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Pre-qualified or pre-approved?

Which one when?

Key Points About Pre-Qualification:

• Informal assessment: Doesn’t involve a thorough credit check.
• Estimate: Provides a general idea of your borrowing capacity.
• Early stage: Often a starting point in the homebuying process.
• No commitment: Doesn’t guarantee loan approval.

Benefits of Pre-Qualification:

• Helps set a budget: Gives you a better understanding of your price range.
• Streamlines the process: Can expedite the homebuying journey.
• Enhances your negotiating position: Shows sellers you’re a serious buyer.

Pre-Approval: A More Formal Commitment

Pre-approval is a more rigorous process that involves a comprehensive review of your financial information, including a credit check. It’s a stronger indication of your creditworthiness and ability to secure a loan. Lenders will typically require documentation such as tax returns, pay stubs, and bank statements.

Key Points About Pre-Approval:

• Formal process: Involves a thorough credit check.
• Conditional approval: Subject to the property appraisal and verification of income.
• Stronger commitment: Shows sellers you’re a serious buyer with financing in place.
• Rate lock option: May allow you to lock in an interest rate for a specific period.

Benefits of Pre-Approval:

• Increases your chances of success: Demonstrates to sellers that you’re a qualified buyer.
• Streamlines the closing process: Can expedite the transaction.
• May offer better interest rates: Lenders may provide more favorable terms to pre-approved buyers.

When to Get Pre-Qualified and Pre-Approved

Pre-Qualification:

• Early in the homebuying process: If you’re just starting to explore your options.
• To get a sense of your budget: Before starting your home search.

Pre-Approval:

• When you’re ready to make an offer: To demonstrate your financial capability to sellers.
• To lock in an interest rate: If you’re concerned about rising interest rates.

Factors Affecting Pre-Qualification and Pre-Approval

Several factors can influence your pre-qualification and pre-approval status, including:

• Credit score: A higher credit score generally leads to better terms.
• Debt-to-income ratio: A lower debt-to-income ratio improves your chances of approval.
• Income: Higher income can increase your borrowing capacity.
• Employment stability: A steady job history is beneficial.
• Down payment: A larger down payment can reduce your loan amount and improve your chances of approval.

Choosing the Right Lender

Selecting the right lender is crucial to the pre-qualification and pre-approval process. Consider the following factors when making your decision:

• Reputation: Choose a reputable lender with a track record of customer satisfaction.
• Rates and fees: Compare interest rates and closing costs from different lenders.
• Terms and conditions: Understand the loan terms and any associated fees.
• Customer service: Look for a lender that provides excellent customer support.

Additional Tips

• Start early: Begin the pre-qualification or pre-approval process well before you start your home search.
• Get organized: Gather all necessary documentation, such as tax returns, pay stubs, and bank statements.
• Shop around: Compare offers from multiple lenders to find the best terms.
• Be transparent: Provide accurate information to your lender to avoid delays.
• Consider a pre-approval lock: If you’re concerned about rising interest rates, consider locking in your rate.

By understanding the differences between pre-qualification and pre-approval, you can make informed decisions and increase your chances of successfully purchasing a home. Remember, these are essential steps in the homebuying process, so take the time to research and choose the best options for your specific needs.

Contact us today if you have additional questions – we can also suggest some local lenders we work with and trust to guide you through the process.

Home Sweet Tax Breaks

Advantages of home ownership explained

Homeownership offers a multitude of tax advantages that can significantly impact your bottom line.

One of the most well-known benefits is the mortgage interest deduction. If you itemize deductions, you can typically subtract the interest paid on your home loan from your taxable income. Similarly, property taxes, which are often substantial, can also be deducted.

Another key factor is capital gains, which is the profit realized from selling an asset—in this case, your home. While capital gains can be subject to taxation, homeowners can strategically reduce their tax liability by understanding capital improvements. Those permanent additions or alterations to your home increase its value or prolong its life. Examples include adding a new room, upgrading the kitchen, or replacing the roof. These expenditures increase your home’s tax basis—the original purchase price plus the cost of improvements. A higher tax basis means a lower capital gain when you sell. Just by carefully documenting capital improvements and maximizing your home’s tax basis, you can potentially shield a significant portion of your sale proceeds from capital gains taxes.

For homeowners who use a portion of their residence exclusively and regularly for business purposes, the home office deduction can provide valuable tax relief. This deduction covers a percentage of your home’s expenses, including utilities, insurance, and depreciation, based on the square footage allocated to your home office.

Furthermore, making your home more energy-efficient can not only save you money on utility bills but also potentially qualify you for energy tax credits. These credits are offered to encourage homeowners to adopt environmentally friendly practices and reduce their carbon footprint.

By understanding and maximizing all of these tax advantages, homeowners can transform their property into a valuable financial asset.

Disclaimer: Tax laws are subject to change, and the deductibility of these items can vary based on individual circumstances. It’s essential to consult with a tax professional for personalized advice.

Tips for Unmarried Couples Buying a House

For unmarried couples, the excitement of buying a home can be tinged with a bit of uncertainty. Fear not! With some careful planning and knowledge , you can navigate the process smoothly and build a secure nest together.

Understanding Title Ownership: You Say Yours, I Say Ours

One of the key differences unmarried couples face compared to married couples is the lack of automatic legal protections. This is especially true when it comes to ownership of the property. Here, you’ll need to decide how you want to hold the title, essentially determining how you own the house:

• Joint Tenancy with Right of Survivorship: This is the simplest option. Both partners own the property equally, and if one partner passes away, the other automatically inherits their share. This avoids probate, a lengthy and costly legal process that determines how assets are distributed after death. Sounds perfect, right? Well, it’s important to understand that both partners have equal rights to the property, meaning either can sell their share without the other’s consent.
• Tenancy in Common: This option offers more flexibility. Each partner can own a different percentage of the property, based on their down payment contribution, for example. You can also designate who inherits your share upon death through a will. This might be useful if one partner contributes significantly more financially. However, tenancy in common does not include the right of survivorship. If one partner dies without a will, their share may go to their legal heirs, which could potentially be someone other than your partner.

Choosing the Right Title:

Deciding how to hold title depends on your specific circumstances and long-term goals. Here are some factors to consider:

• Financial Contribution: Did one partner contribute a larger down payment? Tenancy in Common allows you to reflect that contribution in ownership percentages.
• Future Plans: Do you plan to have children or get married in the future? Joint tenancy with right of survivorship might be simpler, but discuss how future life changes could impact your decision.

Remember, this is a crucial decision. Consulting with a local real estate attorney is highly recommended. They can explain the legal implications of each option within the context of your state’s laws and help you choose the title structure that best suits your needs.

The Mortgage Maze: Two Hearts, One (or Two) Mortgages?

Getting pre-approved for a mortgage is an essential first step in the home-buying journey. However, as an unmarried couple, there are some additional things to keep in mind:

• Joint Mortgage Eligibility: Both your credit scores, income, and debt-to-income ratios will be considered to determine your borrowing power.
  • Credit Scores: The lower of your two credit scores will often affect the loan terms you qualify for, including the interest rate. Discussing credit improvement strategies and working towards a healthier credit score together can be beneficial.
  • Income Verification: Combined income determines the maximum loan amount you can qualify for.
  • Debt-to-Income Ratio: This ratio shows the lender how much debt you carry compared to your income. A lower ratio (typically below 36%) indicates a better ability to manage mortgage payments.
• Applying for a Mortgage as Unmarried Partners: Be transparent with the lender about your relationship status. This could affect the loan agreement. Have all necessary documents ready, such as proof of income, employment verification, and identification for both partners.

Beyond the Bricks and Mortar: Protecting Your Nest Egg

While love is the foundation of any relationship, legal agreements can provide much-needed peace of mind. Consider these two options:

• Cohabitation Agreement: This outlines who owns what assets and how finances will be handled if the relationship ends. It can address things like furniture, appliances, and even shared bank accounts.
• Property Agreement: Similar to a prenuptial agreement, this specifies each partner’s financial contribution to the property and how it should be divided upon separation or death. This can be particularly important if one partner contributes significantly more financially towards the down payment or renovations.

These agreements can prevent disagreements and potential legal battles down the road. Remember, a real estate attorney can help draft these documents properly to ensure they are legally binding.

Trunk & Treat 2023

Join us and some of our favorite clients and friends for this unique Halloween event, held on Sunday before 👻 Halloween 💀.

When: Sunday, October 29, 2023 from 1 to 3pm

Where: Parking at Keller Williams Madison West, 555 Zor Shrine Pl #100, Madison, WI 53719

What: Food 🌮 & ice cream 🍦 truck + lemonade stand 🍋

Bounce 🛝 houses & games 🎯

Children’s jewelry 💍 and clothing 🧢 vendors

And of course, plenty of Trick or Tricking candy 🍬!

No RSVP needed, just stop by!

Bring along family and friends!

Let’s bake cookies

Double Chocolate Peppermint Cookies

Instructions

• Preheat oven to 350 degrees F.
• In a bowl, mix the butter and sugar together for about 2 minutes.
• Add egg, peppermint extract and beat well, until light and fluffy.
• Sift flour, salt, cocoa powder, baking soda and powder gradually over the wet ingredients, mixing as you go, until well combined.
• Add chocolate chips and lightly stir in with a mixing spoon.
• Chill the dough in the freezer for 10 minutes while the oven finishes heating.
• Form the dough into small balls (heaping 1 Tbsp) and place 1.5 inches apart on an un-greased or parchment-lined baking sheet. Press the tops down and then top with a few more chocolate chips for more flavor.
• Bake for about 10 minutes. The edges should start to dry but the tops should still be slightly soft looking.
• Set on the cookie sheet for a few minutes more but sprinkle crushed candy cane on right away.
• Transfer to a cooling rack to rest until completely cooled.
• Store in an airtight container to keep fresh for up to a few days or freeze for several weeks.

Ingredient list

• 1/2 cup unsalted butter
• 3/4 cup sugar
• 1 large egg
• 1/4 tsp natural peppermint extract
• 1 1/4 cup unbleached all-purpose flour
• 1/3 cup cocoa powder
• 1/4 tsp salt
• 1/2 tsp baking soda
• 1/4 tsp baking powder
• 1 candy cane, finely crushed
• 1/3 cup dark, bittersweet or semisweet chocolate chips

Spring Home

First warm days of season are upon us, and with this, it feels good just going outside after long months of cabin fever.

Take a walk around your house, backyard, and garden, and check on everything after the winter season. This is the perfect time to make take care of small maintenance tasks and catch problems before they affect value of your home and turn into expensive fixes.

Check full list of small and easy tasks below!

How many bedrooms?

How much of a house do you need? When you start looking for your place, the first question you need to answer is how many bedrooms and bathrooms do you want or need. The question sounds simply only on the surface. There are few philosophies you can use to help you to the final number.

Now and in the future

One approach is very logical, but requires planning ahead. Consider how many years you plan to stay in the house? Will your kids still live at home at that time? Will you have more children? Can siblings share a room? Will you parents would want to move in, to help take care of the kids – or be taken care of? This should give you a good idea how many bedrooms do you need. Add a guest bedroom or an office if you plan to work from home or host relatives dropping by with a visit.

Each one their own

Another approach asks you to do simple math. Count a room per person you expect to live in the house, and add one bedroom for guests. This risks too many spaces (it counts for example two bedrooms for a couple) and paying to heat and light unused space – it will also add to your property tax. However, it will come handy if the house you select will not have a dedicated space for a home office, typically located off the main entrance – or a non-conforming bedroom to be turned into an office. A non-conforming bedroom is a room without a closet and window or with window that is higher than 4 feet high above the floor.

Resell approach

The third one considers resale value, and essentially suggests to get a so called “cookie-cutter” house of 3 bedrooms and 2.5 bathrooms. Those houses are also easier to rent if you decide to turn it into source of income in the future. Above 4 bedrooms, it’s considered luxury home, which might be harder to sell in the future.

A bit about bathrooms

That is a whole topic by itself. It all boils down to personal preference, where you want to have bathrooms, and how many you think your family lifestyle will require. If you entertain often, half bathroom by the living room is extremely useful. It provides privacy for the rest of the house and is convenient for the whole family.

At least one bathroom per livable level is a must. At the same time, if a level contains only family or living room-kitchen area, half bath will do. Beyond that, the decision is really down to your personal preference. It becomes popular for each bedroom to have its own bathroom. Sometimes you have cute Jack-and-Jill bathrooms for adjoining bedroom, very practical solution. Again, typical house will have 2.5 bath, and for most families, it should be perfect.

Reality check

Next, the number of rooms itself does not determine the size of the house. The rooms can be bigger, a good idea if you want siblings of similar age share the room. If the bedrooms are smaller, each kid can have its own space without adding too much to the whole house.

Make a decision based on what you think appropriate number of rooms will serve you best – and than consider the square footage you can actually afford. For affordability, use the rule of thumb for value of the house to be at 3 time your annual household income. Depending on the average prices of square footage in the area you are moving to (check our Community pages for prices around Madison, WI), you should be able to quickly calculate what you can afford. With that, give us a call or send us an email (click here for contact information), we can take it from here!