PennyMac Loan Services - National Home Mortgage Lender

10 Simple Steps to Purchase a Home in 2020

2020-04-02T08:05:00-07:00

It’s one of the largest purchases you’ll ever make, and one that most people will only complete a few times in their entire life. It’s normal to feel intimidated and even confused by the home buying process. Whether you’re looking to buy your first home or haven’t bought a home in a long time and want a refresher, here are 10 simple steps that will get you through the home purchase process.

Step 1: Check Your Credit and Do Your Research

Though it’s possible to buy a home with cash, most homebuyers do so with the help of a mortgage. There are various types of mortgages available, with different interest rates, down payment amounts, and other terms to consider. Your FICO score will impact which types of loans you qualify for, so getting your credit into great shape is an investment that can offer great returns.

By law, you’re entitled to one free credit check per year, per reporting agency, so obtaining your current score should be the first step in the home buying process. With a credit score of 720 or more, you should easily qualify for a great mortgage rate, and a score of 620 should qualify you for an FHA mortgage.

Step 2: Determine Your Budget

Your home buying budget will be impacted by your household finances and the market you are searching in. Hopefully, you’ll be able to settle on an ideal home price range that gives you both a monthly payment you can afford, and lots of homes to choose from in your preferred neighborhoods. In order to determine your potential monthly payment amount, choose a few sample home listings you like, and run them through a customizable loan calculator.

Step 3: Get Pre-Approved for Your Mortgage

Once you have an idea of what you want (and what you can afford), it’s time to find a lender and get pre-approved. Going through the pre-approval process will ensure that you’re on the right track with your plans and will save you a lot of time and worry. Once you know your pre-approval limit, you won’t fall in love with a home only to realize that you can’t get the loan you need to buy it.

There are several steps involved in becoming pre-qualified or pre-approved, but it is a quick and easy process that your lender will guide you through. Getting this first step in the loan process completed before you start looking at homes will ensure that you are ready to make an offer (and succeed!) when you find your dream home. Plus, some sellers will only consider offers from buyers who are pre-approved, so it’s best to set yourself up for success with this easy move.

Step 4: Find the Right Real Estate Agent

The help and guidance provided by a real estate agent or REALTOR^® can be priceless, particularly for first-time homebuyers or those searching in an unfamiliar area. From negotiation experience to neighborhood knowledge, the right agent can successfully guide you through one of the biggest purchases you will ever make.

An added bonus is that agents don’t cost the home buyer anything; they’re compensated mainly via a commission from the seller of the home. Despite the value that they can offer, it is not required that homebuyers use a real estate agent, and some buyers do choose to handle the process on their own. But be sure you’ve done your research before opting out of using an agent.

Step 5: Begin Looking at Homes

Now that you’ve done your research and prepared financially, it’s time to start the fun and exciting process of looking at homes.

More details: Real Estate in a Digital Age >

You will most likely start your house hunting process with a list of must-have features. Once you find several homes that pass the first test, it’s time to evaluate them individually. Here are two categories of deal-breaker (or negotiation-worthy) features to consider while searching.

Another common exclusion is “Acts of War,” which means that losses from events such as invasions, insurrections, riots, strikes, revolutions, military coups and terrorism would not be covered. Separate war risk protection can be obtained to cover damage from these events.

What to look for inside of a potential home:

Plumbing: Run the showers and sinks to observe the water pressure. You should also look under sinks and appliances for leak evidence, and don’t forget to check the age of the hot water heater.
HVAC: How old are the heating and air conditioning units? When was the last time they were serviced? Would you have to add ductwork or remove extensive old systems to install the features you want?
Exterior: What is the age, condition, and composition of the roof, siding, and windows? These are expensive items to replace, and unexpected issues like siding tear-off or the presence of asbestos can make them even more costly.
Electricity: Are there switches and light fixtures where you want them? Fixtures are easy to update, but running new electrical wiring in areas where it doesn’t yet exist can be a much bigger project.
Appliances: Are they included in the home sale? How old are they, and how well do they work? A set of new appliances for a home, even on the low end, can run $3,000 or more. Is Homeowners Insurance Legally Required?

What to look for near a potential home:

The Street: Is it noisy? What about on weekends or at rush hour? If you or your guests will need to park on the street, is there enough space available?
Your New Neighbors: How do the other homes on your potential block look? Are they updated and well maintained? Does the neighborhood seem safe and friendly?
The Location: How close is the home to your job, schools, shopping, public transportation, and other important places you will need to visit frequently?

Step 6: Make Your Offer

Once you’ve found a house with the location and features you want, it’s time to make an offer. Each home and market are different, but your agent should be able to guide you toward a reasonable offer. Not all offers are accepted on the first go-around — the seller may counter, and you may counter again in return. Once you’ve mutually agreed upon a price, you and the seller will be under contract, also known as being in escrow.

To learn more about escrow accounts, read our article: The Role of Escrow Accounts in Real Estate Transactions.

Step 7: Schedule a Home Inspection (and Other Tests)

The escrow period is a time for you to get more information on your potential new home, including consulting with various experts. The first thing that most homebuyers do is to schedule a home inspection. During an inspection, nearly all features and systems of your home will be checked and evaluated, with both the homebuyer and seller receiving a report on the home inspector’s findings. The results of these findings can trigger additional negotiations, especially if repairs or updates are needed.

View more: Cost vs. Value Report 2020 >

Step 8: Lock in a Rate & Term with Your Lender

Most homebuyers have multiple options to compare when they’re shopping for a mortgage. Whether your priority is a low down payment, a great interest rate, or a particular loan term, your lender should be able to explain the different home loan choices available to you, and how each one impacts your monthly budget and long-term financial goals.

Step 9: Get Your Home Appraised

You have already negotiated a price with the seller, and completed an inspection, so why do you now need an appraisal? This step of the purchase process can confuse buyers, but it’s essential to protect both you and your lender’s investment. An appraiser uses data from comparable property sales, as well as key features of the house you’re looking to buy in order to come up with a value for your potential home.

Because the appraiser is a member of a third-party company (not directly associated with you, the seller, or the lender), their opinion of your home’s value is accurate and neutral. This ensures that you are not paying too much, and that your lender is not lending you more than a home is actually worth.

Step 10: Nail Your Paperwork and Close the Sale

Once you have fulfilled all of your lender’s documentation requests, it’s time to close escrow on your loan. The actual paperwork that you need to complete and sign will vary based on your loan type and even the location of your home, but closing is typically a straightforward process that your lender, agent, and title company will guide you through. Typically, you will walk out of the closing with the keys to your new home, stepping into an exciting new chapter of your life.

Get Started on the Path to Your Dream Home Today

Now that the process has been broken down, it’s easy to see that buying a home is a fairly straightforward (AND fun, exciting, and fulfilling) experience. No matter which step you’re on, working with a PennyMac Loan Officer or getting started online is a great way to make your homeownership dream a reality.

How to Know if That Fixer-Upper Is a Money Pit

2020-04-01T10:05:00-07:00

So, you’ve finally found your dream house. Sure, it may need a little work — okay, a lot of work — but you’re confident it will all be worth it in the end. That is, until your home renovation projects start to go down the toilet (or worse, the toilet starts falling through the floor). Here’s how to know if the home you are considering could be a great investment, or just a great way to empty your wallet.

Is A Fixer-Upper the Right Choice For You?

The right fixer-upper can be a great investment and a lot of fun.

The rise of seemingly simple, yet stylish home renovation television shows has made many homeowners eager to transform rough diamonds into neighborhood jewels. Couple this with the improved job market and an upswing in home values, and you have a tidal wave of homeowners willing to invest in fixer-upper dwellings.

In 2018, homeowners reported an average of $7,560 or more on major home improvements, up 17% over the previous year. But that doesn’t mean that these projects always go as planned — not everything gets wrapped up as quickly and neatly as it does on television. The same Home Advisor study shows an average of $416 on emergency spending. What many homeowners believe to be a simple “fixer-upper” can quickly turn into a “money pit,” transforming a dream project into an expensive nightmare.

Denise Krogman is a general contractor, designer and co-owner with her husband Rob, at RDK Design and Build, LLC. Krogman knows that whether you’re looking to buy a fixer-upper in the near future or remodel your current home, it’s worth paying attention to what separates a fixer-upper from an endless money pit.

The right fixer-upper can be a great investment and a lot of fun. But with every remodel there will be the unplanned, unforeseen incidentals that arise. If it needs more than a little ‘fixing up,’ you could find yourself in the midst of a complete remodel or a total scrap.

Fixer-Uppers vs. Money Pits

The first step to understanding what makes a home a fixer-upper is defining the term. Generally speaking, a fixer-upper is a house that doesn’t have serious problems and can be quickly and inexpensively refreshed, says Thomas Baker, building technology editor at This Old House.

Homeowners who have a big budget, a high level of DIY skills, and plenty of free time may reasonably see any house in deplorable condition as a “fixer-upper.” However, even these skilled, experienced homeowners who are initially excited about a big project may fail to properly plan for a remodel.

Without thorough research and planning, many homeowners are likely to exceed their spending limit and wind up with a money pit. Baker separates remodel-ready homeowners into two personas: the visionary and the accountant.

A visionary homeowner is someone who is emotionally invested in their property and can tolerate higher expenditures in order to execute their ‘vision.’ He or she isn’t worried about the resale value. An accountant weighs each cost of improvement against the likelihood of getting a return on investment at the time of sale. Ideally, homeowners should strike a balance between these two extremes, taking care not to risk their financial futures with unsustainable expenditures on improvements, but also acting as a steward, putting something back into the house so that future generations can enjoy what it has to offer.

A professional home builder, general contractor, or home inspector can help a homeowner assess the condition of the home before breaking ground and help keep a project in line once it’s begun.

Having that person come aboard your planning process is a great step to take. But what should they, and you, be looking for when it comes to fixer-upper warning signs?

Looking to get started with your dream home project? Check out our guide to the financial documentation and other paperwork you’ll need to begin the home loan process.

Fixer-Upper Red Flags

If you are committed to buying a home with a few imperfections, how do you know when those imperfections go from fixable to serious deal-breakers? When purchasing a fixer-upper, a homeowner should always look beyond the surface, says Sarah Boardman-Miller, an interior designer and construction consultant. It’s important to distinguish between a home with a lot of “cosmetic” needs, as opposed to those that need major (think structural) overhauls.

Depending on the ‘fix-up’ budget, one can look past a dated or poorly laid out kitchen or bath. I like a house that has not been touched. It might be dated and original everything, but these are usually good houses. Do your homework. Was the previous owner there for 40 years? Is it clean? Well-kept?

When most people watch the [TV] shows, so much of the process is cosmetic ... from new cabinets, to counter tops, lighting and tile. Often homes are simply outdated, are decorated in poor taste, or just in need of a little TLC. Cosmetic fixes can be quick and cost-effective, and completely change the look of the house.

That being said, homeowners should stay on the lookout for any red flags. Both Krogman and Boardman-Miller say foundational issues, roofing repairs or replacement, and electrical or plumbing problems may require “gutting,” which can send a home remodeling project into an expensive tailspin.

Krogman adds that her team is careful about homes that need footprint changes, such as the removal or addition of walls or entire rooms. It’s best if the changes are minor. To avoid any surprises, it’s important to invest in a thorough home inspection, says Krogman.

Always request an inspection from a highly reputable company. It’s worth the extra expense. Be sure to ask a lot of questions and get documentation. When was the roof last replaced? Have there been any electrical or plumbing fixes? If there was any previous remodeling done, was it done by a reputable general contractor? And look for cracks in the foundation, sinking sidewalks, water spots or damages in the drywall. Those fixes or changes are rarely minor and can become quite costly.

Frank Lesh, an experienced home inspector who works for the certifying agency American Society of Home Inspectors, has two potential problems he wants homeowners to check for within their possible fixer-upper.

First, he says, examine the exterior. Take a look at the big picture. If it’s sitting in a valley, the home may be at risk for water problems.

Then I look at the general maintenance of the house exterior. Not whether there’s new paint, or flowers, but if the gutters and downspouts are in good condition and directed away from the house and if the roof is in reasonable shape.

Next, inspect for insects. Termites and carpenter ants can gnaw away at the bones of a home. It takes an expert insect inspection to discover the extent of the damage, to check behind finished walls and ceilings and to see if bugs are in the walls and subfloors.

A house is made of wood, and that’s what they eat. A good pest inspector can hear them or use infrared to see if they’re giving off heat behind the walls.

Manage Your Remodeling Expectations

One of the biggest dilemmas homeowners face when dealing with a fixer-upper is managing their expectations. Even when a home remodel is expertly planned, problems may still arise, Boardman-Miller says.

It is all about expectations and the ability to roll with what is happening. You have to focus on what needs to be done and cut out the extras that you may have been planning. Be realistic and stay on budget. If you do your homework, you could end up with a fair amount of equity in the finished house and get what you really want.

Baker says one of the most important things homeowners can do to avoid these costly issues is research, first into the home purchase process, then into contractors, home designers, and home improvement costs.

Find a contractor/carpenter who loves to work on houses and whom you can trust to make good decisions on your behalf. Without trust, these projects can become a nightmare. Take your time. Watch home TV shows, read magazines, talk to contractors, and go to the web to become an expert on the topic [of remodeling].

When homeowners embark on a home renovation the risks are great, but the rewards are even sweeter when everything is well planned and executed, Krogman says.

One man’s junk is always another’s treasure, so not only can you benefit financially, but you can give back by creating a beautiful home for your own family, or for someone else.

CHECKLIST: Tricks for Separating Fixer-Uppers from the Money Pits

Get a thorough home inspection
Determine whether improvements are structural or cosmetic
Do your research on what you’d specifically like done
Talk to your contractor/designer and get a plan in writing
Financially prepare for unforeseen issues
Manage your expectations and stay on budget

How do you know a home’s true value? Get a fast, no-obligation home estimate using our free tool.

Getting From ‘Before’ to ‘After’ Without Going Broke

At the end of a well-planned remodeling project, you can end up with the home features you want for a lower cost than the amount of equity you gained. It’s also possible that a lack of insight into your process and potential costs could leave you with an underwater (and maybe even unfinished) home, so it’s essential to make sure you know the facts before you swing a single hammer. But don’t let those potential pitfalls scare you away from a great opportunity for a smart investment. Just make sure you follow the checklist above and do the necessary homework to give yourself the best chance to come out ahead of the game.

Have you done your research and know of a great home you can benefit from investing in? If you are ready to explore buying your own fixer-upper, take the first step and get pre-approved online or contact a PennyMac Loan Officer today to discuss your options.

The views, information, or opinions expressed in this blog do not necessarily represent those of PennyMac Loan Services, LLC and its employees. The inclusion of links to third party sites is not intended to assign importance to those sites or to the information contained therein, nor is it intended to endorse, recommend, or favor any views expressed, or commercial products or services offered on these third party sites, or the vendors sponsoring the sites.

Mortgage Interest Deduction 2019: Here’s What Qualifies

2020-02-05T17:00:00-08:00

If you own a home, one of your first questions may revolve around how your home affects your tax filing. While there have been some changes in recent years, come tax time, it’s important to know exactly what qualifies as a deduction (and to consult with your tax advisor) so you can get the most out of your tax write-offs.^*

What Is the Mortgage Interest Deduction?

A mortgage interest deduction is an itemized tax deduction that allows homeowners to deduct the interest paid on a loan used to buy, build, or improve a first or second home. Homeowners who purchased a home prior to December 15, 2017 can deduct interest on the first $1,000,000 of mortgage debt. For those who purchased a home after December 15, 2017, a deduction only applies to the first $750,000 of mortgage debt.

How the Mortgage Interest Deduction Works

There are many nuances to the mortgage interest deduction, so make sure you keep good records of the interest you’ve paid throughout the year. Here’s a look at some things to watch out for and know as you’re evaluating your deductions.

As noted above, you can deduct all the interest you paid on up to $1,000,000 in a mortgage loan, but you can only deduct up to the first $750,000 of home loan debt if you purchased the property after December 15, 2017.
So for example, if you bought a home in 2016 and you have $1,000,000 in debt on that home, you can deduct all of your mortgage interest. However, if you bought a home for the same cost in 2018, you can only deduct interest on $750,000 according to the 2017 Tax Cuts and Jobs Act.
However, there is an exception to the new limit. If you entered into a written contract for a property before December 15, 2017 and closed on the property before April 1, 2018, you are exempt and can deduct your interest on up to $1,000,000 in mortgage debt.

What Qualifies As Mortgage Interest?

The type of mortgage in question (i.e., a first mortgage, second mortgage, or a Home Equity Loan) and what type of property it covers, such as your primary residence versus a rental or investment property, can affect how your mortgage interest deduction works, so you’ll want to know how it relates to your specific case this year. For a complete list of rules and regulations, make sure to check out IRS Publication 936. Here is a brief overview of a few common scenarios below.

Mortgage Interest For Your Home

In order to deduct the mortgage interest on your home, you must meet a few qualifications. First of all, the home must be a house, apartment, condo, co-op, houseboat, mobile home, or trailer, and it must have sleeping, cooking, and bathroom facilities. The home itself must be collateral for a mortgage loan.

If you receive a nontaxable housing allowance via the military or because you’ve done ministry work, you can still deduct interest. If you have taken out another mortgage to buy out a partner in a divorce as part of a mortgage buyout, you can also deduct the interest on that mortgage.

Mortgage Interest For Your Second Home

You can deduct mortgage interest on your second home, but in order to do so, there are a few rules. You don’t have to use the home during the year, but the home must be collateral for a loan. Also, if you rent out the home and receive rental income on the property, you must be in the house for more than 14 days or more than 10% of the days the home is rented, whichever is longer.

Any Points Paid On Your Mortgage

If you paid points on your mortgage loan as a way to pay down the amount of your loan interest, you can deduct these either all at once, or over the course of the loan, but there are a few requirements. The loan must be for your primary home, and paying discount points must be a regular practice where you live.

Also be aware of the interest rates on the points, and note that they can’t have also been used for closing costs. Your down payment must be higher than your points, and the points must be calculated as a percentage of the loan.

Home Equity Loan Interest

The interest on your home equity loan is only deductible if you are using the loan to make significant repairs to your property. If you are using the loan for another purpose — a large purchase, paying down debt, etc. — it is not deductible.

Late Payment Charges On Your Mortgage

If you’re late making a mortgage payment and are charged a late fee, this additional cost counts as part of the mortgage interest deduction.

Prepayment Penalties

For some lenders, paying off your loan early can result in a prepayment penalty (not however, when you have a loan with PennyMac) because lenders want to ensure they’re getting interest income. If you are charged a prepayment penalty for any reason, you are allowed to deduct this as part of your mortgage interest deduction.

What You’re Not Able to Deduct

Not all extra costs associated with a mortgage are deductible. Here’s a look at what doesn’t qualify.

Mortgage insurance premiums
Homeowners insurance
Any interest accrued on a reverse mortgage
Down payments, deposits, or forfeited earnest money
Title insurance
Extra principal payments made on your mortgage
Settlement costs (typically)

How to Claim Your Mortgage Interest Deduction in 2019

Getting ready to prepare your taxes and want to make sure you’re taking full advantage of your mortgage interest deduction this year? It’s important to make sure all your paperwork is in order and follow these steps to take full advantage of the deduction.

Look Out For Form 1098

This form shows how much you paid in mortgage interest and any points for the tax year. Your lender will send you the form if you paid $600 or more in mortgage interest, and they will also send a copy to the IRS to match up with your return. This form may also show you the amount of interest you’ve paid on your home loan to date. Can’t find it or not sure if you received it at all? Just contact your lender, and they can provide you with the amount of mortgage interest you paid for the year.

Itemize Your Taxes

If you want to take advantage of the mortgage interest deduction, you’ll need to itemize your deductions instead of using the standard deduction. Make sure it makes sense to itemize your deductions, as the goal is to take the highest possible deduction available to you.

Instances Where You Can Claim the Mortgage Interest Deduction

There are some scenarios where you can still claim the deduction even if your situation doesn’t fit the standard requirements exactly. Just make sure you’re keeping extremely accurate records of all of your property costs throughout the year, as well as square footage used for spaces like rentals and home offices, as things can get even more complicated. Here are some cases that would allow you to still claim the deduction.

The home was a timeshare
You rented out part of your home.
You had a home office. (Make sure you track the square footage, and you may even be able to claim an additional deduction using Schedule C.)
The home was an apartment co-op.
Your home was under construction.
Your home was destroyed within the applicable tax year.
You and a partner split and you’re now paying a mortgage on a home you both own.

Mortgage Interest Deduction 2018

The 2018 U.S. tax bill made significant changes to the mortgage interest tax deduction, as well as other updates for homeowners.

Mortgage Tax Bill Changes

The mortgage interest deduction allows homeowners to deduct part of the cost of their mortgage on their taxes. The 2018 tax plan now limits the portion of a mortgage on which you can deduct interest to $750,000, as compared to the previous limit of $1 million. Homeowners with mortgages that existed prior to the bill’s passage can continue to receive the current deduction.

Property Tax Deduction Changes

When looking at the 2018 tax changes, the focus was typically on the mortgage interest deduction changes. The bill has another aspect that affects homeowners: With the changes in property tax deductions, the 2018 tax plan has a limit of $10,000 on the amount of state and local property taxes that can be deducted from a homeowner’s federal taxes.

Know Your Tax Advantages With Homeownership

Whether you already own a home or are taking your very first steps towards making a smart investment in a home to call your own, be sure to stay in the know about all the potential tax advantages, along with the many other benefits of homeownership.

Ready to purchase or refinance and want to know what your options are? Call us now for your free mortgage consultation or apply online to get started on your pre-approval.

^*Consult a tax adviser for further information regarding the deductibility of interest and charges.

Homeowner Deductions Guide 2019 - 2020 and Overlooked Tax Write-offs

2020-02-05T05:00:00-08:00

Filing your taxes can be complicated — especially when you own a home. But there are also a lot of potential write-offs that are often overlooked, as well as tax benefits to home-owning that you’ll want to make sure you’re aware of come tax time.

Of course everyone’s financial situation is different, so make sure you consult with a tax advisor before making any major decisions about your taxes.^* But you can begin doing your own research by reviewing each of these potential deductions, understanding what it takes to qualify, and learning the relevant tax laws that may affect your 2019 taxes.

Standard Deductions vs. Itemized Deductions

The first thing to understand when evaluating tax savings options are the basics of deductions. When you’re filing your taxes, you’ll be offered the option to itemize your deductions, i.e. list out each qualifying item you can deduct from your income, or, use the standard deduction, a flat amount that everyone can deduct from their income if they don’t itemize.

You can’t do both, so be sure to choose the option that’s best for you. Hint: It’s probably whichever one is most favorable to your wallet.

Standard Deductions

The standard deduction is a flat amount that you can deduct from your annual gross income, if you are not itemizing your deductions. This amount changes every year, and the chart below shows the amounts for 2019 and 2020.

Filing Status	2019	2020
Single	$12,200	$12,400
Married (filing jointly)	$24,400	$24,800
Married (filing separately)	$12,200	$12,400
Head of household	$18,350	$18,650

Itemized Deductions

In order to claim any homeowner deductions, such as the mortgage interest deduction, you must itemize your deductions. In order to itemize, you’ll need to keep organized financial records of your qualifying deductions throughout the year. Itemizing your deductions usually requires a little bit of extra effort, but it often results in more tax savings if you have enough qualifying deductions.

Better to Take the Standard Deduction Or Itemize?

There are pros and cons to both routes, but overall you’ll want to ensure you choose the method with the greatest tax benefit in your situation.

The standard deduction is the easiest choice. It takes much less time, and anyone can claim it. (However, if someone still claims you as a dependent, you can’t claim the full deduction.) The deduction relates to your filing status (see chart above), and it is very straightforward. However, choosing the standard deduction could leave you with a smaller deduction if you don’t take the time to itemize.
Itemizing your tax deductions can save you a lot of money, but it can be a time consuming process. While there are restrictions on what you can itemize, you can often come out with larger tax savings and a bigger refund with itemized deductions. Your tax advisor can help you figure out whether or not this option will bring you the most savings, and how to maximize your benefit.

What is a Tax Deduction?

A tax deduction is a type of tax incentive that allows an individual to subtract a qualifying expense from their taxable income. This, in turn, reduces an individual’s tax liability by lowering their annual gross income.

Tax deductions are often expenses accumulated during the year that relate to the tax filer’s work, or there are also deductions available for mortgage interest, home office cost, medical bills, and more. There are many different types of tax deductions, and the sections below explain some of the most overlooked ones.

What are Tax Write-Offs?

A tax write-off, which is the same thing as a tax deduction, is a cost you can fully or partially deduct from your taxable income to lower the amount of taxes you owe the government. If you’re itemizing your write-offs, or deductions, you want to make sure you’re claiming everything you possibly can in order to get the biggest tax benefit.

Often Overlooked Tax Write-Offs

Sales taxes: You can deduct sales tax off of your federal income tax return, so if you’ve made a big purchase with a large amount of sales tax, make sure you save your paperwork. Such purchases can include buying a car, boat, or RV.
Charitable contributions: Financial and material donations are popular write-offs come tax time, but don’t forget to note that there are some other ways to take advantage of this donation. For example, if you purchase goods for a charitable bake sale or dinner, you can deduct the cost of those items.
Ongoing education: The Lifelong Learning Credit allows you to claim a credit of up to $2,000 on post-secondary education — up to 20% of the first $10,000 spent on education.
Home mortgage points: In addition to mortgage interest, if you paid home mortgage points on your home loan, you can deduct those costs all at once or over the course of the loan.
Health insurance premiums: If you’re self-employed and paying for your health insurance, you can deduct 100% of your health insurance premiums.
Offbeat business expenses: Generally, no expense is too weird to deduct, but you must prove that it relates to your work and your business.
Self-employed social security: If you’re self-employed, you pay a large amount of social security and Medicare tax at 15.3% of your income. However, 7.65% of that amount actually counts as your “employer” portion, which can be deducted off of your taxable income.
Job search: You can deduct any resources or materials used in your job search.
Union fees: If you’re a worker who pays to be a part of a union, you can deduct your union fees from your taxable income.
Personal casualty losses: If you have suffered a loss to property, whether via damage or theft, you will be able to deduct a portion of the value of what was lost.

What Can’t I Write Off?

Not everything is tax deductible, so it’s important to take a look at what you can and cannot write off. Here are some examples of expenses that are not deductible:

Roth IRA contributions
Political contributions
Commuting costs
Child support
Alimony paid on divorce agreements entered into after December 31, 2018
529 College Savings Plan contributions (potentially deductible on state returns)
Moving expenses (if not in the military)

Tax Exemptions

Tax exemptions are ways to reduce your taxable income and therefore your tax liability. Some people and organizations are completely tax exempt, while others are able to take advantage of deductions and exemptions to save money during taxes.

2018 Tax Deductions

Significant changes were made to available tax exemptions in 2018, and those changes could affect how you file your taxes. Here’s a look at some of the changes that are in effect through 2025:

Home equity line of credit: You can still deduct interest on your HELOC, but only if you are using that loan to make major improvements to your house. If you are using it to pay off debt or make other big purchases, you cannot deduct the interest.
Alimony: If your divorce occurred after Dec. 31, 2018, you can no longer deduct alimony payments.
Casualty, disaster, and theft: If you were a victim of a robbery or a federally-declared disaster, you can deduct the cost of your house, household items, your car and only the items that insurance did not already cover. Your losses also must make up at least 10% of your annual gross income.
Military moving expenses: You can only deduct your moving expenses if you are an active member of the military. Anyone else who relocates for a job cannot deduct their moving expenses.
Miscellaneous deductions: You can no longer take advantage of the unreimbursed employee education expenses deduction and the unreimbursed work expenses deduction. You also can no longer deduct costs for tax preparation or investment services.

This list does not include all deduction changes, so for a complete look at the 2018 changes, read IRS publication 5307, Tax Reform Basics for Individuals and Families.

Married Filing Separately

If you are married and filing separately, you can claim one exemption for yourself. Additionally, you can claim an exemption for your spouse under the condition that if they had no gross income, aren’t filing a return, and cannot be claimed as the dependent of another taxpayer. However, if you file jointly, you can claim an exemption for each one of you.

Alternative Minimum Tax (AMT) Exemption

The Alternative Minimum Tax is an alternative to standard income tax typically paid by individuals in higher tax brackets to make sure they’re paying some taxes and not deducting too much. In essence, AMT payers calculate their income tax twice — under regular tax rules and under the stricter AMT rules — and must then pay the higher amount.

One of the most important things to note about the AMT Exemption is that, if you qualify and opt to take it, you may not be able to take as many tax breaks, including deductions and credits.

Get the Most Out of Your Tax Deductions

Make sure you take all these tax deductions into account as you plan for your financial future. If you’re curious about how buying a home can bring you benefits during tax time, talk to your tax adviser.

Ready to add mortgage to your list of annual tax deductions, contact a PennyMac Loan Officer today for your free home loan consultation or to get started with a pre-approval online.

^*Consult a tax adviser for further information regarding the deductibility of interest and charges.

Buying a Vacation Home: 4 Critical Factors to Consider

2020-01-13T10:05:00-08:00

Is A Fixer-Upper the Right Choice For You?

The right fixer-upper can be a great investment and a lot of fun.

Probably the most important advice to consider when buying a vacation home — advice that may fly directly in the face of economics and market dynamics — is to choose a property that you absolutely love. Yes, researching average nightly prices and occupancy rates helps in identifying a property that will generate cash flow. But way deeper than that is an owner's affection for the home and the surrounding area. An owner's pride for their vacation rental seeps into all layers of the business: if you have it, all the other cards fall into place.

By doing smaller sections at a time, you will see gradual progress and also have a better chance of maintaining your decluttered spaces than if you were to attempt an entire room in one sitting. Smaller decluttering tasks also fit better with busy lifestyles, so that no matter how little time you have, there will still be time to make progress on your decluttering.

If you are hoping that your vacation home will be both a source of joy and a good investment, you may want to consider which vacation home markets are hot, and which are trending down. With over 14 years of experience in financial analysis and real estate, Mihaela Bordea is a senior analyst at Point2Homes. Bordea performs the data research and analysis that Point2Homes bases their studies on, including those examining the international and domestic destinations most preferred by American buyers looking for a vacation home. Here is what her research has shown:

We look into the international vacation/second home market periodically, to track any changes in trends.In our most recent April 2018 study, Mexico takes the cake when it comes to U.S. residents looking for vacation homes abroad. Compared to 2015, when it ranked fourth, Mexico is the most sought-after destination for Americans. Canada, Puerto Rico, Costa Rica and Belize follow suit in the top five hottest destinations for U.S. residents wanting to step away from their day-to-day life. Most definitely, Latin America is hot and seems to keep its upward trend in Americans’ preferences.

As for national markets, [one of] our partners evaluated homebuyers’ preferences based on the number of homes purchased as non-primary residences. They ranked Ocean City, NJ as the most attractive location, followed by Salisbury, MD-DE, Crestview-Fort Walton Beach-Destin, FL, Barnstable Town, MA, and Panama City, FL.

Andra Hopulele is a senior writer with Point2Homes. She has over seven years of experience in real estate and her data-driven articles have been quoted by publications including Yahoo Finance, Statista, and Business Insider. She reminds homebuyers that purchasing a vacation home may sound easier and more fun than buying a “regular” home. However, buying property is buying property, and for things to work out, you must have a well-thought-out plan, which includes selecting the right location.

Location is always a key factor when choosing a vacation home. If you want to make your investment worthwhile, choose a property that you can visit often; otherwise, it might turn into a burden, both financially and in terms of accessibility. Think about how often you’re reasonably expecting to visit and calculate the cost per night for your paid-for vacation home as opposed to the cost per night at a hotel or any other type of tourist accommodation.

Home loans aren’t just for first-time homebuyers. See what the options are for your ideal vacation home.

Factor 2: What Is Your Budget?

Once you’ve found your dream destination, it’s time to consider your vacation home buying budget. Not all vacation homes have to be large luxurious compounds, but even small rustic cabins can come with unexpected costs. Before you make an offer on a vacation home, make sure that you understand what your actual expenses will be, as well as whether you’re able to afford the property.

Christopher Linsell, real estate analyst for The Close, is an expert on real estate topics ranging from marketing to lead generation to transactional best practices. As a licensed agent in the state of Michigan, Linsell has aided home buyers with everything from modest rural starter homes to massive waterside compounds. Here is his best advice for vacation home buyers on a budget:

The purchase of a vacation home can be the realization of a long-held dream for many. But, the emotional nature of a vacation home purchase can often cloud the judgment of the purchasers. Here are a couple of things to hold in mind when considering a vacation home purchase:

Property taxes are going to be surprisingly high — in most states, a property owner can claim a single residence as their “homestead property,” or what the state considers their primary residence. Any residential property you own in addition to your primary residence will be taxed at the “non-homestead” rate, which is close to double the homestead rates in most states. If you’re purchasing your property from a homestead owner, using their current property taxes as an estimate for what you’ll pay as a vacation property owner can be a costly mistake.

[In addition,] even a part-time home requires full-time maintenance. Just because you only spend six or eight weeks a year in your new vacation home doesn’t mean that it won’t require maintenance year-round. The home care tasks that homeowners often take for granted in their primary residence can become a real hassle or a serious expense when you add up the annual costs. For instance, mowing your lawn at home might take 90 minutes on a Saturday 25 times a year. But for a vacation home owner who needs to hire a lawn care company, $60 per trip adds $1,500 to annual expenses.

Andra Hopulele also warns vacation homebuyers to be careful not to overspend, and to remember that small, recurring costs can add up.

It is very important to determine what you can actually afford. The cost of owning a vacation home is not only what you pay for it, but also associated taxes, utility costs, HOA, upkeep costs, insurance etc.

Also, keep in mind that, even if you visit often or not that much, the chores pile up, and simple tasks like mowing and cleaning the inside and outside of the house add to the costs, whether you spend your own time or pay somebody to do it. Add travel expenses and you’ll have a clearer picture of how much a vacation home will weigh on your budget.

Want to know how much that vacation home will cost? Use our mortgage calculator to estimate how taking on an additional mortgage might affect you.

Factor 3: How Much Time Do You Really Have?

For most buyers, a vacation home represents a greater focus on relaxation and an overall more enjoyable lifestyle. It’s important to keep that focus in mind as you evaluate your options, while understanding that even a low-maintenance second home will still require investments of both your money and time. How much of each do you want to spend?

Luke Babich is the co-founder and chief strategy officer of Clever Real Estate. He's an active real estate investor and licensed agent in St. Louis and his writing has been featured in Homeland Security Today, Mashvisor, Payments Journal, and Bigger Pockets. Here are Babich’s tips for evaluating your potential vacation home purchase:

… the first question potential vacation home buyers should ask is, “[How] will I use it?” While owning a lake house or beach property is nice, consider how much time out of the year you'll actually be able to enjoy your holding.

Once you know your yearly vacation time, compare that to the cost of lodging in the area for the same time frame(s). Next, you’ll need to decide if this will serve as a future retirement location and/or if you want to rent out your property. A vacation home can be a great investment to provide additional income and add value if you intend to use it as a retirement home. No matter how you plan to use your vacation home, you’ll need to outline the costs to maintain your new getaway.

John Bodrozic is a co-founder of HomeZada, a digital home management software app that helps homeowners stay organized while they manage and improve their homes. Bodrozic is responsible for product strategy and has over 25 years of experience in the software industry and is a homeowner himself. A number of HomeZada’s customers have vacation homes, and Bodrozic has become familiar with several recurring vacation home tasks.

Having a preventative maintenance schedule and sticking to it is really important. Vacation homes tend to be near beaches or in the mountains, and thus are more exposed to extreme weather. This weather beating [on] the home means that staying on top of preventative maintenance is even more important, in order to preserve the useful life of the home’s various building materials, equipment, etc...This also helps reduce monthly energy bills and avoids expensive, early replacement costs.

You know the factors involved, now learn how to buy your perfect vacation home.

Factor 4: What is the True Cost of Maintenance?

Every home requires regular maintenance, but vacation homes that are in extreme locations can need even more than average. Chances are, some of the features that make your vacation location so desirable can also take a toll on your home: Snowy mountain weather, the hot desert sun, salty ocean air, and humid tropical conditions are just a few of the natural conditions that can cause your home to need extra maintenance.

In addition, you may feel extra pressure to keep your vacation home in near-perfect condition if you plan to frequently host friends, family, and other guests. If you want to stay organized during your many projects (and protect your investment), Bodrozic has the following advice:

Many people will invest in home remodel projects with vacation homes to get them updated and more attractive to renters. It is important to plan, manage, and track all these remodels to not only stay on budget, but to keep good records and to know what your tax basis is in the home. It’s also helpful to keep contractors accountable for the remodel work they perform.

[Additionally,] vacation homes tend to be bought and sold frequently. So, when you buy your vacation home, start keeping good digital records of maintenance, remodels, and other important property documents. These records can be very useful in the future when you decide to sell the home, as you can use them to differentiate from competing homes for sale by marketing the digital history, and upkeep of the home.

An Informed Choice Is the Right Choice

Owning a vacation home may not be all pool parties and sweet ski runs, but if you take the time to consider all of the required needs and logistics, you will make a choice that is right for your budget, time commitment, and long-term goals. Plus, it can be a great investment if you leverage it correctly. If you are ready to start enjoying the vacation home of your dreams, contact a PennyMac Loan Officer or apply online today.

How To Remodel Your Kitchen for Less than $25K

2020-01-13T10:00:00-08:00

Do those mid-80s beige cabinets with wood trim need to go? Perhaps your countertops are stained and burned from the previous owner. Or possibly, toes are stepped on when the whole family tries to cook together. Sounds like it’s time for a kitchen remodel. But is an affordable kitchen remodel really possible?

After all, most of us don’t have $25,000 sitting around, or even an extra $10k . But with modest kitchen changes using responsible financial choices, you’ll invest in your future by increasing your home’s value and functionality.

How Much Will it Cost to Remodel a Kitchen?

To estimate the cost of your kitchen renovation, and how it impacts your home’s value, visit remodeling magazine’s Cost vs. Value report for your local region or city. That’s the suggestion from licensed architect Jim Molinelli, also known as “The Remodeling Professor.” He’s authored the book “Remodel Without Going Bonkers or Broke,” and also offers the online class “Remodeling Success Blueprint,” which helps homeowners plan renovation efforts.

Interestingly, a mid-range, minor kitchen remodel ($22,507) tends to recoup more than significant kitchen remodels (which can be up to $130,000), according to the Remodeling 2019 Cost vs. Value Report. A “midrange, minor” kitchen remodel involves cosmetic and energy-efficient changes, including:

Replacing cabinet fronts (leaving the boxes in place)
Updating with a new sink and faucet, resilient flooring and countertops
Adding an energy-efficient range and fridge

Kitchen remodel levels are related to quality, but also return on your investment. Owners of a “forever” house might want a grander solution that pays back over time. “Those planning to move soon, or on a tight budget may want their kitchen remodel to be more modest and cost effective,” says Molinelli.

When reviewing the report, keep in mind that some listed details will change based on the size of your kitchen remodel, which will also affect your bottom line. For example, you know that you’ll spend less on cabinetry or appliances, if your kitchen is smaller than one in the report.

How Can I Find Money for Kitchen Remodeling?

Before starting any new projects, figure out how much you have to work with, and how you’ll pay for an upcoming kitchen remodel. Here are three options to consider:

Spread out renovation work over time. Budget money for small monthly renovation spends, or take out a Home Equity Line of Credit (HELOC) that you can tap into anytime. HELOCs usually have much lower interest rates than a standard credit card.
Find significant cash flow. Sure, you might come into an inheritance or other windfall. But if that’s unlikely, consider a cash-out refinance, where you draw on your home’s existing equity in exchange for a large lump sum of cash.*
Create a savings plan. Figure out how much you’ll need, then saving money in a high-yield savings account throughout the year, or years. After you’ve hit your savings goal, start your kitchen remodeling.

When used wisely on home improvements, HELOCs, cash-out refinancing and saving money are all financially responsible methods that can help build additional equity in your home.

Affordable Home Kitchen Remodeling

Typically, the most expensive aspects of any kitchen remodel are the cabinetry, appliances, and countertops. You still have choices that can help reduce costs:

Pick Mid-range Cabinets.

Where cabinets are concerned, the quality level impacts both your bottom line and durability. Although they’re less expensive, Molinelli suggests avoiding builder-grade kitchen cabinets. They look okay, he says, but have a relatively short lifespan. On the high end, custom cabinets are rarely necessary, he notes.

“Cabinet functionality is more important than looks,” he says. Roll-out trays can easily reveal what’s behind your cabinet doors. Cabinet hinges and glides should be durable, and still work well after 5 years. Spend your pennies widely on a high-quality stock line or semi-custom line of cabinets, giving you the best features at a manageable price point.

Seek Sale Appliances.

Dishwashers, fridges and ranges go on sale throughout the year. The trick? Coordinate your upcoming kitchen renovation with store sales. Wait for discounts before purchasing, Molinelli suggests. Many appliance retailers will hold the items until you’re ready for delivery, or will place appliances in your garage to await installation.

When you do buy appliances, go with a local vendor. “Don’t buy online from a distant state,” Molinelli says. When your fridge’s icemaker stops working while under warranty, it’s easiest to call up the local store, who can send out a representative. With Internet purchases, appliance returns or repairs can be an expensive headache.

Choose cost-conscious materials.

Material selection can reduce the cost of any project, Molinelli says. Sheet vinyl, tile and hardwoods have very different prices, where flooring is concerned. Countertops can be laminate, butcher-block wood, Corian, quartz or other materials.

Quick Tips: Renovating on a Tight Budget

If your kitchen is downright ugly, spend a minimal amount on a few DIY projects that make your kitchen cosmetically bearable — at least right now. “Spend as little money as possible on anything that is likely to be torn out and thrown away in the future remodel,” Molinelli says. A few low-cost ideas:

Make your current shelving more useful. Check out Rev-a-Shelf.com, he suggests, which offers products that increase accessibility and functionality: roll-out drawers, under-sink pullouts, tray dividers and more.
With a few hundred dollars, you might focus on resurfacing, or priming and painting your cabinets, and adding new hardware.
Change out the countertop, sink or faucet to sustain you another few years.
Buying appliances that you’ll incorporate into your long-term future kitchen layout are another smart purchase, such as a range or fridge that you’ll hold onto for years.
For other short-term projects, plan a renovation staycation: peel-and-stick wallpaper, hanging art, painting walls or installing a backsplash.

Paying for a Home Kitchen Renovation

Making small but high-ROI changes may improve your home’s value, and increase your long-term ability to create the kitchen of your dreams with a large-scale renovation. If you’re thinking of renovating but need to “find more money,” compare your refinancing options. When you’re ready, get started online or call a licensed PennyMac Loan Officer.

Should You Refinance Your FHA to a Conventional Loan?

2020-01-12T17:00:00-08:00

Like many American homeowners, your first mortgage may have been a loan with the Federal Housing Administration (FHA). Loans backed by the FHA are attractive to first-time homebuyers because FHA loans make it easier to obtain financing, requiring only minimal down payments and fair-to-good credit scores.

On the other hand, FHA loans require certain provisions which sometimes place a heavy burden on a homeowner’s budget, often in the form of premiums paid for mortgage insurance. In such cases, you may want to consider refinancing your FHA loan into a conventional mortgage.

However, before we dive into the pros and cons of refinancing from an FHA to conventional loan, it’s important to learn the basics of these mortgage insurance premiums and costs.^*

Can You Refinance an FHA Loan?

You can refinance an FHA loan to a conventional loan, but it requires meeting minimum requirements. It is especially beneficial to refinance your FHA if you have 20% equity in your home, and can remove the lifetime private mortgage insurance (PMI). If you don’t meet the equity minimum for a conventional loan, you’ll also need to account for continued private mortgage insurance (PMI) costs until you’ve reached 78% in loan-to-value ratio.

Understanding Mortgage Insurance Premiums

FHA loans stipulate that borrowers pay two kinds of mortgage insurance: a one-time, upfront mortgage insurance premium (UFMIP) and a monthly mortgage insurance payment (MIP). The monthly MIP payment is generally required for the life of the loan.

Today, the UFMIP costs roughly 1.75% of a loan's principal balance and is paid at closing. For example, borrowers applying for a $200,000 30-year fixed FHA loan today will have to pay a $3,500 upfront mortgage insurance premium. Additionally, these borrowers must also typically pay an annual premium of $1,700 for every $200,000 borrowed.

The MIP costs from 0.45% to 1.25% of the loan balance throughout the term of an FHA loan. These premiums can add anywhere from $100 to $500 to the monthly payment. While FHA rates may be low, the added costs of mortgage insurance could make refinancing into a conventional loan, even one with a slightly higher rate interest rate, result in lower monthly payments for the borrower.

Now, let’s examine the advantages and disadvantages of an FHA to conventional refi.

The Pros of Refinancing to a Conventional Mortgage

While mortgage rates continue to fluctuate, home values continue to rise, providing more equity to homeowners. This has given homeowners the leverage to successfully refinance into conventional mortgages.

In fact, one of the biggest advantages of switching to a conventional loan is that it can eliminate the mortgage insurance requirement altogether. While conventional loans have stricter credit requirements, and typically require borrowers to have at least 20% equity in their homes, any mortgage insurance provision is cancelled once a homeowner has reached a 78% loan-to-value ratio in their home.

Additionally, refinancing to a conventional mortgage allows borrowers to take out a larger home loan.

The Cons of Refinancing an FHA Loan to a Conventional Loan

It’s important to keep in mind that refinancing comes with costs, such as closing fees, and may require you to present many of the same documents during the application process as you did with your original home purchase. (However some refinance options, such as a Streamline refi, can remove these document requirements. Learn more below.)

According to Smart Asset, refinancing closing costs can range anywhere from 2-5% of your total loan. For example, if you refinance into a $250,000 loan with 3% closing costs, you’ll need to pay $7,500 on your signing appointment day, roll the costs into the loan, or receive a lender rebate to offset the costs.

In addition, if you don’t currently meet the equity requirements you’ll also need to account for continued private mortgage insurance (PMI) costs — that is until you’ve reached that magic number of 78% in loan-to-value ratio.

To apply for a conventional mortgage, you’ll need to present several documents to prove your borrowing worthiness. These documents include:

Pay stubs
Tax returns and W-2's and/or 1099's
A credit report
Asset statements

You may also need to pay for an appraisal of your home.

Too Many Requirements? An FHA Streamline Might Make More Sense

If you can’t afford the closing costs associated with refinancing from an FHA into a conventional mortgage, or if you can’t provide the needed documents, an alternative option is to apply for an FHA Streamline Refinance.

The FHA Streamline Refinancing program provides homeowners with a quicker, simpler way to refinance without the hassle of in-depth documentation, credit, or income verification.

Homeowners who are looking for ways to lower their monthly mortgage payments, or who are hoping to convert an adjustable rate mortgage into a fixed loan, often benefit from an FHA Streamline Refinance — even if their mortgage is underwater. In fact, the Streamline program was put in place specifically to reduce loan defaults.

To qualify for a Streamline refi, you must meet these requirements:

You must already have an FHA-backed mortgage.
All of your mortgage payments must be up to date.
You must wait 210 days, or have six months of on-time payments before applying.
You cannot get a cash-out refinancing with the switch.

It’s also important to note that Streamline refinancing continues the requirement for mortgage insurance, though UFMIPs are typically absorbed in the mortgage and are not paid in cash.

Understanding the Net Tangible Benefit

FHA Streamline Refinancing applicants must demonstrate a valid reason for refinancing, which is determined by something called the Net Tangible Benefit. According to the FHA, this can be either:

A 5% reduction of the principal and interest (P&I) of the mortgage payment, plus the annual mortgage insurance premium (MIP), or
A refinancing from an ARM to a fixed rate mortgage

Checklist: When Is a Good time to Refinance from an FHA to a Conventional Mortgage?

If you’re still not sure whether you should refinance from an FHA loan into a conventional mortgage, answer the following checklist questions to help you decide if it could be the right move.

1. What are my goals?

If you’re looking to lower your monthly payments, or switch from an ARM (or other loan term) to a fixed-rate loan, going into a conventional mortgage might be right for you. You may also be eligible to take advantage of a cash-out refinancing option with a conventional loan.

2. Does refinancing make financial sense?

If current interest rates are higher than your existing rate, or if the difference is negligible, refinancing into a conventional loan may not be worth the cost. You can use a loan calculator to estimate your monthly payments — just don’t forget about those upfront insurance costs.

3. What is the current value of my home?

Most home values have risen over the years giving homeowners more equity and making refinancing into a conventional mortgage an attractive option for homeowners. If you owe more on your mortgage than your home is worth, you can still refinance with an FHA Streamline.

4. What is my existing home equity?

If you have more than 20% equity in your home, converting from an FHA into a conventional home loan makes a lot of sense. If you have less than 20% equity, an FHA Streamline refi may be better suited to your situation.

5. Can I afford refinancing closing costs and fees?

Refinancing can be pricey — oftentimes thousands of dollars. However, borrowers can typically use a rebate from the lender to offset some of the costs or finance the costs and fees. To understand how financing these fees will impact your monthly payment, be sure to use our handy calculator found here.

6. Can I provide all of the necessary documentation?

Refinancing into a conventional mortgage is a process very similar to purchasing your first home, so it’s important to gather all of the right documents. If you can’t produce all of the necessary documents, an FHA Streamline may provide a simpler path to refinancing.

Considering a Refi? Talk to a Mortgage Lender

Even if FHA rates are lower than conventional rates, it may not always be in your best interest to refinance into another FHA loan. A licensed loan officer can help you evaluate the nuances of FHA refinances and help you identify your best financial solution.

To see if a conventional loan refinance makes sense for you, speak with a PennyMac loan officer or apply online today.

^*By refinancing your existing loan, your total finance charges may be higher over the life of the loan.

FHA Loan Requirements

2020-01-09T08:00:00-08:00

With low down payments, low closing costs, and more flexible credit score requirements, it’s no wonder that nearly one in every five home purchases are made using an FHA Loan. FHA loans are famous for their flexibility, but sometimes they come with requirements that both the borrower and the property owner must meet. Here’s how to know if an FHA loan is the right fit for you and your unique homeownership goals.

What is an FHA Loan?

You may have heard of FHA loans, but do you really know where they come from and how they work? To begin, FHA stands for the Federal Housing Administration, a government agency created in 1934 by the U.S. Department of Housing and Urban Development (HUD). The FHA was started by HUD as a resource to increase homeownership in America.

An FHA loan sounds like a loan that comes from the FHA, right? This is not true: The FHA does not issue loans directly to homebuyers. Instead, the FHA insures loans offered by private lenders. If a homebuyer can’t pay for their FHA mortgage, the home will be foreclosed on. If that happens, HUD will pay off the loan to the lender and take ownership of the home. This insurance removes some of the risk for lenders, allowing them to offer lower credit score and down payment requirements, which in turn allows more homebuyers to qualify for home loans.

How to Get an FHA Loan

If you think an FHA loan is a good fit for your needs, it’s time to start taking steps towards securing one. As mentioned, the FHA and HUD don’t actually make the loans, they just insure them: To get an FHA loan, you will need to connect with a lender.

In order to meet your lender’s requirements for an FHA loan, you’ll need to ensure that you have (and understand) the following:

620+ credit score with at least a 3.5% down payment
A home appraisal done by an FHA-approved appraiser
A 50% maximum debt-to-income (DTI) ratio
You must occupy the home as your primary residence

Who Can Get an FHA Loan?

Although FHA loans are a relatively well-known type of mortgage, there are often misconceptions around both eligibility and overall criteria. Here are three common types of homebuyers who can benefit from considering an FHA home loan.

First-Time Homebuyers

Many first-time homebuyers use FHA mortgages to make their homeownership dreams a reality. Even after that first home purchase, you can still use an FHA loan — they are not restricted to your first home purchase. But, because FHA loans can only be used for your primary residence, you generally can’t have two FHA loans open at the same time. However, there are several exceptions to this rule, such as a move required for work, or your family outgrowing your current home.

Homebuyers with Poor Credit

Even if you think your credit score is too low for a traditional loan, you still may be eligible for an FHA loan. Buyers with a 500 credit score can get an FHA loan with 10% down, and buyers with a credit score of at least 580 can get an FHA loan with 3.5% down.

Low-Income Buyers

Many low to moderate-income buyers who don’t qualify for a traditional loan or need a lower down payment option are still able to get an FHA loan. This is because the FHA allows lenders to be more flexible with potential buyers’ DTI ratios, even sometimes approving up to a 55% DTI.

FHA Loan Interest Rates

One of the most important elements of your home loan is your interest rate, which will be a large factor in the affordability of your monthly payment. FHA loan rates are similar to traditional loan rates in that they are based on both larger market conditions and the qualifications of the individual buyer. Wondering what your options will be?

View today’s FHA loan rates!

FHA Credit Score Requirements

One benefit that makes FHA loans attractive to buyers is the flexibility with regard to credit score requirements. (An FHA loan can allow for a credit score as low as 580 depending on your lender, a score that would make you ineligible for many other types of loans.) Once you know your credit score, you can see your eligibility for various FHA loan products. Here is the limit for 2019:

Credit Score of 620 and Higher: PennyMac Buyers with a minimum credit score of 620 can
qualify for the low down payment advantage, which is currently 3.5% of the purchase price.

Need to estimate your monthly mortgage payment? Use PennyMac’s FHA home loan calculator to get an estimate today.

2019 FHA Loan Limits

In addition to the limits on your credit score and down payment amounts, there are also limits on the total mortgage amount that can be offered through an FHA loan. The FHA does have lending limits, and these numbers can differ depending on where you buy a home. Loan limits are established by the FHA and can vary by county.

FHA Loan Benefits

In addition to expanded eligibility criteria (that makes them easier to qualify for overall), FHA loans offer many other benefits to borrowers.

Open to Buyers with a History of Bankruptcy and/or Foreclosure: A history of bankruptcy or foreclosure is not necessarily a barrier to qualifying for an FHA loan. There is a two-year waiting period after a bankruptcy, and a three-year waiting period after a foreclosure before you can qualify for an FHA loan.

Gift Money: Struggling to save for your down payment? If you have loved ones who want to help you, FHA loans accept gift money as a source of down payment or other funds. There are some limits and other rules, so be sure to discuss your situation with your lender.

Competitive Interest Rates: FHA loan rates are comparable to conventional mortgage rates.

Credit History and Loan Eligibility: FHA loans can work for many borrowers when traditional loans can’t, due to the fact that they have looser credit score requirements. FHA lenders will look at your complete financial picture, including your ability to pay for things like your rent, utilities, auto, student loans, and more.

Non-Occupying Co-Borrowers are Allowed: If your debt to income ratio is high, a co-borrower (and their income) can help you qualify for a loan you would not otherwise be eligible for, just like a conventional loan. Co-borrowers have ownership interest and are listed on the home’s title. They must sign all loan documents and will be obligated to pay the monthly payments if you ultimately cannot. FHA loans allow you to have a co-borrower who won’t be living with you, such as a family member who lives elsewhere.

What Mortgage Insurance is Required for FHA Loans?

When buyers have little invested in a home (whether via down payment or equity), lenders consider the loan (FHA or conventional) to be a bigger risk. Because of this, they typically require those buyers to pay a monthly fee for mortgage insurance, also known as private mortgage insurance or PMI. This insurance is usually required for any buyer who has a loan for an amount that is more than 80% of their home’s value. For example, if your home is worth $100,000 and you have a mortgage balance of 90,000, you only have 10% in equity. Your loan is therefore 90% of your home’s value and your lender will require mortgage insurance.

For an FHA loan, the details are a little different. FHA loans don’t have the same standards of a conventional loan, rather, they require the following two kinds of mortgage insurance premiums: one paid in full upfront (or financed into the mortgage) and another which is paid as a monthly fee, regardless of how much equity you have.

Upfront Mortgage Insurance Premium (UFMIP)

This fee must be paid at closing (or added to your loan amount) and is currently 1.75% of your loan amount. For example, this would mean an extra $3,500 due at closing for a $200,000 loan.

Annual Mortgage Insurance Premium (MIP)

This additional insurance cost ranges from 0.45% to 1.05% of your loan amount. The yearly cost (based on your loan-to-value ratio and loan length) is divided by 12 and paid as a part of your monthly mortgage payment. On a $200,000 loan, a MIP at 1% will add $167 to your monthly mortgage payment.

Looking to obtain mortgage insurance financing with down payments as low as 3.5%?Learn more here.

Timeline for Paying Back FHA Mortgage Insurance

Mortgage insurance may be an unexpected expense for many first-time homebuyers, but, depending on your loan details. Your mortgage insurance timeline will predominantly depend on your amortization period (the length of your loan) and the loan to value percentage you had on your loan origination date. Here is a chart that can help you figure out what the details will be on your loan.

Loan Term	Down Payment	Duration
15 years or less and loan amount is no more than $625,500	Less than 10%	Life of loan
15 years or less and loan amount is no more than $625,500	10% or higher	11 years
Over 15 years and loan amount is no more than $625,500	Less than 10%	Life of loan
Over 15 years and loan amount is no more than $625,500	10% or higher	11 years

FHA Loan Requirements for Single-Family and Other Properties

As a buyer, once you have met all of the FHA loan requirements, it’s time to look at the property you want to buy. There are certain requirements that your future home must meet as well. HUD has minimum property requirements to ensure that any home that the FHA insures will be a good investment for both the buyer and the lender. Those requirements ensure that the home must be:

Safe: Your home must be a healthy, safe place to live
Sound: The structure of your home must be sound, not significantly damaged
Secure: The home must be a secure investment for a lender

The requirements above apply to all properties able to be purchased with an FHA loan. If you are not buying a single-family home, there may be additional requirements unique to the type of property you are considering. Here are two of the most common property types that are not single-family homes and the additional requirements for each.

Condominiums

Condominiums can be a great choice for homebuyers in urban areas, or in any area where buyers want the benefits of home ownership without the maintenance that a single-family home can require. You can buy a condo with FHA financing, as long as it is included on the FHA’s approved condominium project list. If the complex you are interested in is not listed, it may still be eligible as long as it meets the requirements listed in FHA’s handbook for condos. Those requirements include:

The complex is in compliance with state and local laws and regulations
The complex contains at least two residential units
No more than 35% of the complex is used for non-residential or commercial purposes
No more than 10% of the units in the complex are owned by one investor or entity⁠—this can be an issue in small complexes
The complex’s homeowners association fees (HOA) are in good financial shape: no more than 15% of the total units in the complex are more than 60 days past due on their condo association dues payments, and the HOA is allocating at least 10% of their budget to a reserves account to be used for maintaining the common areas, and the complex has adequate insurance

If you are planning to buy a condo with an FHA loan, make sure that your real estate agent knows this and can help guide you through the process of finding an approved complex that you will love.

Getting an FHA Loan with Student Loan Debt

If you have student loan debt, it will factor into your FHA loan eligibility. Since they are counted as a part of your monthly debt, student loan payments impact your ability to qualify for (and repay) a mortgage. Consider the following three factors when calculating how student loan debt may affect your ability to secure an FHA loan.

The Debt-to-Income Ratio Factor (DTI)

A big part of how lenders determine your loan eligibility amount is by looking at your total monthly bills. By knowing both your income and what other debts you need to pay, they will be able to see how much you can afford to pay on a mortgage.

If your gross income is $3,000 a month, and you have $1,500 a month in debt payment obligations, your DTI is 50%. Many lenders want you to have a DTI ratio of 43% or less.

The 1 Percent Rule

When determining what your monthly bills are, your lender will usually apply the “1 Percent Rule” to your student loan debt. For example, if you have $25,000 in student loan debt, your lender will assume a 1% ($250) monthly payment. This can be a problem, and inaccurate, if you are on an income-based repayment plan or other student loan forgiveness programs that offer you a monthly payment amount of less than 1%. Fortunately, FHA loans allow for higher DTIs than conventional mortgages which can compensate for the higher student loan payment, which can allow a borrower to qualify.

FHA Loan Alternatives

As common as FHA loans are, it’s important to remember that they are not the only option available to most homebuyers. Whether you are trying to avoid the 1 Percent Rule mentioned above, want to buy an ineligible condo, or are looking for very specific loan terms, there are many situations where a conventional mortgage may be a better fit for you than an FHA loan. It’s important to discuss your situation with your lender, and carefully compare all of your choices.

FHA Loan Final Checklist

Once you have found your dream home and have gone through the application and underwriting process for an FHA loan, there are a few final items you will need to have in order to ensure a smooth closing process.

Homeowner's Insurance Policy: Your homeowner’s insurance will protect one of your biggest investments — your house, its contents, and your loved ones. The cost of this policy will be included in your monthly payment and paid annually by your lender, so make sure your lender has your insurance information before closing.

Identification: At your closing, you will need two forms of identification. One must be government-issued, photo I.D. — your driver's license or passport are good options. The other must only have your name printed on it, such as a Social Security card, credit card, debit card, or insurance card.

Title Insurance Policy: Title insurance protects you and your lender from any costs or other issues that may come from unknown liens, encumbrances, or other issues with the title or legal ownership of your home.

Closing Funds: Finally, you will need the money you are using for your down payment, and any other closing costs you are paying. Talk to your lender to determine the total amount and the form (cashier’s check, wire transfer, etc.) in which the funds will need to be paid.

Ready to crunch your numbers and get your questions answered? Check out our current FHA Purchase Loan Options.

Finance Your Home Today with an FHA Loan

FHA loans are used by many homebuyers every year. From more flexible qualification requirements to greater flexibility with down payment amounts, FHA insured mortgages can help you buy your first home, your last home, and any in-between. If you’ve found your dream home and are ready to buy, reach out to a PennyMac Loan Officer to get pre-approved for an FHA loan today.

Decluttering Your Home: The Ultimate Guide to Tidying Up

2020-01-08T14:00:00-08:00

Whether you love Marie Kondo (a Japanese Organizing consultant and author) or think that a well-folded sock is a silly concept, there’s no question that an organized, clutter-free home is an enjoyable space to be in. Organization comes naturally to some, but many of us struggle with a few (or many) aspects of keeping our home in harmony. Add in the additional pressure of an upcoming move, and it’s easy to feel overwhelmed by the pressure of prioritizing and packing your possessions. We asked expert home organizers, professional movers, and even home designers for their help — read on to see how you can plan for both an easy to maintain home, and an organized move when the time comes.

How to Get Started

The best way to get started without becoming overwhelmed is to set smaller goals that will bring quicker wins. This will help maintain motivation and build up momentum.

Nearly everyone has some aspect of organization they struggle with. Even if you keep a clean desk at work, and are happy to help others with cleaning projects, addressing your own issues with clutter can be different. Familiarity, sentimentality, and even just a tendency to put your own needs last can lead to an overly full, disorganized home. When you feel stuck and overwhelmed and don’t know where to start, it’s often easier to just keep living with the clutter. If you are ready to make a change but just don’t know where to start, here are ideas from two of our experts on how to get it done.

Holly Connors is an Australian full-time blogger who focuses on organization, DIY projects, and simplifying life. With a previous career in psychology, Connors now shares her family-focused tips and solutions for staying organized at home with kids.

One of the most challenging aspects of a successful declutter is knowing where to start! Decluttering can be an overwhelming process, especially when it is long overdue. The best way to get started without becoming overwhelmed is to set smaller goals that will bring quicker wins. This will help maintain motivation and build momentum.

To do this, you may decide to start with a single room or area of your home and break that down into smaller tasks. For example, decluttering the kitchen you would work through section by section — the pantry, each individual cupboard, and any other storage spaces your kitchen has. Any clutter hot spots in the kitchen area would become their own separate tasks too, allowing you to tackle each room space by space.

Adeel Shabir is a content marketing executive at GigWorker, a media outlet focused on the gig economy. Shabir knows that not everyone excels at organizing and that hiring help can sometimes make for a more efficient use of your resources.

There are numerous times when you may need to hire someone to help you with moving or packing something. For instance, I would definitely hire someone when moving to a different location or house — employed individuals are professional packers who know how to pack everything in an organized manner. Organizing stuff is an art and hiring someone can be a great decision versus doing it yourself.

How to Tidy Up Before a Move

A common motivator behind decluttering comes when buying a home (or taking steps towards any other type of upcoming move). Tidying up before you move will save you both time and energy that can often translate into money, such as less moving expenses or storage facility fees. In addition, it can be very satisfying to start over in a new location, accompanied only by the possessions that you need and love.

When you have a family, moving can add an additional layer of complexity. You will find yourself responsible for the possessions of multiple people, some of whom may not be able to help you with sorting, cleaning, and other chores. Julie Morgenstern is an organizing and productivity expert and author of Time to Parent: Organizing Your Life to Bring Out the Best in Your Child and You. Here are her top tips for decluttering and organizing a home before you move.

Moving is the perfect excuse to “clear the clutter” and hit reset in your new home. If you have a family with kids, my warning to you is this: Don’t declutter without involving your kids (if they are old enough to speak), as they may have surprising attachments to things you aren’t aware of. And you don’t want them talking about how you threw out their favorite picture decades from now. Involve them in the process.

As soon as you decide to move, go room by room through the house and tag items according to their destination. Use different colored Post-its to distinguish what you will keep, send to storage, what you will give away, and what you will sell. Give every family member their own stack of Post-it's and have them tag away. Work on one room or closet per day, investing two to four hours per room. Keep only the items you use and love. For the items you will not be moving to your new home, here are two options:

If you are sending items to storage, call the storage company to move selected items into a nearby storage facility. Make a complete inventory of what you are sending, including the details of what is in each box. File this document in a folder called “off-site storage” and store it with your moving papers.

Call a local charity to pick up those items you want to give away, or have a tag [or garage] sale. Remember, selling items is also a lot of work. Options include Craigslist, eBay, and a yard [or garage] sale, depending on where you live, the time you have to invest, and the time of year. For true antiques and items of great value, call in an antiques appraiser or dealer who may buy directly from you.

Stacey Agin Murray, creator of Organized Artistry, is a professional organizer located in Fair Lawn, NJ. She recently decluttered prior to moving out of, renovating, and then moving back into her own home. From both her own personal experience and her work with clients, here’s Murray’s advice for tidying up before you move.

Start decluttering early! As soon as you know that you’ll be moving, start decluttering. Whether it’s an apartment or a house, you’ll be surprised at how long it takes to declutter and purge the belongings of a home.

Here are three essential things Murray says to consider:

Create a decluttering plan: Every room, cabinet, and closet needs to be decluttered before moving. Create a list of all spaces and as you purge through them, scratch the space off your list. Do not zigzag from one room to another, declutter one room at a time.
Play the “fill-the-can” game: While decluttering, do your best to fill your garbage can(s) before putting them to the curb. This will put your decluttering skills to the test on a weekly basis. Reward yourself for filling those cans! Making decluttering fun makes the process much more enjoyable.
Where will it go? Before you start purging your home, designate people and places to donate items to. Pick a thrift shop and/or relative to receive clothes you no longer want. Research what organizations take furniture and household goods. Consider websites such as Craigslist and eBay to sell items in excellent condition. Determining this information before decluttering will help get the items out of your house faster since you’ve already figured out how to “pay them forward.”

After ensuring that you will be moving as little as possible into your new home, it’s time to plan ahead for the storage solutions you will need. It’s an important consideration to keep in mind if you will be updating your new home before you move in. Chad Hanson is the managing general partner at Sustainable 9 Design + Build, an eco-friendly modern home building company in Minnesota.

In terms of designing or remodeling a home with a focus on organization, making sure you build in enough storage space is key! Too often we see homeowners paying for the remodel of their dreams without leaving adequate space for storage. It sounds super simple because it is: If you don't have storage space for your stuff, it’s going to end up in a disorganized mess somewhere else. Accurately assessing how much stuff you need to fit into your new home or remodel will allow you to build in an appropriate amount of storage space. If you don't — it’s a pain, trust me.

The best way to add storage space to an already small room is to show off your stuff. Using hooks or display shelves can provide a nice home for your shoes, coats, pots, pans, wine glasses, or whatever you want to display. It may require more work to keep straight than having the proper space in the first place, but it is a very practical and affordable option if you're in a smaller space.

Staying Organized After a Move

Now that you’ve moved into your new home, you may think your work is done, but for most of us that’s just not true! Just because you are in a new home doesn’t mean you will magically develop new habits. If you want to ensure your new home stays clean and organized, you need to invest in creating a new process and putting new rules in place. Otherwise, you might eventually end up right back where you started.

For an easy, long-term organization solution that will work for nearly anyone, Julie Morgenstern takes inspiration from early childhood education.

Think of kindergarten as you set up your new spaces. When it comes to organizing, every room, closet, and space should be designed around the concept of a kindergarten classroom: the space is divided into activity zones that reflect what takes place in each area. Group similar items together, and get fun containers, label them, and teach kids (or yourself) to use them. With some tweaks, this system works for any space (closets, kitchen, fridge, garage). The zones in a family room, for example, might be: Reading, Entertainment, Hobbies. For a kid’s room, they might be Sleeping, Dressing, Playing, Homework.

[Next,] establish a daily cleanup time. A well-organized system, where every item has a convenient, well-labeled home, should enable you to do a very quick, 10-15 minute tidying at the end of every day.

[Finally,] declutter twice per year. To keep the volume at bay, tie decluttering to predictable annual moments: end of school year, birthday, holidays. Get rid of anything that is obsolete, extraneous, broken, torn, stained or just plain annoying. Each space should be filled with only what you (and your family) use and love — so you can quickly find what you need when you need it, and put it away with speed.

Lior Rachmany is the CEO and founder of Dumbo Moving + Storage, one of the largest moving and storage companies in New York City. Having seen (and moved) many homes, Rachmany offers this four-step cleaning plan that will ensure that your new home stays clean and organized.

Schedule a specific day and time to clean, like you would a meeting, and stick to it. Avoid procrastinating your deep cleaning and don’t postpone this after you’ve selected a time. If you live with others, square away the date and time with them, in order to ensure that they’re as committed and willing to pitch in as you are.
Clean one room at a time. By focusing on one section at a time in a room, you can move from room to room more efficiently. This will make the cleaning process [simple] and full of small victories.
Make the most of your cleaning experience — turn it into a workout. Put on your favorite playlist and reap the cardio and strength-building benefits that come with mopping, sweeping, vacuuming and rearranging furniture.
Create a checklist. As you clean from room to room, write down and check off everything that you have cleaned in order to better celebrate, and keep track of, these small victories.

Sample Cleaning Checklist

Give a nice scrub-down to the walls and ceilings and other areas that you usually don’t clean regularly
Wash your windows inside and out and make sure they are spotless
Dust your books, heirlooms, decorations, and shelves
Wax wooden furniture
Wipe the floor with a mop
Deep clean your carpets and curtains — Luckily, most curtains and draperies are machine washable, but consider having carpets in high-traffic areas professionally cleaned
Clean kitchen appliances that you use on a daily basis, and if anything is damaged, make sure you have it repaired sooner rather than later
Remember that ovens, microwaves and fridges seem to be the most commonly ignored kitchen areas, therefore they can be the most problematic
Make your stainless-steel look bright and shiny again with a stainless steel polish
Organize your closet by packing your winter clothes away and making more room for your spring and summer clothing, or vice versa
Once the sheets and comforter are removed, clean and vacuum your mattresses thoroughly
Clean your books and bookshelves and line them according to the size and subject
Some chores should be done seasonally, and there’s no better time than spring to clean your outdoor furniture and make your garden and patio look more attractive

Decluttering for Your Ideal Home

Tidying up your space means more than just sprucing up its aesthetic value. An organized home can keep your anxiety down and your spirits up and can ultimately save you lots of time and money in the long run! If you are in the process of planning a move, learn about your financing options by contacting a PennyMac Loan Officer or apply online today.

The Essential Home Maintenance Checklist

2020-01-06T14:00:00-08:00

Would you rather repair a small crack, or rebuild an entire wall? How about cleaning a filter versus replacing your entire air conditioning unit? Both examples illustrate the importance of home maintenance: regularly completing small tasks can help protect big parts of your home. In this piece, we’re delivering the essentials in home maintenance. You’ll learn why you need to do it, home maintenance by season (both indoors and out), and perhaps most importantly, how to budget for home repairs. Whether you just bought your first house, or recently made a move to a home with features (or weather conditions) with which you are unfamiliar, this guide will inform you on keeping your home safe, sound, and comfortable.

Why Maintenance is Critical

Home maintenance is about more than just how your home looks — it’s also about how it works. Making continual checks and small repairs when needed will stop small problems from turning into big ones, helping you save money and prevent unnecessary wear and tear. For many of us, our home is our biggest investment, and regular maintenance can protect that investment and help it to increase in value.

Even if you understand and agree with maintenance in principle, it can be hard to know exactly how or when to put a plan into practice. Read on to see a detailed (yet easy to follow) home maintenance guide broken down by month, quarter, year, and season.

Monthly Home Maintenance

Performing consistent monthly home maintenance can help preserve the structure and systems in your home. Although these tasks need to be done frequently, most of them are quick, easy, and relatively inexpensive.

Check and clean kitchen vent hood filter: These filters trap grease and dust, keeping your kitchen clean. They are less effective when clogged, but thankfully many of the metal, reusable filters can easily be run through the dishwasher.
Look for leaks in and around sinks and toilets: Stopping a small drip right away can prevent damage to your cabinets, floors, and even the rooms below.
Check and potentially replace HVAC system filters: How often you need to do this will depend on your climate, type of system, and other factors, but a good rule of thumb is to change the filters once every 90 days.
Inspect fire extinguishers: Having an accessible, functional fire extinguisher can keep a small mishap from turning into a huge amount of damage. Make sure that you have extinguishers ready where you need them.
Clean kitchen sink disposal: Can’t find the source of that yucky smell in your kitchen? It may be your garbage disposal. Clean it by adding ½ cup of baking soda, then ½ cup of vinegar. After the foaming subsides, flush it while running with hot water.
Pay attention to your utility bills: A sudden unexplained jump in your water, electric, or gas usage could be a clue that a hidden problem is occurring.

Quarterly Home Maintenance

Now that you have your monthly tasks complete, it’s time to consider the maintenance tasks that you will need to do every few months.

Flush toilets and run water in rarely-used spaces: Unused bathroom drains can get smelly. This is because the water held in the p-trap that normally blocks sewage smells can evaporate. Taps and valves can also seize up if unused for long periods of time.
Check your water softener: Check for leaks, and add salt or other water softening agents, if needed.
Inspect and touch up caulking and grout: Replace moldy, separated, or otherwise damaged grout. Ensuring that all seams, both indoors and out, stay sealed will prevent water damage, save on utility bills, and help to keep pests out.
Test smoke and carbon-monoxide detectors: Most of these life-saving devices can easily be tested with the push of a button.
Do a deep cleaning of your entire home: Though it’s fairly big project, taking this on every three months or so will ensure that your cleaning tasks never get to the impossible stage.

Biannual Home Maintenance

Even though they only need to be done a couple of times per year, these tasks will help to preserve some of the most valuable parts of your home.

Replace batteries in smoke and carbon-monoxide detectors: Planned replacement will ensure your detectors are working in case of emergency, and will also prevent low batteries beeping in the middle of the night or while you are out of town.
Vacuum refrigerator coils: These coils release the heat produced by the condenser that keeps your fridge cold. When they are dirty, they don’t work as well, causing your fridge to work harder, use more power, and even potentially fail. They are typically on the back of your fridge, or at the bottom of the front behind a grate. Clean them with a soft brush and a vacuum with a hose attachment.
Test your water heater pressure relief valve: This valve releases any excessive buildup of heat or pressure within your water heater, preventing a messy and damaging explosion. To test the Temperature Pressure Relief (TPR) valve, lift it up and down several times, which should lift the attached brass stem allowing hot water to flow from the drainpipe. Should little to no water come out, you’ll need to contact a plumber to replace the valve. If water does continue coming out of the valve, go ahead and raise and lower the valve to clear up debris.
Have your air conditioner drain line flushed: This quick process, which you can even do yourself, prevents messy, damaging leaks. Be sure to check your drip pan for leaks as well.

Home Maintenance For Every Season

In addition to the regular testing and upkeep schedule discussed above, it’s important to remember that each season comes with its own set of opportunities (and potential challenges) in terms of maintenance.

Fall Maintenance

Indoors: Switch your ceiling fan direction to clockwise to push warm air down into the room. Clean your dryer vent to prevent fires and have your HVAC system and chimney cleaned and serviced, if needed.

Outdoors: Clean up any leaves that fall in your yard, making sure that no drains are blocked and that your gutters are clear. Protect your outside plumbing from freezing weather by turning off any exterior faucets and winterizing your pool and sprinkler system.

Winter Maintenance

Indoors: Pay extra attention to your furnace filters and keep the temperature inside your home to at least 55 degrees, even if you will be gone. To prevent sink pipes from freezing on very cold days, you can open the cabinet doors below the sink or additionally run a trickle of hot water.

Outdoors: If you live in an area with a lot of snow and freezing weather, make sure that you have the supplies you need for snow removal, including a roof rake to prevent ice dams.

Spring Maintenance

Indoors: Switch your ceiling fan direction to counterclockwise to pull cool air up into the room. Look for any leaks during thaws, and plan for the necessary repairs. Make any landscaping updates that you have been planning.

Outdoors: Spring is a great time to power wash the exterior of your home and perform any paint or stain touch ups that are revealed. Clean up any winter debris in your yard. Add fertilizer and a fresh layer of mulch to your garden beds.

Summer Maintenance

Indoors: While checking your air conditioner or HVAC filter regularly is important, it will work more efficiently to cool your home if you change it if needed, before hot temperatures hit. Repair any screens or windows that are letting in pests.

Outdoors: Mow your lawn regularly, and water your yard when needed. Keep your pool balanced and clean, and tackle any exterior repairs or projects that will be easier in warm weather.

How Much Should You Budget For Home Maintenance?

Now that you have a better grasp of many of the maintenance tasks that go into owning a home, you might be wondering just how much all of this will cost. Making sure that you include maintenance in your budget is important — it’s a part of the “true cost” of owning a home, as it is something that no responsible homeowner can afford to ignore. While the amount is different for every individual (and every individual home), there are a couple of ways that you can estimate the amount that you will need to budget for home repairs.

The 1% Rule: The 1% rule dictates that you should set aside at least one percent of your home’s value every year for home maintenance. For example, with a $450,000 house, this comes out to $4,500 per year for maintenance.

The Square Foot Rule: Another home maintenance budgeting trick says to set aside $1 for every square foot of your house, then use that money for yearly upgrades and repairs. For example, if you own a 1,500 square feet home, you’ll want to save $1,500 each year for maintenance. You may not use all $1,500 each year, but over the long term of homeownership, your costs will average out to $1,500 per year. In addition, keep in mind that this rule doesn’t take into account the costs for labor and materials, so if you plan to hire someone to do repairs, that estimate may fluctuate.

Additional Factors to Consider When Budgeting

Although the 1% rule and the square foot rule are good guidelines, there are additional budgeting factors that may impact the amount you will need to save for home maintenance.

House Age: Most older homes require more maintenance, and the age of your appliances and other major systems needs to be considered as well.

Location: Whether you are in the humid south, the hot, dusty desert, or the freezing, snowy north, your location will impact what upkeep you will need to perform on your home.

Overall Condition: Did you buy a vintage fixer-upper, or a totally updated turn-key? The overall condition of your home will impact your budget, as one big issue, like a leaky roof, can lead to multiple smaller maintenance needs.

House Type: The suburban single family home with a large yard will require a bigger outdoor maintenance budget than a condo with a small patio (and an HOA that performs all exterior maintenance).

You Know the Maintenance, Now Land Your Ideal Home

Most homeowners find satisfaction and even joy in taking care of their home. It’s a way of preserving and growing their investment, while also creating a comfortable and enjoyable place to live. If you are ready to commit to taking care of a home that will in turn take care of you and your loved ones for many years to come, reach out to a PennyMac Loan Officer or get pre-approved online today.