What are the advantages of buying a home, rather than renting?
First is the sense of satisfaction and pride of ownership you will have owning your own home. With that ownership comes the freedom to do with your home as you see fit, provided you adhere to zoning and other requirements. You can repaint it, replace the 1970s hargest gold appliances or that old shag carpet -- essentially you have the freedom to create your own environment that reflects your tastes and preferences. You also benefit financially from owning your own home: You can deduct the mortgage interest and property taxes from your income taxes. In addition, because your home is likely to appreciate (increase in value) over the years, it represents a good investment. When you rent, your monthly rent payment is gone forever once you write that check. When you buy, your monthly mortgage payment is paying for a solid investment that could well end up being worth much more than you paid for it.
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When I find the home I want, how much should I offer?
Determining the value of a home or other real estate is as much art as science, and ultimately, a property is worth whatever price a willing buyer and a willing seller agree to. In deciding what you think the home is worth, here are some factors to consider:
Have you had a professional home inspection performed yet? If not, we can help you arrange one. Did the home inspection reveal any serious defects that will be costly to repair? Is the asking price comparable to recent selling prices of similar homes in the area? Is the home in move-in condition, or will it require extensive repairs or renovations before you can live in it? How long has the home been on the market, and how does that compare to the average time on the market for similar homes in the area? If the home been listed for sale for a long time, the seller may be more willing to accept a lower price. How much of a mortgage will you have to take out to pay for the house? Be sure you can afford the down payment as well as the principal, interest, taxes and insurance on the amount you offer. You may want to make an initial offer of less than you would be willing to pay, to give yourself room to increase your offer somewhat during negotiations with the seller. How much do you really want that particular home? The closer your offer is to the asking price, the more likely it will be accepted. In a strong "sellers market," you might even want to offer more than the seller's asking price, if you know you are competing with other buyers for the same property.
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What is earnest money?
Earnest money is a deposit you include when you make your offer to demonstrate to the seller that you are serious about wanting to buy the house. When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies.
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What is an escrow account?
An escrow account is an account established by your bank or mortgage lender to pay your real estate taxes, homeowner's insurance and mortgage insurance (if any) on your behalf. Your monthly mortgage payment consists of four items: Principal, interest, taxes, and insurance — also known as PITI. The principal and interest are paid directly to your lender, while the taxes and insurance are deposited into the escrow account. The money is then drawn from the escrow account annually to pay the property taxes and insurance. This ensures that the money is available to pay the taxes and insurance on your home. Also, an escrow account is an account held by a third party for safekeeping of specific money while a transaction is in progress, such as your earnest money deposit.
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What if the seller rejects my offer?
A buyer's original offer is often rejected for one reason or another. Generally, the seller rejects your offer by making a counter-offer of his own. Now the negotiations begin! We will help you as you proceed through this phase of the homebuying process. You may need to offer the seller more money, but you can request that the seller pay for some or all of your closing costs, or perform repairs that would not typically be done, or include appliances or other items that would otherwise not be included with the house. Often, negotiations on a property include several offers, counter-offers, and counter-counter-offers before an agreement is reached and a contract signed. Be patient, try to avoid getting frustrated, and be careful that you don't get so caught up in negotiations that you lose sight of what you can afford or what you really want in a home. Decide early on what's important to you and what you're willing to "give" on.
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What if my offer is accepted?
Once you and the seller reach an agreement on the price and other conditions for the sale of the home, and both of you have signed the contract, many wheels are set in motion. A closing date will be scheduled, and you need to make final arrangements for your mortgage loan, homeowners insurance, and other details related to your home purchase and upcoming move. Federal law requirements that certain information be disclosed to you, including a "good faith estimate" of the amount of money you will need for closing costs. We will keep you informed every step of the way, and let you know what's coming up next.
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Can I apply for a loan before I've found a property?
Yes! You can apply for pre-approval for a mortgage at any time, even before finding the house you want to purchase. A pre-approval considers your personal information such as income, debt and credit history, and provides preliminary approval of a mortgage loan up to a specified amount. The actual loan itself will require that the property meet criteria set by the lender, such as the ratio of the property's value to the loan amount. This gives you a good idea of the amount you will have available to purchase your home. Once you find the property you want to purchase, the remaining parts of the loan process are completed.
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How do I know if I can get a loan?
One good idea is to get pre-qualified for a loan — meaning that you apply for a mortgage before you actually start looking for a home. Then you will know how much you can afford to spend and give you a good idea of the price range you should be looking at. Pre-approval will also help shorten the loan process once you do find the home of your dreams.
If the loan amount you can qualify for is substantially less than the cost of homes that you like, then you might want to postpone your home purchase. It may make sense to pay off your debts and save up your money for a larger down payment. But before you give up, why don't you contact us? We may be able to help you find something that fits your budget, and we know about many types of mortgages available. We can help you find a lender with a program that might be right for you.
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Must I sell my existing home before I can apply for a mortgage for my new home?
Not at all. However, depending on your debt and income, your lender may require that you sell your current home before your new mortgage loan can be finalized. It's not uncommon for buyers to include as a condition of their offer that they sell their current home before closing on the new home — but be aware that it makes your offer less attractive to the seller, who may not wish to be bound by a provision over which he has no control.
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Is it possible for me to buy a home if I don't have much for a down payment, and have a poor credit record?
There are many programs through a variety of sources that may make it possible for you to buy a home, including federal mortgage programs. You can start by contacting one of the HUD housing counseling agencies; they can help you size up your financial situation and assess your options. You should also contact the local city or county housing department to see if they offer any homeownership programs that might work for you.
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The Veterans Administration will let me me finance 100% of the sales price of a home. Why can't I finance the closing costs, too?
The VA does not allow loans greater than the value of the home. Thus, 100% of the sales price can be financed, but all other costs must be paid at closing.
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What exactly will happen at closing?
At the closing, you will most likely sit at a table with one of us, a closing agent, the seller's broker, and probably the seller. The closing agent will have many papers that you and/or the seller will need to sign. The closing agent will provide a brief explanation of each document, but you may want to read each one and ask us for additional explanations, to be sure that you know just what you are signing. Before the closing, the mortgage lender is required by law to provide you with a booklet about the closing costs, a "good faith estimate" of how the amount you'll have to pay at closing, and a list of documents that you need at closing. If you do not receive these documents from your lender, be sure to call the lender before the closing. Also, be sure to read the HUD booklet on settlement costs; it will help you understand the closing procedure and your rights in the process. Please feel free to ask questions. We will be happy to answer them to the best of our ability.
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What are closing costs?
Closing costs are the costs and fees associated with buying a home or other real estate. Your closing costs typically average about 3-4% of the price of your home. These costs cover the fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won't be caught by surprise, and before the closing date your lender is required to give you a good faith estimate of the amount of money you will need for the closing.
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Can I pay my closing costs with a personal check?
No, you must bring a cashier's check or certified check to cover your closing costs.
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Where does the closing take place?
Most closings take place at the office of the local title company or attorney who performs the closing. All the documents relating to your mortgage and the real estate purchase will be prepared and waiting for you there.
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What happens after the closing?
At the end of the closing process, the sale is complete, and you will be given the keys to your new home. Congratulations on your new home! What happens after that is entirely up to you.
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