Tips for Home Buyers
- Am I ready to buy a home?
Ask yourself these questions to determine if you’re ready to buy a home. If you answer “yes”, then you are ready to begin you home search. 1.) Do I have a steady source of income (a job) and is my income reliable (have I been employed for the last 2-3 years)? 2.) Do I have a record of always paying my bills? 3.) Do I have few outstanding debts? 4.) Have I saved money for a down payment on a home? 5.) Is it in my budget to pay a mortgage, plus additional costs, every month?
- How do I begin the home buying process?
Ask yourself if you’re ready to buy a home by answering the questions above. Also ask yourself things like “How much space do I want?” and “What area do I want?” After you think about you’re situation make a “to do” list and start some casual research by talking to family or friends, looking in the newspaper, or even driving past homes you like. Figure out what your personal preferences are.
- Why buy when I can rent?
By renting, you are basically free of any maintenance responsibility, but you lose the chance to build equity, take advantage of tax benefits, and protect yourself from rent increases. And you may not be able to add your own personal style to your home by decorating without permission from your landlord. When you own your home, there are numerous benefits. When you make a mortgage payment, you are making an investment by building equity. Owning also qualifies you for tax breaks that assist you in dealing with insurance, real estate taxes, upkeep, etc. Also, you are free to add your own personal style and make it your home!
- How does the lender decide my maximum loan amount?
The lender of your choosing considers your debt-to-income ratio, which is a comparison of your gross income to housing and non-housing expenses. Cash available for a down payment and closing costs, credit history, etc are also considered by the lender when determining your maximum loan amount.
- I want a good real estate agent. How do I select the right one?
Ask family or friends if they can recommend a good agent for you. Make a list of several agents and talk to them before you choose one. Choose one that listens well and understands your needs. You also want to trust their judgment. A good agent will know the local area well and also have resources and contacts to help you in your search for a home. If you find an agent that you feel comfortable working with and can provide any knowledge and serve that you need, then you’ve found the ideal real estate agent.
- What housing needs do I need to determine before starting my search?
Make a list of all of your priorities. Establish a set a minimum requirements and a “wish list” Minimum requirements are things that your home must have in order for you to consider it, and a “wish list” covers all of the things you’d like to have but are not essential.
- Where can I find information on the property tax liability and are there any other tax issues that should be taken into consideration?
The previous year’s property tax is usually included in the listing information. You can also contact the local assessor’s office. The figures may be approximate, as tax rates can change from year to year. Also, keep in mind that your real estate taxes and mortgage interest will be deductible
- What should I look for when walking through a home for the first time?
Make sure that the home you’re walking through meets all of your minimum requirements. Also, compare it to your “wish list”. Consider the following questions as well: Is there enough room for now and the future? Are there enough bedrooms and bathrooms? Is the house structurally sound? Do the mechanical systems and appliances work? Is the yard big enough? Do you like the floor plan? Will your furniture fit? Is there enough storage space? Does anything need repaired or replaced? Will you be happy in the house year-round? Be sure to carefully think about each home you see. Ask your real estate agent their opinion of the pros and cons from a professional standpoint.
- What questions should I be asking my realtor while looking at homes?
Make sure many of your questions focus on potential problems and maintenance issues. Making a list of questions ahead of time will help you to be organized and remember to ask all of the questions important to you. Keep in mind that your agent may not have every answer immediately. They may have to do some research first before being able to answer your question completely.
- How can I keep track of all the homes I see and how many should I look at before choosing one to make an offer on?
Take photographs of each house you look at and bring a notepad to write down comments and questions to help you keep track. Be sure to get pictures of the outside, major rooms, features that you like or that you see as possibly becoming a problem. (Your agent may have printed off flyers with pictures for you already). Also, don’t hesitate to return to look at a home for a second time. There are not a set number of houses that you need to see before you decide. Just visit as many as it takes to find the want that fits you and your needs. Make sure to communicate with your agent about exactly what you want to avoid wasting your time.
- Why do I need homeowner’s insurance?
Yes, a paid homeowner’s insurance policy or a paid receipt for one is required at closing. Arrangements will have to be made before that day.
- What can I do to lower the cost of homeowner’s insurance?
Shop around among several insurance companies before choosing one to get a policy through. Newer homes and homes constructed with material like brick tend to have lower premiums. Try to avoid areas prone to natural disasters, like floods. Also, try to choose a home with a fire hydrant or fire department nearby. You can insure your home and car with same company or increase you home security to lower costs as well.
- Is my home located in a flood plain and what other issues should be considered before purchasing my home?
If you do live in a flood plain, your lender will require that you have flood insurance before lending you money for your home. Always check to see if the house is in a low-lying area, in a high-risk area for natural disasters, or in a hazardous materials area.
- How do I make an offer and how do I determine the initial offer that I make?
You will be assisted by your real estate agent in making an offer. The offer includes the following information:, amount of earnest money, down payment and financial details, proposed move-in date, price you are offering, proposed closing date, length of time the offer is valid, and details of the deal. When determining the amount to offer, be sure to ask your agent their professional opinion. Consider what homes in the area are selling for, the condition of the home, how long it’s been on the market, financing terms, and the seller’s situation. Be prepared for give-and-take negotiation, which is very common when buying a home.
- What is earnest money and how much do I need?
Earnest money is the money you put down to demonstrate your commitment level when buying a home. The amount should be substantial enough to demonstrate good faith and is usually 1-5% of the purchase price. If your offer is accepted, your earnest money becomes part of your down payment or closing costs. If it’s rejected, your money is returned to you. If you back out of the deal, you will most likely lose the entire amount.
- Should I consider a home warranty?
Warranties are becoming more popular because they offer protection during the time immediately after the purchase of a home, when many people find themselves strapped for cash.
- What is a mortgage?
A mortgage is a loan obtained to purchase real estate. The “mortgage” itself is a legal claim on the home or property that secures the promise to pay the debt.
- What types of loans are available?
Conventional, FHA, VA, 15-year, 20- year, 30-year, fixed rate mortgages, and adjustable rate mortgages. Just to name a few. Contact your bank or ask your agent for a suggestion on who to call about obtaining a loan and what types of loans they offer.
- Can I pay off my loan ahead of schedule?
Yes, by sending in extra money or making extra payments, you can accelerate the process or paying off the loan. As long as there is no pre-payment penalty. Most loans do not have this penalty.
- What is an Escrow account and do I need one?
An escrow account is a place to set aside a portion of your monthly payment to cover annual charges for homeowner’s insurance, mortgage insurance, and property taxes. Escrow accounts are a good idea because they assure money will always be available for these payments. Your mortgage company will likely set up this escrow account for you.
- How do I choose the right lender for me?
Look for financial stability and customer satisfaction. Choose a company that gives helpful advice and makes you feel comfortable. Do research and ask family, friends, and your real estate agent for recommendations.
- What is the difference between pre-qualifying for a loan and getting pre-approved?
Pre-qualifying is an informal way to see how much you may be able to borrow, while getting pre-approved is a lender’s actual commitment to lend to you.
- How can I easily compare the loan terms between different lenders?
Make a checklist for the information from each lending institution. Include the companies name and basic information, type of mortgage, minimum down payment required, interest rate and points, closing costs, loan processing time, and whether prepayment is allowed.
- Is there an application fee when applying for a loan and what does it cover?
Yes. There is a loan application fee to cover the costs of underwriting the loan. This fee pays for the home appraisal, a copy of your credit report, and any additional charges that may be necessary. The application fee is generally non-refundable.
- How long does it take for my loan application to be evaluated and what happens after that?
It usually takes between 3-6 weeks for the lender to complete the evaluation of your application. Once all of the information has been verified the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up and the title company will review the closing documents with you at the closing table.
- What is included in closing costs?
Closing costs are usually made up of the following: attorney’s or escrow fees, property taxes, interest, loan origination fee, recording fees, survey fee, first premium of mortgage insurance, title insurance, loan discount points, first payment to escrow account for future real estate taxes and insurance, paid receipt for homeowner’s insurance policy, any documentation preparation fees.
- What happens on closing day?
You will present your paid homeowner’s insurance policy or receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller and the money the seller owes you. Once you understand all documentation, you will sign the mortgage, agreeing that if you don’t make payments the lender is entitled to sell your property. You’ll also sign a note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.
- What is FHA and how can it help me in buying a home?
The FHA (Federal Housing Administration) provides private lenders with mortgage insurance which gives them the security they need to lend to first-time home buyers who may not be able to qualify for conventional loans. With FHA, you don’t need perfect credit or a high paying job to qualify for a loan. It also makes loans more accessible by requiring smaller down payments than conventional loans.
Contact Diane Heeter
RE/MAX ALLIANCE REALTY