Whether you are about to buy your first home, or planning to make a move to your next home, it is critical that you inform yourself about the factors involved. Before you commit your hard earned dollars to monthly mortgage payments, consider these 6 issues. Effective consideration of these important areas can make your payments work much harder for you.
Industry research has revealed that there are 6 common mistakes that most homebuyers make in mortgage shopping that can have a significant impact on the outcome of this critical negotiation. If handles correctly, these issues could result in a mortgage that will cost you less over a shorter period of time.
6 THINGS YOU MUST KNOW BEFORE OBTAINING A MORTGAGE
1. You can, and should, get preapproved for a mortgage before you go looking for a home.
Preapproval is easy and can give you complete peace-of-mind when shopping for your home. Your local lending institution can provide you with written preapproval for you at no cost and at no obligation, and it can all be done quite easily over-the-phone. More than just a verbal approval from your lending institution, a written preapproval is as good as money in the bank. It entails a completed credit application, and a certificate which guarantees you a mortgage to the specified level when you find the home you’re looking for.
2. Know what monthly dollar amount you feel comfortable committing to.
When you discuss mortgage preapproval with your lending institution, find out what level you qualify for, but also pre-assess for yourself what monthly dollar amount you feel comfortable committing to. Your situation may give you a preapproval rate that is higher (or lower) than the amount of money you would want to pay out each month. By working back and forth with your lending institution to determine what this monthly amount is, and what value of home this translates into at today’s rates, you won’t waste time looking at homes that are not in your price range.
3. You should be thinking about your long term goals, and expected situation, to determine the type of mortgage that will best suite your needs.
There are a number of questions you should be asking yourself before you commit to a certain type of mortgage. How long do you think you will own this home? What direction are interest rates going in, and how quickly? Is your income expected to change (up or down) in the near term, impacting how much money you can afford to pay to your mortgage? The answers to these and other questions will help you determine the most appropriate mortgage you should be seeking.
4. Make sure you understand what prepayment privileges and payment frequency options are available to you.
More frequent payments (for example weekly or bi-weekly) can literally shave years off your mortgage. Simply by structuring your payments so that they come out more frequently, will significantly lessen the amount of interest that you will be charged over the term.
For the same reason, authorized prepayment of a certain percentage of our mortgage, or an increase n the amount that you pay monthly, will have a major impact on the number of years you will have to pay and could shorten you’re your payment term considerably.
These two payment options can cut years off your mortgage, and save you thousands of dollars in interest. However, not every mortgage has these prepayment privileges built in, so make sure you ask the proper questions.
5. Ask if your mortgage is both portable and/or assumable.
A portable mortgage, where available, is one that you can carry with you when you buy your next home and avoid paying any discharge penalties. This means that you will not have to go through the entire mortgage process again unless you are making a move up to a much more expensive home.
An assumable mortgage is one that the buyer for your home can take over when you move to your next. This can be a very powerful tool at the negotiating table making it easier and more desirable for a buyer to buy your home, and again saves you any discharge penalties.
6. You should seriously consider dealing with a Mortgage Expert.
Consider dealing only with a professional who specializes in mortgages. Enlisting their services can make a significant difference in the cost and effectiveness of the mortgage you obtain. For example they can make the process faster thereby avoiding costly delays. Typically there is no cost or obligation to enquire.
13 Extra Costs to Be Aware of Before Buying A Home
Whether you are looking to buy your first home, or trading up to a larger one, there are many costs - on top of your purchase price - that you must figure into your calculation of affordability. These extra fees, such as taxes and other additional costs, could surprise you with an unwanted financial nightmare on closing day if you are not informed and prepared.
Some of these costs are one time fixed payments, while others represent an ongoing monthly or yearly commitment. Not all of these costs will apply in every situation, however it is better to know about them ahead of time so you can budget properly.
Remember, buying a home is a major milestone. Whether it’s your first, second or tenth home, there are many important details to address. The last thing you need are unbudgeted financial obligations cropping up hours before you take possession of your new home.
Read through the following checklist to make sure you are budgeting for your next move.
1.Appraisal Fee
Your lending institution may request an appraisal of the property which would be your responsibility to pay for. Appraisals can vary in price from approximately $175 to $300.
2.Property Taxes
Depending upon your downpayment, your lending institution may decide to include your property taxes in your monthly mortgage payments. If your property taxes are not added to your monthly payments, your lending institution may require annual proof that your taxes have been paid.
3.Survey Fee
When the home you purchase is a resale (vs. a new home), your lending institution may ask for an updated property survey. The cost for this survey can vary between $700 and $1,000.
4.Property Insurance
Home insurance covers the replacement value of your home (structure and contents). Your lending institution will request proof that you are insured as it protects their investment on the loan.
5.Service Charges
Any new utility that services your hook up, such as telephone, natural gas, internet or cable, may require an installation fee.
6.Legal Fees
Even the simplest of home purchases should have a lawyer involved to review all paperwork. Shop around, as rates vary greatly depending upon the complexity of the issues and the experience of the lawyer.
7.Mortgage Loan Insurance Fee
Depending upon the equity in your home, some mortgages require mortgage loan insurance. This type of insurance will cost you between 0.5% - 3.5% of the total amount of the mortgage. Usually payments are made monthly in addition to your mortgage and tax payment.
8.Mortgage Brokers Fee
A mortgage broker is entitled to charge you a fee in order to source a lender and organize the financing. However, it does pay to shop around as many mortgage brokers will provide their services free to you by having the lending institution absorb the cost.
9.Moving Costs
The cost for a professional mover can cost you in the range of •; $50 - $100 an hour for a van and 3 movers and are •; 10 – 20% higher during peak demand seasons
10. Maintenance Fees
Condominiums change monthly fees for common area maintenance such as groundskeeping and carpet cleaning in hallways. Costs will vary depending on the building.
11. Water Quality and Quantity Certification
If the home you purchased is serviced by a well, you should consider having your water checked by your local experts. Depending upon where you live determines whether or not a fee is charged, to certify the quantity and quality of the water.
12. Local Inprovements
If the town you live in has made local improvements (such as the addition of sewers or sidewalks), this could impact a property’s taxes by thousands of dollars.
13. Land Transfer Tax
This tax is applied whenever property changes hands and the amount that is applied can vary.
10 Tips to Save You Time and Money--- Read this BEFORE you visit your first show home!
When shopping for your home, you’ll discover that most homes on the market are resales. Yet, one out of four homebuyers purchases a new home. Both new homes and resales offer advantages. Before you make a decision let’s compare these points:
New Homes: •; Offer innovative use of space and style •; Greater energy efficiency •; A choice of options and upgrades •; Everything is new and modern
Resale Homes •; On the average they are less expensive •; Often they are in already established neighborhoods with mature landscaping •; Homes have already settled, eliminating possible problems that arise from this happening after the purchase of your home
As you can see, there are advantages to both. Most people consider both new and existing homes before they decide to purchase. Should you be thinking about buying a new house, here are ten points to consider before you visit your first show home.
1.Get In Touch With Your Agent Before you visit your first show home, sit down with your agent and do your homework. You’ll want to be prepared so that you can determine a comfortable price range for your new home. If you own a home, you’ll first need to know the net proceeds from its sale in order to determine how much cash you will have to work with. Don’t simply estimate this but carefully calculate every possible selling cost. If you are a first time home buyer, you will need to first qualify your income. Determine the size of your downpayment, and then work out a monthly debt load so you can determine a comfortable price range.
2.Sellers’ Agents Versus Buyers’ Agents Here’s a good point to remember. The sales agent in the model home represents the builder, not you. They are known as sellers’ agents. As a buyer you can work with a buyers’ agent at no additional cost. It is his/her business to best represent your needs by being knowledgeable about home construction, warranties, financing, differences in pricing, quality, even lot selection, so that you get the best value for your money.
3.A Builder For All Reasons Like all tradesmen, builders vary in their fields of expertise. For example, there are builders who specialize in their craftsmanship, others who are known for their innovative use of space, and those who offer below-market financing or customer attention during construction and after move-in. Determine your own specific needs or preferences, and then shop around for a builder that will best address your requirements.
4.Get The Facts About Your Builder Before making a final decision, it is wise to check out the reputation and financial strength of the builder. Get the “spec sheets” on home features covering everything from floor plans to energy efficiency, including lot availability and delivery of your home * See “Buyer Advantages Your Builder May Not Reveal” at bottom of report.
5.Check Out The Neighborhood •;Learn as much as you can about the community •;Discover what amenities it has to offer •;Investigate if financial reserves have been set aside to build or replace major amenities like schools or community roads •;Find out from local land-use officials what else is planned or could be constructed in the area, especially where vacant land is applicable •;Review the rules for the homeowner’s association or find out if one will be set up •;Think of how you will be affected by commuting routes and times
6.Choosing Options and Upgrades The least expensive the base price of the house is, the more options and upgrades you can add without fear of overpricing it for the neighborhood. Options are items the builder installs during construction, such as adding usable space like a sunroom or a powder room. These features can add the most to the resale of your home in the future. Upgrading means selecting quality above “builder standards” such as hardwood floors, ceramics, detailing, kitchen fixtures and appliances. Be sure to take advantage of builder incentives that offer free upgrades or credit off sale. Remember, you can always add a deck, finish a basement or do landscaping later, and sometimes for less money.
7.Negotiations Often buyers don’t realize that there may be room for negotiating price, upgrades or options. For example, you have some scope for negotiating with the builder if she/he has completed a home but hasn’t sold it. Also, some “premium lots” are priced higher and are sometimes saved to be sold last. Keep in mind that typically all lots cost the builder the same, so be sure to enquire about lot pricing. Builders may offer discounts or special financing to help close a sale.
8.Be Sure the Contract Works In Your Favor When spelling out the particulars of an agreement with your builder, ensure that you protect yourself by having safeguards written into the agreement such as: •;Placing your deposit in escrow •;Detailing your upgrades •;Allowing you access to the construction site to check on progress •;A 30 day advance notice of the closing date •;An explanation of what the fine print means in the warranties of the builder and manufacturer
9.Financing - What Is Best For You? Some builders, especially in high-volume communities that place a large numbers of loans, can offer special financing packages. However, because “home loan” lending is highly competitive, you have many financing choices other than those being offered by the builder. Shop around for everything, from rates to lender fees. Appraisals, inspections, surveys, attorneys and closing fees can vary as well.
10.Just Because it’s New….Doesn’t Mean it’s Perfect Yes it’s new and typically built with modern materials that are durable, low maintenance, stronger, quieter and safer. But because nothing is perfect, even if it is new, consider hiring a reputable, licensed home inspector. Then create a builder “punchlist”, from what you have learned to address any problems before closing. Consider budgeting for items to be modified or added later on.
Many new home buyers use a real estate agent to help them negotiate the best price and terms with the dealer.
Immediate Delivery – New Homes
BUYER ADVANTAGES YOUR BUILDER MAY NOT REVEAL
Here’s a fact that you mat not be aware of. Some builders have newly-constructed homes available for immediate delivery. Usually these homes are ready to move into within 30 days. Even if some builders are eager to sell, they’ll probably keep that knowledge to themselves.
Immediate delivery homes are often available for various reasons
•;The community, where new homes are being constructed is nearly complete, so the builder proceeds to have the on-site contractors build “spec” homes (homes built on speculation for sale) on the last lots •;The model home is for sale •;The contract on a home has fallen through •;Builder included constructing homes for immediate delivery for buyers who are relocating or who have sold their previous home and need one to move into quickly
Immediate delivery homes may be more desirable because sometimes builders offer financing incentives or free options. This may in place of chopping prices to appeal to buyers later in the building phase. An immediate delivery home is an advantageous way to purchase a home if you need to move in quickly, or need a physical space to walk through am see before you sign a contract. Be sure to enquire.
HOW TO SAVE THOUSANDS OF DOLLARS WHEN YOU BUY A HOME
If you are like most homebuyers, you have two primary considerations in mind when you start looking for a home. First, you want to find a home that perfectly meets your needs and desires, and secondly, you want to purchase this home for the lowest possible price.
When you analyze those successful homebuyers who have been able to purchase the home for thousands of dollars below a seller’s asking price, some common denominators emerge. Although your agents negotiating skills are important, there are three additional key factors that must come into play long before you ever submit an offer.
These Steps Will Help You Save Thousands When You Buy a Home
Make sure you know what you want….
As simple as this sounds, many homebuyers don’t have a firm idea in their heads before they go out searching for a home. In fact, hen you go shopping for a place to live, there actually two homes competing for your attention; the one that meets your needs, and the one that fulfills your desires. Obviously your goal is to find one home that does both. But in the real world, this situation does not always occur.
When you are looking at homes, you’ll find that you fall in love with one or another home for entirely different reasons. Is it better to buy the 4-bedroom home with room for your family to grow, or the one with the huge eat-in kitchen that romances you with thoughts of big weekend family brunches? What is more important: a big backyard, or within proximity to your child’s school? Far too often people buy a home for the wrong reasons, and then regret their decision when the home doesn’t meet their needs.
Don’t shop with starts in your eyes: Satisfy your needs first. If you are lucky, you’ll find a home that does this and also fulfills your desires. The important thing is to understand the difference before you get caught up in the excitement of looking.
Find out if your agent offers a “Buyer Profile System” or “Househunting Services”, which takes the guesswork out of finding just the right home that matches your needs. This type of program will cross-match your criteria with ALL available homes on the market and supply you with information on an on-going basis. A program like this helps home-owners take off their rose coloured glasses and, affordably, move into the home of their dreams.
To help you develop your homebuying strategy, use this form:
For you to understand how much to offer for a home you’re interested in, it is important for you to know how sellers price their homes. Here are 4 common strategies you’ll start to recognize when you begin to view homes:
1.Clearly Overpriced Every seller wants to realize the most amount of money that they can for their home, and real estate agents know this. If more than one agent is competing for your listing, an easy way to win the battle is to over inflate the value of your home. This is done far too often, with many homes that are priced 10 to 20 % over their true market value.
This is not in your best interest, because in most cases the market won’t be fooled. As a result, your home could languish on the market for months, leaving you with a couple of important drawbacks: •;Your home is likely to be labeled as a “troubled” house by other agents, leading to a lower than fair market price when an offer is finally made
•;You have been greatly inconvenienced with having to constantly have your home in “showing” condition…for nothing. These homes often expire off the market, forcing you to go through the listing process all over again.
2.Somewhat Overpriced About ¾ of homes on the market are 5-10% overpriced. These homes will also sit on the market longer than they should. There is usually one of two factors at play here: •;Either you believe in your heart that your home is really worth this much despite what the market has indicated (after all, there is a lot of emotion caught up in this issue) OR
•;You’ve left some room for negotiating.
Either way, this strategy will cost you both in terms of time on the market and ultimate price received.
3.Priced Correctly on the Market Some sellers understand that real estate is part of the capitalistic system of supply and demand and will carefully and realistically price their homes based on a thorough analysis of other homes on the market. These competitively prices homes usually sell within a reasonable time frame and very close to the asking price.
4.Priced Below the Fair Market value Some sellers are motivated by a quick sale. These homes attract multiple offers and sell fast – usually in a few days – at, or above the asking price. Be cautious that the agent suggesting this method is doing so with YOUR best interests in mind.
How to Avoid the 9 Most Costly (but Common) Home Buying Mistakes
Let’s face it, buying a home is a major expense. But why make it more expensive than necessary? Play the buying game right and you can cut costs AND buy the house that is best for you. I can help you watch out for these common but costly pitfalls.
The Wrong House
One costly mistake is choosing the wrong house: maybe one too big or too small for future needs or a fixer-upper if you are not handy, a house too far from work or too close to traffic, one likely to need extensive fixing up, or a home in the wrong price range. Avoid this #1 trap by working with me to define your present and future needs, what location is most suitable, what level of fixing-up is comfortable and how much you can afford for maintenance, utilities and everyday life after moving in.
Bidding Blind
Some buyers offer a contract above the true market value of the property or fail to bid on a great value because they don’t know the market. Don’t try to go it alone. Ask me for a comparative market analysis to avoid overpaying or underbidding on the house you choose.
Title Trouble Traps
A title search may reveal encumbrances on the property title like tax liens, easements, leases or an undisclosed co-owner. Avoid this trap by having the title search done early, if possible, and by buying owner’s title insurance to protect your investment in case a problem surfaces later.
Survey Surprises
The property survey may show the lot boundaries are different from the property plot, a neighbor’s fence is over the line, or zoning regulations have been violated. Avoid the trap by asking to see the seller’s survey made back when the seller bought the house, and go over any additions or variations with your real estate agent. Also, have your new survey done early.
Last-Minute Defects
During the pre-settlement final walk-through, some serious defects may become apparent that were not noticed before. Avoid surprises by first doing a careful inspection of the house, then consider an independent home inspector to check the house inside and out. Have the inspector report to you any items needing attention, the cost to fix them or the repercussions if they are left as is. Contract settlement should be contingent upon the inspector’s report.
What you must know before you ...
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