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House or Condo – which to buy?

Which costs less to buy – a condo or a house? Well, that is certainly a tricky question which really has no definitive answer. But let’s look a little deeper into this question.

Buying a Condo

As a rule, you can purchase a condo for less than a similar size home. And that’s because it costs less to build condos. When building a condo, you can construct more homes per acre. This also means less roads to build, some walls can be shared and more. So in terms of the sale price of a condo cs a similar home, a condo will usually cost less.

But what if you’re looking at the monthly costs, instead of the basic purchase price? That can certainly change the equation.

Monthly Costs

Some monthly expenses will be the same in either a condo or a house. Taxes, homeowners insurance, utilities and the mortgage will need to be paid on either. Let’s examine these costs a bit further.

Taxes

Quite often, but not always, taxes on a condo will be less. That’s because the taxes are calculated upon the square footage of the building and the size of the lot. But other factors come into play.

Homeowners insurance

Your cost of homeowners insurance is usually lees for a condo. That’s because the association’s policy covers their interests, which are usually the roof and the siding, plus exterior liability.

Utilities

These will usually be very similar.

Mortgage Costs

Ah – we finally hit the spot where there can be a major difference. If you purchase either a condo or a house for $300,000, your mortgage costs, principle and interest, should be the same. But here’s the difference. With a condo you’ll be paying a monthly homeowners association fee. These fees can easily cost between $200 – $300 per month, or more. Let’s look at the numbers.

If you purchase a house and don’t need to pay homeowners association fees, you’ll save that amount. But what if you took that amount and used it to buy a nicer home? If a condo has a $200 per month fee, at today’s interest rates of 3.5%  you can spend $44,600 more for a house and have the same monthly payment!

Do you think you can find a nicer home for 15% more? Probably so.

The Negatives

All is not sunshine and rainbows. You will give something up when you buy a house instead of a condo.

In a condo, that homeowners association fee takes care of things that you won’t get with a home. Things like lawn cutting, snow removal, garbage collection and exterior maintenance of your home. As a homeowner, those costs will fall on your shoulders.

If you’re okay with cutting the grass and shoveling snow, great. I think it’s a small price to pay to own a house. Garbage collection will cost around $30 per month, and some towns offer municipal trash pickup that is paid by your taxes. But if you need a new roof or siding, that can get expensive.

Bottom Line

You can probably buy a nicer home than a condos with the same monthly cost. But consider all factors into your decision.

Either way, when you’re ready to buy, call us. Call Bunny and Art Reiman – Realtors. And if you need to sell a home, we can help with that also.

Would you like to search for homes in other Monmouth County towns?

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Repair Your Credit, Establish Your Credit

Is your credit in need of repair or do you need to establish credit? If yes, it can be done, it just takes time. And both of these goals can be attained by using similar steps.

Start Your Credit File

It’s difficult to live without credit these days. You can’t buy a home without credit unless you pay cash. Many gas stations don’t accept cash, and in some stores many checkout lanes are marked for credit purchases only. And I believe this is a trend which will increase. As a result, if you have credit cards, you’re in good shape. But what happens if your credit is bad or you don’t have credit? These ideas on how to repair or establish your credit may help.

Develop Good Credit Habits

It’s important to make your payments on time. In addition to your credit cards and loans, you need to pay your rent and utility bills. When possible, pay the credit card bills in full. However, if you must carry a balance, try to keep that balance under 30% of your credit limit. And if you do have to carry a balance, pay more than the minimum payments every month. A factor in your credit score is how long the accounts are open. If you open too many accounts, you’ll decrease the average length of time they are open.

Get a Secured Credit Card

This is good for both establishing and repairing your credit file. When you make a deposit to the bank issuing the secured card, you’ll receive a card which has a limit in the amount of the deposit. By making your payments on time, you’ll start to build a good credit history. As an alternative, you can get a secured loan from a bank. It works the same way. The important thing is that both will give a positive report to the credit bureaus.

Repair Your Credit, Establish Your Credit

This isn’t going to happen overnight. To repair or establish your credit will usually take at least 6 months of on-time payments.  However, by developing good habits, you’ll set the stage or either repair or establish a good credit file good shape with your credit. Then, when you’re ready to purchase a home, contact us. Call Bunny and Art Reiman – Realtors.

Would you like to search for homes in other Monmouth County towns?

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About Short Sales

Most everyone has heard about short sales, but not everyone knows much about them. Let me try to explain exactly what a short sale is.

What is a Short Sale

Around 2005 the real estate market was hot and near it’s peak. Home prices were steadily rising and everyone thought it was a great investment. People would buy a home and sell it a year later for a huge profit. Then they would buy another, more expensive home looking to repeat the process. And the banks were very cooperative. If you had a decent credit score and could prove you were alive, you could get a mortgage.

Many of these mortgages were 5 or 10 year ARMs. This was an adjustable rate mortgage where the initial length was either 5 or 10 years at a low rate, then it would change to a higher rate. Also popular was the interest only mortgage, where the interest rate was exceptionally low, and you made no payments towards the principle. In addition, the interest you didn’t pay was added to the principle. When the 5 or 10 year period ended, you would owe a lot more than you borrowed. But people didn’t care, the home value would rise and they could sell for a profit or refinance.

But the values didn’t rise, they fell big time.

People couldn’t refinance because the home wasn’t worth the mortgage value. They couldn’t sell because the market value was below what they owed. But the bank wanted it’s money, and if you couldn’t pay, they would foreclose.

Now, the banks didn’t want to foreclose. Their expenses to foreclose were high, and they would lose a lot by taking ownership of a property and reselling. So they decided they would cut their losses with short sales.

What is a Short Sale

With a short sale the borrowers ask the bank to accept less than what the bank is owed in order to sell and get out from under the problem. Quite often the banks accept less than they’re owed. And that’s because their alternative is to foreclose, on the property,  And that will create an even bigger loss for the bank.

This is a time consuming process. The homes often don’t get maintained properly because the owners don’t have the money to do so. And frankly, they know they’re losing the home, so why should they bother.

Bottom Line

Thankfully there are not as many short sales as there were 5 years ago. And that’s because the real estate market has corrected itself for the most part. If you’re looking to buy a home that’s a short sale, there usually aren’t many available. And if you do find one, it won’t close quickly.

If you’re ready to buy a home, a short sale really isn’t a bargain, unless you’re looking for a handyman special. Either way, call us – Bunny and Art Reiman – Realtors. We can help you through the process.

Would you like to search for homes in other Monmouth County towns?