first time buyer

What To Consider When Buying Your First Home

Buying your first house? You’re likely driven mainly by budget, but there are some other important considerations you may not have thought of that can help you find the perfect place. Not only can these tips help you find a home that really suits your lifestyle, but also helps you afford to live there comfortably.

Can you afford to heat and cool it?

You may only be thinking of home size in terms of the number of rooms or square footage you want. But, in many cases, a larger home costs more to maintain. More space means more space to heat and cool. Although, a home that’s newer or that has updated systems can help defray costs because it’s more efficient. Your real estate agent may be able to get an idea of the monthly utility costs so you can have this information up front.

Who's going to mow the lawn?

If you’ve never had your own lawn or garden, you may not know if you have a green thumb or if you’ll regard the time it takes to care for it as a pleasure or a bummer. Then again, if you’re already dreading the idea of having to spend a couple hours out there each week, perhaps a single-family home isn’t for you. Yeah, you could pay someone else to do it, but you’re already stretching to buy your own place, right? Perhaps the lower-maintenance lifestyle offered by a condo or townhome is the best option for you.

What’s good for resale?

Are you thinking about how easy it will be to sell your home when you’re just about to buy it? Maybe not, but, the truth it it’s always a good idea to think like a seller when buying. Chances are, this starter home won’t be your forever home, and the same questions you have about the floorplan or location are likely the questions would-be buyers will be asking when you go to sell.

As it relates to the floorplan, it’s a good idea to think beyond what you think you might want and consider what’s popular in the area. If homes with downstairs master suites sell especially well and you haven’t considered that plan, this info may make you rethink your strategy.

How close are the schools?

Dying to walk your kids to and from school every day? That’s the dream for many a parent. But what you might not be envisioning is being able to watch—and hear—every kid in the school walk by twice a day, every day. What seems like a super-convenient location right on the walking path to the elementary school may just turn out to be too much of a good thing if it impacts your privacy and peace of mind.

Did anything weird happen there?

Yes, the seller will be required to disclose physical defects and also defects that create the potential for stigmatization. “What you’re talking about is the issue of ‘psychological damage’ to a property, to be distinguished from ‘physical damage,’” said NOLO. “In some cases, the psychological damage is so great—such as after a violent or highly publicized murder or suicide, or widespread reports of haunting—that the house is considered ‘stigmatized’ and therefore less valuable. In most states, the owner would indeed be expected to disclose a defect causing the house to be stigmatized, so that buyers could adjust their expectations and purchase price accordingly.”

A natural death in the home, however, is not generally something that needs to be disclosed. If that’s the type of thing that could keep you from wanting to live there you, just ask. “If a prospective home buyer asks you outright about whether anyone has died in the home, you cannot lie (unless you want to risk being later sued for fraud),” they said. “Also, be prepared for any buyer who is interested in this issue (or shall we say obsessed by it?) to find out the information online, at a site like DiedinHouse.com.”

Copyright © 2018 Realty Times. All Rights Reserved.

Educate Yourself Before Buying Your First Home

By Jaymi Naciri

These are exciting times. You've finally outgrown apartment life or living with your parents or sharing a place with waaaaayyyyy too many roommates, and you're ready to take the leap to homeownership. Now it's time to prepare. As you embark on this journey, beware of six important don'ts that could potentially derail your purchase.

Don't think it's too early to get prequalified

So, you're just going to go out "looking" at houses, you say? The time when you just expect to drive around a little and maybe visit an open house or two is obviously the time when you're going to fall in love with a house and want to make a move on it right away. If you're not already prequalified with a lender, you may not have a chance at it. Competition is fierce across the country thanks to low inventory, and well-maintained, move-in ready homes do not sit if they're priced right. Talk to a lender now to make sure you can qualify - and learn your max budget - even if you just think you're casually looking (because that can change in a hurry!).

Don't wait to the last minute to check credit

As a continuation of the casually looking conversation…you want to check your credit the second you start thinking about buying a home. You never know what's going to be on there. Even if you've never missed a payment and have always done a good job of managing your outstanding debt, there could be errors on your report that you're unaware of or even something from many years ago that you didn't realize had been reported to a credit agency. Those little boo-boos, accurate or not, could be hurting your score, and a low score could keep you from getting a mortgage at all. Give yourself time to correct errors or fix blemishes; every tick upward can help you get a better rate and make your home more affordable.

Don't forget about PMI when calculating your monthly expenses

The idea of putting as little down as possible on your new home is attractive, especially if you're not a natural saver. Today, that can mean just three percent of your purchase price, depending on the loan. For FHA loans, it's three and one-half percent. The problem with making the minimum down payment is that you then have to pay Private Mortgage Insurance (PMI).

"PMI is a fee you pay on your mortgage until you owe 80 percent or less of what your home is worth. It's one reason why so many experts advise homebuyers make a 20 percent down payment; if you do, you avoid the evils of paying PMI," said Student Loan Hero. "PMI can cost between 0.3 percent and 1.15 percent of your loan annually. Depending on how much you borrow, that can mean thousands of dollars in extra costs until you can cancel your PMI."

Don't ignore the closing costs

Many of us micro-focus on the down payment when getting ready to buy our first home, but there is another important expense related to the purchase: The closing costs. Closing costs encompass a wide variety of fees, some or all of which may apply to you depending on where and what you're buying. They can include everything from the application fee and appraisal to the escrow fee to the home and pest inspection to the recording fees. You're looking at between two and five percent of your purchase price for closing fees, which can definitely add up. Many first-time buyers fail to factor this in when getting ready to purchase, and you don't want something that could amount to a few thousand dollars or more to come as an 11th-hour surprise.

Don't forget to factor in all the monthly expenses

New-home communities often quote a monthly payment that looks quite affordable and that can entice buyers who don't look more closely. That's because the payment is based on principal and interest only (Typically, you'll see a star next to the payment that tells you there's a disclaimer at the bottom of the page.). If you take a look at the small print, you'll see that there are also taxes and insurance to factor in. In some cases, there is also a homeowner's association fee. That monthly payment may not be looking so good anymore.

If you're buying your first home and coming from an apartment or other rental property, you may not have worked things like a gardener into your monthly budget. You'll also want to consider that if you're going up in square footage, there could an increase in your utilities, and you may be taking on payments for things like water and trash that were covered by your rental. It's best to have a true idea of what your monthly expenses are going to look like when buying your first home so you don't end up in over your head.

Don't think you can go it alone

Can you buy a home without an agent? Sure. Is it a good idea? Not usually. It could be that you are looking to buy a home that is for sale by owner. "In the industry, we call these types of sellers unrepresented," said The Balance. "Beware if you are trying to buy a home directly from an unrepresented seller. Odds are the seller won't know what she is doing or she might be taking advantage of you; either way, it could be problematic."

Unless you are a real estate attorney or are otherwise connected to the industry and aware of the laws, contract issues, etc., it's best for you to have representation, regardless of what type of home you are buying. 

 

Copyright © 2018 Realty Times. All Rights Reserved.

Get The Home You Want, Millennials

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Hey, Millennials. Come on into the real estate market! We really need you to buy some homes so we can keep chugging along. Oh, wait. Prices are rising and so are interest rates, plus inventory is scary low. Hmmm. Well, come on in anyway, wontcha?

It's not easy to buy a home in a hot market where inventory remains at historic lows - and that covers a lot of areas across the country at a wide range of different price points. But it's especially hard right now for Millennials, who aren't exactly getting a warm welcome from the market that has been begging them to participate.

"I think it's fair to say this is the most competitive housing market we've seen in recorded history," Danielle Hale, chief economist for Realtor.com, told Curbed. "There's record low inventory and strong interest from buyers in getting into the housing market. Millennials are reaching prime homebuying age - in 2020, the greatest proportion of that generation will be turn 30 - just as baby boomers are looking to downsize. This has created especially fierce competition for smaller homes, the type of starter homes that most first-time buyers desire. This dynamic can be especially frustrating for young adults because they may be bidding for the same smaller home as someone from an older generation who can lean on the accumulated wealth of decades of homeownership."

But that doesn't make buying impossible - just a bit more challenging. Get a leg up by following a few smart strategies.

Work with the right REALTOR®

This is not the right time to give your brother-in-law's cousin's neighbor who just got his license a shot. Having a competitive edge is more important than ever, and you need a savvy, experienced, and well-connected real estate agent to help you buy a home.

Work on your down payment

You may be competing against buyers who are coming in with an all-cash offer, which you're going to have a hard time standing up to. But, there are ways you can make your offer look better. Remember that if it comes down to a multiple-offer situation for your home, sellers won't just compare the offer prices. They'll look at your down payment and the terms, and you need to have better terms than the next guy. You may only have 3.5% down, and that may be all you need to qualify for your FHA loan, but that doesn't mean the seller will embrace you.

"Your down payment is a key part of the offer you present to the seller," said Money Crashers. "The general rule of thumb is simple: the larger the down payment, the stronger the offer. More precisely: the greater the down payment's share of the total purchase price, the more likely the seller is to accept."

If you're ready to buy and there's no time to get a second job or go into hyper-savings mode, you can always take advantage of down payment assistance programs like the National Homebuyers Fund or hit up a relative. "If you're struggling to pool enough cash for your down payment, a generous relative or friend can help by giving you money," said NerdWallet. "But the money must be a true gift, not a disguised loan, and it must be documented properly through financial statements and a gift letter. If the gift is really a loan that you have to pay back, lenders won't accept it."

Be flexible on the closing

If another potential buyer is insistent on a 30-day close, but you could close earlier, later, and even rent back to the seller if need be, you just might end up with the house you want. Flexibility is key to submitting a winning offer, so make sure you have a Plan B - a place to stay for a few days or longer if you're going to be between houses, and a mover/storage option squared away.

Look in adjacent neighborhoods

Yeah, you have your heart set on a specific neighborhood. But if it's just not happening, consider the next neighborhood over. Experts say they have great potential upside.

Consider the worst house on the block

Buying the ugly duckling is a top strategy for investors, and one that can get buyers in the door (literally!) if they're having trouble purchasing move-in-ready homes. "When your budget as a first-time buyer doesn't stretch to a house in perfect condition in a neighborhood you adore, you might consider buying a home that needs work. Or maybe you've watched fixer-upper TV shows and think you could handle sweat equity. Either way, real estate experts say buying a house that needs renovating can make sense as long as you are realistic about the process," said the Washington Post. "A fixer-upper can be a smart investment, particularly if you can buy a property under market value and then increase its value with the right projects. While some home buyers prefer move-in-ready homes, they are stuck with the choices the previous homeowner or builder picked for their countertops, fixtures and floors. Not only do buyers of fixer-uppers get to select their finishes, they also can make sure the work is done the way they want."

If you're worried about how you're going to pay for all those renovations, ask your real estate agent or lender about a 203(k) loan, which rolls renovation funds into your mortgage. "An FHA 203k loan, (sometimes called a Rehab Loan or FHA Construction loan) allows you to finance not one, but two major items 1) the house itself, and; 2) needed/wanted repairs," said The Mortgage Reports. "Because the lender tracks and verifies repairs, it is willing to approve a loan on a home it wouldn't otherwise consider."

The loan addresses a common problem when buying a fixer home: lenders often don't approve loans for homes in need of major repairs."

Waive contingencies before you submit your offer?

Note the question mark. Your real estate professional may caution you against this strategy. But, lenders like Better Mortgage are making it work with a program that "allows buyers in select markets to not only underwrite their finances, but also get the appraised value of their home before they submit an offer. That means they have the option to waive both financing and appraisal contingencies to make their offer as competitive as cash."

Copyright © 2018 Realty Times. All Rights Reserved.