November 17, 2022 · 3 min read
There's no question that saving for a down payment is essential when buying a home. But how much should your clients aim to save? And what factors influence how much they'll need? This blog post will break it down for you so you can guide them accordingly. Keep reading to learn more!
The type of home
The type of home they are eyeing to buy will significantly impact the amount of money they need for a down payment. For example, if they are looking to purchase a single-family home, they will typically need to put down 20% of the purchase price. On the other hand, for a townhouse or condo, the minimum down payment is usually 5-10%. Meanwhile, if they are interested in buying a manufactured home, the prepayment can be as low as 3%.
The loan program
The amount they ultimately need for a down payment will also be influenced by the specific type of mortgage they choose. Some loan programs may require a larger down payment than others. For example, FHA loans require a minimum down payment of 3.5%. VA loans, on the other hand, do not require any down payment at all. Therefore, it is important to consider all of these factors when determining how much money they need to buy a home.
The borrower's credit score
A higher credit score may allow the borrower to qualify for a lower interest rate, which could save them money over the life of the loan. If your clients have good credit and can qualify for a loan with a low-interest rate, then they you may encourage them to consider taking out a loan for the full purchase price of the home and putting less money down as a down payment.
The borrower's debt-to-income ratio
This ratio represents the percentage of the borrower's income that goes towards paying debts each month. A high debt-to-income ratio can make it difficult to afford a large down payment, so borrowers with this ratio may need to save for longer or look for homes in a lower price range.
Final Thoughts
As you can see, there are a number of factors that influence how much your clients will need to save for a down payment on a home. But as a general rule of thumb, most people should aim to save between 3% and 20% of the purchase price of the home.
If your clients are having difficulty saving for a down payment, there are a few things you can suggest. For example, they could look into down payment assistance programs or grants that can help with the costs. Additionally, they may be able to use gift money from family or friends towards the down payment.
Joe Paras,
Staff Writer/Resource Analyst
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1. Invest in yourself
Taking the time to enhance your knowledge and skillset can pay off exponentially. Consider committing to a professional development program. Attending to industry seminars or events will help too. Lastly find a mentor who can help you stay current on key trends and strategies.
2. Get creative with marketing
In today's digital world, people are more likely to find you online than through traditional means like print media or word-of-mouth referrals. Take advantage of this by creating an attractive website or blog. Your website must outline your services and links back to your social media platforms where potential clients can follow your work and get updated information about new offerings. Don't forget to update content regularly — keeping your page (and your name!) in front of audiences is key.
3. Network, network, network
Building relationships is essential in this industry, not just with potential clients. So make sure you're connecting with other professionals as well—form meaningful relationships with like-minded professionals through networking events, online discussion boards, and roundtable conversations. Connecting with peers in the industry can provide valuable insight into market trends, current listing inventory levels, and more.
4. Analyze the competition
It's important to keep an eye on what other realtors are doing in order to stay competitive in the market – look at their websites, social media accounts, pricing structures, etc., and use those insights to improve upon your own strategies over time.
5. Keep an eye on technology
Technology is constantly changing, so it's important to stay informed of new gadgets and apps that could make your job easier (and help you stand out from competitors). Utilizing tools such as virtual staging software or automated marketing platforms is a great way to get ahead of the competition.
6. Create a personal brand for yourself
It's important to differentiate yourself from the competition by creating a unique brand identity that reflects your values and expertise. Develop an engaging website, create high-quality content for social media, engage with local groups that align with your values, and take part in industry events to establish yourself as a thought leader in real estate.
Final Thoughts
By following these business tips, you can not only keep up but even get ahead of the competition in this ever-evolving field. Doing so will help you maximize success in the world of real estate while continuing to build relationships, increase sales and expand your career!
Joe Paras,
Staff Writer/Resource Analyst
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Why Agents Should Be Preparing for Tax Season Right Now 5 min read
Another fiscal year is soon coming to an end, which means it is time to start thinking about tax season. While tax season can appear arduous and confusing, it does not have to be. It does not matter if you work full-time or part-time as a real estate agent. All self-employed workers need to report their expenses. As a corporation would, they also need to show their expenditures. As a result, this can make tax filing more difficult. But, agents can make it easier by planning ahead of time and keeping track of their deductions. In general, if you made money during the fiscal year, you must file a tax return. Agents do this step to establish if they are eligible for a tax refund or have a net tax obligation. If you are an agent, real estate agent, or own a real estate agency, you should brush up on specialized tax guidelines. Paying taxes on time and the right way prevents any room for mistakes. As an agent, taxes can be stressful, but planning ahead of time can avoid feeling overwhelmed.
Avoiding Overdue Fees
Filing taxes as a self-employed real estate agent might be difficult. Not knowing what deductions or claims to make can lead to difficulties this tax season. Keeping track of all receipts might be challenging, especially if you are new to the business. Even if you do not have all the little expenses, track and deduct your major business expenses. Keep up with your bookkeeping or engage an accountant to ensure you meet deadlines. That means putting all receipts and invoices in a single and accessible folder. The IRS will not notify agents if they need to file quarterly taxes until they are well past due. The IRS will not accept ignorance as an excuse, so preparing becomes key. If you believe you will be unable to meet your tax deadline, seek an extension.
Scheduling to Prevent Audits
Let us say that you needed to file for an extension. The sooner you meet with your preparer, the sooner you should be able to complete your return. If you expect a refund, you will get it sooner as well. If you wait too long to book an appointment with a tax preparer, you may miss the deadline. As a result, you may lose out on chances to reduce tax bills, such as making deductible contributions. Make a schedule for significant goods in your return. The schedule is a statement on your tax return that allows you to explain anything. The item scheduling may help to avoid an audit. For example, let us say you claimed $30,000 in dental expenses on your tax return but did not explain why. In this case, you will most likely face an audit. You could avoid an audit if you attach a schedule detailing the $30,000 in question. For example, the funds may have been payment for braces and dental implants for members of the family.
Tracking Taxes
When filing a tax return, it is a good idea to use some form of tracking system so that you always know where the return is. Pay for delivery confirmation and tracking information if you file by mail. If you file online, the return will go straight to the IRS via their system. When filing offline, a tracking system will assist you. This system will help prove to a court that you sent the return to the IRS even if they did not get it. As a self-employed real estate agent, you must begin tracking your taxes. This will make filing your tax return easier every year. Take images of critical receipts with your phone and a cloud app and preserve them for later use. Keep track of all business miles and other potential deductions.
Taking Advantage of Tax Deductibles
Take advantage of every tax deduction. Many agents may not realize it, but even minor expenses can be deductible from your taxes. Furthermore, these costs do not have to be business-critical for you to consider them. For example, consider the IRS's Business Expenses document or Publication 535. This document states that business expenses need to be essential or ordinary. An ordinary expense is typical or recognized in one's field. A necessary expense is beneficial and appropriate for a company. These expenses are the only tax deductibles. Everything you use for both home and company should be in precise percentages. For example, suppose you have a 200-square-foot home office and your entire house is 2,000 square feet. In this situation, you can only deduct 10% of your mortgage, insurance, utilities, repairs, and so on. Remember, to qualify for tax breaks, expenses must be in fair quantity and relates to the business. IRS Publications 463 might also help determine if an expense is tax deductible.
Final Thoughts
Taxes can become a complicated and complex matter. So, making mistakes during tax preparation may be costly for you and your business. For tax preparation questions, consult a tax professional who may provide tax suggestions. Real estate agents who are busy will find this beneficial throughout this tax season. Most people wait until they are in a difficult situation. They no longer have time to deal with their taxes before they seek professional help. But, by this point, they could have lost thousands of dollars in possible tax refunds. So it is best to get a professional or tax agent as soon as you have more than your work income to consider.
Joe Paras,
Staff Writer/Resource Analyst
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Education for Agents
Help Your Buyers Avoid a High Mortgage Rate 4 min read
Purchasing a home is one of the most significant financial investments an individual can make. And a lack of awareness of financing options could end up costing the homebuyer a lot more than they anticipated. Mortgage loans and interest rates are essential to budgeting finances. Saving money throughout the life of the loan is possible when a mortgage rate is at a minimum. Unfortunately, there is no guarantee of low mortgage rates. But, there are several steps to get your clients the lowest loan rate. Continue reading to learn about the six ways to avoid paying a high-interest rate.
Good Credit Score
A credit report summarizes the history of paying debts and other bills. In contrast, lenders look at credit scores to check and consider credit risks. They also use this to determine how likely a borrower makes timely payments to repay a loan. In general, the higher the credit score, the better the mortgage rate one can get. Paying bills on time and paying down or erasing credit card balances enhance credit scores. If a borrower has to carry a balance, it must not be more than 20% to 30% of the available credit limit. Check credit scores and look for any errors. If there are any mistakes, correct them before applying for a mortgage. Do everything to improve your client's credit score. Then, advise buyers to work on paying down debt and keeping credit card balances low.
Long Work History
Mortgage lenders want to see a steady and long-term work history on top of a solid credit score. Thus, lenders are more likely to provide borrowers with a loan in this condition. One may also get an appealing rate if they have worked at the same location for a long time. Showing a stable or growing annual income also helps borrowers in their application.
Shop Around
When looking for a low mortgage rate, research to ensure you get the best fit for your client's needs. It pays to shop around and not accept the first quotation you get. It is simple to compare mortgage rates on the internet. Take the time to compare internet banks to national banks and credit unions in the area. The monthly mortgage payment will be cheaper if the rate is lower.
Higher Down Payment
The more money put down, the cheaper the monthly mortgage payment will be. Your client will also pay for a lesser interest over time. Larger down payment may also result in a reduced interest rate. For example, putting down a 30% down payment could lower the rate by more than 0.5%. Keep in mind that putting down 20% or more means that your client will not have to pay mortgage insurance, saving them money.
Shorter Loan Contract
Financial firms are happy when homebuyers pay off their loans fast. For a lower mortgage rate, choose a 10-year or 15-year loan. In fact, any loan with a period of fewer than 30 years should result in a cheaper interest rate. Your client's loan debt will decrease faster with a lower interest rate.
Invest in Mortgage Points
Mortgage points are a one-time cost paid by home buyers to lessen their interest rates. Each mortgage point is equal to 1% of the loan's value. Spending a point decreases their monthly interest rate by 0.125% on average. For example, a point on a $250,000 loan would cost an extra $2,500. But your client's interest rate will be lower by 0.125% over the loan's life. Points can help your client save money if they want to stay in their house for a long time. Lowering the mortgage rate will save money over a 15- or 30-year period.
Final Thoughts
You can help your client do things to boost their chances of getting a loan, particularly with an early start. Begin by working with their finances, records, and other factors associated. With the help of these tips, your client is well on their way to combating increased mortgage rates.
Joe Paras,
Staff Writer/Resource Analyst
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Filed Under: Education for Agents
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