Archive for February, 2022

Five Benefits of Brooklyn Homeownership

Monday, February 28th, 2022
Receiving keys to begin enjoying Brooklyn home ownership.

There are many benefits to Brooklyn homeownership. Homeownership has long been considered the American Dream. And it can mean different things to different people. There has been a steady rise in homeownership since the 1900s in the United States.

Let’s take a look at five benefits of Brooklyn Homeownership.

Financial Benefits

The most apparent benefits are financial benefits. A home purchase is one of the most significant financial investments one will make in their lifetime. The benefits to investing in a home are:

Strengthening Credit

Making your home mortgage payments on time consistently will build your credit rating, which allows you to obtain other types of credit like purchasing an automobile or investing in other properties. In addition, as you pay down your mortgage, your credit score will increase.

Fixed Housing Cost

A fixed monthly payment helps you budget your monthly income more consistently. Your landlord can increase your monthly payment at determined intervals when you rent. With a fixed-rate mortgage, your principal and interest payment remains the same throughout the life of the loan.

Equity

Each month, a portion of your mortgage payment goes to paying down the principal amount on your loan. Equity is the difference between what you owe and the current value of your home. Over time, appreciation and lowering of the principal amount will increase the equity in your home. You may be able to leverage the equity for other financial needs. Building equity contributes to your financial stability.

Personal and Emotional Benefits

Home has become our haven, primarily through the pandemic. Unison recently published a report, State of the American Homeowner. This report discusses how homeownership has become more important to us through the pandemic.

Sanctuary 

Through the pandemic, our homes became our office, our schools, our gyms, and even our churches and synagogues, in addition to a place to eat, sleep and be with family.

Security

Many homeowners felt a sense of safety in their homes throughout the pandemic by controlling any potential exposure. As a result, people found refuge in their homes.

Importance

Our homes have gained more significance in our lives. More homeowners admit they love their home more now than they did pre-pandemic.

Health

According to a study by the National Association of Realtors, more people feel they have better health due to homeownership, having more control over their lives, and higher self-esteem.

Social Benefits

Achieving the American Dream has long been associated with success. But, owning your home also provides some social benefits.

Community

Living in a community provides a level of stability. Homeowners have a vested interest in keeping the community vibrant which attributes to maintaining property values. Many become involved in community organizations and government to better the livability of their neighborhood.

Financial Education

As homeowners gain the financial knowledge that comes with homeownership, they are likely to pass this down through the generations. This unexpected benefit of homeownership can change generations as parents teach their children how to handle mortgage payments.

Privacy

Community involvement is part of homeownership, but having a place to unwind in private is also a benefit many homeowners enjoy. You are in control of when you invite others into your home and when you just need an evening of quiet enjoyment.

Tax Benefits

Our tax laws have changed, but some tax benefits are still available for homeowners. The IRS Publication 530 outlines the tax information homeowners need when filing their federal returns. 

You may have eligible deductions if you recently purchased a home. Check with your tax professional to determine what you can use as a qualified deduction.

The capital gains tax exclusion may allow you to exclude up to $250,000 of the gain on the sale of your home or up to $500,000 if filing a joint return and you meet the homeownership test. You can find out more information about the sale of your home on the IRS website.

Homeowners in New York State may also be eligible for some tax incentives. You can find out more information on their website

It is always wise advice to consult with a tax professional to determine if you have taken advantage of all the tax deductions you are eligible to receive. This is because the tax laws change frequently.

Brooklyn Homeownership versus Renting Benefits

Many individuals are not sure that homeownership is right for them. In addition to the benefits above, let’s look at some of the specified advantages home ownership has over renting. 

Building equity for yourself versus your landlord

Each month that you make a mortgage payment, you increase your equity. Likewise, your landlord benefits each month you make your rent payment.

Interest rates are low

With the currently low-interest rates, you are often paying less on a monthly mortgage than you would be paying for a similar home’s rent. 

Stability 

Homeownership is considered a long-term investment. Renting is regarded as a short-term solution. If you plan on staying in an area for the long term, you should consider owning versus renting.

More Freedom

When you rent a home, the landlord dictates what you can and can not do regarding painting, flooring, and updating. You will need permission from your landlord to make any changes. You would be increasing the value for the landlord if you were permitted to make any updates.

Building credit

Showing your ability to pay your mortgage consistently improves your credit rating. However, different types of loans have different weights when evaluating your credit. For example, car loans and credit card payments do not elevate your credit as quickly as a mortgage.

There are some reasons when renting is a better option, and you must decide what is right for you. For instance, if you are a seasonal employee, temporary employee, or expected to be working only short-term in the area, it may not be to your advantage to purchase a home.

So how do you determine if homeownership is right for you?

If you are thinking about Brooklyn Homeownership, ask yourself these questions:
  1. Do you qualify to purchase a home?

The first step is talking to a lender to determine if you will qualify for a mortgage. Many different loan programs require different percentages for down payments. Therefore, finding the right loan program is a significant determining factor.

  1. How long do you intend to live in this home?

When you buy and sell a home, you need to consider the added expenses of closing costs. It may not be an issue if you are in an area with a greater appreciation rate. However, if you are purchasing in an area with a history of lower appreciation, you may need to stay in a home for 3 – 5 years before selling to realize a profit.

  1. What are your total monthly costs?

The costs of homeownership can be more than just your monthly mortgage payment. 

This previous blog post describes some of the hidden costs of homeownership. You need to know your total monthly expenses before committing to purchasing a home.

Everyone needs to decide what is right for them in their current situation. If Brooklyn homeownership is something you would like to achieve, but you are not ready now, saving for your downpayment and closing costs and increasing your credit score will put you in a great position when you are ready to buy.

Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate. As a Brooklyn real estate agent with over 30 years of experience, I help many home buyers understand the home buying process. Reach me by phone at (718) 253-9500 ext. 1901 or by email at [email protected]
Charles D'Allesandro

Important Real Estate Terms Brooklyn Home Buyers Or Sellers Need To Know

Tuesday, February 15th, 2022

dictionary of real estate terms for brooklyn home buyers or sellers

Real estate terminology can get confusing for Brooklyn Home Buyers or Sellers. After all, there is a lot of information you receive in the home buying or selling process. It may feel like you have to ask a hundred questions to understand the process clearly. 

Real estate professionals often forget that some of our terms are not common to clients. For this reason, I am sharing a simple explanation of some of the words you may need to know.

Adjustable-Rate Mortgage:

type of home loan with a variable interest rate set for a period of time and then the rate adjusts at predetermined intervals.

Amortization:

the schedule of your monthly payments showing how much of your mortgage payment goes to interest and principal until your mortgage is paid in full with the last payment.

Appraisal:

an independent evaluation initiated by the lender to determine a property’s value. An appraiser evaluates the home’s condition and comparable sales in the neighborhood. This report validates the purchase price.

Assessed Value:

a public assessor determines the property’s value for tax purposes.

Cash Reserves:

remaining funds after paying the down payment and closing costs. Lenders generally require some reserves to ensure you have the financial ability to make payments.

Closing Costs:

these are fees required to cover mortgage and title expenses for a property transfer. Both buyer and seller are responsible for a portion of the costs. 

Downpayment:

the amount of money paid upfront in a home purchase. Most lenders require a certain percentage based on the mortgage loan program you are obtaining.

Escrow:

a financial account set up by the lender and funded by the homeowner’s mortgage payments to cover property taxes and homeowner’s insurance when due.

Equity:

the difference between the property value and any outstanding mortgage amount owed on the property.

Interest Rate:

the percentage of interest charged for financing a mortgage. The lender determines interest rates.

Fixed-Rate Mortgage:

the interest rate remains the same for the life of the loan.

Loan-to-Value:

this is a ratio used by lenders to measure the loan amount to the value of the property. A larger down payment will lower the ratio and appeal to the lender.

Mortgage Broker:

an individual who acts as an intermediary between borrowers and lenders. Usually works with several different lenders to provide options.

Preapproval Letter:

the letter provided by a mortgage lender verifying the buyer’s financial ability to purchase a property. Sellers generally require this letter as part of the offer process.

Private Money Loan:  

is money borrowed from an individual investor, usually used by real estate investors to finance deals that may not qualify for a traditional loan.

Private Mortgage Insurance:

this fee is a percentage of the mortgage loan when a buyer puts down less than 20% and can be satisfied once the homeowner reaches a certain equity level. It is also known as PMI.

Proof of Funds:

a statement from a financial institution that verifies the buyer has enough funds available to complete a cash purchase offer.

Refinancing:

a homeowner will usually restructure their loan later after closing to either reduce the interest rate or pull out equity.

The first step for a home buyer is to work with a lender to determine the price range of the house they qualify for and the monthly payment that comfortably fits their budget. Understanding the above terms will help you when meeting with the lender. Nerdwallet discusses how to obtain a pre-approval in this article

The real estate purchase agreement or contract offers its terms for Brooklyn home buyers or sellers.

As-Is:

a property offered in “as-is” condition means the seller is unwilling to repair the home. It does not necessarily mean there is anything wrong with the property. The property frequently offers a lower to sell in “as-is” condition. A buyer can still elect to have a home inspection for informational purposes.

Addendum:

a separate form or addendum is used to add any additional terms and conditions included in the sale but not covered in the real estate purchase contract.

Buyer’s Agent:

is a real estate agent who represents the sole interest of the buyer in the home buying process.

Contingencies:

conditions the buyer or seller needs to meet before purchasing a property can close. Typical contingencies are inspections, mortgage approvals, and appraisals.

Disclosures:

sellers are required to complete property disclosures that may reveal various defects or improvements that may affect the home’s condition. Required disclosure varies by market. Typically, the areas covered in a disclosure include general information about the house, known environmental issues, known structural issues, and mechanical systems.

Due Diligence:

This is a time-specific opportunity for a buyer to examine the property thoroughly. Generally, this timeframe is for inspections or performing tests. 

Earnest Money Deposit:

a deposit made by the home buyer typically when they enter into a contract with the seller demonstrating their earnestness in purchasing the home. The amount is held in an escrow account until closing and deducted from the buyer’s cash needed for closing.

Inspections:

a buyer may choose to inspect the property before deciding to move forward with purchasing a home. Typical inspections are general home inspections, wood-boring insect or pest inspections, and radon inspections.

Listing Agent:

is a real estate agent who represents the sole interest of the seller in the home selling process.

Mortgage Contingency:

a condition in the purchase contract that the buyer must receive a mortgage commitment from the lender by an agreed-upon date.

Seller’s Contribution/Seller’s Assist:

the seller agrees to pay a percentage or defined dollar amount towards the buyer’s closing costs if negotiated.

Title Insurance:

usually required as part of the closing process, title insurance protects the buyer from the responsibility of an undiscovered lien after closing on their new home.

an examination of public records to confirm the property’s rightful legal owner and determine if any claims or liens on the property would affect the purchase.

Transfer Tax:

when property transfers from one owner to another in the state of New York, transfer tax is collected and typically paid by the seller.

That is a lot to remember, but your real estate agent can refresh your memory as you review the sales agreement together. This previous blog post will help you to learn more about how a real estate agent can help Brooklyn home buyers or sellers.

There is some miscellaneous terminology you may hear that may need some clarification:

Comparables:

are comparable, similar homes sold in a defined radius of the subject home used to establish a fair market value.

Distressed Property:

property can be in disrepair; an owner may have defaulted on their mortgage payments or property taxes are delinquent.

Fee Simple:

this term describes the most common type of homeownership. A property owner can transfer, or an heir can inherit the property rights at the owner’s discretion.

Flipping:

an investment strategy of purchasing a home, making improvements, and then reselling the property for a profit.

Foreclosure:

a bank repossesses a property due to the owner’s inability to make mortgage payments.

MLS:

the Multiple Listing Service is a database available to licensed real estate agents to view property listings.

Motivated Seller:

a homeowner may be pressed for time, nearing foreclosure, or own property out of state and are open to negotiating a favorable price for a property.

Probate Sale:

If the death of a homeowner occurs and they do not have a written will, the probate court authorizes an estate attorney or representative to hire a real estate agent to sell the home.

Real Estate Auction:

usually, a financial institution will sell repossessed homes through an auction to the public. Privately homeowners may also choose an auction to sell.

Short Sale:  

a homeowner can not sell their property for more than what they owe on the home. The lender must approve a short sale.

Real estate has specific acronyms and terms that can confuse those not working in the field like any other industry. However, when you hire a real estate professional to work on your behalf, they can answer your questions on anything you do not understand.

Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate. As a Brooklyn real estate agent with over 30 years of experience, I help many home buyers and sellers with their real estate needs. Reach me by phone at (718) 253-9500 ext. 1901 or by email at [email protected]

Charles D'Allesandro