3 Areas Your Home Inspector Should Check in the Attic

On December 16, 2014   /   Home Inspection  
Tags: , , , ,
home inspection

By: Patricia Anne Tom

Before purchasing a house, it’s important to hire a home inspector to evaluate the home from bottom to top—including the attic.

This often-overlooked storage space can provide visual cues to potential problems in the safety and structural integrity of a home.

If there is damage present, the inspection can help you determine what to bring into the sale negotiations, including an estimate of repair costs.

Look at these three primary areas when analyzing the attic.

1. Structural Damage

Before closing on a home, the home inspector should examine the attic for structural damage. Damage to the trusses and rafters can indicate that the home has shifted, causing them to crack or break. A substandard level of wood quality, improper construction or incorrect lumber size may have allowed these pieces to deteriorate and could cause the roof to sag and eventually leak.

If there has been fire damage, you should be able to see evidence in black marks from charred or smoke-damaged wood. However, check to see that such damage hasn’t been camouflaged with layers of paint.

Because water usually enters the shell of the home from the roof and not from the sides, you may see water stains if the roof is leaking or has leaked in the past. Signs of moisture also could indicate that ventilation is inadequate.

Inspectors also may be able to see pest damage from termites if they have eaten the wood (or from other rodents that can leave chew marks on wires and insulation or excrement). Rodents like squirrels and rats often enter through the eaves or loose boards.

2. Proper Insulation

An attic must be properly insulated with the required R-level of insulation material for your climate: the colder the climate, the higher R insulation number. Your home inspector will note whether this is up to code, as the code may have changed since the home’s original construction.

An inspector also should be able to tell you whether insulation has been placed properly and in the correct direction, according to the type of batts (sections of insulation backed with heavy paper) or blow-in insulation used.

In addition, attic windows and dormers should be properly insulated and in good condition to prevent outdoor elements from entering into the attic.

3. Chimney and Storage Areas

An attic inspection will show the condition of the exterior of the chimney shaft under the roof. It should be sealed properly where it meets the attic floor and roof. The condition of the bricks and mortar should be solid—not cracked and crumbly.

Although this inspection will not tell you what the interior chimney shaft condition is like, it will give you an idea of the chimney’s exterior structural health.

While the inspector performs the attic inspection, note the condition of storage areas and attic floors, look for damaged floorboards and again look for evidence of water, pest and fire damage.

Crawling into the attic may be uncomfortable, but a proper inspection will help to ensure there are no skeletons in the attic that will haunt the integrity of your future home.

Updated from an earlier version by Philip Commins.

Back to Top

Help! I Lost My Job While I Was Buying a Home

On September 28, 2014   /   Home Finance  
Tags: , , ,
purchase home

By: Credit.com

Help! I Lost My Job While I Was Buying a Home

Losing a job is tough enough. But what do you do if you find yourself out of work when you’re weeks or even days from closing on your dream home?

Brutal, but it happens.

Employment isn’t a requirement for getting a home loan—just ask retirees. The issue is ensuring there’s stable, reliable income that’s likely to continue. For most homebuyers, the source of that stream is a steady 9-to-5 job.

Needless to say, losing your job unleashes a wave of uncertainty into the loan process. It doesn’t automatically kill your deal. In fact, it may not even delay things. Whether you can salvage the purchase often depends on your overall income picture and how quickly you land a new gig.

And even then, you’re still at the mercy of an eagle-eyed underwriter already on high alert. Success in these situations comes on a case-by-case basis. Here are a few things to know.

Should You Tell Your Lender?

Your first inclination might be to see if you can sneak one past the goalie. That’s a bad idea for a couple reasons.

One, lenders verify your employment and income early in the loan process and again near the time of closing, sometimes just hours before. They’re almost always going to hear it straight from your (now former) employer.

Two, you could be committing mortgage fraud by failing to disclose your job loss. Borrowers usually sign documents requiring them to notify the lender about any significant changes to employment or income.

Three, even if you could keep it a secret through closing, would you really want to? Unless you’re hopping into another job, making those new mortgage payments might be a real challenge. Defaulting on a home loan can wreck your credit and hamper your financial profile for years.

In fact, missing payments on any debt can hurt your credit, and if your job loss results in late payments on other debts in the lead-up to your mortgage closing, your credit score will reflect that.

Monitoring your scores can help you keep up with what’s going on with your credit so you can address any problems with your creditors and your lender (and one way to monitor your scores for free is through Credit.com).

New Employment

You may be able to hang onto that new home if you swiftly land a new job. It’ll need to be similar to your old one, in terms of the field, the type of work and the pay. Written details and confirmation from the new employer can help.

Lenders may require you to be back to work for 30 days before moving forward, a wait that could affect everything from your closing date to your interest rate and more. In some instances, you might be able to convince the lender to move forward without delay, especially if you get a new job posthaste.

So much depends on your specific situation.

Depending on the loan type, you could also look to add a co-signer and count that person’s last-minute income. That person would need to meet the same credit and underwriting requirements you did.

Also, you should both fully understand the implications of being a co-signer, i.e. what happens if you miss a payment.

Talk with your loan officer and your real estate agent about your options. Remember that continuity is critical regarding the new job. Jumping into a new career will usually require a significantly longer wait before lenders are willing to count that income.

Other Income

Most people need their employment income to qualify for a home loan. But some borrowers may have other sources that can satisfy the lender.

Retirement income, disability income and rental income can all be considered. Lenders will want to verify these sources and have confidence that it’s likely to continue for at least the next three years.

—

This article was written by Chris Birk and originally published on Credit.com.

Back to Top

Know the Rules for Buying Property With Your IRA

On August 3, 2014   /   Real Estate News  
Tags: , ,
ira

By: Craig Donofrio

Your Individual Retirement Account can invest in more than stocks and bonds—an IRA also can buy real estate.

But it isn’t as simple as finding a property, investing and moving in. Be prepared to do a good amount of research and financial planning before you start signing papers.

How Buying Property With Your IRA Works

First, you need a self-directed IRA fund. As the name implies, all investment decisions using your IRA are made by you, instead of the IRA holder. But while you make all the decisions, you need a custodian to make investments on your behalf.

Custodians are companies “strictly there to manage the transaction, the paperwork and the reporting,” says Denise Winston, financial expert and author of Money Starts Here! Your Practical Guide to Survive and Thrive in Any Economy.

Custodians will also charge fees related to administrative and reporting purposes, and they don’t give direct advice.

“They may have a seminar, a report or some articles to help you be a better investor, but the deal is the liability relies on us, as a consumer,” Winston clarifies.

You also aren’t limited to buying a house with your self-directed IRA. Some investment examples include these property types:

  • Vacant lots
  • Parking lots
  • Mobile homes
  • Apartments
  • Multifamily buildings
  • Small businesses
  • Boat slips

Avoid Pitfalls

Self-directed IRAs can get tricky, and if you’re not careful, you can wind up in a sticky situation.

For example, don’t expect to live in your property until you retire.

“This is not any kind of personal transaction,” Winston says. “This can’t be a primary, secondary residence or a vacation residence. It strictly has to be a business transaction.”

Neither you nor your immediate family can benefit from the investment before you reach the IRA’s distribution age. If you do, you’ll be slapped with a tax penalty and could have your IRA invalidated.

Everything you use to fund an IRA investment property must come out of your IRA. Likewise, money that comes out of the investment property must be given back to your IRA. So if you buy an apartment and rent it out, that rent money must go back into your IRA—not your wallet.

Similarly, if your investment property requires repairs—like a new water heater—you need to use your IRA to pay for it. If your apartment isn’t rented for months, you’ll still have to use your IRA to pay for the taxes.

“If you don’t have a reserve in there, you have a big problem on your hands,” Winston adds.

Tips

A self-directed IRA can be a great choice for some people—provided you’ve done your homework. A rule of thumb from Winston: “Only invest in what you know and you can explain.”

Potential investors should meet with a financial planner, an attorney, or both before investing in a property. Go over all governing rules for the investment and don’t get caught unaware by any applicable taxes or tax implications.

“There are very specific rules, and it’s a very specialized transaction,” Winston says. “Do your due diligence and research before you get too gung-ho.”

When planning, be sure you have enough money in your IRA to cover taxes, emergencies, maintenance and other potential problems. If you don’t, you’ll have to make the maximum annual contribution and hope it’s enough.

“Live ‘as if’ and do it with pen and paper first,” Winston suggests. “Ask, ‘What if this happens? Where would I get the money?’ You’ll quickly see where the gaps are.”

Back to Top