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How to Calculate Home Equity Percentage?

how to calculate home equity percentage

One of the many questions I receive from homeowners is, how to calculate home equity percentage? This is a very important question, as it is the one factor that can determine whether you can or should sell your home. It’s also a factor in refinancing for a better rate; or taking out some cash for debt consolidation, home repairs, or the like.

Knowing how much equity you have in your home also provides you with a better financial picture. Home Equity is simply the value of the ownership stake in your home. It is the difference between its current market value and the total sum of debts or liens (mainly but not exclusive to your primary mortgage) you have against your home.

How to Calculate Your Home Equity?

First, you can figure out the equity in your home by subtracting the amount you owe on all your loans secured by your house from its appraised or market value. For example, Nicole owns a house recently appraised at $500,000. Nicole subsequently owes ABC Lender $150,000 as a mortgage on her home. We can calculate Nicole’s home equity in the figure below:

(Current Appraised/Market Value) – (Mortgage Balance/Loan Balance) = (Home Equity Value)
$500,000 – $150,000 = $350,000

If you are interested in calculating your home equity percentage, you can do so by dividing your home equity value by the current appraised/market value of your house.
(Home Equity Value) ÷ (Current Appraised Value) = Home Equity percentage
$350,000 ÷ $500,000 = $0.7%

Loan-to-Value Formula

Another method of calculating the equity in your home is through the loan-to-value formula or (LTV formula). Lenders use this method in all cases when you are discussing encumbering your home with a loan. If you are interested in applying for a mortgage, Loan-to-Value Formula will compare the amount of the loan you are seeking against the current market or appraised value of your home.

To calculate your LTV, divide your current loan balance(s) by the current appraised or market value of your home. After that, the answer will be multiplied by 100 to find the percentage.
In the example given above, the $150,000 loan balance, will be divided by the $500,000 appraised value of your house. This will result in 0.3 multiplied by 100 equals 30% LTV for your home.

Take note that LTV can affect you if you must pay Private Mortgage Insurance(PMI). If you qualify to refinance, 80% LTV is the max you can borrow to avoid paying PMI. Nonetheless, these are easy ways to calculate your home equity. Remember that Both LTV and home equity values will be subject to fluctuations depending on the market value of your home.

If you are a homeowner and interested in finding out the value of your home visit our website at www.bascombrealestate.com. Visit the ‘What’s Your Home Worth’ tab or email us at customerservice@bascombrealestate.com, we are looking forward to hearing from you!

Posted in: Home Buying and Selling, Home Upgrades

Difference Between Home Insurance and Home Warranty

When purchasing a new home, it’s important to do in-depth research on all facets of the homebuying process. One thing you’ll need to understand is how to best protect yourself and your investment if anything were to go wrong. Check out the information on home insurance and/or homeowners insurance versus home warranty below to educate yourself on your options.

home insurance

Home Insurance
If you ask “does homeowners insurance cover mold”, here is the answer. Homeowners insurance pays for any accidental damages and loss that are caused by fire, lightning strikes, windstorms, and hail. However, damage from earthquakes and floods is typically not covered. It also covers the replacement of personal property in case of theft or damage and liability if a person were to get injured in your home or on your property.

According to American Home Shield, the average annual cost of a homeowner’s insurance policy ranges between $300 and $1,000. The bank usually asks you to obtain a policy before the mortgage is issued. Make sure to keep in mind that each type of coverage in the policy is subject to a limit. In most cases, you will have to pay a deductible.

Home Warranty
America’s preferred home warranty is designed to cover the cost of repairs and replacements of larger appliances. It also covers crucial systems in your home that may fail or break due to age and wear and tear. This includes but isn’t limited to HVAC, electrical, or plumbing components, kitchen appliances, and your washer and dryer. With a home warranty, you are required to pay premiums year-round even if you do not use it. It won’t cover damages if appliances were not maintained properly or if the damage is from a fire or other disaster.

Posted in: Home Buying and Selling

Diversify Credit: How Credit Mix Helps in Homebuying

Diversify credit! Your credit mix is an important factor a lender/underwriter is reviewing when trying to qualify you to buy a home.

Although this pandemic has had an extremely negative effect on our lives, from a real estate perspective, it has created a great opportunity for those who are interested in buying a property. If you are in the market to buy now, very soon, or sometime in the future, it is wise to start looking at your credit. Just having the right credit score will not guarantee approval, your credit mix is just as important.  The term ‘credit mix’ encompasses the items that make up your credit as well as the age of your credit report.  

diversify credit

 

What’s a good credit mix?

Your credit lines (or tradelines) are very important; generally speaking, a good mix is 2 – 3 unsecured tradelines lines, i.e. credit cards, lines of credit, etc. 1 – 2 installment loan(s), i.e. a car loan and/or fixed-rate loan with the occasional student loan mixed in for a good number of us!  For your credit lines, you should try and keep your balances at 10% – 30% of the line amounts.  An example of this is if you have a credit card with a limit of $2,000, you want to keep the balance at no more than $200 – $600 while you are shopping for a home. 

The age of your report is also important, you may have a great score and all the tradelines lines needed, but if your credit is only 1-year old, additional questions may be asked and you may not qualify because you haven’t established your credit.  To verify your credit’s age, confirm how old your oldest tradeline is, which will determine the age of your credit.

Lastly, but most importantly, Do Not Use Your Credit While Homebuying! I can’t stress this enough to my clients who are buying.  One inquiry could make the difference in you being in contract to purchase your new home, the lender pulls your credit again at closing, and your score dropped because of that inquiry and you do not qualify anymore.  This is a sure-fire deal killer and I have seen it happen.  Don’t let it happen to you!

If you want to know more about diversify credit and homebuying, visit Bascomb website https://bascombrealestate.com and talk to us!

Posted in: Home Buying and Selling

4th Stimulus Check – Where Will You Receive It?

Update: As of Oct 2022, the 4th stimulus check is going to be sent by 18 states as a response to record inflation. Read more here. 

The stimulus package has been passed and many Americans will receive a boost to their income in April.  If you meet the criteria set forth, you can receive at least $1200. But the question is; where will you receive this money?  Most of the money will be directly deposited to accounts tied to your last tax filing. But many members in our communities don’t have bank accounts. Whether it be from previous issues with a bank account you had. May it be mistrust, or a myriad of things, many in our community don’t have access to safe accounts.  

This means many people will receive paper checks and take them to an expensive check casher to get their money.  This doesn’t have to be the case! There are many financial institutions that provide bank accounts to people even if they owe another bank some money.  Aside from any previous bad experiences, the bank or credit union is the best, safest, and cheapest place for you to keep your money and conduct financial business. 

Click the links below to find out the stimulus criteria and banks and credit unions that can help you keep your money in your pocket. In addition, I have attached the BankOn Seattle-King County grid that will give you the list of banks in the state that can provide safe banking opportunities with their individual requirements. 

Stimulus Information

List of Financial Institutions

P.S. There are still no discussions of 4th stimulus check in Washington. 

Posted in: Home Buying and Selling, Open Forum Wednesday

Buying A Home While Quarantined

Soooo, I am very much an introvert and haven’t been too bothered by this ‘shelter in place’, but I am just about caught up on my shows that I record and realized that I am a bit antsy today.  For those of you who are finding you are running out of things to do, I decided to share somethings you can do virtually and guess what, you can buy a house during quarantine! 

 

I just recently had a couple do just that and they are closing in 3 weeks!  Here is how it works:

  • We may be in doors, but homes are still online and finding a home is still very accessible!  As a broker, I am still able to show homes as long as an appointment is made, and we don’t overlap visits. (homebuying was never a group activity, so that hasn’t changed much)
  • My lender partners all have online approval processes and can provide you insights on your pre-approval and/or what you need to do if you aren’t quite ready yet. (I have two couples working on this piece, they should be ready to go in a matter of weeks!)
  • If down payment assistance is what you need, all programs have an online option if you need to take a class and doesn’t require you show up in person. 
  • The title/escrow companies all have virtual document preparation, earnest money delivery, and signings.
  • I am glued to my computer, so I am available to help you in anyway you require my assistance! 

This epidemic does not have to stop your life, and with rates being so low this is a great time to get in the homebuying market! Contact us today at nicole@bascombrealestate.com or 206.250.3133

Posted in: Home Buying and Selling

Setting Strategic Goals: The Great Debate

The Great Debate

With social media abuzz around the great debate of ‘is this a new decade or not’, I for one am excited for what this year and the 20s will bring! My focus: setting strategic goals. I stopped practicing new years resolutions many years back when I realized, they just didn’t work as measurements that were going to be truly attainable in a new year.

setting strategic goals images

 

What I have found effective is practicing setting strategic goals throughout the year. But, I do have specific goals I set at the top of the year to get me motivated for the year to come. The beginning of a year is a time of reflection, renewal, reworking, and revitalization for me; and this new year and decade (I chose a side) has come with a sense of accomplishment just waiting for me to get there!

In order to walk into what is waiting for me, I have a few things I do to prioritize:

1. Identify the most important thing(s) I need to accomplish this year with realistic dates set to accomplish them
2. WRITE IT DOWN and post it prominently so that I see them daily, weekly etc.….
3. Create a process and/or processes to ensure I have the tools and support necessary to achieve them
4. Revisit my list of goals at set times to ensure I am on track
5. Get started and stay committed to my process.

I am beyond excited about this year and what’s in store. Whether your decade started 01/01/20 or will start 01/01/21, I pray you to walk in His will for your life and blow your goals out of the water! I know I am!

Nicole & Bascomb Real Estate Group

Posted in: Home Buying and Selling, Open Forum Wednesday

Moving For Work, Should I Buy?

real estate agents in Seattle Washington

When you move to a new area, particularly for a new job, one of the many decisions that may be considered is whether you should rent or buy a home in your new city.  Either way, real estate agents in Seattle Washington will be a huge help in deciding which is which. Also, there are additional questions one would consider:

  1. How long will I be here?
  2. Does it make sense from a financial perspective?
  3. Where would I live if I am not familiar with the area?

The list of questions goes on, but for transplants to the Pacific Northwest the answer is pretty simple, YES! Buying property in either King, Pierce, or Snohomish Counties is a practical move given our booming economy and market.  If you stay 1 year or 10 years, the property you purchase will more than likely cost you less than renting while you reside in the area. Given the increase in rents, if you leave the area you can convert your property to an investment vehicle or sell it and use the equity for your next move.  Finding the right area and checking real estate agents in Seattle Washington is just a click or call away. Let us help you answer those burning questions around buying!

Posted in: Home Buying and Selling

Cautionary Tale of a First Time Homebuyer

 

first time homebuyer

 

As a real estate broker, my relationship with my clients doesn’t end at the closing of their transactions. I provide support with whatever my clients need. There are questions about rates as they are ready to refinance; home renovation; new purchases and the list go on.

Recently one of my clients contacted me, she had purchased her home the previous year and had some concerns regarding her transaction. She was a first-time homebuyer and had purchased a condo and after a year she confessed she wasn’t happy with her transaction. We got together for tea, so I could find out what exactly her concerns were and help her resolve them. What she disclosed to me was one of the many things I discuss with my clients but may not always get; full disclosure.

What the problem was

She acknowledged that, although I talked with her about providing me and her lender full disclosure regarding her purchase, she did not provide it. There was pertinent information that needed to be shared with us as her homebuying partners, but she omitted these crucial pieces. Now she finds herself in a situation she isn’t necessarily happy with because she did not provide me with all the critical information I needed to help her make the right decisions when it came to her purchase. She is very happy she bought a home, but not necessarily the circumstances by which it was purchased. This is the first time I’ve had a client admit this to me. I was so glad she did. We were able to discuss a plan of action and next steps and we are on the way to her turning this situation around for the better!

What can you do as a first time homebuyer

As a buyer or seller, it is imperative you work with someone who you can trust. You need to trust in their ability to execute your real estate transaction properly. Trust their capacity to counsel you through the process, and your comfort in sharing all the information that must be shared. Even if you have bought and sold before and are not a first-time homebuyer. Every transaction is different and requires a professional to ensure your needs are met and you end up with the best-case scenario for you! Study after study and survey after survey reflects the need for a real estate professional and consumers’ wantonness to work with one. What is not shared is the need to provide your real estate agents in Seattle Washington with the adequate tools she/he needs to support you and your family!

Posted in: Home Buying and Selling

How Often Can You Refinance Your Home?

how often can you refinance your home

 

Refinancing your mortgage is something most homeowners consider at least once throughout the lifespan of their home loan. It allows you to pay off your previous loan by applying for a new one that has better financial advantages. Some of the questions about refinancing is how often can you refinance your home or when can you do it? While there are many good reasons to refinance, here are five common ones.

  • Scoring a lower interest rate. The number one reason homeowners decide to refinance is to secure a lower interest rate on their mortgage. Not only does this save you money in the long run and decrease your monthly payment, but you can start building equity in your home sooner.
  • Using an improved credit score. Even if interest rates have not dropped in the market, if you’ve improved your credit score over the last few years, you may be able to reduce your mortgage rate.
  • Shortening the loan’s term. If interest rates are decreasing, there is a chance you may be able to get a shorter loan term with little to no change in your monthly payment, allowing you to pay off your loan sooner.
  • Switching from an adjustable rate to a fixed rate. If you chose an adjustable-rate mortgage with great introductory rates when you initially financed your home, that rate may increase significantly over the years. By switching to a fixed rate while interest rates are low, you can protect yourself from future increases.
  • Cashing out home equity. If there is a big purchase or payment on the horizon, such as funding a wedding or going back to school, your best option may be to use the equity you’ve built in your home to borrow money at a lower cost.

 

 

Posted in: Home Buying and Selling, Home Upgrades

Seattle real estate market: For Buyers and Sellers Who Just Aren’t Sure

The holidays are coming, on a rocket, I might add; I know buying or selling a home is the last thing on your Christmas to-do list.  But the Seattle real estate market is prime for just that this time of year!

Seattle real estate market

Our local real estate market has come off the fever pitch of summer to a very healthy pace, and the numbers from October certainly support this assertion.  For South Puget Sound, there are still numerous homes for sale at many price points.  Providing a great opportunity for buyers, with the ability to negotiate a strong contract; and sellers who can be confident that the market is supporting listings that are priced right!

Make Christmas 2018 one to remember and contact us to buy and/or sell today!

Posted in: Home Buying and Selling

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Purposeful in providing the most personal of services, our firm is small in size by design in order to enhance the exceptional service we provide.  We are one of the premier real estate agents in Seattle Washington that prides ourselves in offering superior knowledge and skill making us the only choice for your real estate needs.

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