Learn Your Home Loan Options Before You Decide to Buy

When you need help understanding the various ways you can finance a home, your lender will be the best resource.

But it’s still wise to have an overview of the types of home loans available and how they might fit in with your particular financial plan and your tolerance for risk.

Home Loan Options

Most risky loan programs such as optional payment mortgages no longer exist, but you still have some choices when it comes to deciding which home loan is right for you. You can choose between these options:

• Fixed-rate loans: Your principal and interest payment will stay the same for the entire loan term with a fixed-rate mortgage, but your payment may change a little if your property taxes and insurance premiums adjust.
• Adjustable rate mortgages: Most ARMs today are hybrid loans with a period of one, five, seven or ten years at a fixed-rate—followed by a period of adjusting interest rates. The initial period has a lower interest rate than a fixed-rate loan, so you can save money on interest—but if you don’t pay the home loan off during that time, you run the risk of higher payments if mortgage rates rise. It’s important to understand how much the home loan can adjust in the future and whether you can afford those payments if interest rates reach the maximum allowed by your loan. ARMs have caps on the amount they can adjust and how often they can be adjusted.
• Loan terms: First-time buyers typically prefer a 30-year loan to keep their mortgage payments as low as possible. You can pay less interest over the life of the loan and build equity faster with a shorter loan term such as 20, 15 or ten years. Shorter loan terms have a lower interest rate than 30-year loans, but the payments will be higher because you are paying the balance back more quickly.

Home Loan Programs

In addition to choosing your loan terms, you can choose a home loan program to meet your needs:

• FHA loans: A Federal Housing Administration-insured loan protects the lender in the case of a default by the borrower, so lenders are a little more lenient with their qualification guidelines for applicants. FHA loans require a low down payment of 3.5% and are open to all borrowers regardless of whether they have previously owned a home. However, you must pay mortgage insurance with these loans.
• Conventional financing: Conventional loans meet the standards of Fannie Mae and Freddie Mac for credit qualifications and your debt-to-income ratio. Most conventional loans require a down payment of 10% to 20%, but some are available with a down payment of just 5%. If you make a down payment of less than 20%, you will have to pay private mortgage insurance (PMI). A conforming conventional loan must be at or below the loan limit for your area.
• Jumbo loans: A jumbo loan, needed if you are borrowing an amount above the limit for a conforming loan, requires a larger down payment of at least 20% to 25% and has stricter credit standards because of the higher level of risk associated with a larger loan.
• VA loans: Loans from the U.S. Department of Veterans Affairs are only available to veterans, current members of the military and their spouses. Eligible borrowers can buy a home without a down payment and without paying mortgage insurance.
• USDA Rural Housing Development Loans: U.S. Department of Agriculture loans don’t require a down payment or mortgage insurance, but they are limited to homes in designated rural areas and to borrowers with up to 115% of the local median income.

When you’re buying a home, it’s essential to make your financing decisions in the context of a long-term strategy for all of your financial needs such as tuition payment for children and retirement.

Source : realtor.com

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Can You Compromise? Tips For Couples on When to Rent vs. Buy

Many people dream of homeownership. But a purchase becomes complicated when you and your partner aren’t of the same mind when it comes time to buy.

If you’re ready to buy, but your partner wants to keep renting, you’ll have to reach a compromise that’s best for both of you. To get there, make sure you consider every angle on whether to rent or buy.

Talk it out

Before you plan your future, sit down and discuss your reasons for wanting to buy a house, as well as your partner’s reasons for wanting to rent. Here are a few questions to spark the conversation:

• What are the perks of home ownership?
• What style and size of home do you want?
• Do you want to relocate or stay in the area?
• What benefits does your partner see in renting?
• What lifestyle changes may occur if you keep renting?
• Will a home purchase alter your lifestyle in a negative or positive way?

Knowing what your partner is thinking and feeling about the big decision benefits you both and can help you reach a compromise on this rent or buy dilemma.

What’s ahead?

Buying a home is a huge commitment. You may have to live in your first home for several years while you build up equity. If you buy before you’re ready and wind up needing to move, you may take a loss when you sell.

To know if you’re ready, considerwhat lies ahead for you and your partner in the next five to 10 years. For example, if your jobs are stable and you like your area, buying may make sense. However, if your partner may have to transfer for work in the near future, it may make more sense to remain a renter.

Future family planning will also help you decide. If you plan to have children soon, you’ll need a house with enough bedrooms to accommodate everyone. If you want to add pets to your family, you may need a home with a large backyard.

Are you ready?

Buying a house is a large financial commitment and your partner may be hesitating because of financial concerns. Knowing where you both stand financially can help you reach a compromise. Keep your finances in mind as you prepare the following information:

• Your credit histories – Order a copy of your credit reports and scores. These numbers are crucial when you apply for a mortgage.
• Your income – You’ll need stable income. If you’ve recently lost your job or your partner recently made a career switch, renting may make more sense.
• Your combined savings – To avoid private mortgage insurance, you’ll need to put at least 20 percent down on your home.
• Your budget – Homeownership comes with a host of repair and upkeep costs renters don’t typically face. To be prepared, you’ll both need a rock solid monthly budget.

To rent or buy, that is the question. But considering these tips before you decide can make a big difference in how the decision ends up.

Source : realtor.com

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How to Buy a Home in Another State

Whether you’re relocating to another state for work or always dreamed of moving when you retired, you’re going to need somewhere to live. If you know you want to own a home rather than rent, you’ll need to buy one before you move.

But to buy a home in another state requires some effort, but you can simplify the process if you know all the right steps.

Know Your Timeline

Your first step to buy a home in another state should be figuring out a timeline for purchasing the property. Consider:

• When you plan to move.
• If and when you can make any trips to the state to view homes for sale.
• When you need to have finalized the purchase of your new home.
• How much time you’ll need to sell your current home.

A REALTOR® in your area can help you come up with a timeline, sell your home and possibly refer you to a qualified REALTOR® in your new home state.

Obtain a Loan

Obtaining a mortgage or loan to buy a home in another state may not be as easy as it would be were you to buy in your home state. Start by getting pre-qualified for a mortgage. You can typically apply for pre-approval online, but some lenders may need to know the reason for you move.

Remember: Big financial changes can affect your approval. If you plan to buy a car or finance large items like furniture, try to wait until after you have closed on your house.

Do Your Research

An out-of-state buyer may be at a disadvantage because the buyer may not know the best neighborhoods, the real estate agents in town or the state laws. If you have friends or family in the other state, ask them for information on the local neighborhoods. You can also research information on housing, population, crime, entertainment and more online. The more research you do, the more you’ll know before you buy a home in another state.

Find a Good Buyer’s Agent

The best thing you can do when considering a home purchase in another state is to hire a buyer’s agent to represent you. Buyer’s agents are usually referred by family, friends orco-workers of the prospective purchaser. If you can’t get this kind of referral, you can also find local a REALTOR® online to help you buy a home in another state.

Tour Homes Virtually

You may not have time to travel between your home and another state as often as you would like to see a property, but that doesn’t mean you can’t tour homes. Online listings usually include several photos or videos showing you every aspect of the house. Start by visiting homes you or your REALTOR® find online to narrow down your choices before you buy a home in another state.

Understand the Closing Process

If the buyer doesn’t have anyone who can do it for her/him, the next step would be to hop on a plane and fly out to see the property in question. From this point on, the purchase of a home requires the same preparation as buying a house in the buyer’s home state:

• Organize the paperwork
• Secure insurance coverage.
• Get a final approval on a mortgage.

Your REALTOR® can walk you through this process. During the closing, any funds can be wired to the closing attorney in the destination state.

Source : realtor.com

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3 Reasons to Buy Houses That Aren’t Selling

When a house has been sitting on the market for a while, it can leave potential buyers with a bad impression. Home shoppers worry there are hidden deficiencies in the house causing others to shy away. But to buy houses that aren’t selling could be your best bargain.

Here are three primary reasons to buy houses that aren’t selling.

Sellers May Accept Lower Offers

The main reason why a house doesn’t sell is because of the inflated asking price. Potential buyers skip over overpriced homes in favor of more competitively-priced homes. They don’t even think of making an offer on homes listed above their budget.

Buyers assume the sellers aren’t willing to accept a much lower offer. Yet this might not be the case. Sellers may not even be aware their asking price is over current market value. If the house has already been on the market for an extended period, the owner might be willing to consider reducing the asking price.

You have nothing to lose by making a lower offer and trying to buy houses that aren’t selling. Offer the seller a price based on what you think is fair market value. You may be surprised when the seller accepts your offer.

Minor Fixes Can Turn a Beast Into a Beauty

Properties can remain on the market for insignificant reasons. It could be the exterior of the house deters prospective homebuyers. Unmowed lawns, cracking paint and useless junk in a house may be unappealing. Remember, minor and superficial renovations can quickly bring a home up to livable standards, so you can buy houses that aren’t selling.

Because the house has been on the market for a lengthy period, you may be able to purchase it for a bargain and invest some of the money you’ve saved on the necessary repairs. Once you’ve mowed the lawn, painted the walls and removed the rubbish, the house can sparkle and shine.

Location, Location, Location

Sometimes potential buyers pass on homes for sale because of their inferior location. It’s possible the value of the location may be irrelevant to you. For instance, the quality of the schools in specific districts may raise or lower the value of neighborhood homes, even if the homes are just a few blocks apart. Someone without school-aged children can buy a cheaper home in the non-prime neighborhood, even if the school district is a prime factor for other buyers.

Instead of being scared by non-selling homes other potential buyers have rejected, look out for them. A smart home shopper doesn’t worry about the amount of time a house has been for sale; he or she will instead think about why the house could be the right choice for them—to buy houses that aren’t selling.

These three reasons can truly help you find a bargain out there in the market, and you’ll be happy you took the road less traveled on the way to your new home.

Source : realtor.com

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How to Buy a Home With a Dark Past

Your dream home has appeared like an apparition. It was built in the 1920s but has recently been renovated with the latest technologies—in a great neighborhood and close to good schools.

But then you learn your too-good-to-be-true home has a haunted past where someone died … or atrocious crimes once occurred.

You have two thoughts: this could be a really creepy place to live, and maybe you can get a great deal on this joint. Going with the more-exciting idea, this is how to buy a home with a dark past to secure great deals on fantastic properties.

Many homes have histories

A property’s history can affect its price, especially if violent crimes were committed there—and especially if that incident was a high-profile news event. The house price initially may go up thanks to curiosity or fame seekers, but then it can plummet when the owners who bought the property decide to vacate because of the many people coming to gawk at the scene of the crime.

Legal disclosure

A buyer can ask if the house has any negative history. The seller must be honest. If the seller refuses to disclose information, it might be grounds for voiding the sale later if the buyer discovers something psychologically disturbing about the previous owners—or about what took place in the house.

If the house is reputed to be a “haunted house,” you might want to stay away from it: the market value of such a residence is uncertain long-term.

Create a new history

Once you learn how to buy a home with a dark past, here are some things you might consider for your own peace of mind, both short- and long-term:

• Repaint the house
• Re-carpet
• Replace windows
• Replace the landscaping
• Professionally clean the home

If you believe in Eastern practices, consider bringing in a feng shui expert. Ask a clergyman to bless the house if you are Christian. Whatever practice might settle your mind and allow you to live in such a home, there’s no harm in doing so. The seller might even spring for the cost, if he or she is motivated to sell.

Death by natural causes

Generally speaking, if someone died of natural causes, this involves no legal disclosure. However, if there were things in the house that directly contributed to someone’s “accidental” death, that’s another story. Do you see rickety stairs? Are the bathroom tiles too slippery? Is there an electrical problem?

Other questions to ask include the following: Were the former owners involved in criminal activity? Are there dark alleys or abandoned buildings around the property?

A bad history can make a good deal

Now that you and your family know how to buy a home with a dark past, you could score a real winner for yourself. To be prudent, offer a low bid. The owners might just say yes.

Source : realtor.com

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How Long Does It Take to Buy a Home?

Consumers considering a home purchase often want to get a handle on how it takes to actually buy a home.

The problem is this: it’s a surprisingly subjective and multilayered question. Answers tend to focus on the typical time it takes to close a home loan once you’re under contract, which is usually 30 to 45 days.

That’s an accurate response, but it’s a vantage point that leaves little room between the starting and finish lines. The home-buying journey—from financial preparation and finding the right home to getting under contract and through closing—tends to take a lot longer.

The reality is there is no stock answer on how long it takes to buy a home, mostly because everyone’s journey is different. Here is a closer look at some stages and steps that can shape your home-buying timeline.

Building Credit & Savings

Signing a purchase agreement to buy a home is a key step, but it doesn’t mean much if you don’t have the credit and assets necessary to secure a mortgage.

You might need to spend time burnishing your credit profile or stockpiling savings in order to qualify for a home loan. Credit-score and down payment requirements can vary depending on the lender and the loan type. (Checking your credit scores before you begin your home search can help you determine if you need more time to build your credit. There are various services that allow you to check your credit scores for free, including Credit.com.)

Borrowers looking at a $300,000 home would need at least $15,000 in cash for a minimum down payment on conventional financing (5%) and at least $10,500 for FHA financing (3.5%).

The average conventional borrower in April had a 755 credit score, while the average FHA borrower had a score of 685, according to mortgage software company Ellie Mae.

Paying down debt, correcting mistakes on your credit report and other steps can help boost your score, rapidly in some cases. But some blemishes can take longer to clear up than others.

How long it takes to build that down payment nest egg depends on the borrower and their budget. Scraping together enough cash to simply meet those minimum requirements can take considerable time, especially for first-time buyers.

Finding the Right Home

Last year, homebuyers typically looked at 10 homes over 12 weeks before getting under contract, according to the National Association of Realtors.

But there’s no game clock on your home search. You can tour 50 homes over 50 weeks. You can buy the first showing.

It’s obviously the most personal part of the process, but it’s also a time when perfect can truly be the enemy of good. First-time buyers especially have to learn to balance wants and needs with the realities of their housing market and what they can afford.

That’s not always an easy—or quick—lesson to learn.

Loan Processing

For mortgage lenders, the home-buying clock starts once they get a copy of your purchase agreement. From there, work starts on getting the property appraised and all of your financial documentation in order for an underwriter to review.

Like credit and underwriting requirements, appraisal time frames can vary depending on the loan type. For example, most appraisals on VA loans are back within 10 days, but it might take longer in more remote parts of the country.

That 30- to 45-day window from contract to close is a good ballpark for most purchase loans, unless you are trying to buy a short sale (think more like 90 to 120 days). But understand it’s not uncommon for underwriters to require additional documents once they begin scrutinizing your loan file.

Borrowers can help speed the process along by returning those documents as quickly as possible. You don’t have a ton of control once you are under contract on a home, but this is one key area where your swift action—or lack of it—can have a big impact on your home-buying timeline.

Source : realtor.com

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The Basics of Homeowners Associations

If you live in a newer suburban community or planned unit development—like some 63 million Americans, according to the Community Associations Institute—you are probably a member of homeowners associations, or HOAs.

It’s also a good bet you haven’t given your HOA much thought until you have a problem. Since HOAs make and enforce the community rules, it’s smart to understand what you can do if you can’t or don’t want to follow them.

HOA Facts

Homeowners associations, volunteer groups of neighbors who manage common areas and community property, create their own own covenants, conditions, and restrictions (CC&Rs). These CC&Rs cover:

• Resident behavior (no glass containers around the pool)

• Architecture (no fences higher than 8 feet)

• Common responsibilities (fee schedules and fines for non-compliance)

Is there value to living in an HOA? Depends on how you define “value”. A 2005 study that appeared in the Cato Institute’s “Regulation” magazine compared a group of Washington, D.C., area HOA properties with similar homes without community benefits—a total of about 12,000 homes. The HOA house values were found to be 5.4% higher. With the median home price around $190,000, that’s about $10,000.

Of course, that means you’d pay more for the HOA home than the non-HOA home. And you’d pay dues, which average $396, according to the Census Bureau. The real value is your HOA property will be well-maintained and the rules for maintenance enforced.

When You Don’t Like the Rules 

Some boards can impose what some homeowners believe are invasive, silly or elitist rules. In 2014, a Myrtle Beach, SC, association decided homeowners could have only two pets. A couple who’d had three dogs for the past 14 years were threatened with a $100-a-day fine unless they got rid of one of their dogs.

And some years back, news outlets reported a story about a homeowner in an upscale gated community in Frisco, TX, who was threatened with fines for parking his new Ford F-150 series truck in his driveway overnight. The board made exceptions for several luxury brands, but his mid-range truck was ruled “not classy enough.”

Even if you disagree with the rules, keep paying your dues. HOAs have broad legal powers to collect fines and fees and regulate activities. If you don’t respond to letters from the board, property manager, or a collection agency, the HOA can and will turn to small claims court or file a lien against your property.

You can handle some issues with a phone call. For example, adding recycling to the garbage collection route is a budget, not a rules, issue. Call the board member who oversees trash collection to find out if there’s leeway in the budget. If you want to do something that’s against the rules—like flying the American flag in your yard—start by:

• Making a written request for variance, using the appropriate HOA form in your CC&R documents. A variance gives you permission to be the exception to the rule. Submit your request to the board and property management company.

• Seeking a compromise: That you’d like to fly the American flag, but only on national holidays.

Don’t Expect a Quick Solution

Some HOA boards meet as little as twice a year. If the board decides the issue is worth pursuing, it may require a community vote. If it passes a majority, the board will adopt it. Board members also may consult the HOA attorney to see if there’s a legal liability if they rule against you.

If you don’t get a timely response, request a hearing and resubmit your request for variance with as much support for your cause as possible.

If the board rules against you without a community vote, you can appeal the ruling with a petition signed by a majority of other homeowners.

Fine Reality

But if you fly your flag without permission, expect to get fined. Fines can range from a nominal $25 to a painful $100 or more depending on the issue. Your CC&Rs will indicate the fine schedule—per day, per incident, etc. Interest for nonpayment can accrue, and the HOA can sue you in small claims court.

If you feel the ruling or the fines are unjust, the last resort is to hire an attorney and sue the HOA, as a flag-flying couple did in 1999. They battled their HOA in court for nine years before the case was settled in their favor.

Become the Rule Maker 

If you don’t like the rules, the best way to change them is to become part of the process.

1. Know your CC&Rs, annual budget, and employee contracts. Do you see areas where expenses can be cut? Are service providers doing their jobs?

2. Volunteer for a committee or task. If the board needs to enforce parking rules, for instance, you can volunteer to gather license plate numbers of residents’ vehicles. In addition, put your professional expertise to work: Assist the board with data entry, accounting or website design.

3. Stand for election to the board. When a position becomes open, the board notifies the members, and you can put your name forward. New board members are elected at the annual meeting by member majority vote. Many boards are three to nine members large, with terms of one to two years.

Involvement Drawbacks

As a board member, be prepared to spend two to four hours a month:

• Reviewing property management reports

• Monitoring budgets

• Talking to other board members and residents

Most boards meet quarterly; small boards only meet twice a year for a couple of hours.

Accept that you might become less popular if homeowners don’t like your decisions. In the worst case, you could be sued, along with the rest of the association.

Involvement Benefits

But there are rewards. You’ll feel more in control of your community’s fate. You may find that some rules you didn’t support have merit after all. But most of all, you’ll know you’re doing all you can to protect your quality of life and your home’s value.

This story was written by Blanche Evans and originally published on HouseLogic.com.

Blanche Evans is an award-winning journalist. She is the author of five books, including “Bubbles, Booms, and Busts: Make Money in Any Real Estate Market.” Blanche owns a townhome in Dallas and is treasurer of her homeowners association.

Source : realtor.com

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