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Ten "No No's" for the Home Buyer
There are several things that should be avoided before purchasing a home. If you aren't careful to avoid these common mistakes, it is possible that your closing will be delayed or even canceled. Your adherence to the following rules will put the keys to the house in your hands quickly.
First, don't damage your debt to income ratio by making a major purchase before closing. If you decide you can't live without that brand new BMW, you might have to wait on owning a home. The bank could easily determine that your sky high car payment would hinder your ability to pay your mortgage. Wait until after you get the house to do some spending. No one expects a brand new house full of furniture and a sports car in the driveway unless you are a famous sports figure or Donald Trump.
Secondly, don't change jobs if you don't have to. The lenders like to see consistency versus constant job hopping. If you are just miserable with your job, maybe you can switch to a different job within the same field. Or you can tough it out until you have the house and then start putting out resumes.
Also, you should never surrender your earnest money to a For Sale by Owner Seller. There isn't anything stopping the sellers from spending the money before the transaction goes through. If the deal should fall through, the buyers would have to fight tooth and nail to get that deposit back. You should put the deposit into a trust account. You should be able to find an attorney willing to hold the deposit for you until the transaction is finalized. Your contract needs to state what will happen to the deposit in the event that the transaction falls through.
In addition, never let emotions guide you. Stay practical and realistic during the home buying process. Some sellers are willing to fix some of the problems with the home and others may not be as willing. Don't let that refusal close the door on your dream home.
Conversely, you shouldn't let your loyalty to the home blind you to costly repairs down the road. You certainly don't want to be in a money pit.
Furthermore, don't forget to have the utilities activated. The utility companies might need a few days to switch the service. Don't forget to cancel the service at the old residence. That seems simple enough, yet many people forget that step entirely.
Another costly mistake might be forgetting to secure hazard insurance. Talk to your insurance company right away because the lender will want to see proof of coverage for the new home at closing. Failing to line up the insurance will lead to delays in closing.
You should not get too personal with the seller. After all, this is a business transaction, so it should be treated professionally. If you get into too many personal discussions, you might say something that could be taken the wrong way by the seller. You might have been joking about the ugly green carpet in the guest bedroom, but the seller might have taken that as offensive. In the end, it could hurt the dynamics of the transaction. You should be friendly, but professional.
If the appraisal comes in too low, don't freak out. There are several solutions to this dilemma. The seller might be willing to come down on the price of the home. The buyer can put more money down if they are committed to that home. The buyer and seller can negotiate the deal or the appraisal can be disputed.
Don't forget to use your agent. It is the agent's job to keep up with the daily details of the deal, including the lender, the seller, and the seller's agent. It is also your agent's responsibility to set up a final walk through prior to closing.
Lastly, don't forget to take care of your end of the deal. You must be on the same page as the lender. Provide them with the paperwork they need and answer their questions in a timely manner. Failure to do so will keep you from opening the front door of your new home.
These are some of the most common mistakes home buyers make. Educating yourself about the process will ensure a smoother transaction and a definite housewarming party.
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10 Sure Fire Ways to Negotiate a Contract like a Pro
The art of negotiation is the procedure of communicating back and forth in order to come to a mutual agreement. Negotiation is done when two parties have different expectations and must come to a mutual agreement before a contract can be signed. The most experienced negotiators will bring an attitude of high expectations to the negotiation table. They work hard to solve the problems and are easy on the people. It's more effective to remain cooperative and efficient in order to preserve a civil relationship between the buyer and the seller, so they can work together to solve any problems and to complete the transaction as painlessly as possible.
When negotiating a contract over buying a home you want to get the lowest possible price and close on the house within a reasonable amount of time so you can move in.
1. Let the seller know what you need or expect in a clear and reasonable manner. Sometimes a buyer may submit a letter to a seller depicting why the property is not worth the asking price and pointing out the faults. This is a sure way to start the negotiations off with a defensive seller. It would be best to anchor a reasonable price, while continuing to remain polite and respectful of the sellers' home.
2. Be prepared to solve any repair, title, survey or loan problems fairly; so there are no future problems to be addressed at closing.
3. Never respond to offers emotionally. This combative style of negotiating can turn the seller angry or defensive and can escalate into negative comments, table pounding and threats to walk out on the offer.
4. Keep your cool. Never argue. Arguing can sometimes make the seller want to work against you instead of working with you.
5. Do not be too quick to respond. Do not ignore or respond to the sellers' arguments or statements immediately. Make it known that you are listening carefully and considerately, but do not reject or accept any offers until you have had time to carefully consider them.
6. Have any unclear portions of the proposals clarified completely.
7. Never discuss personal issues that involve the seller or buyer, such as an urgency to move in or a financial status.
8. Let trust increase the buyers leverage by: listening and understanding what the seller has to say; convey an appreciation or admiration for the sellers home decorating and gardens; and respond to counter offers within a reasonable time frame.
9. Find a common ground with the seller. This can be a very powerful tool used to the buyers' advantage in the event of multiple offers. Sometimes a seller may select a buyers' contract for personal reasons, like if the buyers' family reminded the sellers of themselves when they bought a home with their young children, or just by sharing the same religion.
10. Understanding your leverage as the buyer. The more the buyer can find out about the seller's needs, the better chance the buyer has to find solutions in negotiation. The buyer must be able to appeal to the seller's concerns. For instance, if the house has been on the market for over 300 days, the seller will have a lot more leverage than they would have with a brand new listing. If the sellers time frame is forthcoming, then the buyer can meet it with some leverage, unless the seller's have multiple offers.
Most buyers usually offer less than the listed price of the house. So, how much under the listed price should you offer? That all depends if the house is listed in a strong seller's market and the market analyses of the recent sales in the neighborhood from where the house is being sold. The buyer should do their homework before submitting an offer so low, they might risk offending the seller and have their offer rejected immediately.
If there are multiple offers on one property, disclosure is favored among all parties. However, the seller or agent representing them will make the final decision as to how the offers will be handled. The seller may disclose the terms of one offer to stimulate another buyer to submit a better offer. Normally the procedure for multiple offers is to notify each party of the multiple offers that have been received. Each of the parties is then given an opportunity to amend their offer and submit it within a certain amount of time. After all offers are on the table, the seller is once again free to review the amended offers and select a buyer to negotiate with. Sellers are in no way obligated to accept the first offer that comes in. Any offer selected may be countered, negotiated, or accepted as is.
Article from Lbry.com
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Home Warranties: What are they and do you really need one?
A home warranty is not much different from a warranty you might have on your car, your computer or your home entertainment center. A warranty on your home usually covers all of your home's major mechanical systems, including hot tubs, pools, wells, septic tanks and all of your appliances. Some policies even cover the roof of your home and almost anything else you'd like to include, as long as it's specified in the policy.
Home warranties are obtainable for most any dwelling, including mobile homes, condominiums, town houses and manufactured homes. They can be purchased by either the buyer or the seller; some sellers will include a home warranty policy to make purchasing their home more attractive. Including a home warranty with the sale is an excellent idea, especially if the home is older and the systems and appliances are aging.
Since the policy can be purchased at closing, the seller doesn't have to come up with the premium out of pocket. Further, the cost of the policy can be split between the buyer and the seller, depending on the terms of the sale.
Home warranty policies are generally effective for one year and are renewable. However, you can expect to pay a little more for coverage each year, as the items covered continue to age. This is reasonable. Policy costs vary according to the list of things covered, but an average cost would be between $350 and $500 per year. Obviously, when obtaining a policy it is important to be specific about coverage. You can expect to pay a small co-payment when the repair person responds to make a repair. This is an industry standard. Your payment will range from $35 to $55 per visit.
According to a Gallup poll, 79% of buyers and sellers surveyed rated home warranties as one of the most important aspects of buying a home. These policies are not like hazard insurance, which covers losses due to fires, storms and accidents; home warranties cover normal wear and tear breakdowns. A new home and its major systems are usually warranted by the builder for at least one year; thereafter, your home warranty policy coverage will take effect. Be sure to understand the limitations and intent of your home warranty. As an example, should your microwave oven catch fire and damage your kitchen cabinets, your home warranty would cover the cost of the microwave; your home owners insurance would pay to fix the cabinets.
Before buying your home warranty policy, you should shop around and find the best and most cost-effective provider. Get recommendations from your mortgage company, your builder, your friends, and from the Better Business Bureau. Obviously, some companies are better and more reliable than others. Ask specific questions: Do they subcontract their work? What is their normal response time? If your freezer stops running you need someone to respond quickly.
When trying to decide whether or not you need a home warranty, the rule of thumb is: the older your home, the more you will benefit from a home warranty policy. Most systems and appliances covered under a home warranty can be expected to last at least 5 years.
Therefore, during the early years of your new home, the home warranty policy may not be necessary. As the components of your home age, the need for a home warranty policy becomes more critical. It is obviously more attractive to pay $400 or $500 in policy premiums than shell out several thousand dollars for a new furnace or even several hundred for a new refrigerator. The policy will easily pay for itself if a major home system has to be repaired or even one major appliance has to be replaced.
If you're the owner of rental property, you should definitely consider a home warranty policy. Unlike the appliances and systems in your own home, you have little, if any, control over the frequency and manner in which these things are used by your tenants. Odds are that you will have to replace or repair items and systems more frequently in your rental property than in your own home. As a landlord, your home warranty policy may very well save you money, but just as importantly, it can buy you peace of mind.
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Title Insurance: Do you need it? What is it?
Buying a home is a significant investment. A title insurance policy helps you protect that investment against potential losses that may occur after your house deal closes and you discover that someone else has an ownership claim to the property.
It may seem unlikely that such a scenario could play out, but it is a surprisingly common occurrence - frequent enough to make purchasing a title insurance policy a good idea to safeguard your investment.
When you buy a home, your lawyer or legal representative will conduct a title search (also called a title examination) to determine ownership of the property in question. A title search involves collecting and examining, in detail, all of the public records that involve the title to the property you are purchasing. The search may include past deeds, wills, trusts or other liens against the property to ensure that it has passed properly from owner to owner. The person conducting the search will also attempt to confirm that all previous mortgages and judgments involving the property have been fully paid.
Most times, your title search will come back clear. On occasion, however, a ‘cloud' or ‘defect' such as a missing signature will be detected, and while the defect is likely the result of an administrative error, it should be cleared before your deal is completed. A thorough title search should also reveal nuisance issues such as easements that may affect your interest in purchasing the property. Easements or right of ways may not present an immediate problem, but could adversely affect the property in the future.
Title searches are helpful in identifying any potential title-related issues relating to your property, but mistakes happen (in the public records themselves, as opposed to just mistakes on the part of your examiner), and you may find yourself involved in a legal battle in the future if a title conflict does come to light after the close of your house deal. That's where title insurance comes into play; if you have a title insurance policy, your legal fees will be paid if you are forced to go to court, and if you lose the property as a result of a title dispute, you will be reimbursed up to the limit of your policy.
Similar to other types of insurance, title insurance policies do have certain exclusions, so it is important to clarify what your policy covers and what it does not. Some title insurance policies, for example, do not cover, or have limited coverage of problems related to easements, liens or mineral rights. Shop around if you want greater coverage and are willing to pay extra for it. No matter which policy you purchase, defects that occurred after you bought the property are not covered by title insurance.
Now that you have a better idea of what title insurance is and how it is used, do you need it? Maybe. If you pay cash for your property and do not require a mortgage, you may choose whether or not you want to purchase title insurance for your own protection. If, however, you are obtaining a mortgage to finance your house purchase your lender will likely insist on title insurance coverage to protect its own interests in the event of a title dispute. Your lender may also stipulate additional coverage to guard your portion of the home's value. Policies vary by insurance carrier, but generally, a lender's policy is for the amount of the mortgage and is payable to the lender in the event of a lost dispute while an owner's policy covers the full cost of the property plus legal fees. An issue to consider when purchasing title insurance is whether your policy includes inflation riders that will increase the amount of your coverage as your property value rises. You may pay a premium for this service.
Home buyers are usually responsible for the cost of title insurance, but may defray the charge by including title coverage as a condition of sale or by having the seller's policy adjusted and transferred to the buyer's name. Additionally, some states may require the seller to pay some or all of the title insurance costs, which are typically paid in full as part of your property's closing costs. Ask your legal representative to outline your responsibilities and the seller's responsibilities.
Article from Lbry.com
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FHA Loans: What are they and do you qualify?
Home ownership has long been a major part of the American Dream. Yet for many Americans, the skyrocketing price of real estate makes it impossible for them to save enough money to qualify for an adequate mortgage let alone buying a home outright. That’s why the Federal Housing Administration of the United States Department of Housing and Urban Development has a loan insurance option that allows first-time buyers or anyone without a lot of money for a down payment to purchase a home.
By guaranteeing lenders won’t lose all of their money if you default on your home loan, FHA’s insurance program increases the number of potential home buyers who are able to secure a loan from the lending institution of their choice. While the FHA program does help qualified buyers secure home loans, not everyone is qualified.
The first measures of whether a potential home buyer will qualify for FHA assistance is whether he or she has a good credit history and whether he or she is employed or has enough income to handle a house loan. It is a good idea to start establishing a credit history as early as you can. You can do this by paying your utility bills, school loans, and car loans on time, or by applying for credit cards and paying the bills in a timely fashion. You may not qualify for a standard credit card right away, but most departments will issue their in-house charge card with very little proof of income, and using these cards is a good way to build a solid credit history. It is also a good idea to keep copies of bank statements, pay stubs and contracts as proof of steady income when you go to apply for a home loan.
Most lending institutions require a down payment equal to about 25 percent, or one quarter, of the full price of the home you wish to purchase. With real estate prices booming as they are, this goal is out of reach for many Americans. However, with an FHA-insured loan, qualified home buyers can secure a house loan with as little as a three percent down payment.
So how do you know if you qualify? Either before you begin looking for a home to buy, or after you have found one you think is a good prospect, do some simple calculations to find out how much of a home loan burden you can afford each month. To determine how much you can afford to pay, multiply your monthly income by .29. Most loan experts agree that spending 29 percent of your gross monthly income on housing costs is a reasonable burden for buyers looking to secure a FHA loan. The amount you get by multiplying your gross monthly income by .29 will give you that magic 29 percent figure. Total housing costs include more than your mortgage principal and interest costs. You also have to calculate your estimated property taxes and insurance, as well as utility costs such as heat, water and electricity. Your total monthly debt load, including payments for any long-term debt you may have, should not exceed 41 percent of your gross monthly income. These debt burden figures are slightly more favorable than conventional loans, which generally require a debt load one to five percent less than what is needed for an FHA loan.
Once you know how much you can afford to pay, you also have to figure out if you can raise enough cash to make a down payment equal to no less than two to three percent of the price you pay for your home. This money will be due on the date you close or settle the deal. You may actually need more than that amount to pay for private mortgage insurance, title insurance, title search fees, attorney’s fees, loan origination fees, discount points costs and any other relevant disbursements, so leave a financial cushion to handled these additional expenses.
Buying a home is exciting, but it is also an investment that requires planning and careful management. An FHA loan can help you buy the home of your dreams, but be sure you can afford the house you want to buy so that the dream does not turn into a financial nightmare.
Article from Lbry.com
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VA Loans: Facts that you should know
American veterans currently serve and have served their country for modest pay and limited financial security. In some cases, a prolonged period outside of the private workforce, or injuries incurred while serving in the U.S. armed forces have resulted in diminished employment and earning potential, leaving some veterans unable to afford a home under regular mortgage and home loan circumstances. That is part of the reason why the United States Department of Veterans Affairs provides guaranteed home loans to help American veterans pay for a home of their own.
VA home loans encompass several advantages over traditional loans, and are available to retired and active duty service personnel, some members of the Selected Reserve, and spouses who fall into certain categories such as the un-remarried wives and husbands of Armed Service personnel who perished from service-related injuries or conditions, or who have been missing in action or a prisoner of war for more than 90 days. The following guidelines may help you determine whether your service makes you eligible for a VA guaranteed loan:
Active duty - eligibility begins after 90 days of continuous active service, or after 181 days of continuous active non-wartime service.
Selected Reserve - reservists or National Guard personnel with a minimum of six years service, or those who have been honorably discharged due to disability, and who have been retired, who now serve on a different Ready Reserve, or who remain in the Selected Reserve are all eligible to apply for a VA loan.
Certain service does not meet the requirement for VA financing, including World War I service and active duty for training in the Reserves or National Guard. Individuals who do not qualify for a VA loan may, however, find themselves eligible for a Housing and Urban Development /Federal Housing Administration veterans' loan. Contact your regional VA office for more details.
Eligibility for a VA loan is made by Veterans Affairs. Qualified individuals will receive a certificate which they can use when applying for a VA loan. Certificates can be obtained from any VA Eligibility Center upon submission of VA Form 26-1880 and suitable proof of service and discharge conditions. A copy, or Certificate in Lieu of Lost or Destroyed Discharge papers is available to veterans who can prove their military service but who may no longer have their original discharge documentation. This certificate can be helpful in obtaining a VA loan.
Each Veterans Affairs home loan supplies an amount of money that it guarantees lenders against loss on loans made to veterans. The maximum entitlement amount is currently $36,000 (or up to $60,000 for certain larger loans), but that figure is always subject to legislative changes. Contact your local VA office regarding loan figures and eligibility before agreeing to a particular loan. This entitlement amount is a one-time allotment unless a prior VA loan has been paid in full and the property it was used to obtain has been sold. The entitlement may also be restored if a qualified buyer agrees to assume the outstanding loan balance and substitute his or her own entitlement (same amount used on the original loan). If only part of the entitlement has been used to secure a loan, the remaining balance may be used for a second loan. This ‘remaining entitlement' option may be particularly useful for veterans who secured a loan using their entitlement when the maximum amount was lower than its present value: in this case, a veteran may use the difference between what he or she was eligible for then and the new maximum to help secure another loan.
When trying to determine which property to buy or fix, veterans should consider that most lenders require the total of the guaranteed entitlement and any cash down payment the veteran is able to make to equal about one quarter of the total sale price of the property in question. This limitation may help veterans decide what they can afford to spend to buy a home, mobile home, townhouse, or VA-approved condominium, to build or repair a home, to refinance an existing home loan, or to purchase a domestic lot for a home.
Finally, VA guaranteed home loans are not administered by Veterans Affairs. Rather, veterans obtain the loans by applying to regularly lending facilities and supplying the necessary proof that they qualify for a VA guarantee.
Article from Lbry.com
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