Zillow predicts a stronger housing market in 2021

Zillow has said that it expects the for-sale housing market to gain even more strength in 2021 following an incredible run that came in the wake of the coronavirus pandemic. Zillow said in its 2021 housing predictions that demand is continuing to grow as we enter the new year, and that this will likely surge […]

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Existing home sales explode, up 27% from last year

Existing home sales have risen for the fifth consecutive month as the housing industry continues to show its resilience in the face of the COVID-19 pandemic. The National Association of Realtors reported Thursday that homes sales are up an astonishing 27% from the same time one year ago. In addition, it was reported this week […]

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Best Advice on Buying or Selling a Home During the Coronavirus Crisis

The coronavirus pandemic has made the logistics of buying and selling a home and moving more complicated, especially in hard-hit cities and communities. According to the National Association of Realtors, the number of homes for sale across the US continues to decline. Additionally, fewer potential buyers can or want to tour properties and risk contracting COVID-19.

The economic downturn—due to coronavirus stay-at-home mandates and social distancing—has resulted in pros and cons for both home buyers and sellers. I’ll cover advice to help both parties make wise real estate decisions during this uncertain time.

4 tips for home buyers during the coronavirus crisis

Since the coronavirus crisis began, more than 26 million Americans have filed for federal and state unemployment benefits. If you’ve lost part or all of your job or business income, and you’re unsure when your finances will return to normal, buying a home may not be the best idea.

But if your income is stable, you have cash in the bank, and you’re confident that you can stay in a home for at least five years, buying a home now might be a smart move. Here are four tips if you’re in the market to upsize, downsize, or become a first-time homeowner.

1. Evaluate your current and future budget

Buying a home is a significant financial commitment, so understanding how much you can afford is essential. If you’re at all worried about getting laid off or the future of your business, buying a home that’s under your budget is wise.

In addition to your mortgage payment, homeowners must cover many other expenses, including property taxes, home insurance, applicable association fees, and ongoing maintenance. Take a hard look at your income, expenses, and savings to make sure you have enough cash for closing and to keep a healthy emergency fund.

Take a hard look at your income, expenses, and savings to make sure you have enough cash for closing and to keep a healthy emergency fund.

Here are some ways to crunch your budget numbers:

  • Down payment: Depending on a home’s purchase price, your credit, and your lender, the required mortgage down payment could range from 3% to 10% of the purchase price.
  • Closing cash: At the closing table, you’ll need to pay the down payment plus additional expenses, which vary depending on location. They typically include fees for a home inspector, surveyor, property appraiser, credit check, loan underwriting, and homeowners insurance. The total could add up to around 2% to 5% of a home’s purchase price.
  • Monthly housing payment: Unless you have a high amount of debt, consider spending a maximum of 20% to 25% of your after-tax income for a home. It includes the mortgage principal, interest, taxes, and insurance—known as PITI.
  • Emergency savings: Keep a minimum of six months’ worth of living expenses on hand. This safety net will keep you safe from unexpected expenses or the loss of job or business income.
  • Maintenance reserve: Have cash ready for ongoing repairs, such as fixing a roof leak, replacing a heating or cooling system, or needing a new refrigerator. A good rule of thumb is to save 1% to 3% of your home’s value for annual maintenance.

2. Get preapproved for a mortgage

Before spending too much time or mental energy searching for a home, make sure you qualify for a desirable mortgage. The amount you can borrow, the interest rate, and your downpayment depend on a variety of factors, including your credit and income stability.  

Due to the economic crisis, lenders are expecting delinquencies from existing customers who are facing hardships. To offset those risks, they’re tightening lending standards for new borrowers making it more challenging to qualify. You may need better credit and more down payment money than was typical before the pandemic.

Due to the economic crisis, lenders are tightening lending standards for new borrowers making it more challenging to qualify.

A mortgage preapproval is a document that outlines how much a lender will allow you to borrow, at what rate, and for how long. It’s a critical tool to know the price range of homes you should be shopping for. Additionally, a preapproval can carry a lot of weight with a potential seller who may be evaluating multiple offers and needs to close quickly.

Remember that you still need emergency money in the bank after buying a home. The fact is, you need even higher amounts of cash on hand for a maintenance reserve. Also, consider other expenses such as moving and furnishing a new place, which can really add up.

3. Use technology to research and tour homes virtually

Many digital tools allow you to research potential homes and stay safe. Here are some ways you can find a new home from the safety and comfort of your existing one:

  • Video calls: Have a Zoom or Facetime call with potential real estate professionals or sellers. They can give you a virtual tour of the home and neighborhood and chat about other points of interest like schools, shopping, and public transportation.
  • Google Maps: Google’s street view allows you to see the features of a neighborhood and even walk it virtually. You can time your commute to work based on the time of day.
  • Neighborhood review sites: Check out the walkability, crime statistics, and school rankings using sites such as Walk Score, SpotCrime, Family Watchdog, AreaVibes, and GreatSchools.org.

Using a variety of resources, you should be able to narrow down your potential home choices significantly. If you can drive by properties, that will also help you know which ones you want to tour.

Once you have a mortgage preapproval and feel sure that you’re interested in buying a specific home or homes, inquire about getting physical access. If it’s vacant, an owner or real estate agent may be able to open it up and let you roam around with plenty of social distancing.

Home tour safety guidelines during social distancing may vary from state to state. Check with your real estate agent to get a better understanding of any requirements or limitations.

However, if the seller still lives in the property, they’ll likely want to make arrangements to be away or to stay outside while buyers tour their home. Be respectful of everyone’s desire to avoid the coronavirus by wearing masks, gloves, shoe coverings, and using hand sanitizer before going into a listing. Find out if anyone in the home has been sick or spent time with someone diagnosed with COVID-19. Likewise, disclose if you’ve been ill or exposed to the coronavirus.

4. Save money with a historically low mortgage rate

The rate for a 30-year fixed-rate mortgage is at a historic low and keeps going lower. According to mortgage rates on Bankrate.com, they fell to 3.55% from last week’s rate of 3.58%. If you want a 15-year fixed-rate loan, it could be as low as 3%. In many parts of the country, owning a home costs less per month than renting a similar property.

However, don’t wait too long to get a mortgage commitment if you’re a serious home buyer. Lenders are under enormous pressure due to a wave of potential defaults, forbearance requests, refinancing applications, and federal stimulus programs they may be processing and funding. As I mentioned, it’s only going to get more challenging to get a mortgage application through underwriting and approved.

Lower rates and monthly mortgage payments may allow you to afford a higher-priced home if your finances are in good shape.

But if you can lock in a low mortgage rate and get a property under contract, it can undoubtedly allow you to save money over the long run. Lower rates and monthly mortgage payments may allow you to afford a higher-priced home if your finances are in good shape.

In addition to low-rate mortgages, there may be bargains on the market, depending on where you want to live. If a seller is uncertain about their financial future, they may be willing to unload their property for a low price. Although many banks are offering forbearance programs, some homeowners may be feeling pressure to sell, giving buyers an advantage right now.

4 tips for home sellers during the coronavirus crisis

Selling a home anytime can be a hassle. But selling a property during a pandemic is probably something you’ve never thought about.

However, real estate closings are happening, so don’t think you can’t find a qualified buyer. Getting a deal may depend on creative marketing and finding a real estate agent who can help you find solutions to new challenges. Here are four tips to make your home attractive and safe for potential buyers.

1. Use technology to market your home

Creating virtual tours is critical to pique a buyer’s interest and reduce the number of strangers in your home. It’s never been easier to use a camera or smartphone to create videos of your home’s interior, exterior, amenities, and neighborhood. However, make sure the lighting is good and presents your home favorably.

You can upload videos to a variety of sites that buyers can access, such as a YouTube channel, Zillow, or Dropbox. If you have a real estate agent, they can include your video files in the multiple listing service (MLS) database and their company website. They may offer professional photographers and videographers as part of their listing services.

 

2. Vacate your home if possible

If you can move out of your home while it’s for sale, you may get more interest from buyers. Touring a vacant property may seem less risky to buyers and real estate agents. Plus, you won’t have to worry about people coming into your space that could be carrying the coronavirus.

If your mortgage lender offers forbearance, consider suspending your payments and using the money for a short-term rental.

If your mortgage lender offers forbearance, consider suspending your payments and using the money for a short-term rental. Getting distance between you and home buyers might be critical if you, or someone in your household, are elderly or have health conditions that make you vulnerable to COVID-19.

3. Be clear about how you’ll interact with buyers

If you can’t move out of your home, be clear about how you will protect yourself, agents, and potential buyers who want a tour. As the seller, you dictate the protocol, such as everyone must wear masks and sanitize their hands before entering.

Include information about measures you're willing to take, such as disinfecting high-touch surfaces and leaving doors and cabinets opens, so visitors don't need to touch anything. If you have hand sanitizer or personal protective gear to offer, that's a goodwill gesture that should make everyone feel more at ease.

Once you have a purchase agreement signed, you or your real estate agent will need to coordinate with other professionals, such as inspectors, appraisers, contractors, and surveyors. Depending on the buyer's lender, you should be able to complete a remote closing by mailing the original documents.

4. Be prepared for longer than normal marketing times

Since there are fewer buyers and many overwhelmed lenders, the average marketing time for homes across the country may be longer than usual. Being as creative and flexible as possible will increase the likelihood of signing a deal.

No one is sure what market value is right now, so buyers may be aggressive to find out how low you'll go.

If a buyer throws out a lowball offer, don't let it offend you. Carefully consider what your bottom line is and make an appropriate counteroffer. No one is sure what market value is right now, so buyers may be aggressive to find out how low you'll go.

While the fear of the coronavirus and a looming recession may make it more challenging to sell your home, remember that the lending environment is favorable. For buyers who aren't worried about losing a job or business income, getting a historically low home loan is a huge incentive to invest in a home sooner rather than later.

What Is Financial Independence And How Do I Achieve It?

Although 2020 was an economic dumpster fire of epic proportions for many, the last few years were filled with plenty of prosperity and, of course, stock market growth. After all, the S&P 500 rose by 29% in 2019 and the unemployment rate was crazy-low, dropping to its lowest level (3.5%) since 1969.  And the years […]

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Have We Seen The End of Record Low Rates?

While it might not seem like the sort of thing mortgage rates should care about, the senate run-off election in Georgia was by far and away this week’s most important event. This wasn’t a surprise either. In fact, interest rates have been bracing for this potential impact since the inconclusive results in early November. But why do rates care about politics? Actually, they don’t! Not too much, anyway. Rates care about the prices and yields of certain bonds in the bond market above all else. Bond prices can take a variety of cues, but the most basic and most objective input is that of supply and demand. Supply and demand can be influenced by several underlying factors. For instance, the Fed currently buys more than $100 billion in bonds each month. That has a huge impact on the demand side of

Employment Resources: Five Steps for Finding a New Job

The Congressional Budget Office believes the unemployment rate will hit 16% during the summer of 2020 due to the impact of the coronavirus. With so many people on the hunt for a new job, landing an interview and getting hired is going to prove difficult for many. But the truth is that getting a new… Read More

The post Employment Resources: Five Steps for Finding a New Job appeared first on Credit.com.

10 COVID-19 Stimulus Benefits for the Self-Employed

Since the outbreak of the coronavirus pandemic in March 2020, life and business certainly have changed. If you’re self-employed full-time or earn business income on the side of a day job, you may be wondering what economic relief applies to you.  

Let's review what relief Congress passed to help self-employed Americans cope with financial challenges. I’ll review ten key stimulus benefits that apply to solopreneurs and small businesses.

If you're experiencing economic hardship due to the coronavirus, using some of these new regulations may be the ticket to managing your personal and business finances better.

10 ways the self-employed can get financial relief

The Coronavirus Aid, Relief, and Economic Security (CARES) Act became law on March 27 as the largest stimulus legislation in American history since the New Deal in the 1930s. Here are ten ways it provides relief for individual solopreneurs and small business owners.

1. Getting lower interest rates

On March 3, the central U.S. bank, also known as the Federal Reserve or Fed, made a surprising emergency interest rate cut of half a percentage point. That’s the largest single rate cut since the financial crisis of 2008. While this move wasn’t part of a coronavirus stimulus package, it was an aggressive cut meant to prepare the economy for problems the pandemic was expected to cause.

An economic recovery could take a few years, which likely means the Fed rate will stay near zero through 2023.

In mid-September, the Fed reiterated its promise to keep interest rates near zero until the economy improves and the unemployment rate declines. They indicated that a recovery could take a few years, which likely means the Fed rate stays near zero through 2023.

While savers never celebrate low interest rates, they're beneficial to borrowers. In general, the financing charge on variable-rate credit cards and lines of credit goes down in lockstep with interest rates. Carrying a balance on your personal and business credit cards may be slightly less expensive, depending on your card issuer and type. For instance, if your card’s annual percentage rate or APR is 20%, your adjusted rate could go down to 19.5%.

If you have a fixed-rate credit card, the APR doesn’t change no matter what happens in the economy or with federal interest rates. Also, note that if you pay off your balance in full each month, a credit card’s APR is irrelevant because you don’t pay interest on purchases.

2. Having more time to file taxes

Earlier this year, the due date for filing and paying 2019 federal taxes was postponed from April 15, 2020, to July 15, 2020. You didn't have to be sick or negatively impacted by COVID-19 to qualify for this federal tax delay. It applied to any person or business entity with taxes due on April 15, 2020.

If you missed the tax filing deadline, be sure to request an extension.

Most businesses make estimated tax payments each quarter. Those payment dates have shifted, too. The 2020 schedule gives you more time as follows:

  • The first quarter was due on July 15, 2020, which changed from April 15, 2020
  • The second quarter was due on July 15, 2020, which changed from April 15, 2020
  • The third quarter was due on September 15, 2020
  • The fourth quarter is due on January 15, 2021

Individuals and businesses can request an automatic extension to delay filing federal taxes. But it doesn’t give you more time to pay what you owe for 2019, only more time to submit your tax form—until October 15, 2020.

If you missed the tax filing deadline, be sure to request an extension. Individuals must file IRS Form 4868, and most incorporated businesses use IRS Form 7004.

However, depending on where you live, you may have to pay state income taxes, which have not been postponed. If you need a state tax filing extension, check with your state’s tax agency to determine what’s possible.

Taxes due on any date other than April 15, 2020—such as sales tax, payroll tax, or estate tax—don’t qualify for relief.

3. Getting more time to contribute to retirement accounts

You typically have until April 15 or the date of a tax extension to make traditional IRA or Roth IRA contributions for the prior year. But since the CARES Act postponed the federal tax filing deadline, you also have until July 15 or October 15, 2020 (if you requested an extension) to make IRA contributions for 2019.

However, this deadline doesn't apply to retirement accounts you may have with an employer, such as a 401(k). Nor does it apply to self-employed accounts, such as a solo 401(k) or SEP-IRA, which correspond to the calendar year.

4. Getting more time to contribute to an HSA

Like with an IRA, you typically have until April 15 or the date of a tax extension to make HSA contributions for the prior year. Under the CARES Act, you now have until July 15 or October 15, 2020, to make HSA contributions for 2019.

To qualify for an HSA, you must be covered by a qualifying high-deductible health plan. In early March, the IRS issued a notice that a high-deductible health plan may cover COVID-19 testing and treatment and telehealth services before meeting your deductible. And just as before the coronavirus, you can pay for medical testing and treatment using funds in your HSA.

5. Delaying tax on retirement withdrawals

While you typically must pay income tax on retirement account withdrawals that weren’t previously taxed, the good news is that for a period, you can delay or avoid tax altogether. The CARES Act gives you two options for withdrawals made in 2020:

  • Repay a hardship distribution within three years to your retirement account. You can replace the funds slowly or all at once, with no change to your annual contribution limit. If you take money out but return it within three years, it’s like you never took a distribution.
  • Pay taxes on a hardship distribution from your retirement account evenly over three years. If you can’t pay back your distribution, you can ease your tax burden by paying one-third of your liability for three years. 

Since withdrawing contributions from a Roth retirement account doesn’t trigger income taxes, it’s a good idea to tap a Roth before a traditional retirement account when you have the option.

6. Skipping early withdrawal penalties

Most retirement accounts impose a 10% early withdrawal penalty if you take make withdrawals before age 59.5. Under the CARES Act, if you have a coronavirus-related hardship, the penalty is waived.

Under the CARES Act, if you have a coronavirus-related hardship, the penalty is waived.

For instance, if you, your spouse, or a child gets diagnosed with COVID-19 or have financial challenges due to being laid off, quarantined, or closing a business, you qualify for this penalty exemption. You can withdraw up to $100,000 of your retirement account balance during 2020 without penalty. However, income taxes would still be due in most cases.

The no-penalty rule applies to workplace retirement plans, such as 401(k)s and 403(b)s. It also applies to IRAs, such as traditional IRAs, Roth IRAs, and SEP-IRAs.

Since you make after-tax contributions to Roth accounts, you can withdraw them at any time (which was also the case before the CARES Act). However, the earnings portion of a Roth is subject to income tax if you withdraw it before age 59.5.

7. Getting larger retirement plan loans

Some workplace retirement plans, such as 401(k)s and 403(b)s, permit loans. Typically, you can borrow 50% of your vested account balance up to $50,000 and repay it with interest over five years.

You can delay the repayment period for a retirement plan loan for up to one year.

For retirement plans that allow loans, the CARES Act doubles the limit to 100% of your vested balance in the plan up to $100,000. It applies to loans you take from your account until late September 2020, for coronavirus-related financial needs.

You can delay the repayment period for a retirement plan loan for up to one year. For example, if you have $20,000 vested in your 401(k), you could take a $20,000 loan on September 30, 2020, and delay the repayment term until September 30, 2021. You’d have payments stretched over five years, ending on September 30, 2026. Any amount not repaid by the deadline would be subject to tax and a 10 percent early withdrawal penalty.

Note that individual retirement accounts—such as traditional IRAs, Roth IRAs, and SEP-IRAs—don’t allow participants to take loans, only hardship distributions.

8. Suspending student loan payments.

Starting on March 13, 2020, most federal student loans went into automatic forbearance until September 30, 2020, due to the CARES Act. On August 8, the suspension of student loan payments was extended through December 31, 2020.

On August 8, the suspension of student loan payments was extended through December 31, 2020.

The suspension covers the following types of loans:

  • Direct Loans that are unsubsidized or subsidized
  • Direct PLUS Loans
  • Direct Consolidation Loans
  • Federal Family Education Loans (FFEL)
  • Federal Perkins Loans

Note that FFEL loans owned by a private lender or Perkins loans held by your education institution don’t qualify for automatic forbearance. However, you may have the option to consolidate them into a Direct Loan, which would be eligible for forbearance. Just make sure that once the suspension ends, your new consolidated interest rate wouldn’t rise significantly.

During forbearance, qualifying loans don’t accrue additional interest. Even if you have federal student loans in default because you haven’t made payments, zero percent interest applies during the suspension period.

Additionally, missed payments during the suspension don’t get reported to the credit bureaus and can’t hurt your credit. Qualifying payments you skip also count toward any federal loan repayment or forgiveness plan you’re enrolled in.

However, if you want to continue making student loan payments during the suspension period, you can. With zero percent interest, the amount you pay gets applied to your principal student loan balance, enabling you to get out of debt faster.

With zero percent interest, the amount you pay gets applied to your principal student loan balance, enabling you to get out of debt faster.

If you’re not sure what type of student loan you have or the pros and cons of consolidation, contact your loan servicer. Even if your student loans are with private lenders or schools, they may offer relief if you request it.

9. Having Paycheck Protection Program (PPP) loans forgiven

The PPP is part of the CARES Act, and it supports small businesses, organizations, and solopreneurs facing economic hardship created by the pandemic. The program began providing relief in early April 2020, and the application window ended in early August 2020.

Participating PPP lenders coordinated with the Small Business Administration (SBA) to offer loans to businesses in operation by February 15, 2020, with fewer than 500 employees. Loan amounts could be up to 2.5 times the average monthly payroll up to $10 million; however, annual salaries were capped at $100,000.

For a solopreneur, the maximum PPP loan was $20,833 if your 2019 net profit was at least $100,000. The calculation is: $100,000 / 12 months x 2.5 = $20,833.

When you spend at least 60% on payroll and 40% on rent, mortgage interest, and utilities, you can have those amounts forgiven from repayment. Payroll includes payments to yourself, but you can’t cover benefit costs, such as retirement contributions, or payments to independent contractors.

In other words, a solopreneur could have received a PPP loan for up to $20,833, paid the entire amount to themselves, and not repaid it by having the load forgiven. Using a PPP loan for qualifying expenses turns it into a grant.

The best part about PPP loan forgiveness is that it won’t qualify as federal taxable income. Some states that charge income tax have indicated that they won’t tax forgiven amounts.

However, if you have employees, the PPP forgiveness calculations and requirements are more complex. For example, you must maintain reasonable salaries and wages. If you decrease them by more than 25% for any employee (including yourself) who made less than $100,000 in 2019, your forgiveness amount will be reduced. 

PPP loan forgiveness also depends on keeping any full-time employees on your payroll. But if you had employees who left your company voluntarily, requested a cut in hours, or got fired for cause during the pandemic, your loan forgiveness amount won’t be reduced for those situations.

The best part about PPP loan forgiveness is that it won’t qualify as federal taxable income. Some states that charge income tax have indicated that they won’t tax forgiven amounts.

However, not all states have issued their rules on taxing PPP forgiveness. So be sure to get guidance if you live in a state with income tax.

You must complete a PPP Loan Forgiveness Application and get approved by your lender to qualify for forgiveness. The paperwork should come from your lender, or you can download it from the SBA website at SBA.gov. Most PPP borrowers have from six months after loan disbursement or until the end of 2020 to spend the funds. 

The forgiveness application explains what documents you must include, and they vary depending on whether you have employees. Once you submit your paperwork, your lender has 60 days to decide how much of your PPP loan can be forgiven.

If some or all of a PPP loan isn't forgiven, you typically must repay it within five years at a 1 percent fixed interest rate. You don't have to start making payments for ten months after loan disbursement, but interest will accrue during a deferral period.

10. Getting SBA loans

In addition to PPP loans, the Small Business Administration (SBA) offers several loans for businesses and solopreneurs facing economic hardship caused by a disaster, including the COVID-19 pandemic.

  • Economic Injury Disaster Loan (EIDL) can be up to $2 million and repaid over 30 years at an interest rate of 3.75 percent. You can use these funds for payroll and other operating expenses.
  • SBA Express Bridge Loans gives borrowers up to $25,000 for help overcoming a temporary loss of revenue. However, you must have an existing relationship with an SBA Express lender. 
  • SBA Debt Relief is a program that helps you make payments on existing SBA loans for up to six months.

Depending on your state, you may qualify for unemployment assistance, which allows self-employed people, who typically are ineligible for unemployment benefits to get them for a period.

This isn’t a complete list of all the economic relief available for small businesses and solopreneurs. There are federal tax initiatives, funds from local and state governments, and help from private organizations that you may find by doing a search online.

How to manage money in uncertain times

When it comes to surviving uncertainty, such as how COVID-19 will affect the economy, those who have emergency savings will feel much less financial stress than those who don’t. That’s why it’s essential to maintain a cash reserve of at least three to six months’ worth of living expenses in an FDIC-insured bank savings account.

If you don’t need to dip into your emergency fund, continue shoring it up when possible. If you don’t have a cash reserve, accumulate savings by cutting non-essential expenses, and even temporarily pausing contributions to retirement accounts. That’s a better option than succumbing to panic and tapping your retirement funds early.

If you don’t need to dip into your emergency fund, continue shoring it up when possible.

If you find yourself in a cash crunch, contact your creditors before dipping into any retirement accounts you have. Many lenders will be willing to work with you to suspend payments or modify existing loan terms temporarily.

RELATED: How to Reduce Money Anxiety—Compassionate Advice from a Finance Pro

My new book, Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers, covers many strategies to earn more, manage variable income, and create an automatic money system so you can strengthen your financial future. It’s a great resource if you’re thinking about earning side income or have already started a business.

Many economic factors that affect your personal and business finances aren’t under your control. Instead of worrying, look around, and figure out how you can create more income or cut unnecessary expenses. Working on tasks that you can control gives you more clarity and helps manage stress in uncertain times.