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Home Buyers
Your search for a new house begins with planning at home. In today’s market, an affordable home is not so much decided by its sale price as it is by the financing which interprets that price into a monthly payment.
How much you can afford to buy depends on two factors: 1. How much you’re able invest in the down payment; and 2. How much you can afford for the monthly housing payment. These payments will include principal and interest on the mortgage loan, and property taxes and insurance (PITI)
• Principal – The amount borrowed, or the part of the amount borrowed which remains unpaid (excluding interest).
• Interest – The fee charged by a lender to a borrower for the use of borrowed money, usually expressed as an annual percentage of the principal; the rate is dependent upon the time value of money, the credit risk of the borrower, and the inflation rate.
• Taxes – The local government where the home is located will assess your home and determine its real estate taxes. Most lenders will collect this as part of your monthly payment and then pay your local government on your behalf. This is commonly referred to as tax escrow.
• Insurance – A promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policy creates a contract between the insured and the insurer. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policy holder a sum of money upon the occurrence of a specific event. In most cases, the policy holder pays part of the loss (called the deductible), and the insurer pays the rest.
Sometimes for buyers, monthly housing costs may also include mortgage insurance, home-owners association dues, and condominium fees.
Down Payment Sources
There are sources of income, other than the profit from selling your house that may not be as obvious as others.
• Home Equity Loan – Homeowners usually have substantial equity built up in their homes. Through a home equity loan, one would be able to offer a down payment on a home for their children. It is possible for parents to be required to issue a “gift letter” after offering down payment to confirm they don’t expect reimbursement. Ask your tax advisor for current information about sharing profit after the house is eventually sold.
• Company Profit Sharing or Savings Plan – Look into the possibility of withdrawing or borrowing against what you have in your employer’s profit sharing or savings plan account.
• Life Insurance – After you have built up a cash value on your life insurance policy, you may be able to borrow up to the amount saved and get a pleasing interest rate form the insurance company.
• Stocks and Bonds –Using your portfolio as security, you may be able to secure a bank loan without selling your stocks and bonds.
The more money you put down as a deposit, the less money you need to borrow. Keep this in mind. You’re still going to need finances to setup you’re new house.
Pre-qualification vs. Pre-approval
You’re focus will become clear during your house hunt after you know you price range. How much money you qualify for will depend on a range of aspects including credit history, length of employment, and down payment amount.
Based on information you provide, your lender can give you an estimated amount of how much money you will be able to borrow before applying for a loan. This non-binding process is called pre-qualifying.
Your lender can also take detailed look at your financial and credit history (including a credit check) and commit to lending you a certain amount of money pending specific property details. The lender will then provide you with a letter stating how much mortgage you qualify for. This process is called pre-approval. With a pre-approval letter, you can:
• Search for a home with the self-assurance of, aware exactly how much you can afford.
• Show sellers you are serious about purchasing and that you can afford to make a purchase.
• Learn of any and all qualification issues early in the home buying process.
Because a pre-approval takes a closer look at your background and includes a credit check, it holds more weight with sellers than pre-qualification.
Mortgage Insurance
If you get a conventional loan, depending on your loan program and down payment amount, you may be required to buy private mortgage insurance (PMI). If you default on the loan, private mortgage insurance protects the lender allowing the lender to approve a larger loan amount.
Mortgage insurance offers several payment options, including making an initial payment at closing or making monthly installments with the house payment. If you want, you may increase your interest rate and have the lender pay the insurance. Compare the benefits of the different plans with you lender to decide which one will be the best for your situation.
Posted: May 11th, 2007 at 10:36 am |
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Posted in
Home Buyers
Earnest money is a deposit towards the purchase of real estate made by a buyer to demonstrate that he/she is serious (earnest) about wanting to complete the purchase. When a buyer makes an offer to buy residential real estate, he/she generally signs a contract and pays a sum acceptable to the seller by way of earnest money. The amount varies enormously, depending upon local custom and the state of the local market at the time of contract negotiations.
The earnest deposit could be several hundred or even several thousand dollars, but normally no more than 5% of the purchase price. If the buyer defaults without a good reason, as spelled out in the contract, the earnest money becomes payment for damages suffered by sellers and their agents. If the buyer’s contract is not accepted by the seller, the money is returned to the buyer.
Posted: May 11th, 2007 at 10:31 am |
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Home Sellers
The biggest mistakes to make when selling your home
Unfortunately, hen homeowners are ready to sell their home, they don’t do their research. It’s very likely for your home is your most valuable investment. When you sell it, you’ll want to collect the biggest possible profit. However, when you sell your home, you need to understand the competition. There are other people selling in your area, and just like in any other competition, mistakes can cost you. Here are some common home seller mistakes we can help you avoid:
• Selling “as is.”
In this competitive marketplace, you need to show your house at its best. Your home should be in a “ready-to-move-in” state from the moment it’s listed. We can point out your home’s principal assets and suggest how to highlight them, as well as help you identify which items need improving.
• Overpricing or under-pricing.
You can turn away some of the best prospects for buying your home by setting the price too high. By not asking enough, you’ll sell faster but net less from the sale. We’ll do a comparative market analysis and help you set the best price for your home.
• Over-improving.
Too many major renovations could cost more money than you would recover from the sale. However, some major repairs, like replacing a roof, should be done if they are needed.
• Failing to offer financial incentives.
Special options can attract buyers without costing a lot. Often, incentives like a home warranty or paying points or some closing costs can be figured in when setting the price of the home.
• Selling it yourself.
Doing your own marketing looks tempting as a way to save money. But surveys show that people who sell they’re selves often net less from the sale than sellers who use a real estate agent. Agents do a lot more than people may think, from bringing qualified buyers to keeping things on track to settlement.
• Ignoring your agent’s advice.
As experienced professionals, we know what works and what doesn’t. Let’s discuss any advice you are uncomfortable with or disagree with, and together we’ll find the best way to sell your home.
Contact us when you’re thinking about selling your house. We’ll assist you with avoiding costly mistakes like these.
Posted: May 11th, 2007 at 10:23 am |
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Home Sellers
Basic Steps to Selling your home
• Do your research.
Read books on selling your home, go through the real estate section of the local publications and attend some Open Houses in the your area.
• Hire a professional.
As neighborhood real estate agents who concentrate on listing in your area, we know what it takes to sell in this market. We welcome your call, questions, and concerns!
• Make the price.
Ask your agent for an analysis of the local market and their opinion of the best price range for your home.
• Create a marketing strategy.
Discuss a marketing plan with your agent and include the main elements in the listing presentation.
• Make your house ready.
Take a hard, objective look at your home. Prioritize and decide what needs to be done first, and how much time and money you can spend to make it look its best before opening it up to buyers. Dispose of all clutter and put some things in storage to make the rooms and closets more spacious. Put together an information packet on local conveniences, your utility bills and other helpful information.
• Think about finding a dependable real estate attorney.
The attorney can help review all the paperwork and explain the logistics.
• Remain on top of the process.
Gather some quick clean-up supplies and double check everything before letting a prospective buyer preview your home. Also, keep a record of everyone who has come to see the home (and their agents), and inform your agent after each visit. This can speed the follow-up process that your agent will do.
Posted: May 11th, 2007 at 9:52 am |
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