Buying your new home is a serious venture. It can be an absolute pleasure or a massive headache. Your house is not just your home, it is a serious investment in the dwelling, the area and your future.
When buying a home – you’re bound to have many questions. For example, “In what area can I find a home that suits my needs?”, “How much money will I need to afford the monthly payments?” and “How long will the home buying process take?”
Below are some articles that you might find useful in the home buying process. Please feel free to click on one of the links below to read more.
Buying a home is one of the most important purchases most people will make. In order to make the right decision the first time, potential buyers need to be prepared. Consider the following before starting negotiations:
As the potential buyer, you want the advantage. While you want answers to all your questions to the seller, reveal very little about your circumstances. Do not give the seller personal information such as your income, the maximum you are able to pay for a down payment or the home, or when you want to move. Make sure that your agent knows not to reveal any such information to the seller or his/her agent.
Also, do not let the seller see how much you want the property. If you appear desperate or overly enthusiastic, the seller then has the stronger bargaining position. When meeting with the seller or listing agent, keep your emotions in check.
Fortunately for buyers, there are a variety of mortgages to choose from. It is in your best interest to investigate each of them to determine which is the best for your situation. You probably won’t qualify for all of them. In fact, you may only qualify for one. But if you do qualify for more than one, you may save yourself money (and worry) in the long run if you do your homework before signing on the dotted line.
Fixed Rate Mortgages
Consider a fixed rate mortgage if either of the following describes you:
Adjustable-Rate Mortgages (ARMs)
Generally, the interest rate when you take out your loan will be lower than a fixed-rate mortgage. Please note that this is true initially, not necessarily long-term.
Since an ARM rate rises and falls depending on the prevailing interest rate, your mortgage payment will rise and fall accordingly. If your income is not sufficient to cover the highest possible payments, then this option is not for you. On the positive side, the lower initial payments will allow you to qualify for a larger loan than if you choose a fixed-rate. The downside is that your payments will increase if/when the rates go up.
Typically, ARM interest rates are tied to a specific financial index (such as Certificate of Deposit index, Treasury or T-Bill rate, Cost of Funds-Indexed Arms or COFi, or LIBOR [London Interbank Offered Rate]) and your payment will be based on the index your lender uses plus a margin, generally of two to three points. Get the formula used by your lender in writing and make sure you understand what it means.
Fortunately, the amount an ARM can increase is limited. There are “caps” on how much your lender can increase your rate, both for a period of one year and for the life of the loan. Plan ahead, and have your lender calculate what the maximum payment would be if your rate went to the highest amount allowed by the cap for your particular mortgage. If you are not confident you’ll be able to pay that amount on a monthly basis, perhaps you should reconsider this type of loan.
If neither the fixed-rate or the adjustable-rate mortgage seems like the best option, perhaps the convertible ARM will be right for you. This alternative combines the initial advantage of an ARM with a fixed rate after a predetermined number of years. Obviously, this type of mortgage has more advantages when the initial interest rate is low and the future rate is not guaranteed.
Another mortgage option available to some people is a government loan, providing that you meet the qualifications for these loans.
Naturally, you want to get the best deal for the least amount of money. This holds true for mortgage rates as well.
A lower interest rate means a lower monthly mortgage payment, which can save you money in the long run. Also, it is easier to qualify for a lower payment than a higher one.
You basically have two routes to finding the best rate. The first is to do all the research on your own. The second is to use a mortgage broker.
With the advent of the Internet, much of this information is readily available online. Once you have educated yourself sufficiently about real estate loans, all it takes is the time and energy to sift through online resources to find the information you need.
Rates change quickly. That great rate you find today might not be there tomorrow. Once you find the rate you are looking for, submit a loan application and lock in that rate.
Some sources for interest rates on the Internet include:
When comparing loans, make sure that you’re comparing loans of the same type. For example, you find that “Loan A” for a 30-year loan has a much lower interest rate than “Loan B” (also for 30 years). Upon further inspection, you find that “Loan A” is technically an adjustable rate mortgage. Its payment is based on a 30-year amortization, but becomes due through either payment or refinancing at the end of 5 or 7 years. These are frequently referred to as a 5-year or 7-year fixed-rate mortgage. While both said “30-year”, they are not the same type of loan.
Ask the lender for a statement detailing all fees associated with the loan. Factors such as “points” (loan fee), interest rate and “garbage fees” (extra fees which some lenders charge) can vary greatly from one lender to another.
If you do not have the time or experience to “do it yourself,” look for a qualified mortgage broker that can assist in finding the right mortgage for you. Ask friends and associates who have refinanced or purchased recently if they have a broker they can recommend. You’ll want to find a broker who is energetic, flexible and knowledgeable about finance and loans and someone who has your best interests in mind.
Congratulations, you are on your way to owning your very own home! Follow these suggestions (and your realtor’s advice) so that the closing and settlement will go as smooth as possible.
You will be asked for earnest money on the home you are purchasing, which is the consideration or item of value that makes the sales contract valid. This earnest money is typically in the form of a personal or cashiers check, or can also be a wire transfer. When it comes to a loan, you can choose to put down as much or as little as you want (depending on your mortgage), but remember, the more you put down toward the total price of your home, the less your mortgage payments will be every month. The earnest money check will be cashed, so make sure that there are sufficient funds in your account to cover this check.
During this period of purchasing your home, you are going to need a title company to act as an independent third party so that you know when and whom to give your money to get the deed to your new home. The title company or real estate brokerage firm will hold your earnest money and along with your real estate broker will coordinate much of the activity that goes on during the contract period.
Assuming the sale goes through, this earnest money will be applied towards the down payment of the home. If for any reason the sale is not consummated, you may be entitled to receive all of your deposit back. In certain instances, the seller may be able to retain this money as liquidated damages. Prior to executing a purchase contract, it would be wise to speak with your real estate agent regarding whether or not it is your best interest to have a liquidated damages clause as part of the contract.
The period that you are under contract is often 30 days, but may be longer or shorter. During this time, each item specified in the contract must be completed satisfactorily. Each contract is different, but most include the following:
A requirement that the seller must provide to a buyer is a marketable title to the property. With your real estate agent, attorney, or title officer you will review the title report. The title must be “clear” to ensure that the seller does not have legal issues regarding their ability to sell and provide clear title to the new owner.
Secure homeowner’s insurance as the lender will require proof of coverage before you can close the sale. It would be in your best interest to apply for insurance as soon as possible after the contract is signed.
Water is transfered by the title company at closing, but you will be responsible to contact local utility companies to schedule to have service switched over when you close on the property.
Schedule the final walk-through inspection. At this time, you should make sure that the property is exactly as the contract says it should be. What you thought to be a “permanently attached” chandelier that would come with the property might have been removed by the seller and replaced with a different fixture entirely.
You’ve made it! Once the sale has closed, you’re the proud owner of a new home. Congratulations!