Essential Tips for First-Time Home Buyers

Each and every person who purchases a home normally will have different experiences, hurdles to overcome, and ultimately have their own opinion on the home buying process, so beware of many opinions when talking with family, friends, and co-workers.  Even though the majority of home buyers are different, the home buying process is usually the same.  There is a general outline that should be followed when buying a home for the first time.

How Much Can You Afford
Whether a consumer is purchasing a car for the first time, a home for the first time, or a set of golf clubs for the first time, it’s important to know how much can be afforded!  This is an extremely important part of the home buying process.  Many first time buyers don’t realize or understand that it’s extremely important to know how much they can afford before looking at homes!  It’s common to have first time home buyers contact real estate agents and get upset when they are educated on the importance of finding out how much home they can afford before getting out into the marketplace!  It’s important that a first time home buyer understands what the costs of buying a home are but also why they are involved.

Set Your Expectations
When buying a home for the first time, an extremely important tip is to make sure expectations are set.  By setting realistic expectations, the chance to be disappointed or let down is minimized.  So, what type of expectations should be set before purchasing a home for the first time?

Once a buyer knows how much they can afford, it’s important to figure out what will their money get them.  When buying a home for the first time, it’s important to do it with a purpose and a realistic goal in mind.  How big of a home can be afforded?  What style of home is desired?  What are acceptable locations of the home?  It’s important that first time buyers have a strong feeling on items like these but also a good idea on which items they are willing to be flexible with.  It is a great idea to prioritize these items in order of importance.

Talk to the bank  – Preparing to get a mortgage in advance of your actual purchase will be super important. Before you start looking at houses you should have a discussion with your lender. The lender will be able to give you an honest assessment of what your finances look like, how much you can afford to spend on a house, and what your rates will be. You want to know all of this – what it will really cost you – before you start looking at homes you can’t actually afford. Find out what your monthly payment will be at different amounts and determine what your personal limits are as well. Once you know the time is right to buy a home, make sure you get pre-approvedby a lender. Make sure you understand the difference between getting pre-approved and pre-qualified for a mortgage. Without a doubt you will want to get pre-approved as a pre-qualification letter is not worth much. A savvy REALTOR® representing a homeowner will pick up on this right away. If you are competing with other buyers and are not financially prepared, you could lose out on your dream home!

Know Your Home Inspector – Home inspections will vary depending on the type of property you are purchasing. A large historic home, for example, will require a more specialized inspection than a small condominium. However, the following are the basic elements that a home inspector will check. You can also use this list to help you evaluate properties you might purchase.  About 10 percent of homes recently purchased weren’t inspected by a home inspector, according to Bill Loden, president of the American Society of Home Inspectors. Some buyers were trying to cut down on the costs of hiring an inspector to investigate a home – which usually averages about $450 — but defects uncovered later could potentially result in the loss of thousands of dollars. “It takes a trained eye to be able to see the problems that can exist in a home,” Loden said. “The inspection can also give the first-time buyer a bit of a schooling on the house and how to maintain it.” Buyers should also be prepared to ask questions about conditions that are common to specific areas, such as radon in Midwest; sewers in California; and active clay soils in Dallas that can lead to foundation issues, the CNBC article notes. The home may require additional inspection from a specialist to rule out potential problems.

 Costs & Fees of Buying a Home – Buying a home is one of the most exciting times in any persons life, regardless if it is the first home or the tenth home they have purchased.  Often times a buyer (particular first time buyers) doesn’t stop and think about what the costs and fees associated with buying a home are.  It can be an eye opening experience for a buyer when they are given a breakdown of the costs and fees associated with buying a home.

  • A good faith deposit or earnest money deposit will be needed when making an offer or having a purchase offer accepted.  The purpose of this deposit is to show that the buyer is serious about purchasing the sellers home.  This deposit is normally held in the listing brokers escrow account until closing.  The amount a buyer deposits is subtracted from the total cost they will need at closing.
    • Home Inspection (Optional): In most cases a home inspection is recommended.  The cost of a home inspection normally varies based on the square footage of the subject property & other factors too.
    • Pest Inspection (Optional): A certified pest inspector will examine both the exterior and interior of the subject property for destructive insects.  Typical ones are termites, carpenter ants, and powder post beetles.  A good pest inspector will provide a detailed report.  If the presence of pests are found, normally the cost to treat the issue are covered by the seller.
    • Chimney Inspection (Optional): A chimney inspector will examine both the exterior condition of the chimney as well as the interior (Liner).  Issues that maybe found by an inspector are negotiatedbetween the buyer and seller of the subject property.
    • Radon Test (Optional): Radon is a natural gas that has been linked to causing cancer (if high “levels” are present) that permeates a home from the ground.  The Environmental Protection Agency (EPA) standard in the United States is 4.0 picocuries(pCi/L).  Anything that exceeds this should be considered dangerous.
    • Well Water Test (Optional): Properties that use a well for it’s water supply can be tested.  A well water test can determine flow rate, test for nitrates or bacteria, and more.
    • Septic Inspection (Optional):  If the subject property is hooked up to a septic tank, it is in most cases, recommended to have it inspected.  The cost normally is covered by the seller (or at least should be requested of the seller).
    • Lead Inspection (Optional): If buying a home built prior to 1978, the buyer has the option to perform a lead inspection, at their expense.  In all likelihood, most homes built prior to 1978 will test positive to lead paint to one extent or another.  Whether the lead is present in the window sills, covered behind multiple coats of latex paint, or elsewhere, it can be extremely costly to remove lead.  It’s rare that a buyer will perform a lead inspection.
  •   Application Fee: This fee will vary from lender to lender.  The fee is charged simply for doing business with the potential buyer.  The mortgage application fee is non-refundable.  
  •  Appraisal Fee: This fee is due when you apply for the mortgage.  An experienced real estate agent should inform the loan officer to hold onto the check for the appraisal until AFTER the inspection contingency(ies) are removed, if the buyer meets with the loan officer prior to the inspection.  This ensures that the buyers money isn’t being spent on an appraisal for a home that the buyer may end up not purchasing due to inspection findings.
  •  Credit Report: Lenders will charge for pulling a credit report on borrower(s).  This is called a tri-merge or fact data report.  This is normally not a large amount of money.
  • A down payment is often what buyers think is the total of all costs to buying a home.  This is a very common misconception and clarification is needed on this regularly.  The down payment for a home will vary depending on the type of financing that is best for the buyer (FHA, Conventional, VA) and also the buyers qualifications.  The minimum amount required for a down payment for a FHA (Federal Housing Authority) mortgage is 3.5% of the purchase price.  The minimum for a conventional mortgage is 5% and a VA mortgagee is allowed to finance 100% of the home, so $0 is the minimum.
  • Closing Costs – 
    • Recording Fee: This fee is generally paid to the local county clerks office for entering the sale into the public records.
    • Flood Certification Fee: This fee determines if the subject property is in a designated flood zone (a flood insurance policy can cost upwards of $1,000 per year).
    • Mortgage Tax Fee: In NYS, when a buyer obtains a mortgage, state and local government enforce a mortgage recording tax to document the transaction.
    • Interim Interest: This interest is due at closing to cover interest due that will not be collected with the first mortgage payment.  The interest is collected from the closing date to the last day of the month.
    • “Points”: This is an upfront fee paid to a lender when a buyer gets a loan.  Each “point” equals one percent of the buyers total loan amount.  The more “points” a buyer pays, the lower the rate.
    • Underwriting Fee: This fee is for the review and assessment of the buyers mortgage application and documents.
    • Bank Attorney Fee:  The buyer is required to pay the banks attorney, in addition to their own.
    • Title Insurance Lender Policy Fee: This fee protects the lender against problems with title of the subject property.  This policy protects the property but not the buyers interest in the property.
    • Title Insurance Owner Policy Fee (Optional):  This insurance protects the buyer against problems with the title of the subject property.
    • MIP/PMI Fee:  Private mortgage insurance (PMI) or mortgage insurance premium (MIP) are charged to protect the lender in the case that a buyer “defaults” on their mortgage.
  •  Prepaid Items
    • Real Estate Taxes: Most mortgage products require a buyer to “escrow” an entire years worth of taxes at closing.  There are situations and products that allow a buyer to pay taxes annually, bi-annually, or quarterly.
    • Homeowners Insurance: Most lenders require a buyer to purchase homeowners insurance prior to closing and provide the “binder” to them.  This insurance protects the buyer against fire, natural disaster, and other scenarios.

Get Educated on the Local Real Estate Market
When purchasing a home for the first time, it’s important a buyer understands the local real estate market.  There are many ways this can be accomplished.  The internet has completely changed the way the real estate industry works in 2014!  There is so much information available on the internet that can certainly help a buyer understand the local real estate market.  The internet is great for providing a wealth of information, however, it’s also important a buyer understands that not everything that is on the internet is true.  Really it isn’t!  There are many third-party real estate websites on the internet that provide some very inaccurate information.  A perfect example of inaccurate real estate information are the “Zestimates” that Zillow provides to consumers.  The inaccurate information provided by these third-party real estate websites is not only specific to the Webster, NY real estate market.  For local market updates ask Faith at  homeslansing.com

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5 Thing to Prepare Your Open House

When it’s time for an open house of course you need to clean your house, but there’s a few not so obvious things you need to take care of before the crowds come. Hiding these few things from view will make your home more inviting and desirable to potential buyers so someone fall in love with the property when they come to visit.

Even if you don’t stage your home, be sure to hide these 5 things before potential buyers start showing up.

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1. Your Pet

Dogs and other pets can be rowdy, messy distracting at an open house. Even if you have a friendly family pet, take them to a friend’s house or out with you during the open house. Some buyers might be allergic to pet hair or even scared of animals.

And most importantly hide their SMELL from your home. When you clean, don’t forget to deodorize. The best way to ensure there are no unpleasant lingering smells is with scented candles or plugins. Don’t choose something too overpowering, just something light and pleasant.

2. Family photos

Buyers want to see their family living in the house, not yours. Taking down family photos depersonalizes the home, creating a neutral space. Don’t worry, this is just temporary. You can bring out the full timeline of school photos later.

Some people suggest leaving just one or two family photos up as a way of staging your home. This is like the stock photos of families in new picture frames – just a touch of personality but not too intrusive.

3. Clutter

It’s important to not only clean your home but de-clutter it. Get rid of clunky design pieces, papers and magnets on your refrigerator, kids toys, and even unnecessary furniture. Keeping furniture and décor to a minimum will make your home look bigger which prospective buyers will love. Putting away area rugs as well, buyers want to see your floors and rugs break up the flow of your space making it look smaller.

The emptier you make your house, the more buyers will be able to imagine themselves filling the space.

4. Religious or political paraphernalia

–It’s not uncommon to have religious statues, wall hangings or pictures in the home and most sellers won’t think twice about leaving them up once it’s time to sell. However you could be unintentionally driving away potential buyers if they don’t share the same religious beliefs. Same goes for political posters or campaign pieces.

Sounds silly right? It is, yet we all know these are controversial topics of converstaion. The key is to neutralize your home, creating a canvas for the potential buyer to imagine themselves making their own.

5. Yourself!

Don’t hover, just put your real estate agent in charge and let them run the show. Although you want stay involved in your home sale, it’s important not to get too involved. Your presence can make potential buyers uncomfortable, making them feel like you’re looking over their shoulder. Buyers want to explore your home on your own, no pressure. When it comes time to for your open house, take the afternoon to run some errands or visit friends.

There’s plenty of tricks of the trade when it comes to selling a house, work with a real estate so you can learn them all.

If your thinking about selling your home Contact Faith today!

Things to Do Before Buying a House

Most articles focus on the financial nuts and bolts of the things you should have in order before you consider buying a home. You’ve got to have good credit. You’ve got to have a down payment. You’ve got to know the housing market. And so on.

Those aren’t the only important things to be thinking about:

1. Save a significant amount each month for at least two years

A mortgage payment requires financial discipline as well as enough money, period. Can you cover the mortgage? The insurance? The taxes? The constant expenses that go with homeownership?

Use a mortgage calculator to figure up what your monthly mortgage payment will be. Tack 50% on top of that for insurance, taxes, and other expenses. Subtract your current monthly rent payment from that.

If you can’t save that amount each month, then you’re not ready to buy a house of that size.

Take responsiblity now. See whether or not you actually can make it work in terms of your month-over-month finances. If you can’t do it now, then you won’t be able to do it then.

2. Sell off all of your stuff that you don’t use

The less stuff you have, the less space you need. The less space you need, the smaller house you need. The smaller house you need, the more likely it is that you’ll be able to afford that house.

Go through your closest. Pare down. Get rid of stuff that you don’t use.

If you sell off a lot of your stuff that you don’t use, you’ll not only realize you don’t need as much space as you thought you did, but you’ll also find that you suddenly have some cash in hand that can help you move towards actually owning a house.

Even better: the less stuff you have, the easier (and less costly) it is to move.

I’m not arguing on behalf of selling off stuff that has value to you. I only suggest that you go through your closets and cupboards and get rid of the stuff that you don’t use. It’s just sitting there taking up space, convincing you that you need more living space, when in fact it could be money in your pocket and freedom in your life.

3. Fix some stuff

If you’re a renter or you live at home, it’s easy enough to call a landlord or a parent when there’s a problem. “The toilet seems to be broken.” “There’s no hot water.” “Why won’t the dryer dry my clothes?” “There’s water flooding the basement.”

Here’s the catch: when those things happen in a house of your own, it’s up to you to fix it. If you can’t, you’re going to be shelling out fistfuls of cash to pay someone to do it.

When you’re living in such an environment, you’ve got a perfect opportunity to learn how to do such things with something of a safety net. When the toilet breaks, try to fix it yourself. Watch some YouTube videos on toilet repair. Identify what parts you need, find a good hardware store, and pick them up. Give the repair a serious attempt all by yourself.

If you can’t do it, then report the problem. Don’t just walk away, though – watch and learn from someone who can do it. Watch your landlord or the repairman. Try to figure out where you went wrong and how you can avoid it next time.

Even if you fail, you’ve learned some things. You’ve learned how to use tools. You’ve learned how to identify problems. You’ve learned what the equipment looks like. This will make solving future problems much simpler and much more cost-effective, especially when you’re living in your home and something goes wrong for the first time.

4. Figure out why you’re buying a home

There are lots of bad reasons and non-reasons to buy:
Don’t buy a home because that’s what you’ve been told you’re “supposed” to do.
Don’t buy a home because that’s what you think you’re “supposed” to do.
Don’t buy a home because you might get married and have kids someday and you need the space for this hypothetical future.
Don’t buy a home because you think it will lead you to some sort of idealized suburban life. A home won’t change who you are.
Don’t buy a home because you’re trying to “keep up” with someone in your life. It’ll make you fall further behind in the long run.

Buy a home because you it truly makes sense financially and you’re ready (and excited) to deal with the challenges of homeownership. Buy a home because it’s better for your housing dollar than the other options available to you.

Buy a home because it’s what you want and it’s what you can handle, not because it’s what others want.