Why a 3% Downpayment is a Terrible Offer For Some Buyers

One of the pitfalls of buying a new home is paying too little for your downpayment. Making the right decision involves an analysis of the costs related to your debt and your income.

When banks offer low downpayment programs in the 3% to 5% range, it doesn’t necessarily mean you should jump at the chance. When you put down a small amount to buy your home, you’re mortgaging a higher loan amount. This can be a costly mistake.

I have recently advised a divorced mom with three kids to put down more than half the cost of her home from a recent inheritance. While this was more than she had expected to put down, she realized that this initial payment would be the best solution and would help her comfortably handle her monthly expenses.

To make the mortgage work, we needed to assess her debt-to-income ratio (DTI). When we talk about debt, we mean more than just the monthly bills. We also factor in costs like the principle, property taxes, condo fees and insurance premiums.

By putting down a big chunk of her inheritance, it created a DTI that was under 45% of her gross income. Hitting this number is critical for certain types of mortgages and banks are far more likely to be as comfortable lending you the money as you would be paying it back.

I help my clients review programs that allow those 3%-5% downpayments, but I also advise them on the risk vs. reward when taking an offer that seems like a blessing but could turn out to be a financial curse you’ll have to live with for many years to come.

There’s no reason to buy a home without talking to a professional first. Get in touch if you or someone you love is in the early stages of buying a home.

August’s Home Improver

Fall Home Prep Checklist

The transition from summer to fall is drastic, particularly for families with children. As the kids get ready to return to school, you may find yourself getting your home ready for the autumn weather and a more regimented family schedule. Here’s a checklist of suggestions to get your home ready for the fall.

1. Close Your Pool. But wait until the weather dips below 90º. You may still need it for another few weeks.
2. Clean Your Gutters. If your gutters are slightly clogged now, they won’t stand a chance once the leaves start to fall.
3. Clean Out The Garage. Move the summer stuff to the back and keep your rake and shovel up front. If it’s cluttered, empty it out so you can fit your car in there when the weather changes.
4. Take Out Air Conditioners. You may also want to purchase covers if you choose to leave them in.
5. Fall Cleaning. This is just like Spring Cleaning, but in September.
6. Change the Decor. Buy a new welcome mat, change your sofa pillows, consider bath towels in fall colors, buy candles that match the feeling of the season.
7. Clean Up Your Mudroom. Move out the flip-flops and summer hats to make room for boots, coats, scarves and everything else the fall weather requires.
8. Change Your Artwork. Move hanging art to other rooms to switch it up. From pictures of your summer vacation.
9. Get Your Pets Ready, Too! New dog and cat beds make your home look neater and your pets feel more comfortable. And don’t forget a raincoat for Rex. Speaking of which…
10. Break Out Your Umbrellas. Buy an elegant umbrella stand for your nice clean mudroom. Add new umbrellas that open when you click the button on the first try — and haven’t been blown inside out a few times over the years.

Reality Check: Longer-term Mortgages Make Sense

I have a friend who hates bills. Hates ’em! She can’t pay them fast enough so she doesn’t have to look at them. Hating bills isn’t necessarily a bad thing. In my friend’s case, her quick payments have yielded a stellar credit rating.
Imagine her surprise when I suggested that she opt for a 30-year mortgage rather than the 15 she was considering.
My friend has good job. She’s recently divorced and has two young children to support. A one-income homeowner with two dependents needs all the financial flexibility she can allow herself. While her income and excellent credit is enough to qualify her for a 15-year mortgage, it may tighten her budget enough to restrict her from paying for unexpected home repairs, a new car and even a much-needed vacation–for 15 years!
The fact is, we’re always paying for something when it comes to our homes. While it may seem like paying the mortgage quickly is a great goal, all we’re really doing is moving our money around differently. It’s easy enough to get the idea in your head that paying off the mortgage leaves you with nothing left to pay. Unfortunately, my bill-hating friend will never be free from paying property taxes, homeowners insurance, repairs and renovations.
A 30-year mortgage isn’t always right for everyone, but in many cases it makes the most sense. Focusing on paying more in a shorter period could make you put off paying for a roof leak that has, over the years, turned into a roof replacement.
There’s also your quality of life to consider. That trip to Europe you’ve always wanted to take. That car with the heated leather seats you dream about every winter. The opportunity for your children to attend the best schools. All of these things are compromised when your mortgage payment doesn’t leave you the financial flexibility to spend your money on the things that are most important to you. It’s great to own a home that you love, but your unnecessarily high mortgage payment should never prevent you or your children from living a fulfilling life.
Do you have a friend or relative in need of mortgage advice? Please contact me. I will be happy to help.
June’s Home Improver
Avoiding a Summer of Mosquito Bites
Question: What is the deadliest insect in the world? Most people think about swarms of killer bees or those horrible fire ants they always show on the National Geographic channel–so called because it feels like your skin is on fire after you’re bitten. Scary!
The deadliest insect, however, is the mosquito. While many of us see the mosquito as a nuisance more than anything else, these flying pests are notorious carriers of awful diseases, including West Nile Virus, dengue fever and malaria.
To avoid the stinging and scratching, remove any standing water around your home. Mosquitoes breed in water, so keeping things dry will force them to seek out breeding grounds elsewhere.
1. After it rains, dump out water that may have filled flower pots and watering cans. When possible, store them upside down when not in use to avoid water accumulation.
2. Keep gutters clear so that water can move through them. A clogged gutter is a common breeding place for mosquitoes.
3. Clean your birdbath. Regularly changing the water in your birdbath will wipe out any mosquito larvae before they hatch.
4. Folds in tarps and pool covers can create pockets of water that mosquitos love. Clean them out weekly and keep your tarp folded flat when not in use.
Remember to use insect repellent to keep yourself safe from mosquito bites. According to the Centers for Disease Control, you should choose a big repellent with one of the following active ingredients: DEET, picaridin, IR3535 or, for those seeking a natural remedy, the plant-based oil of lemon eucalyptus.

Co-Signing a Mortgage: Is It Worth The Risk?

There are several circumstances that require co-signing for a mortgage. The most common scenario involves a married couple. The two incomes combine to sufficiently cover the cost of the monthly mortgage payment. Other cases include parents co-signing for their child’s first home; adult children co-signing for their aging parents whose income has diminished at retirement; siblings or friends helping each other out. The fact is, most people with good credit and assets can co-sign for someone else. Whether the co-signer feels a familial obligation or they just want to help someone, the question remains: Is the risk worth the reward?

Let’s look at that married couple. What happens if they divorce in a few years and the wife remains in the home? While she has now taken over paying the mortgage, her ex-husband’s credit is still at risk, even though he is not making the payments. If she is late with her payment or defaults on it, they will equally share in the liability. There is an option to refinance, but what happens if the ex-wife does not qualify on her own? The ex-husband may choose to keep his name on the mortgage, especially when children are involved.

In the case of friends or family co-signing, it is important to understand that what began as an act of kindness can quickly turn into a regrettable decision. When it comes to your hard-earned credit, you must consider the history as well as the potential of the person you’re signing for: Why is their credit low? Do they have a stable job history? Will their income increase over time? Do you trust that this person with poor credit and/or limited assets will take on and consistently pay a monthly loan over 15 or 30 years?

Worst case scenario: As the co-signer, you are responsible for the loan if the homeowner defaults on the payment. If you already have a mortgage of your own to pay, you now have two. In addition, because the homeowner defaulted on the payment, your credit has taken a hit in the process.

None of this is meant to say that all co-signed mortgages are a mistake. Many of them work out perfectly with no issues. The point here is understand your responsibilities as a co-signer and if you choose to proceed, be ready to take on the full responsibility of the mortgage.

If you are recently divorced and need information about refinancing or if you have further questions about co-signing for a mortgage, please contact me at 617-965-1236 or email me.

April’s Home Library Improver

Marijuana: The Unbiased Truth About The World’s Most Popular Weed by Kevin P. Hill, M.D.

Typically, this space is reserved for home improvement or gardening tips — although I suppose this could fall under “gardening.” My husband, Dr. Kevin P. Hill, had his book published recently and I am excited to tell everyone about it! 
Marijuana: The Unbiased Truth About the World’s Most Popular Weed, by Kevin P. Hill, M.D., explores the history and debunks the myths about this controversial plant’s colorful 2000-year history.
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From the publisher: “Whether you’re a parent concerned about your child’s use, someone with an illness considering medical marijuana as a treatment option, a user who has questions about its effect on your health, or if you’re just trying to make up your mind about legalization, this book will give you the most current and unbiased information you need to make informed decisions about marijuana.”
The book is available in paperback and as an e-book. You can buy it at the following retailers:

The Harsh Truth About Women and Finance

One of the more memorable acceptance speeches delivered at this year’s Academy Awards was from Best Supporting Actress, Patricia Arquette. Her remarks about gender equality and the pay gap between men and women struck a chord that lasted beyond the show, and she recently spoke at an event sponsored by the United Nations on the same topic.

In 2015, it is shocking — though not surprising to some — that women would be paid less for doing the same job as men. Yes, times are changing but perhaps not fast enough in this case. Ms. Arquette made the comment that change starts with women.

I mention this because of a Boston Globe article written recently about how women lag behind men in financial literacy. This is another example where there should be gender equality. The gist of the article says that women scored lower than men in answering questions related to money and finances.

It also goes on to say that the women who were polled were more financially vulnerable than their male counterparts.

Whether or not a gender pay gap is a factor, the truth is that women today need to understand their finances as well as men for a number of reasons.

In the case of a divorce, a woman who may have relied on her husband now bears the full responsibility for her financial well-being.

Among married couples, we know that women tend to outlive their husbands and at some point they need to have a solid grasp of their financial situation.

Obviously there are many exceptions to the rule and plenty of women are both the breadwinner and the decision-maker of the family when it comes to finances. However, it is important that all women (and men, too!) learn and understand how their finances work so that they can make informed decisions at critical moments in their lives.

Here’s the link to the quiz to test your financial capability.

March’s Home Improver
Crocus Focus

There are a few sure signs of spring. First is the end of snow (which may or may not be the case after this record-setting year). Next, there are the clocks “springing ahead” to Daylight Saving Time. Finally, there is the emergence of the beautiful crocus plant.

The crocus is a perennial bulb that is a member of the iris family. It blooms in several colors, including purple, white and saffron. In fact, the spice saffron is made from crocus flowers.

Why does the crocus tend to bloom before other plants? One thing we know is that the crocus will bloom at the first reasonably warm day and will remain unharmed even with a few remaining snowstorms left in the season.

The crocus is also resistant to insects, though a hungry squirrel may have its way with it. Its hardy nature makes it a plant you can expect to see growing in your yard for many years to come.

If you plan to plant crocus bulbs, the best time to do it is in the fall. The bulbs settle in for a long winter’s nap before poking up through the soil at the first sign of spring. Some varieties of crocus actually bloom in the fall and should be planted in late summer. Clearly, this plant enjoys a change in seasons.

The crocus looks best when it grows under trees and in large flower beds. Your blooming crocus will display its stunning colors as its delicate leaves sway in the breeze. Following a brutal winter, this amazing flower offers hope for a warm and beautiful spring.