Tag Archives: buyer

How Much House Can You Really Afford?

Just because a lender approves you for a mortgage doesn’t mean you can comfortably afford it.

If you ask Google “how much house can I afford,” you’ll find a number of online tools and mortgage calculators to help you find a fast answer. You might also find quick but somewhat confusing advice like “your mortgage payment shouldn’t take up more than 35% of your monthly income.”

Quick. Do you know what 35% of your monthly income is? If not, you’re not alone. While online housing tools are a helpful starting point for the early stages of your house hunt, it’s important that you understand how the pieces all fit together, and that you take your personal financial situation into account.

Why a calculator can’t tell you how much house you can afford

  1. 1. Financial rules of thumb may not apply to you

    While 35% seems like a straightforward figure, your financial picture is a lot more complicated than that number would make things seem. Your ideal monthly housing costs could vary depending on things such as debt and other monthly payment obligations — not to mention how much you’ve saved for a down payment.

    If you have high credit scores and a clean financial background, a mortgage calculator can be a great starting point for mortgage shopping. You’ll get a much better sense of what your price range might be instead of a blanket rule of thumb. But they’re only as accurate as the information you provide, so if you forget to add regular budget line items such as food, day care, or gas costs, you won’t get a complete picture.

  2. 2. Your lender may approve you for more than you can realistically afford

    Lenders are now legally required to ensure borrowers can “reasonably afford” to repay a loan before they approve a new mortgage. But there’s a difference between being able to reasonably afford something and being able to realistically afford something.

    When looking at what’s reasonable, lenders account for your income and any current debts that you need to repay each month. If you make $5,000 per month after taxes and need to pay $500 toward your car loan each month, a mortgage payment of $1,500 may seem perfectly reasonable.

    In this (extremely simplified) example, you’d have about $3,000 per month left over to handle all your other expenses. And perhaps you can afford your living expenses on this budget.

    But what about the other goals you want to achieve? What about saving for retirement or investing for your future?

    If you commit to a large monthly mortgage payment, you may find yourself squeezed to make your remaining money cover your living expenses, plus monthly bills and loan repayments. While a lender can give you a mortgage you can reasonably afford, it could mean not being able to handle other financial priorities.

  3. 3. You’re the only one who can determine what’s comfortable

    Only you can examine your life and values to determine what you are willing to spend on your mortgage budget — and what you’re not.

    You might be perfectly happy to take on a larger monthly mortgage payment in exchange for reducing meals out, cutting back on vacations, or sticking with your old phone instead of going for the upgrades just because you can. Or you may decide that renting makes more sense for you because you can mitigate costs, take on less financial responsibility, and enjoy more flexibility.

    Either way, you need to determine what you feel comfortable with. You need to decide what works within both your budget and your long-term plans to reach goals that matter to you.

  4. 4. Ask yourself these questions to decide how much house you can really afford

    Once you set your financial priorities, here’s where you’ll need to do the math:

    • What’s my current income? What are my basic living expenses? What are my fixed costs?
    • How much do I want to put away each month into savings or investments?
    • How much will it cost to maintain my new home?
    • What kind of down payment do I have? (The more you put down, the smaller your monthly mortgage payment will be.)

    Now you can factor a mortgage into all of the above, and see how much you can really afford. When doing so, don’t forget to count both the mortgage principal and interest — along with property taxes, homeowners’ insurance, and other extras such as HOA fees.

Post courtesy of trulia.com

What You Need to Know About Buying a House This Summer

Planning on buying a house this season? Go in prepared with advice from the pros.

Summer brings longer days, warmer weather and more people out house-hunting — particularly families hoping to get settled before the school year begins in September. But there aren’t necessarily more houses on the market—and this year that’s truer than ever. “Inventory is the lowest I’ve ever seen it,” says Denver, CO, agent Susie Best. Recent Trulia research bears this out, showing inventory falling for 8 consecutive quarters. The reasons are varied: investors bought up homes during the crash and are renting them out now; prices have risen so much that homeowners can’t afford to trade up; or some homeowners are still underwater and can’t afford to sell yet. This means “multiple offers are driving up prices,” says Best. How to up your chances? Here’s what agents are advising buyers to do in this hot market — at the hottest time of year.

7 Tips for buying a home in the summer

  1. 1. Research trends based on your market location

    While many markets are red hot in the summer, that isn’t true across the board. For example, Chicago winters are long and many families seize the all-too-brief summers for vacation, so single-family home sales slow down a bit from June to September. “Right now we’re really a tale of two markets,” says Jennifer Ames, a Chicago, IL agent and a broker with Coldwell-Banker. “There’s a home surplus at the high end; the starter homes are where the competition is. I tell buyers, ‘Understand the dynamics of your particular market.’ They’re not all the same.” You can use Trulia Maps to check out historical pricing trends in the housing market where you’re looking.

  2. 2. Line up your financing

    This one applies year-round. And although interest rates will probably keep creeping up, “it’s still relatively cheap to borrow,” says Ashley Kendrick, an agent in Kansas City, MO. Even so, sellers are much more apt to consider buyers who present a loan preapproval letter up front. And make it from a known lender like a bank—not an application completed online.

  3. 3. Be clear with yourself on what matters most

    Make a list of your must-haves, your wants, and your it-would-be-nices so you’re ready to decide right away. “This is no time to be a lookie-loo,” Best says. “There’s no more, ‘Let me see if I qualify for this and come back.’” Know what you can live with and what you can’t live without.

  4. 4. Don’t quibble on price

    As the inventory for starter and trade-up homes continues to shrink, the competition for what’s available on the market is fierce. In markets where this is happening, “the price is never the price,” says Anthony Gibson, an agent from Austin, TX — buyers may need to offer more to stand out. “A healthy down payment always appeals,” Kendrick adds, since it suggests you’d have cash to cover any difference between appraised value and a higher asking price; you may be asked to sign a waiver agreeing to that. That’s not raising the overall price, Best notes—just how much you’d pay outside the loan.

    A bigger earnest-money payment (the good faith deposit you pay to a seller to show you’re serious) could also provide an edge, says Jennifer Ames. “A typical initial check might be $1,000; I might advise a buyer in competition to start with $5,000.”

  5. 5. Get your own real estate representation

    Particularly when timing is everything, a house-hunter needs the right agent. “Make sure yours can provide accurate information the minute a home hits market—for example, whether the seller is reviewing offers as they come in or after the weekend,” Best says. And do get your own agent to represent you: This is no time to try enticing a listing agent to handle both sides of the deal in an effort to curry favor with the sellers. With competing bids flying, you want someone fully focused and advocating on your behalf.

  6. 6. Craft a strong offer

    Top bid doesn’t always mean highest price. For sellers, flexible terms may be what clinches the deal—say, letting them pick the closing date, or a generous leaseback period that lets them stay put until they close on buying a home. Be sure not to load up your offer with unnecessary contingencies. “It’s important owners know they’re getting what they want,” Gibson says. And don’t forget the personal touch: “A letter to the seller always helps,” Kendrick suggests.

    Need some inspiration for that a letter to the seller? Here are three offer letter templates to get you started.

  7. 7. Don’t sweat it if it doesn’t happen by August

    Even when deals fizzle, the waiting and offering will probably pay off. “I tell my buyers, ‘You’ll find a house,’”  Kendrick says. “It’s a patience game.”

Post courtesy of Trulia,

10 Tips for Spring Home Buyers

Follow these 10 tips to make the home-buying process a happy one.

The arrival of spring means it’s time to start fresh. Along with pulling out your warm-weather wardrobe and tackling spring cleaning, you may have a bigger project on your to-do list: buying a new home.

Before you start on your home-shopping journey, check out these 10 home buying tips to save you both time and money.

Find the right agent

Real estate expert Joe Manausa says the key to happy spring home buying is finding the most qualified agent to guide you through the process.

With reviews available at your fingertips, finding a real estate agent you trust can be easy — provided you take the time to do some research.

Check for agents with the best reviews, and give them a call. They’ll relieve some of the pressures of home buying, and walk you through all the necessary steps.

Think location

Sure, the three things that matter most in real estate are “location, location, and location.” Nonetheless, some buyers end up purchasing a home in a location that’s not right for them, simply because they make their choice for all the wrong reasons.

“They’re looking at a house in the wrong area or the wrong school district, but they buy it because they like the kitchen,” Manausa says.

Use the new open house

The internet has completely changed the home-buying process, making it easier to choose which homes to go see in person.

With 3-D tours available on the web, buyers can tour a home from their mobile device or a computer. Eighty-seven percent of home buyers use online resources during their home search, according to the Zillow Group Report on Consumer Housing Trends.

Buy a home, not a project

Buyers who purchase a fixer-upper can end up spending the same (if not more) than they would on a new home.

“When buying a home, pay close attention to the ‘bones’ … and avoid getting caught up in the cosmetic features,” advises Dan Schaeffer, owner of Five Star Painting of Austin.

If the kitchen cabinets are in good shape, but you want the space to be brighter, adding a fresh coat of paint is easier and less expensive than replacing all the cabinets.

Ka-ching! Be a cash buyer

Sellers are more likely to choose the buyer who already has money in hand over an offer that’s contingent on a mortgage loan.

But if you can’t pay cash, getting pre-qualified for a loan can help the seller feel more confident that you’ll be able to secure financing.

Avoid disaster — get a warranty

The last thing you want after buying a home is for something to go wrong. You protect your car, so why not your home? Manausa recommends purchasing a home warranty: “[They’re] very affordable, and cover all the things that go wrong.” Your wallet will thank you.

Make inspection time count

Small problems eventually turn into big problems. The wood could rot, drains could leak, or the electrical panel may not be up to code. “Hire experts, and always get your home inspected,” adds Nathanael Toms, owner of Mr. Electric of Southwest Missouri.

If the inspection reveals issues, be sure to deal with them effectively. For example, “it’s very important that a licensed electrician makes sure all circuits work properly,” say Dana Philpot, owner of Mr. Electric of Central Kentucky.

Put safety first

No matter the neighborhood or the home, your family’s safety should always be the number one priority after purchasing a home.

“Even if the previous owner promised to return the copy of every key, it’s always a good idea to change the locks throughout the exterior of the home,” says J.B. Sassano, president of Mr. Handyman. “If the house has an alarm system, remember to change the code — and don’t forget the garage door.”

Fix common repairs

Repairs may come in the form of patching up small nail holes or weatherproofing electrical outlets. Whatever the need, Schaeffer recommends fixing the repairs before moving in your belongings. “An empty house is easier to maneuver and clean,” he says.

For bigger jobs, find a professional to complete the repairs. Sites such as Neighborly can help you find home services providers.

Add the finishing touches

The best part about buying a new house is making it a home. Change the color of the walls, update the lighting, or add a more personal touch with a photo gallery wall.

“It’s important to find the right gallery layout by measuring the wall space, which determines the size of photos you can use,” Sassano says. “Lightweight frames are the safest option, especially when hanging on drywall.”

Courtesy of zillow.com

Fall Might Be the Best Time to Buy a Home: Here’s Why

Photo credit: Andy Dean Photography / shutterstock.com

Buying a house is one of the biggest investment a person can enter into. A home offers shelter and security to the family and a majority of people consider it a very important purchase. Buying a home comes with spending some good money towards it. For buyers, you are looking at getting the best house at the best possible price. A person who wants to buy a house should always ask himself the best time he or she will be able to get the best deal.

There is always a discussion about the time of the year best to buy a house. A good number of real estate expert believe that fall is the best time to buy a house. Below are the reasons why fall is the best time to buy a home:

1. Less competition.

Competition for houses during fall always drop off but the houses are still available for sale. Due to less competition, the buyers are in a great position to negotiate for the home prices.

2. Sellers are tired.

Most sellers who had placed their houses out for sale during the prime season of property sale are very exhausted in fall. After not having made a deal in the summer and winter, most sellers are always ready to get a deal at a possible price reduction. This favors the buyers.

3. More time with your real estate agent.

There are always fewer buyers during fall meaning a buyer at that time has the full attention of the real estate agents compared to summer or winter period. A person is able to ask questions with the real estate agent and get clarifications easily.

4. There are home improvement bargains.

There will be some improvement needed when you buy a house. It is always good to coordinate the house purchase with home improvement. It is said that fall is the best time to buy most household goods. It is important to take advantage of the low prices during this time.

5. Holidays around the corner.

Most sellers are not only worn out from the summer sale but they are looking forward to holidays. This preholiday time always affects the willingness of the sellers to dispose of their property.

6. Year-end tax credit.

It is always necessary to understand the advantages of having a home in regards to a person’s income tax. By buying a house, a person will be able to qualify for tax deductions.

In conclusion, it is not just about buying a house, it is more about getting a house at a good deal. Knowing the right time to purchase a house is very important for a potential home buyer.

7 Ways To Compete With Cash Buyers In A Seller’s Market

If you really, really want the house, here’s how to play ball.

The old adage “money talks” rings true in real estate. After the stock market crash in 2008, homebuyers with all-cash offers quickly became sellers’ most sought-after suitors. All-cash, after all, means no mortgage, and no loan means no need to rely on lenders. So now that the market has heated up again, bidding wars are the new normal, from Alexandria, VA, real estate to homes for sale in San Angelo, TX. Unfortunately, it’s common for a seller to favor an all-cash offer over an offer from a buyer whose deal hinges on a mortgage approval.

“If you’re shopping for a home, there’s a good chance you’ll be competing with all-cash offers,” says John Lazenby, president of the Orlando Regional Realtor Association. “As of February 2014, 43% of all offers were all-cash! Couple that with the fact that it’s a seller’s market out there, and it can be very difficult — and competitive — to get the house you want.” So what’s a homebuyer to do? Here are seven ways to compete with all-cash buyers in a seller’s market.

1. Put your best foot forward

Don’t wait to submit your best offer. If you want a specific house and it’s a competitive market, you need to put in your very best offer first. “Assume that you will not have the opportunity to negotiate on price, so make your best offer upfront,” advises Lazenby. Adds Ross Anthony, a real estate agent with Willis Allen Real Estate in San Diego, CA: “If you are afraid of overpaying for the home, make sure you look at the current appreciation rate for the market. You may pay a little extra today, but if prices keep increasing and you keep getting outbid, you may find yourself priced out by the end of the year or paying significantly more for the same property anyway.”

2. Go a little higher

The highest offer doesn’t automatically mean a sale — but in many cases, it can’t hurt to inch your price up a bit, says Anthony. “It sounds obvious because it is, but this is often the most important thing to consider when offering on a home in a competitive seller’s market. More often than not, cash buyers are investors and investors want to increase their margins as much as possible by getting the property for as little as they can,” he explains, and that gives you a little negotiation power. “You must understand that in order to make your offer more attractive, you will most likely have to beat out the competition on price. Make sure your agent takes a close look at the comparable sales and can justify the purchase price, but also adjust your expectations of getting a home for less than it’s worth. Sometimes as little as an extra $1,000 on top of the list price can be the determining factor in the seller’s eyes.”

3. Find out the seller’s terms

“When telling agents that I might be coming forward with an offer, I first ask them what terms the seller is looking for,” explains Heather Witt, a real estate agent with Partners Trust in Los Angeles, CA. “Does the seller need extra time in the property to find a new home to live in? Are they looking for a quick close? Do they want to control who processes escrow and title? Do they already have those services picked out so that I might write an offer that won’t need to be countered?” Having a real estate agent who can handle this early negotiating on your behalf can mean the difference between landing a home and losing it.

4. Be flexible

“In any market, the buyer who is financing must be creative when up against all-cash buyers,” says David Dubin, a real estate broker with Douglas Elliman in New York, NY. One key to creating a winning offer? Emphasize your flexibility. If your agent can find out the sellers’ desired terms, you can sweeten the deal by letting the sellers drive the timeline and some of the specifics. “The more flexible and accommodating the buyer is, the more a buyer’s bid will pique the interest of the seller,” says Dubin. Simple things such as being accommodating with the closing date, offering to rent the house back to the sellers while they continue to hunt for their new home, or requesting minimal repairs can go a long way when competing with an all-cash offer.

5. Be thorough

“If you have already done your homework and know the seller’s specific needs, make sure every ‘i’ is dotted and every ‘t’ is crossed in your offer,” says Ross Anthony. “The fewer items that the seller will have to include in a counteroffer will make them more likely to sign and accept your offer.” Don’t forget to include things such as an updated pre-approval letter. You could even offer “to put them in touch with your lender if they would like added assurances of your ability to follow through with the purchase,” adds Anthony. “If the lender is confident and can convey this to the seller, it will help put their mind at ease.”

6. Show some personality

“I always recommend my buyers write a sincere letter to the seller to include with their offer that shows a genuine love and interest in the home,” says Anthony. “If you are just starting your family and let them know you can already imagine your future children playing in their beautifully manicured yard, then the seller is likely to imagine this too. Tug at their emotional heartstrings! Some sellers may not take this into consideration at all, but it certainly can’t hurt your chances and it takes very little effort.” Whatever you do, make sure your offer letter is memorable so that it will stand out from the crowd.

7. Throw in the “as is” offer

What could be more attractive to a seller than an offer that states the buyer will take the home “as is”? “Putting in an offer that says you’ll buy the home without asking for any repairs or any extra money to fix something that pops up in inspections can make a noncash offer way more alluring,” explains Anna Marie Simpliciano, a real estate agent with Hilton & Hyland in Beverly Hills, CA.

Courtesy of trulia.com

8 Times When It's Smarter to Rent a Home Than to Buy

8 Times When It’s Smarter to Rent a Home Than to Buy

8 Times When It's Smarter to Rent a Home Than to Buy

Photo Credit: Andy Dean Photography/Shutterstock.com

Buying can make financial sense for some people, and home ownership has been the American dream for many families. This dream vanished for many during the housing market crash of 2008. Since then, home prices have increased, and mortgages have become more available with interest rates that haven’t been seen in decades. However, life has changed for many families, and home ownership may not be a good plan for people who fall into one of the following 8 categories.

  1. You Might Not Be Able To Stay In a Home for Five Years

 

Experts say it takes about five years for your investment to earn money, or more importantly, to not decline. The most important factor influencing your decision to buy or rent is how long you believe you will be in the home. Changes in your career path and your personal life should be considered. Make a realistic assessment of your lifestyle preferences. Can the home you buy now fulfill the expectations you have for your life?

  1. If You Can’t Put 20% Down

A small down payment means higher costs. The interest rate will be higher, and you will be charged a mortgage insurance premium to protect the lender should you default. If you have to sell the home soon after you move in, then you will likely have to pay to sell.

  1. If You Have Found a Rental Bargain

If you are renting a lovely home at a low rent payment, then you might consider using this time as an opportunity to save money towards a down payment. You will need to weigh all factors including savings in maintenance and the loss of a tax deduction.

  1. When the Housing Market Is Priced Too High

Carefully consider the price of homes compared to what you can get for the money. A home may be priced too high for your budget, but it may be what the market is selling at.

Equally important is the need to assess your ability to buy a home in this type of market. Know your budget limitations and don’t let someone talk you into purchasing a home that you know you can’t afford. Purchase price is one thing, but taxes and upkeep are a totally different and often expensive part of buying a home.

  1. If Buying Extends Your Commute

If you need to drive a car to your job, then you need to consider commuting time and costs. Sitting in traffic on a freeway gets old quickly. Gas and car insurance costs increase along with the commute. Free time is valuable time.

  1. If Your Credit Isn’t Very Good

Your credit score will determine the interest rate you will pay and even your down payment requirement. Think about the impact of a low credit score over the life of the mortgage. You could be paying a lot more money for many years.

  1. If You Are Not a Person Who Likes To Do Maintenance Chores

There will always be things to do around the home – both inside and outside. The costs of maintenance could be up to 10% of the price of your home each year. You might also have to pay an HOA fee. Some tasks are very foreboding like cleaning gutters and inspecting the roof for leaks.

  1. If You Are New To the Area

It can take up to a year to get to know a new area well enough to know where to buy a home. Let your brain guide you and not your heart. Be sure of the area you select. Even if you don’t have children, the quality of the schools will be essential for sustaining the resale value.

5 Tips for First-Time Homebuyers

5 Tips for First-Time Homebuyers

5 Tips for First-Time Homebuyers

Photo Credit: Monkey Business Images/Shutterstock.com

When you are a first-time homebuyer you can expect a whirlwind of emotions—it is very exciting, yet also nerve-wracking if you are not completely sure on what you are expected to do. However, if you plan ahead and do your own financial homework, these questions can be solved.

Use these five tips to help make the process of buying your first home a breeze.

  1. Check your credit

When qualifying for a loan, the homebuyer’s credit score is one of, if not the most important factors to take into consideration. It is imperative that you start the process of checking your credit at least six months before you begin the process of looking for a home.  To get an idea of where your personal credit stands, visit a credit scoring website, such as AnnualCreditReport.com to get your free credit report. Once you have done so, score the reports for any mistakes, unpaid accounts or collection accounts. Fixing damaged credit takes time, and money, so it is crucial that you take care of this business before shopping for your home.

  1. Evaluate assets and liabilities

As a first-time homebuyer, you should be knowledgeable about your budget—how much is owed and how much is coming in? It is a smart idea to track your spending for a few months and see where your money is going and coming in from. Furthermore, first-time homebuyers should be well-informed on how lenders will view their income, which requires being familiar with the basics of mortgage lending.

  1. Organize documents

When in the process of applying for mortgages, homebuyers must document their income and taxes. Usually, mortgage lenders will request a variety of documents—two recent pay stubs, the previous two years’ W 2s, tax returns and the past two months of bank statements. As soon as you decide that you are looking to buy a home, prepare these documents. The process of buying a home can be extensive, however knowing what documents you will need from the beginning will save you time.

  1. Qualify yourself

It is very important for first-time homebuyers to know what they can afford both up front and monthly before the mortgage lender tells them how much they qualify for. The front-end ratio inquires that no more than 28% of your gross monthly income should towards housing costs. The back-end ratio—the portion of income that covers all monthly debt obligations—should be 36% or less, but in some cases borrowers have been approved with back-end rations of 45% or higher.

  1. Figure out your down payment

Although figuring out your down payment can be a task that takes a lot of effort, there are programs that can help buyers with their qualifying incomes and situations. It is also a good idea to speak with a mortgage lender when you are beginning the process of buying a home.