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Top Mistakes of Home Buyers

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Home Buyer Mistakes to AvoidThe process of buying a home is one that you need to engage in with your head as well as your heart. You can’t make impulsive decisions when buying a home or you may find that you make a poor investment that will cost you time, money and frustration down the road.

Insure that you are a smart first-time home buyer by avoiding some common mistakes:

Mistakes to Avoid as a First-Time Home Buyer

  • You Can’t Get Over the Decor – Don’t allow the paint colors or the furniture in a home to sway you either way. The current home owners will take their furniture with them, and paint can be easily changed. Try to picture yourself in the home to determine if it’s the right fit.
  • Skip an inspection – It doesn’t matter how the home looks on the surface; you need a home inspection when purchasing ANY home. You don’t want to be surprised by issues down the road that may have been deal breakers.
  • Rely on Verbal Promises – The only agreements in a real estate transaction are those put in writing. Just because there is an unwritten agreement that you ‘may’ be able to occupy the home before your official closing date, does not mean anyone is obligated to abide by that. Put the important details in your offer and subsequent contracts and you will have better guarantees.
  • Get Approved For a Mortgage After You Make an Offer – It is important that you get pre-approved for a mortgage before you actually start shopping for a home. We can help you get pre-approved in minutes.
  • You See the Home Only One Time – Make sure you schedule a walk-through of the home before you take possession. You never know what condition it will be in when time has elapsed between the initial viewing and the closing date.
  • You Jump on the First House You Like – Seeing a number of houses will help you get your priorities in order. Visiting multiple homes even when you find one you like will help you to think with your head as well as your heart.

Using Gift Money for Your Down Payment

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Gift Money BasicsWith minimum down payment requirements for the purchase of your first home, coming up with the funds can be a challenge. Many new home buyers find themselves in a position to afford the carrying costs of their home, but can’t seem to come up with the cash to put the required money down.

The specific amount required can vary from one lender to the next. It can also vary by state but the general range is between 5% and 20% at a minimum. What first-time home buyers may not know when they are struggling to come up with the money, is that it is possible to use ‘gift’ money if they have a family member with sufficient financial resources.

Gift Down Payment Guidelines

The specific regulations for the use of gift money do vary by state. However, the basic guidelines are as follows:

  • Money can be provided to buyers by family or friends. However, it must truly be a gift and not simply money loaned. Often, mortgage lenders will require the person giving the gift to sign a notice guaranteeing the money is a gift. Sometimes, the source of those funds must be proven as well.
  • The individual providing the gift does not have to pay taxes on the gifted amount, provided it is under the state mandated maximum.
  • Often, the mortgage lender will require that the gift money be available to the buyer 30 days before closing.

Taking some or all of your down payment as a gift can help you get to the first rung on the property ladder. However, it is very important that you only use gift money when it is legitimately that – a gift. If you try to take advantage of this system and claim a loan as a gift, you are not only engaging in fraud, but you may find that you are in over your head financially even if you do obtain the loan.

What to Look For When Searching For a Quality House to Buy

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Home Inspection 101Houses, like people, can be all shapes and sizes. What you choose to buy might not be what someone else chooses, but the thing nearly all home buyers look for is a well-made house. Home inspectors, builders, and previous owners can all help by informing you of the condition of a potential purchase, but knowing what to look for with your own eyes is important since you are the ultimate decision maker.

Not every house is perfect and you can sometimes use this to your advantage. Cosmetic issues like paint and finishes are often some of the most glaring, but are also typically the easiest to fix. A house that has serious issues, however, is not. Insure that you evaluate the following:

Look Structural and Foundation Issues

When you’re touring a home, look for significant cracks in the walls or the ceiling or possible areas where such cracks may have been repaired. These can be signs of settling, structural, or foundation issues, and may be costly to repair if they’re deemed serious. Also be vigilant to the presence of bugs, especially termites, because they can cause significant structural damage.

Look For Water Damage

Be sure to look for signs of water damage that might imply a leak in the roof, windows, or plumbing. If there are cracks in the foundation of the home, water can come in that way as well, causing wood to rot, mold to grow, and general damage to flooring or drywall. Depending on the extent of the damage, these repairs can be cosmetic or costly. Mold can also have serious health implications, which means it is important to check for, especially if you have children.

Other Issues To Watch Out For

While the basic structure of the house is the most important thing, home buyers should also take note that a builder or previous owner’s cost-cutting measure can result in more money spent in the end. Some of these things are a matter of comfort, and some can be a distinct issue, including:

  • The quantity and quality of insulation used.
  • Proper installation of rain gutters, shutters, and accent details.
  • Any drafts coming from windows and doors.
  • How water drains outside.

Just remember, your new home doesn’t have to be perfect, you may save money if there is work that needs to be done, just be sure that you know about existing issues before purchasing. Always do your due diligence!

 

Remodeling Your Home the Right Way

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Remodeling TipsWhen you approach remodeling in the right way, you can bring value to your home, both in the monetary and enjoyment categories. There are mistakes, however, that you can make when renovating your home for the first time that can significantly increase the costs involved. Keep these in mind when you are ready to take on your first big remodel!

Tips for Successful Home Remodeling

  1. Hire the Right People – You need trustworthy, reputable contractors to work on your home. After all, remodeling a house for the first time and leaving it in the hands of contractors means that there is a significant amount of trust required. Ask friends and family who they have used for their projects and do your research online before hiring. Remember, the cheapest option for a contractor is not usually the best one. The costs involved in fixing work that was done incorrectly will usually be higher than those of paying a reputable contractor to do the work correctly the first time.
  2. Make Versatile Choices – There are always trends in home remodeling. Things like tile size and color, for example, change in popularity on a regular basis. Although a certain option may be in today, in 5 years from now, too trendy a selection will just appear more dated. You’re likely to tire of a trendy option quickly, as a result, or struggle to sell your home. Select classic designs when making more expensive changes. Reserve the trends for disposable decor and paint color.
  3. Maintain Flow – Your home’s structure and overall style should mesh well together. If you have a century home and over-modernize it, the home may lose some of its appeal to buyers, and decline in value.

Your home is a big investment, and it can work well for you provided you make careful choices before relying on impulse to renovate it.

Remaining in Control While Selling Your Home

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Be in Control When Selling Your HomeWhen selling your home, there are many things that can cause stress that are out of your control. As a seller, you cannot control the market, the number of offers placed on your home, or how many other houses are for sale in your area. With so much out of your control, it becomes of utmost importance that you tip the scale in your favor by taking control of the things you can.

Controlling Your Home Sale

To control your sale, approach the following with care:

  • Selecting Your Agent – When choosing your agent, don’t make a hasty decision. After all, this is the person that can truly dictate the success of your sale. They will have an influence upon foot traffic, marketing, and the pricing of your home. You need a qualified professional to advice you throughout the process so it leads to a positive outcome.
  • Preparing Your Home for Sale – Insure that your home present itself well by cleaning up your yard, and decluttering your home in the very least. If there are obvious home repair jobs needed, complete the inexpensive ones that act as red flags. You do not want these things to tell buyers you take no pride in your home, or they may expect even bigger problems they can’t see. Your agent can also give you feedback on what areas of your home need attention.
  • Your Expectations on Price – The market controls what your house will realistically sell for. You can control how open-minded you will be about the process. Be willing to bend (but not break) as having a random figure in mind will not be beneficial if it is not realistic to the market you are in. What you purchased your home for or what homes sold for a year ago play no role in what your home may be worth today. If you’ve chosen a qualified agent, they can give you up to date market data on what your home is worth and what you should ask for it.

There are a number of factors in a home sale that are left up to chance – don’t be a passive observer as you work to sell your home – take control over the things you can control!

Qualifying for a Better Mortgage Interest Rate

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Mortgage Qualification BasicsYou may not know it, but the interest rate you’ll pay for your home loan depends on a number of different factors. Changing any one of these factors can help not only make you a better candidate for a loan, but also ease the financial burden that comes from a major purchase like buying a home. We’ve outlined some of these things below:

1. Your Credit Score

Your credit score plays a major role in the type of interest rate you’ll qualify to receive. While different programs have different credit requirements, the rate you pay may increase or you may be disqualified altogether if you do not meet a specific program’s minimum or preferred credit score standards. If you find that you are having trouble qualifying for a mortgage, you might qualify for federally supported loans from Fannie Mae or similar institutions.

2. Available Liquid Assets / Reserve Cash on Hand

The amount cash reserves you can show to the lender are also important. Cash reserves help show that in case there is a disruption in your income, you will be able to maintain your monthly payments.

3. Your Down Payment Options

Another aspect to consider when applying for home loans is your down payment. Different lenders will require certain amounts in order to agree to giving you a loan.The higher a down payment you can afford to make  will not only help you in the long run, but give you an edge when applying for financing. Most financial institutions would prefer a down payment of anywhere from 10 to 20 percent in order to assure a good interest rate although this can vary by program. In difficult economic times, more and more banks are asking for the buyer to put more money down. Government-backed loans allow you to put less money down initially, but also carry higher monthly rates.

It’s important not to be discouraged if your credit score is lower than you anticipated, or if you can’t afford a large down payment. You can investigate other loan options, or even try to find ways to improve your credit. Improvement won’t happen overnight, but it can happen if you have patience. In fact, we can help you improve your credit score and help educate you on how to improve and maintain high credit scores in the future.

Tips for Paying Down Your Motgage Fast

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Pay Your Mortgage Off Faster!Whether you have an FHA loan or a private mortgage from the bank down the street, the idea of paying off your loan is no doubt attractive. If you’re in a good place financially, there are ways to take your 30 year mortgage and pay it off in half, or even a third of the time, without breaking your budget.

1. Increase Your Monthly Payments

The quickest way to chip away at your mortgage is to increase the amount you pay each month. Even if it’s just by a little each month, you’ll be getting ahead of the game. If possible, try to make an extra full payment once in a while, thus reducing the number of payments you’ll owe. While this is often a money management issue, if you’ve been given a bonus at work, or added income to your home, consider devoting more of these funds to your mortgage payment and less to other spending.

2. Renegotiate the Terms of the Loan

Depending on your loan, you may be able to renegotiate certain terms in order to facilitate faster repayment. If you are able to get a lower interest rate, this will lower your monthly payment. The trick is to continue paying the same amount as before. This acts in the same vein as increasing the amount you pay each month. Additionally, speaking to a financial consultant can help you understand bank-specific tricks to pay off your mortgage faster.

Keep in mind, the goal of these tips isn’t to encourage you to live beyond your comfort level. Even if you can only afford to put a little more toward your mortgage each month, that’s okay, you’re still working to pay off your loan sooner rather than later. Working to paying down your mortgage earlier may just allow you to live with limited housing costs during your retirement.

What To Expect When You Take on a Mortgage?

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Mortgage BasicsThe mortgage application process can be daunting for first-time home buyers. Knowing what to expect can help them to prepare for it. The mortgage process should begin as soon as you start looking for a home and it does not end until you take possession of your new home.

Step One: Applying and Getting Pre-Approved for a Mortgage

In order to shop for a home, you need to know how much you can afford to spend. The mortgage pre-approval process gives you that estimate, but it also gets a lot of the legwork out of the way. You will need to bring proof of income, and other appropriate documentation when you get pre-approved for a mortgage. This is only needed once, so when you actually need to finalize your mortgage, your lender does not need to go through that part of the process again.

Step Two: Finding and Assessing the Home

Once you find the right home, there is a step in the mortgage process that must take place. Your lender must approve the mortgage and they want to ensure that the value of the home is worth their loan. This means that a property appraisal will be done. Depending on the lender, arranging it may be up to the home buyer or they may take care of it. In either case, the home buyer often has to assume the cost. Provided the home is valued as high as the bank is being asked to lend based on your offer price as a buyer, the loan should be issued.

Step Three: Closing On Your Home

If anything changes between the time you have put an offer on your home and closing, a lender can choose not to honor a loan. Substantial changes in income, major purchases and more can all be problematic if it may impact a buyer’s ability to afford the home according to lender’s requirements. Home buyers should be aware of this so they proceed cautiously with their finances before closing as nothing is final until that pen has been put to paper.

Mortgage Mistakes Responsible for Foreclosure

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Foreclosure mistakes to avoidWith foreclosures occurring in record numbers across America over the past few years, many borrowers wonder what they can do to avoid ending up in a similar situation. The recent housing crisis can be in part attributed to lender mistakes and in part due to the mistakes of borrowers, these include the following:

Foreclosure Mistakes by Borrowers

Common borrower mistakes that can lead them to foreclosure include:

  • Not Checking the Interest Rate – Some buyers do not pay attention to the interest rate that they’ve signed up for. They may calculate their affordable mortgage amount based on an online approval amount or calculator. If they’re a higher risk borrower, they may end up with a higher interest rate by the time they actually have a mortgage commitment.
  • Not Understanding What an Adjustable Interest Rate Means – Buyers often get caught up in the idea of a adjustable interest rate when interest rates are low and don’t think about the fact that rates could go up again. They can also end up in an adjustable loan with an inappropriate time frame for their needs. When this occurs, home owners may no longer be able to afford their mortgage.
  • Buyers Have To Borrow Their Down Payment – Individuals that require a down payment, but don’t have the cash may choose to borrow the funds. This means that they will struggle to pay back a loan as they pay a mortgage they can only just afford.

Foreclosure Mistakes by Lenders

There have been times when lending criteria has been too flexible, especially when sub-prime loans are concerned. Lenders may not pay appropriate attention to debt ratios, the source of cash that home buyers use for a deposit, or they may not thoroughly explore a buyer’s credit history. As the wave of foreclosures has hit in the past couple of years, many lenders have also been overwhelmed with the amount of work and paperwork associated with the foreclosure process, this has led to lender mistakes which often create a lose / lose scenario for lenders and borrowers alike.

Buyers cannot control the actions of their lenders, but they can inform themselves and make smart decisions to insure that they protect their investments. If you have questions about how to avoid foreclosure or which type of loan is the best for your scenario, we can help inform you so that you make the right decision armed with the knowledge you need.

Is a Home Warranty Worthwhile?

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Home WarrantiesThe addition of a home warranty in a home buying contract can be a very attractive thing. To buyers it means they’re protected if something happens to their appliances within the time frame of the warranty. For sellers, this investment might save thousands of dollars. However, tricky fine print and the age and functionality of the appliances in the home often leave people questioning if a home warranty is worth the price.

Home Warranties: If It’s Not Broken…

For new houses or homes with new appliances, heating and air conditioning systems, or with other recent repairs, the probability of a catastrophic failure occurring is very low. In these cases if something does need repair or replacing, it’s usually covered by a manufacturer or installer’s warranty. If this is the case, a secondary home warranty might not be necessary.

On the other hand, if there is less than a year on any particular warranty when you purchase the house, it might be a good investment. At the very lease it would be something to consider asking the seller to pay for as part of the purchase price. Should you decide to take the home warranty though, understand the process of making claims and what exactly the policy covers.

Read the Fine Print of a Home Warranty

Like all insurance policies, there are stipulations as to how you can use a home warranty. Some policies will only cover repairs versus full replacements, and some policies will only pay for replacements that fall in a certain price point. Find out if your policy allows you to choose the repair service, or requires you to go through the warranty company.

A home warranty can have its benefits for both buyer and seller, as long as you’ve done the research and know what to expect.

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