Setting Roots

You will hear lots of stories, and see lots of articles touting the benefits of the “Down Market” as far as real estate goes. But don’t let yourself get taken away, or else you may get snapped back into reality real quick. The market is down for a reason, and the fact is that finance companies are hurting in a big way. Don’t let your pre-approval letter get you too comfortable, the way I did.

PRE-APPROVAL IS NOT A GUARANTEE!

Read the fine print. Pre-approval means that the bank WILL give you a loan, though it does not say what the conditions of that loan will be. I was recently pre-approved for 100% financing on my home, but when  I was ready to send the contract to the loan officer, I was informed that the bank would now only cover 97% of my loan. Needless to say I was crushed. If I had a down payment, I would not have sought a 100% loan to begin with. My credit is great, and I was approved for a very low interest rate, I just don’t have enough money saved for the down payment, and the closing costs.

At first I felt as though the bank was trying to scam me, or pull a fast one on me. After making a few phone calls, and discussing the situation for well over an hour with more than a half a dozen people, it was made clear to me that the problem was due to the fact that I am buying in a declining market. With home values dropping, all banks are starting to require a down payment. Which I can understand from the business perspective, but it would have been nice to know about in advance.

Fortunately for me, I do qualify for a VA backed loan, which will proved 100% financing (for now), but incurs some additional costs, and requires a more detailed appraisal. If you do not qualify for a VA backed loan, you may qualify for for an FHA backed loan, or grant.

If you find yourself really strapped for cash, I would suggest that you try putting off the purchase of your home until you have some more saved. Do not be tempted or seduced by mortgage scams, or any program that is set up just to get you into a home quickly. Don’t let yourself get talked into an adjustable rate mortgage, or some other high-risk financing. Remember, it is better to wait, and get a good home, with a good mortgage, than it is to rush and wind up setting yourself up for financial disaster.

What are “Points” anyway? How do they effect my interest rate and overall loan?

The interest rate determines the monthly interest payments over the lifetime of the loan. A “point” or “discount point” is equivalent to 1% of the loan amount and usually reduces or “discounts” the loan rate by an eighth of a percentage point.

For example: You want to get a loan for $100,000 to buy a home. Each “point” would cost you 1% of $100,000 or $1,000 but would reduce your loan’s interest rate by .125%. The lender might offer you an 8.0% loan with zero points, a 7.875% loan with one point, or a 7.75% loan with 2 points.

Points, like the down payment, are paid at closing. In some cases, lenders will allow borrowers to finance the points over the term of the loan. Lenders sometimes use points to make their interest rates appear lower. Be aware that lower interest rate offered by a lender may translate into higher points requirements, which means more money due at closing.

Top things to know

1. You’re a statistic.

To an insurer, you’re not a person; you’re a set of risks. An insurer bases its premium (or its decision to insure you at all) on your “risk factors,” including your occupation, who you are, what you own, and how you live.

2. Know your home’s value.

Before you choose a policy, it is essential to establish your home’s replacement cost. A local builder can provide the best estimate.

3. Insurers differ.

As with anything else you buy, what seems to be the same product can be priced differently by different companies. You can save money by comparison shopping.

4. Don’t just look at price.

A low price is no bargain if an insurer takes forever to service your claim. Research the insurer’s record for claims service, as well as its financial stability.

5. Go beyond the basics.

A basic homeowners policy may not promise to entirely replace your home.

6. Demand discounts. Insurers provide discounts to reward behavior that reduces risk.

However, Americans waste some $300 billion a year because they forget to ask for them!

7. At claims time, your insurer isn’t necessarily your friend.

Your idea of fair compensation may not match that of your insurer. Your insurer’s job is to restore you financially. Your job is to prove your losses so you get what you need.

8. Prepare before you have to file a claim.

Keep your policy updated, and reread it before you file a claim so there are no surprises.

Originally Posted at:

http://money.cnn.com/magazines/moneymag/money101/lesson19

Well, after a lot of searching, online and in person I believe I have found the home of my dreams. The house I have found is so much better than what I was expecting, that it is hard to believe… I will refrain from posting any photos or specific details at the moment, because the deal is not complete, and I don’t want to jinx anything, or risk violating some part of the contract in some way.

The home is about 1,750 square feet, which is huge for me, it is in a beautiful neighborhood and has a 2 car garage. In addition, the house also has an in-ground, heated swimming pool. What’s even better? It’s an enclosed pool. Wow! The house was built in 1995, which really isn’t old by anyone’s standards. Although I have not yet had the official inspection done, I have to say, after having been to the home twice, and thouroughly looking aroung, it certainly appears to be in stellar shape. I have read the seller’s inspections, and there does not seem to be any major problems. The only things noted are that it is still the original roof, and the inspectors seem to think there is only 2-3 years of life left in the roof, and there is a minor crack in the front steps. Neither of these are deal breakers.

The house itself has an interesting story… It was appraised at the end of last year for about $210,000. The original owners were selling it  because the husband got relocated by his job. Apparently a major realty company gave them a “relocation package”. The company put the house on the market at $203,000, but it did not sell. So they dropped the price to $200,000. Still no joy. The realty company then bought the home from the owners, and put it on the market at $199,900. But still it did not sell. They dropped the price to $189,900, and this is where I came in. I offered them $185,000. But I settled on $186,000 and they pay half my closing costs.

The negotiation process was nerve-racking to say the least. My agent called the seller and told them my initial offer, then she called me back with their counter offer, and I call them back with my counter-counter offer, and so on and so forth until and agreement was reached. The entire time, I am crunching numbers, and doing all this mathematical juggling to try to make the numbers work within my budget, and also to make an offer that the seller would accept. It was a very long, frustrating process that really had me worried for a bit. I found out the closing costs were going to be a little higher than I originally anticipated. I had done all my calculations and planning based on 3% closing costs. Well it turns out the closing costs will be 4%, which doesn’t sound huge, but it’s very nearly two thousand dollars, and I am already pretty strapped for cash as it is. It is scary to be so close to my dream, with my dream house, and to see it all almost slip away over a sum of money as small as $2000.

Luckily for me the seller accepted my final offer, I will not need any additional funding from my bank, and I was able to secure funds for my closing costs. So in the end it seems everything is once again back on track, but all-in-all, it was a pretty scary day for me, with a lot of ups and downs. I am looking forward to getting all of this done with, and finally being able to take possession of what I hope to be, my new home.

By AP

(TAUNTON, Mass.) — A 53-year-old wife and mother fatally shot herself shortly after faxing a letter to her mortgage company saying that by the time they foreclosed on her house that day, she would be dead.

Police said that Carlene Balderrama used her husband’s high-powered rifle to kill herself Tuesday afternoon, shortly after faxing the letter at 2:30 p.m.

The mortgage company called police, who found Balderrama’s body at 3:30 p.m. The auction was scheduled to start at 5 p.m. and interested buyers arrived at the property in Taunton, about 35 miles south of Boston, while Balderrama’s body was still inside, according to Taunton police chief Raymond O’Berg.

Police did not immediately release the name of the mortgage company. O’Berg said Balderrama’s fax read, in part, “By the time you foreclose on my house I’ll be dead.”

O’Berg also said a suicide note found next to Balderrama told her husband, John, and 24-year-old son to “take the (life) insurance money and pay for the house.”

Joe Whitney, who works with Balderrama’s husband, a plumber, said that Balderrama handled the bills and her husband didn’t know about the foreclosure.

“John didn’t even know about it, that’s the surprise,” Whitney said told The Boston Globe. “It’s just one of those awful, awful tragic events.”

Tragic Mistake #1: Thinking you can’t afford it. Today, buying the home of your dreams is easier than ever before. Many people who thought that buying the home they wanted was simply out of their reach are now enjoying a new lifestyle in their very own new home. Buying a home is the smartest financial decision you will ever make. In fact, most American and Canadian home owners would be financially broke at retirement if it wasn’t for one saving grace - the equity in their home. Furthermore, mortgage rates are more flexible today than ever and tax allowances favor home ownership. Real estate values have always risen steadily. Of course there are peaks and valleys, but the long term the trend is a consistent increase. This means that every month when you make a mortgage payment the amount that you owe on the home goes down and the value typically increases. This owe less-worth more situation is called equity build-up and is the reason you can’t afford not to buy. Even if you have little money for a down payment or credit problems, chances are that you can still buy that new home. It just comes down to knowing the right strategies, and working with the right people. See below.

Tragic Mistake #2: Not hiring a buyer’s agent to represent you. Buying property is a complex and stressful task. In fact, it is often the biggest single investment you will make in your lifetime. At the same time, real estate transactions have become increasingly complicated. New technology, laws, procedures and competition from other buyers require buyer agents to perform at an ever-increasing level of professionalism. For many homebuyers, the process turns into a terrible, stressful ordeal. In addition, making the wrong decisions can end up costing you thousands of dollars. It does not have to be this way! Work with a buyer’s agent who has a keen understanding of the real estate business and who is on your side. Buyer’s agents have a fiduciary duty to you. That means they are loyal to only you and are obligated to look out for your best interests. Buyer’s agents can help you find the best home, the best lender and the best inspector. Best of all, in most cases, the buyer’s agent is paid out of the seller’s commission, even though he/she works for you.

Tragic Mistake #3: Getting a cheap inspection. Again, buying a home is probably the most expensive purchase you will ever make. This is no time to shop for a cheap inspection. The cost of a home inspection is very small relative to the home being inspected. The additional cost of hiring a certified inspector is almost insignificant. As a homebuyer, you have recently been crunching the numbers, negotiating offers, adding up closing costs, shopping for mortgages and trying to get the best deals. Do not stop now. Do not let your real estate agent, a patty-cake inspector or anyone else talk you into skimping here. Ask the inspector what certifications he has and what proffessional organizations he is a part of. Remember that education and training isn’t cheap, so getting a well-qualified inspector won’t be either. Additionally, there is no monetary value that can be placed on experience, but clearly a more experienced inspector will likely provide you with better service. Do yourself a favor…and pay a little more for the quality inspection you deserve.

When I started dealing with my agent, I told her my minimum requirements… I am looking for a minimum of three bedrooms, 2 bathrooms, preferably with a 2 car garage and ideally with a pool. Oh yeah, and I want all of this in the inter-coastal region of Jacksonville, and for under $200,000. In another market, she likely would have told me to take a hike. Luckily for me, this is the ultimate buyer’s market.

She queried her database, and the search revealed about 93 potential candidates. Of those, I reduced the list down to about 30 I was interested in. I split these houses into three categories, (1) was houses I am absolutely interested in seeing, (2) was houses I would like to see if none of the category (1) houses are what I had hoped, and (3) was my “just curious” category. The “just curious” category was for houses that had one or two particular things that caught my eye, that I needed to see in person to be able to adequately judge.

I’ve been given lots and lots of advice about home buying. Some of it has been useful, some not so much… Opinions vary widely on the subject of how long to seek your home. One person told me that I should look for a minimum of three months, until I find absolutely what I am looking for. Still, others told me that I will know the house I want when I see it, and I should jump on it immediately. I think both of these are equaly valid ideas, and I think the correct method depends on the buyer. What I am looking for in a home is relatively simple. Many things, like interior paint, mean nothing to me. I will likely do a lot of repainting regardless. I am also not detered if a house has some minor defects that I can easily repair myself.

I do not need a huge house, and I also am not too picky about the floor plan, split bedrooms, eat-in kitchen or dining room, I am flexible. For me, the feel of the house is more important than anything else. I want to be able to look at each room and quickly imagine a use for it. I need a kitchen with enough room to cook, but it does not have to be elaborate, and the master bathroom should be comfortable and have a large tub. Ideally, I would like a separate tub and shower, but again, I am flexible.

That being said, I see little reason to continue my search, should I find a home that really “takes my breath away“. Obviously, all homes will need to be appraised and inspected, but assuming both of those go well, I believe I am ready to buy when I find the house I want. I don’t need a long decision making process, but I am fortunate to be making this decision alone. Obviously, if I were married, I would have a wife, and potentially kids, to take input from as well, which would lengthen the decision making process.

As I have stated before, I have decided to retain the services of a Real Estate Agent. I believe the benefits of their expertise are worth the loss of any potential benefits of my going it alone, especially since I am new to this whole process.

So far I have been working with one Agent and she has been very helpful, she is very pleasant and seems responsive. The thing is, I didn’t really choose her in a very scientific way… I simply saw her office on my way to Target one day and decided to stop by, next thing I knew we were looking at houses the next day. She asked what I was looking for, listened attentively, and sent me a list of houses in the area that met my minimum requirements. The list was right there in my inbox when I got home. I looked through the list and sent her my favorites, and we’ve started looking. So far things are great.

We were supposed to go looking at houses today, but it seems that she had an unexpected meeting pop-up, and had to cancel on me. This was a little frustrating, but acceptable (for now). She was polite and apologized and sent me another list to review. She also wrote down some of the questions I had about the houses we have already looked at so she could get the answers from the owners.

I was also contacted today by another agent with whom I had made an inquiry over the web several days ago (before my trip to Target)… The second agent listened to my description of what I want on the phone, and also e-mailed me a list. The second agent’s list is substantially shorter, and includes houses that exceed my desired price limit by as much as $10,000.

So, my question is this…

Is it bad form to work with multiple agents? How should I decide which one is best for me?

First-time home-buyers face an unfamiliar road and risk purchasing the wrong place at the wrong time. Here’s a guide to the potholes.

By Liz Pulliam Weston

Buying your first home is an exercise in faith. You don’t really know what you’re getting into, you’re awash in unfamiliar terminology and everyone you meet seems to have strong (and utterly contradictory) ideas about which way the housing market is headed.

You may not be able to avoid every home-purchase mistake, but you can keep your regrets to a minimum by avoiding the following traps:
Read the rest of this entry »

I officially started visiting homes yesterday. I have been looking at online listings for months now, and I have a good idea of what is out there, and what I want. Finally getting out there and looking at homes was incredibly helpful. It’s one thing to read that a place is 1,500 square feet, it is another thing entirely to see what 1,500 square feet actually looks like.

I am single, and I grew up in inner city apartments, so 1,500 square feet is a lot of room for me. I am a pretty handy guy, I know how to do most any minor home repair, and I can do a lot of major ones also, so the house being completely finished is not a major concern for me, but it certainly is a perk.

I have decided to retain the services of a Real Estate Agent. A lot of people have told me that I may be able to get a better deal without the agent, but I find it helpful to have someone who knows the market assist and guide me. Since I am new to the area it is also nice that she is familiar with the neighborhoods as well. The general reason you may be able to get a better deal without an agent is because of how their comission works. As a home BUYER, the agent is free to you. She takes half of the SELLING AGENT’S commission. Needless to say, the selling agent will probably try to get the owners to favor a person who is not retaining the services of another realator so that they can keep 100% of the commission.

It’s important to remember though, that the seller’s agent ultimately works for the seller, and she is looking out for the sellers best interest. It’s her job to move houses, so she may not have your best interests in mind. Purchasing a home is a MAJOR decision. Don’t let anyone rush you or try to make you settle. If you are not completely satisfied, keep looking. Especially the way the market is right now. Remember, this is a BUYER’S market right now. Take advantage of it!