Monthly Archives: October 2015

10 Terms First-Time Homebuyers Should Know

In about a month or so, it won’t just be spring. It’ll be home selling and buying season, and you’ll start seeing the “For Sale” signs posted in yards as well as online advertisements beckoning prospective homebuyers.Vocabularly_FullSize

But before you allow yourself to be beckoned, it would behoove you to familiarize yourself with the following 10 terms – especially if this is your first time making one of the biggest purchases of your life.

1. Fixed-rate mortgage.
This means the interest rate you pay on your home loan won’t change. Over the years, your mortgage payment will likely change some – property taxes will likely rise, your homeowners insurance might climb or fall, or you might shed your PMI (a term we’ll come back to). But generally, if you have a fixed-rate mortgage, your monthly mortgage payment won’t change much over the years.

2. Adjustable-rate mortgage. Also known as an ARM, this is essentially the opposite of a fixed-rate mortgage. You’ll have a fixed rate for several years, maybe five or 10, and then the interest rate adjusts according to the fully indexed interest rate, often the prime rate, which is what banks charge their most creditworthy customers. So while your interest rate and payments will likely be lower in the beginning than those of the homeowner with the fixed-rate mortgage, hope that interest rates remain low throughout the life of your loan. As interest rates climb, so too will your own interest rate and monthly payments.

3. Prequalified.
This can be a confusing term, mostly because homebuyers tend to mix it up with preapproved, says Rick Hogle, chief strategic officer at Supreme Lending, a mortgage company in Dallas.

If your lender tells you that you’re prequalified for a house, that’s a good start – but you’re still a long way from being a homeowner. “Prequalification requires less documentation,” Hogle says. “It provides a general idea of the loan amount in which a homebuyer might qualify.” This way, you can start looking a home and have a sense of what type of house you can afford.

Preapprovals are a much bigger deal, Hogle says. These require the submission of many more documents, such as pay stubs, bank statements and tax returns.

Preapprovals are really for homeowners who are ready to commit to buying a house. If you’re preapproved, you’ve basically been told that the bank will lend you money for a house, provided you don’t blow things in the meantime, while you’re house hunting, like missing a bunch of payments or racking up credit card debt before you’re actually approved.

4. Conventional loans.
These are the typical loans that many people, but not all, apply for when they want a mortgage.

“Those with low credit scores usually won’t qualify for conventional loans,” says Passard Dean, associate professor of accounting at Saint Leo University in Saint Leo, Florida. “In the past, you were also required to put a down payment of at least 5 percent. However, with the new guidelines from Fannie Mae and Freddie Mac, you can now put a down payment as low as 3 percent.  These loans generally require a credit score of above 650.

5. Federal Housing Administration loan. Have poor credit? You’ll probably get one of these, also known as FHA loans.

“These are excellent for first-time homebuyers with subprime credit scores,” Dean says. “In addition to more relaxed credit scores and lower upfront costs, the down payment can be as low as 3 percent.”

6. Appraisal.
This is an estimate that determines what your property is worth. Banks need homes to be appraised, in part, so they don’t lend you, say, $300,000 for a house that’s only worth $175,000. After all, if you can’t pay the loan, the bank will send you packing and will sell the home. But most people won’t buy a $175,000 home for $300,000, and knowing that, the bank doesn’t want to lend you more than your house is worth.

7. Private mortgage insurance.
This is a monthly insurance payment you’ll have to pay if the down payment on your house is less than 20 percent of the appraised value or sale price. If you don’t want to pay the PMI fee – which often ranges from .03 to 1.15 percent of the original loan, divided into 12 monthly payments – you’ll have to fork over a bigger down payment or buy a cheaper house. Usually, PMI insurance isn’t something you pay forever (it just seems like it, if you have a small down payment.) Typically, after your payments reach 20 percent of the value of your home, you stop paying PMI.

8. Closing costs. These are fees related to buying a house that your lender charges you, or you rack up from various third parties, such as a home inspector. According to the online real estate database Zillow.com, expect your closing costs to be 2 to 5 percent of the purchase price of your home. That may sound like a lot, but there are many costs involved in closing the deal, from buying title insurance to paying for points and attorney and surveyor fees.

9. Points. One point is a charge equal to 1 percent of the loan amount. So if you’re buying a $200,000 house, and a lender is charging you 2 points, that’s $4,000. Three points, $6,000. And why do you care? Because points are prepaid interest. The more points you pay, the lower your interest rate will be. If you’re planning to live in your house a few years, you could make a good argument for not paying points, but if you believe you’ll go the distance with a 30-year mortgage, it generally makes financial sense to pay as many points as you can afford to snag that lower interest rate, which, in the long run, should save you money. Ask your lender to do the math.

10. Escrow.
When you hear your real estate agent throw this word around, you’ll know you’re probably near the end of the home buying process.The word can be used in a few different ways, but when you think escrow, think of a third, neutral party. For instance, you may have looked at a house, loved it, made an offer and offered a deposit – which would then be put in escrow.

That is, it’ll be put in a third-party account, probably set up by your real estate agent. This way you aren’t giving the homeowner your deposit, also sometimes called earnest money. Usually you can’t recoup these deposits if you back out of the contract, but if the seller decides to sell the home to somebody else, you most certainly would get your deposit back. The escrow account keeps your deposit safe so the homeowners don’t inadvertently spend your money and put you through the hassle of having to get them to repay you.

You might also hear your lender talking about an escrow account where your property taxes and homeowners insurance go until they’re paid.

Of course, you can buy a house without truly understanding real estate and lender speak. Those professionals will walk you through everything, and you can likely nod your way through it all. But that doesn’t mean you should. After all, some would argue that’s how many homeowners got themselves in trouble before the 2007 recession, making decisions they shouldn’t have, and buying homes they didn’t realize they really couldn’t afford.

From: US News

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How to Buy in New Construction

new home buildBuying “new construction” is a bit different from buying a previously-owned home. For one, because there is no previous homeowner, you don’t have to deal with a seller’s emotional tie to the property, which typically influences the negotiating process. Whether you’re designing and building a custom home or buying a home that’s built on spec in a new subdivision, you’ll only have to work with the builder.

As with buying a previously-owned home, you have to figure out your budget and secure financing before you even begin house hunting. Get pre-approved by a bank or mortgage lender. Decide how much money you want to invest in a new home. And don’t overlook the extras like property taxes, insurance, furniture, window treatments, landscaping costs and maintenance that can drain your bank account.

“It’s absolutely critical for new homeowners to know what they can afford based on their income, debt and credit score,” says Rosy Messina, vice president of sales and marketing for ICI Homes in Daytona Beach, Fla. If you’re considering buying a newly-constructed home, follow these five steps to guide you through the process:

Step 1: Weigh the Pros and Cons

Nothing beats the feeling of being the first person to live in a newly-built home. Everything is shiny and untouched. You can buy a brand-new home in one of three ways: buying a house already built on spec; having a semi-custom home built as part of a development (you can choose from a set palette of finishes and upgrades); or having a purely custom home designed and built to your specifications.

But before you get caught up in the sparkling new paint and granite countertops, evaluate your situation and see if new construction fits your lifestyle. Here are some questions to ask yourself, particularly if you fall within the first two methods of new-home buying:

  • New homes are typically far from the city center; will you mind the commute?
  • Are you willing to coax a new lawn into existence, and can you wait 20 years for sapling trees to mature?
  • Will the cookie-cutter nature of new subdivisions drive you bonkers?
  • New houses tend to be built right on top of each other. Do you mind the closeness and potential lack of privacy?

Step 2: Research Neighborhoods and Builders

When buying in a new subdivision, consider working with a buyer’s agent who knows the area well, can set up home tours and walk you through the closing process. When researching real estate agents:

  • Remember, the listing agent works for the builder, not for you. They’re trying to hit a quota, not help you make the right decision for you and your family.
  • Many states regulate how agents deal with new subdivisions. If you have your own agent, tell him up front that you’re interested in looking at new homes. He must accompany you on your first visit to any new subdivision; if he doesn’t, the builder’s sales rep will get the full commission if you buy a home there.

When researching neighborhoods:

  • Look online for listings for new home construction.
  • Drive around the neighborhood and check out the amenities and the quality of the homes.
  • Walk the community. Ask homeowners about their experience.
  • Go to model open houses, keep a journal and take photographs. Don’t try to cover every model house in the area in one day.
  • Check with the developer about potential homeowners’ association (HOA) fees and rules; some are incredibly expensive — and strict. They may not allow storage sheds, certain paint colors or finish materials, solar panels or even vegetable gardens. Be sure to find out if the HOA can assess penalties for infractions.
  • Ask whether cable and Internet are readily available and from what companies; your new house will be wired for cable but that does not mean the cable company offers service to your neighborhood.
  • If the development is still under construction, you’ll be dodging giant contractor trucks and facing jackhammering at 7 a.m. for a while.
  • Research the zoning laws for the neighborhood, as they can change quickly.
  • Visit the city planner’s office to see what’s in store for a particular location.
  • Ask your agent about plans for the area.

Whether you’re buying a new home that’s being built or building a new home from the ground up, you can choose the builder you work with.

“The buyer is more educated today,” says Rhonda Hoeft, area sales manager for The Estridge Collection in Carmel, Ind. “It’s amazing how much they know as opposed to five years ago. At least 80 percent of prospective buyers who walk into our sales office have researched our homes and the builder.”

In this uncertain economy, builders are feeling the pressure. To make certain you choose a financially-sound builder, Sharon Hanby-Robie, real estate agent and American Society of Interior Designers (ASID) in Lancaster, Pa., suggests, “Go to the courthouse to see if a lien’s been filed against the builder, then go to the construction site. Talk to subcontractors to see if they’re being paid.”

When researching builders:

  • Make sure there are no Better Business Bureau complaints on file against your builder’s company.
  • Ask local real estate agents if the builder has a good reputation in the community.
  • Visit your builder’s previously constructed homes; ask the occupants whether the craftsmanship has stood up to time, use and weather.

Step 3: Know What’s Standard and What’s Extra

Ask the builder about amenities and upgrades. Amenities are features that benefit the entire community like a clubhouse, health and fitness center or a gated entrance. Upgrades refer to added features or items you pay extra for to enhance your home, like certain types of flooring or appliances.

Get a feature sheet on the line of homes you’re interested in and read them very carefully, then compare feature to feature. Find out what comes with the base home price. If you don’t understand exactly what the builder is offering, ask and take notes. There are no dumb questions. Not knowing can cost you real money. Some things to keep in mind:

  • If the stove is included, visit the showroom to see the model. If you’re offered the basic stove and you’re a gourmet cook, it makes sense to buy the upgrade.
  • Make decisions on upgrades early in the process — every change costs money.
  • Have a good idea of what you need and want. They are two different things when it comes to upgrades.
  • Builders rake in the cash on upgrades because they can get parts and labor relatively cheaply. The markup is huge, so investigate each option you’re considering to see whether it would be cheaper to bid it out after you move in.
  • Builders, in general, need to sell quickly to make a profit. If you’re stuck haggling over price, get them to throw in the upgrades you want at a reduced cost or for free — it’s a way to get more value that’s appealing to both sides.

Step 4: Get an Inspection and Home Warranty

Once you decide to buy a new home, make your sales contract contingent on a final home inspection by a professional you hire. Never assume that because a home is newly constructed, it isn’t going to have defects. Municipal inspections for code violations are nowhere near as thorough as an independent professional inspection. If possible, have the home checked during each phase of building, when potential problems are easier to spot. If the builder objects to this, consider it a red flag.

Protect yourself with warranties. All new homes come with an implied warranty from the builder stipulating that any major defect of the structural integrity of the home must be repaired. Ask for a builder’s warranty for a period of time following move-in (a year, for example) that covers any defects in craftsmanship. Preferably, this warranty should be backed by insurance.

Home warranties vary in length, what they cover and typically run from one to 10 years; the manufacturer covers appliance warranties. Make sure any warranty you receive explicitly states what is covered and what isn’t, and what the limitations for damages are. For extra peace of mind, have your real estate attorney look over the warranty to make sure it’s kosher.

Step 5: Close the Deal

Builders often have in-house mortgage lenders or ties to an outside lender. New homebuyers can use the builder’s lenders or find their own financing. Ask your agent for information on special funding programs available for first-time buyers. Contact at least two lenders and compare terms, fees, rates and points.

“You are committing 30 years of your life to the process of homeownership,” says Messina. “Learn as much as possible about the mortgage process by reading everything you can find.”

Kriss Lindblom did just that before he and his partner, Angela Diesner, closed on a Pulte-built home in Maricopa, Ariz., last year. “I read every piece of paper they gave me, every contract, disclaimer, declaration of covenants and restrictions, the bylaws of the community association.”

“I sat there with a pen and paper and anything that stood out I called the sales associate and questioned it,” Lindblom says.

If you’re not comfortable with the legal process, get an attorney. Remember, sign nothing until you fully understand the meaning of the words.

From: HGTV

Make Your Home a Hot Commodity This Winter

The great thing about our area is that we are a 12 month market, which means that homes will sell **all year long**. There are serious buyers that are looking (and NEED to buy) throughout every season in Charlotte. Although the holiday season can be a hectic time to show and sell your house, christmas-housethere are distinct advantages to staging and showing your home at this time of year – you have a chance to show your home at its very best, adorned with warmth and cheer that’s sure to charm. Nothing is more inviting than a home brimming with greenery, twinkling lights and holiday decorations.

Inviting and Warm

First impressions are important. If you live in a snowy area, make sure walkways are cleared. Do you have late fall leaves littering the ground? Rake them up. Also, make sure the walks and stairs are free of ice.

A few exterior holiday lights or decorations show pride in ownership and seasonal cheer, but they don’t add anything during the day when potential homebuyers will be looking at your home, so don’t overdo them. Another thing to consider: Would-be buyers may view it favorably if nearby homes are brimming with lights – it shows unity and neighborliness – so you’ll want to find a tasteful balance.

As you set out to win over holiday homebuyers, here are a few other tips to keep in mind:

  • Trim outdoor trees so unexpected winds don’t knock down branches that could damage your home or hurt someone.
  • Place a holiday welcome mat outside the front door.
  • Keep the door area clear of bicycles, toys or parcels left by the mail carrier.
  • Hang a festive wreath on your door.
  • Play holiday music in the background.
  • Keep the house cozy. Entering a cold house could chill potential buyers’ enthusiasm.
  • Light a fire in the fireplace just before the agent shows your house. (But never leave a fire unattended.)
  • Choose a tree and decorate it to complement the room where it’s displayed. You don’t want the tree to appear to take over the entire living or family room. Remove furniture, if necessary.
  • Keep decorations on the conservative side. You want your house to be noticed, not your decorations.
  • If your house is being viewed in the evening, tell your agent how to turn on the holiday lights. And be sure the agent turns the lights off, or you have a plan to be home immediately, following the showing.
  • Make sure your agent turns the home security system back on after showing your house, especially if you have gifts under the tree.
  • Be certain your windows are sparkling clean.
  • Let there be light. Open blinds and curtains and turn on interior lights to reduce the pervasive dreariness of winter months.
  • Bake holiday cookies and treats to fill the home with enticing aromas before the prospective buyers arrive.
  • Leave those holiday treats and hot chocolate for your guests.

Ultimately, you want to convey the love, comfort and joy your family has shared in the house so that buyers will be eager to move in and create their own holiday memories.


From: Realtor.com

15 Fall Maintenance Tasks Every Homeowner Should Tackle

With fall in the air, your thoughts may turn to what needs to be done to your home before winter sets in. Many tasks are done much more easily when the weather is still nice. Plus, taking care of routine maintenance tasks now can save you aggravation and money down the road.

Rain gutter full of autumn leaves

“If you don’t do these things and you end up having to do repairs, it can cost so much more later,” says Leah Ingram, cost advisor for HomeAdvisor.com and a frugal living expert who publishes the site SuddenlyFrugal.com.

She recalls that one year she didn’t have leaves removed from the roof of her New Jersey home, which would have cost about $300 for a professional crew to complete the job. The result was an ice dam that caused $3,000 in damage from water leaks inside the house.

Many fall maintenance routines are designed to prevent water damage and guard homeowners from safety hazards, especially from fires. “Water is a homeowner’s worst enemy,” Ingram says. “People don’t think about the kind of damage it can do.”

The use of fireplaces, candles and space heaters, all more common in winter, can be a fire hazard if you don’t keep up with routine safety measures. “Unfortunately, house fires are fairly common in the winter months,” says Anne Reagan, editor-in-chief of Porch.com, which publishes advice for homeowners and matches them with professionals who do home repairs and maintenance tasks.

While homeowners can do some routine tasks themselves, others such as inspecting chimneys and repairing roofs, are best left to professionals. HomeAdvisor, which matches homeowners with contractors, publishes a True Cost Guide of how much homeowners pay for various jobs. As cold weather approaches, it may get harder to get appointments, and you may also be less inclined to go outside and work, making it crucial to plan ahead and knock out projects in fall.

“The fall is a really busy time usually for homeowners,” Reagan says. “It’s when we start preparing for winter. … When it’s really cold and wet outside, you don’t want to do those things you need to do.”

Even if you live in an area where snow and ice aren’t likely, fall is still a good time to catch up with routine maintenance. Water and falling branches can cause equally expensive damage in the tropics as it does in the snowbelt.

Here are 15 fall home maintenance tasks to tackle now:

Clean gutters and downspouts. Leaves and debris gather in gutters, which can cause ice dams and other water damage when snow falls and then melts, or during rainstorms. This is an easy task to do yourself if you can climb a ladder safely.

Remove leaves. Not only do you want the leaves out of your gutters, you want them off your roof and off your lawn. Despite what some may believe, letting leaves decay on your lawn does not provide fertilizer. “It’s actually helping fungus and mold build up, which can kill your lawn,” Ingram says.

Repair any damage to your roof. “Anywhere you had shingle damage, that needs to be fixed and replaced,” says J.B. Sassano, president of Mr. Handyman, which franchises handyman services nationwide. If water can get under your shingles, it can get into your home and cause damage.

Clean your chimney. Have a chimney sweep come in every year to check your fireplace for safety and clean out the remains of last year’s fires. “If you use your fireplace regularly with wood, you’ve got to get that soot out of there,” Ingram says. You also want to make sure that the cover to your chimney is intact and that birds or other critters haven’t chosen to move in, Sassano says.

Check smoke detectors and carbon monoxide detectors. It’s smart to test the devices and replace the batteries every six months, making this a chore for fall and spring. Also, make sure you have enough fire extinguishers and that they are in the right place.

Change filters in heating and air conditioning units. Most forced-air systems work better when the filters are clean. While some filters are advertised to last several months, people with pets or old houses with a lot of dust should change filters monthly.

Caulk around the windows. Cold air can easily enter your house around windows. Caulking wears out after a few years. This is a chore many homeowners can do themselves for less than $20.

Repair, add or replace weatherstripping. Good weatherstripping on exterior doors can save energy and help you feel more comfortable in winter. If you can see light from the outside coming in around your doors, it’s time for repairs.

Wrap exposed pipes. Pipes in exterior walls or outside can easily freeze during the winter, and wrapping them makes that less likely. “There’s nothing more costly than having a pipe burst in your house,” Sassano says.

Shut down and drain sprinkler systems. You also want to turn off and drain exterior spigots, plus drain and bring in hoses.

Aerate your lawn. By using a machine to poke holes in your lawn, you help air and water get to the roots. This is best done when the lawn is wet. The process helps it grow back next season. “When it snows and the snow start to melt, the aerated areas help the water get to the root system of your lawn,” Ingram says.

Trim trees. Proper trimming keeps trees healthy, and you should hire someone for the job who knows what he or she is doing. In cold climates, you want to keep weak branches that may become weighed down with snow from falling on your house or car. In warmer climates, you want to avoid wind damage.

Change the direction of ceiling fans. Fans are set to run counterclockwise in summer, which creates a cool breeze under the fan. But they should run clockwise in winter. “Heat tends to rise, and you don’t want to waste it up at the ceiling level,” Sassano says. “You want to bring it back down to where the people are.”

Inventory your snow equipment. Make sure your shovels are in good repair, your snow blower is tuned up and you have sand and salt on hand. “It’s really just easier to get them now before the stores sell out,” Reagan says.

Clean and put away your summer equipment. Now that the warm weather is gone, there’s no need for your lawn furniture, barbecue grill and water toys. “It just makes your springtime so much easier,” Reagan says.


From:  US News