Blair County Real Estate BlogRecently posted or modified blog posts in the category - Buying a Homehttps://www.johnhillhomesearch.com/blog/Copyright JohnHillHomeSearch.com2023-09-25T08:59:09-07:00tag:johnhillhomesearch.com,2012-09-20:13786Understanding FHA Financing: Unlocking Opportunities for HomebuyersUnderstanding FHA Financing: Unlocking Opportunities for Homebuyers<img src="https://assets.site-static.com/userfiles/2414/image/images.jpg" width="275" height="183" />
Welcome to our John Hill Real Estate Blog! Today, we're diving into the world of FHA financing, a valuable resource for prospective homebuyers. Whether you're a first-time buyer or looking to make a move, FHA loans can open doors to homeownership. Let's explore what FHA financing is, its benefits, and how it can help you achieve your real estate dreams.
What is FHA Financing?
FHA stands for the Federal Housing Administration, a government agency that operates under the Department of Housing and Urban Development (HUD). FHA financing is a mortgage program designed to make homeownership more accessible and affordable for a broader range of homebuyers. It's particularly beneficial for those who may have lower credit scores or limited funds for a down payment.
Key Benefits of FHA Financing:
Low Down Payment: One of the standout features of FHA loans is the low down payment requirement. With as little as 3.5% down, qualified borrowers can purchase a home. This feature is especially appealing to first-time buyers and individuals with limited savings.
Flexible Credit Requirements: FHA loans are more forgiving when it comes to credit scores. While traditional mortgages may require higher credit scores, FHA loans are attainable for borrowers with less-than-perfect credit histories.
Competitive Interest Rates: FHA loan interest rates are often competitive with conventional loans, making them an attractive option for borrowers who may not qualify for the best conventional rates.
Assumable Loans: FHA loans are assumable, meaning that if you decide to sell your home, a qualified buyer can take over your existing FHA loan. This can be an attractive selling point for potential buyers.
Streamlined Refinancing: FHA offers streamline refinancing options, making it easier and more cost-effective for homeowners to refinance their FHA loans when interest rates drop or their financial situation improves.
Who Can Qualify for FHA Financing?
FHA loans are accessible to a wide range of homebuyers, but there are specific requirements to keep in mind:
You must have a minimum credit score, typically around 580, to qualify for the 3.5% down payment option. Lower credit scores may still qualify but may require a higher down payment.
You must be able to demonstrate steady employment and income.
The property you're purchasing must meet certain standards outlined by the FHA.
There are loan limits that vary by location, so check the limits in your area.
How to Apply for an FHA Loan:
Find an FHA-Approved Lender: Start by researching lenders in your area who offer FHA loans. Working with an experienced lender is crucial to navigating the application process.
Gather Documentation: Prepare your financial documents, including proof of income, bank statements, and tax returns. Be ready to provide information about your employment history and any other relevant financial details.
Complete the Application: Your lender will guide you through the application process, which typically involves filling out paperwork and providing the necessary documentation.
Undergo a Home Appraisal: FHA loans require an appraisal to ensure the property meets the agency's standards. The cost of the appraisal is typically borne by the borrower.
Wait for Approval: After submitting your application, your lender will review your financial information and the appraisal report. If approved, you'll receive a commitment letter outlining the terms of the loan.
Close on Your New Home: Once your loan is approved, you'll proceed to the closing process, where you'll sign the final paperwork and become a homeowner!
FHA financing can be a game-changer for aspiring homeowners, providing a pathway to homeownership even when traditional financing options might be out of reach. If you're considering purchasing a home and have questions about FHA loans or any other aspect of the real estate process, don't hesitate to reach out to John Hill Real Estate. We're here to help you navigate your real estate journey and achieve your homeownership goals. Contact us today to get started on the path to your new home!
2023-09-25T08:42:45-07:002023-09-25T08:59:09-07:00Matt Eveytag:johnhillhomesearch.com,2012-09-20:10156The Everything Guide to Buying Your First HomeHow to find exactly what you want, and how to work with the experts who’ll help you get it.<img src="https://assets.site-static.com/userfiles/2414/image/Blog_pics/Screenshot_1.png" width="934" height="632" alt="Image: HouseLogic" title="Image: HouseLogic" />Image: HouseLogic
So you’re thinking about buying your first home. Your very own house (and mortgage). A place to call — and make — your own.
It’s a big move, literally and figuratively. Buying a house requires a serious amount of money and time. The journey isn’t always easy. It isn’t always intuitive. But when you get the keys to your new home — that, friend, can be one of the most rewarding feelings pretty much ever.
The key to getting there? Knowing the home-buying journey. Knowing what tools are at your disposal. And most importantly? Creating relationships with experts who can help you get the job done.
That’s where this guide comes in. We’ll show you not only the major steps you’ll take during the home-buying process, but also explain the relationships and experts you’ll need along the way. We’ve even made a <a href="https://www.houselogic.com/buy/how-to-buy-step-by-step/first-time-home-buying-tips/">handy infographic that outlines the home-buying process</a> from start to finish.
You ready to live the dream? Here we go.
Do Your Homework
Oh sure, everybody wants to jump right into open houses. But before you even set foot into a foyer, you should identify your list of “musts” and “wants.” This list is an inventory of priorities for your search. And there’s so much to decide: Price, housing type, neighborhood, and school district — just to name a few.
To get yourself grounded, <a href="https://static.houselogic.com/content/webfiles/c5b8efec-f322-4402-9ffe-73ffebc36423/HouseLogicThe_Ultimate_I_Wanna_Buy_lmXO9NE.pdf">we recommend filling out this brief worksheet</a>.
If you’re planning to buy a home with a partner (in life or in real estate), fill the worksheet out with them. You want to be on the same page while buying a house. If you’re not, you’ll be less able to give agents or lenders the information they need to help you. And you risk wasting time viewing homes you can’t afford — or don’t even want in the first place.
Start Shopping
Once you know what you’re looking for, the next step is to <a href="https://www.houselogic.com/buy/how-to-buy-step-by-step/house-shopping-sites/">start looking at listings and housing information online</a>. (This part? You’re going to crush it.)
Explore More Topics:
<a href="https://www.houselogic.com/spotlight/see-all-steps-buying-home/">See All Steps to Buying a Home</a>
<a href="https://www.houselogic.com/buy-sell/">Buy a Home: Step-by-Step</a>
Find a Great Agent
Your relationship with your real estate agent is the foundation of the home-buying process. (And your agent = your rock.) He or she is the first expert you’ll meet on your journey, and the one you’ll rely on most. That’s why it’s important to interview agents and <a href="https://www.houselogic.com/buy/how-to-buy-step-by-step/how-to-find-the-right-realtor/">find the agent who’s right for your specific needs</a>.
Choose a Lender
Once you’ve found your agent (AKA, your new best friend), ask him or her to recommend <a href="https://www.houselogic.com/buy/how-to-buy-step-by-step/types-of-mortgage-lenders/">at least three mortgage lenders that meet your financial needs</a>. This is another big step, as you’ll be working with your lender closely throughout the home-buying process.
Pick a Loan (It’s Not So Bad)
Once you’ve decided on a lender (or mortgage broker), you’ll work with your loan agent to <a href="https://www.houselogic.com/buy/how-to-buy-step-by-step/difference-between-adjustable-and-fixed-rate-mortgages/">determine which mortgage is right for you</a>. You’ll consider the percentage of your income you want to spend on your new house, and you’ll provide the lender with paperwork showing proof of income, employment status, and other important financials. If all goes well (fingers crossed) you’ll be pre-approved for a loan at a certain amount. (Sweet.)
Go to Showings and Look Around
Now that you have both an agent who knows your housing preferences and a budget — and a lender to finance a house within that budget — <a href="https://www.houselogic.com/buy/how-to-buy-step-by-step/open-house-tips/">it’s time to get serious about viewing homes</a>. Your agent will provide listings you may like based on your parameters (price range, ZIP codes, features), and will also help you determine the quality of listings you find online.
Then comes the fun part: showings, which give you the unique opportunity to evaluate properties. Your agent will help you navigate showings, whether virtual or in-person.
Make an Offer
Once you find the home you want to buy, you’ll <a href="https://www.houselogic.com/buy/how-to-buy-step-by-step/tips-for-making-an-offer-on-a-house/">work with your agent to craft an offer</a> that not only specifies the price you’re willing to pay but also the proposed settlement date and contingencies — other conditions that must be agreed upon by both parties, such as giving you the ability to do a home inspection and request repairs.
Negotiate, Negotiate, Negotiate
Making an offer can feel like an emotional precipice, almost like asking someone out on a date. Do they like me? Am I good enough? Will they say yes? It’s stressful! Some home sellers simply accept the best offer they receive, but many sellers make a counteroffer. If that happens, it’s up to you to <a href="https://www.houselogic.com/buy/how-to-buy-step-by-step/how-to-negotiate-an-offer/">decide whether you want your agent to negotiate with the seller</a> or walk away. This is an area where your agent can provide real value by using their expert negotiating skills to haggle on your behalf and nab you the best deal.
Get the Place Inspected
If your offer is accepted, then you’ll sign a contract. Most sales contracts include a home inspection contingency, which means you’ll hire a licensed or certified home inspector to inspect the home for needed repairs, and then ask the seller to have those repairs made. This mitigates your risk of buying a house that has major issues lurking beneath the surface, like mold or cracks in the foundation. (No one wants that.) <a href="https://www.houselogic.com/buy/how-to-buy-step-by-step/home-inspection-what-to-expect/">Here’s what to expect</a>.
Ace the Appraisal
When you offer to buy a home, your lender will need to have the home appraised to make sure the property value is enough to cover the mortgage. If the home appraises close to the agreed-upon purchase price, you're one step closer to settlement — but a low appraisal can add a wrinkle. Not one you can’t deal with. <a href="https://www.houselogic.com/buy/how-to-buy-step-by-step/what-to-expect-during-a-home-appraisal/">Here’s how to prepare</a>.
Close the Deal
The last stage of the home-buying process is settlement, or closing. This is when you sign the final ownership and insurance paperwork and make this whole thing official. <a href="https://www.houselogic.com/buy/how-to-buy-step-by-step/what-are-closing-costs-when-buying-a-house/">There’s some prep work you have to take care of first</a>.
When it’s all said and done — break out the rosé. You’ll have the keys to your new home!
<img src="https://www.houselogic.com/wp-content/uploads/2010/02/houselogic-logo-blog-author_673efab7c23824330c8c8ef23e453f48.jpg?crop&resize=200%2C200" srcset="" alt="HouseLogic logo" class="image-wrapper__img" sizes="" loading="lazy" />
HOUSELOGIC
HouseLogichelps consumers make smart, confident decisions about all aspects of home ownership. Made possible by REALTORS®, the site helps owners get the most value and enjoyment from their existing home and helps buyers and sellers make the best deal possible.
2022-09-03T08:57:00-07:002022-09-03T09:05:03-07:00Matt Eveytag:johnhillhomesearch.com,2012-09-20:9895A Checklist for Moving Into a New HousePeace of mind begins with changing the locks.
<img src="https://www.houselogic.com/wp-content/uploads/2015/02/things-moving-into-new-house-retina_retina_7976afba709714de55bb38d98441de42.jpg?crop&resize=1024%2C683" srcset="https://www.houselogic.com/wp-content/uploads/2015/02/things-moving-into-new-house-retina_retina_7976afba709714de55bb38d98441de42.jpg?crop&resize=375%2C250 375w, https://www.houselogic.com/wp-content/uploads/2015/02/things-moving-into-new-house-retina_retina_7976afba709714de55bb38d98441de42.jpg?crop&resize=640%2C427 640w, https://www.houselogic.com/wp-content/uploads/2015/02/things-moving-into-new-house-retina_retina_7976afba709714de55bb38d98441de42.jpg?crop&resize=960%2C640 960w, https://www.houselogic.com/wp-content/uploads/2015/02/things-moving-into-new-house-retina_retina_7976afba709714de55bb38d98441de42.jpg?crop&resize=1024%2C683 1024w, " alt="Closeup of yellow door" class="image-wrapper__img" sizes="(max-width: 375px) 375px, (max-width: 640px) 640px, (max-width: 960px) 960px, 1024px" loading="eager" />
Image: Raymond Forbes LLC/Stocksy United
It's easy to get super excited about moving into your new house. But for your own safety and security, be sure to cross these tasks off your checklist before you call it home. (And also, be sure to <a href="https://www.houselogic.com/buy/moving-in/new-home-essentials/">buy these new home essentials</a>).
Here's your new home checklist:
#1 Change the Locks
You really don’t know who else has keys to your home, so change the locks. That ensures you’re the only person who has access. Install new deadbolts yourself for as little as $10 per lock, or call a locksmith — if you supply the new locks, they typically charge about $20 to $30 per lock for labor.
#2 Check for Plumbing Leaks
Your home inspector should do this for you before closing, but it never hurts to double-check.
Keep an eye out for dripping faucets and running toilets, and <a href="https://www.houselogic.com/organize-maintain/home-maintenance-tips/water-heater-maintenance">check your water heater</a> for signs of a leak.
Here’s a neat trick: Check your water meter at the beginning and end of a two-hour window in which no water is being used in your house. If the reading is different, you have a leak.
#3 Steam Clean Carpets
Do this before you move your furniture in, and your new home life will be off to a fresh start. You can pay a professional carpet cleaning service — you’ll pay about $50 per room; most services require a minimum of about $100 before they’ll come out — or you can rent a steam cleaner for about $30 per day and do the work yourself.
#4 Wipe Out Your Cabinets
Another no-brainer before you move in your dishes and bathroom supplies, especially if the house has been vacant. It's not uncommon for mice and other pests to move in quickly. Make sure to wipe inside and out, preferably with a non-toxic cleaner, and replace contact paper if necessary.
And if you do find traces of unwanted roommates, take the next step.
#5 Invest in Pest Control
That includes mice, rats, bats, termites, roaches, and any other uninvited guests. There are any number of DIY ways to get rid of pests, but if you need to bring out the big guns, an initial visit from a <a href="https://www.houselogic.com/organize-maintain/home-maintenance-tips/attic-pest-removal/">pest removal</a> service will run you $100 to $300, followed by monthly or quarterly visits at about $50 each time.
#6 Introduce Yourself to Your Circuit Breaker Box and Main Water Valve
It’s easier to do with two people: one to stand in the room where the power is supposed to go off, the other to trip the breakers or fuses and yell, “Did that work? How about now?You’ll want to know how to turn off your main water valve if you have a plumbing emergency, if a hurricane or tornado is headed your way, or if you’re going out of town. Just locate the valve — it could be inside or outside your house — and turn the knob until it’s off. Test it by turning on any faucet in the house; no water should come out.
<img src="https://www.houselogic.com/wp-content/uploads/2009/08/courtney-craig-author-retina_retina_8ac26eb8fd3abbac002b12695b4e94bc.jpg?crop&resize=200%2C200" srcset="" alt="Courtney Craig" class="image-wrapper__img" sizes="" loading="lazy" />
COURTNEY CRAIG
Courtney Craigis an Atlanta-based writer and editor. She believes no effort is too small when it comes to green living, which she tries to keep in mind while renovating her recently purchased first home.
2022-08-12T07:59:00-07:002022-08-12T08:05:12-07:00Matt Eveytag:johnhillhomesearch.com,2012-09-20:8284The New Rules of Homebuying Today: 5 Secrets To Succeed in a Red-Hot Market
<img src="https://na.rdcpix.com/1968bfd394be467d8f1200308dc6c5cfw-c1999842456xd-w826_h860_q80.jpg" data-src="https://na.rdcpix.com/1968bfd394be467d8f1200308dc6c5cfw-c1999842456xd-w826_h860_q80.jpg" data-srcset="" class="attachment-post-thumbnail size-post-thumbnail wp-post-image ls-is-cached lazyloaded lazy-loaded" alt="The New Rules of Homebuying Today: 5 Secrets To Succeed in a Red-Hot Market" srcset="https://na.rdcpix.com/1968bfd394be467d8f1200308dc6c5cfw-c1999842456xd-w300_h200_q80.jpg 480w, https://na.rdcpix.com/1968bfd394be467d8f1200308dc6c5cfw-c1999842456xd-w826_h860_q80.jpg 768w, https://na.rdcpix.com/1968bfd394be467d8f1200308dc6c5cfw-c1999842456xd-w826_h860_q80.jpg 996w" />
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<a href="https://www.realtor.com/advice/buy/"> </a>
The New Rules of Homebuying Today: 5 Secrets To Succeed in a Red-Hot Market
By <a data-omtag="news:article:author:top" class="url fn n" href="https://www.realtor.com/author/tmastroeni/">Tara Mastroeni</a><br />
Feb 7, 2022
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Here’s an understatement for you: Buying a home today is not the same as it used to be. In fact, it’s a whole new ballgame.
The COVID-19 pandemic, of course, is largely to blame—throwing the economy for a loop, interrupting supply chains that feed home construction efforts, and forcing many of us to reassess just how much space we truly need. As a result, record numbers of people picked up and moved, sparking a full-boil housing market rife with bidding wars. And now, with interest rates on home loans climbing, things may get even more intense, fueling a sense of “It’s now or never!”
With all of these forces swirling, you need to hit refresh on your mindset and the toolkit you bring to the home-shopping challenge. To help you along, we’re sharing five new rules of homebuying in 2022.
1. Old rule: Find your dream home, then finalize your mortgage paperwork
New rule: Lock in a mortgage before you start your search
In the past, <a href="https://www.realtor.com/advice/finance/do-i-need-a-pre-approval-letter-to-make-an-offer/" target="_blank" rel="noopener noreferrer">getting pre-approved for a loan</a> was something you could think about after you’d found a house you wanted to buy. Today, though, this approach can stall your momentum straight out of the gate. In today’s fast-paced market, it’s essential to have your ducks in a row and finish your mortgage pre-approval before you make an offer.
“You should be pre-approved by a lender and knowledgeable about your finances before you even begin your home search,” says <a href="https://www.charlestonrealestate.com/agents/53/beverly-burris/" rel="noopener noreferrer">Beverly Burris</a>, an agent with William Means Real Estate in Charleston, SC. “With houses going under contract as quickly as they are right now, often within days or sometimes hours of going to market, there is no sense in going to see a property before speaking to a lender and learning what you can afford.”
Putting off the pre-approval process could lead to your dream home passing you by, she warns.
“If you wait until after you see a home you like, you won’t have time to speak with a lender or submit your mortgage application before the offer deadline,” she adds.
Many homes today will have offer deadlines that will be impossible to meet if you’re muddling through mortgage paperwork.
Furthermore, having a mortgage pre-approval letter in hand when you make your offer will show sellers you’re serious and can follow through with your purchase. This, in turn, will give you the edge over any competing buyers who haven’t completed this crucial step.
2. Old rule: Shop for homes you can afford
New rule: Shop for homes priced below what you can afford
Traditionally, once you had a pre-approval in hand, that’s the amount that you’d use to set your budget when shopping for homes. After all, a pre-approval tells you (and the seller) how much the mortgage company is willing to give you as a loan.
In today’s market, you may want to structure your budget a little differently.
Lori Ozley, a manager with <a href="https://www.cashforhousesbham.com/" rel="noopener noreferrer">Birmingham HomeBuyers</a> in Birmingham, AL, advises buyers to look at homes with list prices that fall below the top of their price range.
“These days, houses are selling for more than their list price and, as a buyer, you’re more than likely going to end up in a bidding war,” she explains. “If you look at properties that are under your budget, you’ll have room to submit a competitive offer that goes above the asking price.”
Let’s say your budget is $375,000 and you are touring homes that cost that much. Chances are, the homes that list for $375,000 will sell for a chunk more than that. Your mortgage pre-approval won’t cover the overage, and you will be an unqualified bidder. To avoid falling into this trap, shop below your means so you have room to go up.
3. Old rule: Tour a property, then take a day or two to decide whether to make an offer
New rule: If you love a property, act fast
Buying a home is a big decision. It’s no surprise that many buyers want to take the time to weigh the pros and cons of buying a particular property before they decide to submit an offer. Maybe they want to visit on a weekday and the weekend, to see what the traffic is like, or during the day and after dark. Or they want to bring along cousin Fred, who’s a contractor, to kick the tires, so to speak.
Yet today, many buyers who take this ponderous approach may find that the home they love is long gone by the time they pull the trigger—snapped up by a buyer who pounced within hours of seeing the place.
Bill Samuel, the agent and investor behind <a href="https://www.blueladderdevelopment.com/" rel="noopener noreferrer">Blue Ladder Development</a> in Chicago, puts it plainly: “If you are interested in a property, you must act quickly or you risk losing out to another offer. When you really like a property, you should sit down with your real estate agent, go through the comp research, and work on putting together an offer the very same day.”
This is not to say you should feel pressured to gush money at the first home that looks OK. Ideally, you should tour enough homes to understand what you want, and what your money can buy. That way, you can strike with confidence rather than feeling rushed and unsure.
4. Old rule: Offer below asking price and wait for the seller to counter your bid
New rule: Put your big number out there from the start
The tactic of going back and forth with a seller until you’ve reached an agreement is a rarity in this hot market. With inventory at a record low, multiple buyers are competing for the same few available properties. As a result, buyers need to put together strong offers to stand out from the crowd.
“Be prepared to make your best and final offer from the beginning,” advises <a href="https://www.downtownapartmentcompany.com/agents/jodi-dougherty/" rel="noopener noreferrer">Jodi Dougherty</a>, a luxury broker at Downtown Realty Company in Chicago. “Since sellers often receive multiple full-price offers, you may not get an opportunity to counteroffer if you come in too low.”
That said, price is not the only factor that matters when submitting an offer. It’s often also a good idea to have your real estate agent find out about <a href="https://www.realtor.com/advice/buy/what-you-can-negotiate-when-buying-a-home-beyond-the-asking-price/" target="_blank" rel="noopener noreferrer">other negotiation points</a> that are most important to the seller. From there, you can tailor your offer to match the seller’s needs. This involves things like whether you’d be willing to lease back to the seller for a month or two as the seller figures out where to move next.
“If you’re willing to be flexible, any degree of convenience you can offer the seller will strengthen your position,” says Dougherty.
5. Old rule: Expect to buy a home after submitting one or two offers
New rule: It will probably take multiple tries before you succeed
Still, even when you do put your best foot forward, it’s not always enough to persuade the seller to accept your bid. With that in mind, buyers should be prepared to go through the offer-writing process more than once before they are able to land a home.
‘You can almost plan on having several offers not go through before one is accepted,” explains Brian Chinn, leader of the <a href="https://www.brianchinnteam.com/" rel="noopener noreferrer">Brian Chinn Team</a> at Newberry Real Estate in Tyler, TX. “While that isn’t always the case, it happens more often than not in this market.”
Chinn also acknowledges that submitting an offer in this market can be an emotional experience, especially after a few rejections.
“It’s easy to get frustrated,” Chinn adds, “but having patience is key.”
Tara Mastroeni, who comes from a family of real estate agents, writes about home and lifestyle topics. View more of her work on her website: <a class="vglnk" href="http://www.tmrealestatewriter.com/" rel="nofollow">www.tmrealestatewriter.com</a>
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2022-02-07T14:01:00-07:002022-02-07T14:25:48-07:00Matt Eveytag:johnhillhomesearch.com,2012-09-20:4136Is Buying a Home Still a Smart Plan?With the burst of the housing bubble, credit crisis, and millions of foreclosures across the country, you may wonder if buying a home is such a good idea after all. However, it’s important to consider all of the facts. The important message to take away from these events is not that buying a home is a bad idea, but that you must be smart about buying your home.<img src="https://assets.site-static.com/userfiles/2414/image/concept-money-keys-buy-dollar-property-cash-real-estate-credit-tax-success-economy-earn-wealth-taxes_t20_g8WJaN.jpg" width="400" height="298" alt="Is Buying a Home Still a Smart Plan?" title="Is Buying a Home Still a Smart Plan?" style="float: right; margin: 11px;" />
The housing market, like every type of market, unavoidably has its ups and downs. That doesn’t mean buying a home is a bad investment. As a long-term investment, homeownership is still one of the best investments for individual households. Historically, real estate has consistently increased in value, despite shorter periods of depreciation due to local markets and/or national economic conditions. The data shows that homes generally appreciate about 5% per year.
Savings & Investment
Five percent may not seem like a great return on investment, but you have to think about it in the context of the situation. For example, let’s say you put 10% down on a $200,000 house. That’s a $20,000 down payment, or initial investment. At a 5% annual appreciation rate, your $200,000 home would gain $10,000 in value during the first year. Earning $10,000 on an investment of $20,000 is a whopping 50% return.
For further perspective, let’s say instead of spending that $20,000 on a down payment, you invested it in the stock market. With a 5% return, you would gain only $1,000 in profit.
Tax Benefits
So now you’re saying that a home may have a higher return, but that’s before you consider all of the costs of homeownership, such as taxes, etc. Well, think of it this way: your property taxes, as well as the interest on your mortgage, are both tax-deductible. You can deduct those costs from your income, thus reducing your overall taxable income. In other words, the government is subsidizing your home.
Other Benefits
It’s easy to get carried away with all of the economic reasons for home ownership, but it’s important to remember that not every reason is financial. Have you ever wanted to paint the walls of your apartment? Well when you’re renting, you can’t. Has anything in your apartment ever needed updating, but the landlord refused to do it? When you own a home, you can make the space yours in almost any way you want. And you benefit when you do home improvements, both financially and psychologically. Homes generally have more space, for storage, living, etc. than other living arrangements. Not to mention that you have space outdoors for barbecuing, pets, and kids. Owning your home carries with it a sense of pride, accomplishment, and even an elevated social status.
So when you’re considering buying a home, consider the broad range of benefits that owning a home can have. And always make sure you have an experienced real estate agent and loan officer to help make sure you’re getting a home that is right for you, both financially and psychologically.2020-08-20T14:36:00-07:002020-12-02T10:38:18-07:00Matt Eveytag:johnhillhomesearch.com,2012-09-20:4135Thinking About Buying a Foreclosure?With the housing bubble burst and the subprime mortgage crisis, millions of homeowners found themselves unable to make their mortgage payments. Many found themselves owing more on the house than the home was worth. Many just walked away from their homes. As a result of these complicated issues, millions of homes were foreclosed.<img src="https://assets.site-static.com/userfiles/2414/image/sold_2.jpg" width="400" height="266" alt="Thinking About Buying a Foreclosure?" title="Thinking About Buying a Foreclosure?" style="float: right; margin: 11px;" />
While this isn’t the only reason for which homes are foreclosed, it has been a widespread one. With all the foreclosed properties, there has also been extensive interest in buying these properties at a bargain price.
It is true that foreclosed properties can be priced at a significant discount, but they are also a much riskier investment. Before making an offer on a foreclosed property, do your due diligence.
Things you must do before buying a foreclosure:
Do a title search - make sure that when you purchase a foreclosure that you are the only person who has any ownership claim
Check for liens - find out if there are any liens against the property because you will be responsible for paying them
Check for a second mortgage - you don’t want to be surprised by an extra mortgage that you will need to pay
Know how good of a “bargain” you’re getting - foreclosures are sold “as is” and in many cases you will not be able to do a proper inspection. You may end up paying thousands of dollars repairing the property before it is fit to be lived in.
It is also important to consider that there are different types of foreclosure properties and each type comes with its own advantages and disadvantages. The different types of foreclosure purchases are:
Pre-foreclosure
Auction
Real Estate Owned (REO), also called “bank owned”
Pre-Foreclosure
A pre-foreclosure is when you buy the home directly from the homeowner, before the bank officially forecloses. This type of purchase does not require as much capital as other foreclosures. Also, since you are purchasing straight from the homeowner, you will be able to gather all of the necessary information, such as inspection reports, title information, etc. that may not be available with other foreclosure properties. Once you take over the mortgage, you will be responsible for all future payments as well as any overdue back payments.
Auction
A foreclosure property will usually end up at an auction. Real estate auction practices vary by state but common practice is for the auction to be held on courthouse steps, in front of the foreclosed home, or at the county clerk’s office.
Real estate auctions offer the best chance for a great deal but also hold the greatest risk. Auction properties are sold as is, with no opportunity for potential buyers to perform inspections. When buying a home at auction, the buyer must pay cash, usually a cashier’s check. It is also possible that there may still be tenants living in the home. In such a case, you would be responsible for the often costly eviction process.
REO
Once a foreclosure has gone to auction and failed to sell, it becomes a Real Estate Owned, or bank owned, property. Most homes do not sell at auction, most fail to even get any bids.
An REO property is the least likely of the foreclosure properties to represent a bargain, but it is also the least risky. The property can be fully inspected, any title issues can be found and dealt with, and the sale can be subject to a mortgage. REO properties also tend to be in better condition than other foreclosure properties.
Another thing to keep in mind when purchasing a foreclosure is that some states have a redemption period that allows the original owner to buy back the property by paying the remaining balance owed. You may be able to have this redemption period waived, so check the state laws on this topic before purchasing.
Still interested in buying a foreclosure property? If so, always do your research before purchasing!2020-08-20T14:36:00-07:002020-12-02T10:41:47-07:00Matt Eveytag:johnhillhomesearch.com,2012-09-20:4134Closing Costs When Buying or Refinancing a HomeThis is a detailed summary of costs you may have to pay when you buy or refinance your home. They are listed in the order that they should appear on a Good Faith Estimate you obtain from a mortgage lender. There are two broad categories of closing costs. Non-recurring closing costs are items that are paid once and you never pay again. Recurring closing costs are items you pay time and again over the course of homeownership, such as property taxes and homeowner’s insurance. Some of the items that appear here do not traditionally appear on a lender’s Good Faith Estimate and lenders are not required to show all of these items.<img src="https://assets.site-static.com/userfiles/2414/image/Untitled_design_15.jpg" width="400" height="335" alt="Closing Costs When Buying or Refinancing a Home" title="Closing Costs When Buying or Refinancing a Home" style="float: right; margin: 11px;" />
Non-Recurring Closing Costs Associated with the Lender.
Loan Origination Fee - The loan origination fee is often referred to as points. One point is equal to one percent of the mortgage loan. As a rule, if you are willing to pay more in points, you will get a lower interest rate. On a VA or FHA loan, the loan origination fee is one point. Any additional points are called discount points.
Loan Discount - On a government loan, the loan origination fee is normally listed as one point or one percent of the loan. Any points in addition to the loan origination fee are called discount points. On a conventional loan, discount points are usually lumped in with the loan origination fee.
Appraisal Fee - Since your property serves as collateral for the mortgage, lenders want to be reasonably certain of the value and they require an appraisal. The appraisal looks to determine if the price you are paying for the home is justified by recent sales of comparable properties. The appraisal fee varies, depending on the value of the home and the difficulty involved in justifying value. Unique and more expensive homes usually have a higher appraisal fee. Appraisal fees on VA loans are higher than on conventional loans.
Credit Report - As part of the underwriting review, your mortgage lender will want to review your credit history. The cost of running the credit report can vary and is included in closing costs.
Lender’s Inspection Fee - You normally find this fee on new construction and is associated with what is called a 442 Inspection. Since the property is not finished when the initial appraisal is done, the 442 Inspection is done when the building is completed and verifies that construction is complete with carpeting and flooring installed.
Mortgage Broker Fee - About seventy percent of loans are originated through mortgage brokers and they will sometimes list your points in this area instead of the Loan Origination Fee category. They may also add any broker processing fees in this area so you clearly understand how much is being charged by the wholesale lender and how much is being charged by the broker. Wholesale lenders offer lower costs/rates to mortgage brokers than you can obtain directly, so you are not paying extra by going through a mortgage broker.
Tax Service Fee - During the life of your loan you will be making property tax payments, either on your own or through your impound account with the lender. Since property tax liens can sometimes take precedence over a first mortgage, it is in your lender’s interest to pay an independent service to monitor property tax payments.
Flood Certification Fee - Your lender must determine whether or not your property is located in a federally designated flood zone. This is a fee usually charged by an independent service to make that determination.
Flood Monitoring - From time to time flood zones are re-mapped. Some lenders charge this fee to maintain monitoring on whether this re-mapping affects your property.
Other Lender Fees
We put these in a separate category because they vary so much from lender to lender and cannot be associated directly with a cost of the loan. These fees generate income for the lenders and are used to offset the fixed costs of loan origination. The Processing Fee mentioned above can also fall into this category, but since it is listed higher on the Good Faith Estimate Form we did not also include it here. You will normally find some combination of these fees on your Good Faith Estimate.
Document Preparation - Before computers made it fairly easy for lenders to draw their own loan documents, they used to hire specialized document preparation firms for this function. This was the fee charged by those companies. Nowadays, lenders draw their own documents but this fee is charged on almost all loans.
Underwriting Fee - Once again, it is difficult to determine the exact cost of underwriting a loan since the underwriter is usually a paid staff member.
Administration Fee - If an Administration Fee is charged, you will probably find there is no Underwriting Fee. This is not always the case.
Appraisal Review Fee - Even though you will probably not see this fee on your Good Faith Estimate, it is charged occasionally. Some lenders routinely review appraisals as a quality control procedure, especially on higher valued properties.
Warehousing Fee - This is rarely charged and begins to border on the ridiculous. However, some lenders have a warehouse line of credit and add this as a charge to the borrower.
Items Required to be Paid in Advance
Pre-paid Interest - Mortgage loans are usually due on the first of each month. Since loans can close on any day, a certain amount of interest must be paid at closing to get the interest paid up to the first. For example, if you close on the twentieth, you will pay ten days of pre-paid interest.
Homeowner’s Insurance - This is the insurance you pay to cover possible damages to your home and other items. If you buy a home, you will normally pay the first year’s insurance when you close the transaction. If you are buying a condominium, your Homeowners’ Association Fees normally cover this insurance.
VA Funding Fee - On VA loans, the Veterans Administration charges a fee for guaranteeing your loan. The fee will be a percentage of the loan balance but the exact percentage will vary depending on whether you have used your VA eligibility in the past. Instead of actually paying this as an out-of-pocket expense, most veterans choose to finance it, so it gets added to the loan balance. This is why the loan balance on VA loans can be higher than the actual purchase amount.
Up Front Mortgage Insurance Premium (UFMIP) - This is charged on FHA purchases of single-family residences (SFR’s) or Planned Unit Developments (PUDs). Like the VA Funding Fee it is normally added to the balance of the loan. Unlike a VA loan, the homebuyer must also pay a monthly mortgage insurance fee, too. This is why many lenders do not recommend FHA loans if the homebuyer can qualify for a conventional loan. Condominium purchases do not require the UFMIP.
Mortgage Insurance - Though it is rare nowadays, some first-time homebuyer programs still require the first year mortgage insurance premium to be paid in advance. Most mortgage insurance (when required) is simply paid monthly along with your mortgage payment. Mortgage insurance covers the lender and covers a portion of the losses in those cases where borrowers default on their loans.
Reserves Deposited with Lender
If you make a minimum down payment, you may be required to deposit funds into an impound account. Funds in this account are your funds, and the lender uses them to make the payments on your homeowner’s insurance, property taxes, and mortgage insurance (whichever is applicable). Each month, in addition to your mortgage payment, you provide additional funds which are deposited into your impound account.
The lender’s goal is to always have sufficient funds to pay your bills as they come due. Sometimes impound accounts are not required, but borrowers request one voluntarily. A few lenders even offer to reduce your loan origination fee if you obtain an impound account. However, if you are disciplined about paying your bills and an impound account is not required, you can probably earn a better rate of return by putting the funds into a savings account. Impound accounts are sometimes referred to as escrow accounts.
Homeowners Insurance Impounds - your lender will divide your annual premium by twelve to come up with an estimated monthly amount for you to pay into your impound account. Since a lender is allowed to keep two months of reserves in your account, you will have to deposit two months into the impound account to start it up.
Property Tax Impounds - How much you will have to deposit towards taxes to start up your impound account varies according to when you close your real estate transaction. For example, you may close in November and property taxes are due in December. Your deposit would be higher than for someone closing in May.
Mortgage Insurance Impounds - When required, most lenders allow this to simply be paid monthly. However, you may be required to put two months’ worth of mortgage insurance as an initial deposit into your impound account.
Non-Recurring Closing Costs not associated with the Lender
Closing/Escrow/Settlement Fee - Methods of closing a real estate transaction vary from state to state, as do the fees.
Title Insurance - Title Insurance assures the homeowner that they have clear title to the property. The lender also requires it to insure that their new mortgage loan will be in first position. The costs vary depending on whether you are purchasing a home or refinancing.
Notary Fees - Most sets of loan documents have two or three forms that must be notarized. Usually your settlement or escrow agent will arrange for you to sign these forms at their office and will charge a notary fee.
Recording Fees - Certain documents get recorded with your local county recorder. Fees vary regionally.
Pest Inspection - This is also referred to as a Termite Inspection. This inspection tests not only for pest infestations, but also other items such as wood rot and water damage. If repairs are required, the amount to cover those repairs can vary. The seller will usually pay for the most serious repairs, but this is a negotiable item. Usually (not always) the pest inspection fee is paid by the seller of the home and is not normally reflected on the Good Faith Estimate.
Home Inspection - Since it is the homebuyer’s choice to obtain a home inspection or not, this cost is not usually reflected on a Good Faith Estimate. However, it is recommended. Keep in mind that the home inspector has a certain set of standards he uses when inspecting a home, and those standards may be higher than required by local building codes. An example is that an inspector may note there is no spark arrestor on a chimney but the local building code may not require it. This sometimes leads to conflicts between buyer and seller.
Home Warranty - This is also an optional item and not normally included on the Good Faith Estimate. A Home Warranty usually covers such items as the major appliances, should they break down within a specific time. Often this is paid by the seller.
Refinancing Associated Costs (but not charged by the new Lender)
Interest - When you close the transaction on your refinance, there will most likely be some outstanding interest due on the old loan. For example, if you close on August twentieth (and you made your last payment), you will have twenty days interest due on the old loan and ten days prepaid interest on the new loan. Your first payment on the new loan would not be until October 1st since you have already paid all of August’s interest when you closed the refinance transaction (since interest is paid in arrears, a September payment would have paid August’s interest, which has already been paid in closing).
Reconveyance Fee - This fee is charged by your existing lender when they “reconvey” their collateral interest in your property back to you through recording of a Reconveyance.
Demand Fee - Your existing lender may charge a fee for calculating payoff figures.
Sub-Escrow fee - Though it sounds like an escrow fee, this fee is actually charged by the Title Company. Assume it is an income-generating fee similar to some of the lender fees mentioned above.
Loan Tie-in Fee - Though it sounds like a lender fee, this cost is actually charged by the Escrow Company.
Homeowner’s Association Transfer Fee - If you are buying a condominium or a home with a Homeowner’s Association, the association often charges a fee to transfer all of their ownership documents to you.
Asking the Seller to Pay Closing Costs - Rules and Advice.
It has become common to ask the seller to pay some or all of the closing costs when you purchase a home. Essentially, this is financing your closing costs since you will probably pay a little bit more for the property than you would if you were paying your own costs.
Keep in mind a few simple rules. On conventional loans you can only ask the seller to pay non-recurring costs, not prepaid fees or items to be paid in advance. If you are putting ten percent down or more, the most the seller can contribute is six percent of the purchase price. If you are putting less down, the most the seller can contribute is three percent.
On VA loans, you can ask the seller to pay everything. This is called a “VA No-No”, meaning the buyer is making no down payment and paying no closing costs.
On FHA loans, the seller can pay almost any cost, but the buyer has to have a minimum three percent investment in the home/closing costs.
Most refinances include the closing costs and prepaids in the new loan amount, requiring little or no out-of-pocket expenses to close the deal.
If you didn’t get bored as you read through this, now you know everything (almost) about closing costs.2020-08-20T14:36:00-07:002020-12-02T11:36:28-07:00Matt Eveytag:johnhillhomesearch.com,2012-09-20:4133Documenting Your Assets - Verifying Your Down PaymentDocumenting Your Assets - Verifying Your Down Payment
When buying a home, it is not enough to just come up with the money. With the exception of no asset verification loans, lenders want to verify where the money for your new home will be coming from. If you can document that the funds are coming from your personal savings, the lender is more confident of your strength as a borrower.<img src="https://assets.site-static.com/userfiles/2414/image/Untitled_design_16.jpg" width="400" height="335" alt="Documenting Your Assets - Verifying Your Down Payment" title="Documenting Your Assets - Verifying Your Down Payment" style="float: right; margin: 11px;" />
In addition, if you can verify that you have additional assets that are not needed for the down payment, it is important to document those, too. Additional assets are reserves you can draw upon during times of trouble, such as unemployment, medical emergencies, and similar occurrences. Additional assets can also help to document that you have a history of saving money, which makes you a more dependable borrower.
It is extremely important to completely document the paper trail of any funds you use for down payment and closing costs. The sections below provide guidance on both verifying assets and documenting them as a source of your down payment.
Checking, Savings, & Money Market Accounts
The quickest and easiest way to document funds in your bank account is to provide your lender with copies of your most recent bank statements. Most lenders request two months of bank statements, but some still ask for three. Some lenders still send a Verification of Deposit to your bank in order to determine your current bank balances and average balance for the last two months. However, that is the old way of doing business and most lenders nowadays prefer to have bank statements.
If the money you are using for the down payment and closing costs has been in the bank for the entire period covered by the bank statements, you’re fine. These are known as “seasoned funds.” However, if your statements show any large or unusual deposits, the lender will ask you to explain them and document their source.
Stocks, Bonds, Mutual Funds, etc.
Most of those who own stocks get a monthly or quarterly statement from their brokerage. You will need to supply statements for the most recent sixty or ninety days in order to document these assets.
Though it is rare nowadays, some people actually have stock certificates instead of having a brokerage account. When this is the situation, make copies of the certificates and provide those copies to your lender. You might also want to supply tax records to indicate you have owned these stocks for some time.
If part of your down payment will come from the sale of stocks and investments, you will need to keep all documentation that applies to the sale. Provide these copies to your lender as well.
Gifts
Especially when buying a first home, some borrowers need help coming up with the down payment. This help should come in the form of a gift from a close family member. Lenders will require the donors to sign a special form called a gift letter. The gift letter states the relationship between the parties, the address of the purchased property, the amount of the gift, and sometimes the source of the funds used to make the gift. The gift letter also clearly states that the funds are a gift and not required to be repaid.
With most lenders, the donor will have to also provide evidence that they have the ability to make the gift. This can be in the form of a bank or stock statement to show they have the funds available. You should also make a copy of the check used to make the gift and keep a copy of the deposit receipt when you deposit the gift funds into your bank account or escrow.
401K or Retirement Accounts
It is important to provide documentation about your retirement accounts or 401K programs because this is another asset you could draw upon as reserves in case of a problem. It is also another way to show you have a savings history. Just provide a copy of your most recent statement to your lender.
Many people use these accounts as a source of funds for their down payment, too. Some employers allow you to cash out a portion of the 401K and some allow you to borrow against it. Be sure to keep copies of all paperwork involving the transaction. If they cut you a check, be sure to make a photocopy of that, too, including any receipt for deposit into your personal bank account.
If you are borrowing against your 401K, some lenders will count this as an additional debt to go along with car payments, credit cards and other obligations. This may seem kind of silly because you are borrowing your own money, but from the lender’s viewpoint it is still a monthly obligation that you must come up with and should be taken into account. If you are tight on your debt-to-income ratios in qualifying for a home loan, this could be an important consideration. It may affect whether you choose to cash out the account and pay any tax penalty, or simply borrow against it.
Employers
Some companies provide down payment assistance for their employees. They may feel that Homeowners are more stable and reliable employees, or that providing down payment assistance fosters an environment of higher morale and loyalty to the firm. Just make copies of all the paperwork, including a copy of the check and the receipt when you deposit the funds into your personal bank account. It is important that these funds do not require repayment.
Savings Bonds
If you have Savings Bonds, remember that they are also financial assets. Since you hold the actual bonds in your possession, the easiest and best way to verify them for your mortgage lender is to make photocopies of them. If you choose to cash them in for down payment or closing costs, you should do this at your local bank. Be sure to keep copies of the paperwork the bank provides because that will establish the current value of the bonds and show that you received their cash value.
Personal Property - Cars, Antiques, etc.
Personal property includes automobiles, vehicles, boats, furniture, collections, heirlooms, antiques, art, clothing, and practically everything you own except for real estate. The mortgage application asks you to estimate the value of these items.
The larger the loan amount, the more important it is for you to provide details on your personal property. This is because larger loans usually indicate larger incomes, and lenders check to see if your personal property matches your income. If it does not, this sends a red flag to the underwriter and they take a closer look at your application.
You are not required to document the value of personal property unless you intend to sell them to come up with your down payment.
Selling Personal Property
For those Homebuyers who do sell personal property in order to come up with their down payment, the verification process can be arduous. Lenders are much stricter about documenting this method of coming up with your source of funds.
Selling a car is perhaps the easiest to document. First, you need to photocopy the registration that shows you actually own the vehicle. You will have to provide a copy of the page in the “Blue Book” that shows your model and its value. Then you need to photocopy the bill of sale showing the transfer to another individual and a copy of the check used to purchase the vehicle. Do not get paid in cash because that makes it impossible to show you actually received the funds. Make a copy of the receipt when you deposit the funds into the bank.
Other types of personal property are more difficult because you have to show that you actually own the property and that it actually has the value that you sold it for. This is a little harder to do for most assets than it is for automobiles.
Records showing you purchased the property would be helpful. You could also provide an old inventory that documents ownership. To determine value, you may have to contract with an independent appraiser or a specialist who has the knowledge for that particular type of property.
If you cannot document the item’s value, the lender will not view the sale as an acceptable source of funds. Just like selling a car, you have to prove you own the item, make a copy of the bill of sale, copy the check used to purchase the item, and make a copy of your receipt when you deposit the funds into your bank.2020-08-20T14:36:00-07:002020-12-02T11:39:11-07:00Matt Evey