Easy Agent Blogs

No matter how much time you spend looking at houses, buying a home ultimately comes down to deciding which house you really want. You can choose your home in a number of ways, from gut instinct (not generally recommended) to tallying up the pros and cons of an individual home. Here are some factors to consider during the home shopping process.

Mortgage Costs and Financial Considerations

One of the biggest mistakes people make when buying a home is purchasing more house than they can afford. This is easy to do unless you are aware that  homeowner’s costs include far more than just the mortgage. Associated monthly costs include:

• Association, neighborhood or condo fees
• Electricity, water and other utilities
• Homeowner’s insurance
• Maintenance and repair costs
• Mortgage insurance
• Mortgage payments
• Property taxes

It’s all too easy to overextend your finances trying to buy the “perfect” home. Be sure you can afford the home you choose. Your dreams shouldn’t exceed your finances.

The Basics: Structure, Design and Location

The structural integrity of the house is extremely important when you choose a home. It may seem beautiful, but if it isn’t well built, home maintenance costs could cripple a new owner’s finances. From the moment you start looking at homes, keep the houses’ structural soundness in mind.

Design and floor plans are also important when choosing a home. A badly designed floor plan greatly detracts from people’s enjoyment of a home. If an odd-shaped room or tiny kitchen drives you to distraction, maybe you should keep looking at homes until you find something that suits you better.

Location is also critical. What are the pros and cons of a home’s location? Possible considerations include:

• Commuting distance
• Future development projects planned for the area
• Local crime
• Local economy
• Neighborhood age and cleanliness
• Neighborhood traffic noise
• Property values
• Proximity to shops, hospitals and schools
• Nearby traffic noise from cars, railways and airports

Evaluating Other Pros and Cons

Once you’ve evaluated a home’s structural quality and other major pros and cons, the final decision often comes down to little details.

Do you like the carpeting, the windows, and the general feel of the home? Is there anything special about this house you haven’t seen elsewhere while looking at homes?

How long can you see yourself living in this house? What would you change about it if you could? Would you be able to afford those changes?

While it’s not advisable to make a gut decision about buying a house before checking major concerns, once you’ve determined a house is well-built and well-located, your final decision may be emotional.

At one level you’re deciding whether or not to buy a house- but you’re also deciding whether or not to make that house your home. And when all the pros and cons of house buying are considered, whether or not a house feels like home is an important consideration.

A homeowner whose home is on the market has given up a lot of privacy. It is almost guaranteed that buyers will open drawers, peek inside cabinets and touch items that are obviously personal and not included in the sale.

Coming home from work to find that the impeccably-made bed they left in the morning is now covered in a ball of linens is annoying.

These are just a few examples of nightmare homebuyers behaving badly. Read on to learn how to not turn off the seller of your dream home.

Don’t be a time bandit

Savvy home sellers spend a great deal of time ensuring that the home is presentable during the marketing period. They clean, de-clutter and then inconvenience themselves by skedaddling before the potential buyers show up.

Therefore, buyers that cancel appointments at the last minute, or just don’t bother showing up, are behaving quite badly.

Unless an emergency came up and there was no time to call your agent, try to provide your agent with at least several hours’ notice that you won’t be touring the home. It’s the polite thing to do and it just might save the seller from needlessly preparing for your arrival.

“Time is of the essence” is a term you’ll see in most real estate purchase contracts. What it means is that all specified deadlines in the agreement are mandatory — sort of. Yes, you can request an extension of a date and it will most likely be granted, if the reason for the request is compelling enough.

Frivolous requests, however, or those made repeatedly, are time stealers.

Sellers are frequently on a tight schedule to get the transaction to the closing table. Just as you are excited to get into your new home, the seller has plans as well. Keeping contract deadline extension requests to a minimum is one way you can contribute to a smooth transaction.

Then there is the homebuyer that, once the ink dries on the contract, treats the home as if it’s unoccupied and equipped with a revolving door. One week it’s their interior decorator that needs access to take measurement, perhaps the next week it will be their architect.

Many buyers want to show family members their new home – before it is actually their new home.

The seller, in the meantime is packing for the move, having repairs completed, accommodating the appraiser and inspectors all while attempting to live a normal life. Additional home tours are more than an inconvenience, they are time stealers.

If you must gain access to the home, ask your agent to find out when the inspector or appraiser will be in the home and arrange to be there at the same time.

The Nit-Picker

Nit picking is neither a price-reduction nor negotiating strategy, as those buyers who have tried it can attest. Bankrate.com’s Dana Gratch calls these buyers “gladiator wannabes,” who, after they’ve agreed to purchase the home, come in with a long list of things that are wrong with it or a list of concessions.

The art of negotiating depends on give and take, not a barrage of one-sided demands. Let your real estate agent do the negotiating. If you truly feel that what is wrong with the house commands a price reduction, your agent should be able to justify it with a list of comparables and reasons why the seller’s home doesn’t stack up.

The Unprepared

There are several reasons a real estate agent suggests that a buyer get fully approved for a loan before submitting an offer to purchase. Buyers that don’t take this important step run the risk of derailing the entire transaction.

Even a pre-approval commitment from a lender isn’t firm. Once the loan application is in the hands of the underwriter, anything can happen. Many times, the buyer will receive a letter from the bank – in the middle of the transaction — listing all the conditions that must be met before the loan is approved.

Satisfying these conditions not only takes time, but, depending on the conditions, may result in a cancelled sale.

Take the time to work with your lender to ensure that you will get the loan before committing to purchase a home. Don’t make any major purchases until the home closes escrow.

Entering into the process knowing that you’ll get the loan is not only a courtesy to the seller but the peace of mind it gives you is priceless.

Both parties to a real estate transaction have schedules that need to be accommodated during the purchase process and, yes, sellers can behave badly as well (we’ll take a look at that in a future blog post). Respecting one another’s needs helps make the transaction run smoother and more comfortably for all concerned.

Think finding the perfect home is the is the most important step in the homebuying process?

Think again.

It’s the financial aspects of the process that will determine how dreamy of a home you can buy and how you can comfortably pay for it every month.

The bedrock of these aspects is your credit score. Sadly, many Americans have little to no understanding of how vital this score is to your success when buying a home, an auto and even in the purchase of insurance.

If you’re trying to figure out how to raise your credit score, it’s important to understand what impacts it, both negatively and positively.

1. Late payments show up so quickly on credit reports it’s as if the bureaus are standing over our shoulders when we write the check, or go online, to pay a bill. In all fairness, the experts at Equifax.com say that average time period from late payment of a bill to this information being reported to the credit bureaus is 30 days.

Which is a bit scary, because “Even one late payment can cause credit scores to drop,” according to these same experts.

To top it off, each time you make a late payment, and it ends up in your credit report, it will remain there for seven years.

The moral of this story is to pay your bills on time every month.

2. Closing credit card accounts that you no longer use may seem like a good way to help build your credit score. It’s not.

This is because one of the factors used to determine your credit scores is your “debt-to-credit” ratio. “That ratio is how much of your available credit you’re using compared to the total amount available to you,” say the pros at Equifax.com.

When you close an account you’ll end up with less available credit, raising your ratio.

Consider as well that older accounts have more clout than newer ones. “The history of your credit accounts makes up 15% of your FICO Score,” according to Lora Shinn at LendingTree.com.

“So that credit card you opened 15 years ago may well be helping to boost your credit score by increasing your average age of accounts,” she concludes.

3. Opening new credit card accounts seems like it would give you a leg up on a credit score, but it will do the opposite.

Opening new credit card accounts “… may impact your credit scores in two ways: the hard inquiries resulting from those applications … and the new accounts themselves may lower the average age of your credit accounts,” caution the pros at Equifax.

4. Not utilizing the credit you have may have a negative impact on your score; yet another factor that seems counterintuitive to many. If you don’t use a credit account, no new information is reported by the bureaus. This, in turn, “… may make it more difficult for lenders and creditors to evaluate your application for credit or services,” according to the credit experts at Equifax.com.

If the inactivity goes on for a certain amount of time, the creditor may close the account. As mentioned earlier, a closed account may have a negative impact on your credit score.

Use your credit accounts, especially for small purchases, and pay the bills when due.

5. You’re entitled to a free copy of your credit reports every 12 months. It’s important to take advantage of this offer if you hope to keep track of your credit score. Go to annualcreditreport.com (the only source authorized by the federal government) for the details.

It’s May and the Fed recently held their latest pow-wow. When they met in March, they raised “… the federal funds interest rate by 25 basis points,” Rick Dennen, president and CEO of Oak Street Funding, told InsideIndianaBusiness.com.

This month, they raised it 50 basis points, “… the biggest rate increase in more than two decades,” according to Taylor Tepper at forbes.com.

The media loves to tell us how the hike in interest rates impacts the homebuyer, but we hear little about the plight of sellers. Let’s take a look at what happens to this population when interest rates rise.

Mortgages get more expensive

With each tick up in mortgage rates, loans become more expensive for homebuyers. For those on tight budgets, that additional expense may just be what pushes them out of the housing market.

Ryan Boykin at investopedia.com crunches the numbers for a hypothetical homebuyer to illustrate how rising interest rates impact homebuyers.

“… if Johnny Home Buyer wants a 4% rate on a 30-year fixed mortgage on a home worth $400,000, his monthly mortgage payment would be $1,900,” calculates Boykin.

“But if Johnny only qualified for a 5% rate on a 30-year fixed mortgage, his monthly payment would rise to $2,138.”

For each 1% rate increase, Johnny’s payment increases by “… $238, or roughly 13% … A 1% increase in mortgage interest decreases Johnny’s purchasing power by $45,000.” Boykin concludes.

That $45,000 (or more) loss in buying power particularly impacts homebuyers on tight budgets. Naturally, demand for homes is diminished when a large portion of the homebuying pool disappears.

More expensive loans, combined with inflation fears and stock market volatility are contributing to what many experts believe is a slight cooling of the housing market.

As interest rates rise and homebuyers leave the market, sellers will find their home values dipping and homes will sit on the market longer than they have in the past few years.

It’s not all doom and gloom for home sellers

On average, if you put your home on the market now, you are likely to get 47% more for it than you would have if you sold it last year, according to Clare Trapasso at realtor.com.

In fact, the median home price is up nearly 15% from this time last year and now sits at a nation-wide average of $391,200.

So, although the volume of homes sold dropped in April, home prices continue to climb.

For how long?

Now we circle back to how increasing mortgage rates impact home sellers. Most housing market experts predict that the market will change slowly, with price reductions of homes for sale gradually becoming more common.

In fact, the number crunchers at one of the big real estate conglomerates recently said that 12% of homes for sale in the U.S. experienced price drops during late March into early April.

Uncertainty is the watchword right now in the housing market. There is a big “if” in the expectation that the housing market change will be gradual.

“If the economy grows fast enough, rising mortgage rates will not have as great an effect on property value and housing prices, as long as salaries and wages correspondingly grow as well,” Boykin claims.

The economy, as you know if you follow the news, isn’t growing and talk of a looming recession is becoming more common.

“Eventually mortgage rates will slow down home prices …” economist Ken H. Johnson tells bankrate.com.

If you want to, or must, sell your home and you want the most money you can get for it, the time to sell is right now.

If you are toying with the idea of selling your home, but have misgivings, they may just be misunderstandings. Once you understand the process, prepare yourself for it and hire the right listing agent, you’ll have little to worry about.

While staging and cleaning the home is important, there are things to mull over right now, while you’re still deciding.

1. Determine your motivation

If your motivation isn’t obvious, such as a job transfer or divorce, get clear on exactly why you want or need to sell the home. The reason that motivates you to sell will carry you from marketing to close of escrow. It is something to remind yourself of, to keep you motivated if times get tough during the sale process.

2. What would you like in a new home?

Decide exactly what you want in a new home. Put it on paper. Brainstorm with your spouse or partner and come up with at least two “must-have’s” for each of you, plus a list of items you really want but are willing to compromise on.

Check out what is available in the neighborhoods you’ve been eying. Check on prices in those neighborhoods to see if they fit what you can afford.

3. You’ll need a real estate agent to help you market the home professionally

One of the worst mistakes we see many homeowners make is that they feel they have to hire the friend or relative who holds a real estate license. Loyalty is admirable, but not when there are hundreds of thousands of dollars and your future comfort on the line.

Friends and family members tend to treat their clients as just that – friends or family members.

They may put your scheduling needs behind those of their “real” clients, assuming you’ll understand. It happens more than we care to think about.

Then, there is always the chance that your Aunt Martha-the-real-estate-agent doesn’t do a good job. How will you fire her?

Finally, consider all the personal “stuff” divulged in the average real estate transaction. Do you really want Cousin Elmer knowing all that?

Do yourself a favor and interview several agents for the job of marketing your home for sale.

Treat the presentation of the CMA, or market analysis, as a job interview. After all, you are interviewing someone for the job of selling your home.

Furthermore, you are going to pay this person a substantial amount of money to do it.  YOU are the boss, you are in the driver’s seat. Ask specific questions and keep asking until you get a suitable answer.

A final note about the agent interview: do not be intimidated by a pushy agent. If he or she hands you a pen, hand it right back, explaining that you still have other agents to interview.

Questions? We’re happy to answer them

 

 

For the first-time homebuyer, pursuing a home loan is a bit like visiting a foreign country where you don’t speak the language. Those who work in the industry tend to fling terms and acronyms around, expecting others to understand exactly what they’re talking about.

Have no fear, soon-to-be homeowner; we’ve created a handy glossary, of sorts, to help you out.

What exactly IS a mortgage?

“Mortgage” is an old French word that’s been in use since the turn of the 15^th century. Once you learn the definition, we think you will never forget it:

“Mort” = “Dead”

“Gage” = “Pledge”

Sounds rather morbid, but the long-form definition is “… the deal dies either when the debt is paid or when payment fails,” according to the Online Etymology Dictionary.

We think it’s just a whole lot easier to think of it as a type of a loan, because, essentially, it is.

The people part of the mortgage

It’s easy to understand where all those mortgage fees to once you understand just how many people have their fingers in the pie.

Let’s get to know some of the players.

Mortagor/Mortgagee

When you borrow money for a mortgage, you become known as the “mortgagor.” The lender, on the other hand, is the “mortgagee.”

Mortgage Broker

This person is a middle-man or woman who shops among many lenders to help his or her clients find a mortgage that is right for them.

Loan Officer

Should you decide to go directly to a lender (your local bank, for instance), the first person you will be introduced to will most likely be the loan officer.

The loan officer will counsel you on the preapproval process and ensure that you turn over all the documents required to get moving on the loan.

Loan Processor

The loan officer will bundle up all that paperwork you completed and hand it over to the loan processor. This is the person who will check the paperwork for accuracy, verify your credit and make sure you aren’t fibbing about your income.

Once this process is complete, he or she will hand off the entire package to the underwriter.

Underwriter

The loan’s underwriter is the one person in the process that you’d like to be besties with.

This is the person who will determine how much of a risk the lender faces by lending money to you for a home.

The underwriter will do an analysis of everything, determining whether or not:

• your application is complete and includes all documentation.
• you are eligible for the loan.
• you can afford to make the payments on the loan.
• the home is worth what you’ve agreed to pay for it.

These are just some of the underwriter’s duties, but they are the most significant for you.

Appraiser

We mentioned above that the underwriter must ensure that the home is worth at least the amount you want to borrow. He or she does this by using a professional property appraiser.

Common mortgage terms

Amortization: “Mortgage amortization is a financial term that refers to your home loan pay off process,” according to the prose at Chase.com.

The payments on your loan will gradually change over the course of repayment to being those that pay for mostly interest to those that go toward primarily the principle.

You’ll find an easy explainer online at nerdwallet.com.

Closing Costs: Expenses incurred in financing the home. Closing costs vary and some are negotiable.

Escrow Impounds: You will be asked to prepay taxes and insurance when escrow closes. This money goes into an escrow account and is used to ensure the timely payment of these bills. The lender may require up to two months’ worth of payments to be impounded.

Principal: The amount you originally borrow.

PITI: An acronym for Principal, Interest, Taxes and Insurance. This is your monthly mortgage payment.

Point: What the lender charges for originating the loan. One point equals 1 percent of the loan amount.

Private Mortgage Insurance: Typically known as “PMI,” the borrower pays for this policy and the lender benefits if the borrower defaults on the mortgage.

With an FHA-backed mortgage, you’ll notice that this insurance is called “MPI,” short for mortgage insurance premium.

Mortgage insurance is required, generally, if the loan-to-value ratio is greater than 80%.