Buying a home can be an overwhelming process. From financing to negotiating to inspection to closing, there are a lot of moving pieces that can leave homebuyers bewildered.
It is no surprise that there are a LOT of myths surrounding buying a home, here are….
The Seven Biggest Myths of Home Buying!
Myth #1 I will have to put 20% of the purchase price down.
Busted! If you qualify for a VA loan, you can actually buy a house for ZERO down! Some loans require as little as 3% down!
Myth #2 I must have perfect credit to buy a home.
Busted! Financially speaking, there are generally three items that determine if you can buy a home: Income, Debt to Income Ratio, (DTI), and Credit Score. Depending on Income and DTI, you may be able to qualify for a loan with a credit score as low as 580! Even if it turns out you aren’t in a position today to buy a house, once you have the information, it is possible that minor lifestyle changes in the right place, can put you on the road to home ownership in just a few short months. We work with a number of excellent lenders and can connect you with one today!
Myth #3 I can’t afford to make major repairs after buying a house.
Busted! While home repairs can be expensive, Home Warranties are available, covering items such as heating systems, plumbing, appliances, etc, which will repair or replace after you pay the service charge, which is typically $100. For example, you move in and a week later your refrigerator goes out. You call the Home Warranty company, pay the $100 and they send someone out to check the appliance. If it can’t be fixed, they replace it. You will want to review the Warranty to see what is and isn’t covered, and you may choose to add additional coverages. The great news is that most of the time, the property seller pays for your Warranty! Warranties typically last for one year, however you can pay for additional years if you choose.
Myth #4 Real estate agents are expensive, it is best not to use one.
Busted! Property sellers pay real estate fees, so the buyer gets our services for free! We represent you and you alone in the transaction, and it wont cost you a dime!
Myth #5 The market is going to crash, now is a bad time to buy.
Busted! The last real estate value recession was caused by poor lending practices. Lenders were making foolish loans to virtually anyone, that had little chance of being repaid, and when the loans went into default, there were more homes on the market than buyers. As a result, home prices dropped. Lending practices have tightened up significantly, to prevent this from happening again. While home prices do fluctuate, the trend over time is that home values appreciate. Two other things to consider; 1. Rents also continue to increase over time, and 2. Rent is like money flushed away, it provides no long-term value to the renter.
Myth #6 Renting is a lot less expensive that owning a home.
Busted! If you are paying rent, you are already paying a mortgage, someone else’s, and you don’t get any of the tax benefits of home ownership. For example, the difference between renting a home for $1800 per month and making an $1800 monthly mortgage payment is that with the mortgage, you will get roughly $200 per month back in tax savings at the end of the year. Here is what you should really consider though, if you pay $1800 per month in rent for 30 years, you will have paid $648,000, and you will have nothing to show for it. Buying a home means at some point you will stop making payments and own the roof over your head. Rent payments never go away, landlords never get to a point where they say, “Hey you have paid enough, no need to pay any more”. Paying rent means you are always 30 days from being out on the street, which is especially concerning when you are in your later years.
Myth #7 I might end up paying way more than the house is actually worth.
Busted! The contracts are normally written so that the buyer doesn’t have to pay more than the appraised value of the home. If the appraised value of the home comes back less than the agreed-on purchase price, the buyer and seller enter a new period of price negotiation. In the event the buyer and seller cannot agree on a new price, normally the buyer is able to walk away from the deal. Typically in this situation, the seller will drop the price to the appraised value.
We can help guide you through each step of the buying process, offering sound advice along the way. By working with a professional agent who knows the ins and outs of the real estate industry, you’ll not only end up with a great home, but you’ll also walk away with a great experience.
Here are some of the key areas that we can help you with:
Getting pre-approved by a lender
By providing your lender with some basic information about your income, savings, and debt, he or she can assist you in getting pre-approved for a home loan. The lender will then go over your financing options, what monthly payment amount you can afford, and what you can expect for down payment requirements and closing costs. I work with a number of excellent lenders, lets find out which one is right for you!
Choosing a home
For most buyers, choosing a home is an emotional process. We can assist you in this process by offering objective information about each property you look at. From local community information like schools and zoning to home-specific details like condition and amenities, we can help you find exactly what you’re looking for.
Making an offer
Once you’ve found the home of your dreams, we will research recent comparable sales of similar homes in the area to help determine a fair selling price. Based on those comparable sales, as well as other factors like inspections and repairs, we will then help you structure an offer and negotiate to get the very best deal possible.
Once you have an accepted offer on the home, the next step is the home inspection. We can provide a list of state licensed home inspectors and can provide you with recommendations from past clients. Once the inspection is complete, the buyer has an opportunity to negotiate with the seller to have repairs performed. In the event the buyer and seller cannot agree on the repairs to be made, the buyer can typically walk away from the deal. When agreement is reached on repairs, the repairs to be made are specified on a contract, and the buyer can reinspect to ensure the repairs were completed.
A critical component of the home buying process is the use of a title company to research past and current ownership of the property, as well as any other issues affecting the property such as easements, liens, unpaid taxes, covenants, conditions and restrictions. To ensure that the title is valid, the title company will do a title search, which is a thorough examination of property records to make sure that the person or company claiming to own the property does, in fact, legally own the property and that no one else could claim full or partial ownership of the property. A title company makes sure that the title to a piece of real estate is legitimate and then issues title insurance for that property. Title insurance protects the lender and/or owner against lawsuits or claims against the property that result from disputes over the title.
Title companies also often maintain escrow accounts — these contain the funds needed to close on the home — to ensure that this money is used only for settlement and closing costs and conducts the formal closing on the home. At the closing, a settlement agent from the title company will provide all the necessary documentation, explain it to the parties, collect closing costs and distribute monies. Finally, the title company will ensure that the new titles, deeds and other documents are filed with the appropriate entities.
A home appraisal is an unbiased report on the worth of a house in the fair market, performed by a trained and licensed individual. Appraisals are needed to ensure the buyer; the seller and the mortgage lender receive the accurate and true value of the real estate in question. In residential property transactions, you are able to choose your real estate agent and your lender, but you cannot choose your appraiser. Instead the appraiser must be chosen by your lender to provide a level of independence from the buyer and seller.
In order to ensure that appraisals are impartial the Appraisal Independence Requirements, or AIR, prohibits a lender’s loan production staff from having direct contact with—or influence upon—any appraisers. To reduce the risk of violating AIR many lenders now hire appraisers via appraisal management companies. These companies work with many residential appraisers in order to cover a more diverse housing market and to reduce the risk of improper influence. In short, the appraisal system is constructed to make the process as fair to everyone as possible.
Closing, or settlement, can be a complicated process. Before the buyer gets to the closing table, it is a good idea do a final walkthrough of the home to ensure the condition of the property meets the buyers expectations. The title company handles the closing process, and coordinates documents between the parties involved; the buyer and seller, the lender, and the agents. The title company also collects and disburses funds per the terms of the contract. Buyers and sellers must bring ID with them, and funds paid to facilitate the closing must be in the form of a cashiers check, personal checks are not accepted. Possession of the property occurs upon recording of the document