Second Mortgage Success: 5 Hurdles to Avoid, So Your Application Is Approved

If you’re preparing for major home upgrades or paying off major debt, you may be considering refinancing your home with a second mortgage. This means letting lenders poke around in your finances again, inquiring about other assets, savings, and investments. While refinancing can be an exciting financial move, it’s important to be aware of potential roadblocks that could lead to your application being declined. Here are five critical reasons why your second mortgage could face a setback:

Detrimental Debt

Lenders will always look closely at your Debt-to-Income (DTI) ratio, which compares your monthly debt payments to your income. If your debt load is already substantial, it could be a red flag. Lenders prefer a DTI below 43%, so exceeding this limit will likely decrease your chances. Tackle existing debt before applying for a second mortgage, to significantly improve your approval odds.

Credit Concerns

Your credit history speaks volumes to lenders, and a poor track record can raise concerns. Beware of actions lenders interpret as red flags, such as recent credit inquiries, high outstanding debt, or new large purchases. Personal loans and poor payment habits can also catch negative attention. Take the time to address these issues and enhance your creditworthiness before submitting your second mortgage application.

Not Enough Equity

A declining real estate market can impact the value of your home and affect the equity you’ve built up so far. Lenders usually require a minimum amount of equity to approve a second mortgage. If your property’s value has decreased, you might not meet this baseline. Stay on top of your home’s value, as well as local real estate trends, to be sure you are making moves at the right time.

Constant Closing Costs

While you are understandably focused on the loan itself, don’t forget that you are responsible for closing costs on a second mortgage, too. If you can’t afford these expenses, it can lead to a denied application. Research and budget for these costs in advance, to ensure you have an adequate financial plan that covers all of the expenses involved.

Income Instability

Lenders seek stable and consistent income when evaluating mortgage applications. If you’ve recently changed jobs or your income has been inconsistent, it could create doubts about your ability to repay. Demonstrating a steady income history and a reliable employment record assures lenders that you can pay back the loan with consistency.

Securing a second mortgage involves careful planning and preparation. Addressing these potential stumbling blocks will help increase your chances of a successful application. If you’re unsure about your eligibility, consider consulting a financial advisor or real estate professional to guide you through the process.

Preparing to Sell Your Home? Plan for These Four High-Impact Improvements

There are countless things to do in preparation for selling your home. After the major improvements are completed, there are a variety of smaller updates and changes that can boost your home’s appeal to buyers, as well as increase its value prior to listing. These four improvements are accessible, affordable, and have a great impact.

Value-Add Improvements

Some repairs and replacements have a higher return-on-investment than others. Focus your time and money on those that will improve the final sale price. First and foremost, repair any basic damages, like a leaky faucet or broken blinds. Next, target high-ROI improvements, like updates in the kitchen and bathrooms. Any effort to refresh and update these rooms will have a positive impact. Think about small updates to fixtures and hardware, fresh paint, resurfaced cabinets, and modernized décor.

Painting & Carpet Cleaning

Painting is one of the most popular updates made before listing a home for sale. Carpet cleaning is another accessible task. Both require a bit of time but are relatively inexpensive and items you can do by yourself. In combination, they are an excellent facelift for your whole interior. It’s best to tackle these tasks 20 to 30 days prior to listing your home. This allows you to cover the mess of packing and moving, while still giving the space time to settle in. Your home will be looking fresh and bright just in time for prospective buyers!

Creating Curb Appeal

The exterior of your home is an important detail, as it will be the first impression for visitors. Make sure your yard is tidy, freshly mowed, and free of debris. Store outdoor items in a garage or shed to clear the space. Do some fresh landscaping, such as planting flower beds and mulching trees and shrubs. Finally, touch ups and simple projects can add extra impact and make guests feel welcome. Consider repainting your front door, updating your mailbox, or replacing old hardware and lighting appliances.

Decluttering and Staging

The last step in preparing your home for sale is to stage it. The goal of staging is for your home to appeal to as many buyers as possible. You want to make your home feel comfortable and tidy, while showcasing its strongest assets. Work on packing, purging, and storing unnecessary items in the months leading up to listing your home but hold onto items and décor that will be used for staging. You can find online staging guides or consider hiring help to get your home staged for sale.

There are a lot of considerations when it comes to listing your home for sale. It can be hard to focus your efforts, amidst seemingly endless recommendations and checklists. If you’re preparing to list your home, consider these four high-value improvements, and reach out to an agent today.

7 Ways to Save Money When Buying Your Next Home

Buying a new home is a major expense, often the biggest in someone’s lifetime. It comes with many layers of financial responsibility. The expense isn’t just the big number you see on a listing – it’s also closing costs, inspections, insurance, taxes, etc. The good news is every expense is another opportunity for thinking strategically. With a good agent, and these 7 tips, we’ll help you save some money along the way.

Savings tip #1: Prepare Your Credit

The savings journey starts before the shopping. Most buyers will need a loan and that loan will be influenced by your financial situation. Finding the best loan option will save you money in the long run. For the year or two preceding your purchase, nurture your credit. Pay everything on time, every time. Consider increasing your credit limits. Decrease your debt, increase your income. Healthy credit will expand lending options and help you to secure the best loan possible.

Savings tip #2: Shop Around for Lenders

Speaking of loans, you can save money by shopping around for lenders. Don’t settle for the first loan you’re offered. Understand your priorities, compare rates, and even negotiate with lenders to find the right fit!

Savings tip #3: Leverage the Market

You can save a lot by shopping during a “buyer’s” market – when demand is low and inventory is high. In this kind of market, a buyer has more power and can leverage their interest to get the best deal for themselves. Having a good agent will also be helpful in this process.

Savings tip #4: The Value of an Excellent Agent

While we’re on the topic of agents, the right agent will make a world of difference. Real estate agents are industry experts, and they understand everyone’s motivations. They can advise you on lenders, give you insight into the current market, and make or break a negotiation. Be sure to connect with an agent you trust, who will advocate for you every step of the way.

Savings tip #5: First-Time Homebuyer Programs, Grants, and Down Payments

There are several ways for first-time home buyers to save money in the short term or long term, depending on their needs. There are grants, special programs, and specific loan options for first-time home buyers, that will help lower the cost of a downpayment. But be aware, saving money now by putting less down can cost more in the long run. An alternative approach would be to put more money down up front; this will help you avoid private mortgage insurance payments which increase your monthly costs.

Savings tip #6: How to Save on Closing Costs

Closing costs are an often-overlooked expense. They cover things like agent fees, paperwork processing, taxes, and plenty more. One section of closing costs is “services you can shop for”, which offers another saving opportunity. These are things like inspections, document services, attorney services, appraisals, etc. and you can shop around for them.

Savings tip #7: Don’t Skip Inspections

Lastly, you may be tempted to save a few bucks by skipping your home inspection. However, the risk often outweighs the reward. Inspections cost money up front but can uncover major expenses down the road and help you get coverage for repairs in your future. You can also bundle add-ons like radon, pest, and mold inspections.

It’s easy to understand why buying a home is overwhelming. The expenses are numerous, and the journey can be intimidating. But with an expert agent and a savings mindset, you can both survive the journey and walk away with a great investment.

5 Indicators that Now Is the Time to Sell Your Property

Choosing to sell a property is a big decision; the process is complex, and a lot of money is on the line. Determining the right time to sell is crucial: one that aligns with your personal needs and circumstances. While many factors can influence this decision, such as the state of the real estate market, it’s essential to prioritize your individual situation. You should only sell your property if the time is right for you. Here are a few indicators to help you recognize when the time may be “right.”

A Note About the Real Estate Market

There are a myriad of opinions and suggestions when it comes to the influence of the current real estate market. Everyone has their own idea of the “right” time to sell. However, your personal situation is always the most important factor. The market will play a part and therefore, you should seek out expert advice to understand the implications of the current real estate market in your area. You should also keep in mind that often, you will be buying a new property in the same market that you’re selling in. So the risks and benefits of different market trends are multifaceted.

5 Factors that Indicate Now May be the Time to Sell

So how do you know when it’s the “right” time for your personal situation? Generally, it may be a good time to sell if:

  1. Selling will improve your financial situation. If you are looking to downsize, selling could save you the extra capital you need. Additionally, if you need access to your equity for higher-risk debt or urgent financial priorities, selling could provide “immediate” access to cash.
  2. You have equity in your home (at least enough to help you make another downpayment.)
  3. You have a functional need. The most popular reason people sell their home is because their practical needs change. Whether your family is expanding, your nest is empty, or you have a need to relocate, changing functional factors are a good reason to consider selling.
  4. You are financially prepared for selling and moving expenses. They say it takes money to make money and selling a home definitely requires some investment. Minor updates, landscaping, staging, and hiring movers are all expenses you need to be ready for.
  5. You are mentally, emotionally, and financially ready for a new home. Selling a property can be complex and stressful. It’s important to make sure you are available and ready for the journey.

The “Right” Time to Sell Your Property

Determining the ideal time to sell your property is a highly individualized process. While the real estate market and expert resources can provide valuable insights, it’s important to remember that your personal situation takes precedence. Assessing factors such as your financial goals, equity, functional needs, and readiness for the project can help to guide your decision. By carefully considering your personal position and preparing for the selling process, you can ensure that when the time to sell your property comes, you are ready to jump in.

Top 5 Tips for Financing or Refinancing Your Home

Whether you are looking to finance a new home or refinance an existing one, it can be a daunting task to navigate the world of lenders, interest rates, and repayment terms. However, with some research and guidance, you can make the process a bit easier on yourself.

Four Components of The Average Home Loan

A typical loan for financing a real estate purchase consists of four main factors: downpayment, principal loan amount, interest rate, and terms. The downpayment is the money you invest in the home upfront; the more you pay upfront, the less you will need to borrow. The principal loan amount is how much money you are borrowing and the interest rate is how much interest you will pay on that borrowed sum. Finally, the terms designate how much you will pay back over a period of time.

Factors Lenders Consider to Assess Your Financial Responsibility

When lending money for a home, lenders will consider several factors from your personal finances: your credit score, your debt-to-income ratio, and your downpayment or equity. The higher your credit score and the lower your debt-to-income ratio, the more financially responsible you appear to lenders. The higher your downpayment or home equity, the lower the risk is for lenders because you’ve put more on the line.

Top 5 Tips for Financing or Refinancing Your Home:

Lenders want to see that you are a trustworthy and responsible home buyer. The more responsible you are, the lower the risk for the bank when loaning you money. There are a few major factors for how they calculate your financial responsibility:

  1. Improve your credit score. Paying down debt, making on-time and consistent credit card payments, and paying more than the minimum due can all improve the health of your credit score. You can also seek to resolve errors or flags in your credit history.
  2. Reduce your debt-to-income ratio (DTI.) Your DTI represents how much debt you have vs. how much income you have. An ideal rate is 36% or lower, meaning you should be bringing in about 3x as much as you have in debt.  
  3. Increase your down payment. The more you can pay for your home upfront (or the more equity you have in your home, if refinancing) the better your loan options will be. A great goal is paying at least 20% of the home’s value as a downpayment.
  4. Shop around! You can (and should) consider multiple loan options from multiple lenders. There are online tools for comparing loans on your own, and there are also mortgage brokers whose whole job is finding you the best option!
  5. Search for government programs. There are many programs available for first-time homebuyers, low-income homebuyers, buyers in rural areas, buyers of energy-efficient homes, veteran homebuyers, and more. Do some research, talk to a mortgage broker, and be sure you’re taking advantage of any programs you might apply for!

Financing or refinancing a home is a complex process, but with these tips in mind, you can find the best options for your needs. Remember to do your research, shop around for rates, and always read the fine print before signing on the dotted line. Once you’ve secured your financing, contact Bill Hansen Realty to find your dream property!

Trouble with Commercial Property Shopping? You Deserve an Expert.

Buying commercial property can be a wise investment that offers long-term financial benefits. However, purchasing a commercial property is a complex process that requires specific knowledge. Here are some things you will need to know about when buying commercial property.

Major Differences Between Buying Residential and Commercial Properties

Buying commercial property is vastly different from buying a residential property. Commercial properties are often more expensive, and they require a much larger investment. Moreover, commercial properties are usually purchased with the intent of running a business or generating some sort of income. This introduces other new factors such as zoning, permitting, and licensing. For these reasons, buying and selling commercial property requires specialized knowledge and experience.

Special Considerations: Commercial Property Conditions and Zoning Regulations

It’s important to understand how zoning laws and local regulations work when buying commercial property. Zoning regulations dictate what types of businesses can operate on a property and can vary from one location to another and from one business to another.

You should also be mindful of the condition of the property you are purchasing. Commercial properties often have more wear and tear than residential properties due to heavy usage. Be sure to also explore any potential environmental concerns, as commercial businesses can have harsh effects on the property’s natural resources. You should inspect the property thoroughly to ensure that it is in good condition and that you are aware of any past issues or future repairs or renovations that may be necessary.

Commercial Property Expertise and Market Research

When buying commercial property, it is essential to have a team of experts on your side. These experts can include real estate lawyers, accountants, and contractors. They can help you navigate complex regulations and ensure that you are making a wise investment. They can also help you to understand the state of the market, which will inform your decision-making process. You should research the local market and understand the trends and potential for growth in the area.

Commercial Property Financing and Rental Income

Commercial property financing is another component that is distinct from residential. Be sure to consider all of the various financing options and choose the one that best suits your needs. If your commercial property is going to generate rental income, you can consider that as part of your overall income when applying for financing. However, like all sources of income, it must meet eligibility criteria and be properly documented.

Buying commercial property is a significant investment, and it requires specialized knowledge and expertise. By understanding the differences between buying residential and commercial property, you have gotten a strong start. The most critical tip for success is finding trusted expertise – whether that is a realtor, broker, lawyer, or other advisor – it’s critical to get support from industry experts. Bill Hansen Realty is one of these experts and we would be happy to be a part of your team!

Make a More Powerful Offer with a Mortgage Pre-Qualification

Obtaining a mortgage is an essential part of the home buying process, and pre-qualification can be an easy first step. Being pre-qualified streamlines the home buying process and gives you an idea of how much banks may be willing to lend you. Here is what you need to know about getting pre-qualified for a mortgage:

What Does Pre-Qualified Mean?

Pre-qualification is the first step in the mortgage process. It’s an informal process that evaluates your debt, income, and assets based on self-reported details. Based on these details, pre-qualification gives you an initial estimate of how much you may be able to borrow. It is not a guarantee that you will be approved for a mortgage, but it can give you an idea of your purchasing power.

How Is Pre-Qualification Different from Pre-Approval?

Pre-approval, on the other hand, verifies the financial details you provide in pre-qualification; it is a more formal process that involves a hard credit pull. With pre-approval, the bank reviews your financial information and determines how much they are willing to lend you. Pre-approval is a stronger commitment from the lender, and it can make offers more attractive to sellers.

Does It Affect Your Credit Score?

Pre-qualification does not affect your credit score. The lender will ask for some basic financial information, but they won’t pull your credit report. However, pre-approval does involve a credit check, which can affect your credit score.

How to Calculate Your Debt-to-Income Ratio

One essential factor in determining how much you can borrow is your debt-to-income (DTI) ratio. To calculate your DTI ratio, first, add up your monthly debt payments. This should include all credit cards, car, personal loans, and tuition payments. Take your total monthly debt payment and divide it by your gross monthly income. Your DTI ratio should be below 43% to qualify for most mortgages.

What Are the Next Steps After Getting Pre-Qualified?

After getting pre-qualified, the next step is to find a lender and complete the mortgage application process. Your lender will review your financial information and determine if you meet their lending criteria. Once you are approved, you can house hunt with confidence, knowing you are ready to make an offer.

If you’re still hesitant about reaching out to a lender, there are numerous online resources available to help you estimate the amount you may pre-qualify for. By obtaining pre-qualification, you can assess the approximate amount of money that a lender may offer you toward your home purchase. This simple and vital step can help you determine your budget and kick-start your home buying journey!

8 Things to Look for When Viewing a Potential Property

Buying any real estate can be an overwhelming process but buying a cabin comes with its own unique considerations. Here’s what to look for when you’re viewing a potential property.

Cabin Location

It’s critical to consider the location and accessibility of the property. While you can make changes to the building and accommodations, you cannot change the property’s location. Is it in an area that makes sense for you? Is it far enough for a getaway, but also close enough to “home?” Are the access roads well-maintained?

The Changing of the Seasons

There are dramatic swings in weather in Northern Minnesota. If you plan to be heading up to the cabin in the winter, don’t forget to think about the snow! Be sure to ask about winter access and how the roads are handled. Some cabin communities provide snow management, others leave you to handle this yourself.

The Cabin or Vacation Home Lot

Making changes to the lot will come at a considerable cost and require a lot of work down the line. Be sure to look at how water flows, naturally, through the property. Are there areas where rainwater has washed out the landscape? Are there problematic trees or other concerns with the lay of the land?

Water Properties and Quality

Water is a huge consideration and something to stay aware of when viewing potential cabins, especially if you’re looking at a waterfront property. Be sure to research the water you’re buying near. You may want to research how high the water levels get, especially during the Spring thaw and major rains. Also, consider the quality of water in the lake, and what kind of systems are needed for treating it.

Cabin Building Blocks

If you’re looking at rustic or log-style cabins, the building materials and structure itself are something to pay attention to. Log cabins should always be raised off the ground by rocks, concrete or other materials. There should be no rotting, large gaps, or cracks among the logs. The roof should overhang the walls to protect logs from rain and snow.

Cabin Usage

Make sure there is room for everyone! Is this cabin going to be a quiet family getaway? Or a shared, multi-family property? How many people will be staying here at the same time? It’s important to provide a bed for everyone, even if it requires sharing rooms. Sometimes cabins have “bunk rooms” that can sleep 4 or more people in the same space.

Maintenance for Your Vacation Home

All properties require maintenance, but cabins are unique. They may be older buildings, made with different materials than our standard homes. Keep an eye out for how the property has been maintained. How well have the previous owners cared for the cabin?

Terms of Sale

Make sure you understand the terms of the sale agreement and what is included in the price of the cabin. Are you just buying the lot and the building? Are there any appliances the owner is willing to leave behind? Is there any outdoor equipment such as docks, boats, or other lake toys, that may be included?

Buying any property can be overwhelming but viewing cabins “up north” should be a fun and exciting experience! With a trusted team by your side, it’s easy to keep track of all these details and enjoy your property viewing experience!

3 Reasons Why You Should Invest in a Vacation Home

Real Estate is one of the most popular ways for individuals in the United States to build wealth and equity. If you’ve been looking for ways to earn more income, buying a vacation home might be right for you. Here are the reasons why we think you should consider buying a vacation home. 

Your Equity Will Grow

Just like your main living property, your vacation home will grow its own equity over the years. All you have to do is maintain your property and make occasional upgrades. It’s rare that a property decreases in value. 

You Can Rent Out Your Cabin

If you want to make some extra money, renting out your vacation home is a great way to do it. With services like Air BnB and VRBO, it has never been easier to make extra income on your property. Of course, you have to make sure you are maintaining and cleaning your space, and keeping your listing updated. But if you’re willing to put in a little work, the benefits can really start to stack up!

Save Money on Your Vacations

One of the most simple ways that your vacation home will keep a little extra money in your pocket is by saving you money on your vacations. With a designated Northern Minnesota vacation spot that you can escape to at any point, you’ll save on hotels and food when you stay and cook at the cabin!

We think lake life and vacationing Up North is one of the best ways to relax, unwind, and spend time with the people you love. Why not make it work for you by making some extra money. We’re here when you’re ready to invest in your vacation home. Take a look at our current properties to find the property that’s right for you.

Tips to Help You Prepare for Opening Your Cabin this Spring

There’s still a bit of time left before winter is over and we’re ready to start making our weekend trips to the cabin. But it is never too early to be prepared! We’ve pulled together some tips to help you get prepared to open your cabin this spring! 

Make a Plan

Decide what needs to be done and make a list for both the inside and the outside. Don’t forget to check on your licenses for fishing and boating as well. Verify what items need to be renewed or purchased. Also be sure to have a plan to turn on any services that you had shut off for the winter. 

Do an Opening Inspection

Upon arriving, test your smoke and CO2 detector batteries. Turn on water and heating and inspect for any damage to the exterior that might have happened over the winter. 

Check for Critter Damage

Look for holes in your screens, siding, gnawed wires, or rodent droppings, and create a plan for removing or exterminating.

Restock Necessities

Create a list of items that are must-haves in your cabin. Restock non-perishable food items, your first aid kit, and other emergency supplies. 
While it might feel like a long way off, Springtime and cabin days will be here before you know it! Until then, keep an eye on our hot list for the latest properties on the market!