Real estate financing, for the most part, is no different from state to state. However, if it has been a few years since you last went through the process of getting a mortgage, you could use some refreshing on the world of real estate finance before placing an offer and purchasing a new home in a retirement community.

Types of Lenders
While shopping for financing during your home buying process, you may encounter several types of mortgage lenders. Here is an explanation of some of the more common types of lenders you may encounter along the way to homeownership.

Mortgage Brokers
Mortgage brokers are essentially middlemen in the mortgage process. They serve as intermediaries between lenders and borrowers. Mortgage brokers typically have the widest array of loan programs available, because they have relationships with several lenders. The term “middleman” is usually associated with extra expense, but mortgage brokers can actually save you money by helping you comparison shop and find the best mortgage for your particular situation. Mortgage brokers will assist you with things such as filling out and submitting your loan application, running your credit report, scheduling an appraisal, and helping to coordinate your closing.

However, the mortgage broker does not make the decision to fund your loan. A person called an underwriter, who is employed by the lender, makes that decision. Mortgage brokers are paid a fee for their services, sometimes charged to the borrower in the form of points or origination fees, but they can also be paid by the lender, or often times a combination of the two. Sometimes this fee can be negotiated in your favor, or you can also ask that the broker just charge a flat fee, a strategy that is recommended by many industry experts.

Mortgage Bankers
Mortgage bankers are in the business of originating loans and then selling them to the secondary mortgage market (more on that in a moment). Mortgage bankers often have appealing loan rates and programs, but oftentimes do not have access to as many sources as the previously mentioned mortgage broker.

Banks and Credit Unions
Most banks and credit unions also offer mortgages. Funds for these loans are obtained from their customers through checking and saving accounts as well as certificates of deposit. The bank or credit union will sometimes service the loan themselves (if it’s a large bank) or sell the loan to the secondary market.

The Builder’s Lender
If you are buying or building a new home, your builder may also own
a mortgage company or could possibly be affiliated with one. They will
usually try to get your business by dangling low initial interest rates or
credits toward closing costs in front of you. Whether or not going with
the builder’s lender will pay off for you in the long run is not a simple
question to answer. But here’s my advice for what you can do to try and
figure it out.

First, get a good faith estimate from the builder’s lender. I’ll discuss good faith estimates in depth a little later, but for now, just know that it is an estimate of how much money you will have to pay out of pocket at closing, what your closing costs will be, and what your monthly payments will be. With this in hand, take it to a mortgage broker not affiliated with the builder or builder’s lender and have them explain to you the good and bad points of the builder’s financing options. There is no sense in trying to dissect it on your own. There are so many places that lenders can hide fees it’d make your head spin.

A good mortgage broker won’t mind taking the time to explain the pros and cons to you, because they ultimately hope to gain your trust and subsequently your business. However, if the deal you are quoted by the builder’s lender is a good one, an ethical mortgage broker will tell you so. If he can’t meet or beat the builder’s financing, you might want to go with the builder’s lender.

Secondary Mortgage Market
It is common for lenders that provide home loans to sell these loans to the secondary market, made-up of investors such as Fannie Mae and Freddie Mac. Selling your loan provides lenders with the funds they need to issue new mortgages. If your loan is sold, it will not affect the terms of your mortgage or your payment. It will however affect who your payments are made payable to, so if you are using an online bill payment method make sure you are paying the correct entity and sending your payments to the correct address.

Types of Mortgages
Just as there are many sources for your new mortgage, there are also several different types of mortgages. Here are some of the most common types of mortgages.

Fixed Rate Mortgage
The most common type of mortgage, a fixed rate mortgage, is one in which your interest and principal payments remain the same (constant) over the life of the loan. Bear in mind that your total payment may fluctuate (usually upwards) as real estate taxes and homeowner’s insurance rates change over the life of your loan. Different terms are available for fixed rate loans, from as short as 10 years to new 40 and even 50 year mortgages, loan periods which were recently introduced. Keep in mind that the shorter the term, the higher your monthly payment will be. However, the longer the term of the mortgage, the more interest you will end up paying over the life of the loan.

Adjustable Rate Mortgage (ARM)
Adjustable-rate mortgages are mortgages in which the interest rate on the mortgage fluctuates over the life of the loan. The rate will initially be fixed for a specified period of time. For example, with a 5/1 ARM the rate will be fixed for 5 years and adjust every year after that. Rate adjustments are made based on changes to a defined index. The interest rate is determined by adding a fixed number of points to the index. The attraction with adjustable-rate mortgages is that rates are initially lower than that of fixed-rate mortgages. If you do not intend to live in a house for longer than the initial fixed rate period, you will not be subjected to the adjustments in the rate. The disadvantage of an ARM is that during times of rising interest rates, your payments can increase dramatically after the fixed period is over.

Balloon Mortgage
A balloon mortgage is a short term mortgage, usually 2 to 7 years in length, that is amortized over 30 years with the balance becoming due in a lump sum at the end of the term. Again, rates are lower than fixed-rate mortgages, but some people do not want to have to refinance or pay a large lump sum at the end of the loan term.

Reverse Mortgage
Reverse mortgages have been around for many years but are just recently gaining notoriety. A reverse mortgage is a mortgage where the lender pays you either one lump sum or a smaller amount each month, as opposed to you paying them. This can give you extra money to pay your bills and do the things you want to do but otherwise might not be able to afford.

When you pass away or decide to move, your heirs or new owners get ownership of the home and must repay the mortgage. This is most commonly accomplished by selling the home. Reverse mortgages are only available to people over the age of 62, and should only be considered in specific circumstances. In fact, before obtaining a reverse mortgage you must be counseled by an HUD approved reverse mortgage counselor.

VA Loan
Veterans of the United States Armed Services with more than 180 days active duty during peacetime, or 90 days during times of war may be eligible for a VA loan through Uncle Sam. VA loans can be used to purchase a home, manufactured home, or condo. In order to obtain a VA loan, the law requires that:
• the applicant be an eligible veteran who has available entitlement
• the veteran must occupy or intend to occupy the property as a home within a reasonable period of time after closing
• the veteran must have satisfactory credit
• and, the veteran and spouse must show stable income sufficient to meet the mortgage payments.

The advantages of VA loans are that they require no down payment, they are available from most lenders, and the VA prohibits lenders from requiring PMI, or Private Mortgage Insurance. The VA is guaranteeing the loan, so there is no need for a lender to require the veteran to pay for additional insurance against default.

On the downside, VA loans carry a one time funding fee ranging from one and a quarter percent to three percent, depending on the veteran’s service, as well as other factors.

For more information on VA loans, visit http://www.va.gov

Special Financing
There may be times when a conventional real estate loan will not meet your needs. For these cases, special types of real estate financing may be available to you.

B/C Credit Mortgages
B/C loans, sometimes referred to as sub-prime loans, are for those who do not meet the credit guidelines established by Fannie Mae or Freddie Mac. Through B/C loans, borrowers are able to obtain financing for a temporary period of time, when their credit history excludes them from receiving “normal” loans. Recent bankruptcy, divorce, foreclosure, or late payments that show up on your credit report can bump you into this category. You should be aware though that loans of this type carry higher interest rates than those of “A” credit borrowers.

Bridge Loans
Just as Citizen’s Property Insurance is the insurer of last resort, a bridge loan should be your “financing of last resort”. Let’s say you look at a home in Florida or somewhere else, fall in love and have to have it. But, you haven’t yet sold your home in New Jersey (or wherever you’re from). A bridge loan will allow you to purchase the new home without having to first sell your home up North. There are essentially two ways for a bridge loan to be structured.

The first way is you get a bridge loan for enough money to pay off your current home and make your deposit on the new home. Then you would just get a regular mortgage on the new home. You won’t have to make payments on the bridge loan for a predetermined amount of time, say 6 months or a year, but in the meantime, interest is accruing. The rub lies in that if you don’t sell your home in the allotted time, you will have to start making payments on the bridge loan, meaning you’ll now be making two mortgage payments. Once your home up north sells, you pay off the balance of the bridge loan and any interest that has accrued.

The second way to structure a bridge loan is to use the equity in your home up north to make the down payment on the home in Florida. Now you have two loans, your original mortgage, and a second home equity mortgage. Then, you’ll get a mortgage on the new house. So, essentially you have three loans. But, you aren’t usually expected to pay on all three, just your original mortgage and your new mortgage. Again, once your home sells, you’ll pay off your original mortgage and the bridge (second equity mortgage) as well as any interest that has accrued.

Experts only recommend getting a bridge loan if you know that you can afford to make two mortgage payments if you had to. Usually, a lender won’t give you a bridge loan unless you have enough cash to make both payments anyway. Also note that the rates on a bridge loan will be significantly higher than say, a typical 30-year mortgage. It can pay to shop around to different lenders to see what types of bridge loans they may offer and what the rates are.

Interest Rates
News of interest rates is everywhere, your local newspaper, online and on television. Some people in the real estate and finance worlds hang on every eighth-of-a-point fluctuation in interest rates. For most of us, however, there is little need to do this. A quarter-point here or half-point there shouldn’t affect your plans for purchasing a home in Florida, so long as you have planned wisely in the financial department. For average size mortgages these fluctuations won’t add but a paltry sum to your mortgage payment. But it is important to know a few things about interest rates, in hopes of better understanding how they could affect you.

How Interest Rates are Determined
Mortgage interest rates, contrary to what many people believe, do not follow the Federal Reserve Board’s lowering and raising of rates. Instead, they actually anticipate the fed. A closer tracking device for mortgage interest rates is the 10-year Treasury note. If you want to know what mortgage interest rates are doing, follow the 10-year Treasury. But as mentioned before, slight changes in rates are nothing to lose any sleep over.

Rate Locks
The typical escrow (time from contract to closing) on a home is 30-60 days, but interest rates are constantly changing. In order to protect yourself in an environment of rising interest rates, get a rate lock. With a rate lock the lender holds or guarantees the interest rate for you for a predetermined length of time. Sometimes they will do this for free for a minimal amount of days, say 15-20, and for longer periods they will charge you a fee. A 60-day rate lock will be more costly than a 30-day rate lock.

Sometimes during escrow, rates will drop, leaving you paying a higher rate than the market rates at time of closing. To avoid this, ask for a rate lock with a one-time float. If the rate goes lower anytime before closing, you can float down to the lower rate. Again, some lenders offer this feature for free, with others you will have to pay. Shop around because the market is always changing and so are lenders’ terms and policies. Competition among lenders can run high, especially in slow markets.

Interest Rate Buy Downs
An interest rate buy down is a reduction in the interest rate that you pay on a mortgage. There are temporary buy downs and permanent buy downs. Temporary buy downs are common as an incentive for builders; they pay the lender a fee to get the buyer a lower initial rate for a set period of time, usually a year or two. This is also an incentive sometimes offered by home sellers to entice someone to choose their home over another.

As a buyer, you can also acquire a permanent buy down. With a permanent buy down, you pay a fee up front to have your interest rate lowered or “bought down” for the life of the loan. You should only do this if you plan on keeping the mortgage for a long time, as it will take a while for the lower rate to recoup the money you paid out to buy it down. Check with your mortgage lender to see if a buy down might make sense for you.

Applying for a Mortgage
The mortgage application is going to be mostly what you would expect. It will ask for your name, social security number, your address for the past two years, a copy of your driver’s licenses, a list of all your assets as well as debts along with monthly payments, employment information, sources and amount of all your income, and more. The type of lender and type of loan you choose will determine the additional information that the lender will ask you to submit along with your mortgage application. These can either be faxed, e-mailed, mailed, or hand delivered to the lender, depending upon your location and theirs. Just to give you an idea, some of the items they may need include:

• a copy of your sales contract (if you’ve executed one)
• proof of your deposit (copy of the cancelled check, bank statement, etc.)
• pay stubs for the last 30 days if you are still working
• your past two years of tax returns
• statements for all your bank accounts and investment accounts for the past three months
• a copy of your current mortgage statement if you have one
• if you are divorced, they will probably ask for your divorce decree
• if you are self-employed they will need a current profit and loss statement
• if you receive a pension or social security the lender will ask for proof of such

Again, depending on the lender and type of loan you are applying for this list can be longer or shorter.

Good Faith Estimate
Within three days of applying for a loan, you should receive a “good faith estimate” as well as a HUD guide to settlement costs from the bank or mortgage company that you applied to. The good faith estimate is just that, an estimate of the costs that you will be expected to pay at closing. Costs that will be reflected on the good faith estimate will include costs for appraisals, surveys, attorney’s fees, recording and transfer fees, doc stamps, mortgage origination fees, and more. Never fully commit to a lender until you have reviewed and are comfortable with their good faith estimate.

1031 Exchange
Instead of getting a mortgage to pay for your new property in Florida, why not trade for it? You may already be familiar with Internal Revenue Code Section 1031, that allows you to defer any capital gains on the sale of an investment or income property by investing those gains into another “like-kind” property. Most commonly referred to as “1031 Exchanges” or “Like-Kind Exchanges” these complex transactions, when executed properly, can help you purchase your eventual retirement, investment, or second home property in Florida. You should of course consult your tax advisor before considering this type of transaction to see if it supports your financial, investment, and real estate purchasing goals.

Should you get the green light to proceed, your next step should be to contact a Qualified Intermediary. Ask your tax advisor, accountant, or real estate agent for referrals. A Qualified Intermediary is a company that specializes in 1031 Exchanges. Once you contact them, they will guide you as to how to structure any sale or purchase contracts to facilitate the exchange. You will have specific time constraints to adhere to, namely 45 days to identify a property you wish to exchange for, and 180 days to close.

In a perfect world, you would close on the property you are giving up or selling first, then purchase a new property. This is called a delayed exchange, and is the most common, least expensive, and least paperwork intensive type of 1031 exchange. However, as we all know, the world is not always perfect, and sometimes the opportunity to purchase a prime property will pass you by if you do not act in a timely fashion. You may find it necessary to purchase a property before selling your current property. Most people do not know that “reverse exchanges” are available that will allow you to do this and still defer your capital gains. It will be at a higher cost and with much more paperwork involved, but it can be done.

For more information on 1031 Exchanges, contact your tax advisor or accountant. To find a qualified intermediary visit http://www.starker.com.

Your Credit Score
Most everyone has heard of a FICO score, created by Fair Isaac Corporation. In case you haven’t, it’s one score that lenders will look at to determine how good of a credit risk you are, and consequently how much money they will lend you and with what terms. FICO scores range from 300 to 850 and the median score nationwide is 723. If your score is above that median, you are doing pretty well as far as most lenders are concerned and you should qualify for the best rates when shopping for a mortgage.
The big three credit reporting agencies, Equifax, Experian and Transunion also produce individual credit scores based on the information they have about you and your history. The problem, however, with credit scores is that they are generally unpredictable, and can vary widely from different reporting agencies.

The problem that a lot of people face is that they have no clue going in to apply for a mortgage what their credit score is and when they find out it’s too late to do anything to improve it. Experts recommend that at least six months before applying for a loan you should visit www.MyFico.com to get your score. There is a fee involved with this but the knowledge you will be armed with after finding out your score could prove to be invaluable.

Ways to Improve Your Score
There are several ways to beef up your credit score in the months leading up to applying for a loan. Most important, experts agree, is to keep your credit card balances below 25% of what your available credit limit is. Thought you might escape those library fines since you’re leaving town? Not so fast. If they are turned over for collection, they can damage your score, so make sure you are all square with the house. Also, do not open or close any credit accounts, including car loans, in the time leading up to applying for a loan. Both can hurt your score.

Your Credit Report
Your credit score is based upon the information that can be found in your credit report. Everyone is entitled to a free copy of his or her credit report once a year. Simply visit www.annualcreditreport.com to get a copy. Be sure to check your report for any errors, such as erroneous bad debt claims and the like, which can drag down your score.

For more information on credit scores and credit reports visit:
http://www/myfico.com
http://www.annualcreditreport.com

Mortgage Rates, Charts, and Calculators
Visit the Zillow Mortgage Marketplace at http://www.zillow.com/mortgage/Mortgage.htm to find the latest information on mortgage rates and to calculate what your payments might be.

I’ve written quite a bit on this blog about The Villages, the popular retirement community in Central Florida. I’ve also written a book for those thinking of buying in The Villages and wanting to learn more about it, titled “Complete Guide to The Villages Florida”.

One of the reasons The Villages is so popular among baby boomers and retirees is the amount and quality of the amenities available to residents, affectionately known as “Villagers”. What many people don’t know is that the developer did not use his own money to build these amenities such as golf courses, recreation centers, and town squares. These amenities were funded by the sale of tax free bonds that homeowners have to pay off over a certain number of years.

The bonds are available tax-free by setting up what is called A Community Development District, or CDD. These districts are made up of a board, appointed by the developer, to determine how much money needs to be raised and how it is to be spent.

The IRS’s contention is that the developer of The Villages too closely controlled the boards that made up the CDD’s and therefore they’ve determined the developer needs to pay back more than $350 million.

It is too early to tell how the developer will respond to the IRS request or what exactly the outcome will be, but it will no doubt be on the minds of current and future residents of The Villages. I have set up a page tracking updates on IRS vs. The Villages where you can read the most recent articles on this very important subject.

Home inspections and home warranties are two tools available to you that will help to ensure that the present and future condition of your new home is satisfactory. Before finalizing the purchase of a home in a retirement community, you should always have a home inspection done. This point cannot be stressed enough. A home inspection could be the best money you ever spend. Home inspectors conduct a thorough evaluation of the home that can help you understand the condition that the house is actually in before you take ownership. Remember, that sometimes looks can be deceiving, and nobody likes unexpected surprises or costly repairs once they move in. Even if the house is fairly new and appears to be in good condition, you never know what could be hiding out of plain sight.

Most home inspections don’t reveal much of anything, maybe faucets that need tightening, or caulking that needs to be done. The point of an inspection is not to convince you that so much is wrong with the house that you are discouraged to buy it. It is rather to give you an accurate depiction of the current condition of the house, as well as an idea of how certain things will hold up in the future.

When major items are found, such as a failing air conditioning unit, or bad wiring, the parties must look to the real estate contract to see who will be required to make the repairs. Home inspections typically cost anywhere from $200 and up, depending on the size of the home. After the inspection is complete you will be given a detailed report of all the inspector’s findings, whether good or bad, usually accompanied by digital photos.

A typical home inspector will inspect the structural elements of the home consisting of the roof, outside and inside walls of the home, patios and driveways, as well as parts of the foundation if visible. They will go into the attic to inspect the trusses, the underside of the roof decking for water intrusion, and insulation. The systems of the home will be inspected including the electrical, HVAC, and plumbing systems. All appliances that are staying with the home are inspected and tested for proper operation, and usually a random spot check of electrical outlets, windows, and doors will be done.

Other items that a home inspection company might perform for additional fees include radon gas and mold testing, water analysis, and pool and spa inspections. Most home inspectors subcontract for a termite inspection that may be at an additional cost to you, but it is a very important part of any home inspection.

Some national home inspection companies for you to look into are:

Amerispec
http://www.amerispec.com

Pillar to Post
http://www.pillartopost.com

Many local home inspection companies perform just as well and may have specialized knowledge of the homes in the area. Ask your real estate agent, or friends and family for referrals.

Home Warranties
If you are buying a new home from a builder, one of the advantages you have is that your home will usually come with a warranty provided and paid for by the builder. But this doesn’t mean that you’re out of luck if you decide to buy a resale home. There are several home warranty options available to you, no matter the age or condition of the home you are buying.

Home warranties for average homes under approximately 5000 square feet will cost you between $300 and $400 dollars per year. You can renew these on a yearly basis. Most plans do not require an inspection of the property before they take effect. Depending on the company you choose and the specific plan you go with, an additional amount may be needed to warrant some items like the A/C, refrigerator, washer/dryer, and a pool or spa.

Typically covered items include the plumbing, electrical, and heating systems, water heater, most appliances, disposal, smoke detectors, and exhaust fans. You need to read the warranty contracts carefully to see exactly what is and what is not covered. For example, a warranty might cover your refrigerator motor, but not the shelving inside the refrigerator.

Should something that is covered by the warranty break down, there is usually a service call fee, anywhere between $40 and $80. Other than paying that, you will not be required to pay out any money for the repair or replacement of a covered item. Most home warranties are pretty simple to acquire, fairly inexpensive, and are usually worthwhile.

Some national home warranty companies to consider are:

American Home Shield
http://ahswarranty.com

Old Republic Home Protection
http://www.orhp.com

Photo credit: kirkier on flickr

The general idea behind a homeowners’ association (HOA) is that you have a group of people elected by the residents who make up the board directing the homeowners association. The main duties are to 1) represent the best interests of the residents of the community especially in the capacity of protecting home values through the implementation and enforcement of rules, known as covenants and restrictions and 2) to assess and collect homeowners’ fees to help pay for the upkeep of common areas of the community as well as any other areas provided for in the covenants and deed recordings.

Fees and dues
Homeowners’ association dues vary widely depending on the amount of amenities that are provided to the homeowners. Some just cover the maintenance of the common areas including medians, right of ways, lakes, and ponds. Other dues can cover things such as upkeep of the streets (if they are private streets), and streetlights. Some communities negotiate for a group rate on cable TV or Internet access with service providers. You may be charged fees for those services monthly, quarterly, or yearly. Failure to pay your homeowner’s dues can result in the association placing a lien on your property and eventually foreclosing if you get far enough behind on your payments.

As a prospective purchaser in a community, you are entitled to and encouraged to review the budget. When deciding whether a homeowners’ association’s dues are a good deal or not, add up what you think it would cost you to obtain the services provided on your own. Don’t forget the aggravation the association saves you by not having to deal with finding and scheduling the services and vendors yourself.

If you are buying a home in a new subdivision where homes are still under construction, odds are that the developer still controls the homeowners’ association. Until control of the HOA is given to the resident owners, called turnover, the developer is still responsible for maintaining the public aspects of the community (streets, common areas, etc.) and carrying out the duties of creating a budget for the Association and setting HOA dues accordingly. Oftentimes the developer will over-subsidize the budget, in order to keep the initial HOA fees low, in an effort to attract more buyers. But when turnover occurs, and the developer is no longer subsidizing the budget, homeowners can be hit with a sharp increase in their HOA dues. Before purchasing in a community where the developer controls the HOA, make sure that you carefully review the budget to make sure everyone is paying their fair share, or if that is not the case, try to reasonably figure out what your dues might be when control of the development turns over.

Common Rules and Regulations
Another aspect of communities with homeowners’ associations is that most involve rules and regulations, or covenants and restrictions (C and Rs) also referred to as covenants, conditions, and restrictions (C, C and Rs). Be sure to ask for a copy before you sign any purchase agreement, and make sure that the agreement is contingent on (depends upon) your understanding and approval of the covenants and restrictions and rules and regulations.

Some common rules and regulations that may be included in the documents are rules regarding:

Fences
Some communities have restrictions on what type of fence you may have, the material it can be made of, how high it can be, or if any fences are allowed at all. If a community you are considering does not allow fences at all, and you have pets that require being fenced in, you might have to consider an invisible fence.

Playground or sports equipment
Basketball hoops are not allowed in more and more communities, while some allow portable basketball hoops as long as they are stored in the garage when not in use. Swing sets and slides are also commonly not allowed because of how they can deteriorate in appearance, and in maintenance-free communities where lawn care is included they are a hindrance to the easy cutting of your lawn.

Parking
Overnight or long-term street parking are often not allowed. This is as much a fire and police safety issue as it is an aesthetic issue. Boats and trailers are usually not allowed to be stored outside, so you must find room in your garage or park them offsite.

Changes to the exterior of your home
Most homeowners’ associations require that an architectural or design review committee approve any changes you wish to make to the exterior of your home. This includes things such as adding a screened-in patio, swimming pool, or painting your home a different color. Even changes to your landscaping must sometimes be approved.

There is usually a form they have you fill out on which you must describe in detail any changes you plan to make, including a list of materials to be used, who will do the work, and so on. You are also typically required to submit any drawings or plans that show how the change will look when complete. This is to keep everything in the neighborhood looking nice and congruent.

Pets
Some communities have restrictions on the number of pets you may have in a home, as well as the size. These are typically implemented to reduce the number of potentially aggressive dogs such as pit bulls, and are most common in condominiums or townhouses due to the close proximity of your neighbors. Also, most communities and municipalities now have rules requiring you to pick up after your pets. Be mindful of these rules and laws, especially if the area you are moving from had no such ordinances, as you can be heavily fined for ignoring them.

Protection of home values
It can sound like a pain to have to pay these fees and abide by these restrictions especially if you are coming from a community that doesn’t have any fees or restrictions. But all these fees and rules, as inconvenient as they may sometimes seem, do serve the important purpose of protecting your home values. If you are going to pay a quarter of a million dollars or more for your new home, you want to know that someone is looking out for you and your investment. Ask any reputable real estate agent or property appraiser and they will tell you that communities governed by homeowners’ associations have the best track record of preserving and increasing home values.

Deciding if an HOA is for you
So, based on the above information, do you think a community with a homeowners’ association is for you? If you’re at all like me, the answer is a resounding yes. I like knowing that my best interests are being looked after and my home value is being protected. You basically just have to weigh out the pros and cons of living in such a structured environment. While it’s not for everybody, I think that most people will ultimately choose to live in and be happy in communities with a homeowners’ association. I think it’s best for your lifestyle and the future value of your property.

Condo Association Fees
As an owner of a condominium you will be responsible for paying condo fees. Before buying a condo, make sure these fees have been explained to you in writing. You should also ask to see the budget..

The condo fees are collected to pay for things like maintenance of the exterior of the condo, including insurance on the building, maintenance of the common areas, such as the grounds, swimming pool, and other amenities. Quite frequently in a condo the condo fee includes water, sewer, and garbage service. This is often more convenient for you: almost no one complains about having a few less checks to write.

Special Assessments
Eventually, if you live in a condo (and even with a homeowners’ association) long enough, you may fall prey to what is called a special assessment. A special assessment is sometimes a necessary evil, and is used to pay for items such as a new roof or unexpected repairs beyond ordinary maintenance. Your condo’s budget should have a reserve set aside for unexpected events, but sometimes if there is not enough money to pay for what needs to be done, unit owners will be assessed. If you are on a shoestring budget or have a fixed income with little reserves, you may want to rethink a condo because just one special assessment can put you in the red.

Also note that failure to pay any of your condo fees or special assessments can result in the condo association placing a lien on your property, which can eventually lead to foreclosure.

Golf and Country Club
Golf course communities, also referred to as Country club communities are extremely popular. Courses can range from fairly modest to extremely upscale. Many communities have more than one golf course. Most have at least one clubhouse with such amenities as a fitness center, practice facilities, pro shop, restaurants and bars, banquet facilities, even full service spas, so that you can enjoy a massage after that tough round of golf.

Some golf courses are private, meaning you must be a member or the guest of a member to play there. Membership rates vary among country clubs depending on the location and caliber of the course. Keep in mind that most private courses have a food and beverage minimum, meaning that you have to spend at least “x” amount of dollars in their restaurants and bars within a designated period of time. Thankfully, sometimes purchases in the pro shop can be applied towards meeting your food and beverage minimum. If you lose as many golf balls as I do, you should have no problem reaching your food and beverage minimum.

Many country club communities have equity memberships, which pass from one party to another through the sale of real estate in that community. If this is the case with the home you intend to purchase, be sure that the real estate contract includes the right to the membership. Your real estate agent can help you with this.

Some communities have both a private course and a public course. You can own a home in a community such as this, not be a member and instead choose to play the public course exclusively. Surely, though, if your budget allows you will probably want to be a member of the private course to give your golf game some variety.

Country club communities with a golf course that is always open to the public are also an option. Be aware, however, that public courses tend to be more crowded than private courses, although this can depend on the time of year, the level of the course, and the price you have to pay to play. Some new communities allow the public to use their golf courses until there are enough residents and consequently enough members in the community. This is both good common sense and sound economics.

If you do not play golf, you may want to think twice about buying a home in a golf course community. Many boomers who do not play golf resent the fact that they are sometimes required to help fund its operations through their homeowners’ association dues. Whether or not this occurs depends on how the homeowners’ association and club budgets are set up, so you might want to look into that before you buy.

Active Adult / 55-Plus communities
55-plus communities are communities where the majority of the homeowners are over the age of 55. For a community to qualify for the 55-plus designation and to be marketed as such, at least 80 percent of the units have to be occupied by at least one person over 55. A common misconception is that everyone must be over 55 but that simply isn’t true. On the other hand, this does not mean that someone under 55 must be allowed to purchase a home. A community– through its deed restrictions– can legally deny someone the ability to purchase a home if they are not yet 55 years old.

Some 55-plus communities have limits on how long relatives such as kids or grandkids can visit, but those instances are usually limited to mobile home parks. While there are still many 55-plus communities in operation and more springing up all the time, research suggests that some people, particularly baby boomers do not want to move into a 55-plus community due to some of the restrictions involved and because they associate it with being “old.” If you fall into this category, you may want to seriously consider a maintenance-free lifestyle community as an alternative. But even still, the business of developing and building 55-plus communities is… excuse me… booming, and those who do it right are experiencing amazing successes.

Maintenance-Free Lifestyle Communities
If cutting grass, landscaping, painting, pressure washing, and general upkeep of the exterior of your home are appealing to you, skip to the next section. Still with me? Okay then, a maintenance-free community might be for you. While some maintenance-free communities are designated 55 and better, most are not. But because maintenance-free lifestyle communities often have restrictions such as no fences, no swing sets, and no basketball hoops, they tend to discourage many families with young children from moving in.

So in maintenance-free lifestyle communities you might enjoy a little more peace and quiet but at the same time be free to have your children or grandchildren visit how often and how long you like.

Maintenance-free communities are those in which you pay a monthly, quarterly, or yearly fee (sorry, the “free” in “maintenance-free” doesn’t refer to the cost) to a homeowners’ association or resident association, and in return, the association contracts with outside vendors to take care of certain maintenance and upkeep. Some homeowners’ associations fees just include the cutting of your grass and leave the homeowner to take care of other items or contract with vendors directly to have them done. Others include complete landscaping such as shrub trimming, mulching, fertilizing and spraying of the yards, painting, and pressure washing.

Most maintenance-free communities are highly amenticised, with clubhouses, swimming pools, billiard and card tables, craft rooms, fitness centers, and activity directors. The idea is that you fill your time doing the things you enjoy, while leaving the work to someone else.

Resort and Club Communities
Imagine arriving at your condo, villa, or home and all your favorite groceries are in the fridge, your linens are freshly cleaned and beds made, the wine is chilling, and while you’ve been away you have actually been making money by letting the management rent out your home while you’ve been gone. This scenario describes what it might be like to own a home in a resort and club community. In these types of communities, which are often amenticised just like a five star resort, you can elect to have your home in the rental pool, or keep it out, whichever you prefer.

Resort and club communities are great for those who might not be quite ready to make a full-time retirement move, but would prefer to take baby-steps in that direction. However, with residents in and out all the time, it can be hard to forge solid relationships with your neighbors, a factor that may make this option less attractive for some.

Gated communities
Gated communities are gaining in popularity across the nation, especially in the Sunbelt. They can either be manned, with guards posted at the gates and patrolling the streets regularly, or they can be unmanned, with arms or gates that open when you press a button on your garage door opener or enter your secret code in a call box. Guests will either be required to stop and speak to the guard or call your home from the call box before proceeding into the community. While this can sometimes be inconvenient for some people, there is no doubt that gated communities do a good job at keeping solicitors, sightseers, and general riffraff out of the neighborhood, as well as protecting and enhancing the value of the homes in a community.

If your new home is just going to be a part time residence, you might enjoy the added peace of mind that a gated community can give you while you are away. Guards in some communities will even check your doors and windows for you while you are gone. Some can act as a sort of concierge service, accepting packages for you and putting them aside for you until you return. When considering a gated community, be sure to ask your salesperson or real estate agent what level of service you can expect from the guards in the community you are considering.

If you get a chance, speak to a guard and see if they can give you any tips either on the community or the area you are considering. Guards typically see hundreds of people every day and therefore have their fingers on the pulse of the community.

Do not let the fact that a community is gated lull you into a false sense of security. No community, gated or otherwise, is immune to crime. Crime can happen anywhere, it does not discriminate based on zip code. Remember to keep your doors locked, garage door closed, and store any valuables in a safe place.

Photo credit: danperry.com on flickr

My advice to people moving to Florida and shopping for homeowners insurance is to always check with your current carrier (assuming you’re happy with the rates and service you receive) to see if they offer policies in Florida.

Well, for the time being, if your current insurer is Allstate, you’re out of luck. Allstate is locked in a battle with Florida’s Insurance Commissioner over documents regarding the rates Allstate charges for hurricane insurance.

Florida’s Insurance Commisioner originally ordered Allstate to stop selling homeowner’s policies until the matter was resolved, but has now gone a step further and has ordered Allstate to stop writing ALL new policies, including automobile policies.

I don’t expect this little tif to last too long…I can’t see how the citizen’s of Florida come out a winner in having one of the largest insurers not being able to write new policies. Granted, this does not effect policies currently in place or their renewals. But in my mind, healthy competition is about the only thing that ever seems to keep prices down.

Update 1: That was fast…by order of the 1st District Court of Appeals, Allstate is back open for business.

Forbes.com has an article/slideshow featuring seven “ideal” jobs for Baby Boomers.

Obviously not all of them will appeal, but you might get some good ideas. I especially like the prospects of “Move Specialist” Wellness Coach”, and “Travel Coordinator”.

TheStreet.com just ran an article about some Florida banks that are feeling the squeeze due to not only bad mortgages (as you’ve heard by now Florida has a lot of) but also bad construction loans that developers are defaulting on.

I’m all for the local bank. I believe in supporting the little guy. And I know my money would be safe (FDIC insured, etc.). But for now my money is with one of the big boys, at least until we learn a little more about this mortgage/construction loan fallout.

A recent broad daylight break-in and robbery in my gated Florida community reminds me that everyone needs to be careful and vigilant when it comes to keeping you, your loved ones, and your property safe. As I’ve said before, crime doesn’t discriminate based on location. Just because you live in a gated community doesn’t necessarily mean you’re safe.

I recommend having a security system installed (make sure you are given a yard sign and window stickers which can act as an added deterrent). Most people only set it when they are away from the home or when they go to bed at night, but now we’ll be keeping ours on during the day as well, and you should too.

Security systems are available through companies like Brinks and ADT. Personally I use a system through Alarm.com that uses wireless signals (much like a pager) so that if a phone line is cut, it will still notify the authorities in case of emergency.

This type of wireless security system can also be controlled through the internet, which is great for a second homeowner. Through an online interface you can see system activity, arm and disarm if necessary, and more. Check it out if you’re looking for a great wireless internet security system.

Be safe!

Sort of off topic but who could resist. The best laugh you’ll have today. Enjoy: