The first question you should ask yourself when planning to by a house is, do you really need the home and what preparations have you made? You will only need a home if have a permanent well paying job to enable you meet the high monthly payments without stress. You will also need more savings into your accounts since high down payments deposit will be required for the mortgage. This will be a great disadvantage for the low earners since they can hardly meet this demand making them rent for many years. Consider the house price and calculate the monthly payments to know whether you will afford. This is the greatest mistake majority of the people make which eventually leads to debts, or even bankruptcy. Look for a house of your own choice to avoid changing your minds in future. While choosing the home of your dreams, its important to include your family members to choose a favorable home. Take adequate time and go through your family budget. Your family should be given first priority and, if the remaining money can not meet the house monthly payments just quit until you are in a better situation. Home ownership involves many expenses such as repair, taxes, maintenance and landscaping. If you are still paying off your debts, it will be very difficult for you to manage other more bills. After you have applied for the mortgage, get some assistance from a professional inspector and check the whole homestead to see whether its in good order. If you are pleased, go on and bargain. If you are about or planning to get a transfer, wait until you are settled since you will not use the house. Your family is very important and should always be given first priority before involving yourself in other expensive commitments which could interfere your budget plan.
What To Consider Before Buying A House
Eight Steps To Getting A Home Loan And Buying A House
Step 1 – Know How Much You Can Afford
Before you start looking for a house, you need to know how much you can afford in terms of monthly home loan payments, property taxes, maintenance and your general living costs.
Ginne Mae, a government housing initiative, offers a free calculator to help you figure out how much house you and your family can actually afford. It’s available online at – http://www.ginniemae.gov/2_prequal/intro_questions.asp?Section=YPTH.
Step 2 – Know Your Rights
Whether you’re a low-income home buyer or a wealthy real estate magnate, you have to know your rights. The HUD (Department of Housing and Urban Development) offers a very informative series of reports dedicated to protecting consumers and prospective home buyers from predatory lending practices. You can read them here: http://www.hud.gov/offices/hsg/sfh/pred/predlend.cfm.
Other resources to look into include the Real Estate Settlement Procedures Act (RESPA) and the Fair Housing Act.
Remember, you’re the customer and you deserve to be treated with respect. As a borrower, you have the right to shop for financing, request a written Good Faith Estimate of your total costs, ask your mortgage broker exactly what they can do for you, ask any questions you need to clearly understand the process and associated expenses, understand your fee structure and the right to be evaluated for a loan on criteria that’s free from discrimination.
Step 3 – Find a Loan
When looking for home financing, you want to find the best balance among low-rate financing, a loan that fits your lifestyle and plan, and a lender that’s going to provide ongoing, quality customer support. Don’t be stingy on the time investment at this stage, as finding the right lender will pay off for decades!
Step 4 – Find a House
Using a real estate agent and armed with your pre-qualification, you’ll begin your search for a home. Based on what you can afford and your wish list of options and amenities you want in a home, you should be able to locate what you’re looking for. Take the time to solicit recommendations from people you know and respect before selecting an agent.
Step 5 – Make an Offer
An offer is a tricky minefield of negotiations and real estate law. But, with guidance from your trusted real estate agent, you’ll get through it. If you are uncomfortable with the price of a home, feel free to counter-offer what you believe it is truly worth in the current real estate market and that neighborhood.
Step 6 – Have the Home Inspected
Every offer should be contingent on a full home inspection. Hire a quality and experienced inspector who can give you a complete evaluation of the home and let you know if any major renovations or repairs are going to be needed. If the inspector identifies expensive needs, that will either afford you room for negotiation on the price or an opportunity to move on to another home.
Step 7 – Get Insurance
Lenders are going to require you to have insurance on the property, at least until they no longer own a large chunk of it.
Step 8 – Close the Deal
Last, but not least, is signing and closing the deal. Once you’ve gotten to this point, you’ve secured your financing, the offer has been accepted and you’re finally signing the deed to your new home. Shortly thereafter, you will be moving in!
Buying a House – 5 Steps to Help with the Search
A lot of times when home buyers decide to buy that next property instinctively they call their real estate agents to find them new homes that fit their current criteria and needs. This is a great first step because this is what real estate agents do; their job is to find you that next great house.
Sometimes however agents stay on the course and present properties that are easy for them to find and easy for them to work with. However there could be that perfect house out there that gets missed because it’s not in the system for lack of a better term.
It’s a good idea to do some house hunting yourself. Your agent generally won’t be offended if you bring some properties to the table that you want to check out. Listed here are 5 great alternatives to finding that hidden perfect house.
1) Word of Mouth: Telling everyone you know that you are in the market for a new home might give you an advantage in the market. It is very possible somebody knows somebody that has or is about to list their house on the market. Getting that chance to be the first one to look at a property can be invaluable.
2) Real Estate Magazines and Newspapers: These publications usually list new developments and homes being sold. This kind of information in the very least gives you an idea of how much properties are going for.
3) The Internet: Using a site such as MLS.ca to find properties has become the most common way to check out new property listings. The Internet provides instant and updated information about the location, price, and home features for any house in any community. The great thing about the Internet is you can narrow your search down instantly for properties you are interested in looking at.
4) For Sale Signs: Take a drive through the neighborhood of your new community. One: you will be able to compare what you have seen on the Internet or in the paper to what you see in real life. Two: you might find that Gem that is being sold by the owner, usually these houses aren’t as exposed as properties listed by real estate agents.
5) New Development Areas: If a new home interests you, check out the new development areas in your area. Usually builders will have a model home that shows what a typical house in that area looks like. Builders also give new homebuyers options and extras that they can incorporate into their new home if they build from scratch.
These are some great areas to explore along with your agent when buying that next house. Remember using a real estate agent only gives you only 1 option to find that next home.
Buying a House…within your Means
Purchasing a home can be the largest, most expensive undertaking you will face in your lifetime. With real estate prices experiencing double digit growth year over year for the past few years, it may even be our greatest investment. Most of us drive to the neighborhoods with the biggest, nicest homes and dream about one day living there. Our homes are our mark in this world, our castles. Given this, should we spare any expense when it comes to buying one? Most people fall into the routine of living in the most house they can afford. It becomes a matter of, “if I make x and have y to spend on a home, I will look for a house that costs y” instead of “I will look for a house that costs y minus what I don’t need”. My article on living below your means looks at this phenomenon in more detail.
A house should be a place to live, not a place to die. In other words, choose a home that you will be happy living in for many years, not one that will stress you out with high mortgage payments. Choose one in a nice neighborhood that has great schools, allows you to live a comfortable life, and doesn’t strap you for cash. In today’s real estate environment it may be a pipe dream to find a home that doesn’t strap you for cash, but opportunities exist around every corner. Whether it is buying a smaller home, one that needs a little work, or one with a smaller yard, you always have options. If you can’t find a place that allows you to live comfortably while remaining affordable, then maybe you are not ready to own a home.
When buying, there are 10 things you must remember about a home:
1. It is an asset, not an investment.
2. Home expenses can eat your wallet and life.
3. Real estate taxes are calculated using percentages.
4. Home buying and selling has high transaction costs.
5. Size is less important than quality of living space.
6. Utilities increase with square footage.
7. Insurance increases with the price of the home.
8. Upkeep increases with the size of the home.
9. Do it for the kids; get a home in a great school district.
10. A home can loose its value!
Let’s examine each item in this list. Number 1 is getting at the meaning of cash flow. The savviest of investors invest for cash flow, not appreciation. An investment in a home should be no different. If your house is not generating income, it is not an investment. Banking on appreciation is a risky business and should only be performed with risk capital. Risk capital is money that you can afford to lose. Since a place to live is a necessary thing in life, you are better off treating it like an asset. If you buy a home treating it like an asset instead of a speculative investment you are less likely to act irrationally and take unnecessary risks.
Number 2 – This point highlights that homes are not cheap. Mortgage payments, insurance payments, taxes, utilities, maintenance, lawn care, etc. all add up to a substantial amount and can really impact your budget. Buy a home at a price you feel comfortable with, one that will allow you to maintain your freedom to live life the way you want. That could mean changing your job, starting a business, or retiring. You should always avoid a situation where you lock yourself into something for an extended period of time. Buying a home at the top of your price range can really put the shackles on your freedom.
Number 3 – It is important to keep taxes in mind. Remember, death and taxes are the only things certain in life. The pricier the house, the more you will pay in taxes. You will always pay taxes on your home, even if you own it outright. I mention taxes because they are one of the most substantial expenses to owning a home, and they are often overlooked. If you have a house worth $300,000 expect to pay in the neighborhood of $5000-$7000 in taxes a year depending upon where you live. That is about $500 a month! Talk about a budget buster.
Number 4 – Buying a home for the short term is more risky because of high transaction costs. For a buyer, closing costs can be around 3-5% of the purchase price. That doesn’t include the cost of moving which averages around $10,000 per move. If you are a seller using an agent, commissions are typically 6% and that doesn’t include any legal, title, or survey fees. All the benefits of homeownership can quickly evaporate if you are in it for the short term.
Number 5 – I see so many houses built just to be BIG. They don’t always look the best and have a lot of space that probably doesn’t get much use. It’s like everyone is in constant competition to have the biggest house. If you are a first time home buyer don’t put too much value on space. You really need to live in a house before you know what your requirements are. Remember, you still pay for all the space you don’t use. Besides, most people get more enjoyment out of a small house with character than a gargantuan “Mc-Mansion”. The following items in the list highlight the other benefits to having a smaller house.
Number 6 – The size of the home you purchase can have a substantial impact on utility costs. It is safe to assume that the bigger the house, the bigger your utility payments. Remember, more than just the sales price determines the expense of a house. Utility payments can be a big “gotcha” for first time homebuyers. So heed this warning and buy an efficient home without an excesses amount of space.
Number 7 – Insurance is generally pretty cheap for a home. If you live in a flood plain or other area prone to natural disaster it can become more substantial. The bottom line is that like most other household related expenses, insurance premiums increase with the value of your home.
Number 8 – Most people don’t think about upkeep when they purchase a home. That 4 bedroom 4 bathroom house sounds wonderful until you have to clean 4 bathrooms. This holds true with lawn care also, the bigger the yard the more the work. A large house can be wonderful, but remember it takes a lot of work to keep it that way.
Number 9 – School districts are usually the biggest factor for homebuyers. This is for good reason; well educated kids grow into well educated adults. Society benefits from well educated people. One of the greatest gifts you can give your kids is an education. Besides being a huge positive for your kids, great school districts keep real estate prices from falling because they drive up demand for the area. So, even if you are a bachelor/bachelorette with no plans for kids, the price of one of your largest assets is safer in a great school district.
Number 10 – This is probably the most important point to remember, especially since home prices have recently gone through the roof. Your house may lose its value. This is usually what causes the most financial problems for people. Imagine someone who has stretched their budget so thin to afford a house and is unable to start a savings account. If they lose their primary source of income and can no longer make the payments they will need to either find another source of income or sell the house. If the house has decreased in value and they need money to make up the difference between their equity and market value they are probably in some deep trouble. This happens when one sacrifices a savings account for a home. It can also happen if there are no other options to generate the same level of income. Bad things can happen. Make sure you are able to weather the most difficult of storms when purchasing a home.
You may have noticed a common theme with these ten items. Sustainability is key to owning a home. Can you afford the mortgage while still saving/investing? What about the utilities, taxes, insurance, and upkeep? Take all of these things into consideration when purchasing a home. Always make sure that you are able to maintain and grow a savings account or investment portfolio. It is critical that you have a worst case scenario fall back plan. If you can’t afford the home when you want to change jobs or start a business, then you might want to think twice before buying it. Despite all this doom and gloom, home ownership is one of the biggest factors of class distinction in America. You are much less likely to become wealthy if you don’t own anything.
For more information on Real Estate visit The Real Estate Database.
No-doc Loans – Buying a House Without a Job
What are no-doc loans? “No doc” is short for no documentation. These are loans for which the bank or other mortgage lender doesn’t require any documentation of income or employment. It doesn’t quite mean no documents at all, and in fact, it can mean different things to different lenders.
When we got the loan on the house we are in now, for example, we didn’t provide evidence of income. We didn’t have jobs at the time. In fact, the lender made it clear that we shouldn’t even mention what our reported income was. We did have a new business that was becoming very profitable in recent months. However, the previous year’s tax return would have shown an income too low to qualify us for a loan.
We qualified based on credit scores alone. Fortunately, both my wife and I have always paid everything on time and had good scores. We did have to provide information on when we started our business, and the usual appraisal of the home was required. So “no doc” doesn’t really mean no documents, but rather limited documentation.
In fact, many such loans are referred to as “no income verification” loans. You might still have to verify that you have a job or a business, but without any evidence of how much income you make from it. Some loans may be referred to as “partial documentation loans,” or “low documentation loans,” and require some proof of income, but still be based primarily on credit score.Why No-Doc Loans?
At a time when the typical 30-year mortgage loan was charging 6% interest, our loan cost us 7.25%. That is typical of no-doc loans. They will always have a higher interest rate, because they are considered a higher risk by lenders. I know of at least one person who obtained a no-doc loan at 11% annual interest while normal rates were a little below 6%. That brings up the question of why you might want such a loan.
The answer is a simple one – because you have no choice. In our own case we had money in the bank and a growing business, but the business had just started to really take off, so the previous year wasn’t so profitable. We couldn’t show income sufficient for any loan, but we had good credit scores. If we wanted to buy a house, we had to rely on those.
If you have a great job, but were unemployed the year before, you might face a similar situation. Also, getting a better job may seem great to you, but to a lender, if the job is too new and in another field than your previous job, you are a risk. You may have to rely on your credit score.
As you can imagine, when you get a no-doc loan, credit score matters. Our higher score meant 7.25%, which seemed high until compared with that 11% loan I saw. Keep in mind what is likely to happen in the future when looking at these loans. For example, if we were within a month or two of filing the next years tax return, we could have waited to buy a house and obtained a regular mortgage loan at 6%.
Of course, you can also look at a no-doc loan as a temporary solution. As soon as you have documented income from a business, or enough time on the job, or have otherwise corrected whatever the problem is, you can refinance. This certainly would be my goal if I had an 11% mortgage loan when 6% was available.
Mistakes Happen, Even With Buying a House
Everyone makes mistakes. It’s a given. We’re all human after all. But some mistakes can not only be humiliating, but can be costly in time and money. It’s bad enough to be involved in a deal gone wrong due to mistakes. How much worse if you’re the one making the mistakes. Of course we can learn from mistakes. But why must we only learn from our own mistakes? There are some mistakes which any potential house buyer can learn from without having to make them.
An example is someone who merely gets cold feet and backs out of a deal. Or someone who has the money for buying a house, but makes poor choices and spends it on luxury instead of the house as planned. Some people are merely nervous and begin making unnecessary risks. The media can be responsible for making some buyers have cold feet by introducing or enhancing fear of failure by introducing information which may be confusing or seem worse for you than it really is.
There are some tips to avoiding making some mistakes, though. The most important thing is to understand the buying process before getting started. Some of the mistakes merely come from lack of knowledge of the process or by having unrealistic ideas of what to expect. First you need to determine how expensive of a home you can afford. This is vital in not biting off more than you can chew and basically having to spit halfway through a deal. You also need to plan for financial changes as they can considerably change whether or not you will be able to make payments in the future. Next you need to think of things as a team instead of as an individual. If you think of the whole process as a loner, that’s where you’ll most likely end up being. A good realtor and lender are vital in the process of purchasing a home successfully. Make sure to talk with and get to know those on your team and they will be concerned with long term success instead of merely finishing a deal and moving on. And finally, don’t blindly search the internet for a perfect home. If you are going to search for one online at all, speak with your team first and obtain a list if at all possible. Otherwise you may find yourself in a sea of too much choice without any hope not to drown.
Tips for Buying a House
Buying a house is one of the most important purchases that people make so a great deal of consideration should be give to it. You’ll know exactly how much you have to spend and the seller will know that you are serious in your offer. It is also important to inspect everything about your new home before you make an offer.
Pest inspections done by a reputable inspector will ensure that there are no termite problems. Other inspections include plumbing, electricity, and foundations. Make sure the electricity is on or you won’t be able to see that all the power points and plumbing work. With care and consideration you’ll soon be moving into the home of your dreams. Researching various houses will make sure that you get one suitable for your lifestyle and budget. Take your future into consideration. Are you intending to have children while still in the chosen home? If so, make sure there are enough bedrooms.
Buying a home that needs renovations may be a good way to get into the market if you are a bit short of cash, but don’t forget that renovations can be costly too. So unless you can do them yourself or live without them for a while it may be better to buy a home in better condition.
Being pre-approved for a mortgage will give you an edge in purchasing your home. You’ll know exactly how much you have to spend and the seller will know that you are serious in your offer.
It is also important to inspect everything about your new home before you make an offer. Buying a home that needs renovations may be a good way to get into the market if you are a bit short of cash, but don’t forget that renovations can be costly too. So unless you can do them yourself or live without them for a while it may be better to buy a home in better condition. Pest inspections done by a reputable inspector will ensure that there are no termite problems. Other inspections include plumbing, electricity, and foundations. Make sure the electricity is on or you won’t be able to see that all the power points and plumbing work. With care and consideration you’ll soon be moving into the home of your dreams.
Buying a House – Obvious Disadvantage of Buying an Older Home
Most of us consider both of these options when buying a house.
Is buying a new home a better value than buying an older home? Perhaps you have been wondering the same thing.
By the time you finish reading this, you’ll will have learned how easy it is to answer these questions. Let’s compare new home buying with buying an older home.
A word of caution, there are many decisions to make when it comes to finding the best home for you and your family. There are questions regarding location, affordability, and space. But when it comes to the question of buying a newer home versus an older home, taste has a lot to do with your decision.
All in all your tastes are neither right nor wrong. You can’t put a value on perception and it can’t be measured. You develop these preferences through experience over time.
Here is a case in point. A newly built home may appear ideal to one person and to another person less than perfect. You may love the architecture of older homes and somebody else loves the modern conveniences of a new home. Pay close attention to what catches your eye.
The bottom line then is this. When choosing between buying an older home or a new home, let your taste rule.
For instance older homes offer distinct advantages and disadvantages. Some of the advantages may include neighborhoods that are better established. They may be less likely to change over time. The residents may have lived there a long time and turnover is less likely. An established neighborhood often leads to a stable community environment.
Again some older homes offer architectural and landscaping character that new homes don’t provide. Certainly, these qualities are again a matter of taste according to the eye of the beholder. Ask yourself this question, how does this neighborhood make you feel? Many people surprise themselves when they answer this self-imposed question.
Another feature of older homes is that taxes are often lower than a new home. Although taxes are not a matter of taste they are an important consideration. Have you discovered yet that your Realtor can find tax information quickly for new construction and resale homes.
Are you caught up with the thought of owning a vintage house full of character. This being the case, the obvious upkeep and repairs will not deter you.
We have all heard of The Money Pit, right. Services of an electrician are required. The harvest green oven and stove date back to the 1960s. Plumbing is older. Siding, fencing and windows may be worse for wear.
Be sure, when you are going to buy an older home insist your Realtor request a Home Inspection by a qualified and licensed home inspection service before closing. Prepare yourself for deferred maintenance. The price of a home inspection is small compared to the confidence it instills.
Selecting a new home offers obvious and clear advantages over older homes too. Most new homes are now required to be built according to higher efficiency standards than older homes were. So utility bills could be significantly lower than the utilities of an older residence. However, watch out for taxes on new construction as they may not have been determined yet. This may be a trade off.
Put simply, if you like more modern architecture you will prefer the look of a new home more than an older one. Again taste is the all-important deciding factor here. Are you attracted to the crisp and clean lines of new construction? If so follow your preferences.
One clear advantage that most new homes offer versus older ones is up-to-date heating, air conditioning, electrical, and plumbing systems. In addition, most home builders are likely to provide a warranty on these systems for a specified period of time. If a warranty is not offered or the warranty period is too short you can ask the builder to pay for a better one.
When it comes to older versus newer, taste is the all-important qualifier. The easiest way to decide about buying a house is to get out and compare. Ask a Realtor to recommend neighborhoods for older homes and new homes.
After shopping for homes a bit, you may even discover something new about your taste.
Buying a House – How to Save Time and Aggravation
Why Mini Skirts And Buying A House Go Hand In Hand For Joe The Renter
Hey girls! Becoming a home buyer may not be about wearing mini skirts. But how much money you can borrow for buying a house goes hand in hand with current fashion.
How do I know? My dad said so.
I was one of those kids who asked too many questions. Good thing it was the mid 60’s and not the 19th century. Surely, my inability to quit asking questions would have made me very unpopular during Queen Victoria’s reign.
Little did I know the questions I asked my father as a child would eventually help me grasp the connection between affording a mortgage and skirt lengths.
I was born into a farming family. But by 1956, Dad took advantage of the price of land to sell the farm, move our family to southern California and launch a banking career.
I was the youngest so unlike my siblings, my childhood consisted of standing in shiny bank vaults not Illinois corn fields. In fact, I was more familiar with the price of corn than how to grow it.
By junior high I was already asking my dad, “If there is less money during a recession, where does it all go?”
My father, uncles and granddad were known for their “isms”. I think this was partial to southern Illinois living. One of Dad’s favorites was to compare the economy to skirt hems. I argued the logic. Not surprising. I was a teenager.
Now here is what Dad claimed. When economies flourish, fashion dictates shorter skirts. Good times equal more leg. But when economies take a dive for the worst, the result is a return to more traditional values including longer skirt hems.
Like I already mentioned, this logic escaped me. I didn’t buy my father’s theory because I knew better and here is why.
Being the youngest child in our family, I tagged along while Mom ran errands. Since moving to California, she had taken up the hobby of sewing. When I had nothing better to do, I accompanied her to fabric stores where I can still smell the dye that stung my eyes. I also paid attention to how much fabric cost.
So, I disagreed with my dad’s claim that The Great Depression was responsible for long skirts. To me it was obvious. I knew long skirts required more fabric. I also knew additional fabric meant more expense.
So, if it were true that there was less money during a recession, why would fashion dictate longer skirts?
As you are reading this, take a moment to reflect on the era of the Flappers. Now those girls knew fashion. It was the Roaring 20’s, optimism reigned and prosperity ruled. And guess what! Skirt hems rose exposing the leg.
Oh boy, I was beginning to understand what Dad had been trying to tell me. During times of prosperity, traditional standards were assigned less importance.
Turn the clock forward. It is 1998 and I am an adult. Seems I had followed in my dad’s footsteps because I was listening intently to a Freddie Mac speaker. I was also head over heels in mortgage lending.
To paraphrase the FHLMC representative attending our conference, “We are seeing little correlation between debt ratios and foreclosure statistics.”
Now that one little statement blew traditional lending practices out of the water and in my opinion charted a new destiny for America.
Just as traditional values were set aside during the Roaring 20’s, underwriting standards of traditional mortgage lending were becoming old fashioned and cumbersome by the late 1990’s. FNMA, FHLMC and even FHA were gradually raising their skirt hems that were feeling too modest.
By 2001, financial skirts across America were changing with the styles. “No downpayment? NO problem! Lots of debt? Well, that’s no reason to stop you from buying a house.”
In fact, you may have watched a TV advertisement showing a woman sitting by herself at a table. Silently, house keys slid across a table to her. After she hesitantly asked, “Just like that?” a reassuring voice answered, “Yes, buying a house is just THAT easy.”
Well, buying a house may have been that easy but how about affording the mortgage? Who was addressing Joe The Homeowner’s mortgage affordability with more than just lip service?
Where was the balance between traditional standards and changing economic attitudes?
As history demonstrated, the speculation of the Roaring 20’s eventually humbled the mighty Bull. Panic on Wall Street ushered in The Great Depression along right along with longer skirts.
Similarly, it appears hemlines were destined to fall once again. Yet the fate of the 21st century economic mini skirt could have been avoided by considering Joe The Homeowner and how much he could afford in a mortgage.
After all if homeownership isn’t benefiting Joe, what’s the purpose.