Archive for the ‘Buying Real Estate’ Category

Do Your 2023 New Year’s Resolutions Include A New Brooklyn Home?

Friday, December 30th, 2022
Homebuyers dreaming of a new Brooklyn Home

Are you making resolutions that include a new Brooklyn home for 2023? If that is on your list of resolutions, you may wonder where to start. 

As a homebuyer, there are several steps to take before your begin to look at homes:

Talk With A Lender

It is always important to speak with a lender first to determine the amount you will be able to borrow. Interest rates have changed and may affect the price of the new Brooklyn home you can afford. Learn what you can do to beat high-interest rates in this previous blog post.

The lender will look at your credit report to determine the amount of a mortgage you qualify to borrow. If there are any credit issues, the lender can direct you to a credit repair agency that can help you boost your credit score to buy a house within a few months.

Having a pre-approval letter before you start looking will help you in several different ways:

  • You will know your most comfortable price range and target your monthly payments.
  • The seller will require a pre-approval letter to be submitted with your offer so that they know you are qualified to purchase their home before they agree to accept your offer.
  • You will not delay submitting your offer by having to obtain your pre-approval after you find the perfect home.

What information do you need to have when contacting a lender for pre-approval?

  • Income verification. How you get paid will determine what information you need to provide the lender. 
    • W-2 employee – You will need copies of your W-2 forms and two most recent payroll stubs. 
    • Self-employed – You will need a year-to-date profit and loss statement and two years of tax records, including 1099s you used to report income. Self-employed includes sole proprietors, partnerships, and S-corporations.
  • Assets. You will need to provide bank, retirement, and investment account statements.
  • Debts. You will need a list of all your monthly payments for student loans, auto loans, personal loans, mortgages, and credit cards.
  • Other information. It may be necessary to show any rental income you receive, a divorce decree which would address child support and alimony along with property settlements, and down payment gift letters if you will be obtaining your down payment from a parent or family member.

The lender will ask for verification of any other items needed throughout the process. First, you must have a paper trail of sources for the down payment and closing costs. If the lender finds any large deposits in your bank statements, they may request an explanation of its origins. Finally, you will need to notify your lender of any changes in your financial position.

Getting pre-approval from your lender in advance is the first and most important step in the home-buying process.

Find a Good Real Estate Agent

When you are ready to buy a new Brooklyn home, you need to find the right agent to guide you through the buying process, whether you are a first-time homebuyer, a move-up buyer, or a downsizing buyer. 

Interview several agents if you do not know one with a good track record and local reputation. Questions you may want to ask an agent during an interview include:

  • How long have you been an active real estate agent?
  • Do you work full-time in your real estate business?
  • How many homes do you sell per year?
  • How do you stay current on the local real estate market and trends?
  • Do you have references available?
  • Do I have to sign a contract, and can I cancel if I am unsatisfied?
  • How do you communicate with your clients and set realistic expectations?

The local real estate market is changing, and you need someone in your corner who is knowledgeable and can help you negotiate the best deal possible. You also want someone realistic about the market. Hiring a Buyer’s Agent does not typically cost the buyer, as the seller pays the commission. 

A buyer’s agent is responsible for the following:

  • Assessing your needs. The buyer’s agent will ask you about your requirements. You need 3 bedrooms, but you want 4 bedrooms. This information will help your agent research properties that suit your desires.
  • Explaining the buying process. The buying process can be complicated. Every home sale is different. An experienced buyer’s agent can handle unique situations to help you buy your Brooklyn home. 
  • Showing you properties. Your agent will find the properties, make appointments, and walk you through the homes. This is where an experienced local agent is most valuable to help point out the positive features and potential issues they may see.
  • Writing up and submitting your offer. Your buyer’s agent can advise you on pricing and how to structure an appealing offer. They will then submit the offer and communicate with the seller’s agent to begin negotiations.
  • Monitoring the closing process. After your offer is accepted, your agent will coordinate with all parties until the closing is final.

Your buyer’s agent is your advocate. They will answer your questions and guide you through the entire process to help you buy your new Brooklyn home.

A common misconception is that working with the seller’s agent will get you a better deal. The Seller’s agent is working on the seller’s behalf and is contractually obligated to do so. Do yourself a favor and find the right buyer’s agent.

Narrow Your Search Criteria

You most likely know where you would like to buy your new Brooklyn home. However, you may be looking for a particular school or proximity to work. Focus on your top area first, and then move out if you can not find the right home.

Make a list of the items you must have in your new home, and be sure to discuss those items with your real estate agent. Think of the things that would be a “deal-breaker” for you and discuss that with your real estate agent. The more your agent knows about your needs, the better they can zoom in on the suitable homes for you. A resourceful real estate agent can guide you to the properties that meet your criteria. 

Try to get input from others who live in the areas you are considering for the pros and cons they can offer. If you don’t know anyone living in the neighborhood, check out some online forums that can provide insight.

It is a good idea to visit the community at different times of the day to get a feel for what is happening in the neighborhood.

Conduct Inspections

Unless you have a thorough knowledge of house construction and components, I do not recommend waiving the inspections when you buy a house. Inspections are an important part of the home-buying process. 

A home inspector must have an active license in the State of New York. You can find answers to frequently asked questions about New York licensing for inspectors here.

The seller will disclose what they know about the property. However, it isn’t uncommon for the home inspector to find things that the seller didn’t know.

The home inspector will check the home’s major components, starting on the outside. First, they will look at the foundation and the roof for any defects. Then they will begin their interior inspection in the home’s basement. Finally, they will check the electrical, heating, air conditioning, and plumbing systems. In addition, they will also check windows, doors, and flooring.

Ask the inspector what they will and will not check before scheduling your inspection. If you notice something during your home tour, you should ask the inspector to look closely during his inspection.

You will also want to have a pest inspection to ensure there are no wood-boring insects, such as termites, that would be causing damage to the home. In addition, some types of financing will require a clear pest inspection report.

When you initially look at a home, you look more from an emotional point of view. You are picturing yourself and your family and friends in the spaces. You may not be looking at the home with a critical eye. Therefore, having a third party examine the property is valuable to learn if any safety or major ticket items need repairs.

Loan Application

After you accept a home offer, you will need to make a formal mortgage application. If you use the same lender who provided you with the pre-approval, they may have all your information. Notify them when you have an accepted offer on a home and find out what additional information they require.

Once the formal loan application is in process and inspections are negotiated, you can prepare for closing day!

The process of buying a new Brooklyn home can seem daunting. However, the key to a successful home search and negotiation is to have the right team in your corner. There are many people involved. Check out this blog post to learn more about each party.

Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate, to help you make your resolution for a new Brooklyn home come true. As a Brooklyn real estate agent with over 35 years of experience, I have been assisting Brooklyn Homebuyers with advice and resources. Reach me by phone at (718) 253-9500 ext. 1901 or by email at [email protected].

What Brooklyn Homeowners Should Know About Selling Now

Thursday, December 15th, 2022

Many Brooklyn homeowners are debating whether to sell now; you need to understand what is going on with home prices. With all the news, you may still be determining whether now is the right time to sell your home. 

Remember that news outlets design headlines to make big impressions. Are they genuinely accurate? 

Indeed, home prices are down slightly month-over-month in some markets, but nationally home values are up on a year-over-year basis. Based on national statistics, the median house sales price was up +5% year-over-year as of October 2022.

Year-over-year is a method of evaluating growth by comparing a statistic in one time period with the same time period one year earlier.

We hear on the news that home price growth has moderated recently as buyer demand has lessened due to higher mortgage rates. That is a true statement. However, prices are still doing well in the real estate market.

You need to understand that the percentage of appreciation is still well over what we saw during the years before the pandemic and market explosion. Between January 2019 through mid-2020, the appreciation rate was around 3-4%. The latest statistics show that this year’s home prices have climbed roughly 10% over last year.

Ten percent appreciation is a significant rate compared to the average of 3-4%. It is undoubtedly below the 20% appreciation we saw earlier in 2022, but it is still an impressive number.  

If you have owned your home over the last two years, you have probably recognized a substantial amount of equity in your home as the home prices climbed. And even now, as the home prices moderate, you may see an increase in your equity. 

Mark Fleming, Chief Economist at the First American Economic Center, stated in his report on November 28, 2022: 

“Potential home sellers gained significant amounts of equity over the pandemic, so even as affordability-constrained buyer demand spurs price declines in some markets, potential sellers are unlikely to lose all that they have gained.”

The experts are not expecting a crash in housing prices. However, as prices moderate, factors such as local supply and demand will determine the level of moderation for each market. 

Consulting with a trusted real estate advisor who understands your local market is the best advice if you are interested in selling to determine your home’s current fair market value.

The market’s reaction to moderation is not within a seller’s control. But the areas you can control can become barriers when looking for a quick sale. For example, no longer can you put a sign in your yard in the morning and expect multiple offers by dinner.

However, homes are still selling at reasonable prices.

Some simple tips to get your home ready for sale are the tried and true tips that work for selling a home.

Price your home correctly. 

There are five factors to consider when pricing your home:

  • Location
  • Comparable home sales
  • Condition
  • Updates
  • Market Conditions

An experienced local real estate professional understands what is happening in the local market. They study and track the current trends and can provide you with the statistics for your local area.

In this previous blog post, I explain the pricing philosophy in depth.

Prepare your home for sale.

It is essential if you want a quick sale to thoroughly prepare your home before the sign goes in the yard. You have one chance to make a first impression. 

All preparation must start with a deep clean and decluttering inside and out. Inside you should go room by room, decluttering and cleaning as you go. Outside, you may need to powerwash the exterior decks or siding, clean windows, and tidy up the landscaping.

Stage your home.

It is vital to present your home’s best features. That is the purpose of staging a home. Psychology to staging allows the buyer to see the best features of your home and to imagine themselves living there.

Brooklyn homeowners should strive to make their homes look bigger, brighter, and more inviting for the homebuyers that walk through the door. To do this, you need to think like a homebuyer:

  • Buyers want a move-in ready home.
  • They believe that if the seller doesn’t make an effort to prepare their home for sale, there are probably neglected, non-visible high-ticket maintenance items too.
  • Buyers are more likely to offer a better sales price if the home presents well.
  • Only 10% of buyers can visualize a home’s potential and can not see past the clutter and uncleanliness.

When staging your home, you must be objective and keep the buyer in mind. If you find it difficult, hire a professional home stager to help. A home stager is not emotionally attached to the home like you may be and can objectively provide you with advice.

Hire a real estate professional.

Given the skewed news reports an unprecedented real estate market, it is understandable that Brooklyn homeowners need clarification about whether they should sell their homes or not.

Selling a home can be stressful, no matter the market. Hiring an agent to guide you through the process can alleviate some stress. There is much to know about the real estate process to attain a smooth transaction when you are ready to sell your Brooklyn home. 

A real estate professional can do the research and recommend a fair asking price. They know the process and have the negotiating skills to help you obtain the best results. 

They study the market and understand the current trends in the local area that may affect you as a Brooklyn homeowner. Then, a real estate agent will guide you in presenting your home in the best possible light based on what the current buyers in your market want.

Your real estate agent will professionally market your home to obtain the proper exposure to the available buyers. Help with staging, professional photography, and internet exposure of the house are all part of a real estate marketing plan they can provide.

You may wonder if selling a home in the winter is a good idea. There are some excellent reasons to sell during the winter if you are ready.

  • Competition with other sellers is low because fewer homes are listed now.
  • Internet searches increase during the winter as most homebuyers start their search online.
  • Many promotions and relocations happen during the first part of the year.
  • Year-end bonuses give some buyers the extra cash to purchase a home.
  • Buyers looking in the winter tend to be more serious about buying a home.

If we could look into a crystal ball, we would know exactly what to expect. For now, though, we will need to rely on the expert’s predictions and watch our local market. There is no guarantee, but the forecast isn’t as gloomy as the headlines make it seem.

Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate, if you are considering buying or selling a home. As a Brooklyn real estate agent with over 35 years of experience, I have been helping Brooklyn Homeowners with advice and resources. Reach me by phone at (718) 253-9500 ext. 1901 or by email at [email protected].

Charles D'Allesandro

Your Stress-Free Holiday Checklist For Brooklyn Home Owners

Wednesday, November 30th, 2022

Holiday checklist for Brooklyn home owners

Brooklyn Home Owners can enjoy the holidays by following this stress-free checklist. We have officially entered the preparation season, and there is much to do. Checklists are a great way to ensure you don’t forget something important. I use checklists to keep me on track regularly. 

Time Off

Start your holiday planning by deciding on your time off. Block it off your calendar to ensure work or obligations do not interfere. Consider your traditions as you determine the days you want to be free.

Prepare Early

I’m sure you have found the holidays sneaking up on you once or twice in the past. Brooklyn home owners should begin to prepare as early as possible. Start making your list and checking it twice now! Put together a timeline to accomplish all your goals. We overestimate the time we have to get things done. Avoid the last-minute scramble with early preparation.

Holiday Cards

Receiving a greeting card is a good feeling. Knowing that the sender took their time and included you on their list is always heartwarming. Unfortunately, this task has fallen off many “To-Do” lists over the years. If you regularly send cards or want to start sending holiday cards, do it early. The mail service has been slower since the pandemic. If the thought of writing out all those envelopes and getting to the post office for stamps has you procrastinating, you may want to try an online service like Postable. Unlike other greeting card senders, their service has no membership fee.

Clean Before Decorating

Now is a great time to do a thorough cleaning. You will pack many of your non-seasonal decorative items away to make room for that seasonal decor. Getting the major cleaning done first is easier as you are removing the non-seasonal stuff. And once this major cleaning is complete, you will only have to do a minor tidy-up before guests arrive. 

Declutter

While you are cleaning, declutter too. As you deep clean each room, collect the items that you don’t use, need repair, or no longer like. Take them straight to a donation center or repair shop. Everything you keep should have a home. If it doesn’t have a home, now is the perfect time to figure out the most logical, convenient place to store an item. Not only will your home be organized, but you can also make room for guests if you expect them.

Focus on the Entry

Pay particular attention to how your guests will enter your home. Make sure sidewalks and driveways are clear of debris, snow, and ice. Stock up on some ice melter to prepare you for inclement weather. If you are decorating outside, ensure the porch is welcoming and decorations do not restrict the passage through the front door. Inside you will want to also focus on a welcoming atmosphere along with some practical items. For example, where will coats be stored as people enter your home? Is there a place for wet or dirty shoes? Again, make sure any decorations are not restricting the area to provide space for your guests to take on and off jackets and shoes.

Decorating

Whether you go all out or tend to be a minimalist, plan when you want to decorate your home. If your calendar is beginning to fill for December, you should schedule time now for decorating. You should also pre-plan when you are taking down your decorations. 

Delegate or Hire Help

There is so much to do to prepare. Spending a few extra dollars to hire help may be a good investment in yourself for the holidays. Do you have some minor repairs a handyman can tackle for you? Could someone else handle the cleaning? Can you find someone else to decorate the outdoor areas? Hiring help is one of many ways to get the work done. You can delegate chores to other household members. Even children can help by doing chores like watering the tree, decluttering their toys to donate to needy children, and hanging up cards as they arrive. Go through your list of to-dos to see what someone else can help you complete.

Be Safe with Electric

Be sure not to overload circuits. Timers are a good idea to regulate electricity usage for your holiday decorations. Extension cords can be a hazard. Do not use indoor extension cords for outside.

Set a Budget

Spending too much money during the holidays on gifts, food, and entertainment isn’t unusual. Carefully set a budget before you start spending. Some people find the envelope system helpful. You put the amount of cash in an envelope you are willing to pay for a particular category, like gifts, food, entertaining the kids, etc. This Dave Ramsey article explains how to set up and use the envelope system for budgeting. You can adapt the principles for your holiday spending.

Shop Early

Even if our supply chain were back to normal, getting your shopping done early is an excellent way to reduce stress levels. Not only does it feel good to have your shopping done, but it also gives you plenty of time to get things wrapped. Of course, there is always that guy who claims he loves shopping on Christmas Eve! Is it genuinely exhilarating for him, or is he just procrastinating? Don’t forget to buy a few emergency gifts to have on hand if you receive an unexpected gift from someone.

Prepare Your Guest Room

A house full of friends and family is more fun during the holidays. Prepare a space for your guests where they can have some privacy. A guest bedroom decorated with a cozy feel will be where they can retreat if they need some alone time. Be sure there are enough linens and some storage available, and add extras such as water bottles and toiletries to give your room a hotel-like feel.

Stock Your Pantry

Prepare your meal plans with a few extra meals just in case you have unexpected guests. Non-perishable items for breakfast, lunch, and dinner are good to keep on hand for a quick meal or unexpected visitor. A few easy-to-prepare snacks would also be a good idea.

Check Your Essentials

If you haven’t prepared your home for winter, now is the time to pay attention to a few items. 

This previous blog post will help you prepare for the winter ahead.

Check Travel Plans

We have seen quite a travel disruption lately. As a result, you need to double (or triple) check your travel plans. In addition, it would be wise to create a Plan B if your plans are interrupted.

Be In The Moment

It is often difficult to enjoy the moment you are experiencing when you have so many tasks on your list. However, pre-planning will allow you to relax and enjoy your family and friends this holiday season. 

Contact Your Realtor®

As your Realtor®, I am probably not on your holiday preparation checklist, but I will answer your questions if you are contemplating a home sale or purchase. January is a popular month for job promotions. A promotion sometimes requires the employee to relocate. Congratulations if this is you. Let me know how I can help you.

Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate, if you are considering buying or selling a home. As a Brooklyn real estate agent with over 35 years of experience, I have been helping Brooklyn Home Owners with advice and resources. Reach me by phone at (718) 253-9500 ext. 1901 or by email at [email protected].

Charles D'Allesandro

7 Ways You Can Beat High Interest Rates As A Brooklyn Homebuyer

Tuesday, November 15th, 2022

Brooklyn hombuyer surprised by high interest rate

As a Brooklyn homebuyer, you know it is no secret that mortgage interest rates have been rising through 2022. Although that sounds like bad news, there are still ways you can lower your interest rate on your new home.

Although mortgage rates have doubled since the beginning of the year, they are nowhere near the historical high of October 1981, when they peaked at 18.45%. However, that may not be comforting to you if you could not take advantage of the historically low rates.

Still, homeownership typically wins out over renting in the long term. If you are not sure whether you should rent or buy, take some time to read our previous blog post, “Should You Buy Or Rent In The Brooklyn Real Estate Market?”

If you are now in the market to buy a home, there are some things you can do to ensure you receive the best rate possible. 

Improve Your Credit

Your credit score significantly affects your ability to finance a home and the interest rate a lender will offer you. A strong credit score gives the lender greater confidence that you are a reasonable risk and that you use your credit wisely. The better your credit score, the more favorable the loan terms you will receive.

The number one thing you can do is to make your payments on time and in full each month. Credit history makes up approximately 35% of your credit score. This CNBC article discusses all the factors involved in calculating your credit score. 

The credit utilization ratio is another factor that can affect your credit score. Essentially, you only want to use some of the credit available at any time. 

Keeping older credit accounts open can also boost your credit score. On the other hand, having too many credit inquiries within a limited time frame can negatively affect your score. 

It is wise to monitor your credit score and handle any issues that may arise as soon as possible. There are plenty of apps available that can help you monitor your credit.

Mortgage Broker VS Bank

Mortgage brokers source loans from a variety of lenders. They are the go-between for financial institutions and homebuyers. The broker will collect and verify all the information required by the borrower to complete the home purchase and work with both the borrower and the lender.

They may be able to find a better rate than working directly with a bank, although a borrower can certainly work directly with a bank. A mortgage broker can discover various loan options for a borrower, saving the legwork needed.

A Brooklyn homebuyer with some credit challenges may find more flexible lenders through a mortgage broker.

Be careful when you are evaluating the offers a mortgage broker provides you. Depending on their sources, they may not be able to offer a better deal than working directly with a bank. Some lenders will not work with mortgage brokers and may be able to provide you with a better deal. 

Shop Lenders

With the rise in interest rates, the number of people buying and refinancing has decreased. As a result, lenders are more likely to compete for your loan now than they were a year ago. 

When comparing lenders, remember that you are comparing interest rates, the lender’s fees, and the amount of cash you need. The fees are origination fees, points, mortgage insurance premiums, and 3rd party fees. First, ask for an estimate of the monthly payment and total closing costs. Then, compare each lender’s estimate. 

Finding the right mortgage is as important as finding the right home. Mortgages are a long-term commitment, and leaving money on the table is never desirable. Work with reputable people that you trust.

Purchase A More Affordable Home

The interest rate affects the maximum amount you can borrow for your mortgage. The lender you choose will calculate your total monthly payment for the loan principal, interest, taxes, and insurance. Therefore, the higher the interest rate, the less principal you can afford. As a result, you may have to lower the price range of the homes you want. A starter home or fixer-upper is a good option because you will begin to increase equity in your investment. Later, you can roll that equity into a larger home if needed.

Make A Larger Downpayment

A larger downpayment can make a difference in the price of a home you can afford and the terms of your mortgage. In addition, your interest rate may be lower with a larger downpayment which saves on the amount of money you pay in interest over the life of the loan. 

Lenders require private mortgage insurance when the borrower’s downpayment is less than 20%. Once the borrower reaches 20% equity in the home, they can cancel their private mortgage insurance.

When saving for a home, you need to consider the downpayment, closing costs, and an emergency fund for repairs after you close your house. If you do not have an emergency fund when you purchase a home, you may be in a bad financial situation should anything go wrong in the house.

You will also need to consider the time you expect to live in your new home. A larger downpayment is more beneficial for the long term. However, the larger downpayment may not make sense if you do not plan to stay in the house for long.

Buy Down Your Rate With Points

Buying down your mortgage interest rate should be carefully examined to see if it makes sense for you. You pay a one-time fee upfront for discount points or mortgage points. Each point costs approximately 1% of the loan amount. Generally, each point reduces the rate by .25%. 

For example, a Brooklyn homebuyer needs to apply for a mortgage of $300,000 and purchase one discount point at the cost of $3,000. Say the going interest rate is 6.5%; after buying that one discount point, they would pay 6.25% interest on the loan.

Sometimes a builder or seller will offer to pay discount points to buy down your mortgage rate. However, suppose you are considering buying down your mortgage interest rate. In that case, you must remember that you have to have enough cash for a downpayment, closing costs including discount points, and reserve savings.

Analyze the breakeven point or the amount of time it will take you to recoup the cost of the discount points needed to lower your interest rate. Simply divide the cost of the discount points by the amount you will save each month at the lower rate. If you think there is a chance you would be selling the home or refinance it before the breakeven point, it may not make sense for you to buy down the interest rate.

Assume An Existing Mortgage

A Brooklyn homebuyer takes over a home seller’s loan when they assume an existing mortgage. Not all types of mortgage loans are assumable. The buyer must qualify for the mortgage. A cash downpayment is needed to cover the difference between the sales price and mortgage balance. 

Assumable mortgages are a good option for a Brooklyn homebuyer if the original loan’s interest rate is less than the current interest rate for a new loan. You can save money long-term because you are borrowing less over a shorter period than with a new mortgage. 

FHA, VA, and USDA loans are usually assumable, but conventional loans are not. In addition, government-backed loans regulate the closing cost on assumed mortgages, which may save you money.

Qualifying for an assumable loan is similar to qualifying for a new mortgage. You must complete a loan application and provide all the required supporting documentation. A mortgage underwriter will pull your credit and verify your information to determine if you meet the credit requirements. They will also need to confirm that you have adequate funds to pay for the closing costs and downpayment.

As a Brooklyn homebuyer, you must determine which options work best for you. Do your homework, and work with professionals who understand the pros and cons of each to get the best advice. You can not control the interest rates, but you may be able to find a strategy that works in your favor.
Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate, if you are considering buying a home. As a Brooklyn real estate agent with over 35 years of experience, I know the local area, market trends, and available resources. Reach me by phone at (718) 253-9500 ext. 1901 or by email at [email protected].

Charles D'Allesandro

Should You Buy Or Rent In The Brooklyn Real Estate Market?

Tuesday, November 1st, 2022

With so many changes in the Brooklyn Real Estate Market, many ask if they should buy or rent. Unfortunately, there isn’t a clear-cut answer; it depends. Sometimes a person should rent, but most often, home ownership has many more benefits and advantages.  

Whether you buy or rent now depends on your financial situation and personal goals. If you have saved for a downpayment , have an emergency fund, and are comfortable with the total monthly cost of purchasing a home, now could be the right time for you to buy. Realtor.com offers a rent versus buy calculator to help you determine if it makes financial sense for you.

Homeownership is one of the best ways to build wealth. If it feels right to you financially as well as personally, buying a home may be the best option for you. 

There are advantages and disadvantages to buying a home and the same goes for renting. Understanding the advantages and disadvantages of each will help you prepare for the type of housing that is right for you. 

What are some advantages of buying a home?

More Stable Housing Costs

Rent payments can be unpredictable and typically rise yearly, but most mortgage payments remain unchanged for the entire loan period. If the taxes go up, the increase is usually gradual. This stable housing cost is significant in times of inflation when renters lose money and owners make money.

Tax Advantages

Homeowners can be eligible for significant tax savings because they can deduct mortgage interest and property taxes from their federal income tax. However, this can be a considerable amount initially because the first few years of mortgage payments are made up mostly of interest and taxes.

Equity

Instead of payments disappearing into someone else’s pocket, homeowners are building equity in their homes. A home purchase is often one of a person’s most significant investments.  Each year that you own the home, you pay more toward the principal, which is money you will get back when the home sells. It is like having a scheduled savings account that grows faster the longer you have it. If the property appreciates, and generally it does, it is like money in your pocket. And you are the one who gets to take advantage of that, not the landlord. You can then use this equity to plan for future goals like your child’s education or your retirement.

It is Yours!

When you own a home, you are in control. You have the freedom to decorate it and landscape it any way you wish.  If you would like, you can have a pet or two. No one can pop in and inspect your home and threaten to evict you. 

What are some disadvantages of buying a home in the Brooklyn real estate market?

Fixed Location

Homeowners can’t move as easily as a renter who just has to give notice to the landlord. Selling a house can take more time. If you are a travel buff, taking off for parts unknown may be in your blood. How does six months of traveling Europe sound? If you own a home, you will need to sell or rent your home depending on your plans and the length of time you desire to travel. The same goes for a work-related relocation. You may need to sell or rent your home to move to a new location.

Additional Expenses

Your monthly expenses may increase, depending on your situation. As a homeowner, you will pay more for a homeowner’s insurance policy than a renter’s insurance policy. If you are in a flood zone, you may need to pay for an additional flood insurance policy. Other expenses may include a Homeowner’s Association fee, property taxes, all the utilities, and all the maintenance and upkeep costs for the home.  Often you need to supply appliances that were furnished with a rental.

Repairs

You are your own landlord when you own a home. When repairs are needed, it is your responsibility to either make the repairs yourself or hire a professional to do the work. As a renter, you may experience some inconvenience by the repair, but the landlord is responsible for fixing it.

There are also advantages and disadvantages of renting a home. Before you sign a lease, consider the following:

Advantages of renting include:

Ease of Mobility

Depending on the terms of your lease, it may be easier to give notice or get out of your lease. If you have to relocate for a job, or a travel adventure you may be able to move ahead faster.

No Maintenance

Rarely is a renter responsible for repairs and maintenance under the terms of a lease. If something goes wrong you can simply call the landlord. You may face a slight inconvenience to let in a repair person, but you don’t have to pay the bill.

Less Expense

Since you are not purchasing the lease, you will need a smaller security deposit as opposed to a large downpayment. Renters insurance is less expensive than homeowners insurance because you are only covering your belongings and not the building. 

The disadvantages of renting include:

Rent Increases

Your landlord is in the game to make money. Therefore, you can expect increases because you are located in a popular location, inflation, competition or rising property values on a yearly basis.

No Financial Benefits

As a renter, you will not be able to take advantage of the tax benefits of homeownership. You will not have equity in the property or profit from the property appreciation. So although you are paying monthly rent you are not making any financial gains.

Buying a home is an important decision. It is often the largest purchase a person makes in their life. Homeownership comes with some increased responsibilities that aren’t for everyone.

When considering home ownership in the Brooklyn real estate market, you need to weigh the advantages and disadvantages for yourself.  Likewise, if you are like most people, you will find that homeownership is worth the risks and drawbacks. 

Take the time to think through the options before you commit to buy or rent. Be sure you thoroughly understand what works best for your financial situation and lifestyle preferences.

Some helpful questions to ask when considering if your are ready to buy are:

  1. Have you saved enough money?
  2. Is there a chance of a work relocation in your near future? 
  3. If you were relocated would you need to sell your home or keep it as an investment/rental property? 
  4. Will you qualify for a mortgage? 
  5. Can you afford the extra costs of homeownership?
  6. Are you ready to become a homeowner?

The first step to buying a home is to speak with a mortgage lender. They will review your finances and determine a maximum mortgage amount. Once you know the amount of mortgage you can qualify for and are comfortable with the monthly payment you can begin looking at homes.

If you are a first-time homebuyer you may want to read this previous blog post for some homebuying tips. Find a trusted, knowledgeable real estate professional who can help you through every step of the home buying process in the Brooklyn real estate market.

Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate, if you are considering buying a home. As a Brooklyn real estate agent with over 35 years of experience, I know the local area and market trends. Reach me by phone at (718) 253-9500 ext. 1901 or by email at [email protected].

Charles D'Allesandro

Should You Consider Real Estate Investment Properties?

Sunday, October 16th, 2022

Real estate property investmensts

With the recent stock market volatility, the thought of real estate investment properties may sound appealing to investors. While a good many millionaires will agree that their fortunes were made in real estate, the honest ones will also tell you that they’ve probably lost a few fortunes in real estate along the way. 

Real estate investment properties can be risky, and every property purchased doesn’t always pan out to be a success. There are many risks involved in real estate investing and you would be going into battle unprepared if you didn’t take a moment to carefully study these risks and work to avoid them when planning your property investment strategy.

Each type of investing has inherently different risks. This means If you are considering different types of real estate investments, each will involve a new set of risks. 

Investments can be made in various types of real estate.

  1. Residential Real Estate – This encompasses single-family, multi-family, apartments, and vacation homes. Residential properties can be rented to tenants or sold to homeowners.
  2. Commercial Real Estate – These properties include business or office spaces. Multi-family units can be considered commercial property depending on the number of units within the building.
  3. Raw Land – Vacant, undeveloped properties with no improvements that require little to no maintenance would be raw land. However, new construction development can be possible with the right properties.

You can also invest in non-physical real estate investments such as a Real Estate Investment Trust (REIT) or crowdfunding platforms. These are share-based investments where you own a portion of an investment portfolio.

We are going to look at residential real estate as it is one of the easier types to turn a consistent profit. Let’s look at several ways to invest and what risks are involved.

Rental Properties

This type of investing offers some risks that are unique and some that are also risks when investing in properties that are lease-to-own or rent-to-own as well. 

  1. The risk of failing to make a profit. If the property in question cannot achieve an adequate monthly income to cover the expenses of operating the property, then it is not a solid investment. 
  2. The potential of having a bad tenant. A bad tenant can be costly and, in some cases, destructive. Costs of collecting back rent, evictions, and repairs can add up.
  3. Having a vacant property can also cost money, depending on your costs to carry the property. Ideally, you will have short turnovers and long-term tenants.

“Flipped” Properties

This is one of the most enjoyable types of real estate investment properties for many hands-on investors. This allows the investor to roll up his or her sleeves and take an active role in creating the masterpiece that will eventually bring in serious revenue (at least, that is the hope). This is also one of the riskier investments, particularly when trying to turn a profit in what is known as a buyer’s market. 

  1. One of the most significant risks is paying too much for the property.
  2. Underestimating the cost of repairs can eat into any profit.
  3. Overestimating how much work you can do yourself.
  4. Taking too much time to complete the project.
  5. Making a wrong judgment of neighborhoods that can affect resale.
  6. Over-improving a property can affect your profit margin.

Personal Residence

Keep in mind that your personal home is essentially an investment. The intention is that your home will gain in value over time and that equity in your home will build as you age. There are risks involved in this transaction as well.

  1. Not researching the area well and choosing a home in an area that is not showing obvious signs of growth.
  2. Using less than desirable mortgage financing options such as adjustable rate mortgages, balloon payments, or maximizing home equity loans.
  3. Failing to get a proper home inspection that can rule out potentially costly and even dangerous problems. Many of these problems must be remedied quickly. 

Even during a real estate market slowdown, stagnation, or depression, real estate investments can make profits. So let’s look at some tips real estate investors use in building their portfolio strategy.

Research The Curve

The concept of a property market cycle is not a myth; it’s a fact. So first, check the recent historical price data for properties in the area you’re considering purchasing and determine the current market’s overall feel for prices. For example, are prices rising or falling, or have they reached a peak? Next, you need to know where the property market cycle curve is in your preferred investment area.

Get Ahead Of The Curve

As a basic rule of thumb, professional real estate property investors seek to buy ahead of the curve.  If a market is rising, they will try and target up-and-coming areas, areas that are close to locations that have peaked, and areas close to locations experiencing redevelopment or investment.  These areas will most likely become the next big thing, and those who buy in before the trend will make the most gains.  As a market is stagnating or falling, many successful investors target areas that enjoyed the best levels of growth, yields, and profits very early on in the previous cycle because these areas will most likely be the first areas to become profitable as the cycle begins turning towards positive once more.

Know Your Market

Why are you buying the property?  Are you buying to lease to young executives, purchasing for renovation to resell to a family market, or purchasing real estate for short-term/vacation rental?  Think about your market before you make a purchase.  Know what they look for in a property and ensure that is what you will be offering them.

Purchase Price

Set a budget that will realistically allow you to purchase what you’re looking for and profit from that purchase through capital gains or rental yield.

Entry Costs

Research the fees, charges, and all expenses you will incur when you buy your property. Cost may differ depending on the area. In addition, each municipality may have different requirements and fees.  Know how much you will have to incur and factor this into your budget to avoid any nasty surprises and ensure your investment can become profitable.

Capital Growth Potential

What factors point to the potential profitability of your real estate property investment?  Which economic or social indicators exist to suggest that property prices will increase?  If you’re buying to lease, are there any indications that demand for rental accommodation will remain strong, increase or even decline?  Think about what you want to achieve from your investment and then research and determine whether your expectations are realistic.

Exit Costs 

If you will incur substantial capital gains tax liability if you sell your property investment at a profit, will that render the investment profitless? You can learn more about capital gains tax in this recent blog post.

Profit Margins 

What levels of capital growth can you realistically gain on your property investment, or how much rental income can you generate?  Work out these facts and then work backward toward your initial budget to determine your potential profit margins.  You must always keep the bigger picture in mind to ensure that your real estate investment has good potential for profit.

Think Long-Term

Unless you’re buying property to flip it for resale,  you should view real estate investment properties as a long-term investment. So take a long-term approach to your property portfolio and give your assets time to increase in value before cashing them in for profit.

Robert Kiyosaki, the author of Rich Dad, Poor Dad, said, “Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth.”

If you are considering a real estate investment, be sure to do your homework and understand your risks before you take the plunge. This article by Bankrate may help you sort out whether now is the right time for you to invest. A real estate professional who understands the local market can be a great resource to an investor.

Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate, if you are considering a real estate investment. As a Brooklyn real estate agent with over 35 years of experience, I know the local area and market trends. Reach me by phone at (718) 253-9500 ext. 1901 or by email at [email protected].

Charles D'Allesandro

Successful Brooklyn Home Sales Start With Pricing

Monday, October 3rd, 2022

Successful Brooklyn Home Sales start with pricing.

If you keep up with current events, you surely know the unsustainable market driving Brooklyn home sales is slowing down. As a result, it is more important than ever to properly assess the initial offering price of your home before the first buyer walks through the door.

The days of throwing a price on a property and expecting a gazillion offers and selling over that asking price are coming to a close. However, that does not mean that houses still aren’t selling. On the contrary, homes that are in good condition and properly priced are selling.

What has contributed to the shift in Brooklyn home sales? 

There are many reasons. It could be that most buyers have already bought. Some buyers may have changed their desired area to a suburban setting due to working from home. Finally, we are experiencing rising interest rates and a potential recession.

Regardless of the slowdown, sellers need to be aware that the market is changing. Supply and demand dynamics are changing. As a result, buyers will experience less competition in a slowing market. 

Finding the right price to offer your home is crucial and will take some research. 

Homeowners often view listing their homes at a higher price as a way to negotiate a lower price if a buyer makes an offer. But unfortunately, this belief can backfire on a seller.

Statistics show that when a seller overprices a home for their current market, they will end up selling the home for less than they would if they had initially offered the house at the correct price. So you have to decide if that is a risk you are willing to take.

When you overprice a property, you are excluding potential buyers. Buyers are looking for their desired price range and usually search in $5,000 increments. Therefore, the buyer pool narrows when you price your home over the reasonable value. 

You must contend with the home appraisal if you are lucky to find a buyer willing to pay a price over reasonable market value. A home appraisal is an opinion of value based on the most recent sales within a certain proximity of your home.

Correctly pricing a home is a fine art.

Having worked as a real estate professional, I have learned a seller can either “price to sell” or “price to keep.” Simply put, if you are not realistic about your pricing, you must prepare for the possibility of your home not selling.

Five Considerations When Pricing Your Home

There are five factors to consider when you begin to price your home. An experienced real estate agent can help you through this process to come up with your pricing plan. Your home will get the most attention in the first two weeks after hitting the MLS. You want your price to entice buyers.

Location

Your neighborhood and where your home sits within that neighborhood are important. School districts, crime rates, walkability, and accessibility to public transportation and shopping are important. Your location within the community can be affected by being on a busy street or next to a noisy public amenity. 

Appraisal guidelines include finding comparable homes within a ½ mile radius of your home. Homes sold within that radius must be considered first if they are equivalent. The appraiser can go outside that radius if they do not find the required comparable properties.

Location is not something you can change or improve when selling your home. However, if your location is less than ideal, you must adjust the price.

Comparable Home Sales

The next consideration is the recent home sales. As stated above, there is a radius that the appraiser must stay in when evaluating a home’s value. Recent Brooklyn home sales reveal what a buyer is willing to pay for a specific type of home. 

The comparable homes should be similar to your home but do not have to be identical. 

An important point to remember is that not only is the appraiser looking at this information, but so is the buyer when determining an offer on your home. A buyer does not want to overpay.

Condition

It may be obvious that an updated home in excellent condition will sell better than a home with a 1970s kitchen. But, at the same time, a knowledgeable buyer knows that a kitchen update could cost them between $40,000 to $60,000. 

Properly preparing your home for sale is essential. Check out this previous blog post on increasing the value of your home.

A well-maintained home will always be preferable to a buyer. If your home has significant issues, you will need to price accordingly. If you know of repairs but don’t want to make them, you will need to adjust your price. 

Selling “as is” has pros and cons that you should discuss with your real estate agent.

An appraiser will also evaluate the condition and compare it to the sold homes he is using to determine a fair market value of your home.

Improvements and Updates

You should consider significant improvements to your home when determining your price. Although, don’t expect you will get a dollar-for-dollar return on that investment. Remodeling Inc. publishes an annual Cost Vs. Value report by region may help you understand the return on the value of an improvement.

Specific projects offer a higher return than others, as seen in this report. You can not simply add the cost of improvements to the price you paid to determine an asking price.

Market Conditions

There are three types of markets: a Buyer’s market, a Seller’s market, and a Neutral market. The kind of market will give you information about the market conditions.

For example, we are coming out of a Seller’s market. In this market, there was insufficient inventory to meet the number of buyers ready to purchase a home. As a result, the supply of available homes was low, increasing the competition between buyers to win the bid. 

As the inventory of homes increases, we enter a neutral market where the supply and demand are balanced.

A buyer’s market is when more homes are available for sale than buyers are ready to purchase. 

The area that you live in may also affect the market conditions. Markets vary geographically across the country.

Pricing Tips

Keep these tips in mind when you are deciding on a price for your home:

Understand Pricing Search Criteria

Buyers search for homes in price ranges, usually in $5,000 increments. So, for instance, if their maximum price is $350,000, and you price your home at $352,000 they may never find your home in their search.

Watch The Local Market 

Look out for the homes on the market near you, especially those considered your most significant competition. Are they going under contract quickly? Are prices reduced? Try to stay ahead of the market.

Implement the “99” strategy.

In real estate and just about every business, there is a psychological element to pricing at $399,000 versus $400,000. So, for example, buying in the 300’s feels better than the 400’s, even though it is only a $1,000 difference.

Hire a real estate professional.

A real estate professional monitors the current real estate market and offers valuable advice when the market shifts. An experienced agent has probably maneuvered through the three types of markets and can guide you to a successful sale.

The Price Is Right

You will know the price is right based on a few facts:

Initial Buyer Interest

If you receive requests for showings in the first week of the listing, you are probably priced right.

Comparable Homes Are Priced Similarly

If the competing homes are similar in square footage, condition and price, you are probably priced right.

Offers Received Within The Average Market Time

The average market time will vary depending on the market conditions. If you receive an offer within that expected market time, you are probably priced right.

As I said earlier, pricing a home correctly is a fine art. Not only do you have to consider the current market conditions, but you also have to consider future conditions. Pricing ahead of the market would be easy if we had a crystal ball. But unfortunately, pricing is affected not only locally but also nationally by our economy. 

Two common mistakes that affect Brooklyn home sales are overpricing your home and emotional attachment. As I said before, overpricing is a risk. However, pricing your home correctly is essential to a successful sale as the market shifts. Also, I find most home sellers emotionally attached to their homes. That is understandable, but you can not let your emotions cloud the facts.

Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate, if you are considering selling your home. As a Brooklyn real estate agent with over 35 years of experience, I understand the intricacies of pricing a home to sell! Reach me by phone at (718) 253-9500 ext. 1901 or by email at [email protected].

Charles D'Alessandro

Can You Increase Your Brooklyn Home’s Value?

Friday, September 16th, 2022

Can you increase your Brooklyn Home's value

Many home sellers are wondering if they can increase their Brooklyn Home’s Value now that the market seems to be shifting. With interest rate increases, the unprecedented hot market we were experiencing is cooling. 

However, the cooling market does not mean you can not sell your home for the best price. I have seen the markets shift over my full-time real estate professional career. Homes will continue to sell even in a market shift.

As a Brooklyn home seller, it is understandable that you want to sell your home for top dollar. Homes that are in good condition and priced correctly will sell in any market. Your real estate professional can help you prepare for the sale of your home.

Let’s look at 5 tips to help maximize your Brooklyn home’s value.

Do your homework.  

Research the local market conditions for your neighborhood.  Depending on your area, there may be better or worse times to sell.  

As the markets are shifting, it is best to use the services of a full-time real estate agent who knows your local market. If you want to market your property to the largest pool of possible buyers, list your property with a full-service real estate broker/firm.  Now, before you pick up the phonebook or check that postcard you received in the mail, make sure to take the time to interview more than one agent or agency.  

Find out if they are a REALTOR® — a member of the NATIONAL ASSOCIATION OF REALTORS, a trade organization of nearly 1 million members nationwide.  Members of NAR subscribe to a stringent code of ethics to guarantee the highest level of service and integrity.  You may also want to know if they have any special designations requiring that real estate professionals take additional specialized training.  In addition to qualifications, you should check the references of the agent.  Make sure to speak with former clients to see if the agent is responsive and is available to keep you up-to-date with progress.   You should have direct contact with your agent and be as comfortable as possible.  The agent that handles your listing should:

  • Include online and offline marketing in your marketing plan.
  • Prepare a Comparative Market Analysis (CMA) of properties in your area that have sold and are currently for sale.
  • Help you determine the best selling price for your house.
  • Provide recommendations for necessary home improvements.

When your house is on the market, potential buyers will make appointments to view your home, along with any planned open houses your agent may schedule. Try to evaluate the house for the first time. Buyers must envision living in the home, so take care to present the property in its best light.  Imagine yourself in the shoes of a prospective buyer and evaluate the property starting at the front, then list the improvements that will be most cost-effective.

Clean and prepare your home thoroughly.

To increase your Brooklyn home’s value, you will need to do a top-to-bottom cleaning and decluttering of your home. If possible, hire a cleaning service. 

You may need to paint walls (neutral colors are best) or remove dated wallpaper.  If your flooring is worn or dated, consider replacing it. Check and repair damaged or unsightly caulking in the tubs and showers.  Display your best linens, towels, and shower curtains. Make the beds, and put fresh flower arrangements on the table. Finally, make sure that there are no offensive odors in the house.  Odor is the first thing buyers notice and often a permanent turnoff.   

Make your home a potential buyer’s new home.  

Removing your personal pictures and other items will help potential buyers visualize themselves living in your home. There is an art to staging a home for sale. The psychology behind staging is to make rooms feel larger and help the buyer feel like they are at home. This article from the National Association of Realtors discusses the importance of staging even in a seller’s market.

Put away or pack small appliances and other items that might be sitting on countertops or tables throughout the house. You want buyers to visualize the space in each room, so removing as many smaller items as possible is best. By clearing shelves and bookcases, the buyer can begin to imagine their belongings in the space.  Move excess furniture to make rooms more spacious. Replace heavy curtains with sheer ones that let in more light.  Clean and organize the closets. You may want to rent a temporary storage unit to allow you to de-clutter every part of the house.

You can learn more about decluttering your home in this previous blog post.

The outside of the home is also essential.

A buyer’s first impression of your home may be a simple drive down your street. However, if the home’s exterior is neglected, the buyer’s impression may be that the inside of your home is also unkempt.

Proper landscaping can enhance the curb appeal of a home.  Eliminate weeds, patch bare spots, fertilize, and water. Take a good look at the shrubbery. Bushes that have grown to cover windows should be pruned to let sun and light into the home.   Fill in bare spots with small shrubs and colorful, fast-growing annuals, such as impatiens and petunias. A few well-placed flower pots by the front door can be very inviting. Today’s buyers want low maintenance. Ideally, you want an easy-to-maintain yard that looks beautiful.

Make your home available for showings.

When you’re selling a home, you need to be flexible. If buyers can not see your home when they are available, they will not see your Brooklyn home’s value. Your hard work to prepare the home will be to no avail.  It’s often disruptive to have a house ready to show on the spur of the moment, but the more often someone can see your home, the sooner you’ll find a buyer.

Buyers don’t want to offend current owners, so they may be more hesitant to consider your home if you are present for a showing or open house. They feel funny about opening cabinets and closet doors with you in the room. If you are present, the buyer may ask a question that you innocently answer but can affect the negotiation of the sale. For example, the buyer may ask, “Why are you moving?” If you are moving for a job transfer, they now know you have to get the home sold so you can move on.

Whether you are moving for a job transfer, upsizing, or downsizing, the experience can be overwhelming. So many factors go into the sale of a home. Every seller wants to maximize their Brooklyn home’s value. Your real estate professional can help you achieve your goal.

Remember, the best time to sell a home is when you are ready. Even though the market may differ, you can still sell your home for the best possible price if it is in good condition and priced appropriately.

Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate, if you want to increase your Brooklyn home’s value. As a Brooklyn real estate agent with over 35 years of experience, I understand the real estate process, create a marketing plan, and can help you reach your real estate goals. Reach me by phone at (718) 253-9500 ext. 1901 or by email at [email protected].

Charles D'Allesandro

What Is A Service Line Protection Plan?

Tuesday, August 30th, 2022

Man digging water line for service line protection plan coverage.

If you are a homeowner, you may have received an advertisement for a service line protection plan. However, you may not understand the purpose of such a protection plan.

Many homeowners do not realize they are responsible for the lines or pipes that run through their property until an issue arises. As the property owner, you are responsible for any connecting lines from your home to the street. 

Let’s say your incoming water line springs a leak. It may be a slow leak that takes a long time to realize, or it can be more evident by discovering a prominent wet spot in your yard. Either way, you are responsible for repairing, not the water company.

An estimate for replacing a water line in your yard runs from $2,000 – $10,000 per HomeAdvisor. The total cost will depend on the distance from the street to the house, whether you need to dig a trench or whether using a trenchless process is possible. For example, the cost per linear foot to replace a water line ranges from $50 to $250. You will be hit with a hefty bill if your home sits far back off the street.

Homeowner’s insurance companies do not include service line protection as standard coverage.

However, your provider may be able to add a rider to your homeowner’s policy that will consist of service line protection coverage. You need to review your coverage with your insurance agent to be confident you have this coverage.

Many utility companies offer coverage as well. These are not insurance policies but function more like a home warranty. You can read this previous blog post for more information on how a home warranty plan works.

Read the fine print whether you go with a homeowner’s policy rider or a utility company coverage. For example, you may not have coverage for all the utility lines that enter your home. 

Policies can include:

  • Sewage
  • Water
  • Gas
  • Electricity
  • Internet
  • Telephone
  • Fiber Optics
  • Steam

These service lines can become damaged by many different means. For example, damage to underground lines can occur due to shifting ground caused by earthquakes or nearby construction, tree roots, or corrosion. 

Some common causes of damage come from:

  • Rodents
  • Freezing
  • Construction
  • Rust
  • Landscaping accidents
  • Digging into the property
  • Wear and tear
  • Electrical or mechanical breakdowns

Service line protection plans each have their distinct coverage policies. Be sure to read and compare programs before deciding which one to purchase.

Some items that may be covered include:

  • Repair of line
  • Line excavation
  • Loss of use if you must vacate
  • Outdoor property repairs
  • Replacement Costs

Again, it is imperative to read the service line protection plan you are considering to understand the coverage available to you. Do not assume all plans are alike.

Some common items not covered under a service line protection plan include:

  • Water well damage
  • Septic systems
  • HVAC systems
  • Fuel tanks
  • Sump pumps
  • Lines that run under but are not connected to the home.

A rider is necessary if you purchase through an insurance company and will increase your homeowner’s insurance bill. In addition, it would be added to your utility bill if you purchase through a utility company. The monthly charge varies.

New York City offers a service line protection plan covering water and sewer lines through American Water Resources (AWR).

Coverage is available to most residential and mixed-use properties with a 2-inch or smaller service line. The cost of coverage is added to your water and sewer bill and costs $66.84/year for water and $114.60/year for sewer.

The program offers unlimited protection for covered repairs with no service or deductible fees. You would simply contact AWR directly to schedule necessary repairs. Service requests will be answered promptly, and the timing depends on the type of repair.

Do you need a service line protection plan? Certainly, purchasing a service line protection plan is an individual choice. Some advice will tell you that a newer home might not need it. I have heard of a newer home having some issues. The age of the house may not be an issue, but it’s more likely that the older home is more likely to be something that can happen. Ask your neighbors if they have had previous problems. 

If you maintain a substantial emergency repair fund, you may choose not to purchase coverage. However, you may benefit from such a plan if you cannot save for a large emergency repair fund. Keep in mind that some policies have a waiting period of at least 30 days before coverage begins.

I have personally seen the value of having a service line protection plan and saved over $6,000 on a costly repair. Unfortunately, we will see more water line issues in our area as winter approaches due to the freezing temperatures. If you are considering adding a service line protection plan, now may be the best time to finalize your decision.

Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate, if you are considering buying or selling a home. As a Brooklyn real estate agent with over 30 years of experience, I understand the real estate process and can help you reach your homeownership goals. Reach me by phone at (718) 253-9500 ext. 1901 or by email at [email protected].

Charles D'Allesandro

Why Do Lenders Check Your Debt-To-Income Ratio?

Monday, August 15th, 2022

Debt-to-income ratio

Your debt-to-income ratio (DTI) is a simple way of calculating how much of your monthly income goes toward debt payments. The DTI will reveal if your debt is out of proportion with your income. Maintaining a manageable debt level is essential to good financial health.

If you have applied for a mortgage, you most likely know about this calculation. Your debt-to-income ratio is how lenders determine your ability to make monthly payments on the money you plan to borrow.

Lenders use the DTI to determine how much money they can safely loan you toward a home purchase or mortgage refinancing without significant risk. Of course, everyone knows that their credit score is essential in qualifying for a loan. But in reality, the DTI is equally as important as the credit score.

Lenders usually apply a standard called the “28/36 rule” to your debt-to-income ratio to determine whether you’re loan-worthy. 

The first number, 28, is the maximum percentage of your gross monthly income that the lender will allow for housing expenses. The total includes payments on mortgage principal, interest, property taxes, and homeowner’s insurance. This is usually called PITI, which stands for principal, interest, taxes, and insurance. The lender may want to include additional cost like homeowner association dues into that number as well.

The second number, 36, refers to the maximum percentage of your gross monthly income the lender will allow for housing expenses PLUS recurring debt. When they calculate your recurring debt, they will include credit card payments, child support, car loans, and other obligations that are not short-term.

Let’s look at how to calculate your debt-to-income ratio.

Your monthly gross earnings $6,000

28% $1,680 maximum monthly mortgage payment*

*Your maximum monthly mortgage payment includes principal, interest, taxes, and insurance (PITI). This number is what a typical lender will allow for a conventional mortgage loan monthly payment. In other words, the 28 figure determines how much house you can afford.

Your monthly gross earnings $6,000

36% $2,160 total allowable monthly debt*

*This figure represents the TOTAL debt load that the lender will permit. 

Total allowable monthly debt $2,160

Less maximum monthly mortgage payment $1,680

Allowable additional recurring monthly debt $   480

If your monthly obligations on recurring debt exceed $480, the size of the mortgage you’ll qualify for will decrease proportionally. If you are paying $600 per month on recurring debt, for example, instead of $480, the lender must reduce your monthly mortgage payment by $120 to $1,560 or less. The difference means a lower mortgage amount and a smaller home.

Remember, if you have a car payment, it has to come out of that difference. So in our example, your car payment is included in the $480. However, with the recent escalation in the cost of cars, it isn’t unusual these days to reach a $500+/month car payment, even for a modest vehicle, so that doesn’t leave much room for other types of debt.

Some lenders will consider the maximum percentage over 36%. But the desired maximum is not to exceed 36%. Each lender determines its guidelines. 43% is the highest a borrower can have and still qualify for a loan.

The bottom line is that too much debt can ruin your chances of qualifying for a home mortgage. 

Remember, the debt-to-income ratio is something that lenders look at separately from your credit history. That’s because your credit score reflects your payment history. It’s a measurement of how responsibly you’ve managed your use of credit. Your credit score also reflects your debt-to-credit ratio or credit utilization. Credit utilization reflects how much credit you have used versus how much credit is available to you. But your credit score does not take into account your level of income. That’s why the DTI is treated separately as a critical filter on loan applications. This Equifax article explains the differences between debt-to-income and debt-to-credit ratios.

Even if you have a PERFECT payment history, but the mortgage you’ve applied for would cause you to exceed the 36% limit, you may still not qualify for the loan by reputable lenders.

The 28/36 rule for the debt-to-income ratio is a benchmark that has worked well in the mortgage industry for years. Of course, mortgage products may change as the lending market shifts, but a satisfactory credit score and the acceptable debt-to-income ratio have not changed. As a result, you may be able to qualify for a loan above these limits, but it may cost you more in interest or downpayment.

But make sure you understand the worst-case scenario before taking on one of these non-conforming loans. The 28/36 rule for debt-to-income has been around so long simply because it works to keep people out of risky loans.

Mortgages used to be pretty simple to understand. 

You paid a fixed interest rate for 30 years, or maybe 15 years. Today there are many mortgage programs, such as adjustable-rate, 40-year, interest-only, option-adjustable, or piggyback mortgages, each of which may be structured in various ways.

If your DTI disqualifies you for a conventional 30-year fixed rate mortgage, you should think twice before squeezing yourself into another type of mortgage just to keep the payment manageable. Be sure you understand the loan terms thoroughly before signing the closing paperwork.

Instead, consider increasing your initial down payment on the property to lower the amount you’ll need to finance. It may take you longer to get into your dream home using this more conservative approach, but that’s certainly better than losing that dream home to foreclosure because increasing monthly payments have driven your debt-to-income ratio sky-high.

You can also work on decreasing your debt to income-ratio. 

Ways to reduce your debt-to-income ratio are:

  1. Pay down your debt.
  2. Increase your income.
  3. Don’t incur additional debt.

Whether you are considering purchasing a home or not, keeping an eye on your debt-to-income ratio makes good financial sense. It is easy to get over your head when other lines of credit are more easily accessible.

It is also important to remember that you will have additional costs involved with home ownership, not just principal, interest, taxes, and insurance. You can read more about the other expenses involved in home ownership in this previous blog post

Planning for a home purchase is an exciting time. Learning all you can about the home buying process is essential whether you are a first-time or experienced homebuyer.

You can improve your financial life by understanding and monitoring your debt-to-income ratio. Whether you are buying a house, a car, or consolidating debt, this simple calculation will help your stay on track.

Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate, if you are considering buying or selling a home. As a Brooklyn real estate agent with over 30 years of experience, I understand the real estate process and can help you reach your homeownership goals. Reach me by phone at (718) 253-9500 ext. 1901 or by email at [email protected]

Charles D'Allesandro