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10 Tips for Homebuyers

May 14, 2012 By Leave a Comment

Making the decision to buy a new home is a life-altering event…in a good way. But the process can be daunting. Take the following advice from CNNMoney into consideration before heading out on your home-buying journey.

1. Don't buy if you can't stay put. Given today’s challenging marketplace, don’t buy a home unless you can commit to staying there for at least a few years. The days of flipping for profit are long gone and you stand to lose money if you sell too soon after buying.

2. Shore up your credit. Securing a mortgage in today’s market requires excellent credit so take the time to clean up your credit report well before you begin looking for a home.

3. Be honest about what you can really afford. The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But CNNMoney recommends using one of the many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford.

4. If you can't put down the usual 20 percent, you may still qualify for a loan. There are a variety of public and private lenders who, if you qualify, can provide options in terms of interest rates and down payments.

5. Schools affect home values. Even if children aren’t a part of your life now or in the near future, look at homes in areas supported by a good school system. Good schools are paramount for many homebuyers and have a direct impact on the value of your home.

6. Work with a real estate professional. Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Today’s market requires expert guidance through every stage of the home-buying process.

7. Choose carefully between points and rate. When picking a mortgage, you usually have the option of paying additional points – a portion of the interest that you pay at closing – in exchange for a lower interest rate. If you stay in the house for a long time – say three to five years or more – it's usually a better deal to take the points, says CNNMoney. The lower interest rate will save you more in the long run.

8. Get pre-approved. This will help you avoid the emotional rollercoaster of falling in love with houses you can’t afford. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.

9. Make an educated bid. Work with your real estate professional to make the right opening bid. Bids should be based on the sales trend of similar homes in the neighborhood, so review with your agent sales of similar homes in the last three months.

10. Hire a home inspector. In addition to the appraiser your lender hires, you should also hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.

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Guidelines for First-Time Investors

April 30, 2012 By Leave a Comment

Whether it’s for a down payment for a home, college tuition or a retirement nest egg, investing in the future is a wise financial decision. The two most pressing questions are, understandably, “How much can I afford to save?” and “What is the best way to make my money grow?”

Financial experts agree that long-term investing is the surest way to build savings—and also that you do not need a lot of money to get started. What is critically important, however, is that you save on a consistent basis.

There are classes you can take, books you can read, and experts you can consult in order to learn the finer points of investing. To begin with, however, there are three fundamental steps you must take:

   1. Determine your savings goals. You need to know what your savings goals are in order to figure out how to get there. Let’s say you want to retire at age 65 with the same standard of living you have now. You can find retirement calculators online to help you determine how much money you will need in order to reach that goal.

   2. Evaluate the stock market. Guaranteed investments and savings bonds are great for reaching short-term goals. They generally return about 2-5 percent at best. But if you have some time to reach your goal, investing in the market will likely be your best approach. Averaged out over the last 25 years, despite some trying times, DOW returns have paid around 9 percent or 10 percent. Here’s the difference: Over 25 years, a $10,000 investment at a 3 percent rate of return will grow to $26,000. A 9 percent return will give you $86,000.

   3. Understand that time is money and plan accordingly. For saving money to be successful, it must be approached as a long-term plan—there are no get-rich-quick plans that really work. Therefore, it makes sense that the earlier you start to save, the more money you will have at retirement. In these scenarios, assume a 10 percent rate of return compounded annually:

• Begin investing $100 per month at age 30 until you reach age 65. At that point, you will have about $345,000 in investments. You will have put in $42,000 over the 35 year span. The other $303,000 is from the growth of your money over time.

• Begin the same $100-per-month saving plan at age 20. At age 65, you will have about $916,000. You will have invested $54,000. The other $862,000 is from the growth of your money over time.

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Creating Your Homebuyer Wish List

April 16, 2012 By Leave a Comment

If you’re embarking on the exciting process of searching for your first home, you may be feeling a bit overwhelmed. After all, from choosing the right location to securing the necessary financing, there are many important details to tackle.

These details can often cloud your judgment when looking at prospective homes to buy. However, in order to be happy in your new home for years to come, you must choose a property that embodies what’s most important to you. The U.S. Department of Housing and Urban Development (HUD) recommends answering the following questions as a guide to selecting your first home:

1. What part of town/neighborhood do you want to live in?

2. What price range would you consider? Establish the maximum price you’d consider.

3. Are schools a factor and, if so, what do you need to take into consideration (i.e., the school system’s ranking, whether the kids can walk to school, etc.)?

4. Do you want an older home or a newer home (less than five years old)?

5. What kind of houses would you be willing to see (i.e., ranch, two-story, split level, condo, etc.)?

6. What style house appeals to you most (i.e., contemporary, traditional , colonial, etc.)?

7. How much renovation would you be willing to do?

8. Do you need to be close to public transportation?

9. Do you have any physical needs that must be met, such as wheelchair access?

10. Do you have any animals that will require special facilities?

11. What criteria does the lot the property sits on have to meet (i.e., acreage, fenced yard, two-car garage, patio/deck, views, etc.)?

12. What criteria does the interior of the home need to meet (i.e., number of bedrooms, number of bathrooms, square footage, etc.)?

13. What features of the home are most important to you? Consider must-haves vs. would-like-to-haves:
• Air conditioning
• Wall-to-wall carpet
• Hardwood floors
• Eat-in kitchen
• Separate dining room
• Formal living room
• Family room
• Separate den or library
• Basement
• Fireplace
• “In-law” apartment
• Lots of windows (light)

Answering the above questions will help you hone in on what’s most important to you and what you can let go of. This exercise will also help you narrow your home search and find your new home much sooner.

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Americans Leaning More Towards Home Buying

April 11, 2012 By Leave a Comment

More consumers may be looking to purchase homes with a shift in several key housing market indicators, according to Fannie Mae's March 2012 consumer attitudinal National Housing Survey.

More Americans now expect both home rental and home purchase prices to increase over the next year. Nearly half of consumers expect higher rental prices, the highest number recorded since monthly tracking began in June 2010. Thirty-three percent expect home prices to increase, up 5 percentage points since last month,
and the highest percentage recorded in over a year. In addition, confidence in consumers' views of their own finances is stabilizing—for three straight months—44 percent believe their personal finances will get better over the next year. These trends may be providing Americans with an increased sense of urgency to buy a home as 73 percent of Americans now believe it is a good time to buy a home, up from 70 percent in February.

"Conditions are coming together to encourage people to want to buy homes," says Doug Duncan, vice president and chief economist of Fannie Mae. "Americans' rental price expectations for the next year continue to rise, reaching their record-high level for our survey this month. With an increasing share of consumers expecting higher mortgage rates and home prices over the next 12 months, some may feel that renting is becoming more costly and that homeownership is a more compelling housing choice."

Here are several other important survey highlights:

  • 33 percent of respondents expect home prices to increase over the next 12 months, a five percentage point increase from last month, the highest level over the past 12 months.
     
  • On average, Americans expect home prices to increase by 0.9 percent over the next 12 months (up slightly since last month).
     
  • 39 percent of Americans say that mortgage rates will go up in the next 12 months, a five percentage point increase from last month.
     
  • The percentage of respondents who say it is a good time to buy rose by three points to 73 percent, the highest level in over a year, while the percentage of respondents who say it is a good time to sell rose one point to 14 percent this month.
     
  • On average, respondents expect home rental prices to increase by 4.1 percent over the next 12 months, a significant increase since February, and the highest number recorded to date.
     
  • 48 percent of respondents think that home rental prices will go up, a three percentage point increase from last month and the highest number recorded to date.
     
  • 66 percent of respondents say they would buy their next home if they were going to move, up one point since last month, while 30 percent say they would rent, up one point versus last month.
     
  • The rise in confidence in the economy's direction leveled this month, with 35 percent responding that they think the economy is on the right track, consistent with February's total. The percentage who say the economy is on the wrong track rose slightly from 57 percent to 58 percent.
     
  • Only 12 percent think that their personal financial situation will worsen in the next 12 months, consistent with February as the lowest value in over a year, and tied with January 2011 for the lowest to date.
     
  • 21 percent of respondents say their income is significantly higher than it was 12 months ago, up 1 point versus February, while 63 percent say it has stayed the same – consistent with February's values.
     
  • 34 percent say their expenses have increased significantly over the past 12 months (a slight increase of one percentage point).
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Timely Tips for Home Buying

March 30, 2012 By Leave a Comment

Regardless of market conditions, a home is not only a place to live, but also a financial asset and a plan for the future. But is it the right time for you to buy? Here are a few general rules to consider:

- Steady employment. It's essential to have a reliable source of income.

- A solid credit score. A bad credit score will increase mortgage interest rates. Potential homeowners should clean up their credit report and ensure that long-term debts are paid before considering homeownership. And when selecting a house, a potential buyer should determine the qualities that best suit his or her situation.

- An affordable price. The total cost of a home should generally be less than 2.5 years' pay. Ensure that the down payment and monthly mortgage payments are manageable.

- Location, location, location. Where a home is located can change its value dramatically. Being in a district with good schools, for example, is important-both for raising the family and for resale value. Also consider what's going on in the community. Are peace and quiet high priorities, for example? Then perhaps a rural or suburban environment would work best. By contrast, if a desire for high culture and a fast lifestyle is a factor, then an urban setting might be preferred.

- Size matters. Is the home big enough, and will it allow for future growth?

Finally, when buying the house …

- Get some help from the pros. Using a real estate agent and a home inspector is important in selecting a good home and making an appropriate bid.

- Make the right mortgage move. When selecting a mortgage, determine whether it's better to pay additional points: One portion of the interest paid at closing may lead to greater savings down the road. If the plan is to stay around for a while (i.e., more than five years), experts say it's usually better to take the points.

Follow these tips and make your home-owning dream a reality. Buying a home is truly a life milestone, and it can be a big step towards financial security. Finding a good house in a nice neighborhood could be the key to making a home investment pay off.

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Saving Toward a Down Payment: 8 Great Ideas

March 13, 2012 By Leave a Comment

Like many consumers today, you may be thinking this is a great time to buy your first home—and you are right. Rock bottom prices, historically low mortgage rates, and a great selection of properties in all price ranges make this an excellent time to buy.

“The problem for many,” noted consumer finance consultant Elizabeth Ray, “is the lack of a down payment. But favorable price and mortgage conditions will likely last for a while. The smart and hopeful first-time buyer will take advantage of the opportunity to save now for that needed down payment.”

For those willing to make a few sacrifices in the short-term, Ray suggests eight possible ways to help consumers watch their savings pile up more quickly:

• Bank the extras – Anytime you get a refund, bonus, commission or birthday check, bank it in a separate savings account.
• Live on one income – Working couples should try to live on one income and bank the other—or half of it.
• Get a roommate – If single and living on your own, think about halving your monthly costs by taking in a roommate.
• Ditch the second car – If possible, use public transportation and bank the sale funds or payments.
• Do without extras – Can you do without cable? Eating out every night? That Starbucks stop every morning?
• Pay off debt – As you pay off high interest debt to better your credit rating, you will also be saving that high interest spend. Try to bank the payments you no longer need to make.
• Ask about a piggyback mortgage – Consult with a mortgage broker. If you can’t quite get the required percentage together for your down payment, but have a high enough monthly income, you may be able to get a piggybank loan to cover what your first mortgage won’t.
• Check out loan assistance programs – Government organizations like Veterans Affairs and FHA offer special programs designed to help people who don’t have large down payments obtain mortgage financing. Also check with state and local housing authorities to find out what assistance they may offer.

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Avoid Money Pit Homes on Your Next House Hunt

March 2, 2012 By Leave a Comment

Homebuyers should pay close attention and avoid money pit houses as the rules of navigating local real estate continue to change. These rapidly changing rules are happening in every area of the home buying process. Some of these rules have to do with the condition of the homes themselves. Bank owned properties and short sale homes tend not to be in the best shape and could have hidden conditions. New requirements for homeowners insurance policies have made changes on roof and sinkhole coverage limitations. Changes to Federal government regulations for banks and lending requirements make navigating an FHA loan quite tricky.

According to REALTOR® Ginny Zukowski, the “money pit” can not only be a home that has hidden repair costs, but homeowners insurance policies may require the repairs to be made before they will write a policy. Also, banks are not accepting all appraisals and often require a second and sometimes third appraisal before they will provide a loan. This can lead to a lower price than the original appraised amount and less than the contract price.

To help potential homebuyers, Zukowski reveals the following tips:

Tip 1: Be prepared for the new changes and have open communication with the real estate agent and lender. Try to meet with them together and find out all of the upfront cash that will be needed to purchase the home. Buyers will need to pay for all inspections, appraisal, good faith money, and provide a down payment. With new private mortgage insurance, this could be several thousand dollars.

Tip 2: Once the buying process starts, be prepared for the closing to take some time. If it is a short sale, this could be four-to-five months. The loan process is also taking longer, around 45 days on the average, and additional delays often occur.

Tip 3: Be on the lookout for properties that will soon need a new roof or A/C. Home insurance policies can require new ones before they issue a policy and the mortgage lender requires homeowners insurance. This can cost the buyers more upfront dollars.

Tip 4: Before putting in an offer, ask the REALTOR® to explain all the possible things that could require more time and money at or before closing. As an example, the bank may require additional appraisals. A bank-approved appraiser may be required.

Tip 5: Be sure the REALTOR® goes over all of the fine print before an offer is submitted. Be aware of all the possible things that could go wrong and how it could impact the buying process up front.

With a real estate professional to help both buyers and sellers navigate the process, you can be know what to expect in the home buying process…and what to avoid.

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A New Buying Landscape for First-Time Buyers

January 27, 2012 By Leave a Comment

New buyers accumulate approximately 29% of home sales in today's market, down from 40% of sales in past years. Although many first-timers have taken advantage of this unique market, some buyers are now finding that the rules have changed, altering buying habits and attitudes toward the home buying experience. Now is still a great time to buy, however, buyers should keep the following in mind when entering the house-hunting process.

Putting more money down is more important than ever. It's still possible to make a down payment of less than 5%, but it's smarter not to if you have the financial means. Insurance fees on government-insured mortgages are continually rising, having doubled in the last seven months. The difference in cash for a $300,000 mortgage could be as high as $30,000 without a healthy down payment.

Saving a substantial down payment may be challenging for first-time buyers, especially in larger city markets. If you're having trouble coming up with a feasible amount, look into various state offerings and other options (gifts from family or a co-owning agreement) that may be able to help you along the way.

Commit to staying for 10 years or more. The days of flipping homes are long behind us. Buying a house is now a long-term investment and living in your home for a decade or longer is definitely the way to go. In today's market, it may take buyers longer to recoup costs. By staying for a longer period of time, you're also allowing the market some time to further recover, while waiting for house values to increase as well. Serious buyers should be prepared to be in it for the long haul.

Be prepared to act fast and have plenty of competition. According to the National Association of REALTORS , about 32% of purchases were made in cash in the month of January. Competition from international buyers, investors and more, may give first-time buyers a run for their money…literally. What first-timer buyers can do: demand less. Though it is never recommended that you give up your right for a home inspection or appraisal, the less you demand (repairs, closing cost coverage, etc), the more enticing your offer will be to sellers, compared to offers that come with a large to-do list.

Buyers can still benefit from great interest rates and low prices, but it's important to be aware of what is happening in the market and adjust your buying strategies accordingly.

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How to Sweeten the Deal on Your Next Transaction

January 18, 2012 By Leave a Comment

In today's modern real estate transaction, negotiating is a big part of the process. For buyers wanting to sweeten their deal or save some money, knowing how to approach the negotiation table is key to their success. Consider the following before locking in your deal:

Nothing is worse than moving before you have to, so having a flexible closing date is beneficial for both the buyer and seller. Whether kids are finishing up the school year or you're expected to finish out a work project, negotiating for a flexible closing date will save you the cost of renting in between and moving twice. Sellers may even be able to convince a buyer to rent the home back to them for a few months while wrapping up loose odds and ends. Having a loose date gives leeway for both parties.

Another way sellers can entice buyers is by offering bonuses or gifts as part of the closing agreement. Some sellers have even been known to offer trips to New York or Hawaii as part of the close. On the buyer end, you have a legitimate right to ask for items that are either built-in or customized to the home. Almost all questions are fair game and your requests just may be thrown into the deal for an added bonus.

Lastly, think about furnishings. For sellers, is there anything else you'd like to get rid of along with the home? Though it's never recommended to include furnishings along with the price (it hikes up the overall cost), asking buyers if they need any of your belongings is a great idea. Items sold outside of escrow can simply be left where they stand. Buyers may want to negotiate to buy washers, dryers or other large-scale appliances. After all, who wants to move those items? It would make the moving process easier on both parties.

These are just a few of the ways that both buyers and sellers can sweeten the deal in order to keep each other happy. Don't feel bad about asking for such concessions. A great rule to follow: You'll never know until you ask.

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What You Need to Know When Buying a Second Home

January 11, 2012 By Leave a Comment

 

Watch the video!

 


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