What is a "Pre-Foreclosure" & Other Helpful Explanations
Whether it was before you toured your first home or you were curious what other homes were out there during your search, at some point you will find yourself looking on a variety of websites. Below is a guide to help you clarify some of the terms you may find attached to listings that you have come across online:
House For Sale: The majority of the homes you come across listed this way will be available for a showing, provided they have not recently gone under contract or unable to be shown due to a seller’s circumstance. Keep in mind that some of these sites may also not list “new listings” for up to 48 hours after they hit our local MLS. I will set up a website for your search that will populate with the new listings the day they come on the market to make sure you are among the first to know about NEW homes on the market. This can lead to you viewing a home before MOST of the buyers out there!
Pre-Foreclosure: Homes that are flagged as a “pre-foreclosure” have typically been cited by the home’s county/tax record/PVA/lender as heading towards a future foreclosure. Items that may cause a home to be flagged include delinquent or unpaid city taxes, missed house payments or the filing of a “lis-pendens” on a home (this is the legal beginning of a foreclosure proceeding). The value that may be attached to the home as a “pre-foreclosure estimate” is typically not accurate. Your best bet is to watch these homes in hopes they may become listed in the future, however this could be several months to years down the road if ever. Please call me to investigate any of these you come across. I want to caution you that less than 5% of these pre-foreclosure homes are or will be on the market.
Short-Sale: When a homeowner has found their mortgage has become a hardship due to a relocation, job-loss, illness or a variety of other reasons, they may request a short sale from their lender. A short-sale does not mean the home is able to close quickly, yet means the home is being sold “short” of what is owed on the home so that the seller may get out of the burden of the mortgage. This process must be approved by the seller’s lender, and can take anywhere from 3 to 9+ months to go from contract to closing. Most of these homes are sold “as-is” since the homeowner is not in a financial position to make repairs. Some short-sales may close sooner if the owner has been proactive with their lender and the short-sale price has already been approved. I have worked through many short sales and can explain more about this process personally if you would prefer.
Make Me Move: After living in a home for some time, many owners will contemplate moving. Prior to making the commitment to list or sell their home, Zillow has now given owners the chance to throw out “feelers” with this new option. If a buyer was to come along and give them their price, they would entertain moving but aren’t prepared to list yet. A buyer is now able to view homes not available in the MLS with a price the seller has attached to the home. If you’d like to view or discuss one of these homes, please call me so that we can first establish if the home is priced properly or if the seller is trying to get something beyond market value.
Coming Soon: REALTORS® will soon be alerting potential buyers to the listings they have which may not have been placed on the MLS yet. These listings will be like any others and will just require you to let me know you would like to tour the home and I can arrange for a showing. These homes have been listed with an agent and are not treated as typical for sale by owners since they are considered part of a listing agreement.
KEEP IN MIND: While almost all of these sites may list an “estimate” of value, please do not take that to be a true and accurate assessment. Complex algorithms and equations are used by these sites to assess a value, but may not take into account recent upgrades, school districts, unique attributes or a seller’s motivation for selling. Prior to making any offer, we will discuss recent similar sales in the area so that you may ascertain your own opinion of value.
Short sales – The long version…Literally.
I personally have been enjoying the process of being a buyer this year and have been pursuing the purchase of a home that is being sold via short sale. Since this is a growing topic in our market, I figured I would share a little bit about my experience and what a short sale is. Along with some pitfalls to avoid if you decide to go after one.
With the banks trying to move more homes and avoid the expenses incurred with the foreclosure process such as potential eviction, clean up, legal fees and time off of the market, more banks are entertaining the notion of a short sale for some owners. A short sale is when the proceeds from the sale of the home will fall short of what is owed on the property. By agreeing to a short sale, they can take a larger hit up front in lieu of waiting for the home to sell via foreclosure and in deteriorated condition.
Question: How long will it take?
Answer: When many buyers here the words “short sale”, instantly they think that things will progress quickly and they won’t be held up in pursuit of their dream home. The harsh reality is that the typical short sale will take 3-10 times longer than the average transaction. My purchase contract was written and accepted by the home owner on April 4th, 2013. Although the contract was accepted by the seller, the deal is not sealed until the bank issues an approval letter stating they will take the loss and sell the home to the purchaser on the contract. For me, that letter did not come until July 31st, 2013. The last short sale I negotiated for a buyer, there was no bank answer after 9 months of waiting. There are exceptions to this and I have heard of some being done in much less time if the seller has already had the short sale approved by the lender and all paperwork has been submitted on their part to show their hardship in keeping the home.
Question: What kind of deal can I get if I have to wait?
Answer: It all depends on what the lender is willing to accept as a loss. Many times, the listing agent will price the home to get an offer quickly and to reflect the condition the home may be in if there are repairs needed. Almost always the home is going to be sold in “as-is” condition and the seller will not make repairs. Once the price has been negotiated between the seller and buyer, the bank has the final say. In almost all cases, I have seen the bank want to renegotiate the price. In my case they countered me over $25,000 higher than my original offer that was more than fair and was near asking price. We ended up coming to an agreement, and I proceeded forward with the next step.
Question: If it is sold “as-is”, should I even bother with an inspection?
Answer: Um…. GET A HOME INSPECTION. If you believe that you are walking into any kind of equity, or are barely coming up with the funds to close (or both), you want to ensure there will be no surprises the day after closing. If the inspection goes badly, walk away and count your blessing you didn’t buy someone else’s problems. If it goes well, you just confirmed it was worth the wait. The only thing left is to finalize the financing and take ownership of the home at closing.
Question: What should I do while I wait for the bank to answer?
Answer: In any case where there could be a lengthy wait for response from a third party (whether short sale, foreclosure, estate, etc), I always include a clause that says if third party approval hasn’t been received by a certain date that the buyer may walk away with no penalty to them. This could be 2 or 3 weeks. Once that time period has lapsed, I would continue my search and keep that as my backup plan if nothing else comes along. Part of the intrigue with a short sale is that you can sometimes pick up a home for much less than market value if you are willing to wait, however a buyer doesn’t always have that luxury to wait. You have to do what is best for you. I didn’t mind waiting and had a backup plan of where to stay if I needed somewhere to go after my home sold.
Question: How do I know if the short sale house is right for me?
Answer: You have to ask yourself several questions. Is the home going to be worth what I invest in it or more? Do I mind if the process takes several months? Do I have the cash on hand to address any issues up front that are needed? Will I still be satisfied with the home if my investment ends up being larger or if the values in the area drop a little bit? If you can answer all of those questions honestly to yourself, and are satisfied with the answers – talk to your agent and get their thoughts. Sometimes it helps to hear from the professional what they see are issues with the home and if it will be worth it in the end.
Short sales are not the best option for everyone. However if you don’t mind the wait, you can get a great deal in the long run potentially.
If you have questions about the short sale process, are thinking about investing in foreclosures/short sales, or are tired of throwing away money on rent in general – contact me so we can established a plan to make your dreams a reality!
For Sale By Owner - Should You Buy Without An Agent?
While driving through a community recently, we discussed his displeasure with the availability of homes in the area in his price range (which was over $300,000). We had eliminated all possibilities in the MLS and had begun even mailing homeowners who were not listed to see if they would be open to selling. With that opened up the realm of For Sale By Owners. He was worried that they wouldn't be an option with me being involved, and you should have seen his face when he realized that just because they choose to not use an agent, doesn't mean you have to do the same. You deserve representation!
Having an agent aid you with a FSBO (for sale by owner), can not only make things easier for the buyer but it truly can simplify the process for a seller without costing them the commission for their own agent. Most for sale by owners choose not to employ an agent to help save themselves commission costs, yet will still pay a buyers agent if they bring a buyer (not all will, but most will). They understand by having a buyer with an agent that the buyer is more likely to be qualified, motivated and that the agent can help oversee the legal aspect of the process. No attorney will be needed to prepare a contract, the agent will make sure all deadlines are met and it only cost the seller half if not less than what they may have spent with a listing agent.
As a buyer, why should you keep your agent when dealing with a FSBO? Heres a few quick reasons:
1)Pricing. A buyer agent will make sure the home is priced appropriately by providing you with the most up to date sale information. While this information is available online, your agent will break down why the home is under or over priced for you so that you can be sure you are spending your hard earned money the right way.
2)The legalities. Not only will your agent bring their company contract to the table to protect you, they will also hold the earnest money to make sure that everyone is moving in the right direction and your deposit wont have a chance to disappear before closing.
3)Added detail&documents. A seller disclosure of property condition is a great way for you to have in writing what the seller has experienced while they have owned the home and a way to ensure before your inspection your expectations of the home are reasonable. Your agent will also be next to you throughout the process, ensuring you wont be out on your own the moment you walk in the door.
4)Coordinating dates. Your agent will track the process from beginning to end, while making sure deadlines for the financing, inspections and other agreed to terms are met so that you dont have to worry about missing a single date.
Its a myth that you cant bring an agent to work with a FSBO. The best way to approach any for sale by owner you come across is to give the address and phone number to your agent and allow them to contact the owner on your behalf. Most have been trained to ask key questions up front. This way the owner, the agent and the buyer are all on the same page. It will also give them a chance to make sure the seller will compensate the agents company as the agent cannot represent you in most cases if the company will not be paid.
Regardless, my prime objective is to help you get the right home for the right price. One of my best clients recently bought a for sale by owner, and was not able to use me for the transaction. I still consider him one of my best clients, and he went into it asking if he could use me. When it came down to me being included or someone else getting the home, I had no problem shaking his hand and wishing him luck.
Its all about YOU in the end.
Just dont settle into the mindset you are on your own if youre not looking on the MLS anymore.
If you have more questions about dealing with FSBOs, please feel free to contact me directly!
PMI Is Changing & Will Be Part Of The Loan For Life - Don't Fall Into The Hysteria!
While speaking with one of our preferred lenders the other day, the topic of Mortgage Insurance in relation to an FHA loan came up. These added costs to a mortgage cost buyers hundreds of dollars every year, in addition to thousands up front. Since buyers are helping to drive our market back to "stable", the added cost of the Mortgage Insurance Premium (PMI or MIP) typically can take a buyer thousands of dollars lower in price range when searching for a home. This is due to the more you add to your payment through taxes, insurance or PMI (the higher your payment is) causes your debt to income ratios being affected and will equal less money to spend on your next home.
If you're new to buying, PMI/MIP is charged as part of your total payment each month. It is in addition to the Principal/Interest/Taxes/Insurance (PITI). If you are buying a home and are unable to put down the money needed for a conventional loan (many times this can be 20%), then PMI will be added to your payment. In addition, you will be charged an "upfront mortgage insurance premium" as part of your closing costs.
In the past, this PMI would be removed from the loan once you reached having 15 years or less on your loan and a loan to value ratio of less than or equal to 78% at the time the loan was made. If you had a loan for $100,000, your PMI would drop off when your principal reached $78,000 and you had less than 15 years left on your loan. However...
Things are changing!
Here are what changes are taking place:
- If you are taking out an FHA loan and the case number is assigned on or after April 1, 2013, the annual MIP will be increased.
- Removal of the exemption from the annual PMI once the "less than 15 years" and "loan to value of less than or equal to 78%" are reached. Once you get to those milestones, the PMI will then be adjusted down but not entirely removed. This will affect any loan with a case number assigned on or after June 3rd, 2013.
These changes will affect your payment under most FHA scenarios, but there are a few loopholes where this won't apply such as if you are doing a Streamline Refinance. Consult your mortgage professional about how these changes could affect you if you are planning to purchase this year! This is not the first time these changes have been made by the government, but we want to make sure our clients are aware of the changes and don't fall into all of the "hype" or "hysteria" that may arise from news or media outlets.
Are there ways around this? YES!
I am starting to see more lenders offer 5% down, no PMI or lender paid PMI options to qualifying buyers. I have also seen a couple of lenders offer a 3% down with no PMI or lender paid PMI. As with any financing, the buyer must qualify for the loan program. Some of these may have credit requirements, income requirements, location requirements or all of the above. For a list of these lenders or if you have any questions, feel free to call me at 859.866.0347 or email me at email@example.com.
Here is the letter from the Department Of Housing&Urban Development regarding these changes:
The dreaded C Word CREDIT and how it is determined.
After you get past how much money you are going to need to buy your next home, the lender is going to look at another key piece of information in determining if you are approved. Your credit score, which sometimes can be referred to as your FICO score, helps lenders determine quickly and fairly your potential to repay when offering credit. These scores are influenced in a number of ways and go beyond just how often you are on time with your bills and payment history. The score is more than just a number that ranges from 350 to 850 (640 is one magic minimum used to financing), there are several key pieces of data that determine where you rank. Below you will find a simpler breakdown of the information that your credit reports use to determine your score.
Out of all factors, the biggest (35%) is your payment history. How timely you make your payments (in addition to in full) makes up the biggest stake in your score. Each month you fall behind on a bill can cause your score to dip more and more, while long stretches of on-time payments make you look better.
30% of your credit score is then taken by the total outstanding amount that you owe. By outstanding I dont mean how much can you rack up in the shortest amount of time, rather it is how much is left to be paid off in relation to your income. For each line of credit or loan you take out, lenders will look at that line as another obstacle that could hinder you from paying all of your bills on time. Especially if your income doesnt increase much, if at all. Many experts recommend that you carry no more than 50% of your total available credit. In other words, if you have $20,000 available in total credit, you should keep your balances below $10,000 at any one time to keep lenders and the credit scores happy.
One common myth is that closing a card will help boost your score. In reality, the score will only go up if you are paying down the remaining balance on the card while you are in the process of closing them. If you have a long and perfect history with a card, it could also hurt you to close that account when it is in use. Which leads to my next point.
From here, 15% of the score is made up of how long youve had available credit or your history with those credit lines. A report with mostly new accounts is not as favorable as one that holds a long credit history. A rule of thumb is that any account that hasnt been in effect for 12 months may still be considered new.
10% of your score is made up of the diversity of your accounts. A borrower who has a mortgage, car loan, credit cards and a school loan , for example, has a healthier mix of credit products than someone just holding credit cards.
A last significant factor in determining your credit score is the number of inquiries, or times that a potential lender views your credit report. The word lender refers to all types of credit including credit card applications, car loans, etc. Even though all credit inquiries received within a 14 day period is seen as a single inquiry (if done for the same purpose), shopping for credit numerous times can throw up a red flag.
If you are worried about your credit score, there are things you can do to start repairing it. Here are a few things to help get you started:
Paying down your revolving debt, and not moving debt between other cards.
Get current on any past due bills and stay current.
Dont open a lot of new accounts
Many people also dont know that you are entitled to one FREE annual credit report. While this wont provide you with your score, it will show you how current you are and what balances are owed at the last reporting. The website to get your report that was recommended to me by a lender is www.annualcreditreport.com. Again, this does not give you your score, but it is a secure site that will provide you with the beginning pieces to seeing where your history and current credit is. I also had a client/friend recently inform me that they could set up a trial account through http://www.experian.com/ and it would give them a score for $1.
Any lender who pulls your credit for the purpose of a mortgage can also give you that report and the score that accompanies it.
If you have more questions about your credit or what can be done to repair it, please contact me directly and I can pass on to you some very valuable information!
PMI, PITI, VA, FHA, ETC. . . Mortgage Terms That Look Like Alphabet Soup
When sitting down with a lender to understand what you will be pre-approved for, it is easy to become overwhelmed by all of the language being used. Especially if you are not a math fanatic to begin with. This can leave you feeling like fish out of water and you are definitely not alone. Feel free to use this little guide to the terms before, during and after your consultation with your lender.
PMI An acronym that is short for private mortgage insurance. This insurance may be required when the borrower (you) puts down less than 20%. This is an insurance policy that is paid by you and held by a private insurance agency that repays a portion of the loan if the mortgagor (you) does not make the payments as agreed.
PITI This short acronym is short for the the items included in your monthly payment typically. Principle Interest Taxes Insurance. The last 2 elements may not be part of the payment if you choose to put down 20% or more as escrow is not required.
APR A term used in the Truth In Lending Act to disclose to buyers the percentage relationship of the total finance charge to the loan. This is not the same thing as the interest rate. The APR will reflect the cost of the mortgage loan as a yearly rate and will be higher than the interest rate stated on the note because it includes loan discount points, mortgage insurance and other fees. This is a good way to judge if a companys rates/costs are more than others.
FHA This is a loan that is made through an approved lender and is insured by the Federal Housing Administration. There are loan limits that may apply.
VA- When a person has served in the military, they may be eligible for a loan that is guaranteed by the Department of Veteran Affairs. This financing option may include low or no down payment financing.
ARM An adjustable rate mortgage is a loan with an interest rate that changes at certain time intervals over the life of the note. The rate may change with the market, but the changes are pre-determined as part of the financing and will be laid out for the borrower.
MI Mortgage Insurance is used by the lender to help protect them from loss incurred by a mortgage default. You may see this referred to as MI, PMI or MIP (FHA Mortgage Insurance Premium).
If you are meeting with a lender and are still unsure about what they are talking about, do not hesitate to stop them and ask as many questions as possible. You should never enter into a mortgage without knowing the terms, rates, payment, length and other parts of your loan. I have seen this come back and really bite buyers are just applied and went with the first lender they talked to. Just like with closing costs, youll want several opinions from different lenders on who can provide the best rate (APR as well) and the best option for your buying situation. There are times when an ARM may be better than going FHA and vice versa for other loan packages.
If you dont know who to turn to or where to begin with mortgage questions, give me a call and I can direct you to a number of qualified mortgage professionals who will take the time to explain things to you in FULL.
Can we look at 10+ houses tomorrow? How to approach finding the right home from the beginning
Now that youve been pre-approved, youve begun to look online or you may have done that first. How overwhelmed are you with everything youve found? There may be several or tens or in some cases over a hundred houses to weed through. Where do you even begin? Yes it would be easier to just look at all of them to sort through them one by one in person, but do you have that kind of time, money for gas, and focus to see several houses in a single day?
Buyers ask me all the time how I go about looking at homes, and all I can do is give you my approach when I personally have been searching. I may be reducing this down to the ridiculous, but if there is something in here that you didnt think about then I have done my job!
Here is the order I sort them out in: 1)Price Range2) Areas3) Number of Bedrooms/Bathrooms 4) Building Style 5) Misc Features
Sometimes it is convenience to work, easy access to attractions or the peace and quiet of a city that attract me to that general area. What makes you love where you want to live? Is it the cul-de-sac streets, traditional neighborhoods, higher priced homes, nostalgia of growing up or maybe just total privacy? This is vital to beginning your search.
Next, you have to figure out how much bedroom/bathroom space you need. This helps you get rid of houses that may be too small or ones that may be more square footage then you need. Do you need 4 bedrooms to accommodate all of your family, or do you need 3 bedrooms with an office for working at home? Do you need a guest suite or wing? Is one full bath going to be enough or do you need 2?
After those 2 basics are established, now you decide if you want a certain style of a home. Is a ranch needed because you dont want steps or do you need the bedrooms on a separate level like a 2 story? Do you want a finished lower level but cant afford it with a 1 or 2 story, then maybe a bi-level will satisfy what you are looking for. While not all areas will have every time of home for your price, you have to rely on your agent to help you see what is normal.
Then it comes down to what is important to you in the home itself. While your local multiple listing service may be detailed enough to deliver to you if a home has a 2 car garage, fenced yard or full basement I wont always rely on that information to be accurate. Evaluate each home that you see online for potential living space and amenities that mean the most to you. Island kitchens may be worth more than a fireplace, but having a spare bathroom or a finished basement could be features not always found in your price range. Rely on your agent to help you see what things are worth more than others. In the long run you will see what will help you upon resale if you EVENTUALLY resale.
One of the things I do for my buyers is set up a private website that will list all of the homes available with their basic first four criteria from the list above. This will populate the portal and allow the buyer to save and reject the homes. It creates a running list to evaluate and discuss with me so we can see if there is anything that would keep a sale from not being complete in the time frame you are working in. Things such as short sales, homes in such need of repair that they cannot be financed and others may be relocation involved or rehabbed. All of this information is important in the long run and should be made available to you. From then on, my buyers will be emailed any time a home comes on the market or changes their price so that they can be the first to know what the market is doing.
From there it becomes a little more of a process. You and your agent will select a set number of homes based on how much time you have to see that day and how long you feel your attention span will hold. Once you get out, I encourage most buyers to get a feel for the home and layout to see if it will work for them. If the layout wont work, then there is no point wasting more time at that home and it is time to move on. Most buyers will see the same home at least twice before making an offer, so dont feel you have to spend an hour in each house. Then it comes time to make an offer, which is when you go over the final picks with a fine tooth comb and confirm if the home is right for you over a longer showing sometimes with family, friends on or on your own.
In no way does this work out to be as simple as above for most buyers. Each situation is different. In the long run everything I have mentioned above will lead to you getting the best possible terms and conditions on your next home and it will take as long as you feel it takes to get from looking to buying. That choice is always entirely in your hands! Whether it is 5 or 50 houses, Im sure well eventually find the right home if you focus on what is truly important to you.
If you know of anyone who would benefit from having this kind of website set up for them, be sure to share this with them and let them know!
I want to wait until the spring to buy/sell & Why waiting on the holidays to pass may not be worth it
This time of year, so many of us get caught up in the holidays. If you think about it, from the beginning to middle of October, its easy to forget about the idea of moving as there is so much else going on. Halloween rolls in quickly and the kids are all consumed with costumes, the family journeys in from out of town for Thanksgiving, college and pro-football take over your weekends and before you know it Christmas and the New Year are upon us. Those last three months of the year fly by already, so why would you want to complicate it with adding in a purchase or a sale?
Because the market doesnt let up just because the holidays have come around.
Heres an interesting statistic for you: During the summer month of June, 778 homes went under contract or closed during that entire month according to our local MLS. During the month of October, over 600 homes went under contract or closed. While it is not the exact same performance, its not as drastic of a change as many people would believe. Not 25%, not 50% even. Almost 80% of the sales during a peak summer month were still obtained during a slower fall month.
In looking at the market, here are just a few reasons why if you are considering a move that it may not hurt to keep your eyes open or keep the home on the market for the holidays:
Buyers who are looking arent wasting time like some do during the spring months that look because the weather is nice. They are on a deadline due to a recent sale of their current home, relocation to the area or upcoming end to a lease and need a place to go. No one likes trudging out in the cold unless there is a true reason or desire.
Sellers are not having a revolving door of nosy neighbors and are enjoying more qualified and approved buyers who have a stronger need to buy. Yes showing your house during the holiday preparations can be a little more hectic, but selling now versus in the spring where the market could be inundated with competition may save you thousands for your trouble. Less competing homes can equal more money in your pocket.
Buyers are enjoying less competition for great homes and deals since those who are casually looking tend to drop off for the holiday months. Multiple offers are still happening though because sellers are pricing their homes right for the time of year in some occasions.
The first quarter of the year can sometimes be one of the busiest because many buyers and sellers get refocused on their needs, creating the competition that may not have been there a couple months before. Wouldnt you rather look at a dedicated yet more leisurely pace?
If youve been debating taking advantage of this great time of year to look or are curious if there are actually good deals out there that are worth looking into, give me a call or shoot me an email to discuss what options there are! Dont let the spring market leave you sitting when you could have already moved to your next home!
Why should I pay for an inspection? Things that you can't see may cost you in the long run
Youve gone through the home of your dreams a few times, and maybe youve even brought your family through to show them the home you hope to close on in a little over a month. The home has been updated and maybe needs a couple of minor color or cosmetic changes or is a foreclosure you know nothing about condition wise. Now youre trying to decide whether or not a home inspection is going to be worth your time and money.
You may know someone who built a home, a parent/family member/friend who is a contractor or you are well rounded in the home systems&construction field to the point where you may not need to pay an outside influence to evaluate the house. If the seller is okay with having them/you perform the inspection and rely on the findings, you may be saving yourself some money. But what if the seller doesnt agree to that or you dont have those resources available? What do you do then?
A home inspection is not cheap (cost can vary from $250 - $500+ depending on additional inspections), and many buyers are curious if there is value in having one done. However, if I told you spending that money could save you THOUSANDS over the time you own the home would that help you?
In reading an article the other day, there was a quote by the CEO of HouseMaster (an inspection company with offices in more than 390 cities), that said Virtually every used home needs some repair or improvement. Thats to be expected. But with todays high prices, you want to make sure you are aware of any major problems in a house you are considering purchasing, and what it will take to remedy the situation.
Some of the most serious defects they found which may not be found be a general walk-through include the following:
Cracked heat exchanger
Environmental hazards such as radon, water contamination, asbestos, mold, lead paint and underground storage tanks
Moisture in the lower level
Defective roof and/or flashings
Insect infestation termites or carpenter ants
Horizontal foundation cracks & major house settlement
Undersized electrical system
Chimney settling or separation
While these are not all the items that may be discovered during an inspection, any one of these could cost you a minimum of hundreds of dollars and upwards of tens of thousands depending on the damage. You may find items of general maintenance that should be attended to the moment you move in. Things you may not notice the first few times you go through the home because you are past the emotional part of the purchase.
Having a state licensed inspector will provide you with a neutral third party opinion, who also has guidelines they must follow in their inspections to protect you, the seller and themselves. A full report with summary and photos, as well as maintenance suggestions may also be included. All of these things are done to help you understand more about one of the biggest financial purchases of your life. This report will also convey to the seller that your requests for repairs are warranted by a professional.
Whenever one of my buyers writes a contract on a home, I also put in a provision to protect them from being stuck with a home by using an inspection contingency. If the buyer and seller cannot agree on a way to remedy any requested repairs or replacement, then the buyer is not then stuck with a home with more issues than they want to take on. While the appraisal on the home may give you an idea of value for the financing, an inspection will give you a better if not complete idea on condition.
If you have more questions about what is involved in an inspection, what it encompasses or anything else, dont hesitate to call, text or email me!
Closing costs, earnest money, down payment? Breaking Down the Costs of Buying A Home
In my last blog, we discussed many questions that some buyers dont always ask when they start to begin the process of buying a home. Whether it is your first home purchase or not, youll always want to make sure you have all the tools in front of you to make an informed decision. Once you have your mind in the right place to make the move, you will have to focus in on if your bank account is in the right place next.
After you have completed the budget of your personal finances and then filled in the payment breakdowns from speaking with a lender, youll have a great handle on what your monthly expenses will be. If you havent yet filled out a budget, many templates can be found online or you can contact me for one I send to buyers with questions.
Now lets fast forward and talk about what money will be needed once you find that perfect home and are debating making an offer.
Earnest money deposit This money will act as your security deposit for the contract that shows you will be moving forward in good faith to fulfill the terms of the contract. This amount is negotiable but may run .5% to 1%+ of the purchase price to show your serious attachment to the home and closing. The check for this is included in your offer, and deposited upon acceptance. This money will be credited back to you when you close on the home.
Down payment While there are some 100% programs out there (rural housing, VA), you can expect a minimum of 3.5% if you go FHA. Some lenders offer different programs that may vary. This money is due at closing.
Application fee This is paid to the lender to get your loan started but is not always charged by every lender. This helps them to cover up front fees and may be credited back to you when you close on the home. This money is paid at the time of meeting with the lender after acceptance of your offer.
Home inspection cost Your whole house inspection can run anywhere from $300 - $500+ depending on the size of the home, and if you include tests such as termite, radon, mold, etc. Paid at the time of inspection (typically within the first 10 days after acceptance)
Closing costs Many buyers who have minimal funds are financing these into the transaction by having the seller pay for them in the purchase contract. Closings costs consist of, but are not limited to, any origination fees, initial escrow deposits, appraisal fee, credit report, flood certification, title insurance for the lender, and recording fee to the courthouse. These can run anywhere from 1% to 3% of the purchase price realistically. This money is paid at closing.
Homeowners insurance you are required to have the first years insurance paid prior to taking possession of the home. This is based off several factors including replacement cost and square footage. Sometimes this can be included into your closing costs however some agencies require payment upfront before closing.
Moving costs and setting up utilities some utility companies may require a deposit when you set up service. You also may have to pay a company for truck rental, or furnishing your family/friends with food/refreshments for their labor. Any deposits would be in the last couple of days before closing.
Again, these are only estimates and you may have a situation where these are much less or much more. When you speak to a lender, they will break down the closing costs and total out of pocket money needed for the LOAN on a sheet called the Good Faith Estimate. This is the truest way of seeing what lender is saving you the most money. Items like inspection, earnest money&moving costs may not be reflected on this sheet. However, when compared to what you put up for your apartment between the first & last months rent plus any security deposit, youll be surprised at how similar the investment is to own a home versus renting.
Curious about what the numbers look like for a home in your price range? Let me know and we can discuss a few scenarios to get you started!