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10 Real Estate Terms to Know

pblisting-kitchen-logAs 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.

Buyer’s Agent vs. Listing Agent

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!

Fixed Rate vs. Adjustable Rate Mortgages

house-on-calculatorConventional 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.

Pre-Approval Letter

writing-letterBefore 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.

Search Homes For Sale

pblisting-vaultedFind 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.

Inspection

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.

Appraisal

analysis-graphWhen 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.

Contingencies

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.

Offers and Contracts

pblisting-deck-viewOnce 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.

Closing Costs

dollarBe 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.

Title Insurance

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.

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Choosing the Right Agent / Broker

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.

15 Questions to Ask an Agent

  1. Is this your full-time gig? How many clients have you served this year?
    Okay, that’s two questions. But both get to the heart of the same issue: an active, full-time agent is more likely to be up-to-date on the market and the law.
  2. How many sales have you handled in my target area or neighborhoods?
    You want someone who knows the local market, with a few recent deals in your target neighborhoods.
  3. When clients are unhappy with your service, what has gone wrong?
    Asking why a client has been a bad fit for an agent can help you figure out if you’re a good fit.
  4. Has a client ever filed a complaint against you?
    If you’re uncomfortable asking, just check with your state’s licensing board.
  5. What’s your fee?
    The seller pays the buyer’s agent using the money you pay for the house, typically 2-3% of the sales price. Since the commission amount is set by the seller and can vary from home to home, you should insist that your agent is upfront about his share; you don’t want an agent who pressures you into a home based on his chances of landing a fatter commission check.
  6. What services do you offer beyond negotiations and escrow?
    Make a list of what you’ll be paying for. Negotiations, paperwork and contingencies are the minimum.
  7. When am I committed to working with you?
    Many consumers start touring homes without realizing this can obligate them to work with the agent, contract or no contract.
  8. How many foreclosure or short-sale transactions have you handled (if applicable in your situation)?
    Distressed properties can be great deals, but the paperwork is complicated, and your liability is greater. The best agents have experience closing deals with banks.
  9. Who else will be working with me?
    An agent is often supported by a team. But the person you hire should do most of the work when choosing the right real estate agent .
  10. Am I obligated to work with the lender, inspector, or other service providers you recommend?
    A “yes” here is a big red flag. Though good agents may have solid recommendations for lenders, inspectors, or other service providers, you should never feel pressured to use their recommendation. It’s illegal for an agent to force you to use “his” lender or other service provider.
  11. How quickly can you get me into a home?
    Hot homes move fast. Ask how the agent handles tours on short notice.
  12. Do you represent buyers and sellers on the same house?
    When one agent represents both the buyer and seller, this is known as dual agency, and it is not a good thing for buyers. If the seller’s agent is trying to get the most money for his client’s home, how can he also be trying to get you the best deal? Our advice is simple: avoid dual agency.
  13. What sets you apart from other agents?
    Look for expertise, not just enthusiasm. You want an agent with experience in your favorite neighborhoods, a proven track record of happy customers, and deep knowledge of any special requirements you might have in your home search.
  14. What if I’m unhappy with your service?
    Most agents get paid when you buy a house, giving them an incentive to close the deal, even if you have doubts. Even if you have complaints after you purchase your home, it may be too late to do anything. Ask your agent if she’s willing to guarantee your satisfaction, and what recourse you’ll have for a bad experience.
  15. Can I see reviews of your past deals?
    Every agent has clients he served well. But the best agents consistently deliver excellent service. There’s a difference between reading a few hand-picked endorsements and getting the full good, bad, and ugly on your agent. We think a good agent should have nothing to hide; that’s why Redfin posts reviews for all agents and partner agents after every deal. While you won’t find that for every real estate agency, you can use sites like Yelp.com to view real customer opinions for an agent you’re considering.
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10 Home Selling Secrets

Home Selling Secret #10: Pricing it Right

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.

Home Selling Secret #9: Half-Empty Closets

clothes-in-closetStorage is something every buyer is looking for and can never have enough of. Take half the stuff out of your closets then neatly organize what’s left in there. Buyers will snoop, so be sure to keep all your closets and cabinets clean and tidy.

Home Selling Secret #8: Light it Up

lamp-in-grassMaximize the light in your home. After location, good light is the one thing that every buyer cites that they want in a home. Take down the drapes, clean the windows, change the lampshades, increase the wattage of your light bulbs and cut the bushes outside to let in sunshine. Do what you have to do make your house bright and cheery – it will make it more sellable.

Home Selling Secret #7: Play the Agent Field

A secret sale killer is hiring the wrong broker. Make sure you have a broker who is totally informed. They must constantly monitor the multiple listing service (MLS), know what properties are going on the market and know the comps in your neighborhood. Find a broker who embraces technology – a tech-savvy one has many tools to get your house sold.pets

 

Home Selling Secret #6: Conceal the Critters

You might think a cuddly dog would warm the hearts of potential buyers, but you’d be wrong. Not everybody is a dog- or cat-lover. Buyers don’t want to walk in your home and see a bowl full of dog food, smell the kitty litter box or have tufts of pet hair stuck to their clothes. It will give buyers the impression that your house is not clean. If you’re planning an open house, send the critters to a pet hotel for the day.

Home Selling Secret #5: Don’t Over-Upgrade

Quick fixes before selling always pay off. Mammoth makeovers, not so much. You probably won’t get your money back if you do a huge improvement project before you put your house on the market. Instead, do updates that will pay off and get you top dollar. Get a new fresh coat of paint on the walls. Clean the curtains or go buy some inexpensive new ones. Replace door handles, cabinet hardware, make sure closet doors are on track, fix leaky faucets and clean the grout.

Home Selling Secret #4: Take the Home Out of Your House

One of the most important things to do when selling your house is to de-personalize it. The more personal stuff in your house, the less potential buyers can imagine themselves living there. Get rid of a third of your stuff – put it in storage. This includes family photos, memorabilia collections and personal keepsakes. Consider hiring a home stager to maximize the full potential of your home. Staging simply means arranging your furniture to best showcase the floor plan and maximize the use of space.kitchen-faucet

 

Home Selling Secret #3: The kitchen Comes First

You’re not actually selling your house, you’re selling your kitchen – that’s how important it is. The benefits of remodeling your kitchen are endless, and the best part of it is that you’ll probably get 85% of your money back. It may be a few thousand dollars to replace countertops where a buyer may knock $10,000 off the asking price if your kitchen looks dated. The fastest, most inexpensive kitchen updates include painting and new cabinet hardware. Use a neutral-color paint so you can present buyers with a blank canvas where they can start envisioning their own style. If you have a little money to spend, buy one fancy stainless steel appliance. Why one? Because when people see one high-end appliance they think all the rest are expensive too and it updates the kitchen.

Home Selling Secret #2: Always Be Ready to Show

Your house needs to be “show-ready” at all times – you never know when your buyer is going to walk through the door. You have to be available whenever they want to come see the place and it has to be in tip-top shape. Don’t leave dishes in the sink, keep the dishwasher cleaned out, the bathrooms sparkling and make sure there are no dust bunnies in the corners. It’s a little inconvenient, but it will get your house sold.smiling-girl-in-hat

 

Home Selling Secret #1: The First Impression is the Only Impression

No matter how good the interior of your home looks, buyers have already judged your home before they walk through the door. You never have a second chance to make a first impression. It’s important to make people feel warm, welcome and safe as they approach the house. Spruce up your home’s exterior with inexpensive shrubs and brightly colored flowers. You can typically get a 100-percent return on the money you put into your home’s curb appeal. Entryways are also important. You use it as a utility space for your coat and keys. But, when you’re selling, make it welcoming by putting in a small bench, a vase of fresh-cut flowers or even some cookies.

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Selling a Home in 2016?

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.

It’s a Seller’s Market …

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.

By contrast, areas where economic prospects are less favorable have never fully recovered from the housing bust. The more lucrative a region’s economic future appears to be, the easier you can expect it to be to sell a home.

… But Mortgages Could Get More Expensive

One key factor in how much sellers receive for their homes is how much buyers can afford. Low mortgage rates have helped fuel price increases in recent years.

But some now fear that with the Federal Reserve having begun a new cycle of rate increases, a move higher for mortgage rates could make homes less affordable.

So far, the tiny quarter-point boost that the Fed made in mid-December hasn’t pushed mortgage rates appreciably higher. Historically, though, tightening has generally led to increased rates on mortgage loans. Sellers need to be prepared for greater difficulty for prospective buyers trying to get financing.

Tax Benefits Still Favor Home Sales

The biggest tax break for ordinary taxpayers is still the exclusion on capital gains for the sale of a personal residence. Single taxpayers can exclude up to $250,000 in gains from the sale of a home from tax, and joint filers get a double-sized exclusion of $500,000.

To qualify, you have to meet a couple of tests. First, the property in question has to be your main home. In addition, to get the full exclusion, you have to have lived in the home for at least 24 months in the past five years.

You can’t have claimed a home-sale exclusion on tax returns for the previous two years. In some cases, partial exclusions are available, but getting specific tax advice from your accountant or tax professional is essential to make sure you’re aware of all the tax implications of a home sale.

Get Help at the Right Price

Most homeowners use a real-estate agent to help market and sell their homes. Historically, the typical 6% commission on home sales was sacrosanct, but some agents have increasingly been willing to negotiate lower commissions for their services.

Flat-fee brokerages have also popped up, offering a fixed cost that sellers can count on that’s often lower than the percentage-based commission would be.

The issue raises a huge debate in the real-estate community, with full-service agents arguing that they fully earn their commissions by bringing in more potential buyers and eventually getting higher sale prices.

Yet with some agencies offering incentives to buyers and sellers that reduce net commission costs, sellers should realize that they have leverage in coming up with a deal that works for them.

Selling a home is a monumental event, and it can introduce a number of complicated financial considerations. Being aware of those considerations and making a plan to deal with them will help the selling process go a lot more smoothly.

 

Article by Dan Caplinger

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Choosing the Right Agent / Broker

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.

15 Questions to Ask an Agent

  1. Is this your full-time gig? How many clients have you served this year?
    Okay, that’s two questions. But both get to the heart of the same issue: an active, full-time agent is more likely to be up-to-date on the market and the law.
  2. How many sales have you handled in my target area or neighborhoods?
    You want someone who knows the local market, with a few recent deals in your target neighborhoods.
  3. When clients are unhappy with your service, what has gone wrong?
    Asking why a client has been a bad fit for an agent can help you figure out if you’re a good fit.
  4. Has a client ever filed a complaint against you?
    If you’re uncomfortable asking, just check with your state’s licensing board.
  5. What’s your fee?
    The seller pays the buyer’s agent using the money you pay for the house, typically 2-3% of the sales price. Since the commission amount is set by the seller and can vary from home to home, you should insist that your agent is upfront about his share; you don’t want an agent who pressures you into a home based on his chances of landing a fatter commission check.
  6. What services do you offer beyond negotiations and escrow?
    Make a list of what you’ll be paying for. Negotiations, paperwork and contingencies are the minimum.
  7. When am I committed to working with you?
    Many consumers start touring homes without realizing this can obligate them to work with the agent, contract or no contract.
  8. How many foreclosure or short-sale transactions have you handled (if applicable in your situation)?
    Distressed properties can be great deals, but the paperwork is complicated, and your liability is greater. The best agents have experience closing deals with banks.
  9. Who else will be working with me?
    An agent is often supported by a team. But the person you hire should do most of the work when choosing the right real estate agent.
  10. Am I obligated to work with the lender, inspector, or other service providers you recommend?
    A “yes” here is a big red flag. Though good agents may have solid recommendations for lenders, inspectors, or other service providers, you should never feel pressured to use their recommendation. It’s illegal for an agent to force you to use “his” lender or other service provider.
  11. How quickly can you get me into a home?
    Hot homes move fast. Ask how the agent handles tours on short notice.
  12. Do you represent buyers and sellers on the same house?
    When one agent represents both the buyer and seller, this is known as dual agency, and it is not a good thing for buyers. If the seller’s agent is trying to get the most money for his client’s home, how can he also be trying to get you the best deal? Our advice is simple: avoid dual agency.
  13. What sets you apart from other agents?
    Look for expertise, not just enthusiasm. You want an agent with experience in your favorite neighborhoods, a proven track record of happy customers, and deep knowledge of any special requirements you might have in your home search.
  14. What if I’m unhappy with your service?
    Most agents get paid when you buy a house, giving them an incentive to close the deal, even if you have doubts. Even if you have complaints after you purchase your home, it may be too late to do anything. Ask your agent if she’s willing to guarantee your satisfaction, and what recourse you’ll have for a bad experience.
  15. Can I see reviews of your past deals?
    Every agent has clients he served well. But the best agents consistently deliver excellent service. There’s a difference between reading a few hand-picked endorsements and getting the full good, bad, and ugly on your agent. We think a good agent should have nothing to hide; that’s why Redfin posts reviews for all agents and partner agents after every deal. While you won’t find that for every real estate agency, you can use sites like Yelp.com to view real customer opinions for an agent you’re considering.
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10 Steps to Home Buying

  1. Start With Your Credit
    Credit reports are kept by the three major credit agencies, Experian, Equifax, and TransUnion. They show whether you are habitually late with payments and whether you have run into serious credit problems in the past. A credit score is a number calculated from a formula created by Fair Isaac based on the information in your credit report. You have three different credit scores, one for each of your credit reports. A low credit score may hurt your chances for getting the best interest rate, or getting financing at all. So get a copy of your reports and know your credit scores. Try Fair Isaac’s MyFICO.com. Errors are common. If you find any, contact the agencies directly to correct them, which can take two or three months to resolve. If the report is accurate but shows past problems, be prepared to explain them to a loan officer.
  2. Set Your Budget
    Next, you need to determine how much house you can afford. You can start with an online calculator. For a more accurate figure, ask to be pre-approved by a lender, who will look at your income, debt and credit to determine the kind of loan that’s in your league. The rule of thumb is to aim for a home that costs about two-and-a-half times your gross annual salary. If you have significant credit card debt or other financial obligations like alimony or even an expensive hobby, then you may need to set your sights lower. Another rule of thumb: All your monthly home payments should not exceed 36% of your gross monthly income. The size of your down payment will also determine how much you can afford.
  1. Line Up Cash
    You’ll need to come up with cash for your down payment and closing costs. Lenders like to see 20% of the home’s price as a down payment. If you can put down more than that, the lender may be willing to approve a larger loan. If you have less, you’ll need to find loans that can accommodate you. Various private and public agencies — including Fannie Mae, Freddie Mac, the Federal Housing Administration, and the Department of Veterans Affairs — provide low down payment mortgages through banks and mortgage companies. If you qualify, it’s possible to pay as little as 3% up front. A warning: With a down payment under 20%, you will probably wind up having to pay for private mortgage insurance (PMI), a safety net protecting the bank in case you fail to make payments. PMI adds about 0.5% of the total loan amount to your mortgage payments for the year. Once you’ve considered the down payment, make sure you’ve got enough to cover fees and closing costs. These may include the appraisal fee, loan fees, attorney’s fees, inspection fees, and the cost of a title search. They can easily add up to more than $10,000 — and often run to 5% of the mortgage amount. If your available cash doesn’t cover your needs, you have several options. First-time homebuyers can withdraw up to $10,000 without penalty from an Individual Retirement Account, if you have one, though you must pay taxes on the amount. You can also receive a cash gift of up to $14,000 a year from each of your parents without triggering a gift tax. Check on whether your employer can help; some big companies will chip in on the down payment or help you get a low-interest loan from selected lenders. You can also tap a 401(k) or similar retirement plan for a loan from yourself.
  1. Find an Agent
    Most sellers list their homes through an agent — but those agents work for the seller, not you. They’re paid based on a percentage, usually 5 to 7% of the purchase price, so their interest will be in getting you to pay more. You need “exclusive buyer agent.” Sometimes buyer agents are paid directly by you, on an hourly or contracted fee. Other times they split the commission that the seller’s agent gets upon sale. A buyer’s representative has the same access to homes for sale that a seller’s agent does, but his or her allegiance is supposed to be only to you.
  1. Search For a Home
    Your first step here is to figure out what city or neighborhood you want to live in. Look for signs of economic vitality: a mixture of young families and older couples, low unemployment and good incomes. Pay special attention to districts with good schools, even if you don’t have school-age children. When it comes time to sell, you’ll find that a strong school system is a major advantage in helping your home retain or gain value. Try also to get an idea about the real estate market in the area. For example, if homes are selling close to or even above the asking price, that shows the area is desirable. If you have the flexibility, consider doing your house hunt in the off-season — meaning, generally, the colder months of the year. You’ll have less competition and sellers may be more willing to negotiate. Be wary of choosing search criteria that are too restrictive. For example, select a price range 10% above and 10% below your true range. Add a 10-mile cushion to the location you specify.
  1. Make An Offer
    Once you find the house you want, move quickly to make your bid. If you’re working with a buyer’s broker, then get advice from him or her on an initial offer. If you’re working with a seller’s agent, devise the strategy yourself. Try to line up data on at least three houses that have sold recently in the neighborhood. If you really want the house, don’t lowball. The seller may give up in disgust. Remember, that your leverage depends on the pace of the market. In a slow market, you’ve got muscle; in a hot market, you may have none at all. There’s no foolproof system for negotiating a fair price. Occasionally it’s best to deal directly with the seller yourself. More often it’s better to work exclusively through intermediaries. Be creative about finding ways to satisfy the seller’s needs. For instance, ask if the seller would throw in kitchen and laundry appliances if you meet his price — or take them away in exchange for a lower price. Once you reach a mutually acceptable price, the seller’s agent will draw up an offer to purchase that includes an estimated closing date (usually 45 to 60 days from acceptance of the offer).
  1. Enter Contract
    Have your lawyer or buyers agent review this document to make sure the deal is contingent upon:

    1. Your obtaining a mortgage
    2. A home inspection that shows no significant defects
    3. A guarantee that you may conduct a walk-through inspection 24 hours before closing. You also need to make a good-faith deposit — usually 1% to 10% of the purchase price — that should be deposited into an escrow account. The seller will receive this money after the deal has closed. If the deal falls through, you will get the money back only if you or the home failed any of the contingency clauses.
  1. Secure a Loan
    Now call your mortgage broker or lender and move quickly to agree on terms, if you have not already done so. This is when you decide whether to go with the fixed rate or adjustable rate mortgage and whether to pay points. Expect to pay $50 to $75 for a credit check at this point, and another $150, on average to $300 for an appraisal of the home. Most other fees will be due at the closing. If you don’t already have one, look into taking out a homeowner’s insurance policy, too. Most lenders require that you have homeowner’s insurance in place before they’ll approve your loan.
  1. Get an Inspection
    In addition to the appraisal that the mortgage lender will make of your home, you should hire your own home inspector. An inspection costs about $300, on average, and up to $1,000 for a big job and takes two hours or more. Ask to be present during the inspection, because you will learn a lot about your house, including its overall condition, construction materials, wiring, and heating. If the inspector turns up major problems, like a roof that needs to be replaced, then ask your lawyer or agent to discuss it with the seller. You will either want the seller to fix the problem before you move in, or deduct the cost of the repair from the final price. If the seller won’t agree to either remedy you may decide to walk away from the deal, which you can do without penalty if you have that contingency written into the contract.
  1. Close the Deal
    About two days before the actual closing, you will receive a final HUD Settlement Statement from your lender that lists all the charges you can expect to pay at closing. Review it carefully. It will include things like the cost of title insurance that protects you and the lender from any claims someone may make regarding ownership of your property. The cost of title insurance varies greatly from state to state but usually comes in at less than 1% of the home’s price. The lender might also require you to establish an escrow account, which it can tap if you fall behind on your mortgage or property tax payments. Lenders can require deposits of up to two months’ worth of payments. The actual closing is often somewhat anticlimactic. It’s a ritual affair, with customs that differ by region. Your lawyer or real estate agent can brief you on the particulars.

Article courtesy of CNN Money

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How Much Home Can I Afford?

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.

Use the Home Affordability Calculator Now

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 most borrowers can comfortably repay.

 That home payment assumes a 30-year mortgage at current rates, and includes 1% property tax and 0.4% for homeowners insurance.

It does not factor in private mortgage insurance, which you’ll owe if your down payment is less than 20% of the purchase price.

You should reduce the maximum target if you have other savings needs (such as retirement and college) or additional expenses (such as child care, private school tuition, health care, or alimony payments).

Courtesy of CNN Money