Archive for the 'Home Buying 101' Category
Home Buying 101: Step 8: Shop for your House
March 23rd, 2009 categories: Home Buying 101
This is the eighth post in a series of twelve on buying a home, now updated for 2009. Click here for the other posts in this series.
You’ve prepared yourself by putting your finances in order, shopping for a loan, obtaining pre-approval for a mortgage amount you can afford and hiring a buyer’s agent. Now, you’re ready to find the house of your dreams - or at least the house that fits your wants and needs right now.
House=Life
Buying a house is an expression of your personality and lifestyle. If you are a private person who doesn’t like nosy neighbors or noise, then condo living isn’t for you. Or, if you have small children, then you probably don’t want to be in a secluded area where there are no other children for miles.
I begin the search for the perfect property with clients by asking them a lot of personal questions such as:
–What do you do for a living?
–How long do you anticipate living in this house? Or, what is your five-year plan for yourself? Marriage, children, new job, etc?
–How many family members will be in the home? And what are their ages?
–What are your hobbies? Traveling, boating, pets, etc?
–Do you entertain or plan to have overnight guests?
–Do you consider yourself handy around the house?
–How long do you want your commute to be?
Then, I ask questions about what towns or area buyers are looking for and things they like and dislike about homes they’ve seen. I may ask buyers to describe the house they see themselves living in. Lastly, I’ll ask clients for the details - number of bedrooms, baths, size, style, location and amenities.
Then, it’s a process of matching needs to what is available on the market - both through the multiple listing service and for sale by owner properties. An agent will suggest properties but many people like to look online for themselves and will ask to see certain properties. But be aware that your agent has access to the most up-to-date listings - Realtor.com and other advertising and lead generation sites may have houses advertised that are no longer on the market.
Buying a house will likely involve compromises.
Even people looking at million dollar homes need to make compromises. You may need to trade a larger back yard for a larger house. Or, you may need to compromise on condition to get the price and neighborhood.
Don’t Rush It But Don’t Look At Houses Forever
Allow plenty of time to find a house. It typically takes between 30 -45 days to complete inspections, get loan commitment and close on a property - that’s after you already found the house and have an accepted offer. If you need to move in June, don’t wait until May to begin your search.
On the flip side, don’t drag your search out for months and months, unless you’re looking for something really unique or hard to find. Just like properties can become shopworn, buyers can become overwhelmed by the number of houses they’ve seen. If you’ve seen a lot of houses and you can’t find anything you like, then it’s time to go back to the drawing board and really analyze what it is you’re looking for.
How many houses is too many? Or, how long is too long? It depends on what you’re looking for but I think that in most cases, if you’ve seen 30 houses and haven’t written an offer yet, you’re either not looking in the right places, have unrealistic expectations or just aren’t ready to buy yet.
Here are a few other tips to help you make a good decision:
–Bring a spouse, family member, or friend.
–Make sure the house fits into your budget.
–Ask about utility and maintenance costs.
–Think of commuting time and costs.
–Compare what you’d like to have against what you really need.
–Consider your monthly budget - can you afford the renovations and maintenance that you’ll need to do?
–Compare what you’d like to have against what you really need.
–Don’t make a “spur-of-the-moment” decision.
–Ask your agent for help. Your agent may be willing to preview properties for you to save you time.
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Home Buying 101 - Step 7: Other Loan Programs
February 27th, 2009 categories: Home Buying 101
This is the seventh post in a series of twelve on buying a home, now updated for 2009.
In addition to conventional loans, home buyers may also utilize one of the following government insured or guaranteed loans. In fact, FHA mortgages now make up around 25% of all mortgages, compared to 2% during the height of the real estate market. Here’s what you should know about the loans - although please note this continues to change.
These are loans you, as the consumer, may have to bring to the attention of your mortgage lender, especially the programs that aren’t commonly used.
CHFA
CHFA, or Connecticut Housing Finance Authority, offers a “first time home buyer” program which can be a great deal for the right person. There are income limits (currently $81,000/year for a 1-2 person household in most of Hartford County) and sales price limits (vary greatly depending on area and number of units). The property must be owner-occupied throughout the entire term of the loan and if the home is sold within 9 years, the profit may be subject to a recapture tax if certain conditions are met.
There are some really great things about the CHFA program:
–Low interest rate - currently 5%
–More lenient credit guidelines
–First time home buyer only means that you cannot have had ownership in a property in the last 3 years
–You can borrow more than 100% in some cases
–Borrowers can lock in rate for 4 months
–Single family properties, condos and 2-4 unit multi-families are eligible
FHA
The Federal Housing Authority insures loans for first time home buyers that lenders may not otherwise offer. Similar to CHFA in that FHA loans have certain borrower guidelines, FHA has sales price limits as well as credit requirements. FHA allows borrowers to put as little as 3.5% down. And, a borrower can ask for closing costs or credits but they can’t exceed 6% of the purchase price.
VA
Available through many lenders, VA loans are guaranteed by the federal government to give military personnel more access to home ownership. Eligible borrowers include active and inactive members of the armed forces who meet a certain criteria for length and time of service. Reserve forces may also qualify, depending on length of service, as may those who were discharged and widows/widowers provided spouse’s death was service related. The biggest negative to VA loans is a lending fee which varies depending on the borrower’s eligibility. However, the lending fee may also be financed.
If you qualify, there are many positives about getting a VA loan:
–No Private Mortgage Insurance
–No money down required
–100% financing plus closing costs, which are limited
USDA Rural Development
The USDA provides 100% financing for mortgages on homes in “rural” areas, including many in Connecticut. Towns like Burlington, Avon, Granby, Canton, East Windsor and Suffield in Hartford County and towns such as Marlborough, Hebron, East Hampton, Colchester and Ellington in surrounding counties.
There are income limits - for Hartford County the current limit for a 2 person household is $73,150 and the program is only available for owner occupied, single family homes.
But there are also some significant benefits for qualifying properties and buyers:
–Seller may contribute closing costs.
–No down payment required.
–Competitive rates.
–No minimum credit score.
–No monthly mortgage insurance premium.
Here are some other programs:
Good Neighbor Next Door - for teachers, law enforcement, firefighters or emergency technicians.
Home of Your Own - for home buyers with disabilities.
Military Homeownership Program - a CHFA program for military personnel.
Police Homeownership Program - CHFA
You might also enjoy reading:
Five Things Every Home Buyer Should Know About Mortgages and Mortgage Lenders
Want Some Free Money? Little Known Loans and Grants Can Help You Buy a House
Do you dig real estate news, tips and advice? Sniffing around for pet-related information in Connecticut? Get Unleashed - the blog that’s helping to find homes for people and pets.
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Home Buying 101 - Step 6: Shop for a Loan
February 3rd, 2009 categories: Home Buying 101
This is the sixth installment in a series of twelve called Home Buying 101, now updated for 2009.
Once you’ve located a buyer’s agent, use him/her as a resource for a lender, inspector, attorney or anyone else you may need in the home buying process.
You have two choices when looking for a loan - a bank or a mortgage broker. For purposes of this article, I lump them together but they are different.
From the Motley Fool:
“Mortgage brokers are much like independent insurance agents…They have access to many lenders and many different programs. They charge a fee, and are sometimes compensated by the lenders. They provide a great service for many consumers, and originate more than 50% of loans in the country. Mortgage brokers normally originate the loan, process it, and pass it along to a lender, who sells it to an investor.” Read the rest of this entry »
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Home Buying 101 - Step 5: Get a Buyer’s Agent
January 19th, 2009 categories: Home Buying 101
This is the fifth installment of my Home Buying 101 series, now updated for 2009.
Previously, on Home Buying 101, I told you about the rights you have as a home buyer and borrower.
Now, it’s time to find a good agent - a buyer’s agent that is.
As a home buyer, you need to have an advocate on your side, looking out for you. Your buyer’s agent will not only show you houses, but will help you locate financing, negotiate on your behalf, educate you on the buying process and the real estate market, set up inspections, locate an attorney and other people who are integral to buying and will help you determine value of the homes under consideration.
A true buyer’s agent will also show you foreclosures, for-sale-by-owner and un-listed properties if you want them to.
Yes, You Need to Sign a Contract
In order to receive the benefit of all of these services and truly be represented by an agent, you will be asked to sign a contract. This contract also ensures that the agent can be paid at the closing.
Note: It is against the law for an agent in Connecticut to show a buyer another brokerage’s listings without a signed buyer agency agreement. For example, if I show a buyer a home listed by RE/MAX West of the River, I must have the buyer sign a buyer agency agreement as my brokerage is RE/MAX Precision Realty.
A savvy buyer may not want to get locked into a long buyer agency agreement with an agent they just met - understandable. A way around this is to ask for a short-term agreement or one that only covers a select few properties. A buyer and agent can look at a few properties together and the buyer can “test-drive” the agent’s approach, industry and market knowledge - something that’s difficult to gauge in a meeting.
If the agent never asks you to sign a contract, then find one who will. If an agent isn’t willing to protect his/her own interests, then they may not be willing to protect yours. Or, that agent has too much free time on his/her hands.
Who Pays the Buyer’s Agent?
A buyer agent’s service is not free. Although most buyers don’t pay anything out-of-pocket for the service, the home seller, through their listing agreement, pays for the buyer agent’s commission and the commission is built into the home price and paid with the proceeds of the closing. Read the rest of this entry »
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Home Buying 101 - Step Four: Know Your Rights
January 13th, 2009 categories: Home Buying 101
This is the fourth installment of my Home Buying 101 series, now updated for 2009.
Home buyers have several rights regarding fair housing and lending practices, including protection from illegal discrimination and the right to know the true costs of borrowing money.
The Department of Housing and Urban Development already has a great section of their website dedicated to the rights of home buyers. These are all links to their site:
Fair Housing Laws that provide equal access to housing.
Real Estate Settlement Procedures Act (RESPA) RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services.
In addition, you have several other legal rights when you are purchasing a house (in Greater Hartford, the following are included in the standard GHAR purchase and sales agreement):
The right to have an inspection and make purchase contingent upon a satisfactory inspection (must be checked on the contract, though)
The right to receive a seller’s disclosure report
For related topics:
Home Buying 101 Updated for 2009
7 Questions About the Hubbard Clause Answered
Home Inspection Options in Real Estate Purchase & Sales Contract
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