Money Management

Planning to run a business from home? Read on to see why buying in an HOA might be a poor choice. 

One of the biggest expenses small business owners tend to face is rent. It can cost a lot of money to secure office space or a storefront.

If you’re selling goods to customers or are providing an in-person service like group fitness classes, renting space for your business may be unavoidable. But certain businesses can easily be run out of a home.

Let’s say you’re in the business of editing content for different publications. All you really need to do your job is a quiet space, a laptop, and access to the internet. Why bear the cost of renting an office if you have the room to do that sort of work from home?

Similarly, let’s say your business is financial planning. If you have a home office, there’s no reason you couldn’t see clients in your home if it’s quiet there during the day and conducive to a professional atmosphere.

But while running a business from home might seem doable in theory, in some cases, you may get tripped up if you buy a home that’s part of a homeowners association, or HOA. So you’ll need to read the rules very carefully before making an offer on a home in an HOA.

When your HOA gets in the way

There are pros and cons to buying a home in an HOA. The upside is that your HOA might come with certain amenities, like a community pool and clubhouse, that enhance your quality of life. The downside is that you might end up with not just expensive HOA dues, but restrictive rules you have to follow. Those could negatively affect your quality of life.

HOA-USA reports that there are more than 370,000 homeowners associations across the country. Almost two in three newly constructed homes are located in homeowners associations, according to the National Association of Home Builders. As such, steering clear of an HOA may be easier said than done. But if you run a business, you’ll need to be extremely careful when making an offer on a home in an HOA.

The reason? Just as an HOA might tell you that you can’t plant certain types of shrubs in your front lawn or can’t have shutters of a certain color, so, too, might the rules dictate that you can’t run a business from home. So if that’s your plan, that could become a problem.

Get the details before making your choice

Although HOA rules can change over time, if you’re buying a home that’s part of one, you’re generally entitled to see what the rules entail before committing to a purchase. Some HOAs prohibit home businesses no matter what the company is. But other HOAs only prohibit businesses that are likely to result in added noise or other disturbances.

For example, if you’re a personal trainer, you may be prohibited from running a business out of your home because conceivably, the noise of clients using equipment could be disruptive. And if you sell clothing, you may be prohibited from running that business because it would likely lead to a constant stream of people and delivery vehicles coming in and out.

But you may be allowed to run a business that has you meeting with a single client in an office, such as if you own an accounting company. And if you’re the sole employee of your business and your work is quiet by nature, such as if you do web design or content writing, you may be allowed to conduct business from home.

All told, it’s worth getting the details before deciding not to buy a home in an HOA. But make sure the rules are very clear. You wouldn’t want your business to fall into a gray area. For example, you may be entitled to run a business from home if it’s not disruptive. But that’s open to interpretation. Some neighbors might say that having clients come to your door four times a day is disruptive, even if there’s no noise to be heard once they’re inside. So in that case, running a financial planning business from home may not work.

Of course, you may decide to just err on the side of caution altogether and avoid buying a home in an HOA. And that’s not necessarily a bad choice.

HOA rules can change over time. And you wouldn’t want yours to change in a manner that compromises your ability to earn a living.

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Costco’s laptops are competitively priced and come with free technical and troubleshooting support. Learn if you should buy your next laptop at Costco. 

A few years back, I bought my current laptop, a 13-inch Macbook Air, from Apple for what I thought was a decent price. At the time, I didn’t think I’d be using it frequently, only as a personal computer to supplement the more powerful Macbook Pro that I borrowed through my previous employer.

Now I’m a full-time freelancer working from a 13-inch Macbook Air. Turns out, this laptop really isn’t the best to use as a personal finance writer. Example: I currently have 10 open tabs and my laptop is huffing and puffing as if I were mining crypto. No lie — once, my wife heard the laptop overheating from another room and asked if the refrigerator was broken. Not exactly ideal when your job requires in-depth research and multiple open browsers.

So now I’m in the market for a Macbook Pro, ideally a 16-inch. I’ve been comparison shopping and looking around the internet for a good deal. All in all, I decided I’m going to buy this laptop from Costco. Here’s why.

1. Prices are competitive

Costco rarely sells laptops at the same price as the manufacturer. Case in point: Apple sells its 16-inch Macbook Pro (M2 with 512 GB) for $2,499, while Costco.com sells it slightly cheaper at $2,449.99.

But where I could really save money is buying this laptop in a warehouse when Costco is offering a promotion. For instance, I recently saw the 16-inch Macbook Pro at my local warehouse for $200 cheaper than the sticker price, or $2,249.99. That’s about as cheap as you can buy a new Macbook Pro.

If you’re curious, this is how much the same laptop sells on various websites.

Again, if you buy the laptop in-store at a Costco warehouse, you might get a lower price than from its online store. This is especially true as holiday sales approach, like Black Friday, which might see electronics and laptops discounted.

2. Generous return policy and two-year warranty

Costco will let me return a new Macbook Pro for a full refund within 90 days after I purchase it. Even better, Costco will accept my return even if I don’t have the original box. For comparison, Best Buy will give you 15 days to return a MacBook (60 days if you’re a My Best Buy Plus member), while Amazon will also give you 15 days.

Not only that but Costco will extend the manufacturer’s warranty to two years, giving me two years of coverage for mechanical or electrical failures. And if that wasn’t enough, it also sells AppleCare+ at a slightly cheaper price than other retailers: $319 for a three-year insurance policy. In contrast, Apple, Amazon, and Best Buy all sell the same policy for $399.

3. Free technical and troubleshooting support

Lastly, buying a MacBook through Costco means getting free technical support through its Concierge Service. This could really come in handy if you’re working on a deadline, your Macbook suddenly stops working properly, and you don’t have time or energy to figure out a solution on your own.

Even better is that you get technical support indefinitely, whereas other retailers, like Apple, will give you support for a set amount of time, like 90 days.

Low prices + support + 2% back = why I’m buying my Mac at Costco

All in all, I’ll buy my 16-inch Macbook Pro from a Costco warehouse when I can get it for a discounted price. Cost is a major factor in my decision (I can’t blow my personal finance goals for a new laptop). But so is the return policy, technical support, and one-year extension on the manufacturer’s one-year warranty. Plus, I get 2% back with my Costco Executive membership, which is about $50 back on a $2,249 Macbook Pro.

True, it’s important to compare that with other retailers to see who has the best deal, but if you’re a Costco member, you might not find a better value when in-store laptops are discounted.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Amazon.com, Apple, Best Buy, and Costco Wholesale. The Motley Fool has a disclosure policy.

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Need a mortgage? These days, it’ll cost you. But read on to see how you can eke out some savings. 

There’s a reason right now is such a difficult time to buy a home: Not only are property values elevated, but mortgage rates are the highest they’ve been in years.

As of this writing, the average rate on a 30-year mortgage is 7.12%, according to Freddie Mac. Seeing as how home buyers were signing 30-year mortgages at 3% just a couple years ago, that’s a tough blow.

But that doesn’t mean you’re doomed to get stuck with a miserably high borrowing rate. Here are a few things you can do to eke out some savings on a mortgage at a time when rates are soaring.

1. Boost your credit score

The higher your credit score is, the more inclined a mortgage lender might be to write you a loan. Not only that, but a higher credit score sends the message that you’re a reliable borrower who’s likely to repay their debts. As such, your lender might perceive you as a less risky candidate and reward you in the form of some savings on your mortgage rate.

In many cases, you’re not going to be able to just magically boost your credit score overnight. Rather, you may need to spend a few months or longer working on it.

Of the various factors that go into your credit score, your payment history carries the most weight (35% of your FICO® Score). It speaks to how timely you are with bills. It can take time to establish a history of on-time payments, but make that effort, because it could do a lot for your score.

You can also give your credit score a lift by paying off existing credit card debt. The amount of revolving credit you’re using at once plays a role in calculating that number, too. And the less available credit you’re using, the better it is for your credit score.

Finally, check your credit report for errors. Correcting a mistake like a delinquent debt that was never yours to begin with could result in a nice boost — and rightfully so.

2. Shop around with different mortgage lenders

It’s common for home buyers to look at numerous properties before landing on one to purchase. Similarly, it’s a good idea to compare offers from different mortgage lenders before signing a loan agreement. You should get estimates from at least three different lenders.

You never know when one lender might have a more competitive rate to offer. And so spending some time to do that research could result in a nice amount of savings.

Of course, one thing you also want to look at is closing costs, which are the fees you’re charged to finalize a home loan. It may be that one mortgage lender is willing to give you a lower rate but charges higher fees at closing, so pay attention to all of the details when making your choice.

3. Opt for a shorter-term loan

Many home buyers seek out 30-year mortgages because they result in lower monthly payments than shorter-term loans. But if you’re willing to sign a 15-year loan, you might snag a significantly lower interest rate.

Freddie Mac says the average 15-year mortgage rate is 6.52% as of this writing. Compare that to 7.12%, and clearly, 6.52% looks more appealing. But before you commit to a 15-year loan, make sure you can afford the monthly payments. If you’re borrowing $200,000 at 7.12%, your monthly payments will be $1,346 with a 30-year loan. With a 15-year loan at 6.52%, they’ll be $1,744.

In this case, with the 30-year mortgage, you’re looking at spending a total of $284,642 on interest in the course of paying off your home. With the 15-year loan, you’re looking at $113,916. So there’s clearly a lot of savings with the 15-year loan. But you need to make sure you can afford the higher monthly payments that come with a shorter-term loan.

It can be disheartening to look at today’s mortgage rates and imagine yourself getting stuck with them. But there are also steps you can take to save money on your mortgage. And remember, too, that once rates start to fall, there’s always the option to refinance. That could leave you with a much more favorable interest rate on your home loan down the line.

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If you’re buying a home with a mortgage loan, your lender will require an appraisal. Read on for steps to take to ensure it won’t impede your home loan. 

I’m buying a home that needs some updating. I’m getting a mortgage on the house, though, which meant that I would need an appraisal during the process.

When a home is appraised, a professional looks at the condition and details of the property to estimate its fair market value. The home must appraise for enough that it can serve as sufficient collateral for the loan. For example, let’s say you’re paying $100,000 for a home and putting a $10,000 down payment. If the mortgage lender required a 90% loan-to-value ratio, the home would actually need to appraise for at least the $100,000 you’re paying in order to move forward, because otherwise you’d be borrowing more than 90% of what the house is worth.

Since a fixer-upper is, by definition, not in great condition, there’s a greater chance it won’t appraise for enough to close the deal. Here’s what I did to make sure this wasn’t an issue with my transaction.

I made a larger down payment

Since I was afraid my appraisal would come in at a lower amount than I’m paying for the house due to the fact it needs some remodeling, I opted to make a larger down payment. Making at least a 20% down payment is recommended so you can avoid paying for private mortgage insurance (PMI), which is an extra fee tacked onto your loan that protects the lender in case you’re unable to make payments. While I have bought houses in the past and put down the recommended 20% out of my bank account, this time I made a 33% down payment.

With a larger down payment, the house could have appraised for less than I was paying and I still wouldn’t have exceeded my lender’s loan-to-value requirements so I would have been able to go ahead and close the deal.

If you’re buying a fixer-upper, you may also want to plan to put more money down just in case the appraisal doesn’t go as planned. In my case, my appraisal did come in at a little less than I’m paying for the property, so it was good I had the extra money down.

I made sure there were no health-and-safety issues

Before I made an offer on the house, I had a contractor come through and assess the condition. Specifically, I wanted to ensure there were no issues that compromised the health and safety of the home.

See, appraisers are expected to note major physical deficiencies in a house, like leaky roofs or major appliances that are not functional. If these problems exist, the appraiser typically estimates the home’s value “subject to repairs.” In other words, the appraiser specifies how much the house would be worth if the fixes were made and the issues must then be corrected prior to closing.

I knew that no problems with my house could be fixed prior to the closing date due to the circumstances of the sale. So there was no point in trying to move forward with a loan that I would have problems with.

I compared my house to similar homes

Finally, the last thing I did was look up what similar houses were selling for. I wanted to make sure that the cost of what I was paying for the house, plus repairs, wouldn’t exceed the cost of comparable properties. If it did, that would mean I was likely overpaying for the property.

If you are considering buying a home that needs some remodeling, you may also want to take these steps before you make an offer. If you don’t, be aware that you could end up with a home appraisal that derails your ability to move forward with the home purchase. This would not only be disappointing after getting your offer accepted, but it would also mean you were out the money for the appraisal with nothing to show for it. That’s just a huge waste of time and money, and you don’t need that during the home-buying process.

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Home inspectors can make mistakes. Read on to see what happens when yours doesn’t catch something big. 

There’s a reason it can take several months to close on a mortgage loan from the time you make an offer to purchase a home. Not only does your mortgage lender have to fully vet your finances in a process called underwriting, but the home you’re buying needs to undergo an inspection to make sure there aren’t any major issues lurking.

Imagine you’ve made an offer on a home that needs $25,000 in foundation repairs. That’s not the sort of thing that’s obvious during an open house. A home inspector can look out for issues like that and flag them so you can then go back to the seller and have them address the problem before your closing.

Usually, in that situation, one of two things will happen. Your sellers will either fix the issue themself or reduce your purchase price by the cost of the repair at hand.

But what if you pay for a home inspection and your inspector misses a major issue? Do you have any recourse, or are you just plain stuck?

When home inspection blunders happen

Home inspectors are trained to spot issues with properties that average people wouldn’t know to look for. As an example, you might walk through a home without finding any evidence of mold. A home inspector might easily spot mold because they know where to look and what exactly to look for.

But home inspectors are also people, which means they’re capable of making mistakes. You may run into a situation where your home inspector has an off day and simply misses something. Or, it may be that the issue is so hidden that even a trained inspector doesn’t uncover it at first.

If you don’t discover that issue until after you’ve closed on your home, you might have to bite the bullet and pay for the repair yourself. But if your home inspector really made a glaring error, you may be able to go after them or their company for compensation.

How to avoid this unwanted scenario

The last thing you want is to pay for a home inspection, close on your home, and move in thinking all is fine only to discover a major problem a few weeks down the line. One way to avoid that is to find a home inspector or company that carries errors and omissions insurance. If you use a professional with this coverage, you may be able to file a claim if they make a glaring error that costs you money.

However, you’ll need to make sure you have a right to act on such a policy based on your contract. Some home inspection contracts will only refund the cost of your botched home inspection in a situation like this, but you won’t necessarily be eligible for compensation for the work your home ended up needing. It’s important to know the difference.

Finally, make a point to attend your home inspection while it’s happening. That way, you can ask questions and make certain you understand what condition the home you’re buying is in. In some cases, asking the right questions might prompt your home inspector to dig further into an issue, thereby reducing the likelihood of missing something important.

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A home equity loan might seem like an easy way to borrow. But read on to see why falling behind could be catastrophic. 

If you’re a homeowner and you need money, whether to renovate your home, buy furniture, take a trip, or pay for education, you may be inclined to tap the equity you have in your home. Equity is defined as the difference between your home’s market value and your mortgage balance. If your home’s value is $400,000 and you owe $250,000 on your mortgage loan, you’re left with $150,000 of equity.

Usually, when you’re applying for a home equity loan or home equity line of credit (HELOC), you can pretty easily qualify provided you’ll be left with 20% equity in your home. So in the example above, say you want to take out a $50,000 home equity loan. Since that would leave you with $100,000 of equity on a $400,000 property, you’re at the 25% mark. So as long as you have decent credit, qualifying for a $50,000 home equity loan might be fairly simple.

U.S. homeowners today are sitting on a collective $30 trillion in home equity. So a lot of people might seek to tap that equity in the coming months.

But just because it might be easy to get approved for a home equity loan doesn’t mean it’s a good idea. And if you’re going to go this route, it’s important to understand the risk involved.

Not paying could have serious consequences

Any time you fail to repay a loan, whether it’s a car loan, personal loan, or home equity loan, your credit score can take a dive. That’s because your payment history carries more weight (35%) than any other factor when calculating your credit score.

As such, when you sign a home equity loan, you run the risk of falling behind and seeing your credit score take a hit. But more than that, if you’re unable to make payments on your home equity loan, you could actually risk losing your home.

Home equity loans are secured loans, so they’re tied to a specific asset — your home. In an extreme situation, your lender could force the sale of your home to get repaid should you find yourself unable to repay your loan.

That’s why it’s important to borrow carefully when you’re taking out a home equity loan. Examine your monthly bills and figure out how much they total. Then, see what your paycheck gives you. If, without a home equity loan payment, you’re already spending $3,700 a month and you only bring home $4,000, it means you’d really better make sure your monthly home equity loan payments don’t exceed $300.

And even that, frankly, is cutting it close. In this situation, you’d be better off limiting those loan payments to more like $200.

Don’t be so quick to tap your home equity

If the value of your home is up, you may be eager to capitalize on that by borrowing against the equity you have. But before you do, think about whether you really need to be signing a home equity loan right now.

Home values may be up, but so are borrowing rates in the wake of the Federal Reserve’s recent series of interest rate hikes. A home equity loan might cost you more than expected when you factor interest rates into the mix.

If your need to borrow money is pressing, then you may find that a home equity loan is your most affordable option. Otherwise, waiting until interest rates come down could really work to your advantage.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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