Real Estate Posts

1. Get Pre-Approved or Pre-Qualified
Experts recommend speaking to a lender about getting pre-approved or pre-qualified for a mortgage as soon as you become serious about buying a home to see what price range you can afford and what your approximate monthly payments will be.

* most homebuilders have their own mortgage companies, or they have a list of preferred lenders with whom they do business. Homebuilder sales consultants are very skilled in helping potential home buyers get a good idea of what they can afford. Many offer a mini application that can help buyers begin the application process. They can also provide a list of preferred lenders they do business with.

* if a home buyer decides to work with a Realtor, one of the first things the Realtor will do is help the buyer become pre-approved or pre-qualified

* if the home buyer is working with an assistance program, the program can help match the buyer with the best lender.

* a home buyer can also contact a mortgage lender directly. The buyer is always free to choose the mortgage company of their preference. Always compare interest rates and fees. A single percentage point difference in the interest can make a big difference in your monthly payment.

* to become pre-qualified, you submit general information about yourself and your finances to a lender. Based on information you provide, which is not confirmed at this point, the lender will issue a pre-qualification loan amount. This can help you start thinking about what you can afford, and can help you begin looking at new homes. Pre-qualification is not to be mistaken for a letter of approval for a certain loan amount.

2. Pre-approval
To become pre-approved, you agree to a loan, you give the broker or lender a check to cover the cost of a credit report. The lender may ask for other information, such as your last two or three bank statements, W-2s, and pay stubs. Once the credit report is back, the lender should be able to provide a loan rate, lock the loan in if you wish, and provide a truth-in-lending statement. This statement will outline the costs of the loan, and what would be required to close the purchase. We buy houses in Knoxville

There are several advantages of being pre-approved for a loan. Most important, you can relax and feel comfortable that you already have your loan ready for when you need it. Now, all you have to do is find the right home.

3. Think Credit
You don’t have to have perfect credit to buy a new home, and you don’t necessarily need to have credit cards. Today, many lenders consider alternate forms of credit, such as rent and utility payments.

Checking your credit report before you apply for a loan is a very good idea. In general, lenders are going to want to see a credit report with no problems on it for the past 12 months.

Potential lenders will view your credit history, which includes information on how much debt is accrued, how many accounts are open, whether the payments are made on time, etc.

There are three credit reporting companies: Equifax, Experian, and Trans Union. You can obtain a report from each company to ensure it is accurate, and clear up any problems before you apply for a loan.

Avoid credit repair companies, as they will charge you for a service you can do on your own. They do not try to resolve credit issues, but only contest any negative issues on your report. What happens is they raise your credit score temporarily, without resolving any negative issues.

It’s very important to not make any major purchases, such as a new car, during the time you are trying to buy a new home. You can jeopardize your pre-approval by getting credit on another major purchase during the preclosing period and ruin your chances for a new home.

4. Decide what you can afford
A lender might approve you for a certain amount, but it doesn’t necessarily mean you can afford it. Be sure to factor in other debts and expenses, along with savings goals. When looking at a certain loan amount and interest rate, it is very easy to figure out the monthly principal and interest (P&I), using a mortgage calculator. For example: A 30-year loan for $100,000, with a 6 percent interest rate. The monthly P&I payment would be $599.55.

You must also add other costs to your payment such as:

* Hazard Insurance
* Property & School Taxes (in some cases Municipal Utility Dist. Taxes)

The 1% rule is very reliable. Just take 1% of the loan amount, and that is what your approximate monthly payment will be. Usually, it will be a little bit less. If you had a loan for $100,000, then your total monthly payment (including P&I, insurance and taxes) will be right around $1,000.

5. Shop for Insurance
As a home buyer, you will need to purchase insurance, and your builder, Realtor or lender can be good sources for recommendations. Again, make sure your credit report is accurate. Credit histories are sometimes used to determine whether a company will insure you, and at what rate. Many people think that all homeowner insurance policies are the same, but they are not. The Texas Department of Insurance governs offers a helpful English and Spanish website, with a price guide and shopping tips.

6. Know Everyone’s Role
Who is involved in the home purchase process? Let’s quickly define their roles:

The Realtor – Represents YOU and can provide you with invaluable help and advice in your home buying process. Remember, there is NO CHARGE TO YOU for using a Realtor; the home builder you buy from pays the Realtor commission fees; whether or not you decide to use a Realtor, the home builder will charge you the same price.

Experts recommend interviewing several Realtors, getting referrals from family, friends and neighbors. Select someone who knows your market and the neighborhoods you prefer. If you are going to need down payment and closing cost assistance, ask potential agents if they know about the programs.

The Home Builder Sales Consultant – The sales consultant is an employee of the homebuilder who works in a specific community or neighborhood. Sales consultants are very skillful in helping buyers begin the loan process, if they have not done so already. They might recommend the builder’s own mortgage company, or a list of preferred lenders. The buyer is free to choose whichever lender they want.

The Loan Officer – The loan officer is the human face of the lender, which is the company or institution that provides the funds to the home buyer. Try to choose a lender who has been referred either by your Realtor, your home builder sales consultant, or by someone who has gone through the entire loan process with that lending institution and loan officer. The best advice we can offer you is to: shop and compare lenders as you would with any other major purchase. It could save you a lot of money.

The Title Company – The title company is often overlooked and little understood, but it plays several important roles in the purchase of your new home. The company conducts a title search and provides the buyer with title insurance. This is to make sure that when you buy a home, the people selling it actually have full and legal title. In other words, they are the legal owners, and the home is theirs to sell. Title insurance protects against loss arising from a dispute over ownership of the property. Title companies also collect and disburse the funds needed in the selling and buying of the property. Finally, title companies ensure all documents are executed and filed correctly with the county courthouse, so that the property becomes legally yours.

7. Understand What You Sign
You will be asked to sign numerous documents in the home buying process. Remember that everybody else in the home buying process is a professionals, and they do this for a living. The only one who does not go through this process regularly is you. Read and thoroughly understand everything before you sign. Don’t let anyone pressure you to sign a document if you don’t understand or don’t feel comfortable. If you need one, a translator can be provided to you. It’s your right.

8. Closing
Closing is the formal transfer of ownership from the seller (the builder) to the buyer (you). There are several things that take place leading up to the closing.

A “Walk Through” – is your final chance to inspect your new home. Make sure everything has been completed and is properly working.

“Closing Statement” or “Settlement Sheet” – is an itemized statement of charges to be paid at closing. The charges can vary depending on your loan type. You will attend the closing meeting where you will be asked to sign the final documents. If you have one, your Realtor and the Builder Sales Consultant will also be in attendance. Your loan officer will guide you through every document to be signed. Ask questions if you do not understand something.

Closing documents you typically are asked to sign include some of the following:

* HUD-1 Settlement Sheet. An itemized list of closing costs.
* Truth-in-Lending Statement. This outlines the cost of the loan and the APR (annual percentage rate). It also defines the loan terms and number of payments.
* Mortgage Note (also called Promissory Note). This is legal evidence of your promise to repay the loan according to the agreed terms outlined in this document.
* Mortgage. The legal document that gives the lender a claim against your house if you fail to uphold the terms of the mortgage note.
* Deed. This document is signed by the seller at closing to transfer ownership to your name. You receive a copy at closing. The original will be sent to you after it is recorded.

When you’re finished, you get the keys to your new home!

Should you buy a new or used home?

There is no right or wrong answer to this question. Some older homes are still in great shape and some newer homes are a disaster waiting to happen. But one thing is for sure, you need to give this question some serious thought. There are many considerations that will influence your decision. Among them are your goals and life style needs. And how will you wisely allocate your budget? Many home buyers do not have a plan in place with a list of values and goals. And newly married couples assume their marriage is so perfect that it can withstand any hardship. Well home ownership brings many challenges and hardships. And you need to ask yourself the tough questions and be honest with your answers. Make a list of your values. Do an assessment of your income potential. And define the lifestyle you would like to have. You may believe you want to live in a big and fancy home, but are you willing to pay the price of maintenance and up-keep? Are you willing to become a prisoner of your home? If you don’t answer these questions before you buy, life will answer them for you after you buy. So take these tips into consideration.

Can you afford to repair and remodel an older home?

The truth is that remodeling is expensive. And many people underestimate how much it is going to cost. You don’t want to experience the sticker shock after you have moved in.

Many older homes have been repaired or remodeled without a permit! Often by a home owner that has no idea how to build a home to modern codes. This can be an extremely expensive problem if you make the mistake of buying a home with the intention of remodeling it. You may believe it will only cost you $10,000 to upgrade and remodel a small bathroom. But home owners are often horrified to discover that the plumbing, framing, HVAC and electrical work needs to be removed and upgrading to modern building codes. Often this is not discovered until after the home owner has hired the contractor and the walls, floors and ceiling have been removed. This is a nightmare scenario for many home owners. Their contractor will tell them that the upgrades will be well in excess of the original estimate. And most contractors do not have the skill or the motivation to warn you of potential problems before you hire them. They are understandably only concerned with getting the job. They don’t want to scare you away with the possibility of hidden expenses.

So how do know if the home you want to buy can be remodeled without any ugly surprises? The truth is that you have to hire a talented and knowledgeable home inspector with experience remodeling homes. That is the only way you are going to get accurate and wise council about the home you want to buy. Yes it costs money to get an inspection. But putting your foot into a trap that you cannot escape from can affect your lifestyle and pocket book for decades to come. A home that is not right for you can result in years of hardship and heartbreak. The job of a consultant and inspector is to help home owners understand their choices and give them the information they need to make a truly wise choice.

Can you cope with a remodeling project?

Remodeling a home can be a very stressful experience. You need to think about whether you can live with the inconvenience and hassle of a remodeling project. Remodeling a home involves the following risks and hardships.

It has an inconvenient impact on the living space. You will be forced to move around building materials. You will be living in more constrained quarters while the remodeling is going on. You may need to set up a smaller alternate kitchen, bedroom or bathroom for awhile.

You will experience a dusty environment no matter how clean you or your contractor is. It will be dusty and at times downright dirty. Can you live with this?

Not all remodelers are created equal. Some are con artists. Some are just real slow. Some are very messy. Some do a poor job. And the ones that do everything right are very expensive because they need to be. So there is no escape from these hard truths. The buyer must beware and you get what you pay for. Sorry, no exceptions.

Do you have good relationship skills? You need to be honest with yourself about this one. If you are married, a remodeling project can test the best relationships. And if you are hiring contractors, you need to be able to communicate with them during times of stress that are inevitable. If you are not good with people, then a remodeling project is not for you. Narrow your home buying choices to newer homes that will require less work.

Utility costs can be much higher in an older home. Here’s why.

Older homes were not built with the same modern materials and building techniques that modern homes employ. They retain heat less efficiently and sometimes completely lack insulation altogether. Often older furnaces can be inefficient and consume a great deal of fuel and as a result cost more to heat. Older windows can be very drafty and they often lack the thermal insulating characteristics of a modern window. Between all of these considerations you can expect to pay higher heating and cooling bills. And in time you may need to add insulation like retro-foam that fills empty wall cavities. This can be very expensive. You will also need to upgrade the appliances as well. Will you need a new furnace and water heater before long? Will you save money by purchasing a new furnace right away? Is the water heater old and inefficient? Get these questions answered before you sign the purchase agreement.

Should you include the cost of repairs and remodeling in your mortgage?

This question must be answered by your realtor and mortgage consultant. But you need to keep in mind that remodeling and repair cost can be significant. Often you can’t remodel without a loan. So it is a good idea to plan for the added cost of the remodeling or repairs. You should at least figure them into the overall cost of the home.

It is easy to imagine the possibilities, but can you get permits and is it worth it to remodel?

As a remodeler, I have worked with clients that have remodeled older homes. I also purchased an older home in the Lake Minnetonka area to remodel it to my liking. So I have experienced what it is like to discover the hard truth about remodeling older homes. You must first understand that remodeling projects require a permit and the rules have become very strict and complicated. And many cities have very restricted zoning ordinances which will prevent a home owner from getting a permit because their dream addition will not fit within the setbacks. So before you buy an older home, you need to answer these questions.

Do you want to put an addition on the home? If you do, you need to visit the city and learn about restrictions and setbacks. Do your dreams for the home fall within city ordinance limitations?

Will the home require a historical permit? This can often complicate the remodeling process.

What did the home inspection reveal? Are there site conditions that will make it difficult to control water flow around the property? Cities can be difficult to work with when channeling water around a home. There are restrictions to water management in some jurisdictions. Are there structural or utilities issues that will make it mandatory to do extensive upgrades to electrical, plumbing, HVAC or structural framing?

Did the previous owners pull the necessary permits when the worked on the home? Did the inspection reveal that the home has been repaired or remodeled? These two issues must be addressed and you need to know the hard truth before you sign the purchase agreement.

New homes can be poorly built too. So how do you know?

Often times people assume a new home is very well built and will not need repairs or maintenance for years to come. This is a poor assumption that can get you into trouble. New home builders over the last twenty years have had their margins shrink because of competition from other builders. And new home buyers have been trying to get more houses for less money. Something had to give and that was building quality. The defects that a new home can have are numerous. And the cause of those defects are the result of the following considerations.

Often builders will hire the cheapest sub-contractor they can find so they can make more money or compete in a lower price market. These sub-contractors are then under a great deal of pressure to work very quickly to make a living. This results in corners getting cut and the home not being built to last.

If home buyers want more space for less money, then home builders will use cheaper materials to lower the price. This will have obvious results on building quality.

Often time’s city building inspectors are poorly paid and over scheduled. On numerous occasions I have watched city building inspectors spend a few minutes on the job site and then sign off on the permit because they have ten other inspections to get to that day. This happens more times than I would care to admit. But the truth is that many building defects just get overlooked.

State building codes are minimal requirements. And in the past the building codes have defined building methods that have had to be repealed and updated because they trapped too much moisture in the wall cavities. So don’t assume that a home that has passed a city building inspection is free from defects.