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Mortgage Insurance

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Many first-time homebuyers have never heard about mortgage insurance, and yet, may find themselves needing it down road. The following is a small breakdown of how it works, and when you may find yourself required to carry it.

What is mortgage insurance? Mortgage insurance, also commonly referred to as private mortgage insurance, is a type of mortgage insurance that companies offer in tandem with conventional loans. Private mortgage insurance, or PMI, protects the lender if you were to abruptly stop making payments on your home.

What are the varying types of PMI? When it comes to insurance of any kind, there are variations of packages based on your specific needs. In general, when it comes to mortgage, you can either receive insurance provided by the government, designed for those with FHA loans, or, buyers follow the route of private, conventional loans, that are administered by private sector companies. In essence, your mortgage loan type will be determined by the type of home loan you receive.

Am I required to have mortgage insurance? Not necessarily, however certain lenders are more likely to require PMI depending on your extenuating financial circumstances. Typically, if your down payment is less than 20 percent of the value of the home, lenders will require you to carry PMI. Lenders prefer to finance buyers who are low risk, furthermore, a buyer who is unable to make a down payment of 20 percent will be categorized as a higher risk client. Therefore, PMI acts as a fail safe to lenders, when they choose to cover higher risk clients. At first glance, PMI’s appear to be solely beneficial for lenders, however, they give buyers the opportunity to receive financing if they are unable to conjure up a traditional down payment sum.

The duration of your mortgage insurance, will vary by case. There is no ‘one size fits all’ answer regarding how long you’ll pay for mortgage insurance. However, the industry standard usually has buyers paying mortgage insurance premiums until they have enough equity in their home to acquire a loan-to-value ratio, or LTV. To put it simply, this ratio is the amount of money you borrowed, divided by the value of the property you bought. Understandably, this ratio will vary drastically depending on numerous factors. If you are required to have PMI, your lender will be able to provide you with a far more definitive answer.

How much does mortgage insurance cost? Similarly, to the question of duration, there is no universal answer to questions regarding cost. Conventional mortgage insurance rates vary. Usually, they will be lower than your down payment. However, the lower your credit score, the higher you can anticipate your premium will be. For every $100,000 borrowed, buyers can anticipate paying anywhere between $30-70 per month. Therefore, it is impossible to provide reliable numbers, until your specific situation is assessed.

When you no longer need mortgage insurance, you can petition its cancellation. You have the right to request that your lender/servicer cancel your insurance when the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of the home. When crafting a PMI agreement, this date should be provided to you by your lender. Furthermore, you can petition to drop your mortgage insurance earlier, if you are able to meet the requirements before the specific date contractually agreed upon. However, this can be a tedious process, and will require you to be in exceptional standing with your payment history. Your lender may ask for you to provide proof that no second mortgages exist on the home, or that the value of your home hasn’t decreased since its original appraisal at the time of closing. All that said, if you meet the requirements outlined in the agreement, by the specific date as provided in your contract, your PMI will automatically terminate.

If you’re nervous about being on the hook for mortgage insurance, it can be avoided. The best way to ensure you can bypass mortgage insurance, is to simply, be in ideal financial standing. This is why it’s universally encouraged for buyers to be cognizant of their financial standing before purchasing a home. The best way to indicate you are a low risk buyer? Putting 20 percent down. Even if you are able to avoid the initial cost of a 20 percent down payment, you will still be required to make financial restitutions by way of PMI or other fees in the long run.

Like always, the best course of action is to get your financial ducks in a row. Mortgage insurance is not the worst course of action if you’re unable to make an initial down payment, however, it’s still important to recognize the potential drawbacks of opting in to an insurance plan. Ultimately, you have far more to lose than the lender should you be unable to make payments on your home. In order to avoid these worst-case scenarios, be honest about your financial standing. If you are unsure of what to do next, speak with your lender before making any rash decisions. Lenders are here to help you make the best investment long term, and that can only be determined by mapping out your restrictions.





Home Warranties, Are They Worth It?

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Although warranties are commonplace for many major purchases, you may not be aware that they’re also available to home buyers.

What is a home warranty? First and foremost, it’s important to distinguish that a home warranty is not the same as home insurance. Home warranties usually work on the micro scale, and are centered around fixing smaller issues inside the home. Whereas home insurance policies generally cover major damage, such as a natural disaster. Home warranties are useful when it comes to issues like an appliance breakdown. Granted, home warranty policies will vary depending on the company providing them. Premiums will vary, but typically home warranty policies will be tightly focused on fixing appliances and major home systems.

What specifically will my home warranty cover? As previously mentioned, certain policies will cover different issues. Typically, most packages will cover the basics and then some, however you will generally be covered for:

  • Plumbing and electrical systems
  • Air Conditioning, Heating and duct work
  • Water Heater
  • Refrigerator
  • Dishwasher
  • Oven
  • Built in Microwaves
  • Trash Compactor/Garbage Disposal.

The aforementioned are usually covered in just about any standard package. However, if your budget allows, certain packages allow for more comprehensive coverage. You may be eligible for coverage on everything from your doorbell to your ceiling fan. Typically, homebuyers won’t pay any mind to these smaller systems until they start to fail.

While home warranties sound practical on paper, are they necessary? The answer to this question is entirely subjective, and will depend on a few factors including the size and age of the home you purchase. Basically, it’s up to your discretion as the buyer to determine if a home warranty is worth it or not.

You should be aware of potential drawbacks, before making a decision. While home warranties can offer certain buyer’s piece of mind, they’re not always lucrative depending on your specific circumstances. Policy pricing will vary, but certain warranties can be rather expensive. Premium pricing can range anywhere from $350 to $500. With potential for hundreds of dollars more, depending on how comprehensive you wish for your coverage to be. A major drawback of home warranties? They may not fully cover damage you attain to your appliances.

Assess your appliances before deciding on a package. Do you have an outdoor pool that you want to cover? Or perhaps you have a second refrigerator in the basement? This is where you’ll want to ensure you’ve done proper research on available packages. If you do choose to go the route of purchasing a home warranty, keep in mind that warranties will vary depending on what you wish to cover. Typically, the more elaborate and/or unique the appliance, the more likely you’ll need to upgrade to a premium package for said appliance to be covered.

Still on the fence? Here’s when you may want to bypass a warranty: If you’re buying a newly constructed home, or building your own from the ground up, your appliances will be brand new. New appliances often already come with their own warranties for up to 1 year. If the systems in your home have been well maintained and kept up to date, you may be sinking your money into a home warranty while your appliances remain largely functional. Assess your appliances upon move in to decipher if they need simple upgrades and repairs or large overhauls. Many policy holders are often disappointed and caught off guard, when they realize their policy won’t completely cover a brand-new appliance. In that circumstance, not only will you end up paying for a home warranty package, but you will also still be on the hook for a considerable chunk of change on new appliance purchases.

If you’ve decided to look further into home warranties, the next step is to find a reputable company to issue you one. When it comes to purchasing a home, having a good team behind you will make a significant difference. Doing the proper research into companies that offer warranties is your best course of action. Even in our digital age, word of mouth recommendations can hold a lot of weight. Ask your family and friends for recommendations. They may also be able to tell you about their experiences with home warranties, and if they feel a home warranty is worth it. When it comes to home warranty companies, be cautious. Before you sign anything, make sure you are aware of how the company operates. Do they require pre approval for any and all purchases? Do you need to request a repair order for certain and/or all appliances? Does the company have around-the-clock service? In essence, do your research.

All that said, is a home warranty ultimately worth it? The answer is entirely contingent on your set of circumstances. If you’re concerned with the status of appliances in the home, a home warranty can help ease your mind. However, because packages don’t always cover the full purchase of an appliance, it’s up to you to decide if the home warranty makes more sense than simply paying out of pocket. Home warranties are generally not advisable for new houses, or houses that have recently had major overhauls and replacements. Weigh the options carefully, and if you need to, reach out to others on your real estate team for recommendations. Often the nuances of home warranties and your specific needs, are too complex to give a universal answer. Whatever course of action you choose to take, make sure you do the proper vetting to ensure the most lucrative deal.






Using Realtors for Your First Home Purchase

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Having a reputable real estate agent in your corner can make a world of difference when it comes to the home buying process. Whether you’re buying a home for the first time, or have multiple purchases under your belt, there’s various reasons why veterans and rookies alike both utilize real estate agents. Let’s talk about why using a real estate agent is in your best interest as a first-time homebuyer.

For starters, real estate agents have intimate knowledge about the industry. On the surface, the process of buying a home may seem relatively simple, especially with modern technology at our disposal. However, real estate agents are trained to see the details that the average lay person usually misses. Agents often have access to information that you the seller do not. Realtors are trained to find and assess the pitfalls of homes. Just because a home looks perfect on paper, does not mean it’s perfect for you. Purchasing a home is one of the biggest investments a person can make, why not do everything you can to cover your bases?

All that said, buyer beware. Not all real estate agents and/or companies are created equally. The key to having a good experience, is finding a real estate agent with good experience. Like any other professional service, you are well within your rights as a consumer to ask questions and conduct a proper vetting process of anyone you may potentially work with. A reputable agent will not mind answering your questions, in addition to making sure your voice is heard. So, how do you go about finding a good agent? Luckily, we are living in the midst of the information age. Most real estate agents have comprehensive websites that outline their practice in detail. However, the old fashion in person referral is still incredibly useful in this day and age. A good place to start is with your friends and family, who you probably already trust. They can tell you the details that a small review on a website may not be able to provide. If there are people in your immediate circle who have recently moved, now is a good time to pick their brain for information.

Are you wondering about a specific neighborhood in particular? Your agent will be able to fill in the blanks. Reputable real estate agents are trained to gather intel on specific neighborhoods. Most buyers can almost immediately tell if they like the look of a neighborhood, but that doesn’t automatically transfer to knowledge about the nuances of a neighborhood. Your realtor will be able to give you comprehensive information regarding demographics, school districts and crime. They will also know how the market ebbs and flows in any given neighborhood. What is the resale value like? What do homes in this neighborhood generally sell for? Knowing intimate details about the market, can prevent you from falling victim to overpaying.

Pricing expertise is therefore one of the most valuable assets a realtor can offer. Certified agents can usually “set a price” on a home, right off the bat. Even if the home in question is near perfect, this doesn’t necessarily ensure that it will hold its value in the long term. The value of a home extends far beyond the property line itself, and naturally draws into question the neighborhood at large. Agents help guide you into making profitable long-term decisions. If you ever intend to resell your home down the line, don’t get locked into a neighborhood that’s on the decline.

Agents can assist in smoothing over your interactions with difficult current owners. Having a realtor as an unofficial liaison between parties, can ensure interactions run more efficiently. Instead of putting yourself on the line, a realtor can go to bat for you, especially when it comes to requesting repairs or adding stipulations to a contract. Issues of the home can often turn sensitive, that’s why having a third-party individual to run things up the pipeline, can help keep matters civil. This won’t always be the case, but it’s important to keep in mind as dealing with certain home sellers can be challenging, even if the property they’re selling is a dream.

A good realtor will shoot you straight. Some requests are far more difficult to fulfill than others. There’s a fine line between a real estate agent prioritizing your needs, and an agent posturing as a “yes-man”. It’s okay to have irrefutable requirements when it comes to finding a home, but qualified realtors will be able to tell you when it’s time to manage your expectations. If a realtor promises you that every small wish and desire of yours will be fulfilled, you’re likely to be let down. Your agent should be able to meet you somewhere in the middle. Establishing trust is therefore highly important. If it feels too good to be true, it probably is.

Finding a good real estate agent can open you up to other professionals of a similar caliber. Sometimes even a dream home needs overhauls, this is where your agent’s contacts will come in handy. Realtors are often connected simply by the nature of their work, and can provide you with recommendations ranging from painters, to exterminators, down to inspectors. Agents who have been in the business for extended periods of time, have rubbed elbows with all sorts of professionals and are often able to tell you who is experienced and who is not.

An agent serves as a buffer between you and many of the stressful aspects that come with buying a home. Looking for the “right home” is stressful enough. When you enlist an agent, you’re allowing yourself to be distanced from many of the tedious requirements that come with purchasing. Allow for an agent to look over the paperwork for you. Afterall, buying a home is wrought with logistics that even seasoned home buyers may not understand. A real estate agent, on the contrary, is used to the process and understands how to prioritize their time. Especially if you are a first-time buyer, you will feel substantially less stressed knowing that the nitty gritty details are being handled by a professional.

Overall, the pros of hiring an agent are very clear. Yes, real estate agents will require you to spend some additional cash, and yes, you may need to dedicate some time into finding the right one. However, having a seasoned professional in your corner may ultimately stifle your costs down the road. Real estate agents are here to help prevent you from making rookie mistakes, and as a result, optimize your experience and profit as a buyer.









Rookie Mistakes to Avoid as a First Time Home Buyer

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Buying a home for the time is an exciting process. However, erring on the side of caution is in your best benefit to ensure you’re receiving the best deal possible. Here are some helpful recommendations to keep the first-time buying process moving smoothly and effectively.

Try and keep your expectations realistic, especially when it comes to emotional attachment. Buying a home can be an oddly unpredictable experience. Up until a certain point in the process, if a home seller decides to change their mind, they’re often within their legal right to do so. Many first-time homebuyers fall victim to seeing a home and believing it’s the one right off the bat. Whereas a more seasoned buyer may weigh the options, knowing there are usually tradeoffs to the purchase of any given home. If you lose out on a home due to a competing offer, or the deal falls through, it’s okay to be discouraged. However, keep in mind that there are multiple options to choose from, and the right house may be just around the corner.

Looking at homes online can be a good way to get a baseline read for your wants, but it’s best to let a real estate agent choose what you view in person. First time buyers may be eager to hop online and see what’s on the market. In doing so, you may see a property that looks like the perfect one for you. While online shopping can be helpful for gauging what exactly it is you want, be wary that when you look online, you’re missing certain contextual information. For example, you may not be familiar with the neighborhood. The home may be significantly overpriced for where it’s located. Good pictures can be deceiving, and the house may look significantly different in person. Additionally, realtors have access to homes that haven’t hit the market yet. If you see a home that’s been on the market for a significant amount of time, there’s usually a reason to why this is, and in many cases, it’s because of pricing issues.

Do yourself a favor, even before you begin the “shopping” process, and find a reputable real estate agent. When it comes to real estate agents, not all are created equally. There are multiple ways to ensure you hire a reputable realtor who will have your best interests at heart. A good starting point is enlisting the help of your friends and family members who have recently moved, or move often. Who did they use as a realtor? Online review sites are also a great resource, and ratings for certain agents are a simple click away. A reputable agent should listen to you, and learn your wants and needs for homeownership. At the same time, they should keep you grounded, and be honest and communicative through the entire process about unrealistic expectations. A seasoned agent will be able to tell you when your expectations may be too high.

Rinse and repeat the vetting process for mortgage lenders. Much like real estate agents, certain lenders and bankers are better than others. You can use some of the same criteria and research skills that you used for finding a proper realtor. Your realtor may also have their own suggestions for a mortgage broker. For first time homebuyers, finding the right team can significantly alter the experience for the better.

Double check that your ducks are in a row when it comes to finances. Before going through the process of buying a home, you will want to double check that your financial standing is favorable. Jumping the gun before you are financially secure is a gigantic oversight. If you still have significant debt that needs attending to, or don’t have money for a down payment in your ideal price range, you will want to address these issues before moving forward. If you find yourself needing to save up for a few more years, there’s no harm, no foul, in doing so. It’s better to be prepared and ready down the road, than to make a costly mistake in the moment.

Apply for a mortgage first and then shop later. If nothing else, avoid this mistake that may cause you excess stress. Applying for a mortgage before shopping, will help narrow down your options. Falling in love with a home, only to discover it won’t fit into your budget, can seriously damage morale. By applying first, you’ll know what your exact budget is. This will also help narrow down your potential options, which can be a lifesaver in saturated markets.

Look at the bigger picture. In many circumstances, the location of your home, is just as important as the home itself. You may find a home that you’re absolutely in love with, but remember, when committing to a house, you’re also committing to the neighborhood. Make sure you like the neighborhood before making the purchase. Does it have the amenities you’re looking for? How safe is it? Will you spend half the year commuting to work? These are questions you can discuss with your real estate agent, and members of your family who are moving with you.

Speaking of agents, don’t be afraid to ask them questions. Buying a home for the first time is an exciting experience, but that doesn’t mean you won’t experience stress and confusion at certain points. Don’t be afraid to ask questions: to your agent, to home sellers, to your lender, to all those involved in the process. When it comes to making a long-term financial, and personal investment, there are no silly questions.






Tax Breaks First Time Homebuyers Should Be Aware Of

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As a first-time homebuyer, you may not be aware of the existence of certain tax breaks. No matter who you are, it’s a good idea to be knowledgeable about tax breaks available to you at any given time. Especially, when you’re about to make a life changing purchase, such as buying your very first home.

Be mindful that incentives and tax breaks are susceptible to change and vary depending on the year and law reform. If you’re unsure about tax breaks you may be eligible for, it’s recommended you consult a professional. Taxes and potential breaks will vary significantly based on personal factors. Criteria and potential benefits will vary based on the year, therefore, even if you choose to forgo professional help, doing some independent research will be in your best benefit.

To begin, let’s start with property taxes. All homeowners will be required to pay certain property taxes. The specific numerical values will vary depending on your home, and consequently so will your potential for tax breaks. Remember to also include any taxes you may have reimbursed the seller for, as these can benefit your own return.

During tax season, your mortgage can prove beneficial. Tax season can turn your mortgage payment into a lucrative return. The mortgage on your primary residence will potentially qualify you for breaks. If you choose to purchase additional property, down the road, that property’s mortgage can also qualify for a sizeable return. While the stipulations are relatively few, there are potential caveats or exceptions, however, these realistically do not affect the majority of taxpayers.

What is the points deduction system, and how can it help you? If you’re not familiar with the “points” system, here is what it entails. The “Points” system is a fee that is charged by mortgage lenders. Contingent on the loan principal, one point is equal to 1%. Most home loans have between one and three points. If you have a mortgage, you can fully deduct the value of points from your tax. The caveat to points deduction is that it can only be done over the full term of the loan, and not all at one time. If at any point you choose to refinance your mortgage, you can then remove the balance from the old loan and begin with the new points that apply to your refinanced loan.

As of 2018, you should be aware of the $10,000 annual cap on property deductions. The TCJA (Tax Cuts & Jobs Act) has made it so that there is now a $10,000 annual cap on how much you can deduct from a property, state and local taxes. Although prior to 2018 there wasn’t a cap, this cap will now affect property tax deductions until 2025. You are only allotted a $10,000 deduction from the aforementioned taxes. If your lender required that you set up some form of escrow or impound account, you will not be able to deduct the money held for property taxes, until that money is used or paid back to your lender. Any city or state refund on a property tax will be deducted from the possible federal reduction.

Do you use a part of your home to run a business? If you answered “yes”, you may be able to deduct a portion of your business’ costs, for example insurance or repair costs, as part of your insurance. To be fair, this is a highly nuanced and complex subject. It’s best to consult with a tax advisor to verify that you’re eligible. The stipulations of this tax cut are rigid and specific.

Tax cuts and breaks will vary depending on outside factors. While two people, or families, may apply and qualify for the same break, there are different factors that will make a difference in how lucrative the break is. For example, your marital status, your standard deduction amount, your taxable income, and other relevant information will impact what you qualify for.

While certain tax breaks can be awarded for homeowners, be mindful that the following do not qualify for any sort of deduction: Dues that are related to a homeowner’s association are not eligible for breaks. Neither are insurance fees on your home, appraisal fees for your home, or cost of improvements, even if they are major undertakings.

If you’re curious about knowing more, the best course of action is to speak with a professional. While a healthy amount of research can provide you with context and break opportunities, if you’re still wondering about potential cuts, it may be in your best interest to speak with a tax advisor. Tax advisors are often able to find loopholes or rare exceptions that are not common knowledge among average taxpayers. For first time homebuyers especially, talking to an advisor will help you in your future filings, as opportunities are subject to appear on a case by case basis.







First Time Homebuyer – Home Inspection Pros & Cons

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Home inspections are often a crucial part of the home buying process, but are they necessary?

For starters, what is a home inspection? Home inspections are conducted before the closing of a property. If you choose to get a home inspection, it is certainly a good idea to look into an inspector who is qualified and thorough.

What do inspectors look for during a walk through? Inspectors will be looking for a few things such as: determining the functionality and efficiency of plumbing, electrical units, heating and cooling systems, appliances, structural stability, roofing, foundation, etc. Essentially, they serve to make sure that the basic foundation and construction of a home are appropriate, and everything is up to code.

Is a home inspection necessary? What are the cons? Home inspections are not legally required in the sale of a home, and therefore may seem tedious for homebuyers. Additionally, you are required to pay for the home inspector to conduct an evaluation. The cost of a walk through may vary based on how big the home is, where you are located, and the specific rates of the home inspector. If you do choose to get a home inspected, do your research or get a recommendation for a reputable inspector. Some homebuyers hire contractors to do the job instead of traditional home inspectors, however, they are usually not as well versed in recognizing major issues as inspectors are. The major con of a home inspection is undoubtedly the price. They can be relatively costly, usually ranging from $300 to $500.

How long does a home inspection take? Ultimately, this is contingent on a few factors, and a specific time frame cannot be given. The length of time will depend on the size, condition and age of the home. Keep in mind a qualified inspector will be analyzing nearly all systems of the home, and naturally, this can be a time-consuming job. However, a ballpark time frame usually entails anywhere from two to four hours.

If it’s not required, why should I get a home inspection? Homebuyers may be asking themselves this question, especially considering buying a home can be costly when factoring in all the additional fees.

Buying a home is usually the largest investment a person will ever make.  Many people see the home inspection process as another component of a greater investment. Home inspections make it possible to potentially negotiate repairs and fixes with the home seller. Often times, home sellers will be inclined to fix certain issues in order to ensure the sale goes through.

If you get a home inspection that reveals severe damage, or a potential for major issues down the road, you have a few options. The biggest incentive for getting a home inspection is to guarantee that a property does not have any current problems. Home inspections can be beneficial in this regard, as certain issues may be extremely detrimental to a home’s functionality. It’s also important to note that home inspections can help determine if a system may fail down the road. If you choose not to get an inspection, and are faced with a major issue after the sale, naturally, you will be responsible for the fix.

However, if these problems are discovered during the inspection process, there are a few courses of action available to you. You can:

  • Negotiate the overall asking price with the seller.
  • Request that the seller fix the issues before you move in/close the sale; or
  • Revoke your offer entirely.

As a buyer, you have the freedom to even request that a seller fix all major issues as a part of your contract. You may find sellers to be quite flexible in this area, as they are likely to run into the same issue with other buyers who conduct inspections if they choose to refuse to fix issues.

At the same time, be realistic.  Most home inspections will usually reveal small problems here and there. Finding a home without any problems is extremely rare. Ultimately, you will have to use your own discretion once you are presented with the facts. This is why working with a reputable home inspector is so important.

How do I find a home inspector? Getting a recommendation is probably the most effective way to ensure you get a credible home inspector. Start by asking your real estate agent or Citywide Loan Officer.

Now that you have all the facts, is getting a home inspection worth it? In most cases, it is recommended that you do so. Your home is your biggest investment, and like any major purchase it’s better to be fully aware of any potential challenges you may be presented with. While home inspections can be costly, repairing a major issue down the road may be exponentially more expensive. Keep in mind, older homes are more susceptible to wear and tear. If the home is relatively new, the decision to forgo an inspection makes more sense. Be mindful of your specific situation, and what the best course of action is for you.


Do I Really Need to Get a Home Inspection?





First Time Home Buyer Vocabulary

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Buying a home for the first time requires the marriage of several moving parts. Even seasoned homebuyers can find the process to be daunting. Knowing basic vocabulary and terminology can greatly aid in easing the anxious first-time buyer. Here is a helpful glossary of terms to reference as you move forward:

Realtor. Realtors, or real estate agents are integral to the homebuying process, and they serve as your guide to your area’s housing market. Agents will show you listings that fit your specific needs, and often have access to homes that may not even be listed on the market yet. A real estate agent is your unique personal shopper when it comes to home listings.

Annual Percentage Rate. An APR is the standardized method of showing you the total cost of borrowing money. An APR is the combination of the interest rate charged by your creditor, in addition to any fees you may be charged for. These fees are usually presented in percentages, and will be added to the interest rate to give you the total of your APR.

Appraisal. An appraisal is a document that contains the estimated value of a home. These are professional opinions of the market value of a property, and can often help you determine if a home’s value is appropriately reflected in an asking price.

Conventional Loan. There are a variety of different loans and mortgages available for homebuyers. However, a conventional loan is usually the route most first-time homebuyers will take. A conventional loan will typically require a 3 percent down payment. They are not typically advisable for people with low credit scores. Conventional loans are not guaranteed by a government agency, and require private firms to administer them.

Credit Score. What exactly is a credit score? In terms of homebuying, a credit score helps potential loan officers determine the risk level of providing a mortgage to a potential client. These scores are calculated using a formula that assesses your comprehensive credit history. The higher your credit score, the more likely you are to have better options as a homebuyer.

Closing and Closing Costs. First time homebuyers may be surprised to discover there are often closing costs associated with the completion of a sale. These fees may be related to insurance fees, survey fees or attorney’s fees (if applicable). These costs will vary from location to location. Be mindful of these fees before putting an offer on a home, to ensure you have the extra funds to cover any surprise costs.

Closing is the fun part! Closing means the home is now yours, and a deed will be given to you once all necessary documents have been verified and approved. The home is now in your name, and you can begin the move in process.

Down Payment. A down payment is a portion of the sales price you will be required to pay the seller in order to close a sale. The down payment must be paid at the time of settlement (closing). Purchasing a home does not require the entire sale price be provided upfront. This is where your mortgage payment will come into play.

Home Inspection. A home inspection is a close physical examination of a property. It is usually not recommended to get a home inspection unless you are a serious buyer, or have already put an offer on a home. Home inspections determine the functionality of plumbing, electrical units, heating and cooling systems, appliances, structural stability, etc. Home inspections occur before the purchase of a home if finalized.

Lender. A lender is the financial institution or private agency that is responsible for your loan.

Mortgage Banker. An individual, firm or company that originates, sells and/or services loans secured by mortgages on property.

Mortgage Broker. A mortgage broker is a loan provider who serves as a liaison between the borrower and the lender. Hiring a broker can help ease some of the anxiety that comes with applying for major loans. Brokers can work for firms or independently.

Net Income. Your net income helps determine your financial standing when applying for a mortgage. Net income is your after- tax pay, and is the money you receive after all tax withholdings have been deducted from your gross income. Net income allows lenders to gauge your viability is a potential homeowner.

Offer. An offer is your bid on a home that you are interested in purchasing. Offers are almost always the exact asking price or a lower value. Once you place an offer, depending on the value, you may enter a negotiation process with the seller. A seller will either accept the offer, negotiate a value somewhere in between your offer and the asking price, or decline the offer entirely.

Pre-Approval vs. Pre-Qualification. These terms are closely related but still have a few fundamental differences. Pre-Qualification is essentially a less formal version of a pre-approval process. Pre-qual asks for estimated information that you will give to your mortgage broker, that helps them determine if you are a viable candidate. If you get pre-qualified, getting pre-approval is the next step. Pre-approval is far more involved and will require verified documentation of your financial history. Pre-approval is not necessarily required for homebuyers to have, however it is strongly advised, as not being pre-approved by a reputable bank or broker will significantly hurt your chances of closing on a home.

Feeling overwhelmed? Not to worry, you will not be expected to know everything about the buying process up front. Buying a home takes time and patience. Don’t be afraid to ask your real estate team any questions; that’s what they’re there for!








Costs to Consider Before Purchasing a Home

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Costs to Consider Before Purchasing a Home

Buying a home? In addition to the new 2018 tax laws, these other financial considerations could affect your total cost. 
Buying a home in early 2018 could be the best financial decision you make all year. Low interest rates and slowly climbing home prices could make it the perfect time for you to jump into the real estate market. However, in addition to considering the base price, the down payment and the interest rate you will need to make your loan affordable, there are several other things you will be wise to consider before you take the plunge.

The DTI: The Debt-to-Income ratio—your monthly expenses compared to your income—will assist in determining the approval of your loan. You and your family also should consider your ability to keep your current lifestyle when you become home owners. The DTI gives you better idea of what you can spend on a house payment without having to cut lots of corners for the next 10 years. You can find several online calculators and forms that will calculate your DTI based on the figures you input.

Buy property you can afford now, not later. Even if you’re almost certain you’ll be earning more in a year or two, there also might be circumstances that increase the other expenses in your life. Children, schools, a new car, medical bills and home upkeep can be substantial costs. Be sure there will be room in your budget to live life the way you’ve planned.

Don’t underestimate the costs of purchase. In addition to the price of the home, there are many other costs involved,. Ask friends who have gone through the home-buying process. It’s unlikely they will say that it cost less than they planned for. It’s safer to understand and over-estimate those additional costs.

Some of the fees and services you can expect to pay for include the following:

  • Mortgage application fee: Lenders charge a fee for a mortgage application. The price varies, but can be several hundred dollars.
  • Home inspection: An inspection finds any undisclosed problems with the house before purchase. This protects you, the buyer, and gives the owner time to correct problems tied to making a sale. You can expect to pay several hundred dollars for the inspection.
  • Closing costs (title, appraisal and origination fees; interest due and escrow deposits): The paperwork for a home sale involves agencies at the private and government level. Your real estate agent should inform you each step of the way what you’ll be signing and paying for. You can ask for at a list of how much total closing costs will be before the big event. Closing usually runs about 2 to 3 percent of the cost of the house.
  • Homeowner’s Insurance: Coverage provided by a 3rd party agency to protect your home will be part of your total monthly payment, required and disbursed by your lender from your escrow deposits.
  • Mortgage Insurance: Coverage for the lender to protect against loan default may be a portion of your total monthly payment, also disbursed by your lender from your escrow deposits.
  • Property Taxes: As a homeowner, you will make an annual tax payment to the county until your principle is below a certain percentage of the value of your home. This is a part of your total monthly payment and is disbursed through your escrow. Some tax may be owed upon closing.

Contact your real estate agent and loan officer to learn more details about the initial and ongoing costs of homeownership.