The American dream has long been to become a homeowner, but as with anything of a financial nature, requirements can vary between institutions, lenders, and brokers. While one bank may ask for 20 percent down, a mortgage broker may only require 10 percent. Since loans vary in requirements, stipulations, and types of homes available as family dwellings, it is good to know what you may face before you begin the hunt for the perfect house. Here are six things you should know before purchasing a home.
Purchasing Expenses
The percentage the lender requires is not the only cost associated with purchasing a home, so it is wise tounderstand all relevant fees – including closing costs. Also, check out monthly insurance rates, property taxes, and association fees before you put every penny you have saved into a mortgage. You must also consider expenditures you will need in the first few months, such as appliances, furniture, and maintenance.
Knowing Credit
Although it is not a widely broadcast fact, your credit score can be one of the most critical factors in what will determine the terms of your home loan. Most people with a score of 750 or over can usually find good terms and low interest rates that can save them up to 10 percent of the loan costs over the loan’s life. However, if you have a score of less than 700, it is important to find a way to raise the score quickly, so find a credit repair company and work with them to raise your credit score.
Knowing Requirements
It is easy to get lost in the search for a home and fall in love with a house that doesn’t fulfill your needs unless you are firm and set the requirements with your realtor. To make sure you don’t wander into something you really don’t want or can’t afford, know what type of home you require, where it needs to be located, and what restrictions must be included. For example, you may want a condo with a garage that is located in an area near a park. If you tell yourself what you want, repeating it out loud several times, the chances you will get lost in a property search will diminish.
Getting Pre-Approval
Most first-time home buyers don’t know they have an option to get a pre-approval before searching for a house.A pre-approval is a letter or notice from your lender that states the institution will back you for a certain amount of money. That letter lets the homeowners know you can afford to purchase the home and won’t get turned down during the process. This is not the same as a pre-qualification, rather your lender will verify your income, credit score, and employment history before issuing the pre-approval letter.
Understanding HOAs
More than ever before, homes are being built in neighborhoods that are an inclusive unit covered by a homeowner’s association. Condos are almost always a part of an HOA, too. These associations often take care of property maintenance, pools, and parking areas using the dues you will be required to pay. If you areconsidering an area with an HOA, ask neighbors about how the neighborhood is run and what that person thinks about the HOA requirements.
Inspecting Importance
One of the most critical things you can do before purchasing a home is have an inspector check the property. The problem is that not all inspectors are created equally, and some are terrible at what they do. Make sure you have a certified and qualified inspector that is bonded and licensed in your area, and a professional that works for you – not the seller. If you are uncomfortable with the report you receive, ask for a second inspection by someone you hire and feel you can trust. There is nothing wrong with obtaining a second opinion.
Buying a home is a huge decision and may be the largest and most expensive purchase you will make in your lifetime. That is why it is important to take your time and make sure you know what you are getting into before you sign on the dotted line and commit yourself to 30 years of monthly payments. Knowing what you are committing to can help you make a wise financial investment in your future.
Message me if your thinking about buying a Fort Collins or Loveland home at m.me/EdPowersRealEstate
Ed Powers Real Estate 970-690-3113 ed@EdPowersRealEstate.com www.EdPowersRealEstate.com
Home buyers intent on purchasing a Fort Collins or Loveland home now can benefit from three significant advantages:
1. Less Competition: The pandemic continues to keep people home and job loss is at record highs. For these and other reasons, the 2020 spring real estate market is not the mass buying frenzy of past years. Home sales are down significantly in most markets. 2. Low Interest Rates: Interest rates are at historic lows which means buyer purchasing power is strong. Mortgage pre-approval will assure each buyer—and the respective seller—of exactly how much the buyer has to spend. 3. Homebuyer Education Courses: Established to prevent a repetition of the 2008-9 housing disaster, most courses are available online. The wide range of topics is designed to help buyers achieve short- and long-term real estate goals and plans.
Our key question remains: “Is now the right time?”
Whether you must or want to buy now or you’re determined to be ready when the time is right, there’s less room for error in these uncertain times. The more you learn about the buying process and homeownership in advance, the better prepared you’ll be to improve your current situation through a real estate purchase.
To avoid second guessing yourself about the decision to buy now, commit, in advance, to making a confident decision that you can live with during this economic upheaval and beyond. That does not mean making a quick buying decision nor over-researching your choices. What works here is improving your real estate confidence, so that you understand exactly how to buy and how to protect yourself and your home at the same time.
Make FIVE confident decisions from the start, so you end up with confident decision making you can live with:
#1. Set practical expectations
• Rarely, if ever, are home buyers 100% certain about their selected property or it’s price, except in hindsight. When asked to sign an offer to purchase, you’ll be excited and nervous, but aim to be more sure—much more sure—than unsure.
Spending all that money on a property you have only visited for an hour or two is bound to make you nervous. Worry if it doesn’t. What you want is confidence that the property meets your criteria and budget and that it is as presented (a clause in the offer calling for a home inspection will determine the home’s condition).
• Let go of searching for a “dream home” or “forever home”
Attempting to decide today what you’ll want or need two, three, or more decades in the future puts undue pressure on you. The pandemic has taught us how unpredictable tomorrow is. Search in the very best location you can afford for what you need now and in the foreseeable future.
#2. Plan the work and work the plan
Focus your search instead of trying to view a huge number of homes.
(1) Who is the buyer?
Who is or are making decisions?
• If you’re buying solo, who will act as a sounding board, problem-solver, and property “detective”—along with your real estate professional—to help you take a long hard look at each potential home? • Too often couples view properties before they decide what they are looking for. Squabbling, fighting, or competing during the buying process distracts both buyers from assessing the true value of each property.
If you love modern and your partner loves traditional, investigate the two styles so you both understand the compromises involved before viewing property. Often design differences are cosmetic, not structural. Decor issues can unnecessarily distract buyers from expensive-to-fix problems, like a worn-out roof, a cracked foundation, or signs of water leaks. Remember, you’re both on the same side!
(2) Where is your best location?
Location is what you are really buying. Oh, there may be a lovely house or condominium unit included, but it’s location that cannot be changed and that will determine future value. Buy the best location you can afford, even if the property needs some TLC or cosmetic changes, since a great location will usually translate into steadily-increasing value.
Saying “no” to a great location because of someone else’s bad decor is a rookie or a pretentious mistake. Your real estate professional can help with your search by explaining the location-based value of each property. That is, within your budget, value is tied to which end of which street, proximity to what, which school etc.?
(3) How secure is purchasing power?
At the top of the list of your strengths is your purchasing power. What’s the source of the money to purchase, maintain the home, and pay off the mortgage? Many buyers are hesitant to take on a home purchase now when employment, income, and savings circumstances are very unsettled and becoming more so. Why are you confident you can provide the down payment, qualify for financing, make monthly mortgage payments, and meet closing and moving costs without compromises? “Hope” and “wish” are not realistic real estate strategies.
(4) What will be improved by the move?
If you must move now, this will be an easy question to answer. Just be sure you haven’t overlooked other solutions or new housing issues in the chaos that passes for everyday life right now. If you aim at improvements to your quality of living, that should also improve your standard of living. The reverse is not equally true.
#3. Build your confidence with real real estate knowledge
Explore what’s important in your next home: Research substance, not merely cosmetic items like stainless steel appliances and a kitchen island.
Investigate the costs of homeownership and maintenance. Learn about cutting costs to prevent becoming “house rich and cash poor.” Get the facts! For instance:
• Heating and cooling costs can take a big chunk out of your paycheck, so consider an energy efficient, cost-effective home. You’ll find information galore online. Take care you are not reading marketing pitches, but scientific information like A Consumer’s Guide to Energy-Efficient and Healthy Homes
If you pay attention, you can learn a lot from real estate professionals, but their job is not to teach you what to buy. They answer questions and follow your instructions. It’s up to you to decide which property to buy. Your professional will help you make the purchase successfully.
The last real estate crisis led to Homebuyer Education Courses and Counseling Services designed to help prospective homebuyers “think critically about the benefits and risks of homeownership, understand how to choose affordable homes and appropriate mortgage products, and build the financial knowledge, resources, and behaviors needed for sustainable homeownership and long-term financial health.”
Homebuying Courses are intended to provide assistance navigating the homebuying process and to help owners keep their homes over the long run. The directory of HUD-approved housing counseling agencies at US Department of Housing and Urban Development (HUD, hud.org) will introduce you to local housing counselors and to specialty counselors like those for reverse mortgages or for foreclosure avoidance.
Since each Homebuyer Education Course is different, determine the sponsoring organization and what each covers before you sign up. Most programs are available online, like these popular versions:
Once you have a clear idea of your needs and wants, interview local experienced real estate professionals to match your criteria against available listings. Professionals are not limited to selling off MLS. They can contact suitable unlisted property owners to discover who is ready to sell now.
If what you want is not currently available, don’t abandon your plans or goals without re-examination. If you have to change direction or priorities to achieve what you decided on, stop and verify that now is still the right time.
COVID & Housing UPDATE: To provide the most up-to-date and accurate housing assistance information during the COVID-19 national emergency, the Consumer Financial Protection Bureau (CFPB, consumerfinance.gov), Federal Housing Finance Agency (FHFA, fhfa.gov), and HUD recently launched the new mortgage and housing assistance website: cfpb.gov/housing. The site consolidates the CARES Act mortgage relief, protections for renters, warnings about COVID-19-related scams, details on student loan payment suspension, and much more.
Message me if your thinking about buying a Fort Collins or Loveland home at m.me/EdPowersRealEstate
Ed Powers Real Estate 970-690-3113 ed@EdPowersRealEstate.com www.EdPowersRealEstate.com
When preparing to buy a Fort Collins or Loveland home, financing is typically in order. And for those shopping for their best mortgage deal, the two most asked-about questions concern the interest rate and closing costs. Sure, there are certainly other considerations but these two get mentioned more often than others. One lender can have a slightly lower rate, but the lender’s closing costs are a bit higher compared to others. Conversely, a lender offering slightly higher rates might have not just lower closing costs but might also offer a “no closing cost” option in exchange for an elevated rate. These are the things you and your loan officer will discuss.
While the rate is very important, after all it determines what your monthly payments will be well into the future, so too are closing costs. And consumers can make the wrong decision by not paying as much attention to how much a loan actually costs. A lender can provide you with a cost estimate either over the phone or by sending you a sample Loan Estimate. This estimate will highlight a list of closing costs you’re likely to see at your settlement. Your loan officer will also point out which costs are lender costs, and which are reserved for third party services.
Of these, there are recurring and non-recurring charges. Recurring charges are those you’ll see again, either every month or every year. For example, each time you make a mortgage payment, a portion goes directly toward the outstanding loan balance while another goes toward interest. Interest is a cost and it will be paid every month. That makes it a recurring cost. Property taxes and property insurance is another type of recurring cost. Non-recurring charges are one time fees paid at the settlement table. Title insurance, attorney and other one-time costs are non-recurring.
Okay, so when shopping around for a mortgage you want to know where rates are, but you should also ask about the lender fees. Third party charges shouldn’t vary from one lender to the next. An attorney will charge the same amount for a similar transaction, for example. It’s the lender charges that can be different from one lender to the next. What sort of fees does the lender have control over?
Common lender fees might be a Loan Processing fee. A loan processing fee helps to cover the overhead needed when moving a loan file through the approval process. The individual lender decides whether or not to charge such a fee as well as how much that fee will be. Another common lender charge is an Underwriting fee. This fee goes to offset the cost for making sure the loan file meets all the guidelines for the selected mortgage program. Again, the lender decides whether or not to charge the fee and if so, how much. Other lender fees collected might actually go to others such as a credit report fee or funds to pay for an appraisal.
It’s just as important to evaluate the cost of the loan from the lender’s perspective. A lender might have a rate 0.125% lower than another but charge $500 in closing costs. Loan officers know that when quoting a rate to a prospective borrower, the rate will be the most important factor. However, many consumers ignore the other part of the equation. To complicate matters more, the Loan Estimate can be very difficult to discern. Loan officers send them out daily, but they can look a little complicated to the consumer at first glance.
The takeaway? Get your rate quoted but also ask for a list of lender-required charges. The other fees the lender has no control over.
Message me if your thinking about buying a Fort Collins or Loveland home at m.me/EdPowersRealEstate
Ed Powers Real Estate 970-690-3113 ed@EdPowersRealEstate.com www.EdPowersRealEstate.com
