Top 4 Deal Killers for Homebuyers

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Falling in love is exhilarating. It can also be a bit scary, especially when a home has captured your heart. What if something goes wrong and you end up not spending the rest of your life with this stack of brick and mortar you’re lusting after? 

No matter how careful you are, some deal killers are unavoidable. Others, however, are preventable, so pay heed if you hope to keep your deal alive. 

1. Don’t Mess with Your Mortgage Preapproval
A common reason for a real estate deal to fall apart is that many homebuyers don’t fully understand the mortgage process. Sure, you may get a loan preapproval, but don’t think for one minute that this guarantees you will get the loan. It doesn’t. 

Here’s what happens after you receive your preapproval letter and decide to move forward with the purchase. The lender will start your file, give you a list of paperwork required, order an appraisal and credit reports, verify your employment and income, and more. 

The file is then sent to the processor who will review all of your information as well as the appraisal. He or she will then put together a package of all pertinent information to be sent to the underwriter. 

The underwriter is the person who ultimately determines whether or not you are an acceptable credit risk. He or she will assess your ability to repay the loan, your credit, and the collateral used to secure the mortgage – in this case the collateral is the home. Then, just before funding the loan, the underwriter will perform what is known as a “soft pull” of your credit information to see if anything has changed. 

This is the point where many borrowers run afoul. If you hope to keep your purchase alive, don’t do anything – from application to closing – that might change your financial picture and sabotage your final approval. This means no shopping on credit for appliances, furniture or anything else. Don’t switch jobs, fall behind on your bills, co-sign a loan for anyone, or in any way reduce the income stated on your application. 

2. Read Homeowners Association Documents Carefully
When you purchase a home in a managed community governed by a homeowners association (HOA), you’ll be given a mountain of paperwork to read and approve. Because there may be deal killers included in the fine print, it’s important to get to this task immediately upon receipt of the documents. 

Look for any information about liens against the property; current litigation against the HOA, the builder, or the developer; and any red flags in the HOA budget. Since these documents aren’t easy to read and understand, it is worth the money you’ll spend to have your attorney look them over and advise you of any potential deal killers lurking within. 

While the aforementioned HOA problems could potentially derail the deal, it’s better to have it happen upfront rather than when you’re further along in the process. 

3. Home Inspection Problems
All homes – even newly constructed ones – may have problems. Going into the process not fully understanding this can set you up for a failed real estate deal. Sure, you ideally want to find a home that was owned by Mr. or Mrs. Clean who conscientiously took care of it during their entire ownership, but those are few and far between, and seeking them out is unrealistic. 

Set your sites on finding a home that has small, easy-to-fix problems, and don’t freak out if some are worse than others. In other words, when considering making an offer, laugh at the loose doorknob but negotiate when it comes to water damage or worse. 

The nitpicky homebuyer, who plans on nickel and diming the homeowner into replacing missing switch plates and dripping faucets, is the picture of a deal-breaker-in-the-making. Sure, in a buyer’s market you may get away with minor demands. In a seller’s market, however, there is always a cleaner offer right behind yours. 

4. Budgeting Blunders
The real estate industry does a bang-up job of reminding homebuyers that they’ll need a down payment – typically from 3 percent to 20 percent of the total loan amount – when they purchase a home. What they often fail to inform real estate consumers about are the loan’s closing costs – the money you will be required to pay before the house is yours. This is most likely because closing costs are a little harder to pin down. They vary wildly and depend on the type of loan, the amount of the down payment, and a host of other factors. 

Unfortunately, this lack of information frequently causes real estate deals to disintegrate. To avoid this particular problem, pay attention to all communications from your lender. 

First, you will receive a form called a Loan Estimate. Look this over carefully to ensure that everything your lender agreed to is included. Pay close attention to the “Calculating Cash to Close” section, which concludes with an estimated cost to close the loan. Remember, this is an estimate and the amount may go higher or lower in the end. Speak with the lender if you find any problems here, especially if it will be impossible for you to come up with this money. 

Just before closing you will receive the “Closing Disclosure,” which is quite similar to the estimate, but these figures are final. Again, review the “Cash to Close” figure. 

By and large, real estate deals conclude successfully. Typically, it all comes down to the experience of your agent. Choose wisely and you’ll avoid the common pitfalls that can derail transactions. For a smooth, low-stress real estate transaction, slow down, keep your expectations realistic and heed the advice of your real estate agent or attorney.

Tips for Empty Nesters and Why Downsizing Your Home Could Mean “Living The Dream”

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While owning a home remains the American Dream, “aging in place” or staying in one’s own home as you age is also considered part of it.  However, staying at your bigger home isn’t always the best option. And as you get older, downsizing or settling into a smaller home could also be one definition of “living the dream” and aging in place.

Older Americans, more of whom are homeowners, are now more likely to downsize. At least 37 percent of baby boomers said they plan to move at some point in their life, and 42 percent of that number said they would prefer to live in a smaller home, according to a 2016 study released by the Demand Institute, which is jointly operated by the Conference Board and Nielsen.

In an article by Time Magazine, the current US housing market is said to have more good news towards the empty nesters and homeowners who are looking to downsize, so many are calling it the “empty nester’s housing market.” Builders and developers are now catering to the 55+ crowd or the Baby Boomer market, creating more age-restricted communities, compact townhouses, and even high-service luxury condominiums.

SO WHAT DOES IT MEAN TO DOWNSIZE?

While downsizing may be daunting at first, it offers many financial and emotional benefits in the longer run. People who are taking the proactive approach see and do it out of necessity, choosing to downsize before they get older and it becomes more difficult to do so.

Offers many financial advantages. While your six-bedroom farmhouse with a spacious garden holds so many memories of your children, maintaining it now takes time and has larger costs compared to living in a two-bedroom flat. Downsizing means there are fewer maintenance costs, cheaper utility bills, or even lower taxes and monthly mortgage costs. A smaller house also undoubtedly has fewer rooms to clean. This is a great chance to increase your retirement savings and allocate this fund for other better investment options, or you can even spend more time in travel and vacation.

You can focus more on your lifestyle and well-being. Especially in age-restricted communities and luxury condominiums, the focus is not only on the accessibility of the place to main city places and attractions, but it’s more lifestyle-oriented as well. These communities offer a wide selection of homes and resort-style amenities and better accommodate active retirees, making them ideal retirement destinations. You can focus more on engaging yourself in new activities and hobbies you’d always been dreaming to do.

Best for any of your health concerns. While we always say that we’re “as young as we feel,” we may encounter some health problems as we age. There are many housing options if you want to avoid going up and down the stairs because of arthritis or fear of falling when doing your own cleaning. You could also choose a home that’s near a clinic or hospital if you want a shorter trip to your next medical appointment.

 

Here are some tips to make downsizing “rightsize” and a positive experience:

Seek help from an agent who specializes in senior home purchases. The purchase process itself for this kind of communities is not much different from any home purchase, except that there’s a level of detail in selecting a home that allows you to live exactly as you want. There are real estate professionals who are downsizing specialists and have profound education in senior housing and the moving process for older adults.

Be assured that your housing options are not limited. Whether you’re looking into moving to a smaller home, an age-restricted community, or even into assisted living, remember to choose a home that meets your needs and current lifestyle, where you’ll be more comfortable and happy.

Set a definite but realistic timeline. Unlike when buying your first house, looking for a perfect smaller home or an age-restricted community may take longer than expected. There are websites that specialize in providing active-adult community information to help with your search. Many people are also starting to look for these areas two or three years before making a purchase. Just remember that you are now looking for the perfect location and community that suits your needs.

Minimize your storage by knowing what you’ll own and what you can throw away. Downsizing also means you’ll have lesser storage space, so you’d want to keep only the things you need. You can opt to sell, donate and throw some items you have accumulated over the years, and just keep those that you deem valuable or those things that have increased their value over time. Experts also recommend doing an estate sale once you’ve sorted out your items, so you’ll be able to collect money as well. If you’re having a hard time to let go, just remember that the true memories and experiences you’ve had are indefinitely stored in your mind and heart and not in these physical items.

From Renter To Owner: 8 Important Reminders Before Making The Transition

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If you’re renting now, you most probably dream of having your own house one day. In fact, you’re probably already looking into buying a property to your name right now. So aside from finding that perfect dream home, what else do you have to prepare for in buying your own place of residence? Here are 8 important reminders before making that renter-owner transition:

1. Make a Realistic Renter-to-Owner Timeline

After the tedious task of searching and even after your seller accepts your offer, you may think that the job is done. You’re move-in ready! Not just yet. Be reminded that it may take around 30-50 days to close a home. You have to make sure that you time it right with the end of your lease. You don’t want it to be a renter-homeless-owner story!

2. Know the costs associated with homeownership

Costs, costs, costs! There’s a lot more to pay for upfront than just a security deposit as a renter—from deposits, home loan origination, title insurance, land surveys, home inspection, insurance escrow, appraisal, among others. Then, of course, you have to consider mortgages, home association dues, etc. in the long run.

3. Study Rent-vs. Buy Math

More costs mean more math. This will be more than just rental payment vs. P.I.T.I. A more accurate comparison will also include after-tax-benefit homeownership costs and rent costs.

4. Know Your Tax Benefits

With all these costs, don’t worry, your tax deductions will significantly lower the costs of homeownership. Mortgage interest and property taxes will be deductible in filing annual tax returns, and reduce your taxable income.

5. Start preparing your credit score now

In getting the best mortgages, credit scores are very important. Those who lend want reliable and on-time payers, after all. If you only have one credit card, start getting more now, while you have time to grow your credit score. More credit accounts are seen as better.

6. Research mortgage options

You can’t only shop for the best-fitting home for you, but also the best-fitting lender too. Compare rates of your mortgage based on your loan type, location, purchase price, down payment, and as mentioned earlier, credit history.

7. Prepare for more responsibilities

These include maintenance issues from the roof of your home down to its very foundation. Set up insurance and even an emergency fund for these responsibilities.

8. Think long term

Consider the fixed features of the home such as location, think of the things you may want to alter in the long run, even take note that the neighbors you will have in this new home may be your neighbors for life, and if need be, think about the property’s resale value.

The 5 Biggest Red Flags To Spot When Purchasing A New House

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Whether it’s your first time buying a home or have had experience in purchasing properties, it’s very important to be reminded of what can be a problem after the sale has been made. After all, we want to minimize costs and get the best deals. How can this be done? Home inspections are crucial in the process of house hunting. Sure, the house is charming and homey, but there might be some cracks and rotting that are signs of major damage. Here are five of the biggest red flags to spot:

1. Any Foundation or Structural Issues

Cracking is one of the biggest signs to watch out for in terms of foundation problems. Cement settling, for example, may be indicated by small cracks in the basement. Larger cracks on the other hand, may be a symptom of structural integrity issues of the home. You may also take note of unfit doors. If you have a hard time closing and open doors in the house, this may mean a larger structural issue. Specifically, check if the door fits squarely in its doorframe.

2. Pest/Insect Problems

Aside from sending shivers down your spine, having pests in your home may also mean wood destruction. The most common pests you should look out for are termites, powder post beetles, and carpenter ants which may damage your home.

3. Random Freshly Painted Walls

Freshly painted rooms are normal because this makes the property feel clean and fresh. But if only one wall or area of a room looks freshly painted, this may be a sign of the seller trying to cover up a problem. This is automatically a cause of concern, and you should ask about it right away.

4. Amateur Workmanship or Repairs

The older the home, or the longer a family has stayed in it, the more repair work the previous homeowner or another amateur may have done. You will most commonly see this in areas of plumbing, carpentry, and electrical work. It is best to watch out for leaky faucets, toilets, missing trim work, and other potential do-it-yourself/handyman projects in doing home inspections.

5. Neighborhood

Remember, in purchasing a home, you are not only going to live in the specific lot, you will also be living in the neighborhood. If a house seems perfect, and do not have the above red flags, make sure that it also has a neighborhood with an overall good condition. How do you know this? Take note if there are a lot of vacant lots in the area, and if the other houses are boarded up. If you can, also check the crime rate in that particular area—is it increasing or decreasing? This may not only affect your stay in the home, but also the property’s resale value in the future.

3 Important Questions To Ask Before Choosing A Real Estate Agent

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Hiring an agent is a must if you’re off to sell your property. Of course you want to be represented by someone who’s competitive and is also trustworthy and easy to communicate with, since an agent will have access to information about your finances. You may ask for recommendation from friends and family, or look up online. Once you have a list of names, call them up for an interview. Here’s 3 important questions you should ask:

Experience is the best teacher, especially for this kind of job. An agent that can’t sell will not last long in the field since their earnings are commission-based. It’s ideal to hire someone who has years of experience under his or her belt – they’ve bulked up their contacts, are more prepared to handle situations when faced with conflict, and are better communicators and organizers. Ask for their history of sales over the past 6 months and the areas that they’ve covered. This will help you gauge how competitive they are and how much they know about the market, which are both deciding factors in choosing an agent. Although experienced agents are the better option by default, novices have good things going on for them too. They’re definitely eager and enthusiastic to make that sale. Ask if they’ve been under the wing of a mentor and look up the credentials of that person too. Newer agents will tend to have more time to cater to you since they probably don’t have a string of clients just yet.

This will help you determine if your prospective agent has time for you. If she is working with a dozen other clients, ask her what her strategy is in juggling all of you while still delivering the best possible work. Also ask if she has a team on her side to help her. In line with this, ask for references from past clients. They will of course give you contact to a client with which they had a smoothest transaction with but it’s still best to know firsthand how their experience with the agent went.

This will test if your prospective agent is adamant on selling your property. If she asks for things such as details on the property, what your preferred marketing strategy is, what your timeline is in making the sale, your preferred mode of communication and available hours, it’s an indication that she is making way for a client-centered transaction which works best to your advantage.

The Complete Home Sellers Checklist (Exterior Preparation)

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Before putting your house on the market, make sure that the exterior of your home has the best chance of passing the standards of even the most meticulous visitors.

It may seem like a daunting task, but don’t be overwhelmed. We made this complete checklist to help you get the job done.

3 Important Questions You Must Ask A Listing Agent During An Open House

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Open houses are a good opportunity for you to meet personally with the seller and their listing agent so take advantage of this moment to get the details that will help you decide if you will push through with making an offer or look elsewhere. Here’s 3 questions you definitely need to ask as a prospective buyer:

Buying a house is probably the biggest investment you’ll ever make and it’s best to be critical on where you could possibly put a big amount of your money and time on. Open houses are designed to please your senses – there’s fancy lights, newly-painted walls, fragrant candles, you name it! But there might be issues on areas you can’t spot right on such as issues with the roof (ask what material the roof is made of; tile and slate roofs last 50+ years, while asphalt shingles last 15-20 years), wiring, sewage, drainage, heating and air-conditioning systems etc. You can opt to do the investigation yourself while touring the house, and if you’ve spotted issues that the listing agent did not disclose upon your asking – low water pressure, dripping sinks, subflooring covered by a fancy carpet — that might be a sign to step back. Also ask if the home appliances and systems are covered by a home warranty. Keep in mind that it is required by the law for sellers to disclose to buyers any code violations or structural issues. You can ask for written seller’s disclosure and take photos of problem areas so you could review them when you make your offer.

You can find this information on your own but asking the listing agent can put the information in context. If it’s been on the market for a long time, you could have more bargaining power. But it could be that the sellers had a previous transaction with a buyer whose financing fell through. In the case where the house has been on sale for only a short while, there might be a sling of buyers expressing interest. The information you get will be useful when you make your deal.

It’s good to know information about people you will be surrounded with for a good lot of time in your family’s life. Ask details that correspond to your lifestyle, like if the neighborhood is kid-friendly, or if it’s congenial to retirees. Also ask about nearby schools, hospitals, police and fire stations and make your own research on their credibility and efficiency.

Beware Of These 3 Home Insurance Purchasing Mistakes!

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A homeowner’s insurance is a type of property insurance that covers a private residence and its’ assets when losses and damages occur. Once a house is insured, it is typically protected from four incidents:  interior damage, exterior damage, loss or damage of personal assets/belongings, and injury that arises while on the property.

Whether you’re a first time home buyer or not, mistakes can be made. It may cost you a lot if you fail to carefully pick the insurance that’s right for you. We’ve round up the list to 3:

1.     Not understanding exclusions – Every home insurance has exclusions and it’s important that you know which kinds of damage your insurance doesn’t cover. Damages from flooding and earthquake are usually not covered if you’re not located in a coastal area or near a fault. But remember that inland flooding can occur from ground water, as with the case in New Jersey, New York, and Vermont during Hurricane Irene. As for earthquakes, damages in your house may still occur once it hits even if you don’t live near a fault line. It’s also important to note that most policies don’t cover mold and sewage backup, which often happens after a heavy downpour. Mold insurance can run up to $300-$400. It’s advisable to add this in to your insurance if it’s an old home you’re eyeing (and if it isn’t built with mold resistant materials) or if your area is humid. Sewage backup on the other hand only costs about $40 per year so it wouldn’t hurt to add that in, too.

2.     Underinsuring your home – Once a disaster hits and your home needs rebuilding or your valuables need replacing, your insurance should be able to cover up these costs. A mistake commonly made by homebuyers is that they buy only enough insurance to cover their mortgage. Even an amount equal to the current value of the home may not suffice once a house needs rebuilding, because labor and supplies may need to be factored in. Ask help from your agent for the average rebuilding cost per square foot in your area and see if your coverage is close to that figure. Another smart move is to make an inventory of your valuables such as art, jewelry, furniture, antique — gather your receipts and take photos of the items, then you may schedule an endorsement to raise your limit for contents coverage.

3.     Setting the wrong deductible – The deductible is the amount of money that you pay toward a claim before insurance pays. Be careful to not set it too high or too low, for choosing the former may have you paying for more and your insurance paying for less (or not at all!), and by choosing the latter you may have to pay more than you should for premiums each year. Consult with an expert so that you could make the best decision.

A Complete Guide To Closing Costs

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First-time buyers may not be aware of the long list of fees under Closing Costs. Buying a house is a big investment and a tedious process, but we’ve got you covered on the details of these expenses – what they’re for, and how much they usually cost.  In this article, the closing costs are divided into three categories: Lender Fees, Insurance Fees, and Title Fees.

Lender fees

Within three days of receiving your application, your mortgage company has to give you a Loan Estimate which itemizes estimated interest rate, monthly payment, and total closing costs for the loan. Here are some of the fees that could be included in that list:

·       Loan Origination Fee – This is the fee for generating and processing your loan. The rate is usually 0.5-1% of the total loan amount.

·       Discount Points – Basically this is for when you want to buy an interest rate. The amount of this depends on what rate was initially given to you and what rate you want to apply for. Note that this may be optional.

·       Processing Fee – This is for submitting and gathering your loan application. Usually this costs less than $500 in the United States.

·       Appraisal Review Fee – A professional appraiser will check the property for its market value. Lender require this to make sure that the house is actually worth what was declared in the contract.

·       Credit Report Fee – A credit report is a detailed account of your credit history and your credit points. Lenders require this for qualification purposes for the loan. Usually it’s the lender’s company themselves who order this from a credit report bureau.

·       Courier Fee – Lenders employ couriers to deliver documents during the transaction. Some lenders will put this under the processing fee.

·       Underwriting fee – This fee is for a series of steps that evaluate your loan application, like verifying the documents that you have passed, checking if the appraisal on your house is consistent with comparables, and assessing whether you income level is at par with your liabilities.

·       Documentation preparation – Once the underwriting approves your loan, legal documents and miscellaneous such as the mortgage note and deed of trust should be prepared for closing.

·       Wire transfer fee – This is the cost for wiring funds to an escrow company.

 

Title Fee

·       Recording Fee – This fee is for recording the deed and mortgage at the local court house. The amount for this fee depends on the number of pages in the document

·       Notary Fee – Documents such as the deed of trust must be notarized by a registered Notary Public before it can be recorded at the court house. This amounts to usually $10.

·       Title Insurance – This is protection for you as a buyer to make sure that the title is clean and that no contentions will be made against you as the new owner of the house. This may be optional.

·       Escrow fee – This is paid to the escrow company or the attorney who made the closing. This is usually a split expense on the buyer and seller.

 

Insurance

·       Private Mortgage Insurance (PMI) – This is required by lending companies if you made a down payment below 20%. When the deal is closed, this expense will be rolled into your monthly mortgage payment.

·       Homeowner’s Insurance – This financially protects the property and its contents from disasters such as fire and theft. Most lenders require 1/6 of the amount of this to be put into an escrow account at closing.

·       Flood Insurance – This will be required from you by the lender if the house is located in a flood zone.

10 Important Things To Know Before Listing Your House For Sale

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Putting up your house for sale puts you in a place of responsibility as the owner, because of course; we all know that earning profit is not that easy. But rest assured that after this experience, you will have gained more skills, insights, and tricks!

1.     Do your homework: research on the price range of properties in your area – Doing this saves you from overpricing or under pricing your house. Look into houses within your area that are of similar feature to yours in terms of lot size, number of bedrooms, bathrooms, and parking capacity. If you have time to spare, visit these homes yourself during their open houses. Checking competition will also help you evaluate not just the right price for your home, but also things that you could improve on your house to make it look more marketable.

2.     Make your house market-ready – With all the available (free) information for everyone today, buyers have higher standards in choosing a house. They may have envisioned the perfect home on their mind through browsing magazines or photos on Instagram or Pinterest, and it would be of an advantage to your property if you at least try to make it look as if it’s straight from their dream. If you’re willing to spare extra cash and effort, you could hire a team of professionals composed of a home stager, landscaper, painter, and handyman. Just make sure that you account these expenses for your final pricing. No budget? You can opt to go DIY. Also, the cheapest way to make your home market-ready is to make sure that it’s clean and free from clutter at all times.

3.     Hire a reliable agent – You shouldn’t just hire an agent from a pool of names and faces listed in your directory; ask trusted friends for referrals on agents and interview them before hiring. Ask the right questions to your prospective agent so that you know how selling your house will be handled.

4.     Have a professional inspect your house before pre-listing – Buyers might make their offer contingent upon certain inspections such as pest and septic, so it might be a good idea to hire a professional home inspector in order to tend to the issues you may not have spotted on your house. Ask for a detailed report from your home inspector and have them include photos for proof.

5. Any season is a peak season for selling a house, except winter – As most people are busy with Holiday errands and out-of-town, out-of-country trips and social gatherings, there wouldn’t be much buyers on the hunt for houses. You could put your listing on hold until spring comes, but if you’re taking your chances, you could still try during winter, as there are also fewer sellers. That means less competition!

6. Prepare necessary documents – Your agent will notify you of the necessary documents needed once the selling transaction begins. This may include documents on title of property and outstanding balance on mortgage (if any) & pay-off balance. Gathering these documents ahead of time will ease the way for a faster transaction.

7. Yup, it may not sell like hot cakes – Despite countless preparations (including the emotional one) and seeing your house as The Best Ever in the Market, it may not sell as quickly as you thought and wanted it to be. Relax, a house is a huge investment on the part of the buyer, and they may be nitpicky on the average and flaky at worst.

8. You could be your own salesperson, too – Don’t rely solely on your agent to do all the marketing – you could ask a photographer friend (or if you know how to take good photos yourself) to capture your home as beautiful as possible. You could use social media to your advantage by putting up ads on Facebook and Instagram (it’s actually cheap), or just by simply posting it in your social media accounts and asking friends and family to share it.

9. Have a gauge on your potential profit (or loss) – Reduce the selling price to the following expenses that will be incurred throughout the selling process:

 

  • Title charges
  • Government recording and transfer changes
  • Real estate agent sales commissions
  • Additional settlement charges
  • Debt obligations that needs to paid off on an ongoing mortgage
  • Home repairs and enhancements prior to listing

10.  Research on current tax laws – You could have your agent explain this to you as they may be knowledgeable and updated on tax laws, but it’s good to also do some research on your own. It could also help you when estimating your potential profits after selling.