Common Buyer Questions
When looking for your dream home lots of questions pop-up, it is always helpful to have people on your side. Contact me and I will help you to find your dream home.
The price you can afford to pay for a home will depend on six factors:
- Your income
- The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender.
- Your outstanding debts
- Your credit history
- The type of mortgage you select
- Current interest rates
Lenders will analyze your income in relation to your projected cost of the home and outstanding debts. This will determine the size loan you can borrow. Your housing expense-to-income ratio is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your loan, property taxes and hazard insurance. The sum of these costs is referred to as "PITI."
Monthly homeowner association dues, if you're purchasing a condominium or townhouse, and private mortgage insurance are added to the PITI.
First and foremost, it is strongly recommended that you hire a professional person to inspect the home. Many inspectors belong to the American Society of Home Inspectors (ASHI). They attend seminars and stay abreast of the latest developments.
Secondly, some states require sellers to complete a disclosure form revealing everything known about their property. Home sellers are required to indicate any significant defects or malfunctions existing in the home's major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems.
The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachment of easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property.
Also look for settling, sliding or soil problems, flooding or drainage problems.
People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions, if the homeowners association has any authority over the subject property and ownership of common areas with others. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms provided to you.
There are always some sellers who for some reason must sell quickly, however in general, a very low offer in a normal market might be rejected immediately. In a strong buyer's market, the below-market offer will usually either be accepted or generate a counteroffer. If few offers are being made, an outright rejection of offers becomes unlikely. In a strong seller's market, offers are often full price or higher than full price. While it is true that offers at or above full price are more likely to be accepted by the seller, there are other considerations involved:
1. Is the offer contingent upon anything, such as the sale of the buyer's current house? If so, such an offer, even at full price, may not be as attractive as an offer without that condition.
2. Is the offer made on the house "as is," or does the buyer want the seller to make some repairs before the close or make a price concession instead?
3. Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.
4. Are there any requests for seller concessions, such as asking the seller to pay for something or repair something? If so, the offer is not really full price.
Different sellers price houses very differently. Some deliberately overprice, others ask for pretty close to what they hope to get and a few (maybe the cleverest) underprice their houses in the hope that potential buyers will compete and overbid. A seller's advertised price should be treated only as a rough estimate of what they would like to receive.
If possible try to learn about the seller's motivation. For example, a lower price with a speedy closing may be more acceptable to someone who must move quickly due to a job transfer. People going through a divorce or are eager to move into another home are frequently more receptive to lower offers.
Some buyers believe in making deliberate low-ball offers. While any offer can be presented to the seller, a low-ball offer often sours a prospective sale and discourages the seller from negotiating at all. And unless the house is extremely overpriced, the offer probably will be rejected anyway.
Before making an offer, also investigate how much comparable homes have sold for in the area so that you can determine whether the home is priced right.
Various types of loan programs exist. There is a a minimum requirement of 5 percent down payment. Most programs of 0% down are no longer in existence.
Buyers using a small down payment also have a reserve for making unexpected improvements. It may be more prudent to make a larger down payment and thereby reduce the amount of debt that must be financed. Once a buyer puts twenty percent or more as a down payment on their desired home, they will waive the requirement for mortgage insurance.
Mortgage insurance is a requirement on all loans with less than 20% down. The amount of the mortgage insurance is usually included into the mortgage payments but can be paid out up front. For your convenience I have included and Mortgage Insurance Calculator under the Tools tab on the home page.
Title is the legal term for ownership of property. Buyers want "good and marketable" title to a property. "Good title" means title appropriate for the buyer’s purposes; "marketable title" means title the buyer can convey to someone else.
Prior to closing, public records are searched to determine the previous ownership of the property, as well as prior dealings related to it. The search might reveal existing mortgages, liens for outstanding taxes, utility charges, etc., registered against the property. At closing, the buyer expects property that is free of such claims.
Sometimes problems regarding title are not discovered before closing. They can make the property less marketable when the buyer subsequently sells, and can cost money to fix. For example, the survey might have failed to show that a dock and boathouse built on a river adjoining a vacation property was built without permission. The buyer of the property could be out-of-pocket if he is later forced to remove the dock and boathouse. Or, the property might have been conveyed to a previous owner fraudulently, in which case there is the risk that the real owner may come forward at some point and demand their rights with respect to the property.
Title insurance policies can be issued in favour of a purchaser, a lender, or both. Lenders will usually require title insurance as a condition of making the loan. Title insurance protects purchasers and/or lenders against loss or damage sustained if a claim that is covered under the terms of the policy is made.
Title insurance remains in effect as long as the insured purchaser has title to the land.
Title insurance can help ensure that a closing is not delayed due to defects in title. And if an issue arises, the title insurance covers the legal fees and expenses associated with defending the title and pays in the event of loss; however there may be caps on how much they will pay out.
The premium for title insurance is paid once, at the time of purchase. The purchaser pays for the title insurance. The cost is part of the closing costs to the Lawyer.
It is strongly recommended that home buyers are prequalified or pre-approved for a loan as their first step in the process. By being prequalified, a buyer knows exactly how much house they can afford. They can make more informed decisions in the market place. This does not mean they will definitely get the loan because their credit reports, wages and bank statements still need to be verified before you can receive a commitment from the lender for the loan.
Almost all mortgage lenders prequalify people at no charge. Many of them will even do it on the internet. Caution must be advised with approvals on the internet. Going to your own bank or I can suggest some, is much more advisable. In order to be pre-approved, an application will be taken. Your credit report will be pulled, your employment and income will be verified, your checking and savings accounts will also be verified. In other words, all the necessary documentation will be completed in order for you to obtain a loan. The only things remaining will be for you to find a home, obtain an appraisal on it (the bank arranges) to prove its value to the bank and perform whatever inspections you may want on the property. This process considerably shortens the time frame to closing.
Compare the mortgage charts published in most newspapers.
Occasionally some lenders are willing to negotiate on the loan rate. This isn't typical among many of the established lenders who set their rates. Nevertheless, it never hurts to shop around, know the market and try to get the best deal. I can help you in this area.
Sales price increases in either type of housing are strongly tied to location, growth in the local housing market and the state of the overall economy.
Some people feel that buying into a new-home community is a bit riskier than purchasing a house in an established neighborhood. Future appreciation in value in either case depends upon many of the same factors. Others believe that a new home is less risky because things won't "wear out" and need replacement. It often comes down to personal choice and finances.
Distressed properties or fixer-uppers can be found everywhere. These properties are poorly maintained and have a lower market value than other houses in the neighborhood. It is often recommended that buyers find the least desirable house in the best neighborhood. You must consider if the expenses needed to bring the value of that property to its full potential market value are within your budget. Most buyers should avoid run-down houses that need major structural repairs. Remember the movie “The Money Pit?" Those properties should be left to the builder or tradesman normally engaged in the repair business.
The answer to this is usually yes; however you must qualify for the extra loan monies and the lender has specifics that they will lend on.
Major repairs can be: a new heating system, roof, replacement windows, etc. You may then also finance additional repairs and improvements i.e.: new carpeting, kitchen cabinets, appliances, etc. You must of course "qualify" for the total amount you will be borrowing through the program.
Two appraisals are usually required. These appraisals will be on the property "as is” and another “as repaired". Plans and specifications for the proposed work must be submitted for architectural review and cost estimation. Once approved mortgage proceeds are sometimes advanced periodically during the rehabilitation period to finance the construction costs.
Remodeling a home improves its livability and enhances curb appeal, making it more salable to potential buyers. Some of the popular improvement projects are updated kitchens and baths, enlarged master bedroom suits, home-office additions and increased amenities in older homes.
The resale market is often difficult because you are competing with new construction. You need to give your home every competitive advantage you can if you are selling an older home.
Home offices are a relatively new remodeling trend.
Be sure to find out who your real estate REALTOR® is representing before you tell them too much. The degree of trust you have in a REALTOR® may depend upon their legal obligation of representation. An agency working with a buyer has three possible choices of representation. The REALTOR® can represent the buyer exclusively, called buyer agency, or represent the seller exclusively, called seller agency, or represent both the buyer and seller in a dual agency situation. REALTORS® are required to disclose all possible agency relationships before they enter into a residential real estate transaction. Here is a summary of the three basic types.
By signing a Buyer Representation Agreement, your REALTOR® will be working for you. At which point, the more you tell your REALTOR®, the more he or she be equipped to find you exactly what you are looking for.
Contact me and I will help you to find and buy your dream home.