YOU NEED A PROFESSIONAL WHEN BUYING A HOME
Many people wonder whether they should hire a real estate professional to assist them in buying their dream home or if they should first try to go it on their own. In today’s market: you need an experienced professional!
You Need an Expert Guide if You Are Traveling a Dangerous Path
The field of real estate is loaded with land mines. You need a true expert to guide you through the dangerous pitfalls that currently exist. Finding a home that is priced appropriately and ready for you to move in to can be tricky. An agent listens to your wants and needs, and can sift out the homes that do not fit within the parameters of your “dream home.”
You Need a Skilled Negotiator
In today’s market, hiring a talented negotiator could save you thousands, perhaps tens of thousands of dollars. Each step of the way – from the original offer, to the possible renegotiation of that offer after a home inspection, to the possible cancelation of the deal based on a troubled appraisal – you need someone who can keep the deal together until it closes.
Realize that when an agent is negotiating their commission with you, they are negotiating their own salary; the salary that keeps a roof over their family’s head; the salary that puts food on their family’s table. If they are quick to take less when negotiating for themselves and their families, what makes you think they will not act the same way when negotiating for you and your family? If they were Clark Kent when negotiating with you, they will not turn into Superman when negotiating with the buyer or seller in your deal.
Famous sayings become famous because they are true. You get what you pay for. Just like a good accountant or a good attorney, a good agent will save you money…not cost you money
WHAT DO YOU REALLY NEED TO QUALIFY FOR A MORTGAGE?
A recent survey by Ipsos found that the American public is still somewhat confused about what is actually necessary to qualify for a home mortgage loan in today’s housing market. The study pointed out two major misconceptions that we want to address today.
1. Down Payment
The survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 36% think a 20% down payment is always required . In actuality, there are many loans written with a down payment of 5% or less.
2. FICO Scores
The Ipsos survey also reported that two-thirds of the respondents believe they need a very good credit score to buy a home, with 45 percent thinking a “ good credit score ” is over 780. In actuality, the average FICO scores of approved conventional and FHA mortgages are much lower.
If you are a prospective purchaser who is ‘ready’ and ‘willing’ to buy but not sure if you are also ‘able,’ sit down with someone who can help you understand your true options.
GETTING A MORTGAGE: WHY SO MUCH PAPERWORK?
Why is there so much paperwork mandated by lenders for a mortgage loan application when buying a home today? It seems that they need to know everything about you and require three separate sources to validate each and every entry on the application form.
Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.
There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.
1. The government has set new guidelines that now demand that the bank prove beyond any doubt that you are indeed capable of paying the mortgage.
During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their homes. The government wants to make sure this can’t happen again.
2. The banks don’t want to be in the real estate business.
Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million+ short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application. However, there is some good news in the situation. The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate probably around 4%.
The friends and family who bought homes ten or twenty years ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30-year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s).
If you went to the bank and offered to pay 7% instead of near 4%, they would probably bend over backwards to make the process much easier.
Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.
4 DEMANDS TO MAKE ON YOUR REAL ESTATE AGENT
Are you thinking of buying a home? Are you dreading having to walk through strangers’ houses? Are you concerned about getting the paperwork correct? Hiring a professional real estate agent can take away most of the challenges of buying. A great agent is always worth more than the commission they charge just like a great doctor or great accountant.
You want to deal with one of the best agents in your marketplace. To do this, you must be able to distinguish the average agent from the great one.
Here are the top 4 demands to make of your real estate agent when buying a home:
1. Tell the Truth About the Price Too many agents just take your offer at any price and then try to ‘work’ both the seller and you while negotiating later. Demand that the agent prove to you that they have a belief in the price you are offering. Make them show you their plan to get both the seller – and the bank – to accept that price. Every house in today’s market must be sold twice – first to you and then to your bank.
The second sale may be more difficult than the first. The residential appraisal process has gotten tougher. A recent survey showed that there was a challenge with the appraisal on 24% of all residential real estate transactions. It has become more difficult to get the banks to agree on the contract price. A red flag should be raised if your agent is not discussing this with you at the time of the original offer.
2. Understand the Timetable with which Your Family is Dealing You will be moving your family into a new home. Whether the move revolves around the start of a new school year or a new job, you will be trying to put the move to a plan.
This can be very emotionally draining. Demand from your agent an appreciation for the timetables you are setting. Your agent cannot pick the exact date of your move, but they should exert any influence they can to make it work.
3. Remove as Many of the Challenges as Possible It is imperative that your agent knows how to handle the challenges that will arise. An agent’s ability to negotiate is critical in this market.
Remember: If you have an agent who was weak negotiating with you on parts of the purchase offer, don’t expect them to turn into a superhero when they are negotiating with the seller for you and your family.
4. Find the Right HOUSE!
There is a reason you are putting yourself and your family through the process of moving.
You are moving on with your life in some way. The reason is important or you wouldn’t be dealing with the headaches and challenges that come along with purchasing. Do not allow your agent to forget these motivations. Make sure that they don’t worry about your feelings more than they worry about your family. If they discover something needs to be done to attain your goal, insist they have the courage to inform you.
Good agents know how to deliver good news. Great agents know how to deliver tough news. In today’s market, YOU NEED A GREAT AGENT!
HARVARD: 5 FINANCIAL REASONS TO BUY A HOME
Eric Belsky is Managing Director of the Joint Center of Housing Studies at Harvard University. He authored a paper on homeownership – The Dream Lives On: the Future of Homeownership in America. In his paper, Belsky reveals five financial reasons people should consider buying a home.
Here are the five reasons, each followed by an excerpt from the study:
1.) Housing is typically the one leveraged investment available.
“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more .”
2.) You’re paying for housing whether you own or rent. “ Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord .”
3.) Owning is usually a form of “forced savings.”
“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day .”
4.) There are substantial tax benefits to owning.
“Homeowners are able to deduct mortgage interest and property taxes from income…On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain .”
5.) Owning is a hedge against inflation.
“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition .”
We realize that homeownership makes sense for many Americans for many social and family reasons. It also makes sense financially