Home Closing Checklist

• Set a date
• Confirm what you need to bring to closing 
• Review your closing documents
• Complete your final walkthrough
• Get your closing funds ready
• Attend your closing appointment
• Make your move

1. Set a date

The first step in your home closing checklist is pretty self-explanatory. Once you’re approved for financing, your lender will reach out to schedule a closing date. Who needs to be at closing? It varies, but you may want to have your real estate agent, your closing agent, your lender, the seller, and any other borrowers on your loan present at closing. Oh, and you. That’s a big one.

2. Confirm what you need to bring to closing

Once you’ve set your closing date, get in touch with your real estate agent or mortgage lender to confirm everything you’ll need to bring to closing. Some common items include:

• A form of government-issued ID
• Payment for your closing costs
• Proof of homeowners insurance

Typically, your finalized closing documents will be provided for you to sign at closing. More on closing documents next.

3. Review your closing documents

Your lender is legally required to send you your closing documents at least three business days before your closing date. Don’t wait until the last minute to review them, though! Take as much time as you can to comb them thoroughly for any spelling errors, math mistakes, or unexpected fees. If you find errors in your closing documents, make sure to let your lender know as soon as possible so they can correct the mistakes. And if you have any questions about closing or the documents involved, now is the time to ask.

4. Complete your final walkthrough

About 24 hours before your closing date, you and your real estate agent will have the opportunity to walk through the home and make sure everything is aligned with what you’ve agreed to purchase. This could include a lot of easy-to-forget details, so we recommend bringing a final walkthrough checklist along to ensure you don’t miss anything that matters to you.

• Check locks on windows, doors, and gates
• Make sure windows, doors, and gates open and close properly
• Confirm appliances are functional
• Check for mold (especially in damp areas like under sinks)
• Test all electrical outlets
• Test the thermostat and HVAC system
• Check floors, walls, and ceilings for damage
• Look for signs of pests, like mice and ants
• Make sure the irrigation system is functional
• Make sure all agreed-upon repairs have been completed

5. Get your closing funds ready

Whether you’re paying by cashier’s check or wire transfer, make sure you have your payment ready to go before closing. If you’re transferring funds from a different account, don’t forget to leave enough time for the transaction to process before your closing date.

6. Attend your closing appointment

Today’s the day! Gather up your documents and meet at the closing table. Plan for the appointment to take up to two hours. During the appointment, you’ll sign your closing documents, pay your closing costs, and get your keys. Feels good, doesn’t it?

7. Make your move

The house is yours, and now it’s time to move in. Whether you’re moving across the country or across the street, it’s always best to have a game plan for moving day. Are you hiring movers or calling in a favor with friends? Where will your pets be while your belongings are being moved? When does your mail need to be redirected to your new address? The more questions you have answered before moving day, the less stressful your move will be.

Pro Tip: Nail your move with this handy checklist.

Understanding the closing timeline

With all these steps involved, you’re probably wondering just how long it takes to close on a home. A lot of factors determine the closing timeline, including how complex your loan is, how many loans your lender is processing in addition to yours, and the seller’s move-out schedule. In general though, it takes 30-45 days to close. If you’re anxious to get through it, there are a few strategies you can try to move the process along faster:

• Get pre-approved before making an offer
• Agree to buy the house as-is
• Avoid making any big purchases until after closing

Remember, buying a home is a big commitment. Don’t rush the process and miss out on potential savings and peace of mind along the way. Between your home closing checklist, your final walkthrough checklist, and your moving checklist, you’re more than prepared to close on a home, the right way. Ready to get started?

Getting pre-approved, buying your home as-is, and waiting until after closing to make big purchases are all good ways to get through your home closing checklist faster.

The post The Essential Home Closing Checklist appeared first on Cardinal Financial.

If you’re a first-time home buyer, you’ve probably heard about the negotiations, or “bidding wars,” that happen at the beginning of the purchase process. Fewer people, however, are aware of the negotiations that follow the signed purchase contract.

Although home inspections have become less popular over the last few years, they’re still commonplace in the real estate industry. When those inspections uncover one or more problems with the home, buyers and sellers have to agree on who will cover the costs. Here are four tips to help you come out on top when negotiating repairs after home inspection.

Ask for a credit.

Let’s be real, the sellers are on their way out both physically and mentally. If it’s looking like you’re going to complete the purchase and close, they’re probably more focused on packing than they are fixing.

If sellers aren’t amenable to making home inspection repairs—or if those repairs weren’t made to your satisfaction—you could go through the hassle of negotiating a lower purchase price, or you could ask for a closing credit. A closing credit is a way to decrease your upfront, out-of-pocket expenses. That credit reduces your costs, meaning you’ll have more cash on hand to make those repairs yourself. 

A closing credit is a way to decrease your upfront, out-of-pocket expenses.

Think “big picture.” 

Picture this. You’ve toured the home, you’ve agreed on a purchase price, and you’re putting together plans for your future remodel—but the home inspection report found signs of water damage under the sink. And on top of that, the rotted wood extends well beyond the cabinet under the sink. If you could negotiate those repairs now, why wouldn’t you?

When you’re working through home inspection negotiations, think about the future of your new home and remember that a seller credit toward those repairs could offset not only your closing costs, but your eventual renovation costs as well.

Don’t show your hand.

If you’ve got a home inspection coming up, find out if the seller’s agent will be walking the property with you, your agent, and the home inspector. If so, you might want to hide your true excitement about the house. Showing satisfaction with the current state of the home in front of the seller’s agent could hurt your chances of negotiating home inspection repairs later on.

On the other side of things, if the seller’s agent senses disapproval from you during the inspection, they might mention that to the sellers—helping build your case to get any repairs completed to make sure the sale goes through.

Be ready for anything. 

There’s a saying when it comes to buying a home: “It’s not over ‘till it’s over.” That means, until you sign the closing documents and have the keys in hand, anything could happen. The initial contract is just that—initial. With all the people involved, the unknown variables, and the state of the market, there’s a non-zero chance that your dream home could disappear entirely.

Consider this: If your home inspection results are favorable, there’s nothing to negotiate, so don’t try to fight for a lower price or closing credits. If the home inspection results turn up something negative, you may be better off negotiating credits or repairs instead of a lower purchase price—especially if the appraisal came back with a fair value.

Pre-purchase negotiations are tough, and home inspection negotiations can be even tougher. Keep these tips in mind or ask your team—lender and real estate professional—for more advice to make sure you’re prepared for the purchase process.

Although home inspections have become less popular over the last few years, they’re still commonplace in the real estate industry.

The post How to Negotiate Post-Home Inspection Repairs Like a Pro appeared first on Cardinal Financial.

What does buying a house “as-is” mean?

The answer to this one is fairly simple: Buying a house “as-is” means you’re buying a home that’s sold in its current condition—warts and all. 

On the upside, these homes are often priced accordingly, because “as-is” homes are rarely in perfect condition. Sellers realize that there’s some work that needs to be done, and they’re willing to settle for less than they would if the home was turnkey. 

The downside, however, is that because “as-is” homes are sold as-is, sellers are stating upfront that they’re not going to make any repairs or touch-ups prior to exchanging the keys. What you see is very much what you get. However, “as-is” isn’t always synonymous with “bad condition.” In fact, while a home’s condition may be one factor that leads to an “as-is” sale, sometimes sellers simply want to sell the property quickly. 

Four considerations to make before buying

We won’t call this official mortgage advice, but consider the following four things before putting an offer on an “as-is” house:

Don’t skip the home inspection

These days, buyers are sometimes hesitant to ask for home inspections. After all, a seller’s market led to a surge in cash offers, bidding wars, and waiving contingencies. However, because the market has cooled off a bit and home prices have started to fall (slightly), there’s no need to skip the inspection—especially if you’re buying a property “as-is.”

Said simply, a home is a huge investment, and a thorough inspection can protect that investment or keep you from getting involved in something you’re not financially ready to maintain. An inspection is less about trapping the seller or uncovering “gotchas,” and more about making sure the house is being sold as described, “as-is” or not.

Explore home warranty options

We’ve got in-depth coverage on home warranties in this blog, but here’s the gist: A home warranty is not required, but certainly recommended if you’re buying a home that’s in questionable condition. You can either purchase a plan yourself or ask the seller to provide one, but it’ll usually cover servicing and maintenance for the home’s appliances, plumbing, HVAC systems, roofing, and other parts of the dwelling.

Make sure it meets minimum requirements

Fun fact: Mortgages aren’t just handed out for any property. Many home loans—including most government-backed mortgages—have “standards for livability” that must be met before finalizing the sale, regardless of whether or not the property is being sold “as-is.”

For starters, a home is almost always required to be structurally sound. If it’s got walls, windows, a ceiling, and a roof, you should be in good shape. Some loans may require access to safe drinking water, and USDA loans specifically may require up-to-date electrical systems and functioning heating and air conditioning.

If certain requirements aren’t met, appraisers may decide that repairs must be made before closing, which can delay or derail the process completely. For this reason, cash offers—which require no mortgage—are oftentimes more palatable for “as-is” sellers.

Crunch the numbers

Consider this: When it comes to “as-is” homes, you’re not just buying the house. You’re buying whatever repairs and renovations need to be made to make the house a home. “As-is” properties may require new doors, windows, lights, flooring, and/or pest control (among other things). These seemingly little projects can add up to tens of thousands of dollars quickly.

Sure, you may save on the purchase price, but you’re going to want to make sure you have a mortgage that includes the cost of repairs or have enough cash on hand to get the ball rolling on repairs on day one.

Weighing the pros and cons

Buying a house “as-is” comes with a variety of its own pros and cons. 

Pros

Like we said earlier, “as-is” homes are typically priced lower. And because there’s not a lot of “work” to do on the homes before closing, the timeline from offer to closing may be expedited. Lastly, if you’re interested and have the funds available to do so, “as-is” homes offer a nice foundation for flipping.

Cons

When you include the down payment, closing costs, and repairs, you may see higher “all-in” costs. Additionally, not every state requires a “Seller’s Disclosure”, which would identify the home’s issues and alert you to them ahead of time. Finally, as we mentioned earlier, a property’s poor condition may prevent you from qualifying for certain loans. 

Now that you know what “as-is” means, are you more or less interested in buying a house in that category? Whenever you’re ready, we’ve got home loan pros who can help.

When it comes to “as-is” homes, you’re not just buying the house. You’re buying whatever repairs and renovations need to be made to make the house a home.

The post Buying a House “As-Is”: What It Means & What You Need to Know appeared first on Cardinal Financial.

#1. Interest Rate 

Let’s cover one of the basics first. An interest rate is fundamental to all forms of lending. In its simplest form, interest is what you pay a lender to borrow money on top of your principal, or the original amount you borrow. While you’ll always pay back more than what you borrowed, a lower interest rate means you’ll pay back less “extra.”

A lot of things go into determining your specific interest rate, including the amount you’re borrowing, your down payment, your credit score and history, and the length (or term) of your loan. Oh, and market conditions. Market conditions can affect the environment around you—including whether or not you’re in a buyer’s or a seller’s market.

#2. Buyer’s/Seller’s Market

When you’re ready to buy a home, your real estate agent may tell you it’s either a “buyer’s market” or a “seller’s market.” The former, a buyer’s market, is better for you, the borrower, because it generally means there are more available homes than buyers, which means less competition and lower prices. The latter, a seller’s market, is more competitive—often leading to bidding wars and greater potential for losing out on the home you’ve had your eyes on due to increased competition.

In a seller’s market, where homeowners are looking for top dollar from buyers, it’s important to have a bona fide pre-approval from your lender. If you’re interested in knowing what you can afford to offer before you start your house hunt, get your free rate quote here. 

#3. Buydown

A buydown is related to both your interest rate and the market you find yourself in, and it allows borrowers to use cash to temporarily lower their interest rate for a set amount of time—usually one, two, or three years. For example, a 3-2-1 Buydown might allow you to lower your original rate by 3% during your first year of homeownership, 2% during your second, and 1% your third before going back to your initial interest rate.

How are buydowns paid for? There are different methods, but one of the most common is the application of seller or builder credits, issued at closing. So, for example, if your seller offers a $15,000 closing credit, you may be able to apply that cash to the purchase of a temporary buydown. In a high-rate environment or a buyer’s market, where sellers are under a little more pressure to sell, this option could save you thousands of dollars over the lifetime of your home loan.

#4. Closing Costs 

Speaking of closing credits, let’s go over closing costs. Closing costs typically include all of the different fees you’ll pay in addition to the price of your new home, like appraisal, attorney, escrow, and title fees, as well as credit report costs. More often than not, you’ll pay for those with one check at the end of your purchasing process (and they may be included in the same check you write for your down payment). 

A good lender can help you plan for those fees ahead of time to ensure you have the cash set aside when the time comes to spend it.

#5. Equity 

Equity is the overall value of your home, minus your remaining mortgage balance. Like interest rates, your home’s value may fluctuate over time with market conditions, but as long as you owe less than what the property is worth, you’ll have equity. 

Like interest rates, your home’s value may fluctuate over time with market conditions, but as long as you owe less than what the property is worth, you’ll have equity.

For example, if your home is worth $400,000 and your mortgage balance is $300,000, you’d have $100,000 in equity. You can increase your home’s value and subsequent equity by paying down the balance, or by remodeling or renovating the property. 

Did you know that a mid-range kitchen remodel has a return on investment of almost 60%? According to Zillow, a $64,000 remodel can add almost $38,000 of value to your home. 

For additional ideas, check out another of one of our recent blogs, The Renovating a House Checklist You Absolutely Can’t Skip.

#6. Loan-to-Value (LTV) 

LTV, or loan-to-value, is a ratio used to describe the overall size of your loan versus the value of the home you’re buying. It will always be expressed as a percentage and comes from dividing the loan size by the home’s value. LTV is critical in determining your loan options, borrowing power, down payment, and whether or not you’ll need to pay private mortgage insurance (PMI).

Some home loans will require an LTV of 97.5%, which means you’ll need to put down just 3.5%. Other home loans require an LTV of 95% or less, which will require a higher down payment. Remember this general rule of thumb: The higher your down payment, the lower your LTV. 

Remember this general rule of thumb: The higher your down payment, the lower your LTV. 

#7. Debt-to-Income (DTI) 

DTI, or the debt-to-income ratio, is the percentage of your gross monthly income that’s used to pay monthly debts, and it helps lenders determine how much of a risk you are. Borrowers with a low DTI are generally seen as better with money management, and therefore less risky. The exact formula for calculating front-end DTI is:

DTI = (Expenses ​/ Gross Monthly Income) x 100

DTI is often split into two forms: Front-end and back-end. 

• Front-end DTI compares the cost of your living expenses (i.e. rent or mortgage) to your gross monthly income.
  • If your mortgage payment is $1,500 and your gross monthly income is $6,000, your front-end DTI would be 25%. 

• Back-end DTI includes other financial obligations, like credit card payments, student loans, car payments, child support, alimony, and more.
  • If your monthly debts amount to $825 and your gross monthly income is $4,750, your back-end DTI would be 17%. 

So what’s a “good” debt-to-income ratio? We cover that in depth in this blog, but a lower DTI is always better. Different mortgages have different debt-to-income requirements, and lenders may have additional requirements beyond that to help mitigate risk. 

#8. Funding Fees

Funding fees, like closing costs, are fees that borrowers pay to fund the loan and protect lenders from loss. Government loans like VA and FHA loans have funding fees, but those may be waived depending on individual loan circumstances. Your loan originator can help you find out if waivers are available for your specific loan type.

#9. Loan Originator

Speaking of loan originators, these professionals are different from mortgage brokers, because they’re representatives of the financial institution that’s helping buyers with the mortgage application process. A mortgage broker, on the other hand, is a licensed professional who works on your behalf to secure financing. 

Basically, a loan originator works for a lender and a broker is an independent agent. 

#10. Underwriting 

Once your application is complete and submitted (but before you get keys at the closing table), you’ll go through underwriting. Underwriting is the process lenders use to assess an applicant’s income, assets, credit, and risk. 

During this process, lenders comb through your personal information and financial records to determine whether or not you qualify for a loan. They’ll determine your LTV, your DTI, your interest rate, and your closing costs, so it’s important to get your affairs in order well ahead of time to ensure the process isn’t held up. 

Did these mortgage definitions help you better understand the mortgage process? Is there anything else we can clarify for you? Let us know on social media, check out our full glossary, or get in touch with one of our experts for more information. We’re always here to help!

The post Home Buying, Defined: 10 Mortgage Definitions You Need to Know appeared first on Cardinal Financial.

Your out of state move checklist

• Assess your finances and set a budget
• Compare costs of living to narrow down locations
• Explore potential homes virtually
• Find a great local real estate agent
• Visit the new area and view potential homes
• Get pre-approved for financing from the lender of your choice
• Make an offer
• Start planning your move

1. Assess your finances and set a budget

When you’re moving out of state, your costs won’t just include buying a new house. You’ll also need to budget for things like movers, storage, gas or plane tickets, and accommodations for the period between moving out of your current home and into your new one. As for your new house, don’t forget to include closing costs and appraisal fees in your mortgage budget.

Pro Tip: We may not be able to help you calculate your unique moving expenses, but we can help you calculate how much home you can afford. Take our affordability calculator for a spin to see what’s possible.

2. Compare costs of living

It’s no secret that the cost of living has been on the rise lately. That being said, cost of living does vary by state, city, and even neighborhood. So, once you have your budget, it’s time to use that to narrow down your target location. Cost isn’t everything, of course. When deciding where to house shop, don’t forget to prioritize what matters most to you. That could be school districts, proximity to work, walkability, and anything else you need to be able to put down roots.

3. Explore potential homes virtually

So, you’ve decided on an area. Now, it’s time to explore homes. Even though this step is a challenge with out of state moves, virtual tours have come a long way since Covid. In addition to listing photos, many homes may also provide video tours, FaceTime tours, and more ways to see the space without booking a flight.

4. Find a great local real estate agent

This one is important. Since you’ll be conducting most of your house search from across state lines, having a real estate agent on your team who knows the local area is key to finding great homes in areas you’ll love. A good agent should have:

• In-depth knowledge of the local area
• A track record of closing quickly, for less than the asking price
• Clear communication expectations
• Strong negotiation skills

5. Visit the new area and view potential homes

Whether it’s time, budget, or any number of other obstacles, this step might not be possible for everyone buying a home out of state. But, if you can swing it, it’s always best to see a home in person before you make an offer. To make the most out of your trip, wait until you have specific houses in mind to tour with your real estate agent (and make sure those showings are scheduled ahead of time). You should also use this opportunity to explore the local area and get a feel for the specific neighborhoods you’re considering living in.

6. Get pre-approved for financing from the lender of your choice

So, you’ve got a home in mind. Now it’s time to choose a mortgage lender. If you want to use a lender you’ve already worked with before, great! Just make sure they’re licensed to operate in the state you’re moving to. Especially in a seller’s market, pre-approval is a must-have if you want to bid competitively. Most pre-approval letters are good for up to 60 days, so don’t take this step until you’ve chosen a home and are ready to make an offer.

Especially in a seller’s market, pre-approval is a must-have if you want to bid competitively.

7. Make an offer

Ready to take the plunge? Once you’re pre-approved, your real estate agent can help you make an offer on your home. Just a heads up: You may find yourself in a bidding war with other buyers. To ease the stress and reduce the chances of your offer getting rejected, try these strategies:

• Get pre-approved
• Lower contingencies
• Include an escalation clause
• Stay flexible
• Don’t give up if your first offer isn’t accepted

8. Start planning your move

We could fill a whole separate blog with moving tips, but here’s the general breakdown.

8 weeks before you move

• Take inventory of your stuff. What are you keeping? What are you donating? What needs to be thrown out?
• Arrange moving transportation. For long-distance moves, you’ll likely also need to consider storage for your belongings if they arrive before you do.
• Transfer school and vet records if needed.

6 weeks before you move

• Buy packing supplies (more than you think you’ll need).
• Remember that casserole that’s been sitting in your freezer? Time to use it or lose it.
• Measure your new space to make sure your furniture will fit. No sense lugging a dresser across state lines only to find that it won’t fit through your new doors.

4 weeks before you move

• Packing time! Don’t forget to set aside items that you’ll need to keep with you throughout the move, as anything you pack may be in storage until you can settle into your new home.
• Disassemble furniture you’re not using. Your movers will likely do this anyway, but probably with less care.
• Label your boxes. Your future self will thank you when it’s time to unpack.
• Change your address and update your billing information once USPS has processed your request.

2 weeks before you move

• Submit your workplace PTO requests for moving week if needed.
• Prep your vehicle for the trip.
• Confirm moving day details with your mover.

Week of your move

• Refill prescriptions if you have them.
• If you have pets, update the address associated with their microchips.
• Get cash to tip your movers.

Bonus tips on how to buy a house out of state

Our final advice for how to buy a house out of state? It’s never too early to start planning. An out of state move may not be in your immediate future. But, if it’s something you’re interested in doing down the line, make sure you’re ready when the time comes. Start saving for your move, plan trips to cities you may want to live in, and don’t forget to have fun.

With a little extra research and the right real estate agent, it’s easier to buy a house out of state than you might think.

The post How to Buy a House Out of State in 8 Steps appeared first on Cardinal Financial.

So, if you’re looking for the best ways to build good credit, you’ve come to the right blog. Here are our top seven tips. Let’s get into it, shall we?

1. Knowledge is power.

Maybe you signed up for a store’s charge card to get that extra 20% off one day. Maybe you took out a car loan to celebrate your first adult job. And maybe, just maybe, you have a few late payments hiding amongst the skeletons in your proverbial credit closet. We get it—looking at your own credit score and the history attached to it can be frightening for some people. But if you don’t know what you’ve got, you won’t know what to improve. Our advice? Get familiar—not only with your own credit history, but with how credit works in general. 

First, you’ll want to pull a copy of your credit report from a reputable, reliable source. Any one of the three major reporting agencies (Equifax, Experian, or TransUnion) ought to do. Everyone in the United States can get six free credit reports from Equifax per year until 2026. Per the Federal Trade Commission’s Consumer Advice section, that’s on top of the report you’re able to get for free each year from the three aforementioned agencies. All you have to do is visit AnnualCreditReport.com to get started.

After you’ve pulled and reviewed your credit report, you’ll want to keep this in mind: Each reporting agency calculates your score differently, and not all creditors report to all three bureaus. While they may vary slightly, they all follow the FICO scoring method, which uses predictive data analytics to generate an accurate credit score. That said, they all consider things like account age, payment history, balances, and the number of accounts when generating your score. 

2. Error. Error. Error.

While the nation’s leading credit reporting agencies use digital tools and analytics to read your data and generate a score, those tools are often operated or read by people. And let’s be honest, people make mistakes sometimes. Lenders and creditors are no different. 

Should you obtain a copy of your credit report and discover an error or two—maybe an amount owed is higher than you thought, or maybe your address is wrong—you’re more than welcome to dispute those errors. In fact, you’re well within your legal right to do so, since the Fair Credit Reporting Act promotes the accuracy, fairness, and privacy of consumer information held by credit bureaus. It gives you the right to dispute errors or inaccuracies, have them investigated, and (hopefully) get them corrected. 

3. A low balance is a good balance, but no balance is better.

Hands down, one of the best ways to build good credit is to keep your balances low, or flat-out non-existent. Hey, we understand—sometimes you have to use a credit card to get by until the next paycheck, and sometimes you’ve gotta take out another student loan to cover a semester’s tuition. Those balances play into your “debt-to-income” ratio, or DTI. 

As a mortgage lender, we and other companies use your DTI as one way to gauge your readiness for, and ability to pay off, a home loan. Different home loans and programs have different DTI requirements, but generally speaking, a higher DTI signals greater risk for the lender. We want to know you can pay back what you borrowed, and having to pay off a bunch of other accounts may get in the way of that ability to repay. 

How can you lower your DTI? Lower your balances. There are a number of ways to approach this, but one of the most popular methods is sometimes referred to as “the snowball method,” where you pay off the smallest balances first to free up funds for later payments on larger balances. Even getting a small balance to zero is a win, so don’t hesitate to get started as soon as you’re able.

Want to learn more about DTI? Check out this blog to get all the details.

4. The best time is on-time.

Of all the things that can hurt your credit score, late payments are near the top of the list in terms of impact. That’s because payment history is a major player in determining your credit score, and even one missed payment can cause your previously stellar credit score to go sideways. The later your payment, the greater the impact.

• 30 days late is usually seen as a minor mistake.
• 60 days late is a red flag. 
• Once you hit 90 days late or more, creditors start exploring their options—one of which is sending your account and balance to a collection agency.

Of all the things that can hurt your credit score, late payments are near the top of the list in terms of impact.

Getting sent to collections won’t just damage your credit, it’ll drive you up a wall and have you ready to do whatever it takes to make them stop calling you. So, whatever you do, try not to fall behind. 

An easy way to help keep you on track? Auto-pay. Obviously you’ll want to make sure you’ve got cash in your account to cover every payment, but if you’re someone who frequently forgets to make payments (even minimums), this is a no-brainer. 

5. Budget best practices.

For some people, remembering to make payments isn’t the problem. It’s having enough money in the first place.

While living by a budget may not have a direct impact on your credit report, per se, it will lead to better financial habits. That trickle-down effect should then find its way to your credit report, because you’ll have budgeted appropriately to pay down (or pay off) your balances on time, every time. 

Budgeting is a discipline, but it’ll have a long-lasting positive impact on your life if you stick with it. Some folks need a little help with accountability, so ask a friend to tell you “no” next time you want to put a new pair of shoes on that credit card. And while there are apps abound to help keep track of your money and where it’s going, sometimes you can get away with a simple spreadsheet that documents when your money is coming in and what it’s going to. We’re talking simple addition and subtraction, folks. Budgeting is a discipline, but it’ll have a long-lasting positive impact on your life if you stick with it.  

Budgeting is a discipline, but it’ll have a long-lasting positive impact on your life if you stick with it.  

6. Live within your means. 

Just because credit can help you buy things you wouldn’t typically be able to afford, that doesn’t mean you should depend on it. A smarter way to get a handle on your finances is to live frugally and well within your means. 

If you want to use a credit card for daily expenses and bills, fine, no one will stop you. We recommend treating it like a debit card instead of a credit card, though. If you rack up expenses, pay them off in full each month with your income. That way, you reap the rewards (literally, in some cases—hello, cash back) but maintain good standing with a low or zero-dollar balance. 

Alternatively, consider going on an all-cash diet. Once you’ve got a habit of responsible spending, then you can get back into using your credit card. 

7. Age is more than just a number.

Everyone loves a new pair of shoes, but when it comes to credit reports, the older your account, the better. Earlier, we mentioned credit bureaus keeping track of how long your accounts have been active. That’s where this piece comes into play. 

An older account, especially one that shows consistent on-time payments and a history of keeping a low balance, will do wonders for your credit score. On the other end, new accounts can temporarily lower your score and will impact the average age of your credit profile. One account you’ve held in good standing for 10 years is better than several new accounts you’ve opened up back to back over the last three years. Each new account lowers the average age, which is a major factor in your credit score. 

An older account, especially one that shows consistent on-time payments and a history of keeping a low balance, will do wonders for your credit score.

That said, opening new accounts is still key to building good credit. A blend of accounts shows lenders and creditors that you’re able to balance different types and amounts of debt. The secret is to keep those older accounts open, even if you’re not using them all that often anymore. 

The best way to build good credit? Be responsible.

If you’ve ever wondered how to build good credit, now you’ve got the goods. Take this information and make your credit work for you, not the other way around. And if you know someone else who wants to know how to build good credit, be a pal and share this blog.

The post The Best Ways to Build Good Credit appeared first on Cardinal Financial.

When you live in an apartment or a condominium, odds are you never really had to consider landscaping beyond occasionally pruning a small tree or repotting some pretty flowers. When you move into something larger—whether it’s a simple upgrade to a townhome with a small patio, a detached single-family home with a full yard, or a manufactured home sitting on a large plot of land—you’re in for a change. 

Change, however, is good. Homeownership comes with all sorts of new projects—landscaping chief among them—but those things ultimately serve the benefit of helping you become closer to your new home. While few of us loved having to mow the lawn as a kid, you may in fact find that landscaping can be a labor of love. 

To help you prepare, we assembled eight home landscaping tips for you to check out, and a host of questions to consider before tackling your first landscaping project.

Tip #1: What’s your use case?

Congratulations, you’re a homeowner. Which, unless you’re living in a community that’s run by a strict HOA, means you get to decide how to use your space. You’ll also benefit from the ability to decide how it should look (within local ordinance requirements, of course). Now that you’ve got some amount of outdoor space to play with, you’re going to want to think about how you plan on using it. Consider the following:

• Will there be kids and animals running around, or is this a peaceful, private garden getaway from the day-to-day grind? 
• Do you want to rip up all the grass so you can work on vehicle repairs, or do you want something where nature can thrive? 
• How much labor are you willing to put into your landscaping over the next several years? 

How you want to use your lawn now and how you’ll want to use it in the future are two key considerations to make before starting anything expensive or time-consuming. After all, the last thing you want to do is rip up an entire yard’s worth of grass now, only to realize you don’t like walking on hot gravel two or three summers from now. Likewise, if you’re planning on installing an in-ground pool this year, there’s probably no point in overseeding or paying for sod right now. 

How you want to use your lawn now and how you’ll want to use it in the future are two key considerations to make before starting anything expensive or time-consuming.

Beyond that, you’ll also want to consider curb appeal. If you just recently purchased, you’re probably not looking to sell anytime soon. Still, attractive landscaping can boost your property’s value—either perceived or actual, and a house with good landscaping is more likely to sell than a house with bad landscaping. 

Tip #2: Grading, irrigation, and drainage.

Grading, irrigation, and drainage are things few new homeowners consider, either through the purchasing process or after the purchase is complete, at which point it’s too late to raise a red flag or negotiate a concession. 

Like all things, water is controlled by gravity or the grade of your land. It follows slopes and dips and collects in low points. Without appropriate grading or drainage, that runoff can have disastrous effects on your new home and the landscaping surrounding it. So, how do you fix poor drainage? Re-grading is one (expensive) option, but you’ve got other possibilities:

As for irrigation? That’s simple enough, depending on the size of your yard. Larger lawns (both front and back) may call for a zoned sprinkler system, which can use well water or city water and can be operated automatically. They’ll keep your grass and the surrounding plants nice and hydrated without the risk of overwatering. Downside? They tend to come with a hefty price tag and involve digging small (but noticeable) trenches throughout your yard. 

Alternatively, if you’ve got a hose and one or two spigots (or hose bibbs, depending on what you call them), you can connect them to all sorts of accessories like oscillating and/or drip sprinklers. The downside to these accessories is that they’re not as comprehensive as built-in irrigation systems, so you’ll have to move them to ensure full coverage depending on the size of your yard.

Tip #3: Know your soil.

Next up in our landscaping 101 lesson: Soil testing!

Getting your soil tested isn’t just super important, it’s super easy. For starters, there are a number of private third-party testing services to choose from. If you’re not into that, here’s a list of state-by-state testing labs to work with. Generally speaking, they’ll all charge a nominal fee to test your soil, but that cost will more than pay off when you’ve got a happy, healthy lawn. 

Why is knowing your soil makeup so important? Fertility and growth. Maybe you’re planning on overseeding this fall, maybe you’re in the market for a few new shrubs, or maybe you’re thinking about planting a tree that’ll someday support a whole tree house for your future children (or yourself, no judgments here). 

Most soil tests will tell you what nutrients your yard is full of or lacking, as well as the pH balance of your yard. From there, you can purchase soil amendments that will help restore balance to the land, promoting growth for your greenery. Knowing what you’re working with can help you save on costly fertilizer treatments and even some pest control treatments. 

Most soil tests will tell you what nutrients your yard is full of or lacking, as well as the pH balance of your yard.

Tip #4: Grass matters. 

Tall fescue, bermuda, bluegrass, zoysia, and dichondra are just some of the most common turf options both here in the United States and around the world. 

If you’re not sure what type of grass is growing in your lawn, a landscaping professional can usually tell you just by looking at it. If you’re looking to start fresh from bare topsoil (maybe with a few pallets of sod), you’re going to want to get a soil test done and you’re going to want to compare the textures, colors, durability, and seasonality of different turf types. 

To help you out, here’s a little cheat sheet:

Tip #5: To weed or not to weed, that is the question.

Some weeds, like dandelions, are pretty to look at. Others, like spiny sowthistle, are less pleasant to deal with. Depending on what kind of yard you want, you may decide to keep all, some, or none of the weeds that are encroaching on your freshly mowed grass. 

For many homeowners, getting rid of or keeping weeds is strictly an aesthetic choice. They may be unattractive to look at, but bare ground doesn’t always mean healthy ground. To these homeowners, some coverage is better than none—weed or not. On the opposite side, what’s the point in taking painstaking care of your turf if and perfecting those criss-cross mow lines if you’re just going to let weeds take over? 

For homeowners that are less anti-weed (we hear you, Colorado), the choice is often environmental. That’s because not all weeds are bad and many attract pollinating insects. Remember, bees are our friends! Letting flowering weeds live to see the light of day isn’t just good for the bees, it’s beneficial for the environment at large. 

All that said, the aforementioned soil test can help you regulate what kind of weeds show up in your yard and how often, since weeds are often an indicator of soil quality. 

Tip #6: In the zone. 

We’re nearing the end of our list of home landscaping tips. Next up? Zone coverage. 

Have you ever wondered why some plants thrive better in some environments than in others? Beyond the difference between annuals and perennials, knowing what zone you live in can help determine what kind of flowers, shrubs, and trees will grow best in your climate. 

The USDA Plant Hardiness Zone Map is a free resource that allows you to plug in your zip code to find your specific zone, which ranges on a scale from 1a (the frigid tip-top of Alaska) to 13b (the pristine coasts of Puerto Rico). Hardiness zones are “based on the average annual minimum winter temperature, divided into 10-degree zones and further divided into five-degree half-zones.” When you’re shopping for new plants, you can often sort and filter to find plants that grow best in your designated zone. For example, we’re headquartered in zone 8a—a warmer band that stretches across much of the southern United States. 

Knowing what zone you live in can help determine what kind of flowers, shrubs, and trees will grow best in your climate. 

What zone are you located in?

Tip #7: Native vs. Non

Okay, you’ve gotten your soil tested, your sprinklers are installed, you’ve had your sod laid, and you know your hardiness zone. What’s next? The best part of landscaping, we think: picking out the plants that’ll beautify your new space. 

But before you go selecting all sorts of plants and flowers, do some research into what you’re thinking about planting. 

Native plants are well-adapted to their surroundings, and familiar to the native wildlife that surrounds us. They often require less care because they’re so well-established to the area.

Non-native plants are things that have been introduced to the area by human hand, and will likely require greater and more frequent care and maintenance to ensure healthy living. Non-native plants aren’t always invasive, but invasive species are always non-native. Executive Order 13112, signed by President Clinton in 1999, designates invasive species as “non-native species whose introduction does, or is likely to cause, economic or environmental harm or harm to human, animal, or plant health.” 

So before you go transplanting any random pretty wildflower to your yard, take your time and find out if it’s native to your region. If not, skip it for something that is!

Tip #8: Best the pests.

Our final home landscaping tip deals with the pests that populate your yard. They may not be fun to look at (or have flying around your head), but ants, bees, and spiders are beneficial to your new yard. 

In a home, ants can certainly be annoying. Out in the yard? Ants actually help aerate yards, allowing water, oxygen, and other nutrients to reach deep roots. Bees pollinate our plants, and spiders spin webs to collect all sorts of nasty critters. While bee stings can be dangerous to those who are allergic to them, they usually don’t sting people unless they’re confused or threatened. Likewise, spiders are often thought of as dangerous—but of the 50,000+ spider species around the world, just 1% are capable of harming humans. 

The same cannot be said for other insects. Mosquitos, for example, are a nuisance that can carry various diseases, as do ticks and fleas. And roaches? We shudder at the thought of seeing one of those things scurry across the floor. 

What’s our point here? Not all pests are bad, but if you’re going to tackle pest control as part of your landscaping dream, make sure you target the right pests with eco-friendly (and potentially pet-safe) treatment options. 

Love the land you live on.

Now that you’ve been prepped, taught, and trained on home landscaping, we want to know what your first landscaping project will be! It could be something as simple as the season’s first mow, or as complex as a new irrigation installation. Either way, there’s always more to learn and even more to do when you’re a homeowner. Check out our related blogs to help you make the most of your home this summer!

The post 8 Home Landscaping Tips for New Homeowners appeared first on Cardinal Financial.

Should I buy a house? 10 reasons to say “Yes”

• Long-term stability
• Room to grow
• More privacy
• Control over your space
• Consistent budgeting
• Ability to build home equity
• More potential tax benefits
• Opportunities to grow your credit score
• Unique financing options to fit your lifestyle
• Potential to refinance for better terms down the line

1. Long-term stability

If you’re not ready to put down roots, renting can often be the best fit for you. But when you find the place you can see yourself living for the long term, you can’t beat the stability of homeownership. Depending on your loan terms, a mortgage is typically a 15 to 30-year commitment. Even if you sell your home before the mortgage term is complete, it takes at least a few years of staying put for your home loan to be a good investment. That’s years of getting to know your community, settling into your space, and not living with one foot out the door wondering where you’ll live next.

2. Room to grow

Kids. Pets. Plants. Whatever you want more space for, owning a home can deliver. And while apartments are limited to the square footage on your lease, your home has the potential for additions and renovations when your needs change (and if you do decide to renovate, there’s a loan for that).

3. More privacy

Sharing a wall with neighbors is, as the kids say, “not it.” One of the biggest benefits of owning a home is the privacy of a space that’s truly yours, both indoors and out. Especially with more people working from home, having your own quiet, dedicated space is a game changer.

4. Control over your space

One of the biggest downsides of renting is having to leave the space as you found it when you move out. You also have to adhere to the landlord’s policies. When you own your home, you can decorate it however you want, fill it with as many pets as you want, and generally make it feel like home. Just keep in mind that if your neighborhood has an HOA, they may have a few guidelines you’ll need to follow.

5. Consistent budgeting

If you’ve been renting long enough, you’ve probably noticed that rent rises every time you renew your lease. Between that and miscellaneous amenity fees and utilities, it can be hard to budget consistently when you rent. With a fixed-rate mortgage, you can rely on the same monthly payment due every time, until you pay off the loan or refinance for a new rate.

6. Ability to build home equity

This is one of our favorites. Home equity is the amount of your mortgage that you’ve paid off. In other words, the percentage of your home that you own. Unlike monthly rent, every payment you make on your mortgage gets you closer to paying it off entirely, all while your home equity keeps accumulating. And even though renovations may seem expensive upfront, those actually boost your home equity, too. If you need to, you can also leverage your home equity for more flexible funds with a cash-out refinance.*

7. More potential tax benefits

Taxes aren’t anyone’s favorite subject, but you’ll want to hear this one. When you switch from renting to homeownership, you could potentially qualify for more tax benefits like:

• Mortgage interest (applies to the interest paid on the first $750,000 of your home loan)
• Discount points (pre-paid interest on your mortgage)
• Property taxes (exact amount depends on where you live)

How much you can actually write off will depend on your unique financing situation.**

8. Opportunities to grow your credit score

Not only are there plenty of home loans that don’t require a high credit score, but each monthly payment you make helps improve your credit history. You can even leverage that healthier score down the line to get better terms when you refinance your mortgage. Win-win.

Pro Tip: Got credit challenges? We’ve got strategies to help you navigate them here.

9. Unique financing options to fit your lifestyle

Rent is, well, rent. Not much about it changes regardless of your circumstances. When you apply for a home loan, you can choose from a wide variety of mortgages that are actually built for your unique goals. For example, many first-time home buyers enjoy the flexible down payment and credit requirements that FHA loans offer. If you’re not quite ready to take on a house, a condo loan is a great way to transition. And if you qualify, VA loans offer some of the best benefits around.

10. Potential to refinance for better terms down the line

Even though a mortgage is a big commitment, it’s actually more flexible than you think. The rates you have now don’t necessarily have to be the rates you have forever. As you build home equity and credit, you can eventually leverage that to refinance your loan for different rates or cash out. You can even refinance to a different mortgage type altogether (from FHA to Conventional loan is a popular route).

Are there any reasons I should NOT buy a house?

The answer to “Should I buy a house?” really comes down to whether or not the timing is right for you. A mortgage can involve more upfront costs than renting, and a home loan application is a lot more involved than applying for a rental. When you own, you’re also responsible for any maintenance issues that arise. So, if the flexibility of renting still outweighs the commitment of a home purchase, now might not be the right time for you. Just remember that even if you’re not looking to buy a home now, it’s never too early to start planning for it.

*Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

**This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before making the decision to buy or refinance a home.

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