Many people think too narrowly about real estate agents. All they do is show homes, right? Well, actually no. We can do a lot more than that to help our clients.
Realtor.com has published a fantastic infographic showing the profile of veteran and active duty home buyers and sellers. There’s lots of good information here, especially if you are considering listing a home.
Are you still renting? Or perhaps you’re starting to outgrow your starter home? If so, and you’re thinking about buying a new home in the next year or so, let us give you some great tips for finding your forever home.
Okay, we know it probably won’t be an actual forever home, but we do think you’ll want to find something you can live in comfortably for at least a few years. Here are some things to consider.
Last week we wrote about the things you needed to get in order before buying your first home, and some of those involved costs you might not have thought about before. In this post we’re going to talk more about hidden costs of homeownership, just to be certain you know exactly what to expect.
1. Home inspections
This isn’t an ongoing cost, but it’s one which often takes first time home buyers by surprise. Yes, it’s an expense when buying a home, but it’s an important one because it protects everyone, especially you, the buyer. Many home owners honestly don’t know about certain needed repairs. Take an attic leak, for example. Caught early, it’s easy enough to fix, and because most home owners don’t regularly go into their attic, it might go undiscovered for a while. A home inspection will catch it, and it can be addressed before you move in and suddenly have to deal with a leaky attic. Definitely good for you!
By the way, your lender will probably require this because it protects them as well.
2. Ongoing taxes and insurance
These costs will affect your mortgage every month, and we strongly believe they should be a part of your monthly payment. Why? One of our clients had a mortgage which didn’t involve an escrow, so they were responsible for paying real estate taxes twice a year. Taxes were billed in July and December, and one year, something happened to the December bill. Either it was lost in the mail or accidentally discarded. We’ll never know, but the important part is that the December bill was paid late, in January, which meant that bill couldn’t be deducted until the following year’s tax filing. Bummer. It was the difference for that client between getting a refund and paying taxes that year.
When taxes are paid as a part of escrow, that won’t happen. Just be sure to do your research in advance to get an idea of what the amount will be and add it to your monthly payment when you are calculating your budget.
3. Principle Mortgage Insurance (PMI)
You’ll need to allow for this if you can’t come up with a 20% down payment. We’ve discussed it more in this post, and we suggest you read that. If you do need PMI, be certain to get information on when and how you can eliminate it, based on increased equity in your home.
4. Maintenance and repair
One of the best parts about owning is that you don’t have to pay for most repairs to the apartment. When you own a home, you’re responsible for all of them. We suggest you set up a savings or money market account and add to it each month to create a “slush fund” for home repairs. That way you won’t need to scramble to find the money to replace your HVAC system in the middle of a July heat wave. Trust us. Roofs leak and HVAC system breakdowns do seem to happen at the worst possible times!
5. Increase utilities
If you’re moving from a relatively small apartment to a single family or even a town home, be prepared for your utilities to go up. You’ll have both more square footage to heat, cool and illuminate, and you’ll be losing the insulating effect of the surrounding apartments. This increase may be less if you move to a condo, but we still recommend being prepared.
Don’t be put off by the extra expenses. Even with them, buying is still often a better financial decision than renting, especially now when rents are so high.
Want to explore your options? Give us a call!
If you’ve been watching the news and paying attention to this blog, you know that 2016 is going to be a great year for buying a home. Renting is still expensive, and mortgage rates are, surprisingly, still low. All this adds up to make now a great time to make the switch from renting to buying. However, the process can be overwhelming the first time. Here’s our list of the most important “must-dos” when buying a first home.
1. Use the mortgage calculator on our site
You should have some idea of how much you can afford to pay each month. If you’re not sure where to start, look at your monthly rent. That’s not a bad place to start. Do a Google search on “mortgage rates today,” and you’ll have an idea of what rate to put into the calculator. That will give you a ballpark home price to shoot for.
2. Check out listings in your area
Now that you have a number to play with, go online and check home prices in the areas you think you’d like to live. If the prices are way out of line with what you can afford (and don’t be surprised if they are–it’s common to overshoot at first), keep looking until you find some neighborhoods and homes that meet your initial set of criteria.
3. Factor in other costs
When you rent, you’re effectively paying for your landlord’s taxes and other fees. When you buy, you’re responsible for those. Get information on likely property taxes, HOA fees and homeowner’s insurance. You’ll want to include those numbers in your initial budget.
4. Estimate closing costs
Bankrate has a breakdown, by state, of average closing costs. Add that into the approximate sales price you estimated above to get a new monthly rate. Keep in mind, however, that some closing costs are negotiable, and sellers may be willing to pay some or all of them, depending on how hot/cold the market is in your area.
5. Take another look at your budget
Now that you’ve factored in most of the monthly costs of owning a home, see if it works with your budget. A good rule of thumb is that your housing costs should be less than 28% if your income. More than that, and you’ll be stretching to make ends meet. If the numbers don’t add up, go back to searching listings and see if you can’t still find something in your price range. Remember that your first home is a “starter home” to help you build equity. It might not meet all the items on your “dream home” list, and that’s okay.
6. Find a real estate agent
Now that you’ve got some idea of what you might be able to afford, it’s time to talk to some agents (we’d love to be one of them) to assess the market conditions. Is it a seller’s market currently? That means less negotiating power at closing. Is it a buyer’s market? If so, that’s good, but you’ll still want to work with an agent. Here’s lots of reasons why.
7. Pull your credit
You’ll want to do that before talking to a lender. If there’s anything which needs to be improved, we suggest you work on it as soon as possible. Make sure there aren’t mistakes on your report. If there are, get them corrected. You don’t want surprises when you go to get pre-approved. The better your credit, the lower your rate will be.
8. Get your paperwork in order
Assemble all the documents you’ll need to take to a lender for your pre-approval. Although not a complete list, here’s a list of documents to get you started:
- Two years tax returns
- Last two W-2s
- A list of asset accounts
- A list of liabilities (i.e. credit cards, car loans and other amounts you owe)
9. Get your pre-approval letter
While not a final approval for a loan amount, a pre-approval letter will give you bargaining position and the ability to move fast if you find your perfect home quickly.
There you have it. Work through that list, and you’ll be in great shape for buying a first home.
So you’ve purchased your first new home. Congratulations! You might be thinking that it’s enough to just move in and start living. Hold on. Here are our top tips for new home owners.
1. Save for unexpected problems
It doesn’t matter how well you’ve planned. Things happen. A hot water heater starts leaking two weeks after you’ve moved in. Or your AC stops working on the hottest day of the year. (Yes, both of those have happened to people we know.) Make sure you have some extra money set aside to deal with unexpected expenses.
2. Buy a bunch of furnace filters
It’s such a simple thing, but it can make the difference between your HVAC system lasting a long time or dying quickly. Your system needs good air flow, and if it has to work too hard because your filters are dirty, you could potentially lose years off its life. Stock up on filters now, so you’re always prepared to replace them.
3. Get in the habit of inspecting your home regularly
Make a list of things to check on a regular basis, like inspecting your siding and windows. Walk around your house quarterly and check the condition of walls, ceiling and floors. Leaks can go unchecked for months, but if you are in the habit of inspecting for water damage, you may be able to keep a small problem manageable.
Have your HVAC system checked at least once a year, and it’s a good idea to keep an eye on your roof, especially once it hits the 15 year mark.
4. Know the age of your appliances
All appliances have a life expectancy. Here’s a handy guide for how long you can expect your appliances to last. It also has suggestions for things you can do to extend their lifespan.
5. Start keeping records
Many improvements can increase the resale value of your home, so get in the habit of keeping records of all major improvements (like a new roof, siding or windows). If those improvements lead to greater energy efficiency, they may also qualify you for tax credits.
6. Look at your insurance
Talk to an insurance professional to make sure you have the ideal coverage. Your bank will require certain coverage minimums, but that may not cover everything you’d like. Explore umbrella policies and other options to make sure you are adequately covered in case of an emergency.
Those are our tips for new home owners. Did we miss anything?
Image courtesy of phanlop88 at FreeDigitalPhotos.net
We decided to get creative and make some graphic calendars to help both buyers and sellers understand the timelines of their various transactions. While we won’t write about everything in the calendars, we did want to highlight a few points.
1. Finding a great agent
Note that this happens at a different time, depending on whether you are buying or selling. We suggest finding an agent six months out if you are selling and three months out if you are buying. If you are selling, it’s likely there is work to be done on your home before you can put it on the market. Finding an agent well in advance will give you time to complete the work. Note that if you were thinking of selling your home this year, you’d better get looking for that agent. It’s almost too late to get your home ready for the summer selling season. Of course, we’re ready and able to help you out!
Getting pre-approved six months out if you are buying is an excellent idea, especially if you suspect your credit rating may need a bit of work. Meet with a lender early to evaluate your situation and be certain you are prepared if your dream home hits the market unexpectedly.
3. Three months to two months out is busy for sellers
You need to do quite a bit to get your home ready to list. You’ll want to be certain to be well-organized and on top of everything in that busy time. Completing all those tasks in a timely fashion can be the difference between your home selling on schedule and not.
4. Two months out is the time to submit an offer
Did you know that you will be submitting an offer on the house you want to buy two months out? Yes, it’s that far out. Buying a house isn’t like buying a car. There’s a lot more involved in the sale process, so be prepared for that closing to be a few weeks later than you might have been expecting.
2016 looks like it’s going to be a great year for real estate, and we hope this will help keep you on track.
Images created with the help of Canva
It’s the new year, and you may have been thinking about your resolutions. If one of them is to buy a home in 2016, you’ve made a great one. Here are some reasons why.
1. Interest rates are still low
Although it looks like they will rise this year, they are unlikely to go up high enough to depress home buying. However, as the economy continues to improve, you can bet that rates will continue to go up, making waiting a potentially costly decision.
2. Builder are building more starter homes
If you are looking for a newly built home but have been discouraged with the trend toward large, expensive homes, don’t despair. There are strong indications builders are going to build more starter homes this year. Now would be a good time to get one.
3. Rents continue to rise
Rising rents are another trend which is showing no signs of ending. In many metropolitan areas, it’s already more expensive to rent than to own, and there are few signs of that improving any time soon. If you live in one of those areas (and the Metro DC area is one of them), do what you can to save for that down payment and make your purchase before you rent goes up too much more.
4. Home prices are stabilizing
Home prices have been steadily rising the last few years as the market recovered from the sharp downturn of several years ago. Overall, we are seeing a return to a “new normal” of steady but not accelerated growth. Don’t think, though, that this means you should wait. A more stable market provides opportunities for buyers, and you don’t want to miss out on those.
5. Down payments can be low
Are you having trouble saving up that down payment? Don’t despair. Some new loan programs are available with down payments as low as 3%. While this does mean you will have to pay mortgage insurance, if you can qualify for an FHA loan, they have some programs with reasonable rates for the insurance. Even with mortgage insurance, you still might end up with a lower monthly payment than your rent check.
Talk to a qualified mortgage loan officer to look at your specific situation and see what options are available for you. Not sure who to talk to? Give us a call, and we can refer you to a good loan officer.
2016 is going to be a great year. Don’t miss out!
You’ve reached that happy day where you’ve decided to purchase your own home. Congratulations! That’s a big step, and we’re delighted you’ve made it. Here are some things you may not have thought of to get you ready for the process of buying a home.
1. Use a reputable realtor
We don’t just say that because we are realtors. There are solid reasons to not do it yourself, especially if this is your first time. We wrote a post on this earlier. Please give it a look.
How do you find a good one? Ask around. Talk to your friends. Ask who they used, why and what was the outcome. If your friends can’t help, go to some open houses and talk to the agents there. Ask lots of questions and don’t be afraid to go with your gut instinct.
2. Contracts can be negotiated
Remember that when you are buying a house, you are signing a contract. Don’t think that those contract terms are set in stone. Many of the points can be negotiated, which is another reason to use a reputable realtor to aid you in the process.
3. Look beyond the exterior
Remember that cosmetic changes are relatively easy and inexpensive to make, so don’t turn down a house just because you don’t like the color of paint or the carpet. Consider your long term goals for the house (more on that in a minute), and use that to make decisions. Bathroom and kitchen remodels can be expensive so before you purchase a house that will need major work, consider your budget.
4. Think long term
How long do you plan to stay in the house? Of course plans can change, but ask yourself the question before you buy. Do you plan to stay only a few years? If so, consider carefully before you purchase a house which needs major work. Your equity might not grow enough to make back the cost of those purchases. Do you plan to stay a decade or longer? Then a fixer-upper or the otherwise perfect home with the ugly kitchen might make more sense.
5. Buy what you know you can afford
Don’t let your mortgage company or agent convince you to purchase a home which will stretch beyond your budget. You may qualify for more home than you can comfortably afford, especially if you have significant other expense, like childcare. A home is intended to be an investment, not an overwhelming strain on your finances.
6. Don’t just look at purchase price
A home needs to be maintained, and that costs money. The purchase price is only part of the equation. Try to get some idea of reasonably monthly maintenance costs so you can factor those into your budget and how much you can afford.
7. The home mortgage deduction is a nice bonus, nothing more
When you are looking at purchase price and mortgage costs, it’s likely that someone will factor in the home mortgage deduction and say that your “actual monthly mortgage payment is actually $X lower.” That’s true. Sort of. The home mortgage deduction is a nice thing to have come tax time, but remember that it comes once a year. You have to manage the mortgage payment every month.
We hope this list will be helpful as you consider your journey to your first new home. We’d love to help you along the way!
Image courtesy of Ambro at FreeDigitalPhotos.net