What Are the Fees to Get a Reverse Mortgage?

By DEBORAH KEARNS

A reverse mortgage is a special type of home loan that allows homeowners 62 and older who have paid off all or most of their mortgage to withdraw some of their home’s equity and convert it into cash.

When evaluating the costs of a reverse mortgage against other potential retirement strategies, you’ll want to look at Home Equity Conversion Mortgages, or HECMs, in particular. HECMs account for nearly all reverse mortgage loans in the U.S. and are insured by the Federal Housing Administration.

Reverse mortgages differ from other types of home equity loans in a number of ways, one of which is higher costs. Fees will include mortgage insurance premiums, both initial and annual; third-party fees for closing costs; a loan origination fee, capped at $6,000; and a loan servicing fee.

It’s also worth noting that reverse mortgage rates tend to be higher than traditional home loans, and will vary depending on how much you borrow, how you withdraw your proceeds, the home’s appraised value and your credit profile, among other factors.

To get to the bottom of reverse mortgage costs, we asked two experts to weigh in: Dan Hultquist, co-chair of the education committee at the National Reverse Mortgage Lenders Association, and Paul Fiore, executive vice president of retail lending at American Advisors Group.

Here are their insights on HECM fees, broken down by upfront and ongoing costs:

Upfront costs

Out-of-pocket HECM counseling fee: In order to get a reverse mortgage, borrowers must undergo mandatory counseling with a third-party HECM counselor approved by the U.S. Department of Housing and Urban Development. The fee is typically around $125, according to the Consumer Financial Protection Bureau. The counseling addresses the lending process, benefits, drawbacks and eligibility requirements involved in a reverse mortgage. This fee cannot be rolled into your loan and must be paid directly to the counseling agency in most cases.

Appraisal fees: Professional home appraisals are always required for a HECM and cost about $300 to $500, on average, Hultquist says. Appraisals can be more (or less) expensive depending on the size, age and condition of your home, he adds. This is a fee you’ll need to pay upfront to an appraisal management company.

Third-party closing costs: Expect to pay typical mortgage fees for loan recording, credit checks, title insurance and so on. Ask to see a detailed breakdown of each fee, which should be included in your closing disclosure from your lender, Hultquist says. Keep in mind that you can shop for your own title company (if you don’t want to use your lender’s suggestion) to perform the title search and provide title insurance.

Initial mortgage insurance premium: You will be charged an initial mortgage insurance premium at closing. The initial MIP due at closing will be 0.5% or 2.5%; the percentage is determined by how you choose to receive your reverse loan proceeds (line of credit versus a lump sum, for example), according to HUD.

Loan origination fee: Many lenders charge a loan origination fee to process, underwrite and close your loan, and a HECM is no exception. Expect to pay either $2,500 or 2% of the first $200,000 of your home’s appraised value (whichever is greater), Fiore says. Additionally, you’ll pay 1% of the amount over $200,000. Loan origination fees were the main barrier to obtaining a reverse mortgage in the past, but they’ve come down in recent years, Fiore says, and are now capped at $6,000. Although HECM origination fees can be rolled into your loan, that’s still cutting into your loan proceeds, he notes.

Ongoing costs

Annual mortgage insurance premiums: Over the life of the loan, you’ll pay an annual MIP that equals 1.25% of the outstanding mortgage balance, according to HUD. You’ll also have to pay an FHA mortgage insurance premium, which acts as collateral to ensure you receive loan advances. You can roll the MIP costs into your reverse loan, which will accrue interest for the life of the loan.

Loan servicing fees: Lenders can charge a monthly servicing fee of up to $30 if your reverse mortgage loan has an interest rate that adjusts annually, and no more than $35 monthly if the interest rate adjusts on a monthly basis. When you close on your reverse mortgage, your lender will deduct the servicing fee cost from your available loan funds and add it to your loan balance each month, which will increase your balance over time. Also, your lender can add the cost of its servicing fee into your interest rate, which will increase your monthly loan balance.

Long-term property costs: When you apply for a reverse mortgage, the FHA requires that you show proof of enough income (without the proceeds from your reverse mortgage) to continue paying essential items such as your homeowners’ insurance premiums, annual property taxes, homeowners’ association dues and hazard insurance premiums (if applicable to your area; these can be steep). If you have any liens on your property because you haven’t paid property taxes or HOA fees, for example, you likely won’t qualify for a reverse mortgage.

Next steps to getting a reverse mortgage

The old way of thinking about reverse mortgages as a “last resort” has shifted in recent years, Fiore says. You have multiple options to tap into your home’s equity with a reverse mortgage while living in the house for years to come.

“A lot of people could really benefit from it, but they need to find someone who knows the products,” Fiore says, adding that anyone thinking about a reverse mortgage should search the NRMLA database for a member lender to work with.

If you think a reverse mortgage might be right for you, contact a HECM counselor to enroll in counseling, or call HUD toll-free at 800-569-4287 to learn more. If you decide to apply for a reverse mortgage, contact an FHA-approved lender that can help.

What Is Transitional Style? The Type of Decor Everyone Can Agree On

By Margaret Heidenry

With so many decor styles out there, it can be hard to stick with just one. Modern, rustic, shabby chic, traditional—deciding on the vibe you want for your home can be downright confusing. But here’s the great thing about interior design: Many of these styles overlap, and can actually work really well together. The design world uses the term “transitional style” to describe the type of design that melds two different aesthetics—modern and traditional—into the same room. So how can you bring transitional style into your home? Our experts break it down for you.

Defining transitional style

The key to achieving this style is balance. Transitional style welcomes disparate styles—the traditional and the modern, the feminine and the masculine—in the same space. It’s a classic, clean look that’s reinvigorated by mixing in contemporary furniture, rugs, and accessories, according to Ellie Thompson, CEO of Venyou, an online platform that lists private homes and estates for events. An angular, modern dining table surrounded by traditional upholstered chairs is a typical example of transitional design. A rule of thumb: You want the decor to be inviting and accessible, not veering too far into one trend or another.

Photo by Ashley Campbell Interior Design—A modern marble table is paired with more relaxed, upholstered dining chairs.

As with any design style, there are unofficial rules to get the look. You can best achieve the mix-and-match transitional style in your home by choosing pieces that follow these guidelines.

Element No. 1: Beige is your friend

Neutral tones are the hallmark of transitional style, according to Thompson. Go for an unsaturated palette of white, cream, beige, tan, gray, or light brown. A simple neutral backdrop for the walls, flooring, cabinets, and large furniture will make the room feel timeless.

Element No. 2: Mix textures

Transitional style embraces different materials that have the same color but that give texture to the space. “Whether it be stone, wood, or leather, transitional style isn’t married to one type of material,” says Thompson. “Using a couple different textures will help you achieve an elegant but modern look.” She suggests incorporating such textures as chrome, gold, wood, glass, fabric, and faux fur into every room of your home.

Element No. 3: Use antiques strategically

Balance out an otherwise contemporary room with an antique statement piece. This will give the room depth and show off your curating skills. “Nothing makes a room feel more modern,” says interior designer Mark Cutler of Los Angeles. “The more sleek the space, the more rustic and worn the antique should be,” he says.

Element No. 4: Use bold accents sparingly

“Don’t overdo it!” says Thompson. Keep it simple by picking a couple loud pieces that accent the room but don’t clutter it. Patterns are used sparingly and tend toward geometrics. “And window treatments will be simple, with sleek lines instead of fussy or complex designs,” says Griffin.

Photo by Martha O’Hara Interiors—Yellow accessories in a transitional living room add interest but don’t overpower.

Element No. 5: A contemporary rug is a must

Transitional furnishings will almost always be partnered with a contemporary rug—think solid, geometric or animal prints—rather than a traditional rug that’s floral, paisley, or oriental, says Griffin. “This is a simple way to touch on transitional style that doesn’t require a complete redesign of your home.”

Element No. 6: Choose modern art that makes a statement

“Keep it big and bold for a greater impact, instead of hanging lots of smaller pieces,” says Griffin. Art should have a contemporary look, in terms of style and colors—abstract works, graphic prints, and photography are best.

Element No. 7: Rely on classic lines

Stick to furniture, tables, and beds that have a sophisticated shape with simple, sophisticated lines, as opposed to pieces that are rounded and ornate. Transitional furniture will be comfortable but boast straighter lines.

“Square off everything,” says Tracy Kay Griffin, lead designer at Express Homebuyers. That means that in choosing a traditional element, you avoid curves and ornate detail, and make sure it has straighter lines, to minimize detail. “For example, doorknobs could be straight levers as opposed to round knobs, and sinks may have a rectangular shape.”

The transitional aesthetic requires the seamless marrying of several traditional pieces with true contemporary pieces. Essentially, this means that your home should be a sophisticated yet livable home, full of beloved items and sensible furniture that can last a lifetime.

Orderly Outdoors: 5 Tips for Spring Cleaning Your Yard

By 

 

Spring is the perfect time to spruce up your yard. Cleaning your outdoor landscape not only makes your home more attractive, it provides a functional space for play, entertaining, and relaxing. Here are five tips for a tip-top home exterior this spring.

1. Remove Debris

The first step in a successful yard clearing is to remove branches, debris, and leaves that have accumulated during the winter months. You can rent a wood chipper to turn the debris into mulch or bag it and have it collected by your municipality. Removing leaves and other detritus allows air and sunlight to reach your grass, encouraging it to turn green with the season.

2. Clean Hard Surfaces

Consider renting or purchasing a pressure washer from a business like Jetwave Industrial Equipment to freshen your patio, paths and walkways, sidewalk, and other hardscapes. These devices can also be used to effectively clean siding, fencing, sheds, and more. Use a low-pressure tip for best results, especially when it comes to removing algae and mold growth.

3. Install Outdoor Lights

If you already have outdoor lighting, spring is the best time to change the bulbs and ensure the fixtures are in good working order. If not, consider investing in motion lights along all pathways and walks. This not only makes the space more inviting, but also increases safety by preventing trip and fall injuries.

4. Inspect Foliage

When the snow melts, check your landscape for signs of winter wear and tear. Prune any dead branches or overgrown areas. If there are any dead patches in the grass, prepare them for seeding and do so depending on when the weather is warm enough in your area. Starting early can help ensure lush green grass as the temperature rises. If you have perennials in your yard, these should also be pruned as directed to allow for new growth as spring arrives.

5. Plot Your Planting

If you’re planning to conduct any updates to your landscape, make a sketch of your yard and indicate the changes you’ll be making. This can help you determine exactly what plants you need to buy. Once you make your purchases, the garden center can provide advice on when to plant and how to care for new annuals and perennials.

By taking these five spring cleaning steps, you’re on your way to a peaceful, vibrant outdoor space when summer arrives. Let the spring cleaning begin with what people see first when they pass your home!

So, What’s a Pre-War Apartment?

House Tour: A Writer’s Perfect, Peaceful Tiny Brooklyn Studio (Image credit: Melanie Rieders )

If you’ve ever searched for an apartment in New York City, you’ve probably heard the term “pre-war” before, but are you familiar with what it means? Pre-war apartments refer to buildings that were constructed before 1939 (AKA those that were built before World War II began).

Pre-war style came about during a population boom in the city in the 1880s, according to Street Easy. Buildings were made with sturdy construction materials and architects incorporated elaborate and stylish designs. The building boom—and its style—declined during the Great Depression, ending when World War II began. After the war, building styles changed (those are referred to appropriately as “post-war” apartments), so you can tell a lot about an apartment and what it will look and be like just by the “pre-war” descriptor.

So What Does Pre-War Really Mean?

As in, you know the definition, but what does the “pre-war” label say about a home—and why would you want one? For starters, pre-war apartments have specific architectural details that make them unique and give them character, so if you prefer elaborate details to a modern minimalist look and layout, a pre-war apartment might be for you.

The Details (and the Pros)

Pre-war apartments are known for touches like unique layouts, crown molding, high—and beamed—ceilings, sunken living rooms, plaster walls (often with ornamentation) that keep sound out, and wide hallways. They also typically have large foyers, wood floors (especially with a herringbone pattern), arched doorways, and solid wood doors with brass fixtures, according to Street Easy. Pre-war apartments also generally have larger bedrooms than newer buildings in New York City do, so it won’t feel like you’re sleeping in a closet.

…And Then There Are the Cons

While pre-war apartments have all of those beautiful features, they also have some less-than-desirable qualities. “Unique” layouts can often mean confusing layouts that are hard to work with, and most pre-war apartments have small kitchens and bathrooms and no central air. They also usually have older radiators that clank when they turn on, and inefficient windows (i.e. they don’t always hold up to the elements that well). You might love the look of a pre-war apartment, but you also have to be prepared for the downsides—if they’re not something you want to deal with in your home, you may want to find something with a more modern construction instead.

Finding the Pre-War Apartment of Your Dreams

Apartment hunting in New York City is already a bit of a challenge, and looking for something specific like a pre-war apartment definitely makes it harder. You have to look in specific neighborhoods, and there are other requirements in place that make it more difficult to own a pre-war apartment once you’ve found it.

Where To Look

Pre-war apartments are—unsurprisingly—typically found in specific neighborhoods. Darren Sukenik, a managing director at real estate company Prudential Douglas Elliman, told the New York Times that finding a pre-war apartment is like finding a zebra since they only exist in certain places.

According to Sukenik, you’re most likely to find pre-war apartments if you focus on neighborhoods like the Upper West Side and the West Village in Manhattan, but you can also head to Brooklyn and look in neighborhoods like Carroll Gardens, Cobble Hill and Boerum Hill for less expensive older apartments with pre-war touches. You may also be able to find pre-war apartments in the Bronx.

What’s the Catch?

Generally speaking, pre-war apartments (at least the ones in Manhattan) are co-ops—meaning, they require co-op board approval, and you’ll likely have to put down a bigger down payment, according to Sukenik. There are exceptions, of course, but they might not be exactly what you’re looking for. So, if you have your heart set on owning a true pre-war apartment in New York City, be prepared to pay more (and to impress the board!).

Speaking of impressing the co-op board, you should know some of the factors that go into the approval process. Co-op boards typically judge based on your finances, whether or not you’ll be a good neighbor, and whether or not the apartment will be your primary residence, according to Brick Underground. You also have to put together a co-op package that details your finances, personal qualifications, employment background, plans for the apartment should you be approved, and more. (You can find out more about what goes into a co-op package and how to impress the board here.)

If you’re interested in buying a pre-war apartment, CityRealty has a list of the top 100 pre-war apartment buildings in New York City so you can start your search.

 

Before and After: 13 Dramatic Kitchen Transformations

Many people want to change their kitchen, whether it’s because it functions poorly, their taste has evolved or they purchased a home marked by someone else’s style. In fact, “can no longer stand the old kitchen” is the top reason homeowners choose to remodel kitchens, according to Houzz research. If you’re experiencing kitchen fatigue and are looking for inspiration, take a look at these 13 kitchen transformations. Perhaps you’ll find your kitchen soul mate here.
Wood to White
Many homeowners ditch wooden cabinets in favor of white. Our first group of before-and-afters shows four kitchens where this was done, in a variety of styles.1. Raising the RoofKitchen at a Glance
Who lives here: A professional executive coach and a beer distributor, their 10-year-old daughter and two Pembroke Welsh corgis
Location: Groton, Massachusetts
Size: 251 square feet (23.3 square meters)
Designers: Halsey Platt and Diana MacLeod of Platt BuildersBEFORE: The kitchen in this Massachusetts home occupies what used to be a barn, and the low roof meant windows that were just 12 inches tall.

AFTER: The homeowners raised the roof 18 inches, allowing for bigger windows and a proper view. The remodel also exposed some of the original beams, and added new ones to highlight the space’s historical character.

Cabinets: in English Linen finish, Candlelight Cabinetry; Bakes cabinet pulls and Sheraton cabinet knobs in dark antique: Horton Brasses; wall planking: painted in Mayonnaise OC-85 by Benjamin Moore, Boral; rustic glass pendant lights: Pottery Barn; Iron/Tones undermount sink in white: Kohler; three-legged bridge faucet: Rohl; single-drawer dishwasher with panel: Fisher & Paykel

Read more about this kitchen remodel

7 TAX BREAKS EVERY FIRST-TIME HOMEBUYER MUST KNOW

The tax landscape changes yearly. Congress meets occasionally to review and adjust the tax code, so first-time homebuyers must stay on their toes to understand year-to-year tax changes.

The government provides tax breaks for existing and new homeowners to incentivize buying homes. Homeownership offers multiple home tax deductions, tax credits and other breaks that aren’t available to those who rent. If you bought your first home in 2016 — or you’re hoping to buy one in 2017 — it can pay to familiarize yourself with first-time homebuyer tax credits so you can take advantage of tax breaks that lower your tax bill.

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HOME MORTGAGE INTEREST DEDUCTION

The mortgage interest deduction is one of the biggest home tax breaks and is a crucial new homeowner tax credit. It covers interest paid on loans of up to $1 million, or $500,000 if you’re married but filing a separate return.

The deduction can be especially beneficial for borrowers with new loans because interest charges on mortgages are typically steeper in the early years of the mortgage’s term.

“The way loan amortization works, your first payments have the highest ratio of interest to principal,” said Andrew Christakos, an accredited investment fiduciary with Westfield Wealth Management in Westfield, N.J.

You must itemize on Schedule A of your tax return to claim the home mortgage interest deduction. To do so, add up all deductible expenses for the year, including those related to homeownership as well as other categories. Claiming the mortgage interest deduction can save you tax dollars if your itemized deductions are greater than your standard deduction.

Don’t miss this new homebuyer tax credit. Your loan provider should send you Form 1098 shortly after the tax year ends. It will show the amount of interest you paid the previous year.

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MORTGAGE INTEREST CREDIT

The federal government’s mortgage interest credit provides another opportunity for first-time homebuyers to claim a tax break for the mortgage interest they paid. Unlike the mortgage interest deduction — which reduces your taxable income — this mortgage interest credit directly counts against your tax bill, lowering what you owe.

“It’s a little-known but very cool program,” said Deb Tomaro, a Bloomington, Ind.-based broker with RE/MAX Acclaimed Properties. “Depending on the purchase price of your home, a buyer can get 20 to 30 percent of the interest they pay every year back as a straight tax credit.”

For example, imagine you prepare a return and find that you owe the IRS $1,000 in taxes. However, completing IRS Form 8396 for the mortgage interest credit shows that you’re eligible for a $1,000 credit. In that situation, you can apply the credit and not owe the IRS anything.

The credit is not refundable, so you won’t receive a check if the credit is larger than what you owe in taxes.

To be eligible for this strategic tax break, a state or local government must have issued you a Mortgage Credit Certificate. Typically, this certificate is issued at the time you originate the mortgage. The certificate tells you how much interest you can claim as a credit. If you also claim a mortgage interest deduction when you file your taxes, you must reduce the credit by that amount — no double-dipping is allowed.

5 Bathroom Ideas to Steal From Hollywood’s Coolest It Girls—and How to Shop Them

Sacha Strebe

by SACHA STREBE

If there’s one thing we’ve learned from the myriad of celebrity homes we’ve had the privilege of shooting for MyDomaine, it’s that when it comes to style, some people are just born with it. Case in point: Lauren Conrad’s former Cali-cool home in the Pacific Palisades. It’s an undeniable master class in swoon-worthy, texture-rich bohemia, with that timeless glamour and modern femininity we’ve come to expect from the A-lister.

However, Conrad’s not the only one. We pretty much want to steal the bedrooms, dining rooms, and living rooms of all our favorite It girls—oh, and we definitely want to raid their closets, too. But if there’s one room we want to mimic above all else, it’s the bathroom. While the kitchen will always be the hero of the home, the powder room is where we really take a load off, expunge the daily stresses, and soak the senses, both literally and figuratively. So we compiled five of our all-time favorite celebrity bathrooms along with the key pieces to get the look at home—and all of them have one thing in common. Can you guess? It’s bound to assuage your Instagram envy.

 J U L I A N N E  H O U G H

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When you have a crazy-busy schedule like actress and musician Julianne Hough’s, you need a stylish sanctuary to come home to. That’s exactly what she did with her bathroom. It’s earthy and raw, turning on Mother Nature’s charm with a floor-to-ceiling window that floods the room with sunlight. In fact, this natural palette runs throughout her entire home. “Muted, earthy greens, browns, blues and some yellows feel grounded and protective,” she told Better Homes & Gardens. “But I also love pops of color. They symbolize pure joy.”

L A U R E N  C O N R A D

2088017-1487360228-640x0cPHOTO: Justin Coit for MyDomaine

Lauren Conrad’s bathroom is a traditional-modern fusion. It strikes a balance between classic and contemporary with ease, and we’re pretty sure most of you reading this wouldn’t pass up an opportunity to have this freestanding-tub situation in your own home. We love the all-white look balanced out with natural light and warm timber details. The textured Little Market throw and the vintage Turkish rug really add a hint of boho-chic flair. You simply must check out the full tour of her Cali-cool home for more interior inspiration.

 

N A O M I  W A T T S

2088010-1487360227-640x0cPHOTO: Douglas Friedman/Trunk Archive

It’s hard to imagine a New York city loft could ever be transformed into a space fit for a family of four, but that’s exactly what design firm Ashe + Leandro did when they approached the home interior of actress Naomi Watts, featured in Architectural Digest. The two-time Oscar nominee shared the space with former husband Liev Schreiber and their two sons, 8-year-old Alexander and 7-year-old Samuel, so it needed to have that fusion of fashion and function. The end result is an inviting family oasis complete with a master bathroom and a freestanding tub we all want to soak away the hours in. We love the glam gold touches and penny-tiled floor.

 

C A T  D E E L E Y

2088013-1487360227-640x0cPHOTO: Douglas Friedman/Trunk Archive

We all love her style on So You Think You Can Dance, so it’s not surprising that the television personality’s superior taste extends into her house, too. When InStyle toured her Benedict Canyon home, we fell head over heels for her laid-back cool design with a hint of bohemian flair. It has that elevated nomadic vibe that comes from traversing the globe. It’s these subtle jet-setting sentiments that truly make this bathroom feel like home.

 

E R I N  F O S T E R

2088011-1487374667-640x0cPHOTO: Justin Coit for MyDomaine

We’re not the only ones who favor the bathroom as the top spot in the house. Erin Foster cherishes her master bathroom complete with a freestanding clawfoot bathtub. “I’ve never had a nice bathroom before,” she told MyDomaine. “The truth is I just couldn’t afford anything nicer, so I lived in a dump for 10 years, and I waited until the very last minute to finally let myself have beautiful things. Now when I shower and look around, I literally smile because I’m just so happy with myself in this beautiful bathroom. I’m just in heaven. Sitting in there, washing my hair, and smiling.” We love how she styled the bleached-out space with a pop of color via the fuschia African juju hat. In fact, her entire home tour has similar pops of color to brighten your day.

 

First-Time Home Buyers On: The Finances

By Adrienne Breaux

 

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(Image credit: Reagen Taylor )

How long do you need to save up for a down payment? How long does it take to get approved for a mortgage? Buying a home—especially for the first time—is a learning process, made all the more intense thanks to the fact that large sums of money are also involved. So I asked real-life first-time home buyers Tiffany and Alan Goldsteinto help illuminate some of the money-related concerns of buying a home.

Saving starts with getting a grasp on what you’re making and what you’re spending.

Early on in our marriage, we made a habit of sitting down and making a budget. How much are we going to make each month after taxes? What known expenses do we have (i.e. rent, car payments, charitable giving etc.)? What is our targeted spend for things like groceries, clothing, eating out, and various luxuries? Everything after that would go towards savings and a down payment. After a few tweaks, we had a plan to have an “emergency fund” and a targeted down payment in about three years.

The next step was following through, but also reevaluating and adjusting as we went along. Want to take a trip? That’s fine — we would go add the expense to our plan and see how much longer it would take for us to meet our home ownership goal and decide if we were comfortable with that.

Spend less going out to eat or pass on that awesome shoe sale? At the end of the month we could see how much closer those decisions brought us to meeting our goal. Getting organized put us in control and took the fear out of making decisions. Ultimately, we compared ourselves to our plan each month and were able to stay on track.

→ Where you put your savings is just as important

On a side-note, it was equally important to decide where we wanted to put our savings. We decided to put the money for our down payment in a high interest savings account through a different bank than the one we used for our checking account. This gave us better growth prospects than a checking account, took away the risk that it would drop with the stock market the day before closing, and put it out of sight while still leaving it accessible in case of a major emergency. We also took advantage of a credit card that provided 2% cash back on all purchases. Since we were closely monitoring our expenses and paying off our card each month, these became ways to reach our down payment goal faster at no additional cost.

Get pre-approved

We did get pre-approved for a loan long before we were even serious about looking for a home. As we considered getting pre-approval, we were nervous about how the whole financing process worked. We asked around and were recommended a mortgage loan officer who met us on the weekend, talked through the entire process, and gave us advice about what we should be doing in anticipation of getting serious. When we finally made the decision to buy this house, we went back to him and he actually recommended we reach out to other people to test his rates. He ultimately matched the best offer we found.

→ Be ready to move quickly depending on the housing market

The Austin housing market is pretty aggressive right now with finite inventory and a lot of demand. This doesn’t leave a lot of wiggle room to negotiate. Our offer was accepted two days after we put it in. The house had only been listed for four days and there wound up being three backup bids after they accepted ours. That said, we did go through a process with our realtor to develop a list of post-close items we would need to address with the house and asked the seller for related concessions off of the purchase price. They were amenable, so it was definitely worth the exercise.

→ Between the offer being accepted and closing, there’s still a lot to do

The offer was accepted in late December and we closed in February, so the overall process took about two months. To be honest, we spent most of that time focused on scheduling the necessary vendors required for closing (inspector, bank appraiser, etc.), as well as looking for a contractor, budgeting renovations, and aggregating furniture and accessory lists. Overall, it was more along the lines of dreaming about paint colors…and doors…and light fixtures…in the middle of the work week.

Where House Flippers Can Get Financing

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Chris Gash

Until recently, home flippers—investors who buy houses to improve and resell for a quick profit—had few options for financing. Now, traditional lenders and crowdfunding firms are increasingly willing to put up the money.

Luxury-home flips can be lucrative, but risky. “With one flip, you could make the same amount that you could with 10 deals of a lower-end property,” says Daren Blomquist, senior vice president of Attom Data Solutions, an Irvine, Calif.-based real-estate data provider. “But you’re putting many more eggs in one basket and counting on that one property to deliver.”

Jeff Pintar, founder of Pintar Investment Co. in San Juan Capistrano, Calif., is one of the most active luxury flippers in the nation, according to Attom Data. Last year, Mr. Pintar says he purchased 65 homes priced at $500,000 or more, and he’s averaging returns on equity of about 12% to 15% per flip.

Mr. Pintar, 47, says he uses multiple sources for financing. He has established business lines of credit at local banks with about a 5% interest rate that he can draw against to acquire homes. He also works with private-investment companies, which he says charge higher rates but are able to respond quickly. “The banks have trouble keeping up with the pace that we need,” says Mr. Pintar.

Many small-scale home flippers still rely on so-called hard-money loans—short-term, high-interest loans provided by private investors. David Dweck, a hard-money lender from Boca Raton, Fla., will finance up to 60% of the estimated after-repair value of homes purchased for over $500,000. That means if a house costs $600,000 but will be worth $750,000 after repairs, Mr. Dweck will lend up to $450,000, with the flipper putting down $150,000 in cash.

“Most people can’t walk into a bank and get a loan for one of these deals,” says Mr. Dweck, who also flips homes. His terms: an interest rate of between 11% and 14%, with two to four points—a point is equal to 1% of the mortgage amount—and up to one year to repay the loan.

Another source of capital for luxury flippers: crowdfunding, where the funds to finance a deal are raised through the contributions of a large number of people, usually via the internet. “The biggest benefit we offer is flexibility and a national focus,” says Nav Athwal, chief executive officer of RealtyShares, a San Francisco-based company that finances investment properties in 35 states. Funds come from more than 38,000 high-net-worth individuals who invest in a specific transaction for as little as $5,000.

RealtyShares funds up to 70% of the estimated after-repair value of a property in as little as 10 days. Interest rates vary from 8% to 11%, with the average loan term on luxury flips 12 months. RealtyShares also does preferred-equity deals, where they take a partnership interest in the property and benefit from both the interest paid and the potential upside of the transaction.

Jumbo Jungle Tips

Here are some things luxury flippers should consider.

The numbers are critical. Make sure your budget is realistic and your contractor has a record of finishing on time. Luxury flips take more time than lower-cost ones—an average of 208 days, compared with 181 days for all flips, according to Attom Data. A delay of just days can bring additional costs that will eat into profits, so make sure your budget includes reserves for contingencies, such as delays in getting construction permits.

Details count. Luxury buyers are demanding when it comes to high-end finishes. Hire a good designer and pay attention to the details when renovating a property. Factor in the cost of luxury upgrades a buyer will expect.

Beware of defaulting. Like banks, hard-money lenders and crowdfunders secure their loans with a mortgage on the property you’re flipping. If you default, they can foreclose on that mortgage. They may also report your failure to pay to the credit bureaus, which can affect your credit score.