By Joe Szabo, Scottsdale Real Estate Team Rarely does a buyer or seller show up to the closing without knowing exactly what their costs of sale will be. In fact, based on the mortgage loan amount of the purchase/sale price, it’s not hard to ballpark either side’s closing costs. Before you get too far along in the process, ask your real estate agent or mortgage professional for an estimate. Once you have a real, live deal with a closing date, you should be able to know your costs pretty close to the penny. If you’re new to real estate or haven’t bought or sold in a while, here’s what you need to know about closing costs.

Buyers have a higher number of costs

In a closing, both buyers and sellers have costs. Usually, the buyer is faced with more line-item expenses than the seller (although sellers pay more). For starters, most buyers are getting loans to make the purchase, and many of the charges stem from the loan. A buyer should receive a loan estimate form early on in the sale process. This document spells out all the approximate costs the buyer will face when making the purchase, so there aren’t any surprises at closing. Some buyers use the information on the loan estimate form to shop for different lenders, interest rates and costs. Typically, buyers getting a loan will see some of the following costs:

Appraisal fee Origination fee Prepaid interest Prepaid insurance Flood certification fee Tax servicing fee	Credit report fee Bank processing fee Recording fee Notary fee Title insurance

Be sure to go through these fees line by line with your mortgage professional to understand exactly what they are and how they apply to your loan. Aside from the expenses of getting a loan or buying a home, some expenses, such as property taxes or homeowners association dues, are pro-rated and paid at the time of closing. For example, if you’re buying a home and you close toward the end of the property tax period, you’ll likely need to pay the balance of taxes upfront. The same holds true for prepaid loan interest. If you close toward the end of the month, the lender may ask for the first month’s payment up front.

Negotiate sharing some of the costs

Coming up with an extra one to two percent toward closing costs can be a bigger deal than a $5,000 reduction in the purchase price, so ask the seller to pick up some of the closing costs as a part of the negotiation. Credit for $5,000 to go toward closing costs will be a much greater bang for the buyer’s buck. The price reduction won’t amount to much more than a few dollars per month over the length of the home loan. But saving $5,000 at the closing will be money right back in the buyer’s pocket.

Sellers pay the commission

For sellers, there are always fewer line items on an estimated closing statement. But the seller generally bears the biggest brunt of the fees: the real estate commission. The commission is based on a percentage of the total sale price, so it tends to be the biggest fee. In addition to the real estate commission, sellers may have to pay the balance of their property taxes, if they haven’t done so already, as well as any prorated homeowners association dues. Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, info@ScottsdaleRealEstateTeam.com or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

By Joe Szabo, Scottsdale Real Estate Team Home shoppers eager to qualify for a mortgage could get turned down because of a number they’ve never heard of: their debt-to-income ratio (DTI). If you’re a bit hazy on DTI, you’re in good company. According to Fannie Mae’s Economic & Strategic Research (ESR) Group, more than half of consumers surveyed weren’t sure what it is either. And, in this case, what they don’t know could hurt them — financially, that is. High DTI (not credit scores or how much borrowers had in the bank) was the top reason to reject a loan applicant, according to a 2014 FICO study of credit-risk managers covered by The Washington Post.

Understanding DTI

Put simply, DTI is a calculation of your monthly debt payments divided by your gross monthly income. Lenders calculate DTI in two ways, and both are important. First, they’ll add together all your expected housing expenses (your new mortgage, including taxes and insurance) and divide that by your gross (pre-tax) income. That’s called your front-end DTI. Second, they do the same calculation but include all of your monthly expenses, like minimum payments on credit cards and auto loans. That’s called your back-end DTI. For conventional mortgage loans (loans not insured by the government), mortgage lenders are generally looking for 28 percent or lower for the front-end DTI, and 36 percent or lower for the back-end. “Some lenders may be a little stricter, and others less so,” says Cara Pierce, who’s worked as a housing financial specialist with Atlanta-based ClearPoint Credit Counseling Solutions for 19 years.

Why DTI matters

Your DTI ratio is important, Pierce says, because it’s what lenders use to determine how much money they will loan you. If you’re already using 10 percent or more of your gross income to pay your monthly living expenses, such as car payments and credit card minimum payments, you’d have less than 26 percent for your other housing expenses to stay under 36-percent DTI on the back end. A DTI higher than 36 percent doesn’t mean you won’t qualify. In fact, Fannie Mae purchases loans from lenders with back-end DTI ratios as high as 45 percent. But you may want to re-evaluate how much you want to spend on a home — or if it’s even the right time to buy.

Can I lower my DTI?

Lowering your DTI could help you get a lower interest rate “because less debt is generally viewed as a good thing,” notes Investopedia. So if you still want that more expensive home, there are two ways to lower your DTI. First, pay down debt. Even paying a little over the minimum payment each month on accounts will help. “If you have a $100 a month payment and can’t afford $200, just pay $125,” advises Pierce. “That will make it faster for you to pay off the debt.” Alternatively, you could look for ways for you or your household to raise your income or consolidate your debt. Either way, it’s important to know how lenders calculate DTI, and how a high DTI ratio could affect your chances of being approved for a loan. “People don’t understand DTI because it’s a math equation,” says Pierce, “but it’s a number that lenders will use to approve or deny loan applications.” Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, info@ScottsdaleRealEstateTeam.com or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

By Joe Szabo, Scottsdale Real Estate Team You’re excited about closing on your new home and can’t wait to dig into the blank canvas of a newly sodded lawn. Well, here’s the bad news: That emerald green grass is also hiding terrible soil, unmarked wires and pipes, weed seeds, and years of hard work. The good news is that it’s easy to dig new beds, weeds aren’t yet established, and your landscape is on equal footing with the Joneses. Now, follow these five guidelines to make it even better and create a landscape you’ll love for years to come.

Start off beds right

The dirt beneath your feet is just that: dirt. Whether it’s newly added topsoil or nothing more than fill dirt, it will need your help to become fertile, rich and loamy soil. In a perfect world, we’d all have heaps of compost lying around, but it takes time to let all of your grass clippings, wood chips, expired produce, and weeds rot into the perfect blend of life-sustaining goodness. For now, you have fewer options, with bagged composted cow manure being the most common. Mushroom compost is also available, but be advised that it can be harmful to seedlings and salt-sensitive plants like azaleas, rhododendrons and camellias. If you happen to live near a zoo, ask if they offer their own composted manure; it’s good s— stuff.

Get the lay of the land

It may be tempting to plant that veggie garden of your dreams right after closing on the house, but be sure you have a reason to plant there. Does the spot receive lots of direct sunlight? Is it well-drained and puddle-free? Ignore the inner voice that says “I can only draw stick figures” and draw a terrible diagram of your backyard to help you visualize areas with problems and promise. Draw one amoeba to remind you of an area that gets shade, and another one to represent a planned garden bed. Even if your amoebas look like protozoa, no worries! As long as you understand the scribbles, they’ll help you plan with a purpose.

Remove unwanted builder plantings

Those builder plantings crammed against your house look innocuous enough now, but they could come back to bite you later. Properly identify your existing plants, and make sure they’re good choices for you. A tree with messy leaves, flowers or fruits will leave you with lots of work, clogged gutters and stained driveways. A tree with weak wood might later snap and be found crashing on your couch. A weedy or invasive plant will take over your lawn today — and tomorrow, the neighborhood. Some plants are fine in the right setting, but will really cramp your style if they’re too large for their space or were planted too close to the house. When in doubt, rip it out.

Think ahead

Write down your biggest priority in the garden right now. Entertaining friends? Great! Now imagine yourself 10 years into the future, and accompanied by a spouse and kids, or a flock of cats, or cooler, older friends. What will be your priority then? Now write down your priorities in 20 years, 30 years, and so on, until you get depressed and start to feel old. Here’s why this silly little exercise matters: Don’t turn your whole yard into a decked out party zone with a pool (or a Zen garden complete with koi pond and jagged rocks) without at least considering what you’ll do with that space down the road. Plant the garden of your dreams, but be sure that it will be the garden of your family’s (or cats’) dreams as well.

Start with mulch and groundcovers

Weeds are inevitable, but a struggling lawn or half-hearted attempt at a garden bed provide weeds with a veritable breeding ground. Mulch is your first line of defense, and it also keeps soil from drying out. Begin mulching with a two-inch layer now, but plan on phasing it out in a few years if possible, since repeated mulching can rob the soil of nutrients and rob your wallet of money. Instead, find a good, weed-suppressing groundcover like mondo grass, creeping phlox or Japanese forest grass, and plant as much as possible now so that you’ll be able to divide, replant and save heaps of money down the road. Grow them along the edge of your borders and borrow every time you plant a new bed. Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, info@ScottsdaleRealEstateTeam.com or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

By Joe Szabo, Scottsdale Real Estate Team The agent/seller relationship is like none other. No other professional spends the majority of their client time in the client’s actual home. We get very close to our sellers, not just physically but mentally and emotionally. Because we see them in this somewhat vulnerable setting, and for an extended period, sometimes special bonds form. The line between the business and the personal sometimes blurs, and the seller feels comfortable enough to indulge in some behaviors that drive the agent crazy. Here are five things sellers do that make agents go nuts — and diminish their chances for a successful sale at the best price and in the shortest amount of time.

Failing to keep the home clean

When your home is on the market, it needs to be ready for a showing on a moment’s notice. That means you need be “seller aware” 24/7. If you’re serious about selling, keeping things tidy is par for the course. Make a plan to remove Fido’s saliva-stained tennis ball from the couch or Susie’s Barbie doll off the floor. Before you list, move out the stuff you won’t need until you settle into your new home. Make a particular space in a closet or storage bin for the day-to-day stuff that could turn off potential buyers. Doing so will only ensure a positive experience for your prospective customer, the buyer.

Sticking around during an open house

There’s a reason real estate agents don’t want sellers hanging around when potential buyers arrive. While you may be perfectly friendly and agreeable, your presence can alienate your customers or make them feel uncomfortable without you even knowing it. They want to dig their feet into their potential new home. That means they need to feel free to open closets, poke around in cabinets and make comments to their partners or kids. Your presence prevents them from getting to know your home — and it can backfire. If you’re desperate to find out what’s going on at an open house or how buyers are responding, make a plan with your agent to show up anonymously during the open house.

Holding out for extra money at the last minute

A home sale negotiation can be a rocky road, even in healthy markets. If you sense the market is in your favor, you may second-guess the list price if you see activity quickly, particularly in the form of multiple offers. It’s a great and powerful feeling. But imagine if, in an attempt to squeak out an additional $3,500 from a serious buyer, you pit them against a not-so-great buyer, and you lose both? It happens, much to the dismay of the listing agents who advocate working with the best buyer and not necessarily the best “offer.” In other words, you should always be thinking of the big picture — which isn’t always the same as the most significant offer.

Neglecting to clean up for the new buyer

Imagine you’re the buyer. Would you want to walk into your new home and find 12 cans of old paint in the garage? How about an old baby carriage in the attic? Clean your home and deliver it in good condition to the new buyers. Not only will they appreciate the gesture, but they’re more likely to be on your side if you need them in the future for favors like forwarding mail or packages.

Insisting your home is unique

Your home is no doubt very special to you. You’ve built memories, tracked major life events and used it as more than just a place to lay your head at night. When it comes time to sell, it’s often hard to think of your home as a product on the open market. Because of your emotional attachments to it, you may feel your place is unique, which you then equate to being more valuable. If you find yourself resisting your agent’s pricing advice, take a step back and consider if you’re ready to sell. Resisting may be a sign you’re not yet willing to emotionally detach. Keep in mind that an overpriced home, even in a strong market, will ultimately sell for less than a home priced well from the start. Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, info@ScottsdaleRealEstateTeam.com or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

By Joe Szabo, Scottsdale Real Estate Team Whether you’re rehabbing an investment property, getting your house ready to sell, or just want to improve your home, renovating a house is expensive. For our business, Tarek and I have to make a lot of hard decisions to stay within really strict budgets, but we can’t ever leave one of our flipped houses looking shabby or rundown. Because we absolutely have to do the best job possible for all of our properties, we’ve learned a lot about prioritizing our rehabs and balancing those big price tags. I do all of the designs for our properties. As I’ve been going over floor plans, looking at attractive kitchen remodeling projects, and finding the best ways to please our buyers, I’ve been thinking a lot about the choices we make, and how they can help real estate investors and homeowners with their renovations and improvements.

Consider your options

You probably don’t have the budget to splurge on everything you really want in your home improvement project. And even if you do, it’s nice to come in under budget, especially if you plan on selling the property. When I sit down to design our remodeling and renovation projects, the first thing I do is look at the house as a whole. I decide which rooms are most important, and where I’ll spend the most money. For most properties, the kitchen and bathrooms are going to be your best investments, but they’re not always the rooms that need the most work. Look at the materials you have in your kitchen and bathrooms to see what you can salvage and what you need to update. Look at the rest of the house to see which areas will be the most impressive to buyers after renovations are complete. The places I almost always spend a little extra on include the front porch and outdoor entrance, as well as the front foyer. First impressions are crucial.

Balance splurges and savings

As you look at each room in the house, consider which elements and features will get the most attention, where you want to splurge, and where you can save. For example, let’s say you’re renovating the kitchen. I recommend splurging on marble or quartz countertops, but you don’t have to do it for all of your counters. You could go with that higher cost material for the counters lining your walls, but then save some cash by choosing a butcher block or stainless steel countertop for the island. It’ll still work with the rest of the design for your kitchen, but it won’t cost nearly as much. Similarly, you don’t have to buy the most expensive tile on the market for the bathroom. In fact, you can save a surprising amount of money by going with a cost-effective, neutral tile for the floor and shower walls. Then, to spruce it up and elevate the look of the room, you can add an accent strip of nicer tile that wraps around the shower stall and/or borders the floor. You’ll spend a fraction of the money, and you’ll get really beautiful results.

Give thought to your flooring

Now, everyone loves hardwood flooring, but beautiful wood floors come with some pretty big price tags. I get around this issue by considering my options and looking at the best, most cost-effective way to go. For example, a lot of laminate wood flooring has gotten so good that it’s almost impossible to tell it’s not true hardwood. Laminate is less expensive than hardwood, and it won’t have the same issues with moisture that real wood flooring can have. As a result, you might be able to go with a single type of flooring throughout the house, even in the kitchen. This is an especially attractive option if you have an open floor plan. Even if you really do need to go with real hardwood floors (which we’ve had to do on some of our investment properties), you still have some options to save money and create gorgeous results. For example, do you actually need to rip out and replace the flooring for the whole house? You already know that you’re likely going to have tile in the bathrooms and kitchen to avoid water damage and give those rooms a more defined look. Have you considered whether you can get away with carpet in the bedrooms instead of hardwood floors? Depending on the design of the house, I sometimes go with hardwood floors throughout the communal spaces like the living and dining rooms, and then I go with a soft, new carpet in the bedrooms. When the budget permits, I’ll extend the hardwood or laminate flooring into the master bedroom to give it that extra luxurious look and feel — but it’s not always necessary.

Keep it simple in the yard

Finally, don’t go crazy with landscaping, especially if you’re selling the house. Instead of planting a bunch of expensive shrubs, flowers, and bushes that need to be cared for and watered on a regular basis, go with some low-maintenance options.

You can also go with an attractive gravel front walk and then line the house with gravel, as well. This will create a cohesive look, and it’s less expensive than paving.

Basically, when it comes to landscaping and outdoor features, keep it simple. Simple is attractive and neutral, and it lets buyers see themselves in the house, even before they actually enter the home. Make sure that everything is well kept, but don’t spend a lot on your yard. Save that money for what your buyers will see when they walk inside. If I had to pick one piece of advice for getting everything done on a budget, it really would be, “pick your battles.” Choose the things you care most about and splurge on them. Then save wherever you can on the things that don’t matter as much and won’t improve the home’s value or your enjoyment of living in it. Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, info@ScottsdaleRealEstateTeam.com or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

By Joe Szabo, Scottsdale Real Estate Team Now that the summer season is in full swing, it’s time to turn your attention to your vacation home. Whether you’re perched on a tropical beach or kicking back surrounded by mountains, all vacation homes require a relaxing ambiance. Good news: It can be achieved by decorating with our easy-to-follow steps below. So sit back, pour yourself a summertime cocktail, and take notes on how you can better decorate your vacation home for yourself and your guests.

Keep durability in mind

More often than not, you’ll be playing host to family, friends, and out-of-town visitors. There will probably be small children, pets, and plenty of people to keep you on your toes as you cook dinner, serve cocktails, and entertain during the summer evenings. With this in mind, it’s always safe to start by subbing out your nice linens and fabrics for those that are durable and easy to clean. For high-traffic areas like the kitchen and living spaces, use outdoor rugs; they will maintain their shape and coloration despite muddy footprints, and help protect your tile or hardwood flooring at the same time. On sofas and chairs, opt for stylish slipcovers for easy fabric removal and care, or recover them with durable outdoor fabric for low-maintenance, high-impact design.

Be adventurous

Vacation homes are meant to be used as an escape from everyday life. Use this space to fulfill your design dreams of using bold colors or graphic patterns where you wouldn’t normally. Dare to be different by implementing your favorite decorating ideas like mixing patterns, trying a new wall color, or even simply rearranging furniture into a unique layout.

Keep an open concept

Whether it’s for your own enjoyment or for those who may rent the space from you, having an open floor concept with plenty of room to entertain is key to a comfortable vacation home. Vacationers head to rentals to relax and spend time with family and friends, so making the space as welcoming as possible for big groups is a way to make your vacation home stand out among the rest. Large pieces of furniture and open central areas, like an extra-long dining table or one with removable leaf extensions, is a real selling point. Another way to make room for extra guests is by keeping decor to a minimum in areas where renters might want to store their own things, like tabletops, counter space, and nooks.

Pay extra attention to private areas

Many vacationers will be looking for the most possible number of beds to accommodate large families, a big group of friends, or out-of-town visitors. Design guest rooms with numbers in mind. Putting two beds and a loveseat or sofa in guest rooms is a smart way to make space available to your guests, while also keeping them comfortable. When it comes to the master bedroom, be sure to be extra thoughtful. Whether you’ll use the vacation home yourself or rent it out, this room should be a getaway worth dreaming about. Polished furniture, fresh color palettes, and soft linens create a peaceful, relaxing atmosphere for an afternoon nap or rainy day lounging. With these steps in mind, you and your loved ones can enjoy a fun and stylish holiday all year-round. Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, info@ScottsdaleRealEstateTeam.com or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

By Joe Szabo, Scottsdale Real Estate Team In a competitive rental market, you’ll need to do quite a bit more than simply fill out an application and put down a deposit. Since 2005, there has been “an uptick in renters, with people in their 50s and 60s making up the largest chunk of the increase,” CNN Money reports. With large numbers of millennials and Baby Boomers competing in a growing pool of renter applications, it’s important to consider ways to boost your odds during the application process. Read on to learn how to give yourself an edge over other renters when you’re applying for a rental home in a competitive market.

Apply online in advance

If you’ve browsed photos online of your dream rental property over and over, and your gut feeling is telling you that you’ve found “the one,” there’s no harm in filling out an application online if the option exists. This shows the property manager you’re already a serious applicant when you visit the property.

Come prepared

When you arrive for a viewing of the rental property, come with a copy of your credit report, copies of your last few pay stubs, your checkbook, and a printed list of references (including your current employer and previous landlords). Make the application review process easy for the property manager by bringing hard copies of more than enough application materials than your potential landlord would ever need. An optional (but oh-so-helpful) document for your application package is a letter written to the landlord, explaining why you would be an excellent tenant — and if you’ve already visited before, what the home means to you. Think of the application packet as an argument for why you’re the tenant for them. And beyond documentation, bring a strong interview game. Prepare for your first meeting with your potential landlord as you would for any job interview. You’ll be asked questions, but additionally, they expect you to present questions to them, too. This shows you’ve been thoughtful about the application process, and take the potential of living in their rental home seriously.

Express interest

It may seem obvious, but property managers want to see applicants excited about their home. While Utah-based landlord James Hedges certainly values excellent references, he looks for a potential renter who gives the impression that they appreciate the home. “Ultimately, you want someone who will take care of and respect your property,” he says. “How they react when they go through it should not be discounted.” “Showing an interest in the place and the neighborhood helps because it makes me feel like [the potential tenant] will treat my [rental] home and neighborhood as their own,” Virginia-based landlord Julia Jarrett adds. “That sets me at ease a bit.”

Be flexible

With lots of applicants in the pool, landlords often have a tough choice when deciding on a tenant. In addition to offering strong application materials and expressing sincere interest in the home, showing your ability to be flexible is another way to stand out. If you’re able to sign a longer lease, say so. It shows serious commitment, and means your potential landlord won’t have to hunt for more tenants anytime soon — surely a relief for them. And if it seems like the landlord wants to get the property rented immediately, mention that you’re willing to move in earlier than your listed preferred move-in date, if that’s possible.

Be transparent

Property managers will check references. Stretching the truth about something almost always comes out. “If you lie on the application or in person and a reference contradicts you, it’s a huge red flag,” Hedges says. “Any indication of money problems is a red flag as well.” This hint may come in the form of an applicant haggling on price, negotiating what’s included in the price, or asking to cash their check within a certain timeframe. “None of these are guarantees that they will be a bad renter, but they are warning signs that a landlord would take into consideration,” Hedges explains. Iowa-based landlord Laura Kilbride suggests potential renters keep their social media profiles somewhat public. “Having your Facebook profile visible can be a huge advantage,” she says. “If your profile is blocked, they can’t connect with you, and that’s off-putting when [another applicant] has theirs readily available.”

Follow up

After leaving your meeting or open house with the landlord, send an email thanking them, along with asking any follow-upquestions you may have. This encourages further dialogue, and having your name in their inbox serves as one more reminder as to who you are. Hunting for the perfect rental property doesn’t have to be a headache. Once you’ve found the rental home of your dreams, it’s up to you to make the application process easy for the property manager. Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, info@ScottsdaleRealEstateTeam.com or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

By Joe Szabo, Scottsdale Real Estate Team If you bought a home with an adjustable rate mortgage (ARM) thinking you’d sell the home before the ARM adjusted, you’re not alone. Many people buy homes with ARMs because they plan to relocate or upgrade to a larger home in the near- to medium-term. But when plans change and you decide to stay, you must know what will happen to your ARM — and what you can do about it. Let’s take a look.

ARM vs. fixed rates

ARMs help your budget because rates on ARMs are lower than they are for fixed loans. For example, today’s rates for a loan on a $300,000 home purchase with 20 percent down are 2.75 percent for a 5/1 ARM versus 3.5 percent for a 30-year fixed. In this scenario, the monthly 5/1 ARM payment ($980) is $98 cheaper than the 30-year fixed payment ($1,078). This ARM vs. fixed savings is significant no matter what your home purchase price is, and if you are in fact only keeping the home (or the loan) short term, it can be worth it.

How to choose

The best way to determine whether you go with an ARM or a fixed loan is to peg your loan term as closely as you can to your expected time horizon in the home or the loan. Here are a few options to consider:

• If you’re buying a home with plans to relocate and sell the home within five years, a 5/1 ARM would be a good option. If you’re planning to move within 10 years, a 10/1 ARM would be a good option. You can also get 3/1 and 7/1 ARMs.
• If you plan to pay the loan off within five years and keep the home, a 5/1 ARM would also be a good option.
• If you’re going to relocate but want to keep the home, a fixed loan would be a good option.

How your ARM will adjust

If you get an ARM and plans change so that you need to keep the home (or the loan) longer than you intended, your payment will adjust at the end of the ARM’s fixed period. An ARM is a 30-year loan with a rate that’s fixed for the initial period of the ARM. For example, the quoted rate on a 5/1 ARM will be fixed for that initial five-year period. For the remaining 25 years, it will adjust to a base rate (called a margin) plus the current level of a certain index the loan is tied to. A common margin for a 5/1 ARM on a conforming loan up to $417,000 is 2.25 percent, and a common index for these loans is the one-year LIBOR which is 1.25 percent as of this week. If your 5/1 ARM adjusted today, it would adjust to a rate of 3.5 percent, which is the 2.25-percent margin plus the 1.25-percent LIBOR index level as of now, and it will adjust once per year every year after the initial five-year fixed period. The margin will always be 2.25 percent, but the LIBOR index changes in real time, and will be higher if economic conditions improve, or lower if economic conditions worsen in the future. And finally, it’s not just the rate that adjusts, it’s also your payment. In the initial five-year period, the payment is calculated using the initial rate and a 30-year amortization. After the initial period, the payment is calculated using the margin plus index rate and a 25-year amortization. Using our scenario above, this means your payment would adjust from $980 to $1,063.

What to do if your ARM is almost out of time

You could argue that a payment adjustment like this would be tolerable if you were keeping the home (or the loan), but this example is only the first adjustment, and it will adjust every year after the initial adjustment, so it’s a lot of risk to take on. The alternative is to refinance into a new loan, and the same rule would apply for deciding what loan to refinance into: do your best to peg the new loan term to your expected time horizon in the home (or loan) from this point forward. Rates have been steadily low for the past five years as the economy has been slowly recovering from the economic crisis. If this recovery and economic growth continues, rates have more risk of rising. As such, if you chose a new 5/1 ARM today, it would be safest to assume that your rate and payment would adjust up in another five years. If this is too much risk for you, the best choice is to take a slightly higher rate and payment now on a 30-year fixed, which gives you the security of knowing your rate and payment cannot change.

Other important facts about ARMs

Keep in mind that the payments above don’t include homeowners insurance and property taxes, which would be the same whether you chose an ARM or a fixed loan. You can run your own fixed vs. ARM scenarios, and the results will show you homeowners insurance and property taxes. Another point to remember is that ARMs shouldn’t be used to qualify for more home than you can afford. This was a common scenario prior to the economic crisis, when lenders were allowed to qualify borrowers using the lower ARM payment. Now lenders must use the highest-case payment that could occur after the adjustment. As a final note, if your loan amount is up to $417,000, a 5/1 ARM will get you the best savings relative to a 30-year fixed. If you have a jumbo loan above $417,000, you can also get strong savings using a 7/1 ARM relative to a 30-year fixed, so ask your lender to provide both options. Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, info@ScottsdaleRealEstateTeam.com or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.