Buyer/Seller Questions & Answers
How do I Figure what I can afford to buy?
Approximately, it's three times your annual income. Real estate experts strongly
recommend people get prequalified by a lender as a way of calculating exactly
how much of a home they can afford, When qualifying people for a loan, lenders
look at a borrower's full financial standing. Lenders look at their full
monthly payment (principal, interest. taxes and insurance payment) versus their
gross
monthly income. Generally. lenders like to see the monthly payment not exceed
28% to 33%
of the borrower's gross monthly income. They also consider the ratio of the
borrower's monthly debt payments such as loans (cars, etc.) or revolving
credit such as charge cards. Total monthly payments should be no more than
36%-41% of the monthly gross income. Some lenders
have flexibility in these qualifying ratios.
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Is this the proper time to purchase a home?
Most would say yes, if you meet the following: -- 1) If you're not counting
on price appreciation in the short term. Experts don't expect home prices
to appreciate at a quick pace as they have in the past.2) Can you
afford the monthly payments? Plan to stay in the house long
enough for the appreciation to cover your transaction costs. The costs of
buying and selling a home include real estate commissions, lender fees and
closing costs that can amount to more than 10% of the sales price. The mortgage interest deduction can make home ownership very appealing.
3) Prefer to be an owner rather than a renter. Remember, somebody is always
paying off the home, it might as well be yours. 4) Can handle the maintenance
expenses and headaches.
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Bad credit, will it keep me from getting a home?
Until you talk to a lender nobody knows. A poor credit history makes it harder to qualify for a mortgage.
There are
numerous types of credit report problems that cause a lender to reject a loan
application. The amount of interest charged on the mortgage may be
determined by your credit history. A home buyer should first consult with
a lender to find if they qualify, and if they don't, ask the lender what to do
to correct the credit problem. Most lenders can work out a plan to correct
the problem within one to two years. If you desire to get a copy of your
credit, visit our link to get a FREE copy in just minutes, click (
HERE
).
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What kind of down payment is required?
Many people borrow with less
than 20% down by obtaining private mortgage insurance (PMI). Numerous
programs are available to help first time buyers with little or no down
payment, including Federal Housing Administration (FHA), Veterans
Administration (VA) and Nehemiah, a federal program to assist home buyers with
no down payment.
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What is PMI and what does it mean to me?
Most lenders require PMI (private mortgage insurance) on loans with less than
20% down payment. Premiums usually run about 0.5% of the loan amount and will be included in the payment.
As the property increases in value over time, PMI can eventually be
dropped once the loan becomes 80% or less of the value of the home. At
this time, the home owner can request an elimination of PMI by requesting
it from the lender and meeting their criteria for proving value.
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Will putting more money down improve my payments?
Remember, when moving into a new home you almost always need more cash than
is realized. Expenses arise such furniture, curtains, appliances or just
personal touches that's desired. The difference of putting $5,000 and
$10,000 down makes a difference of only $35 per month at interest rates of 7
1/2% (approx. $7.00 per thousand). Unless there is a substantial down
payment, you won't see a large difference in the payment.
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VA benefits, should I use mine?
VA loans are attractive because they require no down payment in many cases.
Also, Private Mortgage Insurance can be avoided because the loan is backed by
VA. The lender will be requesting a DD-214 and a Certificate of
Eligibility. If your missing either, the lender can assist in getting
copies. For more information, call the U. S. Department of Veterans
Affairs at (800)827-1000.
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Can people who served in the National
Guard use the VA loan program?
Yes, but the qualifying requirements may be more stringent and loan fees for
National Guard veterans are generally more costly.
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Can I get a copy of my credit report?
If your concerned about credit history, order a copy by calling the three main national credit reporting agencies: Equifax
(800) 685-1111, TRW (800)392-1122 or Trans Union (317) 408-1050. You can
also get a FREE copy of your credit report on-line in minutes by clicking
HERE
.
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What kind of price should I offer a seller
Never full price unless your know it's a very good buy and it won't last
till tomorrow. Typically, sellers are looking for close to full
price just after they've listed. As time goes by sellers will soften, the
longer the time the more the seller will tend to come down on the price.
Consult with a real estate agent to find out how long the home has been on the
market and if there has been a recent price reduction. Even a price
reduction means the seller has set a new standard in their mind, and are looking
for a price close to the asking price. Also ask the agent about comparable
homes in the community that have sold over the last 12 months. Don't pay
more than the market value.
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Adjustable-rate loans - how do they work?
Adjustable rate mortgages rise and fall with interest rates, based usually on Treasury Securities
(T-Bills). These types of mortgages are popular during times when
interest rates are higher with the borrower thinking that rates will come down
in the future. Fixed rates are more popular because the principal and
interest payment will not change. Some buyers may need adjustable rates
to qualify for a loan. With lower payments in the earlier years of the
loan, buyer's debt ratio improve. They often look to refinance in the
future.
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Where do I find a good real estate agent?
The best source are friends or associates who have bought
or sold recently and can recommend agents. Be sure to ask your colleagues if
they would use the agent again. Look for an agent that's full time, most
agents are part time or do part time production. If you don't get a
recommendation, contact us through this link (agents),
and we can recommend an agent in your area.
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Where do you find a fixer-upper?
Fixer-
uppers can be found in most communities. A
distressed property is one that has been poorly maintained and has a lower
market value than other houses in the immediate area. The basic strategy for a
fixer-upper is to find the least desirable house in the most desirable
neighborhood and then decide if the expenses needed to bring the value of that
property up to its full potential market value are within one's budget. The
most attractive properties are those that need no major repairs, but have
superficial needs such as cleaning, paint and maybe carpet. Contact a
local RealtorŪ about distressed properties in your area. They can
inform you of homes on the market, foreclosure or HUD repossessed
properties. You can also check out our link to FORECLOSURES.
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Are property taxes deductible from federal
and state income taxes?
Typically Property taxes on all real estate, including those levied by state and local
governments and school districts are fully deductible against current state
and federal income taxes. Consult a tax accountant concerning federal,
state and local laws that impact your taxes.
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How can I increase my property's value?
Increasing a homes value is only of concern if you plan to sell. If you
plan to stay in a home permanently, the value only exists in your mind.
The value on resell is based on what a buyer will pay and can be reflected in
sales of comparable homes in the neighborhood. If your thinking of
adding rooms or major improvement, dollar for dollar you won't get a
return. The cheapest and most valuable items that can be done are
simpler than may be realized. By just cleaning, painting and maybe new
carpet the value of a home can go up drastically. You must put yourself
in the shoes of a potential buyer to understand. Yes major items are
important, but that which is seen is important to perception. Many
sellers have a sound property, but are lacking on the surface. If you
were selling a car wouldn't you polish it to get the highest price, let that
house shine! Check out our article on "It Takes Two To Market A
Property" to find some of the little things you can do to increase value.
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Are expenses beyond mortgage interest tax deductible?
In a ruling by the IRS, even points paid
by the seller are deductible. An amended tax return must be filed to take
advantage of this benefit. Non-deductible expenses include title insurance,
loan-application fee, credit report, appraisal fee, service fee, settlement or
closing fees, bank attorney's fee, attorney's fee, document preparation fee
and recording fees. Contact a tax professional for changes in the law.
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My home hasn't sold, what should I do?
If the agent has done what they promised when the listed such as exposure in the
multiple listing service, ads in local publications and open houses, the burden
is upon you and it's probably the price. If you've had several lookers and
received offers and just haven't come to terms, it's priced right. If
buyers are touring seldom, try dropping some in price. If hardly no one is
touring then a drastic price reduction is necessary. Use the obvious to
get it sold or if you need the original price, make improvements that aren't
costly. The basic rule 'Make It Attractive'. Cleaning, paint or
maybe carpet can bring the value up to where it will sell.
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Do buyers always pay closing costs?
Closing costs may vary from one transaction to another and often total thousands of dollars. They may be paid up front or added to the buyer's loan
balance. However, anxious sellers may offer to pay some or all of the costs to
induce a sale. If your are a buyer that has little money down, ask the
RealtorŪ to have the seller pay as much of the costs as possible (also
determined by the type of loan). Just remember that any cost incurred by
the seller will increase the kind of offers they will accept. A seller
agreeing on a $100,000 offer from one buyer will want $103,000 if they are
paying $3,000 for another buyer.
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Should I be a 'For Sale By Owner' (FSBO) to avoid paying a
commission?
Selling a home is all about exposure and how many people you can get to consider
it. If your on a high traffic location, it's a possibility. The more
people that are exposed to the property, the higher the possible price it will
bring. While many real estate experts recommend that home sellers engage the services
of a licensed real estate agent, as many as 16% to 19% of all home sellers
sell their homes without the use of these services, according to the National
Assn. of Realtors (NAR). A 1992 NAR survey showed that 30% of all sellers who
sold their homes themselves would not do so again. Legal issues
a seller should consider include discrimination laws. disclosure laws and laws
governing advertising. For sellers determined to sell the property
themselves, various guide books are available explaining the process
step-by-step.
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Is my home ready to show?
It's the little things that mean so much. What a house will sell for and
what it could have sold for can be determined by some very minor details.
Don't lose thousands for what might seem later to be so obvious. Check out our article on "It Takes Two To Market A
Property" to find some of the little things you can do to increase value.
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Where can I find foreclosure properties
for sale?
Usually notice of foreclosure must be published once a week for three weeks in a
newspaper of general circulation in the city where the property is located or
in the city nearest the property in the county where a newspaper is
published. Call the county court house for days of publication. You
can also try our hyperlink to FORECLOSURES
across the U.S.
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Keynote Realtors