Here are some tips that you will find helpful regarding all important aspects of buying the house.
Stages of Buying a Home – What to Expect
It may be a goal you have had since childhood. Perhaps, you have rented for most of your adult life and now want to experience the joys and satisfaction of home ownership. Buying a home is a big step and requires a lot of important decisions along the way. With some advanced planning and research, you can be sure your home purchase is something you feel good about for many years ahead. Here are the basic steps that lead you to a successful transaction.
Understanding what you can afford
This is different from qualifying for a loan. This is calculating how much of your budget you will devote to your home and how much money you want for other things. For a person who values travel, they can afford more house than they should buy. Some of their money will go toward accommodations on the road or other travel expenses. If you love fishing, boating, or a hobby such as restoring classic cars, factor the required budget for your preferred pastime into your overall household budget. With that in mind, think twice about buying a home the bank says you can afford. You will be happiest in the home that allows you to enjoy life to its fullest.
Review your credit report
Know your credit score prior to meeting with any loan officers or mortgage brokers. A lower score will result in a higher interest rate and possibly prevent you from qualifying for the loan you want. It can take several months to correct any errors in your report. By reviewing your report a few months before home shopping, you could save yourself several thousands of dollars over the life of your loan.
Choosing your professionals
The U.S. Department of Housing and Urban Development (HUD) advises potential home buyers to attend a homeownership education class prior to choosing a mortgage. The Consumer Financial Protection Bureau was established to help protect consumers from predatory lending and mandates all required information about your loan and real estate transaction be written in clear, easy to understand wording. It is an excellent resource for home buyers.
Take time to interview several loan professionals before signing with one. You can be pre-qualified by your bank or any loan company. That does not obligate you to choose them for your home loan. Discuss your goals with Coldwell Banker® brand agent. They are here to consult with you at each step of the process. Also, it is a good idea to know who will be your attorney for the closing. Many builders want you to close the transaction with their attorney. As the home buyer, it is your right to choose the attorney who will represent you in the closing. Call Patti to discuss further 818.262.3787
Choosing your home
Once you are pre-qualified, you are ready to begin shopping for your new home. For most buyers who plan to purchase with a standard 30-year fixed-rate mortgage, there are few restrictions on the houses they view. If you will be using a FHA loan, USDA home loan, or other special financing, you can only consider homes that qualify for these programs. HUD has incentives for first-time buyers and community servants like firefighters, teachers, and lawenforcement officers. To see if you qualify for special financing, and to learn if there are any Good Neighbor Next Door homes available in your area, consult with a Coldwell Banker® brand agent.
Take your lifestyle and future plans into consideration as you view homes. If you plan to move in a few years, you may want to choose a simple, easily affordable home that will always be in demand and fairly easy to sell. It is best to have a second and third choice in mind that you can go to if you have to walk away from negotiations on your first choice.
Negotiating the contract
Buying a home is an emotional experience. Trust your home buying expert with Coldwell Banker Real Estate LLC for guidance. They work with lenders, home sellers, and other real estate agents every day. They will advise you on negotiation strategies and be there to provide objective advice that protects your best interest in the transaction. Most contracts have contingencies, and the negotiation is not complete until all contingencies are met.
A thorough home inspection by a certified professional is crucial for any home purchase. You should attend the inspection and feel free to ask questions about any areas of concern. Once you have received the home inspection report, your Coldwell Banker brand agent will review it with you. You may choose to ask the seller to make some needed repairs, negotiate a lower price, or accept the report and move forward with the transaction as it is.
The Real Estate Settlement Procedures Act (RESPA) requires that lenders provide home buyers with as accurate of a good faith estimate as possible and that they disclose the nature of all cost. It also prohibits kickbacks and other unlawful payments among real estate professionals and lenders. The TILA-RESPA Integrated Disclosure rule combines forms required by the Truth in Lending Act, also known as Regulation Z, and the Real Estate Procedures Act, known as Regulation X, into one simple form. This new document replaces the final document required by the TILA and the HUD-1. You have three days to review and discuss it with your Coldwell Banker brand agent.
For any changes in amounts before or after closing, the lender must provide you with a corrected Closing Disclosure showing the actual amounts. All financial figures must be documented in writing and not delivered verbally. With sufficient communications prior to closing, you know the amount of certified funds (if any) you need to bring to closing. You can relax, sign the necessary paperwork, and receive the keys to your new home.
Everything You Need to Know About Mortgages and Mortgage Rates
Mortgage rate 101: getting down to basics – Tips from Coldwell Banker® Mortgage
Looking for and buying a house is an exciting time in your life. The excitement can be dulled, though, when you start looking for a mortgage and the right interest rate. There is no argument: the financial considerations of your purchase can be confusing and stressful – that is, when you don’t have someone you trust, like your Coldwell Banker agent, guiding you along the way. You can turn to your agent for the insight and resources you need to make informed decisions at every step of your home-buying journey.
That’s why we have put together this helpful “mortgage rate primer” on some of the most common types of mortgage products you will encounter. Remember that just as you turn to your Coldwell Banker agent for his or her expertise, you should also consider speaking with an experienced, trusted mortgage lender before making a loan choice.
Mortgage rates – the basics
Generally speaking, mortgages can be broken down into two main types: fixed-rate and adjustable rate. The difference between the two is surprisingly simple and is in their names:
- Fixed-rate: Offers a mortgage rate that remains the same throughout the life of the loan
- Adjustable rate: Offers an interest rate that changes based on market conditions
Which loan type you choose – just like your house – will be based upon your needs, specifically short and long term. Fixed-rate loans are typically recommended for people intending to stay in their homes for a long period of time, while adjustable rate loans are better suited for those looking to the short-term. But let’s look at this a little more closely.
Why are these best for people looking at the “long picture”? Primarily because nothing changes throughout the life of the loan – the rate will remain the same, regardless of changing marking conditions, and so will the monthly payment. Over the standard 15- or 30-year mortgage that kind of predictable stability can be very attractive.
As with an adjustable rate mortgage, whether you choose a 30- or 15-year fixed-rate mortgage comes down to time. If you are looking for a shorter payoff period or don’t think you will be in the house in 30 years, a 15-year loan may be a good choice. However, it is important to understand the tradeoffs for the shortened timeframe: 15-year fixed-rate loans typically have lower interest rates than 30-years and you will build equity more quickly; however, you will have a higher monthly payment due to the compressed schedule.
Adjustable rate loans
Adjustable rate loans, or ARMs, are attractive for short-term homebuyers – or those willing to accept a level of risk – because they do just that: adjust. Depending upon the term and terms of the loan, the initial rate – often considerably lower than that on a fixed-rate loan – will remain constant for a set period of time, after which it will continue to adjust to the current rate. This adjustment can occur periodically – say once or twice a year – or every month, depending upon the loan.
The initial low rate is what makes this kind of loan attractive because it allows a consumer to purchase “more house” than if they went with a higher-rate fixed loan. The lower monthly payments – at least during the fixed period – will also allow for more “in pocket” or investment money each month. The drawback, of course, comes once the fixed period ends, because you are at the mercy of fluctuating rates that could be considerably higher and volatile than when you locked in at the start. As a cautionary note, many of the people most severely impacted by the housing crisis held adjustable rate loans and were helpless when their fixed periods ended and rates skyrocketed.
Speak with a trusted mortgage professional
Buying a home is one of life’s most important decisions – and how you buy it is even more critical. The mortgage world can be complex and a little confusing, especially when you start to consider all of your options. A good place to start is with a Coldwell Banker Mortgage professional, who can help you examine your current and future needs and goals, and guide you throughout the entire mortgage process, from selection to close.
Disclaimer – PHH Mortgage Corporation D/B/A Coldwell Banker Mortgage, 1 Mortgage Way, Mt. Laurel, NJ 08054. NMLS ID #2726 (www.nmlsconsumeraccess.org). Alaska Licensed Mortgage Lender #AK2726-3, 800-446-0964; Arizona Residential Mortgage Licensee #BK 0903210; Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act; Licensed by the Delaware State Bank Commissioner #2784; Georgia Residential Mortgage Licensee #6266; Illinois Residential Mortgage Licensee #MB.0005752, 100 W. Randolph, 9th floor, Chicago, IL 60601, 800-532-8785; Kansas Licensed Mortgage Company #SL0000792; Massachusetts Licensed Lender #ML2726; Minnesota – This is not an offer to enter an interest rate lock-in agreement; Licensed by the Mississippi Department of Banking and Consumer Finance; Montana Licensed Mortgage Lender #2726; Licensed by the New Hampshire Banking Department; Licensed by the New Jersey Department of Banking and Insurance; Licensed Mortgage Banker – NYS Banking Department; Ohio Certificate of Registration MB.804016; Oregon Mortgage Lender #ML-355; Rhode Island Licensed Lender. Coldwell Banker® and the Coldwell Banker Logo are registered trademarks licensed to Coldwell Banker Real Estate LLC and used with permission. Equal Housing Lender.
Why Buying a Home is Better than Renting
Conventional wisdom used to state that buying a home is always a great investment. But after the housing crisis, many people who saw their equity sliced in half began questioning this logic.
That’s unfortunate. In most parts of the U.S., home buying is still a better decision than renting for people who plan to remain in the space for at least 4-5 years or more, both for financial and emotional reasons. Let’s explore some of these factors in-depth.
Price Security in Home Buying
Historically, prices tend to rise over time. For example, a loaf of bread, a gallon of milk, and a semester of college tuition cost more today than they did in 1990.
Your mortgage payment, however, is one constant you can rely upon. If you hold a fixed-rate mortgage, your monthly principle and interest (P&I) payment remains the same, regardless of how prices are moving in other industries. (Your property taxes and homeowners insurance may rise.)
Price consistency offers the advantage of planning for the long-term future. As a homeowner, you can anticipate your monthly housing costs in 5, 10 or 15 years.
As a renter, you can’t lock in this type of security. As prices climb, landlords raise the rent to meet the current market. In fact, some landlords write rent escalation clauses into their leases, systematically raising the rent annually.
If you’re renting with a month-to-month lease, your landlord may announce a price jump with only 30 to 60 days of advanced warning, depending on the laws in your area. This puts renters in the difficult position of needing to either find the additional funds or scramble to secure new housing with little advance warning.
Investment – Cash-on-Cash Return
As a homebuyer, the outlay of a small down payment can give you the opportunity to make outsized gains.
Hypothetically, for example, imagine that you put a 20 percent down payment on a $100,000 house. The price rises 5 percent, to $105,000. You would earn $5,000 on your initial outlay of $20,000 – a return of 25 percent. This is known as cash-on-cash return, and homeownership can make this type of gain accessible to the average person.
A home can be a type of “forced savings.” Each month, a portion of your mortgage payment is returned to you in the form of equity. The longer you own your home, the more equity you build – both via mortgage payments as well as in potential value increases.
Renters don’t have this luxury. Many of the pro-rental arguments hinge on the assumption that money “saved” (either via lower monthly payments or through alternate uses of the down payment) would be invested in the stock market.
Realistically, though, what’s the likelihood that a renter would invest that money, rather than spend it on a trip to the Bahamas? And if that money were invested, what’s the likelihood that a renter wouldn’t panic during the next crash and sell at the bottom of the market, turning paper losses into actual losses?
A home functions as ‘forced savings,’ helping you build equity. Like a personal trainer, it keeps you accountable.
Flexibility with Home Improvements
As a homeowner, you can have the freedom to upgrade your home to your heart’s content – without carrying risk or ongoing financial commitment.
If you get a bonus at work, you can celebrate by installing hardwood floors or renovating the bathroom. If you suffer a financial setback, you can defer your plans to remodel the kitchen.
Renters don’t hold this flexibility. The only way they can upgrade their living space is by moving, and this entails both hassle and commitment.
Homeowners, by contrast, can upgrade their home piecemeal as they accumulate cash over the years. Home improvements are a one-time expense that doesn’t require continuous commitment.
Pride of Home Ownership
You wouldn’t invest hundreds of hours cultivating an exquisite garden in a rental property. You wouldn’t hang wallpaper or replace the light fixtures on a rental property.
As a homeowner, you can take pride in crafting, personalizing and perfecting your home. The space can truly morph into a reflection of you, in a way that a rental property never could.
As a homeowner, you’re more likely to become involved in your local community. There’s a stronger chance that you’ll join the neighborhood association, organize potlucks or block parties with your neighbors, coach a local sports league or volunteer at the local school.
While it’s possible that you’ll get involved with the community as a renter, you’ll also likely feel an emotional barrier that stems from knowing you might move in a year or two. Committing to an area for the long-term can inspire you to invest more time and energy into improving the neighborhood and connecting with the surrounding community.
How a Home Warranty Can Help Buyers and Sellers
A home warranty is a great investment whether you’re buying or selling a home, or even if you’re a current homeowner who is planning to stay put for a while. When selling, you don’t want to get stuck having to spend a lot of money if an appliance breaks right before you move out. When buying or remaining in your home, you want to prevent yourself from having to pay big bucks for major repairs or replacements.
Homebuyers often see the Coldwell Banker Home Protection Plansm, issued by American Home Shield®, as a premium add-on to a home sale. A recent consumer study conducted by an independent company supports the fact that homes covered by a Coldwell Banker Home Protection Plan will sell an average of 11 days faster and for an average of $2,314 more.*
Georgie Smigel, marketing real estate professional in the greater Pittsburgh area affiliated with the Coldwell Banker® brand, also knows the value of including a home warranty in her deals. Thanks to American Home Shield (AHS®), Smigel can be sure her clients aren’t saddled with the expense and inconvenience of a major system breakdown in their new home.
“We’re blessed with a lot of industry like Westinghouse, a huge facility hiring a lot of engineers, in addition to PPG Industries relocating its headquarters within the area. I always try to get an AHS home warranty on every listing,” says Smigel. “It’s a big stress reliever for my seller. When we sell, and have the inspection, if one of the systems is failing, we have coverage.”
Smigel goes on to say that incorporating an AHS home warranty into the home-buying or -selling process has saved a lot of her deals over the years. Whether it’s the furnace, HVAC system or any other covered item that fails during the listing period, the AHS service has saved her clients significant money time and time again.**
Home warranties are a great way for home buyers to protect themselves against unexpected costly home repairs. And most home sellers will agree that the relatively small upfront cost of a home warranty is worth the money to be made from a quick sale at a great price.
For more information, please visit ahshome.com/cbhpp
*Information above is based on data collected by AHS and a large national real estate firm of the firm’s listings that closed between January 1, 2012 and December 31, 2012. We studied 24,230 listings from across the country ranging in price from $100,000 to $500,000. These results were verified by Cannon & Company, a third party accounting firm.
**Comments reprinted with permission from RISMedia. © 2015. All rights reserved.
For 42 percent of home buyers, the first step in the homebuying process was searching online. While technology has a number of benefits, it also comes with some potential pitfalls. Below include some of the most common mistakes home buyers made when searching for a home online.
Use a Real Estate Agent Even After Finding Your Perfect Home
With the vast amount of real estate information available online, some home buyers choose not to hire a real estate agent at all. While you may succeed in finding a home, an agent is extremely helpful in the negotiation process. He or she also helps to ensure you don’t miss relevant legal documentation or paperwork which could cause trouble later.
A good real estate agent can have years of experience in a local area and may know what the best neighborhoods are just from your description of your ideal home. In addition to their ability to find more listings and efficiently narrow things down, agents stay informed about current developments in a neighborhood, which may be difficult for home buyers not from the area.
Use Multiple Search Engines When Searching for a Home
Don’t rely on a single search engine or a few listings to find possible homes. All homes of interest are not necessarily listed on these sites, so this may eliminate many prospects from the search. This is also where a real estate agent can be useful.
It is recommended that you consider and use several search tools, including Coldwell Banker’s various property searches, and use them in tandem. This can fill in gaps and allow you to compare results.
Jessica Edwards, sales associate affiliated with Coldwell Banker Sea Coast Advantage in Wilmington, N.C., says that she often is able to show her clients listings before they even make it online. In a hot market, this can be a major advantage.
Don’t Waste Time Looking at Homes You Can’t Afford
Many home buyers waste time searching for homes online that they cannot afford. Get pre-approved for a mortgage to determine what price range to shop within and once you have decided on a property in your budget, act quickly.
One resource home buyers may be unaware of is real estate RSS feeds or email alerts, which can help fill in knowledge gaps about a specific market and provide current information. This can shorten the amount of time you spend retreading old ground during a home search, and may present the opportunity to get to a good property first. Home sellers in a hurry may be inclined to make a good deal for the sake of promptness, so speed could be a significant advantage in negotiations.