For Home Sellers
All Articles on Buying | Back to Previous Page
Advantages of Buying |
Home Finance 101 |
Preparing to Shop |
Your Real Estate Team |
Making an Offer |
Getting a Mortgage |
Closing the Deal |
After You Buy
Preparing to Shop
Getting Pre-Approved, Financing Options, Home Search, Good Neighborhoods, Evaluating Neighborhoods, Pre-Owned, New Homes, Condo Advantages
When you're under contract to buy a property it's beneficial to have your mortgage application already approved.
- Pre-qualification is an informal discussion between borrower and lender. The lender provides an opinion of the loan amount that you can borrow based solely on what you, the borrower, tell the lender.
- Pre-approval is a more rigorous process. Loan pre-approval is based on documented and verified information regarding your employment, income, liabilities, and the cash available to close on a home purchase.
Going through the pre-approval process demonstrates your seriousness to house sellers -- it places a Good Borrowing Seal of Approval on the buyer. A lender's pre-approval letter is considerably stronger than a pre-qualification letter. In a multiple-offer situation, where more than one prospective buyer bids on a home at the same time, buyers who have been pre-approved for a loan have an advantage over buyers who have not yet been pre-approved.
The interest rate is linked to a financial index, such as a Treasury Security or a "cost of funds index" (COFI) -- so your monthly payments can vary up or down over the life of the loan -- usually a 25 to 30 year term. Interest rates can change monthly, annually, or every 3 or 5 years. Some ARMS have a cap on the interest rate increases, to protect the borrower. Other terms relating to adjustable rate mortgages:
- Adjustment period: The interval at which the interest is scheduled to change during the life of the loan. Example: one year ARM-interest changes annually.
- Cap: The limit on how much an interest rate or monthly payment can change at each adjustment over the life of the loan.
- Conversion clause: A provision in some loans that enables you to change an ARM to a fixed rate loan, usually after the first adjustment period. This may require additional fees.
- Index: A measure of how an interest rate changes. Used to determine changes in the loan's interest rate over the term of the loan.
- Margin: The number of percentage points a lender adds to the index rate to calculate the ARM's interest rate at each adjustment.
This is a loan that must be paid off after a certain period. The advantage to a balloon mortgage is an interest rate that is lower than a mortgage that is made for 30 years.
The VA does not lend money -- it guarantees a portion of the loan so that lenders who originate the loan feel comfortable with their risk. VA-guaranteed loans can be combined with second mortgages and are assumable upon qualifying by any future buyer.
FHA does not lend money or make a loan; rather, it insures loans. The down payment can be much lower than conventional rates. Either buyer or seller may pay discount points. FHA charges a 2.25% up front Mortgage Insurance Premium (or as little as 1.75% for a first time home buyer) that can be financed in the mortgage amount or paid in cash (no premium is required for condominiums). The borrower must also pay an annual Mortgage Insurance Premium of .5%, which is collected monthly. (Numbers are subject to change, please check with your lender.)
A second mortgage, often referred to as a "combination loan," can be used to help you with a portion of your down payment at the time you purchase a home. A combination loan is one that has a first and second mortgage combined. Usually, a combination loan is used when a borrower does not have the typical 10 to 20 percent for a down payment. For example, one type of combination loan is an "80/10/10." With this type of loan, you get a mortgage for 80% of the purchase price, put 10% down (of your own funds) and borrow the remaining 10% on a second mortgage. The second loan is called a "piggy back loan." Some buyers use this type of loan to avoid private mortgage insurance, an expense which is NOT currently deductible on your income taxes.
First-Time buyer programs
Many lenders offer special first time home buyer programs or packages. Please check with your lender to see what is currently available.
Searching for a home has never been easier thanks to the services and resources that we provide. Our agents never underestimate the importance of spending time with their clients, exploring different homes and neighborhoods, in search of the perfect home. Modern technology has also enabled many home buyers to go onto the Internet to search for prospective properties. Communication is the key to a successful home buying experience, so your agent will partner with you to find a home based upon your individual needs.
Your agent will provide you with the following tools and services to assist you in your home search:
- Online Tools:
- Home Driving Tour: Even with all the latest advancements in technology, many people choose to begin their home search process by driving around. Home driving tours enable you to become familiarized with different neighborhoods and housing styles, which simple photos and descriptions cannot provide. A driving tour also helps you to communicate more knowledgably with your agent so they can better understand what your needs are.
- Real Estate Homes Magazines: Real estate homes magazines list homes in your area of interest. Photos and corresponding descriptions give you a preview of available properties.
- Our Web Site: We give you every MLS listing at your fingertips through your computer. Our web site tools give you the ultimate technology with the ability to save and rate your listings, compare them side-by-side, and even add your own personal comments to each listing. You can even request email alerts when new homes come on the market that match your specifications as well as open house tours and price changes. Every MLS listing is put online with full color photographs within a few days of listing the property even when the listing agent is other then me.
Good neighborhoods are in the eyes of the beholder. For example, being near excellent schools is important if you have children. If, conversely, you're ready to retire, buying in a peaceful area with outdoor activities may appeal to you.
- Amenities: Amenities are special features of a neighborhood that make it an attractive, desirable place to live. Wide streets bordered by stately oak trees, lush green parks, lake views, quiet cul-de-sacs, parking, and proximity to schools, churches, shopping, restaurants, transportation, playgrounds, and boat docks are prime examples of amenities that add value to a neighborhood. The more of these features a neighborhood has, the more appealing it is from the perspective of most homebuyers.
- Quality schools: When you're ready to sell your house, many prospective buyers with children will be interested in the local school system.
- Low crime rates: Most people today are concerned with crime, especially in neighborhoods that they're considering. Communities compile crime statistics, generally by neighborhood.
- Pride of ownership: A home's cost has no bearing on the amount of pride its owners take in it. A drive through just about any neighborhood, posh or modest, will demonstrate whether the people who live there are proud of their homes. This can have an impact on the values of surrounding homes.
When researching neighborhoods, you may want to examine the health of the local economy, area amenities such as parks and entertainment, school quality, and crime rates, before you buy a home. Here are some sources of information:
- Local resources: Check the local library. The local chamber of commerce is another excellent source of information.
- Talk to people who live in the neighborhoods: What do residents say about the neighborhoods you are considering? Drive or walk through the neighborhoods at various times of the day and evening.
- Get days-on-market (DOM) statistics from your real estate agent: DOM statistics indicate how long the average house in an area takes to sell after it goes on the market.
- Get help from a professional: Ask a real estate broker, agent, lender, or appraiser to compare the upside potential of home values in each neighborhood. Get an analysis of each neighborhood's present and future property values from full-time real estate people.
Pre-owned homes have many great features:
- Pre-owned homes can be less expensive than new homes. Families who bought houses years ago paid less for their homes than what a developer may charge to build a new home today.
- Asking prices of pre-owned homes are generally much more negotiable than asking prices of new homes.
- Pre-owned homes are usually located in well-established, proven neighborhoods.
- Like with any home, you should have a pre-owned home thoroughly inspected (inside and out) by qualified professionals before you buy it. Be sure that the home meets today's building codes; doesn't have environmental, health, or safety hazards; is well insulated; et cetera.
- Pre-owned homes are "done" properties. When you buy a pre-owned home, you generally don't have to go through the process of buying and installing carpets, window coverings, and light fixtures. The work is already done and everything is generally included in the purchase price.
- Buying a pre-owned home may be the best way to get the architectural style, craftsmanship, or construction materials you want. Perhaps you want plaster walls, parquet floors, stained glass windows, or some other kind of materials or craftsmanship that could be difficult to find in new homes.
New homes also have some great advantages:
- New homes may be less expensive to operate and maintain. Some pre-owned homes have been retrofitted with energy-efficient heating and cooling systems. The older a pre-owned home's roof, gutters, plumbing system, furnace, water heater, appliances, et cetera, the sooner you may need to repair or replace them.
- New homes generally have updated floor plans or design features like a master bedroom, multiple bathrooms, garages, adequate electrical service, and central heating or air conditioning.
New homes have some very appealing advantages:
- Choosing a new home produced by a reputable builder of high-quality properties gives you the peace of mind. Furthermore, you can rest assured that your new home complies with current federal, state, and local building, fire, safety, and environmental codes.
- A properly constructed new home can be cheaper than a pre-owned home to operate and maintain. Operating expenses are minimized because a new home should incorporate the latest technology in energy-efficient heating and cooling systems, modern plumbing and electrical service. And with a quality new home, your initial maintenance expenses are practically nonexistent because everything is new.
- New homes have enough wall and floor outlets to accommodate all your high-tech goodies.
- Visit several of the developer's older projects. Ask homeowners in older developments whether they'd buy another new home from the same developer. See what kinds of problems, if any, they've had with their home over the years. Inquire whether the builder closed the sale on time and honored all contractual commitments, including the completion of any unfinished construction work, on time.
Condos increase your buying power. Compare the price of a two-bedroom condo to a two-bedroom detached single-family dwelling in the same neighborhood. On the basis of livable square footage, condos generally sell for at least 20 to 30 percent less than comparable detached homes. Owning your very own roof, foundation, and plot of land is much more expensive than sharing these costs with a bunch of other owners. For some would-be buyers, the choice is either buying a condo that meets their living-space needs or continuing to rent.
- Attached residences generally cost less to maintain than detached homes. Although replacing the high rise's roof, for example, costs more in absolute terms than replacing the roof of a detached single-family home, the cost per owner should be less.
- Attached residences have amenities that you couldn't otherwise afford. Most homeowners can't afford expensive swimming pools or tennis courts.
- Attached residences are ideal homes for some empty nesters. Perhaps a building with no maintenance hassles and a doorman who'll forward your mail while you're off on one of your frequent vacations might be right for you.