Buying Your Home...
Questions answered!
Emotions, family and personal reasons all come into play in any home-buying decision.
No one knows what the future holds for you, your family, your job or your finances. But we can help you understand what you're going to encounter when you embark on the sometimes-difficult journey toward the American Dream of owning a home.
"When you get that urge to buy a house, the first thing to do is step back and ask whether it makes more sense to keep renting for a while. If you still want to buy, you need to figure out how much house you can afford.
Economic differences between renting and owning
If you're looking for the best return on your money, historically you're better off investing in the stock market than buying a house. Primary homes generally don't earn the investment return of financial instruments such as mutual funds. While the stock market's long-term average rate of return is in the range of 8 percent to 10 percent, housing historically has appreciated on average in the low- to mid-single digits. Don't buy solely for investment gain.
On the other hand, Uncle Sam helps out by letting taxpayers deduct part of the mortgage interest and real estate taxes each year. Borrowers get the benefit only if they pay enough in one year to exceed the standard deduction. But that usually happens, especially during the first few years of a mortgage when most of each payment goes toward interest rather than principal.
Sunny side of homeownership
Owners enjoy other benefits, too. They build equity over time as home values rise and their mortgage balances shrink. They also don't have to worry about their housing costs shooting through the roof because lenders can't boost borrowers' rates and payments, unless those borrowers have adjustable-rate mortgages.
Cloudy side of homeownership
When something breaks at an apartment, it's the landlord's problem. When it's your name on the deed, the problem is yours. If you throw every penny into a down payment, you're taking a big risk because you may not have enough money left to fix leaky pipes or buy a new air conditioner.
Potential buyers might want to hold off for other reasons. If there's a good chance that you will be laid off soon, you might want to wait. The same goes for people who plan to leave a job soon. The monthly payment isn't the only obstacle for this kind of customer. Closing costs and other home-buying fees, as well as the commission that most owners end up paying to real estate agents when they sell their homes, add up. People who have to sell after living in one place for only a short time can end up in the hole on their investments.
Explore all the options
Some middle-ground approaches to homeownership blend elements of buying and renting. Some of the more popular loan types are seller financing, "lease with an option to buy" and "contract for a deed" plans
Seller financing
With seller financing, the seller actually assists the buyer in purchasing the home, by "lending" the buyer either a portion of the amount to be financed or the entire amount.
Let's say the buyer and seller agree on a price of $150,000 for the house. In many cases a lending institution would require a 20-percent down payment -- $30,000 -- and give the buyer a mortgage for $120,000. But if the buyer has only $15,000 cash, the seller could "take back" a second mortgage for the $15,000 the buyer is short. The buyer makes payments on the first loan to the bank and the second loan to the seller.
Another example of seller financing: If the sale price of the home is $150,000 and the buyer has only $15,000 for a down payment, the buyer gives the $15,000 down payment directly to the seller who agrees to carry the entire mortgage amount of $135,000. The buyer would make all payments directly to the seller.
YOUR FICO SCORE BUYER'S REFERENCE BUYER'S CHECKLIST
CLOSING COSTS
THE BUYING PROCESS FROM BEGINNING TO END
Buying your new home is a serious venture. It can be an absolute pleasure or a massive headache. Your house is not just your home, it is a serious investment in the dwelling, the area and your future.
When buying a home — you're bound to have many questions. For example, "In what area can I find a home that suits my needs?", "How much money will I need to afford the monthly payments?" and "How long will the home buying process take?”
Advice for First-Time Buyers
Pre-Qualification:Meet with a mortgage broker and find out how much you can afford to pay for a home.
Pre-Approval:While knowing how much you can afford is the first step, sellers will be much more receptive to potential buyers who have been pre-approved. You'll also avoid being disappointed when going after homes that are out of your price range. With Pre-Approval, the buyer actually applies for a mortgage and receives a commitment in writing from a lender. This way, assuming the home you're interested in is at or under the amount you are pre-qualified for, the seller knows immediately that you are a serious buyer for that property. Costs for pre-approval are generally nominal and lenders will usually permit you to pay them when you close your loan.
List of Needs & Wants: Make 2 lists. The first should include items you must have (i.e., the number of bedrooms you need for the size of your family, a one-story house if accessibility is a factor, etc.). The second list is your wishes, things you would like to have (pool, den, etc.) but that are not absolutely necessary. Realistically for first-time buyers, you probably will not get everything on your wish list, but it will keep you on track for what you are looking for.
Representation by a Professional:Consider hiring your own real estate agent, one who is working for you, the buyer, not the seller.
Focus & Organization: In a convenient location, keep handy the items that will assist you in maximizing your home search efforts. Such items may include:
- One or more detailed maps with your areas of interest highlighted.
- A file of the properties that your agent has shown to you, along with ads you have cut out from the newspaper.
- Paper and pen, for taking notes as you search.
- Instant or video camera to help refresh your memory on individual properties, especially if you are attending a series of showings.
- Location: Look at a potential property as if you are the seller. Would a prospective buyer find it attractive based on school district, crime rate, proximity to positive (shopping, parks, freeway access) and negative (abandoned properties, garbage dump, source of noise) features of the area?
Visualize the house empty & with your decor:Are the rooms laid out to fit your needs? Is there enough light?
Be Objective:Instead of thinking with your heart when you find a home, think with your head. Does this home really meet your needs? There are many houses on the market, so don't make a hurried decision that you may regret later.
Be Thorough:A few extra dollars well spent now may save you big expenses in the long run. Don't forget such essentials as:
- Include inspection & mortgage contingencies in your written offer.
- Have the property inspected by a professional inspector.
- Request a second walk-through to take place within 24 hours of closing.
- You want to check to see that no changes have been made that were not agreed on (i.e., a nice chandelier that you assumed came with the sale having been replaced by a cheap ceiling light).
All the above may seem rather overwhelming.That is why having a professional represent you and keep track of all the details for you is highly recommended. Please email or call us directly to discuss any of these matters in further detail.
How to Negotiate with Sellers
Buying a home is one of the most important purchases most people will make. In order to make the right decision the first time, potential buyers need to be prepared. Consider the following before starting negotiations:
Be prepared
Research the housing market in the target area. Once you have information about the general area, focus on the particular property and seller. Look for answers to questions such as:
- Why is the homeowner selling? (If they're moving because they find the area undesirable, you might want to consider this issue.)
- How long has the home been on the market? (If it has been on the market for a long time, perhaps there are negative facts about the property that you need to know.)
- How much did the seller pay for the home compared to the current asking price? (If the seller paid more, find out why. Was it a general real estate trend, or did property values in that particular neighborhood go down?)
- What is the seller's time frame for selling and moving? Does it fit within your needs?
- Are there any defects in the home or problems with the surrounding neighborhood? (For example, is the roof so old that it will likely leak during the next storm? Is there a new construction project in the area that will lead to major traffic congestion?)
As the potential buyer, you want the advantage. While you want answers to all your questions to the seller, reveal very little about your circumstances. Do not give the seller personal information such as your income, the maximum you are able to pay for a down payment or the home, or when you want to move. Make sure that your agent knows not to reveal any such information to the seller or his/her agent.
Also, do not let the seller see how much you want the property. If you appear desperate or overly enthusiastic, the seller then has the stronger bargaining position. When meeting with the seller or listing agent, keep your emotions in check.
Establish a Timeline
Find out if the seller needs to have the sale closed sooner rather than later. If the seller is feeling pressured to sell, use that to your advantage in negotiating. Even if you, the buyer, are the one with the deadline for purchasing a home, don't let yourself be rushed into making concessions or a purchase you may regret later.
Types of Mortgages
Fortunately for buyers, there are a variety of mortgages to choose from. It is in your best interest to investigate each of them to determine which is the best for your situation. You probably won't qualify for all of them. In fact, you may only qualify for one. But if you do qualify for more than one, you may save yourself money (and worry) in the long run if you do your homework before signing on the dotted line.
Fixed Rate Mortgages
Consider a fixed rate mortgage if either of the following describes you:
Since most home loans are for a period of 30 years, if you want a payment you can count on for that long of a period of time, a fixed rate mortgage may be what works best for you. Once your loan amount and interest rate are calculated and locked in, a fixed rate mortgage will guarantee that you will have the same payment over the life of the loan. Making extra payments to principal will allow you to pay your loan off sooner.
This may not always be the best choice, however. If interest rates are very high at the time you take out your loan, with a fixed rate mortgage you'll be stuck with that high interest for the life of the loan (unless you choose to refinance). Conversely, if interest rates are very low, you'll come out the winner with interest rates that will stay low no matter how high interest rates go in the future.
The following are the advantages and disadvantages of the varying lengths and terms of fixed-rate mortgages:
15-Year Fixed-Rate:
20-Year Fixed-Rate:
30-Year Fixed-Rate:
Adjustable-Rate Mortgages (ARMs)
If you are more comfortable in taking a risk with your money or if interest rates are very high at the time you take out your loan, an adjustable-rate mortgage (ARM) may be the solution for you. You might also choose this type of loan if your planned ownership of the property is short-term or if you expect your income to increase to cover any potential rise in the interest rate.
Generally, the interest rate when you take out your loan will be lower than a fixed-rate mortgage. Please note that this is true initially, not necessarily long-term.
Since an ARM rate rises and falls depending on the prevailing interest rate, your mortgage payment will rise and fall accordingly. If your income is not sufficient to cover the highest possible payments, then this option is not for you. On the positive side, the lower initial payments will allow you to qualify for a larger loan than if you choose a fixed-rate. The downside is that your payments will increase if/when the rates go up.
Typically, ARM interest rates are tied to a specific financial index (such as Certificate of Deposit index, Treasury or T-Bill rate, Cost of Funds-Indexed Arms or COFi, or LIBOR [London Interbank Offered Rate]) and your payment will be based on the index your lender uses plus a margin, generally of two to three points. Get the formula used by your lender in writing and make sure you understand what it means.
Fortunately, the amount an ARM can increase is limited. There are "caps" on how much your lender can increase your rate, both for a period of one year and for the life of the loan. Plan ahead, and have your lender calculate what the maximum payment would be if your rate went to the highest amount allowed by the cap for your particular mortgage. If you are not confident you'll be able to pay that amount on a monthly basis, perhaps you should reconsider this type of loan.
Convertible ARMs
If neither the fixed-rate or the adjustable-rate mortgage seems like the best option, perhaps the convertible ARM will be right for you. This alternative combines the initial advantage of an ARM with a fixed rate after a predetermined number of years. Obviously, this type of mortgage has more advantages when the initial interest rate is low and the future rate is not guaranteed.
Government Loans
Another mortgage option available to some people is a government loan, providing that you meet the qualifications for these loans.
VA Loans:Veterans may qualify for a loan from the Veterans Administration. There is a limit on the amount you can borrow, so this option works best for those buying a lower priced home.
FHA Loans:The Federal Housing Association offers loans to lower-income Americans. Look for the phrase "FHA approved" when looking at ads for homes.
Getting the Best Rates for Your Mortgage
Naturally, you want to get the best deal for the least amount of money. This holds true for mortgage rates as well.
A lower interest rate means a lower monthly mortgage payment, which can save you money in the long run. Also, it is easier to qualify for a lower payment than a higher one.
You basically have two routes to finding the best rate. The first is to do all the research on your own. The second is to use a mortgage broker.
Do-It-Yourself
With the advent of the Internet, much of this information is readily available online. Once you have educated yourself sufficiently about real estate loans, all it takes is the time and energy to sift through online resources to find the information you need.
Rates change quickly. That great rate you find today might not be there tomorrow. Once you find the rate you are looking for, submit a loan application and lock in that rate.
Ask the lender for a statement detailing all fees associated with the loan. Factors such as "points" (loan fee), interest rate and "garbage fees" (extra fees which some lenders charge) can vary greatly from one lender to another.
Mortgage Broker
If you do not have the time or experience to "do it yourself," look for a qualified mortgage broker that can assist in finding the right mortgage for you. Ask friends and associates who have refinanced or purchased recently if they have a broker they can recommend. You'll want to find a broker who is energetic, flexible and knowledgeable about finance and loans and someone who has your best interests in mind.
You've Opened Escrow, Now What?
Congratulations, you are on your way to owning your very own home! Follow these suggestions (and your realtor's advice) so that escrow and settlement with go as smooth as possible.
CLOSING COSTS YOU MAY ENCOUNTER
You will be asked for a down payment on the home you are purchasing. You can choose to put down as much or as little as you want (depending on your mortgage), but remember, the more you put down toward the total price of your home, the less time it will take you to pay off and the less your mortgage payments will be every month.
During this period of purchasing your home, you are going to need an escrow or settlement company to act as an independent third party so that you know when and who to give your money to get the deed to your new home. The escrow or settlement company will hold your deposit and coordinate much of the activity that goes on during the escrow period. This deposit check may also be held by an attorney or in the broker's trust account. Make sure that there are sufficient funds in your account to cover this check.
The deposit check will be cashed. Assuming the sale goes through, this money will be applied to the purchase price of the home. If for any reason the sale is not consummated, you may be entitled to receive all of your deposit back, less standard cancellation fees. In certain instances, the seller may be able to retain this money as liquidated damages. Prior to executing a purchase contract, it would be wise to speak with your counsel regarding whether or not it is your best interest to have a liquidated damages clause as part of the contract.
1. The period that you are "in escrow" is often 30 days, but may be longer or shorter. During this time, each item specified in the contract must be completed satisfactorily. By the time you have opened escrow, you have come to an agreement with the seller on the closing date and the contingencies. Each contract is different, but most include the following: 1. Inspection contingency: this should be completed as soon as possible after the contract to purchase is signed as unsatisfactory results of the inspection may mean that you will want to cancel the contract.
2. Financing contingency: once the contract is signed, you have a period of time to secure funding. If, for any reason, you are unable to secure funding during the period of time granted to you by the contract (and the seller will not provide a written extension of time), you must decide whether you want to remove the contingency and take your chances on getting a loan. You may choose to cancel the purchase contract.
3. A requirement that the seller must provide marketable title.
With an attorney or title officer, review the title report. The title must be "clear" to ensure that you do not have legal issues regarding your ownership.
Check into local and state ordinances regarding property transfer and make sure that you and/or the seller have complied with them.
Secure homeowner's insurance. This will probably be required before you can close the sale. Due to such requirements as special fire and earthquake insurance, obtaining this insurance may require a lengthy period of time. It would be in your best interest to apply for insurance as soon as possible after the contract is signed.
Contact local utility companies to schedule to have service turned on when you close escrow.
Schedule the final walk-through inspection. At this time, you should make sure that the property is exactly as the contract says it should be. What you thought to be a "permanently attached" chandelier that would come with the property might have been removed by the seller and replaced with a different fixture entirely.
You've made it! Once the sale has closed, you're the proud owner of a new home. Congratulations!
HOME ABOUT OCEAN CITY ABOUT US OUR FEATURED PROPERTIES SOLD HOME SEARCH CMA
BUYING YOUR HOME SELLING YOUR HOME CURRENT & FUTURE OWNERS' REFERENCE
FINANCIAL CALCULATORS INVESTMENT PROPERTY INVESTMENT ANALYSIS
MORTGAGE INFOMATION 1031 EXCHANGES CLOSING COSTS
OCEAN CITY GENERAL INFORMATION LOCAL INFORMATION and GOVERNMENT OCEAN CITY EVENTS
OCEAN CITY ACTIVITIES OCEAN CITY POPS DIRECTIONS TO OCEAN CITY
STATE OF NEW JERSEY WEB RESOURCE DIRECTORY
CONTACT US SITE DIRECTORY OCEAN CITY PHOTO GALLERY
SITE DIRECTORY
WE ARE ALSO PROUD TO SERVE THE WILDWOODS...
CLICK THE PICTURE FOR MORE INFORMATION!
"Your SECOND Home Is Our FIRST Priority!"
JOSEPH & JOHNNA ZARROLI
REALTOR(S)
609.402.8900
FULL-TIME AGENTS & YEAR-ROUND RESIDENTS OF THE JERSEY SHORE
AVAILABLE 365 DAYS A YEAR FROM 6AM TO 11PM
2007 MULTI-MILLION DOLLAR SALES
Serving the South Jersey Shore from Brigantine to the Wildwoods
&
the Mainlaind Community of Somers Point!
In Ocean City: In the Wildwoods:
1229 Asbury Avenue 1701 New Jersey Avenue
Ocean City, NJ 08226 North Wildwood, NJ 08260
609.398.8000 609.522.4999
oceancityjoe@verizon.net joewildwood@verizon.net
Within this website you will find listings of properties for sale represented not only by Fasy Real Estate but other sales agencies through the MLS Broker Reciprocity Program
SITE MAP