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Best Ways to Add Value to Your Home

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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If you’re tired of the way your home looks and feels but don’t necessarily want to move, you don’t have to settle. Whether you crave more square footage, an upgraded interior or better curb appeal, you’ll find an endless supply of ideas that can improve your home’s functionality and style.

But, that doesn’t mean that all remodeling projects are created equal — not by a long shot. While plenty of home upgrades can be “worth it” in a financial sense, there are ways you can improve your home that may cause its value to drop as well.

Before you remodel, it pays to research the best ways to add value to your home and which projects might offer the most “bang for your buck.” With the right strategy and a professional remodeling team by your side, it’s possible to create your dream home while building equity in the process.

Benefits of making home improvements

There are plenty of ways homeowners can benefit from a home remodel, but one of the biggest perks is an increase in their home’s value. With a home addition, a new kitchen, upgraded bathrooms or big project completed, it’s very likely your home will appraise at a higher value than it did before you remodeled. That means you’ll have a larger share of equity in the property, which is any homeowner’s ultimate goal.

And in when your home is worth more, there are several benefits you’ll get to enjoy.

  • The potential to remove private mortgage insurance (PMI) from your home loan: Private mortgage insurance is typically charged as an added fee when you buy a home with less than a 20% down payment. This fee can vary, but it’s usually equal to 0.15% to 1.95% of the loan amount. If your home’s value increases after you remodel, it may be possible to have your home appraised and the PMI charges removed from your monthly mortgage payment.
  • Increased net worth: An increase in your home’s value could boost your net worth — the measure of all your assets minus your liabilities.
  • Sell your home at a profit: The more your home is worth, the more likely you will be able to sell it for a profit if you need to move.
  • Easier qualification for home equity loans: By remodeling to improve your home’s value, your ability to qualify for a home equity loan or HELOC will improve. The amount you can borrow may also be higher.

In addition to the financial benefits of remodeling, there are other personal benefits you can acquire as well. Realtor Guillermo Salmon of Pearson Smith Realty says one of those benefits is the fact that you get to enjoy the fruits of your labor yourself if you stay in the home.

“It’s your home, and you want to be comfortable,” said Salmon, who sells real estate in the Washington, D.C., area. “I always tell my clients to make updates early so they can enjoy them instead of waiting to remodel until right before you sell.”

Salmon’s thoughts seem to line up with national statistics regarding home remodeling projects. According to the 2017 Remodeling Impact Report from the National Association of Realtors, 75% of homeowners who responded to the survey had a greater desire to be in their homes after their remodeling project was completed. And 65% of those polled also reported increased enjoyment in their homes.

Another important benefit of remodeling is the fact that it may improve your home’s utility, says Salmon. The NAR survey also revealed that 36% of homeowners reported better functionality and livability as the most important result from their project.

When you think about it, that makes a lot of sense. A kitchen with a better layout or a bathroom with a new garden tub could make living in your home a more positive experience, for example.

Last but not least, remodeling your home may help you avoid moving and all moving-related costs. Remember that moving to a new home may require hiring movers, some remodeling of your new home, realtor fees to sell your home, and of course closing costs on your new home loan.

“If the space is there and you are able to remodel, the price of a big project or full-home remodel could be well worth it,” said Salmon. “There are a lot of moving costs that people don’t think about, and it is often a lot more expensive than people realize.”

Home improvements that can add value to your home

While remodeling your home can make it more appealing to the eye and more functional, the right remodeling project can also boost the value of your home. The key to increasing your home’s value through remodeling is making sure you’re choosing projects that will actually pay off.

Kitchens and bedrooms and bathrooms, oh my

According to Salmon, kitchens, master bedrooms and master bathrooms are the areas buyers pay the most attention to — as well as the areas that could add the most value to your home if you remodel. Other bathrooms in the home are also important, he says, because “buyers don’t want to have to remodel rooms they need, and bathrooms are some of the most used rooms in a home.”

Salmon also says that paint may be more important than people think.

“Paint the interior of your home so it looks clean and fresh, but make sure to choose a neutral color,” he said. Salmon notes that many buyers lack imagination, so if they walk into your home and see lots of bright colors or a lack of cohesion in the color palette, they may be scared off.

“Some people hate bright wall colors or bold wallpaper,” he said.

Open concept conversion

Residential designer Paul DeFeis of Trade Mark Design & Build in the New Jersey area says another project that typically pays off is opening up walls to create an open living space.

If you have an older home with a boxy and broken-up interior, opening up the walls to create a larger living space is often one of the best “bang for your buck” remodeling projects. “Opening up a wall that connects an adjacent room to your kitchen is huge,” said DeFeis.

Curb appeal

Last but not least, both DeFeis and Salmon agree that curb appeal is important, and that improving the exterior look of your home can go a long way toward fetching a higher sales price or just upping your home’s value.

Salmon says that planting nice bushes, adding mulch or painting your exterior door can make your home pop. You should also make sure your grass is mowed and debris is removed. “Even basic yard cleanup can go a long way,” he said.

The National Association of Realtors also offers their own list of home upgrades that can pay off the most over time. According to their study, the home upgrades they believe will increase your home’s value the most in 2017 included:

  • Complete kitchen renovation
  • Kitchen upgrade
  • Bathroom renovation
  • Add new bathroom
  • New master suite
  • New wood flooring
  • HVAC replacement
  • Hardwood flooring refinish
  • Basement conversion to living area
  • Attic conversion to living area
  • Closet renovation
  • Insulation upgrade

In terms of exterior home remodel projects, they list new roofing, new vinyl windows, a new garage door and new vinyl siding as the top four upgrades that will appeal to buyers and increase the value of your home.

Home improvements that can negatively impact your property values

While there are plenty of improvements that can be a net positive for your finances, there are just as many that can make no impact in your home’s value — or worse, decrease your home’s value.

This list isn’t all-inclusive and the type of projects that can hurt your home’s value also vary depending on your neighborhood and where you live. If you want to avoid completing updates that won’t be worth it, think long and hard before you tackle any of the projects below:

  • Garage conversions
    • Cost: $5,000 – $30,000 and potentially more depending on job site conditions and square footage. While it might be tempting to convert your garage into a room to increase your square footage, DeFeis says this is often a bad idea. Not only can a converted garage look awful from the road, but it could be a zoning issue as well. Further, many buyers will want a garage over more square footage and may not consider your home without one.
  • Swimming pools
    • Cost: $30,000 – $100,000 depending on construction materials, landscaping and upgrades. Swimming pools may be standard or popular in warmer climates, but you could limit your potential pool of buyers by adding one no matter where you live. “It depends on the buyer,” he said. “Some buyers want a pool and some people absolutely refuse to have one.”
  • Nonconforming additions
    • Cost: $30,000 – $60,000 and potentially more for a home addition depending on size. Adding onto your home can increase your square footage and make your home more livable, but that doesn’t mean all additions look great from the outside of your home. “If you’re driving down the street and your house looks out of place, then it’s not going to help your home’s value,” said DeFeis.
  • Luxury upgrades
    • Cost: $1,000 – $2,500 per linear square foot for custom kitchen cabinets, $22 – $32 and up per square foot for marble flooring including installation. While luxury upgrades like custom cabinets or Italian marble flooring may have been all the rage a few decades ago, these products seem to be taking a back seat to more mainstream products, says DeFeis. “People want the look but they do not want the luxury product anymore.”
  • Overdone landscaping.
    • Cost: pricing varies. Too much landscaping can make buyers feel overwhelmed, but it depends on the neighborhood. Ideally, you’ll want your landscaping to look similar to your neighbors.
  • Overbuilding
    • Cost: pricing varies. Last but not least, don’t forget it’s possible to improve your home too much. Making your home a lot bigger than the rest of the homes in your neighborhood may not be a good investment, for example. “If the average price point in your neighborhood is $400,000 and your home is worth that amount but you add a $100,000 addition to your home, that doesn’t mean your home will be worth $500,000,” said Salmon.

Final thoughts

Whether you want to remodel to sell or to make your home into what you want it to be, it’s smart to research different remodeling projects to gauge your potential return on investment. While some projects can absolutely pay off, there are just as many home “upgrades” that can hurt your home’s value or make no impact at all.

 

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Janet Berry-Johnson
Janet Berry-Johnson |

Janet Berry-Johnson is a writer at MagnifyMoney. You can email Janet here

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How Credit Report Disputes Can Sabotage Your Chance for a Mortgage

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Mortgage underwriting can feel like it’s taking a lifetime when it’s standing between you and your dream home. But your lender wants to make sure that you’ll be able to repay the loan, so they’ll take the time to go over your credit history with a proverbial magnifying glass.

Before you get to underwriting, you’ll want to make sure you’re a creditworthy borrower. This means maintaining a good payment history, paying down debt and disputing any errors on your credit report.

However, credit report disputes can impact your ability to get a mortgage if they’re still pending when you’re applying for a loan. This guide will explain how and why.

Why your credit reports and scores matter

One of the first things lenders look at is your credit report, which provides information about your credit history. It details whether you’ve made on-time payments on credit cards, loans and other accounts.

The information included in this report is summed up by a credit score that generally ranges between 300 and 850. The higher your score, the more creditworthy you are perceived to be.

Although credit scores aren’t the only factor that determines whether you’ll qualify for a mortgage, your credit score heavily influences the mortgage interest rate you receive. The highest scores qualify borrowers for the best mortgage rates.

Before you begin the homebuying process, it’s smart to review your credit report and have a copy handy. You can request a free credit report once a year from each of the three major credit reporting bureaus, Equifax, Experian and TransUnion, at AnnualCreditReport.com.

It’s critical to arm yourself with this information in advance. That gives you the opportunity to dispute any inaccuracies you’ve discovered and clean up your report.

What is a credit report dispute?

Credit report inaccuracies are relatively common. Inaccurate information can happen for a variety of reasons — a credit card payment being applied to the wrong account or duplicate accounts in your report giving the impression that you carry more debt than you actually do, for example.

Not only can errors harm your credit score, but they can prevent you from qualifying for a new credit account, such as an auto or home loan. That’s why it’s important to regularly keep track of the information found in your credit reports.

When you review your credit report and find an error, you have the opportunity to formally dispute it under the Fair Credit Reporting Act This is the first step to take to get the error corrected or removed.

Fortunately, it’s easier than ever to file a credit dispute with all three credit reporting agencies online.

How to file a credit report dispute

If you’ve found an error on your credit report, take the following steps to dispute it:

  1. Provide your contact information.
  2. Identify the items in your credit report that are inaccurate.
  3. Explain why you’re disputing the info and include documentation to support your dispute.
  4. Request a correction or deletion.

You’ll also want to reach out to the creditor that is reporting inaccurate information to the credit bureaus. Let them know you’re disputing the information and provide them the same documentation you’re giving to the bureaus.

In many cases, the credit bureaus investigate disputes within 30 days, according to myFICO.com.

However, many disputes can go unresolved for long periods of time, which can be troublesome for consumers applying for a mortgage. Many loan applicants don’t realize an open credit report dispute can raise a red flag to lenders and may even prevent mortgage approval.

When to file a credit report dispute

You’ll want to file a dispute as soon as you spot an error on any of your credit reports, but if you’re thinking about buying a home in the near future, it’s best to exercise caution when filing disputes, especially right before you apply for a mortgage.

Although the dispute investigation can wrap up in 30 days, it could last as long as 90 days, so it’s best to avoid filing new disputes a few months prior to starting the homebuying process.

How mortgage lenders view credit disputes

When a dispute is filed, credit reporting agencies are required to label the item as “in dispute.” The dispute itself doesn’t impact your FICO Score. However, your score may temporarily deflate or inflate while the disputed items are being investigated.

Mortgage lenders know credit reports with disputed items don’t paint the most accurate picture of a consumer’s creditworthiness and many require this status be removed before approving a mortgage application. This leaves some consumers with a difficult decision to make — accept costly credit report errors or delay applying for a loan until disputes have been resolved.

Here’s how lenders who provide conventional and FHA loans consider credit report disputes when determining whether a consumer qualifies for a mortgage.

Conventional loans

Both government-sponsored enterprises, Fannie Mae and Freddie Mac, have automated underwriting systems that alert lenders to existing credit report disputes. These entities don’t issue loans, but buy mortgages from lenders that follow their rules.

Fannie Mae’s system initially reviews all accounts on a borrower’s credit report, even those that are being disputed. If the borrower would be approved for the loan even with the account in question, the loan moves forward. But if the disputed account would push the borrower into the “rejection” category, the system will direct the lender to investigate whether the dispute is valid.

Lenders using Freddie Mac’s system are required to confirm the accuracy of disputed accounts. The borrower would need to have the accounts corrected before the loan can move forward.

FHA loans

FHA-approved lenders require borrowers with disputed delinquent accounts on their credit report to provide an explanation and supporting documentation about their dispute. If the account has an outstanding balance of more than $1,000, the loan must be manually underwritten, which means the loan officer has to review the loan application and supporting documents outside of the automated system.

The loan officer goes over the paperwork included in the borrower’s file very closely to determine their risk of mortgage default and whether they qualify for the loan program that they’re applying.

Disputed medical accounts are excluded from consideration, but disputed accounts that are paid on time must be factored into the borrower’s debt-to-income ratio.

How to remove a lingering credit report dispute

Gaining access to a new credit report with updated information is not an option for the borrower if the creditor won’t correct the information. And when a consumer files a complaint with the credit reporting agencies, the agencies will often defer to the creditor.

Just as you’ve reached out to your creditor and the credit reporting bureaus to file your dispute, you’ll want to take the same action to remove it. Contact the creditor directly and request that they update the account information to show that it’s no longer being disputed.

You may also want to reach out to Equifax, Experian and TransUnion to request dispute removal, but keep in mind they may also reach out to the creditor who is reporting the disputed account. See the FICO website for more information about contacting each bureau’s dispute department.

The bottom line

Dealing with an unresolved credit report dispute can turn into a consumer nightmare. Even if you’ve followed best practices, you may still be unhappy with the results.

Fortunately, you can still submit a complaint to the Consumer Financial Protection Bureau. They will forward your complaint directly to the company in dispute and work to get a response from them. Another option is to seek guidance from a consumer advocate or an attorney. The National Foundation for Credit Counseling may be a helpful place to start.

Credit reports and scores have such a strong influence on lifelong financial health, so the most effective defense is to be proactive about making sure yours are in the best shape possible. Regularly monitoring your credit profile and working to fix inaccuracies before applying for a mortgage is a good game plan to prevent major problems as you embark on the homebuying process.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Crissinda Ponder
Crissinda Ponder |

Crissinda Ponder is a writer at MagnifyMoney. You can email Crissinda here

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