NEW MORTGAGE LAWS EFFECTIVE JANUARY 10, 2014: CHECK OUT https://deanlucich.axiahomeloans.com/blog
Getting Started: What First Time Home Buyers Need to Know
One of the best ways to make the home buying process flow easier is to become better-acquainted with your options and clearly define your goals. Understanding the reasons you want to buy—and what you want to accomplish in your move—will go a long way towards shaping your plans and improving your results.
Perhaps the most important first step involves deciding how you will approach your home search. Who will you work with throughout this process—and how will you work with them?
It is common for first-time homebuyers to weigh the pros and cons of buying against continuing to rent. If you have been renting, you have probably been somewhat free from maintenance responsibilities. However, you are also losing the chance to build equity, take advantage of potential tax benefits and protect yourself from monthly rent increases. Buying a home is an investment in your future and can offer many long-term benefits. Plus, when you look into it, you may be surprised—owning your dream home may be less expensive than renting!
Get a Free Home Buyers Toolkit – offered only by ABR representatives
http://rebac.net/request_information.cfm
Alternative Buying Opportunities
The vast majority of U.S. real estate transactions begin as advertised listings, held by real estate brokerage firms. Sellers begin the process by selecting an agent to represent their side of the transaction and agree to a listing price. These listings are then readily promoted by the agent’s brokerage firm, in hopes of attracting interested buyers.
This, however, is not the only way you can buy real property. Alternative buying opportunities, including foreclosures and auction sales, provide additional paths to homeownership. While listed transactions still dominate the real estate market, informed buyers will want to consider all their options.
If you decide to investigate alternative buying opportunities, make sure you take time to become fully educated on the process. It may be necessary to consult with a local attorney who specializes in these matters. Also, you will experience better results if you work with an Accredited Buyer’s Representative who is familiar with these types of transactions. Foreclosures and auction sales are unique, involving specialized knowledge and training. You may find attractive opportunities, but you must also be prepared to avoid potential pitfalls.
Foreclosures can be a difficult topic, simply because no one wants to see any homeowner fall on difficult times and suffer major financial set-backs. Still, foreclosures are an unfortunate fact of life. When they do occur, financially-stable buyers are needed to help remedy the situation.
Foreclosures may initially appear to be an appealing homeownership option. While this is certainly true in certain situations, it’s also essential to recognize that investing in foreclosure properties is no simple matter. This is a niche market with many subtle but important nuances, requiring considerable specialized knowledge, experience and contacts.
If you decide to pursue a foreclosure purchase, you’ll want to work with an Accredited Buyer’s Representative who can educate you on the process. He or she can help you crunch the numbers, determine a logical purchase plan, avoid potential set-backs, and assist you with all the unique processes and paperwork involved with foreclosures.
Auction sales have been gaining traction in all categories of real estate, including, but also extending well beyond, foreclosure properties. Auctions have become more popular, in part, because property owners recognize that taxes, maintenance, financing and other costs can significantly erode their equity, especially if the property sits idle for many months. Auction sellers can effectively pick their sale date. And they may be sending a strong signal that they’re motivated to sell, depending on the type of auction method chosen.
As a homebuyer, you can feel good about participating in auctions because you are largely in the driver’s seat, in terms of determining what price you will pay. The seller may set a minimum price, and you will still have to compete with other buyers, but the actual selling price is ultimately set by you, the buyer. This is in sharp contrast to houses listed for sale through brokerage firms, where the seller sets the price, and the rest of the purchase process is about negotiating a sale.
Even though auctions are managed differently than traditional brokerage sales, it’s still a good idea to engage the help of a qualified Accredited Buyer’s Representative. Your agent can assist you by providing a competitive market analysis and other information that will be helpful in developing your pricing strategy. He or she can also help you review the disclosure package, accompany you to any presale inspections, explain the sales terms and auction procedures, coordinate attorney reviews, assist in prearranging financing and act as your representative in managing transaction paperwork with the auction company.
Houses are expensive. Probably the largest purchase you’ll ever make. That’s why very few prospective homeowners have enough cash on hand to purchase a home outright. Instead, most home buyers seek financing—a mortgage—to cover the difference between what they’ve saved, and what they need, to buy a home.
Determining how much house you can reasonably afford, and the size of your mortgage, requires carefully evaluating:
- Contact a Lender – getting pre-approved for a mortgage.
- Savings —how much have you set aside to cover a down payment on your home, as well as your closing costs?
- Affordability —how much can you safely borrow, and still meet all your financial obligations?
Credit ratings are built upon information provided by banks and other finance companies, based on your performance against past loans, credit cards, and bank accounts. If you’ve made timely payments and properly managed your bank balances, you probably have a solid credit rating.
Mortgage lenders use these ratings to evaluate you as a potential borrower. A good credit rating puts you in a better position to secure attractive financing rates on your mortgage.
It’s a good idea to check your credit rating, even if you’re sure you have an excellent record. Sometimes blemishes can appear in your credit history, without your knowledge. Mistakes can be removed—but only if you know about them and take steps to correct them.
Credit Reporting Agencies
Experian: 888-397-3742
Equifax: 800-685-1111
TransUnion: 800-888-4213
Before applying for financing, review your credit report from all three agencies. The easiest way to do this? Visit www.annualcreditreport.com. (Or call 877-322-8228.) This centralized site allows anyone to request a free copy of their report, once a year, from all three reporting agencies.
When selecting a lender, your goal is to obtain a mortgage loan with terms that are most favorable to your situation. In order to find the best home loan for you, contact several lenders to discuss the mortgages they offer, their rates, closing costs, and other fees. If you already have a mortgage, contact that institution too.
Mortgage loans are available from many sources, including:
- Mortgage companies
- Savings and loan associations
- Banks
- Credit unions
Your buyer’s representative may also be able to suggest loan providers that are offering competitive rates. To shop for mortgages and compare rates online, go to https://deanlucich.axiahomeloans.com.
What’s the difference between being pre-qualified and pre-approved for a mortgage?
Typically you will first pre-qualify for a mortgage, then get pre-approved before you have found the specific home you wish to purchase. What is the difference?
Pre-qualification: An informal determination by a lender or mortgage broker stating how much mortgage you can afford.
Pre-approval: A guarantee in writing by a lender to grant you a loan up to a specified amount.
What are the advantages of being pre-approved?
There are two advantages of being pre-approved for a loan as early as possible in your home-buying process:
- Sellers will find any offer you make more attractive if you are pre-approved for a mortgage.
- The length of time before closing can be shorter if you’ve completed the steps to securing mortgage approval prior to signing a contract on a property.
Everyone deserves to be paid for valuable services they render to others, and real estate professionals are no different. But as a prospective home buyer, you’ll want to be sure you understand how compensation factors into your transaction.
Common questions include:
What is the standard compensation structure?
For the most part, real estate professionals are compensated by commission, based on a home’s selling price. Commission rates are not standardized, but vary, as does how the sales commission will be divided between the agents on the selling and buying side of the transaction. There is consistency, however, in how commissions are paid. When a seller signs a listing agreement, their contract is with a brokerage firm. All fees must pass through that brokerage firm. Typically, the seller’s representative—and your buyer’s rep—will be paid by the listing broker after the transaction closes.
What services can I expect to receive?
This depends on what level of service you have established as a home buyer. If you have not formed an agency relationship, you are probably considered a customer, rather than a client, and you will likely receive a lower level of service. The terms vary from state to state, and each buyer’s representative can set their own guidelines within their state parameters and their brokerage practices. So you should clarify, preferably in writing, the services you are entitled to receive before you start viewing properties.
It’s also important to understand that if you do buy a home, your buyer’s rep will probably receive compensation (through the listing broker), regardless of whether you are a customer or a client. So more times than not, it’s in your best interest to formalize an agency/representation relationship, so you’ll receive the highest level of service possible. (Learn more about agency relationships.)
Will I pay more to be represented as a buyer?
In the vast majority of cases, the answer is no. When a house is listed for sale, the seller’s contract spells out the commission rate that will be awarded to a buyer’s representative. This is known up front and typically covers all, or at least most, of your representative’s compensation.
If it doesn’t, the choice is yours. You can scratch this house off your list, or decide to view it, knowing that any remaining compensation will need to be addressed. But even if the seller’s listing contract doesn’t entirely cover your buyer’s representative’s compensation, and you must pay the difference, it’s quite possible that these relatively small differences will be more than offset by other purchasing terms negotiated with the seller.
Can I avoid real estate commissions altogether and buy directly from a seller?
Yes, this is an option that some buyers explore. However, it’s important to understand that nothing is truly free and this approach still carries a price. Unrepresented sellers (for-sale-by-owner properties) frequently lack adequate information about how to price their home, or attempt to inflate the price in lieu of paying a real estate commission.
As an unrepresented buyer, it will be much harder for you to know if you’re overpaying. Real estate professionals have developed keen pricing insights that go well beyond simply evaluating data through the Multiple Listing Service (MLS). And if you are overpaying, it will create further complications in securing financing.
For these, and many other reasons, a high majority of consumer-to-consumer housing transactions never reach closing. Real estate professionals play a valuable role in keeping your home-purchase on track, starting with selecting and touring properties and continuing through negotiations, inspections, financing and closing. This is especially true in today’s market, where alternative buying opportunities, including short sales, have added even more complexity to some real estate transactions.
When buying a home, it’s important to think carefully about your offering price—but also your offering terms. Most purchase offers define both. And in some cases, terms and conditions can represent thousands of dollars in additional value for buyers—or additional costs.
Terms may include inspections, requests for specific property repairs, or timing considerations, such as a conditional purchase clause (if, for example, you must first find a buyer for your current home).
Some buyers mistakenly believe there is a predetermined formula for offers—that offering prices should be X percent lower than the seller’s asking price or the amount they are really willing to pay.
In practice, your offer price actually depends more upon the basic laws of supply and demand. If many buyers are competing for homes, then sellers will likely get full-price offers and sometimes even more. If demand is weak, then offers below the asking price may be in order.
The process varies by state. In most cases, you complete an offer that your representative presents on your behalf. The owner, in turn, may accept the offer, reject it or make a counter-offer.
Because counter-offers are common (any change in terms can be considered a “counter-offer”), it’s important that you remain in close contact with your representative during the negotiation process so that any proposed changes can be quickly reviewed.
Inspections are common in residential realty transactions. Depending on your needs and where you live, they may include:
- mold inspections
- “green” issues, including energy efficiency and eco-friendliness
- surveys to determine boundaries
- appraisals to determine value for lenders
- title reviews
- structural inspections
Structural inspections are particularly important . During these examinations, an inspector evaluates the property for any material physical defects and whether expensive repairs and replacements are likely to be required in the next few years.
For a single-family home, these inspections often require two or three hours. You should plan to attend too. This is an important opportunity to examine the property’s mechanics (plumbing, wiring, etc.) and structure, ask the inspector questions and learn far more about the property than is possible with an informal walk-through.
Closing costs are simply the fees associated with 1) purchasing a home, 2) borrowing money, and 3) preparing paperwork to finalize the sale. Your total closing costs will vary depending on where your new home is located, what type of property you are buying, the price of your home and the complexity of the transaction.
It is extremely important that you work closely with your buyer’s representative in the early stages of your home search to estimate what these costs could be, since closing costs can easily represent thousands of dollars.
The main categories are:
Discount points to buy down the mortgage
If you want to reduce the ongoing cost of your mortgage over the life of the loan, you’ll want to consider this optional fee. Amounts can vary significantly, from 0.5 to 3 points on the total mortgage amount. This is a one-time charge that is fully deductible as mortgage interest.
Costs for originating the mortgage
This generally includes a variety of fees such as the loan origination fee, the appraisal fee and the cost of credit reports. Other related closing fees may include hazard and mortgage insurance, and interest accrued on the mortgage between closing date and the end of the month.
Charges will vary according to local government requirements. Some may demand that property taxes be pro-rated according to when you officially own your home. You may also be required to pay personal property taxes, homeowner’s association dues, and other assessments that are specific to the area that you are moving into.
You will have to pay for any research involving public records and title history for your new property. This insures that the title is unencumbered by other ownership claims or liens and can be delivered to you at closing. Other costs include recording and transfer fees, which cover legally recording the deed to your name.
A home warranty is an insurance policy that covers a variety of mechanical, electrical, and plumbing items, as well as some appliances, inside the home. Coverage is also available for more expensive systems such as air conditioners, refrigerators, pools, and spas. For a moderate premium (usually in the $400 range for a basic policy) payable at closing, you can acquire a policy which protects your home for one full year after closing. You will be covered for major repair or replacement bills.
Most policies have a $50 to $100 deductible, and you usually must call through their people for repairs. The age of the home should be a consideration as to purchase a warranty or not – a 15 year old home with original equipment versus a two-year-old home. Several companies offer these policies.
You may purchase a home warranty policy prior to selling to protect against repairs needed during the listing period, and the buyer may be able to assume the policy at the close of escrow.
A home warranty policy may provide these benefits:
- Increase the marketability of your home by reassuring potential buyers.
- Help sell your home faster and at a higher price.
- Ward off potential disputes after the sale for repair and/or replacement of covered items.
- Most home warranty policies can be paid for at the close of escrow. A copy of the invoice is presented to the title company and it becomes part of the seller’s closing costs.
You found your home, the contract has been signed, and the closing date has been set. Now, it’s time to prepare for moving day. You should, however, begin planning for it well in advance. Moving, after all, may be the biggest job of all.
Careful preparation is essential, whether you’re moving across town or across the country. Here, you’ll find useful information on:
Selecting a Moving Company
Selecting the right moving company is a critical step. You’ll want to be sure you understand all the costs and options involved. Start by asking friends and families if they have any recommendations. Plan to interview at least two companies for estimates, which should be cost- and obligation-free. Your buyer’s representative may also be able to suggest reputable moving companies in your area.
Deciding which moving company is right for you involves three key steps:
Step 1: Arranging the interviews
Call movers and schedule interviews as soon as you know when the actual move might take place, especially if you’re moving during a peak moving period, which includes:
- The first or last few days of each month—this is when most closings take place
- Holidays—especially those coinciding with school vacations
- Summer months—since most families try to schedule a move between school years
Step 2: Conducting the interviews
Moving companies should agree to visit your home and provide a written estimate. Ask whether this estimate is binding or non-binding, so you know whether they will still honor it later, when you actually make your move. Also insist that the estimate provide as much detail as possible, so you can make better comparisons with other estimates.
Local moves – I f you’re moving within a local or regional area, the estimate will probably be based on an hourly rate, depending on how many workers are needed and how much time it will take to pack (if you want this done for you), load, transport, and unload your possessions at the final destination. Interviewing at least two companies will give you a more accurate picture of just what your move will entail and how much it is likely to cost.
Out-of-state moves – If your move is out of state, estimates will be based on the distance of your move and the projected weight of your shipment. To provide you with an accurate estimate, movers will need ample time to walk through your home and inspect each room, as well as all storage areas, viewing everything that will be going to the new location.
Many factors can influence the price of your move, including how many optional services you require, such as:
- Packing and unpacking—Are you willing to do this yourself, or would you prefer to pay professionals to pack some or all of your loose items?
- Boxes—Most movers will sell you new boxes. Prices vary by company. Ask about used boxes too, since some movers offer these too at a reduced cost.
- Special handling—If you have unique, heavy or delicate pieces, such as a piano, large exercise equipment, or antique furniture, you may need to pay more for special handling.
- Special packaging—Movers may recommend that certain pieces be packed in wood crates. Check the cost versus the advantages of this choice.
Insurance – Most movers have some level of liability insurance. You may, however, want to investigate additional insurance coverage, since it’s not uncommon for objects to be damaged during a move.
If you want these or other services, make sure you tell each moving company to include them in their estimate.
Step 3: Making your selection
Several factors will affect your final decision:
- Price—While this may seem straightforward, it may take some effort to accurately compare prices, since weight estimates will likely differ by mover, as will prices on individual services.
- Availability—If you move during a peak time, you may find yourself coordinating your move with your mover’s schedule, rather than your own.
- References—Request and contact references beyond the letters of recommendation that you should be offered in the interview. If you want to do a little more research, call the Better Business Bureau or the State Attorney General to see if any complaints have been filed against the company.
- Customer service—The person who provides your estimates will probably be your key contact leading up to and during the actual move. Are they experienced, confident, a good communicator, and seemingly interested in satisfying your needs?
Moving – Just the word conjures up images of heavy boxes and furniture—excitement and headaches. We realize that it take tremendous effort to move. So to help ease your moving experience, consider these tips and helpful resources.
Use a moving checklist
Your move may be simple or complex, depending on your situation, including how much you own, how far you’re moving, and how many people are moving with you. In any case, it’s a good idea to start with a thorough moving checklist that covers all the possible bases, including important time frames.
