Closing costs: These are fees you have to pay when you close on your mortgage. They’re based on the individual purchase, but can vary from 2% to 7% of the purchase price of the home, but they’re often split between the buyer and seller. According to Realtor.com, buyers typically pay 3% to 4% in closing costs and sellers typically pay 1% to 3% (you can try to negotiate who pays which closing costs). With some closing costs, you have to use a certain service, but with others, you’re allowed to shop around for a better price. Here are some common closing costs.
This is the fun part! As a buyer, you can peruse thousands of real estate listings on sites such as realtor.com, then ask your agent to set up appointments to see your favorites in person. Since the sheer number of homes can become overwhelming, it's best to separate your must-haves from those features you'd like, but don't really need. Do you really want a new home or do you prefer a fixer-upper? Make a list of your wants and needs to get started, and whittle down your options.
"Building equity in a home can be a good way to grow your wealth, but it's important that you do so in a way that doesn't stretch your finances too thin," he cautions. "Things can get really ugly when the housing market declines, so it may be a good idea to take out a 30-year mortgage but accelerate your monthly payments as if you had a 15-year mortgage. If you ever need to lower your payment in the future, you'll still have that option."
Your agent may generally know which home you are going to choose, due to experience and intuition. However, make sure that you don't feel your agent is trying to steer you toward any specific property, and choose the home without interference from the agent because it's your choice as the buyer alone to make. Keep in mind, however, that real estate agents are required to point out defects and should help buyers feel confident that the home selected meets the buyer's stated search parameters.
Each month, part of your monthly payment is applied to the principal balance of your loan, which reduces your obligation. The way amortization works, the principal portion of your principal and interest payment increases slightly every month. It is lowest on your first payment and highest on your last payment. On average, each $100,000 of a mortgage will reduce in balance the first year by about $500 in principal, bringing that balance at the end of your first 12 months to $99,500.
For the past 15 years, Williams has specialized in personal finance and small business issues. His articles on personal finance and business have appeared in CNNMoney.com, The Washington Post, Entrepreneur Magazine, Forbes.com and American Express OPEN Forum. Williams is also the author of several books, including "Washed Away: How the Great Flood of 1913, America's Most Widespread Natural Disaster, Terrorized a Nation and Changed It Forever" and "C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America"
Whether it's the roof, water heater or furnace, aging home systems will need replacement. And that may end up being sooner than you’d like, especially if you didn’t pay close attention to the age and condition of the roof, plumbing, electric and heating and cooling systems when your inspector pointed them out. HomeAdvisor’s 2015 New Homeowner Survey found that 75 percent of homeowners face an unexpected emergency within a year of purchase. To expect the unexpected, Hunter points to the survey’s recommendation that homeowners plan to spend 1 percent of the home’s purchase price on unplanned repairs. Maintaining at least that much in your emergency fund will help keep you from dipping into other savings from year to year.
Homeownership is one of the core concepts of the American Dream. When a person is ready to make that dream a reality there are certain steps to buying a home that must be followed. These steps ensure that the person is prepared to actually own his or her own home, that the right location and home are selected, and that the actual purchase of the house proceeds with as few problems as possible. The process of buying a house can be complicated, even for those who have previously owned a home. The following guide will help navigate home buyers through the necessary steps.
Don’t hit the open houses just yet. Make sure your finances are in order, so you know what you can realistically afford. Use a mortgage calculator to estimate your budget given your income, debt, savings and other financial obligations. Check your credit score and compare your debt to income. You should be able to comfortably pay your full mortgage payment (including taxes and insurance) each month. And you likely need money up front for a down payment and closing costs. The good news is, most first-time homebuyers put down less than 20 percent.
Before you head out home buying, you should seek pre-approval from a lender for a home loan. This is where you meet with a loan officer, ideally a few at various mortgage companies. Each mortgage lender will scrutinize your financial background—such as your debt-to-income ratio and assets—and use this info to determine whether they're willing to loan you money, and what size monthly payment you can realistically afford. This will help you target homes in your price range. And that's good, since a purchase price that's beyond your financial reach will make you sweat your mortgage payment and puts you at risk of defaulting on your loan.
My tip – STICK TO YOUR PRICE RANGE! We looked at 10 houses in our price range and one house just north of our price range. Of course – the more expensive house looked better. We fell in love with it and we stretched our budget to afford it! We didn’t have a chance to view any other prices in that higher price range either so didn’t know if our offer was too high (it was in hindsight). Just a tip!
Your agent can put you in contact with Coldwell Banker Home Loans so you can be pre-approved for a mortgage even before starting the house hunting process. Although the pre-approval is not a final loan commitment, the pre-approval letter will demonstrate your financial strength and ability to go through with the purchase when you are ready to make an offer on a home.
In a quick conversation with you about your income, assets and down payment, a lender can prequalify you to buy a house. Getting preapproved takes a little more work. A lender will need to verify your financial information and submit your loan for preliminary underwriting. But it pays off when you begin your home search because a preapproval letter shows that you’re a serious buyer.
Owning a home is expensive—much more expensive than renting, even if your monthly house payment will be similar or cheaper than your current rent amount. That’s because when you own a home, you’re responsible for all the maintenance and upkeep costs. And those can add up fast! So, before you even think about buying your first home, make sure you’re debt-free and have an emergency fund of three to six months of expenses in place.
If you're like most first-time home buyers, you've probably listened to friends', family's and coworkers' advice, many of whom are encouraging you to buy a home. However, you may still wonder if buying a home is the right thing to do. Relax. Having reservations is normal. The more you know about why you should buy a home, the less scary the entire process will appear to you. Here are eight good reasons why you should buy a home.
When you’ve made an offer that’s within your budget, your Realtor will prepare the paperwork for you to sign and will submit it, along with your pre-approval letter and your earnest money, which is a good-faith deposit of about 1 percent of the purchase price. All this usually happens quickly, especially if other buyers are interested in the same property.
What to do instead: Have a frank discussion with anyone who offers money as a gift toward your down payment about how much they are offering and when you’ll receive the money. Make a copy of the check or electronic transfer showing how and when the money traded hands from the gift donor to you. Lenders will verify this through bank statements and a signed gift letter.
Mortgage insurance: If you take out a conventional loan and put down less than 20%, it’s possible you’ll have to pay private mortgage insurance, which protects the lender financially. You can typically request for PMI to be canceled once you reach 20% equity in your home. If you take out an FHA loan, you have to pay mortgage insurance, though you may be able to cancel your insurance once you pay down enough of your loan.
Your agent can provide detailed information on almost any property currently listed for sale. This includes Coldwell Banker listings as well as all other real estate broker listings on the Multiple Listing Service (MLS). Your agent can also provide information on homes that you see advertised for sale in the newspaper or online, such as properties that are advertised “For Sale by Owner.” Your Coldwell Banker agent is the only resource you’ll need.
You can buy a home without a Realtor, but there’s really no reason to do so. Because in most cases, the seller of a home pays the real estate commission. So, as a buyer, you have nothing to lose. (Some real estate firms do charge a fee to buyers; if you don’t want to pay for their services, look for a Realtor that charges sellers exclusively.) And having a Realtor on your side can help you all the ins and outs of buying a home, which can be confusing.
For most buyers, this is when the butterflies really show up. Once you’ve found a home you want your agent will work with you to craft an offer. Remember, the listing price is only a starting point. Your agent will understand the market and help guide you to make the most attractive offer, whether it’s below, at or above listing price. Are there any contingencies to your offer? Will you require an inspection? These are all things your agent will help you with. Once you’ve submitted the offer you get to wait. It will seem interminable. You may get neither a simple yes or no but a counteroffer to consider. It can be something of a dance. If you get a solid “no,” it’s back to Step 5. If you get to a “yes,” celebrate!
IRS Publication 530 contains tax information for first-time home buyers. Real estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes. In California, the passage of Proposition 13 in 1978 established the amount of assessed value after property changes hands and limited property tax increases to 2 percent per year or the rate of inflation, whichever is less.
Before you start looking for a house, you need to have a prequalification letter in hand. This letter is basically proof that a lender will loan you a certain amount of money. This is your ticket to putting an offer on a house. People with excellent credit scores, can have their pick of lenders and the most competitive rates. If your score is somewhere in the middle, you might have to spend more time shopping around to get the lowest rate.