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What Homebuyers Should Look for Inside a House

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Location, curb appeal, square footage and number of rooms might get you in the front door of an available home, but what should be deal-breakers or deal-makers once your real estate agent is taking you “on the tour”?


These days, many sellers realize the advantage of “staging” their home so it will look appealing to almost any buyer. But be careful! That great furniture, those artfully placed knickknacks and the eye-catching bedding don’t come with the house, and you might not be able to duplicate “the look” with what comes out of your moving van. The same thing is true if you don’t like the flooring or the décor. Make the time to take a deeper look and think about how much redecorating or remodeling you can afford.


Room Arrangement

If the home has an open-concept floor plan, can you see the kitchen area from the front door? Because it is one of the most lived-in areas of your home, you might not want to feel the kitchen always has to be shipshape anytime the doorbell rings. Is it on your wish list to have a separate eating area or can you comfortably sit down to dinner in the same space where you just created a home-cooked meal?


The number of bedrooms can be important, especially if you have several children or will have frequent out-of-town guests. Be sure to consider the placement of the bedrooms and the bathrooms, especially if you want younger children to be close to the master bedroom, or older children to be where you can’t hear their late-night music. If you plan to be in your home as your children grow from toddlers to teens, consider the flexibility of the spaces over time.


Does the laundry room’s size and location meet your family’s needs? Will the location of that and other plumbing in the house make it easy to combine rooms in a future remodel?


Room Size

Many older homes have a lot of small rooms, while today’s trend is toward more open living, entertaining and sleeping areas. Are the bedrooms large enough for the beds and other furniture they will need to hold and is there enough closet space? A small bathroom with a combined shower and tub might be adequate for a family with a toddler, but when the toddler becomes a teen, you might wish you had a separate bathroom for you and the kids. If you want to stay in this location during your family’s growing years, think about where you could add another bathroom.


Your Wish List vs. What You Can Afford

See our article, “Your Dream Home Wish List: Consider What You Can and Can’t Do Without” for more ideas on what in the home you’re looking at would be a Deal Breaker, a Heart Breaker, a Really Want It, a Could Go Either Way or a First to Cut. After you’ve found the style of house you want with the number of rooms you need, be sure to consider whether you will want to and be able to afford upgrades to:

  • flooring: wood, carpet, tile
  • Kitchen cabinets & countertops
  • Windows
  • Fireplace: gas or wood-burning
  • Heating & cooling systems



The Value of a Home Inspection

Home inspections are not legally required in the sale of a home. They do come with a price, so is a home inspection necessary and worth the cost? What are the pros and cons? Check out our article on Home Inspections. You probably know enough to look for such things as the age and condition of the windows, the roof, and the HVAC system, but what surprises could be uncovered once you’re actually living in a house?


Inspectors will be looking for a few things such as: determining the functionality and efficiency of plumbing, electrical units, heating and cooling systems, appliances, structural stability, roofing, foundation, etc. Essentially, they serve to make sure that the basic foundation and construction of a home are appropriate, and everything is up to code.


Many people see the home inspection process as another component of a greater investment. Home inspections make it possible to potentially negotiate repairs and fixes with the home seller. Often times, home sellers can be convinced to fix certain issues in order to ensure the sale goes through. The biggest incentive for getting a home inspection is to guarantee that a property does not have any current, major problems. If you choose not to get an inspection, and are faced with a major issue after the sale, you will be responsible for the fix.


Talk to a Citywide Loan Officer about prequalifying for a loan on a home that fits your budget and includes most of the highest ranking wishes on your list. Then let us help you find a realtor who specializes in homes like the one you’re looking for. With these two experts and maybe a home inspector on your team, you’ll be set to find the home of your dreams for now and in the long-run.





How to Save for &/or Acquire a 20% Down Payment

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If you meet the qualifications for certain types of loans—e.g., VA, FHA, Fannie Mae, Freddie Mac—you may be able to put down as little as 10%, 5%, 3% or even 0% on a first home, but this article focuses on the benefits of and the how-to-come-up-with of the industry standard 20% down payment.



You are in an optimum position with the seller and the lender, when you’re able to provide 20% for a down payment. It indicates to lenders that you–the buyer—are serious, and that you have the ability to save money for a specific purpose. In a competitive market, your offer will be preferred by most mortgage lenders over those who cannot provide 20%. Your down payment also is a key part of the offer you present to the seller. It’s usually true that the larger the down payment, the stronger the offer.


You could get a better interest rate on your loan. “Jumbo loans,” or loans in excess of $417,000, may be considered a higher risk and require a higher interest rate. A homebuyer who puts enough money down to lower a home loan out of the jumbo loan category could save thousands of dollars over the life of the loan.


You can avoid Private Mortgage Insurance (PMI) when you put down 20% or more, and your monthly payments will be lower. PMI, protects the lender if you were to abruptly stop making payments on your home. Typically, if your down payment is less than 20%, lenders will require you to carry PMI. With PMI, a higher risk client has the opportunity to receive financing, even if they are unable to put 20% down. PMI usually is only paid until the loan reaches an 80% loan-to-value (LTV) ratio.


Because, with a higher down payment, less of your monthly payment will be going toward interest, you will be able to build equity in your home more quickly.


How to Acquire Down Payment Money

Saving more of the money you already have coming in isn’t the only way to acquire money for a down payment. Here are 10 ways to acquire money without lowering your present lifestyle:

  1. Borrow from a family member and pay them interest.
  2. Financial gifts can be included in the down payment on some types of loans.Tax law allows gifts of several thousand dollars a year to be bestowed without tax consequences to either the giver or recipient. The gift does not have to be from a family member. Ask your Citywide Loan Agent if the down payment for your type of loan can include a gift.
  3. Get a second job. A part-time job could help you earn the extra money you need. Explore the many ways to make money from home.
  4. Add your tax returnto your down payment savings.
  5. Ask for a raise. Base your request on your accomplishments, not your need for a down payment.
  6. Look for lost money.Check the National Association of Unclaimed Property Administrators to see if you have any missing money.
  7. Borrow from your 401K. Just be aware that you have to pay back your 401k loans, with interest – typically at 2% above the prime rate.
  8. Withdraw from your IRA: Tax laws allow you to withdraw up to $10,000 in IRA funds to buy your first home. If you’re married and you both qualify, you could have a potential $20,000 down payment, and the penalty for early withdrawal is waived.
  9. Ask the seller for the money. Some sellers will be willing to do that, if you’re willing to pay their asking price. Some will give you the down payment as a credit, pay your closing costs, or both. You won’t know unless you ask. If the seller agrees to give you a credit for closing costs, that frees up money for the down payment. Check with your lender before asking.
  10. Apply for a DAP loan, also known as a second mortgage on your home. In most cases, the interest rate on a DAP loan will be the same as the interest rate on your first mortgage. Ask your Citywide loan agent about eligibility requirements.


How to Save Money for a Down Payment

  1. Make a budget that includes all your fixed expenses and an estimate of those that vary. Anytime the amount you spend in a month is lower, put the difference in your down-payment account.
  2. Use a budgeting app. Check this link for ways to save money on a tight budget.
  3. Save a certain amount by direct deposit from your paycheck every month.
  4. Save any tips, performance bonuses or profit sharing payments.
  5. Downsize your lifestyle:
    1. Move to a smaller apt. or a place with lower rent or utilities.
    2. Sell one of your cars and save the selling price. You will also save on car insurance and other car-related expenses.
    3. Eat out or get take-out less often. It’s less expensive to eat at home.
    4. Don’t buy pre-made coffee or lattes from a coffee shop. Make your own.
    5. Instead of paper towels or disposable diapers, use cloth/washable towels and diapers.
    6. Buy store/generic brand groceries and, where possible, prescriptions.
  6. Stop putting money into your retirement fund for a while. Put it in your down payment account until you savings goal is met.
  7. Save the money you get from cash-back credit cards.
  8. Round up purchases to the nearest dollar and save your change or the amount that’s not going on your credit card.
  9. Reduce credit card debt by paying off cardswith the highest interest rate first. For other tips, click here to see a Citywide article on paying down credit card debt.
  10. Invest the money you save in FDIC-insured instruments such as traditional savings accounts, certificates of deposits (CDs), and money market accounts, rather than the Stock Market.


While you’re building up your down-payment fund, don’t completely neglect your other savings goals, such as money to replace a car, necessary home improvements, unexpected expenses and your kids’ education. While most would not argue that a 20% down payment is ideal, for many it is simply not practical under their current circumstances. According to the National Association of Realtors, 71% of first-time homebuyers and 52% of all buyers put 10% or less down. Imagine the impact to our economy had those people been unable to buy a home. Delaying your home purchase until you have 20% may cost you in the long run. Call Citywide Home Loans for advice on what makes the most sense for you and your home-buying needs.










Location, Location, Location!

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You’ve all heard the real estate mantra “Location, Location, Location,” when talking about home values. The cost and desirability of approximately the same home can vary widely, based on where it is located. Location can refer to a specific part of the country, a state, a city or even a neighborhood.


Location, land and home value compared

Real Estate appraisers consider a home’s location when they determine property values. They compare the home and land to similar properties in the same area. The initial price is based on the value of the land at the time of purchase, the cost of construction of the home, and a percentage of markup for profit for the builder. The land and home value can rise and fall with the value of the properties around it and the commercial or recreational activities that develop in close proximity.


Obviously, different buyers appreciate different aspects of the location of a home. Many people would like our home, because it is only 15 – 30 minutes from several ski resorts, but we don’t ski. However, there are some considerations with regard to location that don’t change much, no matter who the buyer is.


Locations consistently more in demand than others:

  • Near the ocean, rivers, lakes, or parks and other outdoor recreation opportunities
  • A school district with high test scores and a good reputation: visit org
  • Panoramic views of cities, the ocean, mountains, or golf courses
  • Easy access to shopping, entertainment or recreation opportunities
  • Well-kept neighborhoods
  • Areas with bigger, better-shaped lots


Locations where demand and property value are lower:

  • Residential property close to commercial buildings
  • Noise, traffic, and other activities caused by a nearby business or school
  • Retail developments under construction
  • Proximity to railroad tracks, overpasses, airports, and busy intersections
  • Neighborhoods with higher crime rates: visit comand use a zip code to search
  • Hazardous conditions, such as poor air quality or a vacant building


Additional location factors that may affect property value:

  • ​New or planned construction nearby
  • Vacant land that could be developed
  • Changes in zoning laws
  • Weather and the probability of natural disasters
  • Property taxes



When you buy a home in a good location, it’s usually a wise long-term investment. Real estate agents often advise their clients to buy a house in need of some TLC on the best street in the neighborhood. Why? Because fixing up a home in a great neighborhood will give you the best return on your investment, when it comes time to sell.


“You can change the price of the house. You can change the shape the house is in. But you can’t change the location,” says Toni Spott, a top-selling realtor in Milwaukee, Wisconsin. Everything about the location can affect the value, affordability and livability of your home. The appraised value of your future home helps determine the size of the loan you can qualify for. Be sure to ask your Citywide loan agent how location figures into the value of the home you are about to buy.








How Home Ownership Can Affect Your Retirement

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My husband and I have been retired for more than 10 years. We’ve lived in our 4000 sq. ft., 6-bedroom home for almost 31 years. We feel fortunate that we haven’t had a mortgage payment for 20 years. However, we continue to receive lots of unsolicited advice about whether to keep the equity in our home, to downsize and invest the difference, or even to take out a home equity loan at the now historically low interest rates and invest in the Stock Market or real estate, where our gains might exceed our expenses.


The increase in value of our home over the past 30 years and the plunge in the Market since the advent of the Corona Virus make us feel happy, at least for now, that more than half of our retirement assets are in our home. However, our desire to stay put and be debt-free may not be the best strategy for everyone, or even for us going forward. We are living comfortably on Social Security, pensions and the required minimum distributions from our 401Ks. When age or other circumstances make a safer and more easily maintainable home seem like a good idea, the best choice might be to move to a smaller home. Or we may need sell the house and use the profits to pay for needed healthcare services or life in an assisted living facility. It feels good to have several options.


Mortgage-Free One of the Keys to a Comfortable Retirement

Owning a home is typically thought of as one of the keys to a comfortable retirement and financial stability in the future. But what about in these unsettling times? Is owning a home still a necessary part of a good retirement plan? A majority of pre-retirees expect to carry mortgage debt into retirement. If you’re among them, it’s a good idea to understand what the pros and cons are, and to consider your options.


If you would like to keep your home when you retire, are close to paying off your mortgage and won’t have to liquidate other investments to do it, it may be a good choice to stay put. You’ll get a drop in monthly expenses with the end of mortgage payments. If you can afford to pay taxes, insurance and all the upkeep that goes with owning a home, living mortgage-free can be less stressful. However, you might be missing out on the opportunity to put the equity in your home to use at a low interest rate.


A recent study from the Urban Institute looked at the home equity patterns of older Americans and found that homes still rank among their most valuable assets. “Not only does a house meet the basic needs of shelter, but it’s an asset that typically can be used to build wealth as homeowners pay down their mortgages,” the authors say. However, the report also warns that taking on more mortgage debt and financing it for longer periods is a trend that might make future generations less able to rely on home equity as a source of retirement income.


The Pros of Having a Mortgage in Retirement

Having a little debt may not be as risky as we have been led to believe. If you have the resources to rethink your mortgage-free retirement strategy, you have the potential for significant gains.


Investments: Using home equity to invest in rental property or other real estate assets can make a lot of sense for some retired home owners. Low rates mean they won’t be spending too much of their nest egg toward an extra mortgage payment, and they could benefit from a steady stream of rental income or the likely growth in value of other property. However, one has to be up to the responsibilities and uncertainties of being a landlord.


“I am a fan of living without debt,” said Ted Halpern, a Washington-area financial planner. “However, we’re looking at interest rates that are unbelievably low. I can understand why someone would want to borrow at those rates and invest that money elsewhere.”


Tax Benefits: State and local real estate taxes and the interest on your loan are deductible, if you meet other conditions. You need to be aware of how the 2018 tax law has affected those deductions. Now, state and local taxes (including property taxes) are limited to no more than a total deduction or combined limit of $10,000 on a federal return. The interest on new mortgages of up to $750,000 can be deducted, depending on your tax bracket. Interest on home equity loans is deductible only if the loan is used for the purpose of improving the residence, effective through the end of 2025.


The standard deduction for federal taxes has more than doubled. The new tax law means that fewer people will benefit from itemizing deductions. Home owners and buyers need to weigh the other pros of homeownership, like building wealth through equity and appreciation in value over time.


Cash in Your Pocket: One of the biggest arguments for not scrimping and saving to pay off your mortgage is you can have more cash available for things you want to do (travel, dine out, entertainment) and for things you might have to do (make repairs to your home or cover major health expenses). If you’re considering selling your home to pay off your mortgage before retirement and then renting, think about the potential threat of inflation. Each year, you will need to renew your lease, which will likely increase.


Cons of Having a Mortgage in Retirement

Having too much mortgage debt in retirement may be risky, especially if you are living on a fixed income of Social Security and perhaps a pension. You might not have the wiggle room for a big increase in expenses.


Lower Tax Deductions: The tax benefits from holding a mortgage may drop significantly when you retire. You may be paying much less interest on your loan, resulting in a much smaller interest deduction. It’s likely your income will be less than it was when you were working. Your tax bracket will be lower, so mortgage interest and real estate tax deductions may have less or no value.


Unexpected Major Expenses: Outright home ownership can be an important resource to cover unexpected expenses. You can take out a home equity loan or even a reverse mortgage. Remember there are costs involved in securing those, and they’re likely to come with higher interest rates than a primary home loan. It’s smart to consider how liquid your other assets are.


Investment Portfolio Risk: The chance that your investment portfolio will take a big hit during your retirement makes being mortgage-debt-free an important increase in financial stability. There can be a significant relationship between retirees’ comfort with their debt levels and financial satisfaction. Focus on your comfort with debt and the risk level of your other investments


Decide Now

One thing my husband and I have learned, and what experts advise, is that the more we can do with our possessions and our home while we can still make those decisions ourselves, the easier and more profitable it will be for our children. With the help of an attorney, we’ve made it easy for our children to sell our home. However, we are already being asked why we choose to stay in a home that is obviously larger than we need. We think we have lots of very good reasons, and so far our children aren’t pushing us one way or the other, but our situation could easily change.


When age or other circumstances make a safer and more easily maintainable home seem like a good idea, our best choice might be to move to a smaller home that is easier to care for. We might need to sell the big house and use the profits from the sale to supplement retirement income and pay for needed services or assisted living.


The best home-ownership approach for you could depend on how you feel about debt, your age, how much money you’ve put aside for retirement, where it’s invested, your retirement-living goals, and how disciplined you are about saving and spending.



Why, When and How to Refinance Your Home Mortgage

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Are you wondering whether or not now is a good time to refinance your home mortgage? The short answer is to contact a home mortgage professional for an answer tailored to your special circumstances. For example, the loan officers at Citywide Home Loans use software that, with some basic information from you, can calculate in just 15-20 minutes a cost analysis on the current interest rate and fees and how long you will have to stay in your home to make a refinance worthwhile financially. They can look up your current loan, the amortization schedule and payoff time, compare it with a new loan and tell you how much you can lower your monthly payment. Make sure that whoever you go to will conduct an analysis free of charge and with no obligation to refinance with them.


However, if you’d like to know more about your options before you call, this article might contain just the information you’re looking for.


Mortgage interest rates have plummeted to historic lows, the #1 reason that is making homeowners think about refinancing. You might be hoping that a refinance can help you:

  • lower your monthly payments,
  • shorten the term of your loan and pay it off faster, with less money going toward interest,
  • pull out cash for another purchase or a financial emergency,
  • consolidate debt, or
  • convert from an adjustable-rate mortgage (ARM)to a fixed-rate mortgage, or vice versa.


How can I time refinancing so I get the lowest interest rate possible?

In the wake of the Coronavirus, rates are still fluctuating, but they are likely to even out and stay low through the rest of the year, once lenders catch up with the backlog from the initial wave of refi requests. Another consideration is, “Will lenders have the resources to let mortgage rates go any lower?” Banks could artificially hold rates up to “slow the flow” of refinances, in order to ensure the money is there to fund the demand. You don’t have to rush to refinance or get a mortgage, because at the time this article was written, banks were likely to be inundated with applications. A little later this year could be the opportune time to apply for or refinance a loan.


The best approach could be to determine a target rate that justifies your cost of refinancing, and then work with a professional who understands the factors that impact mortgage rates daily, and who will monitor that target rate for you and advise you when to lock it in. Generally, if refinancing will save you money, help you build equity and pay off your mortgage faster, it’s a good decision. And with rates this low, even people who have relatively new mortgages may be able to benefit from refinancing.


What are the benefits of refinancing to shorten the loan’s term?

When interest rates are low, you might be able to refinance your existing loan for another loan with a significantly shorter term, but without much change in the monthly payment. That could save a lot of money in interest payments. Do the math, or let a professional help you, and see what works.


Should I refinance to take equity out of my home?

Homeowners often access the equity in their homes to help pay for a large purchase or to cover major expenses, such as the costs of home remodeling or a child’s education. They justify the refinancing because remodeling may add value to the home or because the interest rate on the mortgage loan is less than the rate on money borrowed from another source.


Another reason to access equity can be a serious financial emergency, such as losing your job. At face value, replacing high-interest credit card debt with a low-interest mortgage may seem like a good idea. But you should carefully research all your options for raising funds before you take this step. If you do a cash-out refinance, you may be charged a higher interest rate on the new mortgage than for a rate-and-term refinance. A savvy homeowner is always looking for ways to reduce debt, build equity, save money, and eliminate their mortgage payment. Taking cash out of your equity when you refinance does not help to achieve any of those goals. This is another good time to consult with a professional.


When is it financially sound to convert from an ARM to a fixed-rate mortgage, or vice versa?

ARMs (Adjustable Rate Mortgages) often offer lower rates than fixed-rate mortgages. However, periodic rate adjustments can result in increases that are higher than the rate available through a fixed-rate mortgage. When this occurs, converting to a fixed-rate mortgage results in a lower interest rate and can eliminate concern over future interest rate hikes.


Converting from a fixed-rate loan to an ARM can be a sound financial strategy, if interest rates are falling and you don’t plan to stay in your home for more than a few years. Currently, rates may be at or near their lowest rates and the chances of them going up are greater than getting lower. When mortgage interest rates have a better chance of rising, this is not a wise strategy.


How long does it take to recoup the costs of refinancing?

The interest rate is not the only cost to weigh when you’re considering whether refinancing is worth it. Expect closing costs to total 2 to 5 percent of the principal amount of the loan. As with an original mortgage, refinancing requires an appraisal, title search, and application fees. Many lenders let you roll the closing costs into your principal balance and finance them as part of the loan. To determine an approximate break-even point, divide the total closing costs by the amount you will save each month.


When refinancing a mortgage, you’ll also have “pre-paids” or “escrows,” which are the money you are required put aside upfront to account for future property tax and homeowner’s insurance liabilities. Once your old loan is paid off, your existing lender will send you a refund of the balance in your old escrow account approximately 30 days after closing. You will also skip a mortgage payment in the month immediately following your settlement. It is advisable that you bring the money required to establish the escrow account on your new loan to settlement, if you can afford it.


When is private mortgage insurance (PMI) required? Can I avoid it?

Private mortgage insurance is generally required when less than a 20 percent down payment is made on a home purchase, or in the case of a refinance, when the homeowner has less than 20 percent equity in the home. On conventional loans, the monthly PMI drops off automatically when the loan balance equals 78 percent of the original value of the home at the time the mortgage was originated.


How long does it take to complete the mortgage refinance process?

The time it takes to refinance depends on your lender, as well as how long it takes to complete inspections, appraisals, credit checks and other requirements. Even though the internet has simplified the process, you should probably count on it taking at least 30 days.


The Bottom Line

Refinancing can be a great financial move if it reduces your mortgage payment, shortens the term of your loan, or helps you build equity more quickly. When used carefully, it can also be a valuable tool for bringing debt under control. Before you refinance, take a careful look at your financial situation, consider all of the information above and seek advice from a mortgage loan professional.




Say Hello to Fresno

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The lifestyles offered by Fresno, California are some of the biggest draws in California’s real estate investment market today. While California’s more populated and well-known cities, like Los Angeles and San Francisco, are both too expensive and overcrowded for the average family to seriously consider investing there, Fresno is smack-dab in the middle of the state—  granting the people who live there the broadest range of access to all the best that California has to offer. 


Citywide VA Loans in Utah

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What is a VA Loan?

The origins of the VA home loan program—a part of what is officially known as the Servicemen’s Readjustment Act, or “G.I.” Bill—was written into law to aid WWII veterans. After it was enacted into law, the Bill allocated funds that established hospitals, granted stipends to cover college tuition, and also made low-interest home mortgages more available to servicemen and servicewomen who wanted to buy, build, or refinance a home. A “VA Loan,” as they’re most commonly known, is available to nearly every service member and veteran, and if you qualify for one, the loans can save you tens of thousands of dollars. VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.


Interest Rate Influencers & Their Effect on Mortgage Loans

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While you’re working from home home trying not to catch or spread the Corona Virus (Covid-19), you’ve probably watched the Stock Market plunge to new lows and the Federal Reserve cut its interest rate to near zero. If you’re wondering how or why these events are related and what they could be telling you about the direction of mortgage loan rates, you’re not alone. Even people who haven’t recently thought about buying a new home or refinancing an existing mortgage are wondering if they should seriously think about it and act NOW.


Hopefully, looking at each link in this chain of events and how each is influencing the others will help you to decide whether or not to rush into a possibly life-altering decision.


The Coronavirus (Covid-19)

It’s all you’re hearing about on the news, and even if you’re not worried about your own financial situation, chances are that there’s someone close to you who is. Let’s take a look at the big picture. There’s a huge trickle-down effect on the economy from all the efforts to keep the virus from spreading.


For example: You’re not traveling, so planes aren’t flying and cars don’t need as much gas. The usual tourist destinations are closing, because no one is allowed to go there. Hotel occupancy is rapidly dropping. Restaurants have been ordered to close their dining rooms. In-store shopping is considered a health hazard, etc. Social distancing is causing a slowdown in all kinds of consumer spending. These preventative measures and more are forcing businesses to close and causing people to lose, be laid off or get lower pay from their jobs.


The Stock Market Plunge

This is not just happening in America. It’s all over the world. As businesses close or fail, their stock value falls, and as it does, an excess of caution or panic causes people to sell. The Stock Market goes into a free-fall. More stocks are sold out of fear that investments won’t recover. Because the economies of the various countries of the world depend on and influence each other so much, a Domino Effect is created. Desperate people start looking to the Government to Do Something about their losses.


The Federal Reserve

On Sunday, March 15, the Federal Reserve cut its benchmark interest rate or federal funds rate, to almost zero percent. This is the interest rate paid by banks to borrow from each other to meet legally required cash reserves. It is the second emergency rate cut this year in response to the coronavirus and its negative effect on economic growth. If the federal funds rate is cut, banks can afford to lend more money and borrow required reserves from other banks at a cheaper rate. Increased lending by banks increases the amount of money in circulation. This is likely to lower interest rates for other forms of borrowing, such as home and car loans.


The Federal Reserve does not directly set consumer interest rates, but it indirectly encourages an increase or decrease in them. The goal is to maintain economic stability. When the Fed wants to boost the economy, it typically becomes less expensive to take out a mortgage. When the Fed wants to clamp down on the economy, it acts to drain money from the system, which means borrowers will likely pay a higher interest rate on mortgages. It takes some time before it is known whether a change in interest rates will positively impact households, the housing market, businesses and the financial sector.


Mortgage Loan Interest Rates

What does the Federal Reserve cutting its target interest rate to near zero percent mean for mortgages?

It’s designed to stimulate the economy by making it cheaper for people to borrow money for a mortgage, a car loan or other big purchases. Mortgage interest rates won’t go to zero percent. Even consumers with a high credit rating carry more risk than the U.S. Treasury, so the consumer rate is usually at least two percentage points higher than the Fed’s. “Mortgages respond to market forces and not to the Fed,” says Holden Lewis, mortgage and real estate expert at NerdWallet. “The Fed is actually following and not leading when it comes to mortgage rates.”


Even so, in response to the coronavirus, mortgage rates have already plummeted to historic lows, causing increasing demand from those who want this financial advantage. Another consideration is, “Will lenders have the resources to let mortgage rates go lower?” Banks could artificially hold rates up to “slow the flow” of refinances, in order to ensure the money is there to fund the demand. You don’t have to rush to refinance or get a mortgage, because banks are likely to be inundated with applications. Rates are still fluctuating, but they are likely to even out and stay low through the rest of the year, once lenders catch up with the backlog from the initial wave. That could be the opportune time to apply for or refinance a loan.

Keep an Eye on these Indicators

The Fed’s decisions on rate movements are often influenced by several economic factors, which consumers can easily track. Consumers can follow the employment report, which is published monthly by the Bureau of Labor Statistics, or BLS. The target inflation rate is another yardstick for rate changes. Employment, inflation and consumer price index are essential data the Fed considers when deciding what to do with rates. The banks and mortgage lenders follow. As things start to look better with the coronavirus, other influencers will carry more weight. Mortgage lenders set interest rates based on their expectations for future inflation and interest rates.


Changes in the federal funds rate affect a benchmark interest rate called the prime rate. According to the Federal Reserve Bank of San Francisco, the prime rate is the base rate from which many interest rates on consumer and commercial loans are set by banks. Consequently, a cut in the federal funds rate can trigger a decrease in mortgage rates, if lenders link their rates to the prime rate.


Lower interest rates provide the opportunity to obtain a mortgage with a more favorable interest rate, which yields long-term financial benefits from the reduction in the cost of financing a home or refinancing a current mortgage. At Citywide Home Loans, after just a 15-minute phone call, we can usually tell you whether or not now is the best time for you to buy a home or refinance your current loan. For consumer support and inquiries please contact our Consumer Solutions Dept. at 1 (866) 508-5515 or by email to consumersolutions@citywidehomeloans.com.




Bigger Tax Refunds = Bigger Down Payments

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Bigger Tax Refunds = Bigger Down Payments


A Tax Refund is an easy way to come up with at least part of the money for a down payment, closing costs or the cash reserves needed to buy that home of your dreams. Just be sure you have a minimal emergency fund to pay any unexpected bills. If you do, then your refund can be a great way to put you on a faster track to homeownership. You won’t be alone. Mortgage professionals say that during Tax Season, many first-time homebuyers turn to their tax refunds as a down payment option.


Most mortgage programs require that the money you use for your down payment be “sourced and seasoned.”  When using your tax refund, a copy of the treasury check and a bank receipt showing the deposit are all the proof you need to prove the funds are sourced and seasoned, making a tax refund a little easier to use than other resources.


2018 – 2019 Tax Laws

The Tax Cuts and Jobs Act took effect Jan. 1, 2018. The new tax law capped state and local tax deductions at $10,000, doubled estate tax exemptions, put new limits on the deductibility of home equity debt, and changed the tax brackets. With so many changes to the forms and numbers to keep track of, many Americans are still unclear about how much their refund will be. For a simple summary of the 2018 changes, see our article “How Does the 2018 Tax Law Affect New Homeowners?”


There are also a few changes that took effect in 2019 and could affect your refund:

  • Nonbusiness Energy Property Credit –An additional credit may be taken for 10% of the amount incurred in 2019 for qualified energy efficiency improvements and any residential energy property costs paid or incurred in 2019.
  • Residential Energy Efficient Property Credit –You may be able to claim a credit of 30% of the costs of energy-saving improvements to more than one home you used as a residence in 2019.
  • The standard deduction amounts increased slightly – The increased standard deduction will allow even more individuals to file without itemizing deductions on Schedule A.
  • The penalty (individual mandate) for not having health insurance no longer applies for 2019 federal tax returns. However, some states do require health coverage—or charge a fee.
  • The threshold for medical expenses on Schedule A has reverted back to 10% of your AGI.
  • Alimony deduction eliminated —The payer will not be allowed a deduction for payments made, nor will the payee be required to claim the alimony as income on their respective tax returns.
  • 401K and IRA Contribution limits have increased. 401K contributions limits have been increased to $19,000 and $6,000 for taxpayers over age 50 making catch-up contributions. IRA contribution limits have increased to $6,000 with a $1,000 catch-up amount for those over age 50.


Tips to Increase Your Refund this Year

Home ownership deductions: Current and future homeowners should check to see if they will qualify for these money-saving tax deductions, per the 2018 tax laws*:

  • Mortgage Interest: The interest on a new mortgage of up to $750,000 can be deducted.
  • Property Tax + State and Local Taxes: Starting last year, you can only take a total deduction or combined limit of $10,000 on property, state and local taxes on your federal return.
  • Home Equity Loan Interest: Interest on home equity loans is deductible only if the loan was used for the purpose of improving the residence, effective through the end of 2025, including existing home equity loans.
  • Home Sale Gain Exclusion: You are allowed to potentially exclude from federal income tax up to $500,000 of gain from a qualified home sale, if you are married filing jointly.
  • Home Office Deduction: If you use a portion of your home exclusively as an office, you can write off a percentage of the expenses based on the square footage of the office compared to the total area of the house.

Earned income tax credit: You can reduce the amount owed on your tax bill if you qualify for common credits like Child and Dependent Care Credit, the American Opportunity Tax Credit, the Premium Tax Credit, and the Save’s tax Credit.


Review Possible Deductions: – Because the Tax Cuts and Jobs Act raised the standard deduction and placed new limits on some deductions, it’s less likely that itemizing makes sense. Financial planners often recommend “bunching” deductions to exceed the thresholds, if possible. “Bunching” means timing expenses so you can push deductible expenses into the same calendar year. For example, doubling charitable contributions, property taxes or medical bills into one year, plus other itemized deductions, may allow a person to be over the standard deduction and itemize every other year.


Review the remaining itemized deductions in the Schedule A instructions and look for the “above the line” deductions on Form 1040 – these deductions subtract from your adjusted gross income and you don’t have to itemize to take them. For other tips, see our article, Tax Tips: Things to Think About When Filing Your Taxes.”


One Way to Increase Your Refund Next Year

Double-check the withholding stub on your paycheck. Are you sure the correct amount of tax is being withheld from your paycheck? Use the IRS’ tax withholding estimator and adjust your withholding for 2020, if necessary. If you’re not having enough tax withheld, you will owe money at tax time. If too much tax is being withheld, you’ll get a refund. Some people would rather have that money in their pocket on payday to help meet every-day expenses.


Use the IRS’ tax withholding estimator, especially if you fit any of these scenarios:

  •            Two-income families
  •             People working two or more jobs or who work only part of the year
  •             People with children who claim credits such as the Child Tax Credit
  •             People with older dependents, including children age 17 or older
  •             People who itemized deductions in 2018
  •             People with high incomes and more complex tax returns


If you had major changes in your life in 2019 —e.g., you got married or divorced or started your own business — your taxes will be more complicated. As a result, you might need to hire a CPA or other tax professional to prepare and file your taxes. Just don’t wait until April to make that decision, because it could end up costing you more, and it could be hard to find someone who’s not too busy to help you. Also, don’t “shop” to find a preparer who promises to get you a bigger refund. The tax preparer who makes promises like that could be unscrupulous.


Shield yourself from tax scams and fraud

More and more frequently, people are getting phone calls, emails and text messages from entities claiming to be the IRS. The U.S. mail is the only way the IRS will correspond with you, so don’t respond or give these people any of your personal information. For other tax tips see our article “Things to Think About When Filing Your Taxes.


*Contact a tax professional about your specific circumstances to find out more details about the tax benefits of homeownership and how to get the biggest tax refund possible to use as a down payment.








What should you consider when buying a second home?

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Most importantly, can you afford a second home? If you’re having difficulty maintaining and keeping up with the expenses of your primary residence, a second home will only further create strain. Can you afford a second mortgage? Can you afford insurance? If you plan on being at the property sporadically, can you afford its upkeep when you’re not present? While vacation homes can be lucrative investments, you will likely have to sink money into the property long before you start to see sizable returns.

Let’s talk taxes. Come Tax Day, you’ll need to do additional work when it comes to your second property. In many regards, the taxes on primary and secondary homes are similar, but there are some distinct differences. Particularly when it comes to renting out your second property. If you choose to rent out your second home (which is a very popular choice among secondary home owners) you will be on the hook for a considerable amount of additional paperwork. Be mindful that all rental receipts must be reported to the IRS as income. You are however allotted 15 days to rent out the home without penalty. Any amount of time surpassing 15 days, and you will need to report the property and its income to the IRS. Unlike your primary residence, all profits from the sale of a second home will be taxed as capital gain. In certain circumstances, you may be eligible for write offs. Although, it’s best not to bank on getting significant tax exemptions.

What are the benefits and drawbacks of renting out a property? It is assumed that when you buy a secondary property, you will typically spend less time at that location than your primary residence. Many people who own multiples homes choose to live in one place during the warmer months, and a secondary property during the colder months. If your secondary home is sitting dormant for a significant amount of time during the year, it may be worthwhile to rent it out. Or perhaps you are looking to buy a property for the sole purpose of renting it out. Either way, you can potentially generate a sizable profit from the home when you’re not actively using it.

Beware of the unforeseen responsibilities associated with renting out a home. A vacation property will require upkeep, particularly if you want to make it habitable for renters when you’re not there. Certain climates, like the beach for instance, require a lot of upkeep from the natural wear and tear associated with location. If you want to have a successful rental property, you’ll need to invest a certain amount of money to keep the home functional. Where is your second home located in proximity to your primary residence? Is your secondary home in a popular tourist location? This can make a significant difference if you depend on the income from renters to keep your secondary home functioning. Certain areas won’t be as lucrative simply because they don’t draw in a large amount of tourism. Any issues that arise with the home, will be your responsibility to fix, as is the case with your primary residence.

If you choose not to rent out a secondary property, be prepared to funnel money into upkeep, regardless. Some people may believe that if a home is not being actively used, it won’t need consistent attending to. Like any other building, there will be necessary upkeep required regardless of how often the home is used. You will still likely need to have people check on the home periodically, particularly if you have landscaping and/or exterior needs to attend to. This is especially important to keep in mind if you live in an area where there is a strict Home Owners Association (HOA). Many HOA’s have rules and regulations, regarding exterior appearance, that will result in consequences if ignored. You will likely need to contract out workers to help keep the house within regulations.

Do your research before buying a property.  Just because you love visiting that California coastal town, doesn’t mean you should buy a vacation property there. A vacation property comes with far more responsibility than people often realize. You will need to learn about local laws and ordinances that may vary drastically from where your primary residence is located. Certain cities have unique rules when it comes to renting out properties, particularly if they receive heavy tourist traffic. Utilities and cost of living can be significantly different depending on where you buy. A dreamlike vacation home can shortly turn into a nightmare if you fail to do the research beforehand.

Speaking of research, get to know the culture of the area before you buy. Living in an area and vacationing in that area are vastly different experiences. We can easily get caught up in the beauty of a location without realizing that everywhere worth living has drawbacks. You may come to realize that while the location is beautiful, you’re not a fan of the culture. Maybe the politics don’t align with what you prefer. If you’re planning on spending a considerable amount of time at your second property, don’t impulse buy. Rather, allow yourself the opportunity to visit multiple times before jumping into anything contractually binding. A second home is a large undertaking, and should be treated as such.

When getting serious, speak with a local real estate agent. A reputable real estate agent will be able to take you through the process of buying a home in that specific area. They will have the knowledge necessary to give you the local perspective, and guide you to make the most practical decision.

Consider alternatives to full ownership. Buying a secondary home is a big undertaking, and not everyone is prepared to take the plunge. There are other alternatives at your disposal if you’re looking for a bit less responsibility. You can always go the route of shared ownership, and split the costs among various shareholders. This will help alleviate some of the financial burden, so that one individual isn’t the only fall person for any damages. Timeshares are also a popular alternative, and can be less expensive depending on what company you choose to buy through. Timeshares also eliminate the primary responsibility of maintaining a property.

A vacation home is a lot of responsibility, but for many, a worthwhile investment. Overall, it’s up to you to decide whether a secondary home is worth it. Much like buying a primary residence, there are many variables to consider. In certain ways, buying a secondary home requires even more research and flexibility.