To arrive at an “affordable” home price (that is, how much home you can afford), we followed the guidelines of most lenders. In general, that means your total debt payments should be no more than 36% of your gross income.
Once you enter your monthly debt (including credit cards, student loan and car payments), we come up with a maximum monthly home payment you could handle while staying under that threshold.
Why do lenders use this guideline? It’s been shown to be a level of debt that Read More →
Here’s what you need to Know
If you expect to put your home on the block at some point in 2016, here are some key factors for you to keep in mind before you address issues and concerns to make the best possible deal.
Many homeowners remember the fallout that the housing bust had on real-estate prices. Even though most investors think of the financial crisis as having hit its peak in 2008 and early 2009, it took three more years for home prices to hit bottom.
Yet since early 2012, prices have climbed higher, and the Case-Shiller National Home Price Index is coming within spitting distance of matching its highs from 2006 and 2007.
Where you live is a key factor in determining just how much of a seller’s market you can expect. Hot markets like San Francisco have seen some housing-boom-era practices return to favor, with many reports of bidding wars that result in offers well above the asking price. Read More →
As you prepare to take the plunge into home ownership, you’ll find yourself surrounded with plenty of jargon. Educating yourself on the lingo will make you more confident throughout the process and help you keep track of important steps.
Having a basic understanding of important real estate concepts before you start the home buying process will give you peace of mind now and could save you a fortune in the future. Here are ten real estate terms you should know before you start looking for a home. If you still have questions or are ready to start touring homes, we would be happy to help.
There are usually two agents involved when you buy a home; the “buyer’s agent,” who represents you, and the “listing agent,” who represents the home seller. Dual agency is when there is only one agent representing both sides of the transaction, and it is something you want to avoid at all costs!
Money saving tip: When buying a home, you don’t pay your real estate agent – they’ll get a commission from the home seller. Choose a broker who will give you part of their commission back!
Conventional loans include “fixed rate” and “adjustable rate” mortgages. A fixed rate mortgage has a predetermined interest rate throughout the life of the loan; the most common are for 30 years. An adjustable rate mortgage has a variable (changing) interest rate; the most common are for 5, 7, or 10 years.
Money saving tip: Adjustable rate mortgages can make financial sense if you’re planning to sell or refinance your home before the introductory period ends; but if you’re planning to own your home longer than five years, it’s less risky to choose a fixed rate loan. Make sure to shop around so you can get the best mortgage possible, which will save you a lot of money in the long run. Ask your friends, family, and real estate agent for lender recommendations.
Before you apply for a mortgage or even start looking for a home, you should get a pre-approval letter from the bank, which is an estimate of how much they’ll lend you. This letter will help you determine what you can afford, and ensures home sellers that you will be able to get a loan when needed.
Money saving tip: When you go in for a pre-approval letter you should be clear on what the bank is offering. Ask them about closing costs, what fees are involved, what you’re getting for that fee, and if they’ll lock in your loan at a specific interest rate. Note that if you end up competing for a home against other offers, it can help to have a local lender. Local lenders want continued referrals and really care about their reputation; listing agents prefer to deal with them for this reason.
Find all of the homes for sale near you. Real estate agents frequently refer to homes for sale as “listings.” A “listing” on a website shows information about the home, like the price and number of bedrooms as well as other details.
Money saving tip: For the most up-to-date listings, use sites from real estate brokers like Pagosa Brokers, rather than real estate portals. Brokers have access to the multiple listing service, which real estate agents are required to update, so the information is more accurate than sites who aren’t affiliated with a brokerage. In a competitive real estate market, you can miss out on a good deal if you use sites that don’t show all the homes for sale.
After you’ve made an offer on a home, you’ll need to schedule an inspection, which costs around $500 – $800, depending on the market. The inspector will go through every nook and cranny, and review things like the plumbing, electrical, foundation, walls, heating, and appliances.
Money saving tip: Get advice from your realtor on a good inspector. If they find something wrong, you can negotiate for a reduced price. If they miss something, you could be stuck with expensive repairs after you’ve purchased the home.
When you apply for a mortgage, your lender will require an appraisal of the home you want to buy. A licensed appraiser will estimate the home’s value based on comparable homes that have sold in the area and an investigation of the property.
Money saving tip: If the appraised value is less than the offer you are making on the home, you might not be approved for a loan. The bank doesn’t want to invest in a home that’s overpriced (and neither do you!). Before making an offer, ask your agent to do a comparative market analysis, which will tell you what comparable homes have sold for nearby. If you’re a seller, get an estimate on how much your home is worth as well as how to increase your home appraisal value.
When you put in an offer on a home, you can specify certain conditions that must be met before the deal will go through – these are called contingencies. You have to make sure you can actually get the loan (a financing contingency), that the inspection doesn’t show anything too crazy (inspection contingency), and that the appraised value is close to what you’re offering to pay (appraisal contingency). Those are just a few common examples; there are several other types of contingencies, which you should discuss with your agent.
Money saving tip: If you’re in a bidding war on a home, sometimes it can help to shorten contingency periods or waive them altogether. You may not necessarily have to pay more money, just be more flexible.
Once you find the right home, you’ll make an offer on the property with the help of an agent or attorney. If the seller counters your original offer, it’s usually because they want more money or a faster timeline for closing the deal, at which point you’ll have to negotiate. When submitting an offer, it’s a good idea to add a personal touch by including a cover letter that explains why you want to buy the home.
Money saving tip: Choosing an experienced realtor is key to winning in negotiations. Do your research to find one who has done recent deals in your area.
Be prepared to pay a lot of fees when you purchase a home. Typically, closing costs will amount to 2-5% of the purchase price of the home, and that doesn’t include the down payment. Common fees include excise tax, loan-processing costs and title insurance.
Money saving tip: Ask your lender about every fee involved in the Good Faith Estimate, and see if you can shop around for a better price for those services or negotiate down. Examples include homeowner’s insurance, wire transfers, underwriting and settlement fees.
After all the negotiations are done and the seller has accepted your offer, you should receive a home title report within a week. Most mortgage lenders require you to pay title insurance as part of the closing costs; title insurers search the public records to make sure the home seller actually had rights to the title and that there are no liens on the home (like an unpaid contractor or unpaid taxes).
Money saving tip: Ask your agent for recommendations, and shop around to find the best title insurance rates. You may also be able to negotiate some fees the insurance provider charges.
Find out what your home is worth, then shave 15 to 20 percent off the price. You’ll be stampeded by buyers with multiple bids — even in the worst markets — and they’ll bid up the price over what it’s worth. It takes real courage and most sellers just don’t want to risk it, but it’s the single best strategy to sell a home in today’s market.
Info coming soon!
Do you know what makes a good Real Estate Agent? Most of us have very little idea what their role actually is or how to pick a good one. Wherever you find an agent, asking a few questions up front can save you a heap of trouble later by choosing the right real estate agent now.