WHY YOU SHOULD WORK WITH A REALTOR®
Not all real estate practitioners are REALTORS®. The term REALTOR® is a registered trademark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION of REALTORS® and subscribes to its strict Code of Ethics. Here are a few reasons why it pays to work with a REALTOR®.
1. In a REALTOR®, you will have an expert to guide you through the real estate process. Buying or selling a home usually requires disclosure forms, inspection reports, mortgage documents, insurance policies, deeds, and multi-page settlement statements. A knowledgeable expert will help you prepare the best deal, and avoid delays or costly mistakes.
2. Your REALTOR® will provide you with objective information and opinions. REALTORS® can provide local community information on utilities, zoning, schools, and more. They will also be able to provide objective information about each property of interest to you. Additionally, a professional will be able to help you answer these two important questions: Will the property provide the environment I want for a home or investment? Will the property have resale value when I am ready to sell?
3. Your REALTOR® will work to find you the best property that is available for sale. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your REALTOR® to find all available properties.
4. You will benefit from the negotiating experience of your REALTOR®. There are many negotiating factors, including, but not limited to, price, financing, terms, date of possession, and inclusion or exclusion of repairs, furnishings, or equipment. In addition, the purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your REALTOR® can advise you as to which investigations and inspections are recommended or required.
5. Real estate has its own language, your REALTOR® will serve to translate and explain the lingo. If you don’t know a CMA from a PUD, you can understand why it’s important to work with a professional who is immersed in the industry and knows the real estate language.
6. REALTORS® have done it before. Most people buy and sell only a few homes in a lifetime, usually with quite a few years in between each purchase. And even if you’ve done it before, laws and regulations change. REALTORS®, on the other hand, handle hundreds of real estate transactions over the course of their career. Having an expert on your side is critical.
7. REALTORS® understand that buying and selling is emotional. A home often symbolizes family, rest, and security — it is not just four walls and a roof. Because of this, home buying and selling can be an emotional undertaking. And for most people, a home is the biggest purchase they will ever make. Having a concerned, but objective, third party helps you stay focused on both the emotional and financial issues most important to you.
8. You will be treated in an ethical manner by your REALTOR®. Every member of the NATIONAL ASSOCIATION of REALTORS® makes a commitment to adhere to a strict Code of Ethics, which is based on professionalism and protection of the public. As a customer of a REALTOR®, you can expect honest and ethical treatment in all transaction-related matters. It is mandatory for REALTORS® to take the Code of Ethics orientation and they are also required to complete a refresher course every four years.
National Association of Realtors®
WHY YOU SHOULD OWN A HOME
1. Tax breaks. The U.S. Tax Code lets you deduct the interest you pay on your mortgage, your property taxes, as well as some of the costs involved in buying your home.
2. Appreciation. Real estate has long-term, stable growth in value. While year-to-year fluctuations are normal, median existing-home sale prices have increased on average 6.5 percent each year from 1972 through 2005, and increased 88.5 percent over the last 10 years, according to the NATIONAL ASSOCIATION OF REALTORS®. In addition, the number of U.S. households is expected to rise 15 percent over the next decade, creating continued high demand for housing.
3. Equity. Money paid for rent is money that you will never see again, but mortgage payments let you build equity ownership interest in your home.
4. Savings. Building equity in your home is a ready-made savings plan. And when you sell, generally, you can take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.
5. Predictability. Unlike rent, your fixed-mortgage payments do not rise over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will increase.
6. Freedom. The home is yours. You can decorate any way you want and benefit from your investment for as long as you own the home.
7. Stability. Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.
WHAT YOU CAN DO TO IMPROVE YOUR CREDIT
Credit scores, along with your overall income and debt, are key factors in determining whether you will qualify for a loan and what your loan terms will be. So, keep your credit score high by doing the following:
1. Check for and correct any errors in your credit report. Mistakes happen, and you could be paying for someone else’s poor financial management.
2. Pay down credit card bills. If possible, pay off the entire balance every month. Transferring credit card debt from one card to another could lower your score.
3. Do not charge your credit cards to the maximum limit.
4. Wait 12 months after credit difficulties to apply for a mortgage. You are penalized less for problems after a year.
5. Do not order items for your new home on credit — such as appliances and furniture — until after the loan is approved. The amounts will add to your debt.
6. Do not open new credit card accounts before applying for a mortgage. Too much available credit can lower your score.
7. Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.
8. Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.
Fannie Mae Foundation
WHY IS A MORTGAGE PRE-APPROVAL IMPORTANT
Why Get Pre-Approved? Pre-approval provides you with a definite idea of what you can afford and shows sellers that you are serious about buying. In addition to documenting your financial ability to close on a transaction, pre-approval shortens the time needed to close on a loan, and makes you a more attractive buyer for sellers who want a quick and efficient escrow.
Note: *Pre-Qualification is an informal way to see how much you might be able to borrow for your new home. You can get “pre-qualified” over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. The lender will not make a commitment to lend to you based on this unverified information, but you will have a ballpark figure for how much you can spend on a house.
WHAT IS ON THE LOAN APPLICATION CHECKLIST
Photo ID with Social Security Number
Home addresses for last 5-7 years (if applicable, with names of landlords)
Payment for application fee
Employment history (minimum past 2-3 years, for each person signing the loan)
Employment pay stubs (minimum past 2-3 years, for each person signing the loan)
W-2 forms — or business tax return forms if you’re self-employed (minimum past 2-3 years, for each person signing the loan)
Documentation to verify additional income (Social Security, child support, retirement pension, etc.)
Copies of 2-4 months of bank or credit union statements for both checking and savings accounts
Copies of your most recent 401(k) or other retirement account statement
Copies of brokerage account statements for 2-4 months
Copies of title documents for all major assets of value, i.e. automobiles, motorcycles, boat, RV, etc.
Copies of documentation for all stocks or bonds not held in a brokerage account
Account numbers of all your credit cards and the amounts for all outstanding balances
Documentation identifying lender, loan number, and amount owed on installment loans, i.e. automobile, college/student
Documentation for mortgage loans
Documentation for childcare expense/support
Discharge documentation for Bankruptcy
Letters outlining circumstances for adverse credit
Documentation of Divorce Decree (settlements, deeds, modifications,etc.)
HOW TO FIND THE RIGHT NEIGHBORHOOD
Your neighborhood has a big impact on your lifestyle. Follow these steps to find the perfect community to call home.
• Is it close to your favorite spots? Make a list of the activities — movies, health club, church, etc. — you engage in regularly and stores you visit frequently. See how far you would have to travel from each neighborhood you’re considering to engage in your most common activities.
• Check out the school district. This is especially important if you have children, but it also can affect resale value. The Department of Education in your town can probably provide information on test scores, class size, percentage of students who attend college, and special enrichment programs. If you have school-age children, visit schools in the neighborhoods you’re considering. Also, check out www.schoolmatters.com.
• Find out if the neighborhood is safe. Ask the police department for neighborhood crime statistics. Consider not only the number of crimes but also the type — such as burglaries or armed robberies — and the trend of increasing or decreasing crime. Also, is crime centered in only one part of the neighborhood, such as near a retail area?
• Determine if the neighborhood is economically stable. Check with your local city economic development office to see if income and property values in the neighborhood are stable or rising. What is the percentage of homes to apartments? Apartments don’t necessarily diminish value, but do mean a more transient population. Do you see vacant businesses or homes that have been for sale for months?
• See if you’ll make money. Ask a local REALTOR® or call the local REALTOR® association to get information about price appreciation in the neighborhood. Although past performance is no guarantee of future results, this information may give you a sense of how good of an investment your home will be. A REALTOR® or the government planning agency also may be able to tell you about planned developments or other changes in the neighborhood — like a new school or highway — that might affect value.
• Make personal observations. Once you’ve narrowed your focus to two or three neighborhoods, go there and walk around. Are homes tidy and well maintained? Are streets quiet? How does it feel? Pick a warm day if you can and chat with people working or playing outside.
WHAT ARE THE PROS AND CONS OF GOING CONDO
Condominiums and townhouses offer an affordable option to single-family homes in many markets, and they’re ideal for those who appreciate a maintenance-free lifestyle. But before you buy, make sure you do your legwork. These are some of the important elements to consider:
• Storage. Some condos have storage lockers, but usually there are no attics or basements to hold extra belongings.
• Outdoor space. Yards and outdoor areas are usually smaller in condos, so if you like to garden or entertain outdoors, this may not be a good fit. However, if you dread yard work, this may be the perfect option for you.
• Amenities. Many condo properties have swimming pools, fitness centers, and other facilities that would be very expensive in a single-family home.
• Maintenance. Many condos have onsite maintenance personnel to care for common areas, do repairs in your unit, and let in workers when you’re not home — good news if you like to travel.
• Security. Keyed entries and even doormen are common in many condos. You’re also closer to other people in case of an emergency.
• Reserve funds and association fees. Although fees generally help pay for amenities and provide savings for future repairs, you will have to pay the fees decided by the condo board, whether or not you’re interested in the amenity.
• Resale. The ease of selling your unit may be dependent on what else is for sale in your building, since units are usually fairly similar.
• Condo rules. Although you have a vote, the rules of the condo association can affect your ability to use your property. For example, some condos prohibit home-based businesses. Others prohibit pets, or don’t allow owners to rent out their units. Read the covenants, restrictions, and bylaws of the condo carefully before you make an offer.
• Neighbors. You’re much closer to your neighbors in a condo or town home. If possible, try to meet your closest prospective neighbors.
WHAT DOES THE ESCROW COMPONENT ENTAIL
Escrow is the process where a neutral, third party is hired to gather all the information needed by the parties to close the transaction, including receiving funds and documents, completing and filing required forms and obtaining release documents for any loans or liens that are paid off as part of the transaction.
Typical documentation collected by the escrow agent/holder includes: Loan documents Tax statements Fire and other insurance policies Title insurance policies Purchase agreement Documentation related to seller-financing Requests for services to be paid out of escrow funds. Upon completion of all escrow instructions, the closing can take place. All outstanding payments and fees are collected and paid, and title to the property is transferred and the title insurance issues, as dictated by the escrow instructions.
An Escrow Agent/Holder does the following: Prepares escrow instructions Requests a title search Complies with lender instructions specified in the escrow agreement Receives funds from the buyer Prorates insurance, tax, interest and other payments according to instructions Records deeds and other documents as instructed Requests the title insurance policy Closes escrow when all instructions of the seller and buyer have been met Disburses funds and finalizes instructions.
An Escrow Agent/Holder does NOT do the following: Give advice to either party – the escrow agent is a neutral, third party Offer opinions about tax implications.
WHAT ARE THE COMMON CLOSING COSTS FOR BUYERS
You will likely be responsible for a variety of fees and expenses that you and the seller will have to pay at the time of closing. Your lender must provide a good-faith estimate of all settlement costs. The title company or other entity conducting the closing will tell you the required amount for:
•Points, or loan discount fees, which you pay to receive a lower interest rate
•Private mortgage insurance premium
•Insurance escrow for homeowner’s insurance, if being paid as part of the mortgage
•Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and insurance in escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you.
•Title insurance policy premiums
•Prorations for your share of costs, such as utility bills and property taxes
Note: Because such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for services used by the sellers before they moved. Proration is a way for the sellers to pay you back or for you to pay them for bills they may have paid in advance. For example, the gas company usually sends a bill each month for the gas used during the previous month. But assume you buy the home on the 6th of the month. You would owe the gas company for only the days from the 6th to the end for the month. The seller would owe for the first five days. The bill would be prorated for the number of days in the month, and then each person would be responsible for the days of his or her ownership.
If you are seeking assistance with the purchase of a home, provide your contact information and a brief message indicating your needs below:
2016 Predictions for Housing and Real Estate
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