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Financing

Financing

So you have decided to buy or sell a home. You’ve been searching online for the perfect new home for you and your family, but are you financially ready? Are your finances in a good place for such a big move? Whether you are buying or selling, there are important steps that you need to take to make sure you’re fiscally fit.

Before you start shopping for your fabulous new home, take steps to get your finances in order. Here is a quick guide for buyers and sellers about what it takes to get financially ready so you can move forward in the process.

 

For Buyers

If you are thinking about buying a house, getting your finances in order should be at the top of your checklist. Long before you start looking for houses, ideally years before, you need to start improving your credit score. Although standards fluctuate, if you want to get a good rate, your credit score should be at least 720. Spend a few years:

  •      Paying off debts
  •      Updating your credit report
  •      Making payments on time
  •      Increasing your income
  •      Building up savings for the down payment

 

Once your finances are in better shape, it’s time to get organized for a home purchase. This involves choosing a loan type, shopping for a loan, and getting a pre-approval letter from your lender. Your bank will base your qualifications on a number of criteria. Some of the financial paperwork you will need to show your lender includes:

  •      Proof of income
  •      Amount of savings
  •      Assets or collateral
  •      Employment verification
  •      Credit report
  •      And Identification information, i.e., social security card and driver’s license

 

For Sellers

When it is time to sell your home your checklist begins with finances too, but in a different way. Your goal is to get your home ready for potential buyers. That will usually involve making improvements, upgrades, and repairs to get the most money for your home. In order to do that you need to get the cash together.

Deciding which repairs and upgrades to make depends on your location, the state of your home, and the state of the market. Note that there are some repairs you just have to fix no matter what. If for instance you have a bad roof, this needs to be taken care of before you list your home. Very few buyers will be willing to eat the costs of major repairs.

There are many minor repairs and improvements that won’t cost you an arm and a leg. Improvements that often pay off include things like:

  •      New Interior and Exterior Paint
  •      HVAC Repairs
  •      Window Replacement
  •      Entry Door Upgrades
  •      Updated Cabinetry
  •      Upgraded Flooring

Once you have a good idea of how much your home improvements are going to cost, you then need to factor in the other costs associated with selling your home. While many of these can potentially be negotiated away on the negotiation table, it’s best not to rely on it.  You should talk with your agent about:

  •      Closing costs
  •      Inspection fees
  •      Attorney’s Fees
  •      Insurance riders
  •      And so on

 

Finding the Right Agent
Beyond financing, there’s so much to understand about buying and selling a home that it just makes sense to use a professional real estate agent. The right agent can make or break the deal down the road. Chris is the top agent in Philadelphia. Get his professional help with buying or selling your home today!

 

When is the Best Time to Sell Your Home?

You may have heard many different opinions about when the best time to sell your home is. Spring? Summer? Fall? The fact is there are several factors that determine when it’s a good time to put your home on the market. Mainly, there are four criteria that are pretty solid cues that it may be time to sell:

  •      Low Inventory
  •      Low Interest Rates
  •      Rising Home Prices
  •      And Warm Weather

Take a look at this list and then talk to Chris about listing your home.

 

When Inventory is Low

During the height of the housing collapse, buyers had their pick of the litter with an overabundance of homes for sale all across the country. It’s when inventory is low that sellers have the advantage. If you are one of only a few people looking to sell in your area, you could find yourself smack dab in the middle of a bidding war!

If you have been thinking about selling your home, ask your agent about the inventory in your area. What is the current rate of home sales where you live? How many foreclosures? Is demand high for new homes? If housing supply is limited, now may be the right time for you to sell.

 

When Interest Rates are Low

A drop in interest rates often spurs on-the-fence buyers to finally make their move. If you’ve been thinking of moving up or downsizing, you may want to put your home on the market soon so you can start your search for a new one and take advantage of low interest rates.

 

Depending on the type of mortgage you take out, you could lock in a very low interest rate. That could mean paying less than 5% interest on your new mortgage over the term of your loan.

That is excellent news considering that the interest paid on a 30-year mortgage is only second to the principal on your mortgage in terms of cost. Wouldn’t it be great if you could knock off several thousand dollars in interest over the life of your loan? Check with Chris to see just how much you could save with a low interest rate.

 

When Home Prices are Rising

When home prices are rising, it is great news for sellers, bad news for buyers. Unfortunately, the housing market can be very unpredictable. Trying to time your home sale with rising home prices could prove tricky. An experienced agent can best advise you about whether or not now is the time to list your house while your home’s value is on the upswing.

 

When the Weather is Nice

This is one that you may have heard before – spring is the best time to sell your home. According to a study by Zillow, this is good advice. Generally, in the early spring in warmer climates homes sell faster and for an average of 2% more. In areas where the climate is colder, the peak time to sell is late spring, early summer.

 

Combined with low interest rates and rising housing prices, if you time it just right, you could be looking at triple cherries right now. Could this be the perfect time for you to sell your home? Talk to the top agent in Sample City now to find out!

 

Understanding Home Inspection

When you are close to closing the deal on your home, one of the contingencies that need to be met is the home inspection. In fact, some sellers get a pre-sale inspection report long before they start entertaining offers, as this gives them more time to make necessary improvements early.

In order to keep your home sale from being derailed, it is imperative that you understand the home inspection. Who gets the inspection done? Can buyers trust your home inspection report? And what happens if you get a bad inspection report or if your report is refuted by the buyer’s inspector?

 

Who Does the Inspection?

Both parties typically get an inspection done. It makes sense. As the seller, you want to know what problems could complicate your sale. Plus, you want to know what repairs need to be done so you can get the most value for your home.

The buyer wants to make sure that they are not putting all of their hard-earned dollars into a money pit. They are not going to rely on your inspector’s report alone, nor should they. When both parties do an inspection, it protects both sides. But it can also create problems if the reports have conflicting results.

There are many ways to resolve those disputes that will not derail the transaction. In order for that to happen, both parties have to be willing to compromise:

  •      You can bring down your asking price to account for the recommended repairs.
  •      You could split the costs of the repairs with the buyer.
  •      You could get a third opinion from a neutral party.

 

Is Your Inspector Trustworthy?

The worst thing that can happen when there are conflicting reports is for trust to deteriorate. You can help avoid that by choosing a home inspector that is trustworthy, not just one that will give you a good report. Face it, even if they give you an artificially glowing report, the truth will come out in the end.

When a deal breaks down over the home inspection, inflexibility and a lack of trust is typically the culprit. If you are not willing to negotiate on the price when problems show up on your inspection report you are setting yourself up for a rough close at the very least and a busted deal at worst.

  •      Check the qualifications of your home inspector.
  •      Ask your agent to recommend a good inspector.
  •      Seek referrals from friends, family, and neighbors who can recommend a trustworthy inspector.

 

What Happens When You Get a Bad Inspection Report?

First of all, don’t panic. Take the case of a couple whose home inspector reported that their furnace was condemned and had to be replaced. That repair would have cost the couple thousands of dollars. Moreover, the report naturally made the buyers nervous about closing the deal.

What did the sellers do? They got a second opinion from a contractor who completely disagreed with the first inspector and declared the furnace fit. The buyers did not know what to believe so the seller called in the gas company to inspect the furnace – a neutral third party. When the gas company found nothing wrong, the buyers were satisfied.

Inspectors are not perfect. They can get it wrong sometimes. The best approach to take to the entire home inspection process is to be flexible, willing to compromise, and get a second or even a third opinion if necessary.

 

Lean On a Pro

A qualified agent can help you better understand all of the ins and outs of the home inspection process. Are you searching for a home inspector? Lean on a pro! Contact Chris today to learn more.

 

What is a CMA and Why Do You Need One?

A Comparative Market Analysis or CMA is a report that agents use to help determine the proper value of your home. It helps them to price your home based on other similar properties in your area. It is not an appraisal. It does not require an official inspection to produce.

It is important to know how much your home is really worth because homes that are overpriced tend to linger on the market for months and months. When a home is listed for more than 90 days, buyers start to get suspicious about the reason why, which often produces a domino effect. If interest is low it will deter other prospective buyers from considering your property.

You could have a perfectly lovely home that would have attracted a stampede of prospective buyers if only it was priced right. That is why a CMA is so important. It should be done before you list your home.

 

How Does a CMA Help You?

Both buyers and sellers use CMAs to their benefit. Buyers often request one in order to determine whether or not your home is overpriced. Besides helping to ensure that your home is priced appropriately, the CMA can also help you avoid making unnecessary improvements before the sale. If you’ve been thinking about remodeling your kitchen or replacing the siding, the CMA will show you which improvement will net you a higher ROI in your area.

Before you begin knocking down walls and laying tile, have a CMA produced so that you spend your money wisely when making improvements or upgrades before listing your house.

 

Who Produces the CMA?

Again, the CMA is not an appraisal. It is not done by an appraiser, but by the seller’s agent. Your agent will come to your house and do a general inspection of your home. It’s not as in-depth as a full inspection or appraisal. Your agent will just assess the overall condition of your home compared to others in your neighborhood.

Using market data specific to your location, your agent will analyze current market trends, assess how much similar homes in your neighborhood are selling for, and will use that information to set your asking price. Because your agent has access to listings that are not publicly listed and up-to-date market information, they are perfectly suited to produce the CMA for you.

Therefore if you are planning to make any upgrades or improvements, you should let your agent know when they come to assess your home. They can use that information to make a much stronger assessment and will be able to make recommendations about which improvements are most beneficial to you.

 

Is a CMA Mandatory?

The CMA is not mandatory but it is necessary. Your agent’s job is to put you in the best position to get a good return on your home. There are many reasons to use an agent to help you sell your home. Using an agent to produce an in-depth CMA so that you can price your home to move is one of the main reasons why. Contact Chris now to discuss how he can help you set the right price for your home today!

 

The Importance of the Appraisal

One step that sellers often overlook in the home selling process is the appraisal. You can hypothetically list your home for any asking price you want (of course that’s not the best strategy), but mortgage lenders will only approve buyers for the amount of the appraisal – and if it falls short of the agreed upon sales price, this could result in the purchase contract getting cancelled.

Understanding this concept will help you to grasp the importance of the appraisal when selling a home. It will also help you to make the right choices when pricing your home, as you’ll want to use the same information the appraiser will – market data, recent sales, comparable homes on the market – to determine the market value of your home.

 

What Does an Appraisal Involve?

A home appraisal, at its essence, is the process of determining how much a home is worth. The appraisal in a home sale is required by the lender (the buyer pays for it) and it is an essential step in the financing approval process. It is used to determine the fair market value of your home.

Whatever value is determined by the appraiser is the value that the lender will use to determine the loan amount that the buyer will be approved for. A licensed appraiser covers the entire property, including the house itself, the land, and any additional structures on the property. Factors that affect the appraisal include:

  •      Square Footage
  •      Number of Bedrooms
  •      Number of Bathrooms
  •      Location
  •      School District
  •      Home Interior Features
  •      Age of Home
  •      Unique Features
  •      Property Views
  •      Improvements or Upgrades
  •      Swimming Pools and Landscaping

If you fail to make repairs or improvements to your property or fail to point out upgrades and improvements to the appraiser, it could result in a low appraisal. Prospective buyers will use a home inspector to take a look at the property as well. It’s important to note that inspections and appraisals are two different processes, conducted for different reasons.

Different Types of Appraisals

There are four basic types of appraisals. Though most appraisers will use a comparison analysis appraisal, it is still good to know the different types to make sure that they’ll be using the right approach:

  •      Comparison Analysis Appraisal – Used to assess home values based on local neighborhood sales and uses the most current data
  •      Walkthrough Appraisal – In-depth appraisal where pictures are taken and the home is appraised from top to bottom and inside and out
  •      Tax Appraisal – Least useful for home value assessment as records are only updated annually
  •      “Drive-By” Appraisal – A quick snap analysis of the general value of the home, particularly noting the home exterior and surrounding area

 

Preparing for an Appraisal

Preparing for an appraisal is a lot like staging for an open house. In fact, if you approach the appraisal the same way, you can maximize the reported value of your home. Remember as well that most buyers are more interested in buying a move-in ready home.

An appraiser is different from an inspector. They are interested in the nuts and bolts of your home; its best features and how it compares to others.

  •      Clean the House
  •      Make Repairs and Upgrades
  •      Paint the Exterior
  •      Trim Landscaping and Drive
  •      Improve Curb Appeal

 

Weighing Appraisers

In most cases, the buyer’s lender will select the appraiser. However, if you’re doing an independent appraisal, the decision on which appraiser to go with has lasting repercussions. Make sure to shop around before deciding on an appraiser – and make sure that whoever you choose is on the lender’s list of approved appraisers. Ask questions about the data that they will use to appraise your home:

  •      Are they working from this year’s statistics?
  •      What are some of the market conditions that affect pricing?
  •      How many sources does your appraiser reference?
  •      How thorough will the appraisal be?
  •      Is the appraiser familiar with homes in your neighborhood?

 

Learn More

Too many sellers only realize the weight of the appraisal when it is too late. Don’t be caught off guard. Contact Chris to learn more about the importance of the appraisal and how to successfully navigate the process.


Home Selling FAQs

This is a quick rundown of the most common questions about home selling. Below you will find the answers to these questions to help you get a better understanding of what to expect.

How Do I Set My Asking Price?

First things first, you want to price your home as accurately as possible. That can be contrary to some advisors who suggest pricing high in a sellers’ market. Others suggest pricing low to spark more interest. It is a game to get into these types of price manipulations and someone inevitably loses. Avoid the risk altogether and set the price competitively for your particular area.

 

How Do I Attract House Hunters?

You will need to promote your home online in order to attract more house hunters. More than 90% of homebuyers begin their search online. They look at homes listed on national MLS portals or on local realtor sites. Some other things that you can do are:

  •      Spread the word via neighbors, co-workers, and friends
  •      Make furniture or quality appliances part of the deal
  •      Share your listing on social media
  •      Use a professional real estate photographer for listing photos
  •      Hire an agent with an excellent track record

 

Should I Renovate First?

To renovate or not to renovate is a question all sellers have. The answer is that it’s really subjective, but a few tips will help you decide.

  •    If you live in a part of the country that sees a lot of weather events like thunderstorms or snowstorms, storm windows and doors, roofs, and basements are good renovations if yours are lacking.
  •    For the most part, minor improvements like paint or a new front door can do more to improve the value of your home than a complete renovation.
  •    Fix the HVAC, repair floors, and clean out the basement or garage if you want to make a big improvement.

 

Should I Use a Stager?

Do you design home interiors for a living? If not, you should definitely use a stager. Buyers form a snap judgment about your home if things are untidy and out of order, so you should definitely make sure it’s spotless. However, to truly stand out, you want better than just a clean home. You could have a perfectly tidy house but it’s the overall aesthetics that will make or break a sale.

Here’s how you can get started with sprucing things up if you don’t want to call a stager yet:

  •      Clear out the clutter
  •      Cut the hedges
  •      Hose the driveway
  •      Plant fresh bulbs
  •      Wash ceiling fans and light fixtures
  •      Put away clothes and shoes
  •      Add lighting and accents

 

How Do I Negotiate the Best Price?

If you want to negotiate the best price for your home, use a professional agent. Studies show that sellers who use an agent to negotiate the deal get a much better price than those who sell on their own. A seasoned agent knows the process best and knows exactly what your home is worth.
Using an agent will also ensure that you get the most out of online advertising. Shop around for agents whose listings are the kind that get attention. That is the agent that you want to list with. Make sure to ask about all of the services that your agent will provide throughout the home selling process.

 

Advice for First-Time Buyers

The first time you buy a home can be the most exciting and the most nerve-racking experience. In order to make the process a positive one, take this helpful advice for first-time buyers to heart.

It can help you avoid many of the mistakes that first-time homebuyers make and can ensure that you buy the house that is right for you. Here is the general roadmap for happy house hunting!

Financing First

Before you even begin to start saving properties and calling agents, you have to get your finances in order. That begins with cleaning up old debts, improving your credit score, and building up a healthy savings to put down a 20% down payment if at all possible. Get this done first.

At the very least, most banks will require 5% down. Just know that lenders will typically require you to pay private mortgage insurance (PMI) if your down payment is less than 20%  

Once you have your financial ducks in a row, it’s time to start preparing for the house hunt. The first step is actually going to a bank and getting pre-approved for a home loan.

Keep in mind that pre-approval and pre-qualification are two different things:

  •      Pre-Qualification: Only tells you how much you can afford for a home.
  •      Pre-Approval: Tells you how much the bank will guarantee to lend you for a home.

When you go to an open house with a pre-approval letter in hand, the seller knows that you are a serious buyer. Plus knowing exactly how much you are approved for can help you stay within your budget. When budgeting for your home purchase, don’t forget to include other costs that will arise like:

  •      Inspections
  •      Repairs
  •      Closing Costs
  •      Contingencies
  •      And Other Fees

 

Know What You Are Looking For

Now comes the fun part for first-time homebuyers. Now you get to put together your wish list for the house that you really want. You will want to have two lists to work from. One list is your list of needs:

  •      Specific Number of Bedrooms
  •      Specific Number of Bathrooms
  •      Square Footage
  •      Location, Etc.

These are the things that you cannot budge on. These may include a lot of other things like specific school districts or distance from your place of employment. That is your primary list. Your second list is your wants; things that you would love to have but are not a deal-breaker if they are not included. Things like:

  •      Pool
  •      Attic Bedroom
  •      Finished Basement
  •      Multi-Car Garage, Etc.

 

Get Help from a Pro

After you have completed these steps, it is at last time to call in a pro. You have everything you need to give your agent a good idea about what you are looking for. Now let your agent take you through the next exciting steps! Contact Chris now to discuss your goals for buying a home.

Make an Offer

Coming up with a purchase offer that the seller will want to say yes to is one of the trickier aspects of the home buying process. Chris will be a great help here since he knows the local market and will be able to provide you with the necessary comparative market analysis (CMA) and advise you on what price to offer.

Not every offer is going to be immediately accepted, especially if it’s for less than the asking price or if you’re proposing contingencies that the seller may not want to comply with. This is when having a good agent comes in handy. Chris will take care of negotiating the best terms for you and will make sure that your interests are protected.

How to Negotiate with Sellers

When you are at that point of the home buying process where you’re ready to start negotiating the purchase price, first-time buyers tend to run into problems. As major a purchase as buying a home is, this is the last place that you want to take chances.

Here are some do’s and don’ts that will help you to understand how to negotiate with sellers.

What to Do

First of all you do need to be prepared. The seller wants to get as much money out of you for their home as possible, while you are trying to pay as little as possible. This is why having leverage is crucial when negotiating with sellers.

Asking questions, researching the area and the house, and knowing the local market trends will help you gain leverage. Take for instance a home that has been lingering on the market for an extended period of time. There are many reasons why a home languishes on the market and many of them are negative.

  •      Home values in the area are falling.
  •      There are a lot of foreclosures or abandoned property in the area.
  •      New construction in the area is causing traffic congestion or noise pollution.
  •      The house is overpriced.

Find out why the house has been on the market so long. Other questions that help you gain leverage include:

  •      Why is the seller moving?
  •      Are there any negatives about the neighborhood?
  •      Is there a lot of turnover in this area? (i.e., lots of homeowners moving out)
  •      Does the area get flooded in bad weather? (Does the basement get flooded?

 

What Not to Do

The cardinal rule for buying a home is to never let the seller know just how much you want the property. That is the fastest way to lose leverage and hand it all over to the seller. Even if you are anxious to buy a house or to get out of your current one, never let on that you are desperate to buy.

Other things that put you at a disadvantage in negotiations with the seller include:

  •      Telling the seller or seller’s agent your maximum for the house or down payment
  •      Revealing too much about your own personal financial circumstances
  •      Making it clear how anxious you are to move
  •      Letting the seller rush your decision

Establish your own timeline and stick to it. If the seller is in a hurry to close the deal, you may end up paying for it later after inspection. Take your time and do not let yourself be pressured into a rushed deal.

 

Where an Agent Matters Most

Very few people attempt to buy their first home without the aid of a qualified agent. Those who do take on the task themselves often believe that they will save on costs. However, where an agent matters most is during negotiations. They are in the best position of all to negotiate on your behalf.

In fact, buyers who do not work with an agent tend to spend upwards of $10,000 more for a home than those who can call on the skillful negotiation prowess of a top real estate agent. If you do enough research, you could find the home that you want.

But to get it at the price that is best for you, you need an expert. Contact Chris today to help you get the best deal!

 

Types of Mortgages

Most buyers are going to need some type of financing to purchase their new home. Understanding the different types of mortgages out there can help you figure out just which one will work best for your situation. Here are the different mortgage types, how they work, and how to choose the right one.

Fixed-Rate Mortgages

The fixed-rate mortgage is the most standard type of mortgage for those who intend to stay in their homes. The benefit of this type of mortgage is that the monthly payments do not change. The downside is that neither the interest rate nor monthly payment amount ever goes down. Whatever the interest rate is at the time that your loan starts is the rate that you will have over the life of the loan.

These types of loans are most attractive when interest rates are low so that buyers can lock in that interest rate. As with all home loans, your particular situation will dictate which loan is best for you. Here is how each type of fixed-rate mortgage stacks up against the other:

  • 15-Year Fixed Rate Mortgage: Monthly payments are the highest for 15-year mortgages; however, equity builds faster too. The loan is paid off in half the time of other FRMs.

This is the type of loan for buyers who want the stability of a regular monthly payment but want to pay the loan off quicker.

  • 20-Year Fixed Rate Mortgage: As you might suspect, the 20-year loan is the middle ground between the other two FRMs. The loan is paid off quicker than a 30-year loan. That means that the amount of interest paid over the life of the loan is significantly less than for a 30-year mortgage.
  • 30-Year Fixed Rate Mortgage: Most buyers who choose fixed-rate mortgages go for the 30-year loan. It’s the most stable FRM, with lower monthly payments than either a 15 year or 20 year mortgage. It is easier to qualify for a 30-year mortgage and you can claim a bigger tax deduction each year.

This loan is for people who plan to live in the same place for a long time.

 

Adjustable-Rate Mortgages (ARMs)

Just as the name implies, the rates on adjustable rate mortgages change. The introductory rate for an adjustable-rate mortgage or ARM is usually lower than a fixed-rate mortgage. However, over time, the rate fluctuates with interest rates.

That means that even if you get in at a low rate, you could end up paying a really high monthly mortgage payment when interest rates go up. The bank that supplies your loan calculates your interest rates based on a particular index.

It is very important to understand the formula your lender will use and to get it in writing when choosing an ARM.

Lenders are capped at a certain amount of interest that they can charge you. Still, when rates go to their highest level, will you be able to afford the monthly payment? That is a very important question to figure out the answer to before you take out an ARM.

These types of mortgages are best if you do not plan to stay in your house for long and can cover any increase in interest rates.

 

Convertible Adjustable-Rate Mortgages

Convertible ARMs offer a low introductory rate and convert to a fixed-rate mortgage after a specified number of years. When interest rates are low, this can be a very affordable option. However, be aware that when the loan converts, your fixed rate will be set at the future interest rate, not at the lower introductory rate.

Government Loans

Finally there are two main government loans that homebuyers can take advantage of. They offer easy qualification, low fixed interest rates, and affordable monthly payments. However only certain people will qualify:

  • FHA Loans: Made for low-income Americans. Qualifications for this loan are based on income.
  • VA Loans: Service members, veterans and their spouses are eligible for VA loans. The qualifications differ depending on the branch of service and length of time in the service. VA loans are capped based on a calculation of average home prices from state to state.

 

Choosing the Right Mortgage

A qualified agent can help you to decide which mortgage type is best for you. Many agents like Chris can help you navigate the process and advise you along the way. Speak to Chris today about choosing the right mortgage for you!

Article #4

Home Buying FAQs

You’re interested in buying a home, which means you probably have a lot of questions about the process. While there are dozens of questions that any first-time homebuyer has, this is a quick rundown of the most common questions about home buying. Below you will find the answers to those questions to help you get a better understanding of what to expect.

Is it cheaper to buy than to rent?

That is the 20,000 dollar question! The short answer is yes – kind of. If you pay rent for the same length of, say, a 15-year fixed-rate mortgage, your monthly rent payment is likely less than the monthly mortgage payment on a 15-year mortgage. But at the end of those 15 years, as a renter you don’t own the property; while as a homeowner, you do.

One advantage of being a renter is that you do not have to pay for upkeep and maintenance. If you bought a home that needed massive amounts of repairs, you may end up spending more than the renter over those 15 years. Still, even after paying more, you have an extremely valuable asset when the home is paid off. It can be resold for more than what you paid for it and you have equity that you can borrow against that a renter does not.

Can I buy a home even if I have bad credit?

Today, since the housing collapse, lenders have tightened up credit standards. However, it is always best to speak with a mortgage lender to determine exactly what you can be approved for. There are a number of different loan types that don’t require a sterling credit score. In short, don’t rule out buying a home until you’ve talked to a professional.

 

How much do I have to put down on a home?

Generally a lender will require at least a 5% down payment on your home. That number increases the more expensive the home is. A good rule of thumb is to only buy a home when you are able to put at least 20% down up front. That will reduce your monthly mortgage payment, give you some equity right away, and will help you pay off the loan faster. Also, with a down payment of 20% and up, you likely won’t have to pay Private Mortgage Insurance (PMI). There are some programs, such as the VA Loan, that can require 0% down.

What costs are involved with buying a home besides the down payment?

First of all, there are closing costs, which typically are less than 5% of the price of the home. You’ll also want to factor in inspection and appraisal costs. If you buy a condo or buy a home in a planned community, you may have to pay HOA fees or condo board fees. Lastly, you will now have to pay property taxes…on the plus side you will be able to deduct those costs on your taxes at the end of the year!

Should I use an agent?

Yes! It is possible to buy a home without using an agent, but why not get an expert advice if you can get it? An agent negotiates the deal on your behalf, assists you through the financing process, and has up-to-date market information to get you the best deal.

You can save yourself a lot of stress and wasted energy by finding a trustworthy experienced agent. Chris is more than qualified to help you with the entire home buying process. Give him a call now to get answers to your specific questions!

Surviving Escrow and Closing

After you have found the home that you want, made the offer, and gotten the seller to accept it, you have two more hurdles left to clear before the home is yours. It can be a very tense period for both buyers and sellers – but it doesn’t have to be!

One way to survive escrow and closing is to understand the process. If you are using an agent for the transaction, they will help guide you through the process. If you are doing it on your own, you have to have a clear understanding of all of your and the seller’s obligations.

Either way, it doesn’t hurt to know what to expect. Here is what you need to know in order to not only survive escrow and closing, but to close the deal smoothly.

 

Escrow

By the time you are ready to put your earnest money deposit into escrow, you and the seller already have an agreement in place for the purchase of the house. That agreement includes contractual obligations that must be satisfied before the deal is finalized. While those things are being done, a neutral third party will hold your down payment in escrow until all terms are satisfied.

This is the step where money starts to change hands, specifically your money. Whatever earnest money deposit you settled on will go into escrow, and the process typically takes 30 days (sometimes more, sometimes less). A title company, escrow officer, or attorney usually is used as the intermediary who holds the money in escrow.

Funds do not get deposited until after all of the terms of your agreement have been satisfied. Still you will have to keep funds available in your account so that when you are ready to close, the deposit goes through. A bounced check could ruin the deal and give the seller an out if they are looking for one.

Contingencies

Two of the main contingencies written into almost all home purchase agreements are financial contingencies and inspection contingencies. There may be many other requirements listed in your contract. These are the hurdles that must be cleared before your escrow check gets cashed, the deal is closed, and the home is yours.

  • Inspection Contingency: The inspection contingency basically allows you to back out of the deal if after the home is inspected some major issues that were not disclosed are discovered. This clause protects the buyer.
  • Financing Contingency: The financing contingency is designed to guarantee that you have the funds to purchase the home. If you are waiting on a loan approval and your loan is not approved, the deal is off. That is why it is best to get pre-approved long before you get to this step. This clause protects the seller.

 

Closing

At the closing you meet with your agent, the seller’s agent, the seller, and all other interested parties. This is called the settlement or the closing. This is where all contingencies are verified, final documents are signed, and the deed is transferred. There are fees associated with the close, which are paid at the settlement. Typically closing costs are less than 5% of the cost of the home.

It is a good idea to get a title search done – in fact, this is often a requirement if you’re getting a mortgage – so that you can verify the validity of the title and make sure that there are no issues of ownership or liens on the property. Different localities have different requirements for transfer of ownership. Your agent will be able to help verify that you have met all of them.

If you are obligated to pay HOA fees, those will usually have to be paid before close. You will need to get the utilities turned on in your name. And you will have to have homeowners insurance in place. This can take some time; therefore, you should do it as soon as your agreement is in place. Proof of insurance is required at the settlement.

Once all parties have agreed that everything is copacetic, your escrow check gets deposited and you get the keys! You are now a homeowner – congratulations!