Almost all home buyers know that higher credit scores mean lower mortgage rates, so it’s no surprise that one of the top questions home buyers ask is: will shopping for mortgage rates lower my credit scores?

The short answer is “No.” But only if you manage your mortgage shopping process correctly. Here’s how to preserve your credit score while shopping for the best rates.

Is it safe to have multiple lenders run my credit?

Three bureaus generate your credit scores: Equifax, TransUnion and Experian. Lenders report your monthly activities on student loans, credit cards, auto loans and mortgages to these bureaus, who then score you on an ongoing basis. Your credit scores change constantly each month based on factors like:

• Credit card balances relative to limits
• Number of open accounts and length of time accounts have been open
• On-time versus late payments
• Number of inquiries

When it comes to that last factor, credit card inquiries hit your score harder than car and mortgage inquiries. For example, if you’re out shopping at three department stores and allow all three stores to process new credit cards for you, the bureaus’ scoring models are coded to lower your score for each individual inquiry.

Each inquiry would lower your score by up to five points, or more if you have just a few accounts and/or a short credit history. The inquiries would stay on your credit report for 24 months, and your score wouldn’t recover for about 12 months — until you demonstrated strong payment history and balance-to-limit control on those new cards.

Car and mortgage inquiries make less of an impact because the bureaus know consumers shop for these big-ticket items. The bureaus’ scoring models are coded to “de-duplicate” multiple mortgage inquiries, since the end result of those inquiries would be one mortgage.

For example, if you were shopping for a mortgage with three lenders, and all three ran your credit one week, the three inquiries would show on your report, but would be scored as only one, so your shopping process would cause your score to shift by up to five points instead of up to 15.

How long can I shop for mortgages without damaging my credit?

Equifax, TransUnion and Experian are constantly changing scoring models. The newer the model, the longer a consumer can shop for mortgages with multiple lenders and have all inquiries scored as one. There’s no law requiring lenders to upgrade to the latest model, and it’s impossible to know which model is being used by which lender at any given time.

The oldest scoring models still being used by lenders de-duplicate multiple mortgage inquiries posted on your credit report in the past 14 days. The newest models de-duplicate multiple mortgage inquiries posted on your credit report in the past 45 days.

Obviously, the newer models allow for more shopping time, but since you won’t know which credit scoring model your various lenders are using, it’s safest to get your mortgage shopping done (including having lenders run your credit) within 14 days.

Will lenders take a credit report I ran myself?

You’re reminded constantly by the media and advertisements that you should check your credit regularly, but before you do anything, you must understand the following critical points:

• Federal law requires mortgage lenders to check your credit history and scores when approving your loan. So even if you have your own report, the lender can’t accept it. If they’re going to lend to you, they must run their own credit report on you. They will run scores from all three bureaus, and typically use the middle of the three scores to finalize your rate and make loan approval decisions. However, some lenders might provide initial rate quotes if you can provide a reliable and recent credit score estimate.
• Federal law also states consumers must be able to obtain a free credit report every 12 months. The only government-sanctioned place to do this is AnnualCreditReport.com. This service provides a stripped down report that doesn’t give you a credit score. There is a charge for the version of the report that includes your score. Before you pay a third party that lenders won’t accept, remember that if you’re a serious mortgage shopper (rather than someone just monitoring your credit history for other reasons), you’ll need to allow a mortgage lender to run your credit report. That lender can brief you on your credit scores and history.

After months of searching for the perfect home, making some offers, and maybe even competing with other buyers, you finally have a deal on your dream home. It took some negotiations, but you and the seller have come to terms.

Or have you?

Too often, getting a signed contract and putting your money into escrow is the beginning of what can become yet another round of negotiations. Here are five things every home buyer and seller should know about last-minute negotiations or credits.

Buyers may ask for credits based on property inspections.

Usually, a real estate contract either provides for a property inspection, or buyers inspect before signing. Depending on the property and the issues, a buyer might also have a particular type of inspection for the sewer line, septic, pool or roof.

These inspections can bring to light issues that the buyer couldn’t possibly have known about before making an offer. Once inspected, the buyer may still be interested in pursuing the sale. But given the needed repairs they will probably want to re-negotiate the price by asking for credits or a reduction in the purchase price.

Sellers should consider having a property inspection before listing.

The goal is to avoid negotiations once you’re under contract, because they’re not going to be in your favor. If you know the roof is near the end of its life or the furnace breaks from time to time, let it be known upfront, because rarely can you “sneak” something past the buyer.

You might even go as far as having your property inspected before listing the home. This way, you can address any issues, and make the inspection report available to buyers. They can come up with their best offer upfront, knowing what they’re getting.

If you have an inspection report or are otherwise assured your property is in great shape, you could even ask for an “as-is” clause in the contract. Although it’s not necessarily enforceable, it will send a strong message to the buyers that you aren’t open to more negotiation.

Sellers may try to avoid giving credits by having work done before escrow closes.

After inspections, the seller might agree to have work done before the closing. Or the seller may require that a payment is given directly to a contractor for the purpose of performing the specific, required work and nothing else.

These agreements help protect the seller, because buyers sometimes ask for credits just to help offset the closing costs — and never intends to do the repair work.

It also protects the seller if initial estimates for needed work turn out to have been overstated.

Buyers who ask for credits just to get the price down may be taking a chance.

Sometimes the buyer concedes on the purchase price thinking they can come back after the property inspection and ask for an additional concession.

The buyer may even feel empowered now that they’ve completed a series of inspections and are just weeks away from closing. The seller isn’t going to go back to the drawing board with a new buyer over a few more dollars, right?

Actually, they might. If it’s a strong buyer’s market, there’s a good chance the buyer can pull it off, but if it’s more of a neutral or a seller’s market, the seller may call your bluff. They’re assuming that you’re the one who, having invested all this time and money on inspections and an appraisal, isn’t going to walk away over a few dollars.

Buyers nearly always ask for credits, so sellers should give themselves some cushion.

You should also leave some additional room for negotiation when you’re in escrow. Always assume the buyer will ask for minor repair work — they nearly always do, even if there are no major issues. If you leave some cushion for yourself, you’ll feel better about the deal, and you’ll have protected yourself against the inevitable.

Conversely, the last thing you want is to be blindsided by a buyer asking for a few thousand dollars credit — just when you think the deal is finally done.

You may live in your home for two years, or you may hunker down for two decades. But no matter how long you call it yours, you’ll likely experience these four key stages of homeownership — from the day you get your keys to the day you hand them off to your home’s new owner.

Read on to learn more about what to expect from each phase.

Phase 1: Starting out

The “sold” sign is posted, your belongings are packed, and the day finally arrives — you get the keys to your new home. You open the front door, and possibilities abound. How will you decorate? Where will that new couch go? Which rooms will the kids choose?

This first phase is all about unpacking, settling in, and getting to know your new home. If you’ve upsized from a smaller home, you may be tempted to jump in and start filling all that extra space.

And while you may be eager to make your mark on your new home’s interior (or exterior), Diana Bohn, a Seattle-based agent with Windermere Real Estate, warns against making extensive changes to a home right after moving in.

“It’s always good to be in your home for a year or so before knocking down any walls,” she explains. “Get your furniture in there, unpack, and see how the home lives. It’s hard to know how the space is going to feel until you’ve been there for a while. Go through all the seasons at least once.”

Phase 2: Settling in

It may take you a few months to move into the second phase — or even a few years (we won’t judge if you still have packed boxes gathering dust after a year or two). But this phase is when your house becomes a home, and you start enjoying your everyday life in the space.

You’ve figured out where all your belongings should go, you’ve done the bulk of your decorating, and you’re getting to know your neighbors and a few local hangouts. You’ve likely celebrated the holidays in your home a time or two, welcomed out-of-town guests, and gotten to know (and love?) your home’s unique quirks.

Phase 3: Fixing up

If the housing market continues its current upward trend, it’s likely that, after even a few years in your home, you’re sitting on some equity. So what should you do with it? Phase 3 is often the time when homeowners can take advantage of equity they’ve gained.

First, if you bought an older home, it may be time to update some of your home’s major systems — think furnace, roof, or windows. Portland, OR-based mortgage broker Lauren Green of Green Family Mortgage recommends researching two options for financing home improvements: home equity lines of credit (HELOC) and cash-out refinances.

“Many people have no idea they can access their home’s equity,” Green says. “They think the only way to take advantage of their home’s increased value is to sell it, but in reality, there are some great ways to access the equity in your home while still living in it.”

Second, after living in your home for a few years, you probably have a better idea of the renovations that would really make your home work for your lifestyle.

“There are lots of reasons why someone may decide to remodel instead of sell and look for a new home,” says Tyler Coke, project manager and business development manager at Marrone & Marrone, a custom home builder and remodeler in the Bay Area. “One thing that appeals to many homeowners is the custom aspect of it. You can design and create exactly the type of space that fits your lifestyle and speaks to how you use your home.”

Phase 4: Moving on

When will you know it’s time to move on? And what will prompt you to move somewhere new?

“Usually, it’s some kind of transition that causes people to sell,” says Bohn. “A new job, a growing family, or downsizing once the kids move out. In big cities, we’re also seeing people moving from more centrally located neighborhoods to farther-flung suburbs, where their money will get them more.”

Whatever your reason for putting your home on the market, the day you sign on the dotted line and close your front door for the last time is likely to be a bittersweet moment. But change can be good, and the next time you buy a home, you’ll be well-versed in all four phases and know just what you’re looking for.

Trained to spot financial mismanagement, mortgage lenders take careful time to review your finances before approving or denying you for a home loan. The role of the lender in approving a loan is to make sure you have enough money for a down payment and closing costs, and to assess whether you’re able to regularly make your monthly payments. Part of how they do that is by reviewing your bank statements. That’s why it’s important to make sure all your documents and records are sorted and straightforward.

Bank statement warning signs

Overdraft charges

Lenders typically include your last two months of bank statements in their evaluation of your finances. Having a long list of overdraft charges in your account isn’t the best indicator that you’ll be a good borrower. No matter the circumstances, having a history of overdrafts or insufficient funds noted on your statement shows the lender that you might struggle at managing your finances.

Large deposits

Another red flag to lenders is when a bank statement has irregular or lump-sum deposits. This can be seen as iffy because it could appear that those funds are coming from an illegal or unacceptable source. Unless you can provide an acceptable explanation for your large deposit, it’s likely the lender will disregard those funds and apply your remaining dollars to their assessment of whether you qualify for a loan.

Signs of the bank of mom and dad

One way to help ensure that your bank statement won’t raise any red flags with lenders is by having consistent, tracked payments. If, for instance, you have automatic monthly payments to an individual rather than to a bank, lenders could see that as a non-disclosed credit account. This would be the case if you were to take out a loan from your parents and make car payments to them rather than an actual bank, for example.

How to reduce bank statement scrutiny

Take extra care of your transactions for at least a few months before applying for a mortgage. Lenders want to know that the money in your account has been there for some time, not just recently deposited. One or two big deposits into your account right before applying could indicate to lenders that the money you claim to have isn’t actually yours or isn’t a “seasoned” asset, meaning the money hasn’t been in your account for at least two months.

At the end of the day, it’s best to start the process of organizing your bank activity and statements prior to applying for a loan. When you start looking for a home, it’s best to have your financial information sorted in case your dream home hits the market and you have to move fast.

​If you keep your bank statements top of mind in the initial search phases, you may have an easier time applying for a loan and ultimately securing it. Remember: Underwriters review your accounts once more, just prior to closing. So, be sure to maintain healthy finances throughout the closing process too.

Whether you’re a seasoned or first-time home buyer, be prepared to know your FICO score and have a firm understanding of your credit history. And if you’re buying with another person, their credit history can affect your joint home purchase.

What is a FICO score?

First things first — what’s a FICO score and why does it matter? FICO is an acronym for the Fair Isaac Corporation, the company that developed the most commonly used credit scoring system. Everyone is assigned a number ranging from 300 to 850. The number assesses your credit worthiness through previous payment history, current debt, length of credit history, types of credit and new credit. For the purpose of buying a home or obtaining a loan, it’s the score most commonly used by lenders to determine the borrower’s level of risk. Many people simply refer to the FICO score as “credit score,” so we’ll do that moving forward.

Which score do lenders look at?

Typically, your lender will look at three credit scores reported from each of the three credit bureaus — Experian, TransUnion and Equifax — and then take the median score of the three for your application. Borrowers should hope for at least a 680, which is generally the minimum score for getting approved for conventional loans. For borrowers with lower credit scores, FHA loans allow a 580 score, or even as low as 500 if a 10 percent down payment is made. In any case, the higher the score, the better interest rate you’ll be offered.

Should I apply with my spouse or alone?

Deciding whether or not to include a spouse or a co-borrower on a mortgage application often comes down to whether it makes the most financial sense.

There’s not a ton of wiggle room when it comes to qualifying for a loan. You typically qualify or you don’t. If the only way you can qualify for the loan is by applying jointly to include the total income of both borrowers, then that might be your only option. But even if your credit and income are good enough to qualify for a loan on your own, applying together still might be a better option, as each scenario has its tradeoffs.

My partner has bad credit

When applying jointly, lenders use the lowest credit score of the two borrowers. So, if your median score is a 780 but your partner’s is a 620, lenders will base interest rates off that lower score. This is when it might make more sense to apply on your own.

The downside in applying alone, however, limits you to just your income and not the combined amount from you and your partner. While your credit score might be better, having a lender evaluate you on only your income could lower the total loan amount you qualify for.

If having your name on the home is a big deal, don’t worry. You can still be on the title of the home, just not on the mortgage.

Homeownership may be a goal for some, but it’s not the right fit for many.

Renters account for 37 percent of all households in America — or just over 43.7 million homes, up more than 6.9 million since 2005. Even still, more than half of millennial and Gen Z renters consider buying, with 18 percent seriously considering it.

Both lifestyles afford their fair share of pros and cons. So before you meet with a real estate agent, consider these five costs homeowners pay that renters don’t — they could make you reconsider buying altogether.

1. Property taxes

As long as you own a home, you’ll pay property taxes. The typical U.S. homeowner pays $2,110 per year in property taxes, meaning they’re a significant — and ongoing — chunk of your budget.

Factor this expense into the equation from the get-go to avoid surprises down the road. The property tax rates vary among states, so try a mortgage calculator to estimate costs in your area.

2. Homeowners insurance

Homeowners insurance protects you against losses and damage to your home caused by perils such as fires, storms or burglary. It also covers legal costs if someone is injured in your home or on your property.

Homeowners insurance is almost always required in order to get a home loan. It costs an average of $35 per month for every $100,000 of your home’s value.

If you intend to purchase a condo, you’ll need a condo insurance policy — separate from traditional homeowner’s insurance — which costs an average of $100 to $400 a year.

3. Maintenance and repairs

Don’t forget about those small repairs that you won’t be calling your landlord about anymore. Notice a tear in your window screen? Can’t get your toilet to stop running? What about those burned out light bulbs in your hallway? You get the idea.

Maintenance costs can add an additional $3,021 to the typical U.S. homeowner’s annual bill. Of course, this amount increases as your home ages.

And don’t forget about repairs. Conventional water heaters last about a decade, with a new one costing you between $500 to $1,500 on average. Air conditioning units don’t typically last much longer than 15 years, and an asphalt shingle roof won’t serve you too well after 20 years.

4. HOA fees

Sure, that monthly mortgage payment seems affordable, but don’t forget to take homeowners association (HOA) fees into account.

On average, HOA fees cost anywhere from $200 to $400 per month. They usually fund perks like your fitness center, neighborhood landscaping, community pool and other common areas.

Such amenities are usually covered as a renter, but when you own your home, you’re paying for these luxuries on top of your mortgage payment.

5. Utilities

When you’re renting, it’s common for your apartment or landlord to cover some costs. When you own your home, you’re in charge of covering it all — water, electric, gas, internet and cable.

While many factors determine how much you’ll pay for utilities — like the size of your home and the climate you live in — the typical U.S. homeowner pays $2,953 in utility costs every year.

Ultimately, renting might be more cost-effective in the end, depending on your lifestyle, location and financial situation. As long as you crunch the numbers and factor in these costs, you’ll make the right choice for your needs.

Home equity is the percentage of your home’s value that you own, and it’s key to building wealth through home ownership. Let’s take a closer look at how to build home equity without blowing your budget — and how to access it when you need it.

How much equity do you have?

Equity is easy to calculate when you first buy a home because it’s basically your down payment. For example, if you put $11,250 down on a $225,000 home, your down payment is 5 percent and so is your equity.

From 2016 to the first quarter of 2018, most first-time home buyers in the U.S. started with about 7-percent equity, according to Inside Mortgage Finance. This is encouraging because it shows you don’t need to spend years saving for 20 percent down or more before you buy. Repeat home buyers started with more equity, at about 17 percent.

How to build your equity

Here are six ways your home can create wealth for you. Some require time, money — or both. A lender can help you decide what works best for you.

1. Let your home appreciate

Building equity through appreciation can take little time or a lot, depending on the market. With home prices going up like they have in recent years, appreciation has been a boon for many home owners.

Zillow research indicates that the median home value grew from $185,000 in April 2016 to $216,000 in April 2018. If you bought a home for $185,000 in April 2016 with a down payment of $12,950, your beginning 7-percent equity would have grown to 23 percent by April 2018.

We calculate this by subtracting your current loan balance ($165,600) from your home’s current value ($216,000). Then we divide the difference by your home’s current value. One-eighth of this additional 16 percent equity is from paying down your mortgage, and the rest is market appreciation.

If you waited two years and bought the same home in April 2018 with a 20-percent down payment of $43,200, you started off with 20-percent equity. You also used 3.3 times more cash to make the purchase. And here’s the kicker: Your total monthly housing cost would be the same — about $1,050 in both cases.

This example illustrates two things:

First, the power of home appreciation. It’s a lot like buying stock and benefiting as its value goes up. But there’s also a difference: While you’ll pay capital gains on rising stock value, you’re exempt from paying taxes on primary-home capital gains up to $250,000, or $500,000 for married couples.

Second, waiting to “save enough” isn’t the primary factor in determining if you can afford to buy a home. When it comes to qualifying for a loan, lenders do indeed look at your down payment. They’ll also want to know how much you’ll have in cash reserves after closing. But there are lots of options for low down payments that require minimal reserves.

Your monthly budget is the primary factor lenders consider when deciding whether you can afford a home. Lenders will allow you to spend between 43 percent and 49 percent of your income on monthly bills, which is actually on the high side and could strain your budget.

Since 2016, most first-time buyers have spent about 38 percent of their income on housing and other debt, which is a pretty safe cap for budgeting.

2. Make a larger down payment

You can do this but, as we’ve seen, waiting to save extra cash can go against your broader financial interests if you lose the chance to build equity through appreciation. Therefore, you must strike a balance among down payment, monthly budget and savings for other priorities. A good lender can provide rate and market insight to help you do this.

3. Use financial windfalls

Take advantage of work bonuses, family gifts and inheritances to pay down your mortgage. If you do pay down in lump sums, see if your lender will recalculate (or “recast”) your payment based on the new, lower balance.

4. Make biweekly payments

Make mortgage payments every two weeks instead of once a month. Over the course of a year, this will add up to 13 monthly payments instead of 12. You’ll build equity faster and shave five to six years off a 30-year mortgage. Just make sure your lender isn’t charging extra for processing semimonthly payments.

5. Cut your loan term in half

Take out a 15-year mortgage instead of a 30-year mortgage, and you’ll build equity twice as fast. Two caveats here: You’ll have a significantly higher monthly payment and, because of that, you may have a tougher time qualifying.

6. Make home improvements

New appliances or cosmetic features like paint are unlikely to increase value. Only big improvements like new kitchens, or additional bathrooms or other rooms will add meaningful value. Make sure the cost of such improvements will create the added value you’re looking for.

How to use your equity

You must borrow or sell your home to use your equity. The three most well-known ways to get to your equity through borrowing are a home equity line of credit (HELOC), home equity loan or cash-out refinance. Compare the pros and cons of each.

Rates are rising right now, so these borrowing options might cost more in the future. Talk to your lender to determine the best approach for you.

Home equity is a valued resource, and if you have it, you might be tempted to tap that wealth for other purposes. A home equity loan, which allows you to use your home’s equity as collateral, is a great way to do this. But depending on your personal situation, it may not be the right thing to do.

Here’s when a home equity loan makes sense — and when it doesn’t.

DON’T: Fund a lifestyle

Remember when homeowners yanked cash out of their homes to fund affluent lifestyles they couldn’t really afford? These reckless borrowers, with their boats, fancy cars, lavish vacations and other luxury items, paid the price when the housing bubble burst. Property values plunged, and they lost their homes.

Lesson learned: Don’t squander your equity! Look at a home equity loan as an investment — not as extra cash when making spending decisions.

DO: Make home improvements

The safest use of home equity funds is for home improvements that will add to the home’s value. If you have a one-time project (e.g., a new roof), then a home equity loan might make sense.

If you need money over time to fund ongoing home improvement projects, then a home equity line of credit (HELOC) would make more sense. HELOCs let you pay as you go and usually have a variable rate that’s tied to the prime rate, plus or minus some percentage.

DON’T: Pay for basic expenses or bills

This is a no-brainer, but it’s always worth reiterating: Basic expenses like groceries, clothing, utilities and phone bills should be a part of your household budget.

If your budget doesn’t cover these and you’re thinking of borrowing money to afford them, it’s time to rework your budget and cut some of the excess.

DO: Consolidate debt

Consolidating multiple balances, including your high-interest credit card debts, will make perfect sense when you run the numbers. Who doesn’t want to save potentially thousands of dollars in interest?

Debt consolidation will simplify your life, too, but beware: It only works if you have discipline. If you don’t, you’ll likely run all your balances back up again and end up in even worse shape.

DON’T: Finance college

If you have college-age children, this may seem like a great use of home equity. However, the potential consequences down the road could be significant. And risky.

Remember, tapping into your home equity may mean it takes longer to pay off the loan. It also may delay your retirement or put you even deeper in debt. And as you get older, it will likely be more difficult to earn the money to pay back the loan, so don’t jeopardize your financial security.

Know what we hate? We hate going through mails and seeing an envelope bearing the words “URGENT LETTER” and “PLEASE EXPEDITE” — because rather than informing that a wealthy distant relative has passed on and have less than 24 hours to claim the inheritance, have the sneaking suspicion that…sure enough: another refi offer.

Don’t get us wrong — refinancing can be a boon to mortgage holders who are either locked in at, or have found themselves adjusted to, a significantly higher APR. Today’s featured Real Estate guide article, Refinancing Your Home, explains the various reasons people choose to refinance. But as syndicated columnist and “Mortgage Professor” Jack Guttentag notes in last Sunday’s column, many borrowers are being tempted by refi offers that would actually wind up making them poorer. These loan offers start off on an alarmist note (“Interest rates are going up!” “Qualifying guidelines are changing!”), but don’t despair — if you ACT NOW, you can still take advantage of their “money-saving” loan programs. Credit problems? No problem!

Reading the fine print, however, reveals minor details like the fact that incidentals such as taxes, title, and insurance are often not included in their APR calculation. Moreover, it turns out that making the minimum payment (i.e., the one they advertise prominently) may cause negative amortization. Finally, the predicted savings (not to mention the ability of the borrower to make payments) depends on housing prices continuing to rise. And as an increasing number of subprime lenders are painfully aware, that’s not always the case.

Here’s the thing to remember the next time you receive an “urgent” offer to refinance your home: The companies that send these loan offers don’t guarantee that you’ll be better off after all the new fees have been paid in order to get rid of the old mortgage. If you are seriously considering refinancing, proceed with care and do the math.

​What does it take to make a home famous? In case you’re wondering how to make YOUR home famous, there are two main routes to explore: Either become famous yourself (the more difficult of the two options) or lend your home to a film project for use in a movie or even a commercial.

Found an interesting article published March 5 in the Los Angeles Times titled “The star treatment: Want a film set in your living room?” (To access this article, registration is required). It’s all about looks, marketing and good neighbors that gives some background on how to go about getting your residence into a film. The article states that “On a big-budget Hollywood film, your house can earn anywhere from $2,000 to $20,000 a day.” Even though you have to register on the L.A. Times site, it’s definitely worth the effort if you are looking for the fast track to having a famous home (or if you just want to get paid $2k-20K per day to stay in a hotel)!

Millennial veterans and military members are helping fuel the resurgence of the historic VA loan program. Last year’s 700,000-plus loans were more than double the agency’s total from five years ago.

Younger buyers in particular have flocked to these government-backed mortgages during a time of tight credit and flatlining wage growth. The VA says millennials accounted for about a third of all VA loans last year.

These low-interest loans offer qualified buyers a wealth of benefits. That’s especially true for millennial borrowers, who often have dented credit or minimal savings. This $0 down payment loan program was created to help level the playing field for those who serve our country, and it’s still doing so today.

“VA loans offer an extraordinary opportunity for veterans because of lower interest rates, lower monthly payments, no or low down payments, and no private mortgage insurance,” said Jeff London, director of the VA home loan program.

Here’s a closer look at three of the big benefits that make VA loans such a good match for millennial home buyers.

1. No down payment requirement

This renowned benefit of VA loans helps veterans purchase without having to spend years saving for a down payment. When determining affordability, qualified buyers in most of the country should know that they can purchase a home for up to $424,100 before having to factor in a down payment. That ceiling is even higher in costlier housing markets.

The average VA loan last year was for about $253,000. Getting a conventional loan for that amount often requires a down payment of at least $12,000. FHA loans require at least 3.5% down. That’s no small sum in either case, particularly for younger veterans and military families.
2. No mortgage insuranceVA buyers also don’t have to pay extra each month for mortgage insurance, a common feature of low-down-payment loans. Conventional buyers typically need to pay for private mortgage insurance unless they can put down 20%. FHA loans come with both upfront and annual mortgage insurance premiums.
For example, FHA buyers shell out an additional $140 per month for mortgage insurance on a typical $200,000 loan. That extra outlay can limit your purchasing power, as well as put a hole in your monthly budget.
Most VA buyers encounter a funding fee that goes straight to the Department of Veterans Affairs. Veterans and military members can finance this cost over the life of their loan. Borrowers who receive compensation for a service-connected disability don’t pay it at all.
3. Flexible credit guidelinesVA loans were created to boost access to homeownership for veteran and military families. They’re naturally more flexible and forgiving when it comes to credit underwriting.
Lenders typically have lower credit score benchmarks for VA loans than for conventional mortgages. The average FICO score on a VA purchase last year was 50 points lower than the average conventional score, according to Ellie Mae.
Compared with conventional borrowers, qualified VA buyers can also bounce back faster after a bankruptcy, foreclosure, or short sale.
Despite their flexibility, VA loans have had the lowest foreclosure rate on the market for most of the past nine years. That’s due in large part to the VA’s commitment to helping veterans keep their homes.
Loan program officials can advocate on behalf of veteran homeowners and encourage lenders and mortgage servicers to offer alternatives to foreclosure.
“VA is even there to assist veterans who encounter difficulty making payments,” London said. “Last year, VA and servicers helped over 97,000 veterans avoid foreclosure. Using the VA program is a win for veterans, lenders, and taxpayers.”
More than seven decades after their introduction, VA loans are still making a big difference for veterans, military members, and their families.
“A home and its equity becomes the bedrock of their economic future,” said Curtis L. Coy, deputy undersecretary for economic opportunity at the Department of Veterans Affairs. “Money that would have typically been used for the down payment is now money in their pocket—money that can be the beginning of their savings or can be used to fix up their home.  It is a win-win for the veteran and the community where they spend that money.”

This article was written by Chris Birk, director of education at Veterans United Home Loans and author of “The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits.”

The upward trend of our economic status has fueled drastic changes within the housing sector. Inventory shortages have resulted in escalating home values and bidding wars between investors and house hunters. Of particular interest, however, are the changes seen in subsequent rental rates. Several cities throughout the United States have experienced increased rental rates, some of which have doubled in price.

While increased rental rates have burdened tenants, investors of all types have become eager to acquire buy and hold properties. Recent activity has facilitated the development of new projects and made everything from apartment buildings to existing single-family homes a hot commodity. Increased rental rates have even caused some homeowners to move out and rent their property for additional cash yields.

According to MPF Research, San Francisco has experienced the largest surge in rental rates. As such, the Northern California city was placed atop a list with the 50 metropolitan areas that experienced the highest rent growth during the second quarter of this year. San Francisco rents increased by 7.8 percent, according to preliminary estimates by MPF Research market-research firm based in Carrollton, Texas. The following is a comprehensive list of the cities that experienced the highest increase in rental rates:

• San Francisco (7.8%)
• Oakland, CA (6.9%)
• Denver (6.1%)
• Seattle (6.0%)
• San Jose, CA (5.0%)
• Portland, OR (4.4%)
• Houston (4.3%)
• Austin, TX (4.1%)
• West Palm Beach, FL (4.0%)
• Fort Worth, TX (3.6%)

Increased rental rates have therefore made buying rental properties the latest investment trend. Opportunities for passive income have never presented themselves with such promise. Further supporting the idea of acquiring a rental property are statistics released by Trulia that acknowledged owning a home may be 44 percent cheaper than renting one.

With incentives for owning more promising than ever, now is the time to buy. However, keep an eye on local rental markets while attempting to do so. It is likely not worth the hassle, or price, to have to move from one rental property to another before buying. Increased rental rates may therefore drive many towards ownership. Investors, in particular, are searching for optimal rental properties to take advantage of the increasing rates.

The prospect of an all-cash transaction is one in which homeowners welcome with open arms. It may serve as the difference between an acceptable offer and rejection. All-cash offers may even facilitate the sale of a property that was not originally on the market. For these reasons, and several more, the acquisition of hard money transcends the lengthy process that typically accompanies a traditional sale.

Investors with the capability to provide immediate capital are therefore at an advantage over the typical homebuyer. By comparison, the saturation of our market with all-cash offers has made it increasingly difficult for those without the necessary means to compete. Potential homeowners, unable to make an all-cash offer, are being squeezed out.

According to the National Association of Realtor’s (NAR’s) Confidence Report, all-cash offers account for 33 percent of home sales. International purchases account for the greatest amount of all-cash offers in the United States. Furthermore, 87 percent of the Realtors involved in the report acknowledge that they are witnessing a continuous trend of increasing home prices. Homebuyers, particularly those in the market for the first time, are already battling low inventory and rising home prices. The added pressure of all-cash offers is therefore an unwelcome one.

According to William Delwiche, an investment strategist at Baird Research & Insights, cash transactions have been supported by investor pools acquiring real estate, not by individuals looking to live in the home. “These are investment pools paying cash for houses to hopefully get returns,” he says. “It’s not necessarily a trend among individual homeowners because most people going to buy houses don’t have that kind of cash sitting around.”

According to Patrick Newport, an economist with HIS Global Insights, sellers prefer all-cash offers to those of the traditional approach. Having the money up front removes the complications typically associated with selling a home. “If you own a home and are selling yourself, it’s probably easier if someone pays you cash — it cuts out the messiness and having the homebuyer get approved for a loan.”

Continuation of this recent trend will likely reinforce the momentum the housing sector is currently exhibiting. However, it will have a resounding impact on first-time homeowners. Karen Dynan, vice president and co-director of economic studies at the Brookings Institute, says “it just makes the housing market less affordable. It’s good for the overall economy, but not for every person in the economy.”

Concurring with Dynan, Delwiche acknowledges that all-cash offers may prevent more people from entering the market. “Home prices go up and it affects housing affordability,” Delwiche says. “You can’t have first-time homeowners who are seeds for long-term growth, because they are then crowded out of the market. So short term it’s something of a positive, but is a headwind for first-time homeowners.”

While first-time homeowners are at a significant disadvantage, it is hard to argue with the prospect of all-cash offers. Those using cash have a greater negotiating power than those requiring a loan. Sellers, recognizing the increased ease of sale, are most likely going to chose the suitor providing cash and are often willing to reduce the house’s price on their behalf.

Transactions consisting of nothing but cash carry a much lower cost. Mortgage rates alone can serve to double or triple the cost of a property. Furthermore, closing costs are significantly lowered when purchases are made with cash. Aside from saving money, all-cash offers save buyers valuable time. There is no need to locate the best lender and significantly fewer documents to sign.  So, while it may be difficult, first-time homebuyers are advised to take part in this trend.  The following tips may make the prospect of an all-cash purchase a little easier:

• Set aside unexpected monetary gains, such as work bonuses or inheritances.
• To help safeguard money and earn interest on it, lock it into a long-term CD at the bank.
• Once you have the cash in-hand, look for a house you can afford without borrowing extra money.
• Consider moving to a less populated area, further from a big city, where home prices are likely to be lower.

When it comes time for you to decide on how long you want your mortgage to last, you have several options to choose from, each with their own pros and cons. Since no two people or families are exactly alike, each homebuyer will have his or her own specific financial capabilities and goals.

To accommodate these differences, you can obtain different terms for your mortgage depending on how long you want to pay it back. With 30-, 20- and 15-year terms available, you can choose the option that best suits your short- and long-term financial priorities.

Let's take a look at what these different options mean for you:

30-year mortgage

While three decades might seem like a long time to pay off a mortgage, the 30-year term is actually standard for a majority of homebuyers. According to Freddie Mac, 2016 saw approximately 90 percent of homebuyers opt for the 30-year fixed-rate mortgage. Its popularity stems from the length of the mortgage, which allows for lower monthly payments for the homeowner.

"The 30-year note allows for lower monthly payments for the homeowner."

Having to make smaller monthly payments makes a lot of financial sense for new homeowners who might not have the ability to make larger payments. However, it should be noted that 30-year terms often come with a higher interest rate than shorter mortgages.

Keep in mind that you can still make additional payments on the loan principal, which shortens the term length. This can help you speed up the repayment process and save money on interest.

15-year mortgage

After the 30-year, a 15-year note is also fairly common mortgage term. While not nearly as popular as the former, Freddie Mac noted that about 6 percent of homebuyers decided to go this route.

Since you'll pay off this loan in half the time as the 30-year one, it means you'll end up with a larger payment each month. Although you'll have a higher payment, the shortened term reduces the amount of interest that accumulates on the loan.

This is a great option if you want to finish your mortgage quickly and save money since you won't have to pay as much interest.

However, if your financial situation drastically changes, it could make it difficult to make these higher payments, so be sure you have a strong sense of your ability to pay off this mortgage.

20-year mortgage

In addition to the 15- and the 30-year terms, you can also implement a 20-year mortgage. This option typically has a repayment and interest rate that falls in between the other two options.

Homebuyers who have just started a new family or are planning on doing so shortly, a 20-year option makes for a great choice as you will have paid it off by the time the kids are ready to go to college.

The bottom line

With any major life decision that carries a long-term financial impact, it's crucial that you evaluate the different mortgage options and decide which one most closely aligns with your current and future situation. Talk with your First Centennial Mortgage loan officer to find out which term option works best for you and your financial situation.

You’re in the process of buying a home and you feel like everything is going well: you found the right house to buy, you’ve made an offer and began submitting your documentation for your mortgage – it seems like move-in day is not far away.

“An appraisal puts you one step closer to closing on a new home.”

However, there are some steps that must occur between this stage and receiving the deed and keys to your new home. One of the most important – and misunderstood – is the appraisal.

The basics of a home appraisal are simple. Once you have been fully vetted as a buyer, your home must also be assessed and determined to meet certain standards. Real estate appraisers assess the market value of a property, and if the appraised value is roughly in line with expectations, you will receive a final loan value and begin to proceed with the loan process.

The appraisal process

It’s helpful to understand how appraisers do what they do. Unlike home inspectors, who are typically checking for safety and maintenance-related items, appraisers are almost entirely concerned with market value. To determine the market value of an existing property, for example, an appraiser will usually take a look at how other similar properties have been valued in that location. Or, if a home is new and unique to the local market, he or she could determine its value based solely on construction costs. Either way, appraisers must compile a detailed report that backs up their final determination with public records, calculations and anything else used to arrive at that number. Copies of this report are made available to the buyer.

You’re in the home stretch.

When you decide you want to make the move toward becoming a homeowner, one of the first things you’ll need to do is prepare yourself for the home loan application process. From getting a copy of your credit report and scanning it for errors or inaccuracies, to gathering your proof of income, there are a lot of steps involved when it comes to getting your application ready.

Follow these tips for preparing all essential documents for your loan officer.

Create a checklist

My FICO suggests making a checklist of all necessary paperwork so you can make sure you are completely prepared when you submit your application. Unfortunately, not having everything ready or submitting the wrong document can delay approval.

​Reach out to your loan officer and ask for a complete list of all the paperwork needed for a specific loan product. While there might be additional documentation requested, below are some items you’ll need. Remember, these documents are not necessary to apply for a loan:

• Federal tax returns for the last two consecutive years.
• Recent pay stubs.
• Proof of income, including: investments, tips and social security payments.
• Bank statements.
• W2 or 1099 DIV income statements for the last two consecutive years.

Gather personal information

In addition to proving you have the finances to support the purchase of a new home, you will also need to provide personal information to your loan officer. Identification topics include your social security number, legal status and two forms of government identification.

“Reach out to your loan officer and ask for a complete list of all the paperwork needed.”

Come in prepared

Realtor.com indicated that you will want to be able to demonstrate your financial competence and ability to manage a mortgage loan responsibly. Bring along information about whatever home you are interested in purchasing.  Have a folder with everything you need as soon as you head in to speak with your loan officer.

Know who can get your paperwork 

Some of the necessary paperwork can easily be retrieved. However, information about the listing you are interested in will likely need to be gathered from the real estate agent or property manager. This is why you should enlist the help of a professional who has the experience and knowledge to understand what you need and where to retrieve it.

Invest in storage now 

The earlier you get a filing cabinet or other type of organization system, the better off you will be when you decide to apply for a home mortgage. When you have everything in one spot and collect essential documents, the application process will be smooth and efficient.

Becoming more informed and organized will ensure your journey toward homeownership is pleasant and exciting. In addition, having all your documents ready to go minimizes the chances of denial.

Prominent tax advisers still don’t agree on whether all those people who prepaid 2018 property taxes can deduct them in full.

The debate on such deductions arose after Congress passed the largest tax overhaul in three decades late last year. In a landmark change, lawmakers capped write-offs for state and local taxes at $10,000 per return for both single filers and married couples. The provision takes effect for 2018 and will lower these write-offs for millions of Americans.

The overhaul barred deductions for many prepayments of 2018 state and local income taxes, but it was silent on deductions of prepaid property taxes. After Christmas, long lines of people rushing to prepay their 2018 property taxes before year-end gathered at local government office.
​
Then on Dec. 27, the Internal Revenue Service warned that not all prepayments of 2018 property taxes would be deductible on 2017 returns. The agency said that to qualify for a write-off, the tax liability actually had to have been known at the time.

Right away, some tax specialists strongly agreed with the IRS but others strongly disagreed. The IRS and its supporters argued that those who prepaid all their 2018 property taxes can only deduct the portion that was known or determined at the time. In many cases, that means only for a few months of the year or not at all.

The IRS’s opponents argued for higher deductions of reasonable estimates. They based this argument on prior tax rulings and regulations that they think apply to this issue.

Now, three months later, little progress has been made.

Leading the opposition against the IRS’s position is Lawrence Axelrod, an attorney at Ivins, Phillips & Barker.

“The IRS position is misguided because it doesn’t take into account Treasury’s own regulations,” he said.

These regulations allow taxpayers to deduct amounts paid that will be due within 12 months. The IRS and its supporters disagree. They cite court decisions which say that to be deductible, taxes must have been imposed and the amount must be known.

Stephen Baxley, who heads tax planning for Bessemer Trust, a prominent multifamily office, agrees with Mr. Axelrod.

“If the amount is a reasonable estimate made in good faith, it’s deductible,” he says. The firm is responsible for preparing nearly 1,000 individual returns.

Other tax preparers agree with the IRS.

Brian Lovett, a certified public accountant with WithumSmith+Brown in New Jersey, where property taxes tend to be high, says his firm is following the IRS’s guidance: “We think the amount due must be determined for a prepayment to be deductible.”

The correct answer matters.

More than 80% of property-tax revenue is collected by local governments with a fiscal year other than Dec. 31, according to the latest data compiled by the Lincoln Institute of Land Policy. Frequently, the fiscal year ends on June 30.

As a result, total property tax bills for 2018 weren’t determined by year-end in many areas of the country. Many could reasonably be estimated, however.

For example, say John lives in a county with a fiscal year ending June 30. By the end of 2017, he knew he would owe $6,500 in property tax due by June 30, 2018. He could likely assume that his bill for the second half of 2018 would be about the same. So in late December, he prepaid $13,000 for 2018 to his county.

According to the IRS’s position, John can only deduct a prepayment of $6,500—because the amount due for the second half of the year hadn’t been set.

But if Jane lives elsewhere and knew she would actually owe $13,000 in property tax for 2018, she can deduct a prepayment of that amount on her 2017 return.

Some advisers allow both approaches. David Lifson, a CPA with Crowe Horwath who has many high-earning clients, says he recommends that clients deduct prepayments of known amounts. But he will allow a deduction of an estimate, “if I feel the client understands the risk that the IRS will disagree.”

The debate is ongoing. In March, Democrats on the Ways & Means Committee wrote acting IRS Commissioner David Kautter to protest the IRS’s interpretation of the law.

The good news for taxpayers who want to deduct prepayments of estimates is that neither Mr. Lifson nor Mr. Baxley thinks these write-offs need to be disclosed on IRS Form 8275. On it, taxpayers are supposed to disclose risky positions to avoid certain penalties. Supporters of the IRS’s position think the form should be filed, however.

Some taxpayers are also pushing preparers to take the deduction because the audit risk is low, given constraints on IRS resources.

Emily Matthews, a CPA with Edelstein & Co. in Boston, says she explains the IRS’s position to clients. But she says, “I think we’ll see a lot of people who prepaid estimated taxes opt to deduct them.”

Builders recently completed the most newly constructed homes in a decade, says a recent report. Buyers can finally exhale.

About 1,319,000 homes were finished in February—the most that were completed since 2008, according to the seasonally adjusted numbers in the latest residential sales report jointly released by the U.S. Census Bureau and U.S. Department of Housing and Urban Development. That's a 7.8% bump from January and a 13.6% jump from February 2017.

"Hitting a record level of new, finished houses should lead to an increase of more homes on the markets for buyers," says Chief Economist Danielle Hale. "It’s not going to turn from a seller's market to a buyer's market overnight, but this is a step in the right direction.”

The most new, finished homes were in the South, at 659,000 in February. That region was followed by the West, at 336,000; the Midwest, at 164,000; and the Northeast, at 160,000.
But buyers shouldn't rejoice just yet. Fewer newly constructed homes could be coming online this spring—despite the frantic demand. Builders received only 1,298,000 permits in February to put up new homes, a 5.7% drop from January, according to the report. However, it was a 6.5% rise from February 2017.

Permits are considered a good indication of how many completed new homes will hit the market in the coming months.

“There’s plenty more room to grow," says Hale. She'd like to see permits to erect single-family homes rise from 872 in February to 1 million. "It's going to be better than last year, but we're still not back" to precrisis levels.

Housing starts, which means construction that has begun but hasn't been completed, fell 7% from January to February, according to the report. It was down 4% from February of the previous year as well.

"The fall in housing starts in February is a movement in the wrong direction," Lawrence Yun, chief economist of the National Association of Realtors®, said in a statement. "The key to economic prosperity at this juncture of economic expansion is to produce more new homes. That will help with job creation and reduce the swift price appreciation in several markets."

Flipping a house is becoming incredibly popular again, but for those recently looking to get into real estate investing, it may seem complicated. Those new to the industry may wonder how it works, how it is different from other investment strategies and what its benefits are?

Industry insiders classify flipping a house as buying, renovating and reselling a home.

The extent to which homes are improved can vary widely from ‘prehabbing’ (clearing out and creating a blank slate) to modest cosmetic home improvements like painting and landscaping. Experienced investors may prefer full on remodels with new roofs, additions and kitchens.

Some of the reasons real estate investors choose to flip a house are associated with their preferred investing strategy. These may include: speed of seeing returns, avoiding the risk the of long term holding, capturing larger lump sums of cash in the short term, and because it is a lot of fun and therapeutic.

There is nothing wrong with building a portfolio of rental properties, building new homes, investing in mortgages or most other real estate investing strategies. It is important to determine, whether or not, flipping a house is right for you.

Wholesaling homes, or simply flipping real estate contracts can be profitable as well. However, those addicted to flipping houses prefer that they are able to get in and revitalize communities and create profits in any market.

Flipping a house is a great way for investors to diversify from these other real estate investing strategies while generating wealth. It can increase profits, recapitalize and boost funds for rentals and allow them to flex their creative muscles.

​However, one of the best reasons to make it your initial focus as a new real estate investor is the ease of entry. Without making it sound too good to be true, flipping houses really can be done with little money out of pocket, even with poor credit and for fast profits.

Will rising mortgage interest rates really have an impact on real estate wholesalers?

We all know that interest rates have to go up. We’ve enjoyed sickly sweet low mortgage rates for a long time and while predictions of increases really haven’t become a reality until now, real estate investing pros and the public can’t be fooled into a false sense of security.

Rates recently hit a 12 month high and are expected to keep rising. The markets will demand it, bankers need it and while not all will be pleased about paying more in interest, it will mean higher yields on savings and more fuel for economic growth.

No one expects interest rates to soar out of control in the short term. However, historical cycles suggest that double digit rates could well be on the horizon within the next decade.
For real estate wholesalers this may not seem like much of a concern. After all, most of those flipping houses only use leverage for extremely short periods of time, and if you aren’t holding the debt you won’t be paying interest on it. Plus, access to more loans and easier borrowing is probably a welcome tradeoff for most investors flipping homes.

We are already seeing this with lenders and mortgage brokers becoming the most aggressive we’ve seen in almost a decade. This is especially true of hard money lenders and commercial mortgage brokers offering blanket funding and bridge loans. Just hop on LinkedIn or get on a few lists and you’ll probably be bombarded with lenders looking to make loans today.

With this said, it is still critical for investors and especially wholesalers to remember that rates are a factor when it comes to resale. Higher rates will affect both retail borrowers and buy and hold investors. While this doesn’t mean you will see any dip in volume or interest, you made to moderate prices to compensate for this.

Finally, remember to use this trend in rising rates as motivation to get more buyers to pull the trigger now, and fuel to move more units right away. With these rates, there is still timeto get into the wholesale business.

Most real estate investors are missing out on the bulk of potential returns due to one major mistake…

Is real estate leverage your most dangerous enemy or best ally?

Fear resulting from the last bubble is neglecting many investors from realizing their full potential and greater returns by snubbing real estate leverage.

Many are afraid to use real estate leverage, as taking on increasing debt is associated with bad business practices. However, not all borrowing is bad. In reality, it’s an investors’ best friend and tool. Used well, real estate leverage can make all the difference in returns, success, lifestyle and ultimately financial freedom. In addition, attracting a private money lender has never been easier.

Paying cash, keeping down debt and refusing to take on overhead can be smart. Subsequently, it can seriously diminish returns, cap growth and permanently cripple top end potential!

Compare paying $800k cash for a property, putting in $150k in repairs and walking away with $50k in profit after flipping the house versus diversification and using leverage.
Consider the interest and returns on that can be compounded again and again over time, adding years of additional returns in a matter of weeks. Plus, this doesn’t even discuss the advantages diversification and leverage has for liability protection and preserving wealth.

​Embrace leverage; reach your full potential!

Have you been looking for more private mortgage money?

Great news is emerging for those real estate investors who having been searching for more capital…

Hard money and transactional lenders have been promoting their services more than ever recently and even conventional mortgage lenders and banks have begun to offer more incentives to borrowers to take out new loans.

Of course some real estate investing pros just prefer private mortgage lenders for the lower interest and fees, speed, control and ease of doing business. If that’s you then thanks to Ben Bernanke and the Fed it could be getting a lot easier for you this week.

Bloomberg reported this week that mortgage REITs are losing money, losing investors and losing returns in response to the Federal Reserve plan to buy up mortgage debt and the number of homeowners refinancing thanks to low mortgage rates and the $25 billion mortgage settlement.

Investing in mortgages may still be a great investment but giant REITs are bleeding investors due to a drop in returns and are showing investors how investing in publicly traded stocks is incredibly risky and volatile compared to direct investment in real estate, mortgage notes or private partnerships.

It doesn’t matter if you are up 99% in a day if you can lose it all tomorrow. Fortunately this isn’t an issue private lenders need to worry about with investing directly in mortgage notes or flipping houses for that matter.

According to the Bloomberg report annual dividend yields on these big home loan REITs have been around 13%. That’s not bad, and at least far out beats the S&P 500 performance.
Maybe you don’t want to giveaway those types of returns but at least you as a real estate investor can offer a much better investment vehicle which will be safer and more consistent.

​Strike on this opportunity and close more private lenders. Don’t just build great presentation materials showing the strength and track record of what you are offering but contrast it with the downside of investing elsewhere too.

You’ve invested a great deal in this house. So when the time comes to put it on the market, you expect potential buyers to recognize its true value. But sometimes, you get an offer that’s so far below your asking price it feels like someone pitched a baseball straight at your stomach.

Should you simply walk away from such a number? Or does it make sense to pause and weigh your options? Here are some points to consider before you decide:

#1 Is It Really Low-Ball, or Just Lower Than You Wanted?

Some agents define a low-ball offer as 25% or more below list. In areas where there’s a shortage of available homes, that figure may drop to 20%.

“What defines low-ball varies from market to market and even submarket to submarket, but certainly from price range to price range,” says Steve McLinden of Bankrate.com.

In other words, it’s likely that an offer of $80,000 on a $100,000 home will be more quickly dismissed than a $1.6 million offer on a $2 million home, he says.

#2 Should You Immediately Reject a Low-Ball Bid?

Although your feelings may be hurt, giving in to the drama monster won’t get your house sold. “When the low-ball offer comes in it can be upsetting, but it doesn’t have to be,” says Bill Gassett of RE/MAX Executive Realty in Hopkinton, Mass. “The fact that someone wants to buy your home is a good thing and you should deal with every offer — unless it’s just completely ridiculous.”

What constitutes a “ridiculous” offer? Anything significantly less than 25% below your list price should probably trigger warning bells. However, it pays to rely on your agent’s expertise to help you decide on the right response.

Countering, rather than ignoring, a low offer is often the smartest strategy. A counter to a low-ball offer “shows buyers you’re willing to work with them,” says Eric Snyder of Douglas Elliman in Boca Raton, Fla. After all, he reasons, “it’s not about where buyers start, it’s where they end up.”

And you’ll never have a chance of getting to that final number if you allow your emotions to cloud your judgment.

#3 Is Your Price Too High?

Sometimes when a seller receives one — or more — low-ball bids, it may be because the asking price for the home is out of step with the market.

Before you set a price, your agent will provide you with comps – for-sale listings of similar properties in the area —  along with a pricing recommendation. Your best bet is pricing that reflects the comps. If you decide to “test” a higher price, you might have to tweak your price to invite more reasonable offers, which is just going to delay the sale.

#4 What Do You Really Need?

There may be factors involved in selling your home that are more important to you than price. Perhaps you need to sell quickly because you’re buying another home. Maybe an all-cash deal would make your life a lot easier. There are a number of potential deal sweeteners that a potential buyer could provide that may make a low offer more appealing. These include:

• A preferred closing date
• A solid mortgage pre-approval letter from the buyer (not just a pre-qualification)
• A larger down payment
• Fewer inspection contingencies

#5 Will You Look Too Desperate?

Don’t worry about how your willingness to entertain a low-ball offer is perceived. What matters most is the result, says McLinden.

​“Some sellers get so wrapped up in righteous indignation following an ‘insulting’ offer that they tell their agent to refuse all further communication from the offender,” he says. And while that may soothe your wounded ego, it won’t help sell your house.