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Updated: Monday, November 23, 2020

When Is the Best Day of the Month to Close?

Maybe youve heard this and maybe you havent, but when someone asks when the best time is to close on a contract its typically at or near the end of the month. Why? Because its how mortgage interest is accrued. When someone makes a mortgage payment on the first of the month, the payment doesnt apply to the month about to be lived in but instead its for the interest that accrued for the previous month. But at the settlement table when a purchase mortgage is taken out there are no previous occupied days, yet interest is still collected.

Its called prepaid interest and its an amount that includes interest on the first day of the new note up until the first of the following month. If a closing takes place on the 20th of the month, the lender will collect interest up to the first of the following month. In this example that would be 10 days. If on the last day of the month, there will only be one days worth of interest collected.nbsp;

Then, there would be no mortgage payment on the first of the following month because its already been paid. So, with a purchase transaction, it makes sense to close as close to the end of the month as possible. Some like to give a little breathing room and close on the next to last day of the month just in case something happens to cause a delay.nbsp;

The closing date on a purchase is clearly laid out on the first page of the contract. Closing must take place on or before that date. Any extension must be agreed to by both parties. Theres really no wiggle room about that. If the buyers cant close on the specified date, they run into the possibility of losing their earnest money deposit.

On the other hand, theres a bit of a difference as it >

When refinancing, there will be interest in arrears for the number of days for the old mortgage plus prepaid interest collected up to the first of the following month. Again, because the interest has been prepaid, there will be no mortgage payment on the first day of the next month because its already been paid.

During a purchase transaction the closing date is established upon execution of the contract. When refinancing, its completely up to the homeowners not just whether or not it makes sense to refinance but setting a closing date.


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5 Surprising Ways to Invest in Your House

Expanded Driveway

One area that many people never think about changing is their driveway. Over the years, a lot of people have learned that they can expand their driveway to hold more cars. This is especially useful if you have multiple vehicles that members of your family drive.

In the average neighborhood, there is simply not enough space for more than a few cars. It is a small investment to expand the driveway of your home, and the potential future buyers will love this feature.

New Cabinets

The kitchen is one of the most important areas of the home when it comes to selling. Cabinets are a central point of any kitchen. If you want to improve or replace your cabinets, it is vital to work with a company that has experience in the field. Look for cabinet refinishing companies near you through online sources.

The cabinets in your kitchen should flow with the rest of your home. With such a large investment of both time and money, make sure that you have conducted research on the best cabinets for your current home.

Tile in Bathroom

Another vital room in your home is the master bathroom. You will spend a lot of your time in this room, so it is important to make it as inviting as possible.

Upgrading the floors in your bathroom is a great choice. Tile is the most common piece of material to use. Not only does it last longer, but it looks much better than other options as well.

Heated tile is another feature that many people enjoy. In the cold mornings of the winter, heated tile can be a nice luxury. As soon as you walk on the tile, your feet will be heated and you will enjoy the bathroom experience much more. This is new technology that a lot of people are upgrading to.

Smart HVAC System

Everyone knows that a new HVAC system is not cheap. However, there are new HVAC systems that focus on reducing your total energy consumption. Although these units are still expensive, you will save some money every month on lower electricity bills.

With so many options on the market today, it is vital to spend some time finding the right model for your home. If you live in a cold area, make sure the heating unit is large enough to heat your entire home. In many areas, the upstairs part of the home is difficult to heat in the winter without a large unit.

New Paint

Perhaps the easiest way to improve the value of your home is to simply paint the walls. New paint on the walls can really improve the look and feel of your home. Although you can do the painting yourself, it makes sense to hire someone who has experience painting.

Painting an entire house is a long process. Although it will not be cheap, it will improve the value of your home greatly. This is one of the best things to do right before you list a home on the market.

Investing in your home is one of the best financial decisions that you can make. As the housing market continues to improve in value, investing in your home will help you financially. You can even use the equity in your home to pay for the new upgrades that you want.


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How To Create Year-Round Home Curb Appeal

Exceptional curb appeal will add to the enjoyment and value of your property and home. Maintaining your curb appeal throughout each season may pose its challenges, but with these tips, you can ensure that your home and landscaping will look their very best throughout the year.

1 Clean It Up

A thorough power wash is essential for maintaining the cleanliness of your home, driveway and walkways. Many homeowners prefer to do this in the spring, but you might consider an additional wash in the fall as well. By keeping your landscape free of debris like broken branches and dead trees, you can better maintain the appearance of your property.

2 Planting for Seasonal Interest

Its helpful to plant with each season in mind to ensure that your landscape looks great year-round. Spring bulbs and flowering trees add visual interest to your landscape at the start of the growing season. A lush lawn and pots of colorful annuals can provide eye-catching appeal in the summer. Think about late summer perennials and deciduous trees or shrubs that boast spectacular fall colors. Evergreens are >

3 Vertical Interest

To avoid flat looking landscaping, be sure to include vertical interest. Arches, even when bare during the winter season, will add visual interest to your front yard. Hanging plants, vines, climbing plants, t>

4 Hardscaping

Plants arent the only method of achieving excellent curb appeal. Consider replacing a worn-out front walkway with elegant cobblestone or brick pavers. Replace mulch with stone or encircle trees and shrubs to achieve a more formal look for your property. Boulders can be strategically placed to draw the eye and provide further visual interest for your setting.

5 Tackle Problem Areas

If you have a slope thats difficult to mow or a sunken section of landscaping that always seems to flood, consider a solution. A low-maintenance, terraced garden is ideal for sloping sections of land that are difficult to mow. On the other hand, there are no-mow grasses that can replace a traditional lawn. Installing adequate drainage for low-lying areas of your landscape can help reduce the flooding that occurs during stormy seasons.

6 House Appeal

You can increase the year-round curb appeal of your home by maintaining its outward appearance. A pleasing door, elegant fixtures, contemporary railings, eye-catching shutters and stylized window boxes will go a long way to boost your curb appeal. For an additional wow factor, consider expanding your porch or replacing worn siding to improve the appearance of your home.

Conclusion

Great curb appeal begins with assessing your current setting. When you do install new features, its important to consider how they will appear during each season.


Andrea Davis is the editor for HomeAdvisor, which helps homeowners find home improvement professionals in their area at no charge to ensure the best service in the shortest amount of time.


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Should You Add a REIT To Your Investment Portfolio?

A lot of people want to invest in real estate, but theyre not ready to flip properties or be a landlord. There are other ways to invest in real estate without having the responsibility of holding physical property. One way is a Real Estate Investment Trust or REIT.

The purpose of a REIT is to help individuals invest in income-producing real estate. A REIT will own and usually operate real estate or >

The REIT isnt a developer who aims to resell. Instead, they buy and develop properties to operate them as part of their portfolio.

Again, one of the big benefits of a REIT is that as an individual retailer investor, you can own a share of real estate income without going and buying commercial real estate.

How to Invest in REITs

There are a few different ways to invest in REITs. In general, you buy shares listed on stock exchanges. You can also purchase shares in a REIT ETF or mutual fund. An estimated 87 million Americans invest in REITS through their financial funds and retirement.

The price of REIT shares fluctuates throughout the trading day, like companies with publicly-traded stocks.

The four types of REITs are:

  • Equity REITs: Most REITs that are publicly-traded are equity REITs. Equity REITs own or operate real estate that produces income.
  • mREITs: These are also called mortgage REITs, and they produce income by having mortgages or originating them and mortgage-backed securities.
  • Public non-listed REITs: These are SEC-registered REITs that dont trade on the national stock exchange.
  • Private REITs: These are SEC registration-exempt and dont trade on the national stock exchange. Usually, theyre only available to institutional investors.

If you want to buy shares of a REIT listed on a major stock exchange, the process is the same as buying shares of another public company. If you buy an ETF or mutual fund, you may find more liquidity than buying traditional shares.

Buying private REITs is more complex, with them being limited to accredited and institutional investors.

What Are the Pros and Cons of Investing in REITs?

Some of the benefits of adding a REIT to your portfolio include:

The biggest advantage is exposure to real estate. You dont have to acquire properties directly, and you can still take advantage of the upside of the real estate market. Owning real estate directly can be lucrative but also risky and time-consuming.
REIT companies must payout at least 90 of their taxable income to their shareholders, so theyre a good option for dividends. You could use REITs as a source of income.
Theres diversification with REITs. Real estate is an asset >

The downsides of REITs include:

The dividends earned on REITs are usually taxed at a higher rate than the dividends of traditional stocks.
Theres a high level of risk and volatility that comes with REIT investment, even though they dont always follow the market. There can be big swings in the real estate market and the economic market in general that have a massive impact on the volatility of REITs.

Whether or not to invest in a REIT depends on a few factors. First, how risk-averse or tolerant are you? Second, are you interested in adding something to your portfolio that tracks the real estate market? Is this a better option for you than a traditional real estate investment?

Theyre all things to ask yourself about REITs, which do have the advantage of beingnbsp;income producers.


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HOA Group Think

Homeowner associations are often portrayed as the detached governed by thankless volunteers. Its the blind leading the blind or rather the clueless in charge of those that could care less. So how should this union of the unwilling go about acquiring the wisdom it needs?

James Surowiecki makes the case that a group is smarter than the smartest individual in his book "Wisdom of Crowds." Surowiekis research indicates that the wisdom of answers from those with only general life experience exceeds the wisdom of world experts. Here are some excerpts from an interview:

How did you discover the wisdom of crowds?

"The idea really came out of my writing on how markets work. Markets are made up of diverse people with different levels of information and intelligence, and yet when you put all those people together and they start buying and selling, they come up with generally intelligent decisions. I realized that it wasnt just markets that were smart."

Could you define "the crowd"?

"A "crowd" is any group which can act collectively to make decisions and solve problems. So, big organizations like a company count as crowds and so do small groups, like a team of scientists working on a problem. But so are groups that arent really aware of themselves as groups, like investors in the stock market. They make up crowds, too, because theyre collectively producing a solution to a complicated problem: the choices of investors determine stock prices."

Under what circumstances is the crowd smarter?

"There are four qualities that make a crowd smart:

nbsp;

Diversity. Group members are bringing different pieces of information to the table.

Decentralized. No one at the top is dictating the crowds answer.

Summarizes Answers. Combines all member answers into one collective verdict.

Independent. Individual answers are independently arrived at without worrying about what others think."

nbsp;

And what circumstances can lead the crowd to make bad decisions?

"Bad answers are more likely when most of the group are biased in the same direction. When diverse opinions are squelched, groups tend to be dumb. It usually spells disaster when too much attention is paid to what others think. Stock market bubbles are a >

What kind of problems are crowds good at solving and what kind are they not good at solving?

"Crowds are best when theres a "right" answer to a problem. If there is a factual question, groups consistently provide the correct answer. Groups arent good at problems of skill -- for instance, dont ask a group to perform surgery or fly a plane."

Why are we not better off finding an expert to make all the hard decisions?

"Experts, no matter how smart, only have limited amounts of information. They also have biases. Its very rare that one person can know more than a large group of people, and almost never does that same person know more about a whole series of questions. Its actually hard to identify true experts."

How can the crowds collective wisdom help an individual?

"The principle works for individuals as long as the groups are diverse and individuals try to be as independent as possible."

Is the wisdom of crowds about consensus?

"No. The wisdom of crowds emerges from disagreement. Its the "average" opinion of the group, but not an opinion that every one in the group can agree on. Collective wisdom does not result from compromise."

In the final analysis, while its common to >
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Should You Move Out During a Remodel?

Maybe youve been planning a remodel for quite some time, and youre finally getting started. You might be doing a large-scale remodel to make your home more functional for your family, or perhaps the plan is to get it ready to sell.

Regardless of why youre remodeling, theres a big question that will arise: should you stay, or should you go? Meaning, should you move out while the work is being done?

The following are some of the things to think about as you decide.

Is Moving Out a Realistic Option?

If you have family or friends that are willing to take you in for a period of time, this may not be a concern, but otherwise, can you realistically afford to move out? If youre paying several months of rent, for example, think about how much this will add to your total renovation costs.

It could be thousands or tens of thousands. Thats even if you can find a short-term rental for the window of time youll need.

Even if you technically have the money to move out and into temporary housing, could that money be put to better use in the remodel itself?

Do You Work From Home?

A lot of people work from home for the foreseeable future because of coronavirus. If youre one of them, and perhaps your spouse is as well, you may need at a minimum a >

Working in a construction zone can be even tougher than trying to live your day-to-day life in one.

Maybe staying throughout your renovation would cause your productivity to take such a hit that you just cant manage it, in which case you might move out.

Staying Could Extend the Timeline

If you stay during a remodel, the contractor is going to have to work around you. Theyre not going to be able to work hours that are as flexible such as in the evenings. Theyre going to be building their schedule around yours, which might mean that it takes longer to finish things.

Plus, youre taking up space, and your personal items are as well. That can slow down the process.

What Part of Your Home Are You Renovating?

Whether or not you move out can depend on your budget and timeline and what the project is. If youre renovating something like a kitchen or bathroom, it can make more sense to move out. Otherwise, you may have to set up a temporary area of your home for essential functions like preparing snacks and meals.

Of course, if youre doing a gut renovation you probably dont have any choice. Youll have to move out. Otherwise, in addition to the obvious downsides, you might also be exposed to toxic chemicals and fumes.

If youre renovating something like a basement or a living area, you might not have to move. It could be that you can stay out of that area easily enough during the renovation. You just need to think about your needs and life>

Some homes have layouts that are more conducive to staying put during a renovation too. For example, maybe you have a multi-level house so you can confine most of your activities to one level or the other during renovations.

If you do stay in your home, but you restrict yourself to an area where work isnt being done, you can rent a storage pod so you can completely empty the work area. This will keep your furniture and other items protected, and it will also make it easier for the people who are working.

Safety

Safety is another issue that is likely to sway you in one direction or the other. If you dont have kids or pets, or your kids are older, this might not be a concern. If you do have kids or pets, staying in your home during renovations can be a safety concern.

The contractor and subcontractors should make an effort to keep their work areas sectioned off, but worksites are inherently risky.

If youre trying to decide whether or not to move out during a remodel, theres not one right answer that works for everyone. It depends a lot on how much you can tolerate in terms of inconvenience, your family and life>
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The Pitfalls of Fractionalized Deeds of Trust

Many investors like the alternative lending space where they can invest in mortgages, otherwise known as, Trust Deed investing, whereby they become the lender on real estate. The two major ways to invest in these mortgages is either in some kind of pooled investment [a Fund], similar to a mutual fund or owning the deed of trust on a specific piece of real estate, similar to owning an individual stock.

In the case of investing in a Fund, the investor invests in the Fund, and the manager chooses which loans to make to borrowers. In the situation of owning an individual deed of trust, the investor chooses which specific loan to invest in and is recorded on title. It is the latter that is the focus of this article, and specifically fractionalized deeds of trust where the investor shares ownership in the investment with on or more other parties.

Most note brokers [in California; other states may vary] are licensed to fractionalize a deed of trust [notes] with up to 10 owners [beneficiaries]. Other brokers have licenses from the Department of Corporations to have more than 10 beneficiaries. The reason brokers fractionalize notes isnbsp;usually because they are too big for one investor. A 40,000 note may be able to find a home with one investor, but a 700,000 note may need more than one investor in order to be funded. Each investor receives a recorded deed of trust [for their protection as evidence for their loan]. When the borrower pays the loan off, each investor is required to reconvey their interest in the loan [notarized signature] in a timely manner [California requires this be done within 21 days of the request]. The reconveyances are deposited in escrow, and each lender is paid off in escrow as well.

If everything goes smoothly, no one complains; however, what happens if things dont go according to plan? What if a lender is unavailable to sign off in a timely manner? What if a lender refuses to sign? What happens if the borrower defaults on a fractionalized loan? What happens if you have a minority interest [less than 50 ownership] in a fractionalized loan? These are just a few instances where a fractionalized lender faces challenges, and these challenges can be monumental.

First, lets look at a simple situation where a 900,000 loan has been fractionalized into 9 different lenders [each having 100,000 ownership in the loan] and 8 of the 9 lenders signs the reconveyance paperwork in a timely manner but one chooses not to sign [in time, or not at all]. Why would the lone lender choose not sign? What if the loan was very well secured and the note was yielding a higher than market rate of interest? A nave lender may think that they can enjoy the higher interest for longer than allowed [not signing in a timely manner]. This situation is not as far fetched as one might think. In the 1990s, first deed of trust notes yielding 12 were not uncommon. When rates dropped dramatically, borrowers were quick to refinance. One investor tells the story of how a 12, 1.2M loan was trying to be refinanced by the borrower at 9 with a new lender. The fractionalized note had 5 owners. 4 of the 5 had their reconveyances notarized and delivered to the escrow company in a timely manner. The last investor had 500,000 in the note and did not want to lose his 12 rate; he was under the misconception that he could just keep coming up with excuses as to why he was not able to get to a notary [he was a busy surgeon]. After more than a month went by, the borrower sued all of the lenders for the difference in the rates [3] plus attorney fees. Although thenbsp;lone holdout was ultimately responsible, all of the other lenders had to defend themselves, which put undue burdens upon the innocent 4 lenders.

Next, lets look at a situation where a majority [over 50] lender chooses to extend a loan when it matures, and a minority lender does not. Unless the minority lender requests a partition action so as to separate himself from the majority lender, the majority lender is in control of the fate of that loan.

Dealing with foreclosures by the lenders introduces an enti>

Thus, foreclosing may not even be possible if the note holders cannot agree to their destiny or come up with the funds needed to file the paperwork to foreclose [which can be many thousands, depending on the size of the loan].

Other issues arise even if foreclosure has been started; one lender tells the story of how the borrower stopped making payments to both the 1st and 2nd mortgage. This particular lender was one of many in the 2nd mortgage. The 1st started the foreclosure process. Nobody in the 2nd mortgage wanted to cure the 1st. There was an offer by an independent 3rd party to purchase the property for the 100,000 over the1st mortgage, which would have been given to the 2nd [which would have paid its loan down but not off]. There were 25 beneficiaries on the 2nd DOT. 24 of them chose to allow the salenbsp;and take the 100,000, which would have amounted to a short sale; however, the one lone holdout, who represented only 4 of the 2nd, refused to sign off on the sale. His reasoning? He stated that he believed that, at the foreclosure sale, someone would bid the property up more than 100,000 over the 1st. Not only was this illogical [based upon the value of the property], but it went against his previously signed documents stating that he would go along with the majority, opening himself up to a lawsuit by the other lenders. The title company refused to give title insurance to the potential buyer, and the sale never went through. At the trustee sale, one bidder bid just over the 1sts credit bid, and the 2nd walked away with zero.nbsp;

Many individual trust deed investors believe they are protected from many perils if they own over 50 of the note, as most states have a rule that the majority holder makes the rules; however, title companies are not bound by such laws. If they refuse to give title insurance, any prudent would-be buyer of the property will walk away.

Another issue is that an investor in a note does not have to come up with his fair share of the money it takes to file foreclosure, and there is no provision that states that other investors who come up with more money get a preference, so it is difficult to maneuver a foreclosure unless each person comes up with his percentage required.

Other not infrequent situations come up where the borrower wants to do a loan workout or re-write the note. Unless all parties agree, everything is at a standstill. Some unethical fractionalize note holders will sometimes hold this over on the rest of the note holders by demanding a larger share than they are entitled to or demand that the other investors buy them out.

For these reasons, many investors have turned to Funds where the Fund manager handles the foreclosure paperwork, pays the fees, and sees the entire process through.

The takeaway here is that one needs to be extremely careful if one wants to invest in a fractionalized note not only do you want to own more than 50 of the note, but make sure you know every other owner and have like minds, which, in todays world, is more than a daunting task.


nbsp;nbsp;Edwardnbsp;Brownnbsp;is in the Investor >
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Buyers: Reset Your “Must-Haves”

Home buyers who had their real estate plans interrupted by the pandemic may benefit from a reset before they plunge into the current real estate market.

Buyers whose real-estate buying efforts stalled in March 2020 may benefit from reviewing their must-have list and how they created it.

Buyers whose pandemic experience triggered a work-from-home must-have list may benefit from adopting a long-term view of how they need home to function for them and their family.

How much have your experiences during the pandemic changed your lists of real estate must-haves, dont-wants, and ready-to-splurge-ons?

Real estate buyers want a new homean invigorating space to spread out in, an affordable celebration of what theyve achieved, a comfortable shelter to share, somewhere to play, a place to belong.

Over the last few months, a lot has changed. The old normal has been replaced in ways that are only now becoming apparent.

Pre-covid, open conceptwhich is commonly created by tearing down interior wallswas a sought-after life>

Opening lines of sight and combining three, four, or more functional roomskitchen, dining room, livingroom, rec room, hobby room, studycreates an enviable airy living environment. Parents can see what children are up to; the family cook is part of the action instead of being shackled to the stove; entertaining is enhanced for guests who can scatter across welcoming spaces without missing out on anything.

After more than nine months of families isolating together in open-concept spaces 24-7, this unstructured environment hasnt provided the perfect life>

What makes looking after pre-school and small children easier may not work as well when your children are a few years older or in high school. For instance, teens value personal space and privacy so you may be sitting in the open space alone.

Working and schooling from home requires privacy and quiet for concentration. High ceilings, hardwood floors, and hard tile surfaces can become noisy nightmares. Balancing hard and soft surfaces with acoustical panels is an often-overlooked solution.

Cost can also be a factor. When you are only using one corner of your high-ceiling, open space, you will still have to heat or cool the entire volume 24-7.

Buyers, stop and think why you want what you want and what youll need over the next two or three yearsthat is, during and after the pandemic:

1. Where did your wants come from?

Do many of your must-haves reflect pre-covid working-away-from-home life>

2. Whats typical?

Talk to your real estate professional about the age, construction quality, common defects, and dated-design features of homes in your preferred area and price range. What will you getfeatures and building qualityfor your money and what might be beyond your price range or not readily available in those neighborhoods?

Know in advance what to expect, so you recognize realistic compromises and a deal you can enjoy living with.

3. How can you stretch buying dollars?

In view of your must-haves, where does value lie and how can you stretch your buying dollars? Will you buy a move-in-ready home, pay for extensive renovations, or tackle do-it-yourself make-overs of specific areas? Covid->

If renovation is part of your plan, dont jump into a home purchase without researching costs, wait-times for professional contractors, and completion times. Understand what youre getting into.

4. What does feels like home mean to you?

Ill know it when I see it and it must feel like home are common buyer strategies that dont always serve buyers well. Change paint color and furnishings and any room takes on a completely different feel. There may be more value in a house that is poorly decorated but that has good bones than a house cleverly staged to camouflage flaws and shortcomings, if not outright problems.

Invest time looking in magazines, at TV series, and online at before and after room make-overs to learn what it is about a room that designers see before they set to work transforming.

Measure your current rooms and larger furniture pieces to establish an understanding of how much space you really need to live comfortably.

5. Do you understand that What You Dont Know About Real Estate Could Cost You?

Its what you dont know about real estate that could cost you when buying or selling. What you dont know about real estate, real estate professionals do. Learn about significant knowledge gaps for buyers and sellers, and how professionals fill those gapswhen askedRead on

As always, a prepared buyer/seller is a confident buyer/seller


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What Are the Pros and Cons of Open-Concept?

If youve ever watched a real estate show, youve likely heard the number one thing buyers want is an open floorplan. Open-concept design has its perks certainly, but its not right for everyone and their needs. Despite it being so in demand, its important you think about those downsides you might not have considered.

What is Open-Concept?

An open-concept floorplan indicates a layout where there are large, open rooms and multiple functions within a single space. If you dont have a lot of square footage to work with, an open floorplan works well. If you have a large home, you might not need an open-concept plan because each individual room itself is so big.

Homes built before the 1990s tended to have a lot of separation between rooms. By the 2000s, the open floorplan was definitely the more popular option.

nbsp;The Pros of Open-Concept

The following are some of the upsides of a wide-open living area.

If you have a family, particularly with young kids, open-concept can make it easier for everyone to be together and for you to keep an eye on the kids even while youre doing other things like cooking. You get a sense of togetherness with an open floorplan.
Open floorplans help you make better use of space that would otherwise be unusable. For example, if you have a formal dining room, you may not use it often. With an open floorplan, youre more likely to use all of the space available to you.
If you entertain, open floorplans are undoubtedly ideal for you.
Taking out walls or having a design with limited interior walls allows for more natural light, and you can get outdoor views.

The Cons of Open-Concept

Again, while people rave about open-concept living, its not right for everyone. Downsides include:

If you have older children or multiple generations in your household, you might want the privacy that smaller rooms can bring to your home. If you have, lets say a nanny who lives with you or something similar, open-concept can bring you all together in a way that maybe you dont prefer.
If youre someone who loves to display items on your walls, youre going to have limited space to do so with open-concept. For art collectors, as an example, you might want more rooms and thus more walls.
If your kids regularly make a mess, have enclosed rooms can help you contain it to one room more easily, so it doesnt spill into other living areas.
Noise travels a great deal in open-concept plans.
You may want rooms that are dedicated to specific, individual uses. For example, maybe you want a home office, a workout room, or a crafts room.

If youre deciding on a new home or thinking about renovations, it doesnt have to be all-or-nothing with open-concept.

There is a middle ground. For example, maybe your living area and kitchen are open to one another, but your dining area is separate. There might also be designs where you put partial walls to provide some delineation between spaces without full closure.


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Using Income from Tips to Help Qualify

For those in the service industry, getting additional income from tips for many accounts for quite a bit of an employees take-home pay. In fact, its not unusual for someone working in a restaurant to get the majority of the income from tips as the employer pays a minimum wage. Tip income is a big deal. But when it comes to getting approved for a home loan, while tip income can be rather significant, borrowers need to be aware of how that tip income can be used to help qualify.

First, there needs to be a history of receiving it. Borrowers must be able to show receiving income over the previous two years. In addition, this income must also be consistent. Providing a two-year history helps lenders make the determination the income will continue into the future. But how the borrower treats the income is significant. Tips can come in the form of a few dollars left at the table or nightstand or included on the credit card slip. What the employee does next is critical.

Tip income must be logged. When an employer sends out W2 forms, the wages shown will typically be the minimum wage paid. Employers dont keep track of an employees tips, its up to the borrower to track it. There can be a manual log kept that keeps track of how much tip income was received and when. In addition, the tip income deposits must be verified.nbsp;

This is accomplished by reviewing past bank statements. For instance, an employee can collect tips on a daily basis but deposit the tip income weekly. These deposits must show up on these past bank accounts.

Further, the tip income must be reported to the IRS for the past two years. The income reported is the income lenders will use when qualifying, regardless of how much tip income has actually been received. For some, all the tip income might not make it to any bank account at all but instead spent on everyday expenses. Here again, while the tip income is in fact received, there is no third party record of having received it. Unless the income is deposited on a regular, consistent basis, it might not matter how much tip income is being received if there is no third party verification.

In general, lenders treat tip income just like any other in the way it can be verified and used for qualification. Lenders want to see a two year history of employment while showing the income is likely to continue. The income needs to come from a qualified source. The income must be received at >

If this sounds like you or someone you know and buying a home is definitely on the radar screen, its important to know ahead of time how to use this additional income. Lenders, employers and employees all know its there and available, but how its documented is important. If you dont really need tip income to help qualify, then theres no issue. But if tip income must be used, its crucial to properly document the receipt and keep an eye on reporting requirements.


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