Articles Tagged with: buying a home
Home / Blog Archives
March 18, 2017
Understanding Your Local Real Estate Market

It’s important to study your local real estate market before you seriously look at houses so that you can make educated decisions through out the process.

As your agent, I can get you a report of sold comparables and we can look at what current listings are being priced at to reveal the mindset of sellers in your market.

Start browsing the real estate market in your town now, before you talk to a real estate agent or for sale by owner seller.

  • Browse listings on the my website of the entire MLS market
  • Pick up real estate for sale books in your area.
  • Read real estate ads in the local newspapers.
  • Take adventure drives and look for For Sale signs. Note which neighborhoods you like the best.
  • Make changes to your Wants & Needs list if necessary.
March 18, 2017
Advice for 1st Time Home Buyers

Even for experienced home buyers, it can be a confusing process, but can be especially intimidating for the 1st Time Home Buyer, so here  are some tips to help guide you through the  process

Get Prepped in Home Buying Basics

Before you begin, get educated about the home buying customs where you live. Relatives or friends who live in another state might have some good general advice for you, but chances are the process is very different in their area, so avoid the mistake of relying solely on their advice to make important decisions.

So How Do You Learn the Basics?

Talk to a real estate agent for advice about the typical home buying scenario. This does not mean you have to sign an agreement for the agent to represent you, but it is a good opportunity for you to gain some knowledge off of an expert who deals with these transactions on a continuous basis and allows you to get a feel for me as your potential agent when you are ready to make that decision.

You can also talk to a bank loan officer or mortgage broker, they look at home buying from a different perspective, but can usually give you a basic overview of the process.

Home Buying Questions to Ask

1. Will the agent help you compose your offer to purchase a home? If not, who does help?

  •  If the agent uses fill-in-the-blank forms, ask for a blank sample copy to take home and study.

2. What types of disclosures are sellers in your area required to give to buyers? Can the agent give you a sample copy of typical disclosures?

3. What types of home inspections are standard in your area? Are there other inspections that the agent recommends?

  • How much do the inspections usually cost? Are they regarded as a buyer expense?
  • When are inspections done?

4. Is a survey required for most transactions? If so, who typically pays for it, the buyer or the seller?

5. Does an attorney or title company do a title search to verify that the deed is problem free? What’s the average cost for that service?

6. Who acts as settlement agent, the person who puts together final paperwork for you to sign? (attorney, title company personnel, real estate broker, other)?

7. Other than loan costs, what’s the average total cost for other closing fees?

  • Taxes, settlement agent fees, etc.

8. How long does it usually take to close on a home once an offer is accepted?

That’s a good start. After you have the answers to those questions, you’ll have a better feeling for the basic customs in your area.

March 18, 2017
10 things not to do

1. Don’t Make a Major Purchase

If you are depending on a mortgage to move in, don’t make any major purchases until after the closing on the home (fight the urge to get a new car to put in your new driveway).
An increase in your debt to income ratio reduces the amount of monthly income available for your mortgage payment.

Using cash to purchase the car could also create a problem, since banks consider cash reserves when approving your mortgage. If you must make a major purchase before closing, talk to your loan officer before you do it.

2. Don’t Change Jobs Unless It’s Necessary

Lenders like to see a consistent job history. They aren’t usually as nervous if you change jobs within the same field, but it’s better to stay put until the keys to the house are in your hand.

3. Don’t Let Your Emotions Take Over

Be realistic. No home is perfect, especially older homes. If the seller refuses to do a small repair, don’t let it kill the deal on a home you truly love, realize It’s not unusual for new owners to take care of some repairs themselves. Keep a cool head during the entire home buying process, especially during and after an inspection.

On the other hand, don’t fall so much in love with the house that you’ll buy it no matter what needs to be done–unless you’re absolutely sure you can handle it emotionally and financially. Decide what type of repairs you can realistically tackle, then stick with the decision.

5. Don’t Forget to Switch Utilities

That sounds simple, but you’d be surprised how many people forget to apply for utility service at their new home. Call the utility companies as soon as you have a contract. Find out how many days lead time they need to switch the service, then get back with them when you have a firm closing date.

Don’t forget to discontinue services at your old home.

6. Line Up Your Hazard Insurance

A no-brainer, right? Acquire hazard insurance as early as possible, as it’s another often-forgotten task that buyers scramble to take care of at the last minute. Lenders will ask to see an insurance binder showing you have coverage at the closing.

In some locations, additional types of insurance coverage might be necessary. Talk to your lender about insurance requirements well before the closing date.

7. Don’t Become Best Friends with the Seller

While it’s great to be friendly, but don’t get into too many long discussions with the sellers, because it could cloud your judgments.

Remember, this is their home. A casual statement about “ripping up that ugly carpet” might be enough to keep the seller from negotiating with you about repairs or other issues that crop up.

8. Don’t Panic if the Appraisal Comes in Low

At least not at first. There are some things you (and your agent) can do to correct the problem.

9. Don’t Go It Alone

As your agent, it’s my duty to track many of the day to day details that involve the lender, the seller, or the seller’s agent.

10. Don’t Ignore Lender Requirements

Know what is expected of you and take care of it. For instance, a Certificate of Eligibility is required to move forward on a VA loan. That’s something you must handle yourself. Answer lender questions and provide required paperwork as quickly as possible–your closing depends on it.

March 18, 2017
A Step By Step Look at Home Buying

Some real estate laws and customs differ depending on where you live, but there are many home buying steps that are standard, even though they might not be accomplished in the same order in every location.

Here are the 11 steps to buying a home.

Step 1, Get Your Credit/Finances in Order

Your credit reports is a primary factor in determining what interest rate you will receive and how much the banks are willing to loan you toward the purchase of the property, so make sure you check it and ensure there are no issues before starting the property search process  Know your financial history before you apply for a mortgage, as errors on credit reports are common and often require a lot of time to clear up.

Step 2, Get Familiar with the Mortgage Industry

Have at least a bit of background about the loan process before you talk to a lender (if you do not already have it, find some one who does or consult with your realtor who can assist you in the process).

Find a ender that you are comfortable with and that fits your needs.

Step 3, Get Pre-Approved for a Mortgage

Once your credit/finances are in check, apply for a pre-approved mortgage to establish how much house you can afford? It also helps if you are involved in a bidding war for a property, the potential buyer that has already been pre-approved will get preferential treatment from the seller.

Step 4, Determine Your Wants and Needs

Grab a piece of paper and divide it into three columns. If you’ll have a co-owner, have that person make a list too, but don’t share ideas just yet.

Column 1, List Must-Have Features
  •  If the house must be located in a specific neighborhood or school district.
  • If the house must have 3 bedrooms, a 2 car garage, a large kitchen, a view.
  • If there must be no restrictions against a home-based business.
  •  If the home must be one level, with few or no steps.
  • List every feature you feel is a must.
Column 2, List Features You Would Like:
  •  A basement or a deck.
  • Whirlpool tubs, walk-in closets.
  •  A certain type of architecture.
  • Gas heat.
  • Central air conditioning.
  • List all features that are important to you–but that you might be flexible about.
Column 3, List Features You Do NOT Want:
  • A home located next to a highway or in a congested area.
  • Certain types of architecture.
  • Homes that need a great deal of work.
  • List all features you absolutely cannot accept.

Review your list. If your co-owner made a list, compare them to see if your priorities match. If they don’t, you’ll need to compromise, revising your lists so that both of you are happy.

Making a list is a good exercise because it forces you to think about your wants and needs, but I can almost guarantee you that the list will change and evolve when you actually begin to look at houses. Even home buyers with an unlimited budget rarely find the “perfect” home.

Step 5, Select a Qualified Real Estate Agents

Basically, there are many agents, all adhere to the professional standards or code of ethics established by the National Association of Realtors, but here are some reasons of what you should look for in an agent and why you should do business with me

  • Find an agent that you feel comfortable with in their personality, professionalism and ability to serve or assist you in your home buying/selling process – like me!
  • Find an agent who has a good website that provides you with ample educational resources, information about the area, offers me services and has a good MLS search and information on listings I am interested in
  • Find an agent who will offer you prompt professional service
  •  Find an agent who is knowledgeable and will help guide you through the real estate process
  •  Ask me for referrals. Don’t do business with me because I have a nice website, let my previous customers tell you how I serviced them
  • Make an appointment and interview me, ask me about my marketing tactics, placement in MLS, services offered, commission rate, etc.
  • Get a feel for my knowledge and experience of the industry and the area and more

Step 6, Start Searching for a Home

As a Realtor, I have many tools at my disposal to help you through the process.  I can help you by searching the multiple listing service (MLS) system to find listing that match your desired criteria, providing you with Comparative Market Analysis (CMA) reports, lend my knowledge of the area, school systems and more.

You can also pick up House For Sale magazines and read classified ads in your local newspapers, surf the Internet for homes, we plan afternoon drives to preview neighborhoods.

Hint:  You can use my website to search and find and then I can show you any property in the area!

Start looking for two types of real estate:

1.  Houses that seem to match the one you’d like to buy

2.  Houses that are similar to your current home..

Step 7, Handle Pre-Offer Tasks

Deciding whether or not you want to buy a house involves a look at its structure and its features, but there are many other topics that are every bit as important to your purchase.

Step 8, Make an Offer

Here are some tips that can help you get the best deal when it’s time to make an offer on a home.   No matter what your strategy is, you should have a very good idea of the home’s market value before you make an offer.

Lowballing it

Be realistic, some seller’s take a lowball offer as a personal insult and may not be as anxious to deal with you on your next offer.  That’s fine if low is all you’ll go, or if the property is truly overpriced, but it can create problems with future negotiations.

Being generous

Come in too high and you may not find the seller’s low point.

Helpful Advice from your Agent

One area I can help you is to provide you with enough information and advice to assist you in determining the best price to offer. I can run comparables for you, and will be involved in offer strategies.

Finding Sales Information – Courthouse/Local Tax Collector Website

Ask the staff to explain how to decipher deeds or other records that indicate sales prices, find out the selling history of properties in the area and often get  sketches and facts about a home’s structural components.

Asking prices

Advertising gives you a feel for average asking prices, but your focus should be on sales prices. You’ll find them recorded as explained above or on multiple listing recaps of sold properties.

Should You Have an Appraisal?

Order an appraisal before making the offer, but make sure the results will not be shared with others (and keep in mind that opinions from different appraisers can vary).

What about tax values?

Tax valuations are not a good measure of a property’s market value. Your community might have a general guideline, such as tax value = 80% of market value, but the figures are not usually reliable. Ask your local tax assessor for details about your specific area.

Take a look at a home’s tax value, but never assume it matches the market value of the property.

Other factors that affect price
  • How long has the house been on the market? If only a short time the sellers might not too motivated.
  • How does the house compare with others for sale in the same neighborhood?
  • s the house in need of repairs or massive updates? Updating items such as insulated windows, plumbing and electrical systems, kitchens, and baths can be costly.
  • How much time is left in the roof?
  • What about the neighborhood, do you foresee home values climbing, staying the same, or possibly taking a downturn?
Bottom line

Analyze each home’s condition and compare it to others on the market, but your final offer will likely involve a good deal of gut instinct. Is it the house for you? If you’ve been searching for a home for awhile, you will probably know the answer to that question the minute you walk in the door.

 

Step 9, Home Inspections and Other Tests

In some states, home inspections are accomplished before the final purchase contract is signed. In other states, inspections take place after an offer is finalized. No matter when you do them, it’s critical to decide which inspections and tests you want to perform.

Talk with your real estate agent or other advisor to find out when inspections should be handled and if additional types of testing are important for your specific area.

Step 10, Avoiding and Correcting Last Minute Problems

As your closing date nears, everyone involved in your real estate transaction should check its progress on a daily basis, because staying on top of things means you’ll know immediately if there’s a problem that must be dealt with. Here’s a bit of information that focuses on a few common problems that home buyers must deal with before they close on a house.

Step 11, You’re on the Way to Closing

Most of your home buying problems are behind you now and you’re on your way to closing, also called settlement, the event that transfers ownership of the property to you, here the realtor and the closing agent (can be broker, lawyer or closing specialist) will help guide you to your new home.

March 18, 2017
Mortgage Information

It’s a good idea to get pre-approved by a lender before you start looking for a home. Most will give you a free consultation. Once you’re pre-approved, you’ll know exactly what you can afford, you can act immediately when you find the home you want, and sellers are more comfortable accepting your offer.

What to expect on your first visit/contact with a lender?

A mortgage lender will evaluate four areas of your financial history to determine your ability to secure a loan. These are:Credit history/credit scores

  • The amount of monthly credit you currently have
  • Income/employment history
  • Your financial assets (money in the bank, investments, retirement accounts and potential gift funds).
    Typically the lender will only look at the last two years of your history in all the above areas.
    In order to prepare for your first visit to a lender, you should have documents on your most recent 2 year residence and employment history ready. (Recent grads who are newly employed are usually fine as school can be a part of the 2 year history without any problem.)

Routine documentation you should have available:

  • 30 days of pay stubs
  • 2 yrs of W-2’s or 2 years tax returns (if self employed)
  • 2 months worth of bank/asset/investment/retirement account statements (all pages)
  • Diploma or school transcript if a full time student during the past 2 years
  • Information on any real estate you may currently own
  • A copy of recent mortgage statements or your current lease
  • Explanations for any derogatory credit or gaps in employment you know you may have Any correspondence with creditors if you have disputed any debts

Other items that would be helpful include:

  • Social Security card
  • Drivers license

The Loan Market

It is important to know that almost all loans are sold by the financial institutions making the loan. The lender you work with is the “originator.” Your loan is then sold in the “secondary market.” The largest buyers of loans are agencies called FNMA (Fannie Mae) FHLMC (Freddie Mac) and GNMA (Ginnie Mae). These huge organizations constitute the “secondary market” and write the rules for loans that they will buy. A lender must then follow the rules these agencies have written in order for the loan (borrower and property) to qualify as conventional or FHA. During the loan process your loan will be evaluated by an Underwriter. Their job is to make sure that the loan fits the guidelines for a particular program (FHA or conventional), so the loan can be sold.

What is an FHA Loan?

An FHA loan is a government insured loan that was instituted to assist buyers with minimal cash to purchase a home and first time buyers. This program requires that the buyer invest a minimum of 3% of the purchase price. Part of that can be a minimal down payment of 2.25% plus some closing costs. Sometimes the buyer can negotiate for the seller to pay the remaining costs.
FHA loans have more lenient guidelines for borrower credit history, allow for all or part of the funds needed by the borrower to be a gift, and has stricter requirements on the property’s condition for the protection of the borrower.

What is a Conventional Loan?

A conventional loan is a loan that meets the standards of the “conventional” secondary marketplace. There are two types of conventional loans, Conforming & Non-Conforming. Conforming loans usually fit neatly into the box of rules and are under the prescribed maximum loan amount set each year. Both the borrower and the property fit the typical scenarios and there is nothing unusual.

Loans over the “conforming” loan amount or loans that have some facet outside the box either related to the borrower or the property are called Non-Conforming loans. A loan can be Non-Conforming if the borrower is unable to document their income or assets, or their credit scores are low, or if the property is unusual for the area or if the loan amount or program is designated Non-Conforming.

What’s the Difference Between a Fixed Rate and an Adjustable Rate?

Fixed Rate

A fixed rate mortgage is one in which your monthly principal and interest payment will always be the same for the life of the loan. The benefit is that you always know what your principal and interest costs are. Fixed Rate loans are usually amortized (paid in full) over a period of 30, 20 or 15 years. Your monthly payments are predictable over the life of the loan. (Keep in mind that your monthly mortgage payment may include principal and interest AND 1/12 of your annual property taxes and home owners’ insurance. So although the principal and interest will remain steady, the taxes and insurance amounts can vary.)

Adjustable Rate Mortgage

With an adjustable rate mortgage (ARM), the interest rate may fluctuate which makes the payment change during the life of the loan. ARMs start off with a fixed interest rate for a determined period of time (1, 3, 5, 7, 10yrs.) and then adjust annually after that. Typically, the shorter the fixed term is, the lower the initial rate. The lower rate means lower payments for that period of time. Once the rate adjusts, the payments can go up if the interest rate is higher. Most loans adjust annually after the fixed rate period.

ARM’s adjust based on the combination of the index and the margin. The index is the predetermined indicator that establishes the basis for the rate adjustment. The index can be the 12 Month Treasury Average (MTA), the 1 year LIBOR rate, the 1 year Treasury Note, or Prime Rate, or several other accepted indicators. The index is the rate for the particular indicator on a particular date (usually the anniversary of the loan). The index is a number that changes daily, the margin is a static single number, usually 2.25-3.00% that is added to the index. When you add the index and the margin together, you get the new rate.

Both types of loans have their benefits and pitfalls. For example, a fixed rate mortgage is appealing because you always know what your payment will be. On the other hand, when interest rates are high and falling, choosing the adjustable rate mortgage may be favored because the initial interest rate will be lower than fixed and the interest rate may drop in the future, resulting in smaller monthly payments. However, with an adjustable rate mortgage you run the risk of ending up with a higher payment should the interest rate increase during the life of the loan.

An ARM may be advisable if you intend to be in the home for a short time (the fixed rate term or less). Many people know they will be moving in 3-5 years or less and chose to take advantage of the lower rate to have a lower payment or afford more house.
If you intend to stay in the house for a long time, the fixed rate loan and its predictability may be preferable in a rising rate environment.

Which Mortgage is Best?

There are literally dozens of loan products and hundreds of combinations of these products. A good Loan Consultant will listen to your needs, evaluate your situation and should recommend loan scenarios that fit your need. A home loan should fit into your overall financial plan, help meet your long and short term financial goals with the desired monthly payment and equity position.
Just calling around for the best rates on a 30 year mortgage could cost you thousands of dollars over the life of your loan if you don’t get the loan that best fits your needs. There is so much more to the home loan process than just rates. A professional loan consultation is a vital first step in the process and is usually at no cost to you.

Your real estate professional can assist you in finding a lender for a consultation.

Written with assistance from Bob Muni of Founders Mortgage Services
Contact Bob: www.foundersmortgageservices.com