| Q: When I start visiting homes, what should I be looking for the first time through?
A: The house you ultimately choose to call home will play a major role in your family's life. A home can be an excellent investment, of course, but more importantly, it should fit the way you really live, with spaces and features that appeal to everyone in the family. At each home, pay close attention to these important considerations:
Is there enough room for you now, and in the near future?
Is the home's floor plan right for your family?
Is there enough storage space?
Will you have to replace the appliances?
Is the yard the size that you want?
Are there enough bathrooms?
Will your present furniture work in this home?
Q: Is an older home as good a value as a new home?
A: It's a matter of personal preference. Both new and older homes offer distinct advantages, depending on your unique taste and lifestyle. Newer homes generally have more space in the rooms where today's families do their living, like a family room or activity area. They're usually easier to maintain, too. However, many homes built years ago usually offer more total space for the money, as well as larger yards. Taxes on some older homes may also be lower. Some people are charmed by the elegance of an older home but shy away because they're concerned about the potential maintenance costs. An older home often has features or workmanship that you would not be able to afford to build into a new home.
Q: Do I need to bring anything along when I am looking at homes?
A: Its recommend having something to write on and pen for note taking and a flashlight for seeing enclosed areas. Although if you are viewing homes with us we will provide you with a feature sheet of each home with note taking space and will have a flashlight available for you to use. Be prepared to "snoop" around a little. After all, you want to know as much as possible about the home you buy. Sellers understand that because their home is on the market, it will be looked over pretty thoroughly. If you need to go back to a home for another look, we will be happy to schedule a second showing. Be sure to ask any questions you have about the home, even if you feel you are being nosy. You have a right to know and we will help you find the answers.
Q: What questions should I ask my agent about each home that I look at?
A: As a rule of thumb, ask any questions you have about specific rooms, features or functions. Pay particular attention to areas that you feel could become "problem" areas-additions, defects, areas that have been repaired. And above all, if you don't feel your question has been answered, ask until you do understand and are satisfied. In most cases, we will be able to provide you with detailed information or we will get the information.
Q: What should I tell my agent about the homes that I look at?
A: Tell them what you liked and didn't like about the home you saw. It is important for to really get a feel for what you're looking for in a home in order to find your dream home. Don't be shy about talking about a home's shortcomings. Was the home perfect except for the carpeting? Let them know that, too!
Q: What things should I think about when I'm deciding which community I want to live in?
A: Good services, nice parks and playground facilities, convenient shopping and transportation, a track record of sound development and good planning-these are just a few considerations that are important to many people when they choose a community in which to live. Travel time between work, family, friends and social activities that you are involved in is also an important consideration.
Q: Where can I get information about local schools?
A: We will usually be able to tell you where the local schools are, and can provide you with valuable information about school districts and more. School reports can be found on the web for each school district in the Middle Tennessee area by visiting www.tennesseeanytime.org/education.html.
Q: How can I find out what homes are selling for in a given neighborhood?
A: Home sales are a matter of public record at the local Assessor's office or the County Clerk's office. However, a better and easier way for you to get this information is click here to get our online market analysis sent to you or to ask your agent if you're interested in a particular home. They will be able to provide you with a list of comparables-sales prices of homes in your area that are roughly the same size and age as the home you're considering. Although there will certainly be some differences between the homes-the house next door may have an extra bedroom, or the one down the block may be older than the one you're looking at-it's a good way to evaluate the seller's asking price.
Q: How do I determine the amount of my initial offer?
A: There is really no rule to use in calculating a realistic offer. Naturally, the buyer wants the best value and the seller wants the best price, but negotiations can be influenced by many factors, such as seller who may be changing jobs and wants to sell quickly, or a buyer who really wants a specific home.
After you've looked at the home's features, asked questions, checked comparables, and discussed this information with your agent, you should have a good idea of what the home's value is in the current market. A critical element to successful negotiation is recognizing how well the house is priced relative to the market and making a reasonable initial offer. A well priced home or one that is new on the market and that is receiving a lot of attention from prospective buyers will dictate an aggressive initial offer, while a less well-priced house will dictate a reasonable offer and a slower paced negotiation strategy.
Most buyers and sellers negotiate on price, with both sides "giving" a little until both agree. When the price is agreed upon, the paperwork will be signed by both parties. At that point, you typically will begin the process of arranging for an inspection and finalizing your mortgage application.
Q: What is a mortgage, and what are the benefits of different kinds of mortgages?
A: Simply put, a mortgage is a loan that a home buyer obtains directly from a lender to purchase real estate. The mortgage is a lien on the property that secures a promissory note (promise to repay the debt) that states the terms of the loan, including the interest rate, and the number of payments.
The most popular mortgages available to home buyers today can be divided into two general categories: those which offer fixed interest rates and monthly payments, and those where one or both of those factors are adjustable.
Fixed rate/fixed payment loans are more traditional, and remain the most popular home financing method, currently accounting for about two-thirds of all residential mortgages. Their advantages are well-known: You always know what your monthly payment and interest payment will be, so your basic housing cost will remain unaffected by interest rate changes until the mortgage is paid off.
Mortgages that entail flexible rates and/or payments have grown in popularity during period of high interest rates and/or rapidly rising home prices. Many, including ARMS (Adjustable Rate Mortgages), offer lower-than-market interest rates that allow buyers a measure of affordability unavailable in fixed-rate loans. The tradeoff may be higher interest rates and higher monthly payments later on.
Q: What are the different types of lenders, and how do I choose the right one for me?
A: Before someone lends you the money to purchase your home, they'll want to know a lot about you. And you're entitled to know as much as you can about them, too.
It's important because getting a mortgage is not just a one time signing of documents, a handshake and a check. You will be depending on your lender to fund your loan as promised, on time, and over the life of the loan, to keep good payment records, pay your taxes and insurance (if included in your monthly payment) and many other continuing services.
Look for a lender that has the authority to approve and process your loan locally. It's easier to obtain information on the status of your loan and discuss conditions directly with a person locally. It's important that your lender know home values and conditions in your local area. And while biggest doesn't always mean best, financial stability, reputation, qualifying procedures, and unique programs are what they offer home buyers.
Q: Are there any mortgages especially designed for first-time home buyers?
A: Today, first-time home buyers enjoy a number of mortgage options that make purchasing a home more affordable by minimizing down payments and keeping monthly payments as low as possible during the early years of the loan.
Most ARMS feature an interest rate that is often below market for the first year, and may only rise gradually after that.
VA and FHA insured loans call for extremely low down payment (0-5% of the purchase price), and often offer a below market interest rate. Similarly favorable terms can also be arranged with the help of Private Mortgage Insurance or PMI.
Finally, first timers who can find a cooperative seller or third-party investor can look into such non-traditional financing methods as a lease/buy arrangement.
Q: Can I get an FHA or VA mortgage?
A: Just about anyone can apply for an FHA-insured mortgage through banks and other lending institutions. They are particularly well-suited for buyers of moderate income; the low down payment requirements (as low as 3% of the purchase price) are matched by a relatively low maximum mortgage amount.
Similarly, VA-guaranteed loans often require no down payment for up to four times the amount guaranteed by the VA. These loans are reserved for either active military personnel or veterans, or spouses of veterans who died of service-related injuries.
If there is a downside to these loans, it?s the qualifying process. Though you apply for government-insured financing through a lending institution, the Federal Housing Administration or the Department of Veteran Affairs must insure or guarantee the loan and may require specific documentation or procedures not necessarily required by conventional financing. That may take more time than is generally required for conventional mortgage approval. Additionally, FHA-required insurance must be added to your payment. Make sure the lender you select has approved authority by each of these agencies to ensure a quicker loan process.
Q: How much of a down payment will I need to buy a home?
A: A down payment of 20% has been the benchmark for conventional financing, but today, many options are available, some requiring as little as 0% down. For buyers who qualify for conventional financing but can't handle the high down payment requirements, lenders offer this financing with PMI, or Private Mortgage Insurance. Designed to protect the lender against default by the borrower, PMI allows you to obtain traditional financing with a down payment significantly lower than the standard 20%. By using PMI you may be able to get a fixed rate or adjustable rate mortgage by putting as little as 5% down.
As with an FHA-insured loan, you must pay premiums for PMI coverage, the amount of which are determined by the lender. Moreover, PMI premiums are often lower than FHA insurance, and may be paid as part of your monthly mortgage payment, in annual installments, or in a lump sum at the time you obtain the loan. Your mortgage expert can help you determine which down payment option is right for you and your budget.
Q: How does the lender determine the maximum mortgage I can afford?
A: The three primary areas lenders examine in determining the size of mortgage you can handle include your monthly income, non-housing expenses, and cash available for down payment, moving expenses and closing costs. There are a number of different ways lenders interpret these variables to estimate your mortgage capacity. The most popular method is detailed here. Most lenders feel a family should spend no more than 28% of its gross monthly income on housing costs, including the mortgage, insurance, and real estate taxes. Also, these housing costs plus your long-term debts (car loans, student loans, etc.) shouldn?t exceed 36% of your income. If your down payment is 10% or lower, most lenders will tighten these restrictions even further. Some lenders may also include home maintenance costs and utility payments in their calculations.
Q: What are the steps involved in the loan process?
A: The information that your lender needs is not much different than what is needed when you apply for a major credit card: names and addresses of your employer and bank account numbers and balances. The lender will also need other financial information such as installment payments, auto loans, charge cards, and department store accounts. The location and description of your property are also required. Your lender will verify this information with your present and past employers, order a routine credit report on your current and past accounts, and order a professional appraisal of the property you're wanting to purchase.
Allow yourself two to four weeks to complete the application process. Then once all of the verifications have been completed, your lender will underwrite and approve the loan. Overall the time from the date of application to the date of move-in is generally four to five weeks for conventional loans and five to seven weeks for FHA and VA loans.
Q: What are "Points"?
A: In real estate, the term "point?\" refers to 1% of the total mortgage loan amount. Buyers often pay lenders this supplemental fee, calculated in points, to get a better interest rate on a particular mortgage.
For instance, a lender may offer you a choice of two 30-year mortgages: the first at 10% with no points, and the second at 9-1/2% with an additional three points. If the loan is for $100,000, those three points will cost you an extra $3,000 up front-but you will get a payback of significantly lower monthly payments ($840.85 vs. $877.57) for the lifetime of the loan.
Many lenders will advise you to pay the points for the better rate if you can afford it, especially if you plan on keeping the home for more than a few years. Like interest, the money you pay for points may be tax deductible, and the investment may pay for itself through savings generated by lower monthly payments. We suggest you call your tax preparer.
Q: What is APR, and how is it calculated?
A: The Annual Percentage Rate is a calculated rate of interest for a loan over its projected life. This rate includes the interest, al points (which are considered prepaid interest), mortgage insurance, and other charges associated with making the loan that the lender collects from the borrower. The APR is calculated by a standard formula that all lenders use. This enables the borrower to comparison shop between lenders and/or loan products.
Q: What is a good faith estimate?
A: Your lender or loan agent must provide you with a good-faith estimate within three days of your application. This is the information you need to make a fair and accurate judgment when shopping for a loan. Your estimate is a written document that shows all the costs that can be estimated in advance by the lender. You need this information so there are no surprises on the day you close your sale on the property to be purchased. You will be expected to pay closing costs.
You should review all costs, know which are non-refundable in the event your loan is not approved, and be prepared to pay outstanding fees at closing. You may also want to compare these costs to those charged by other lenders when shopping for your home plan.
Q: What does my monthly mortgage payment include? And what does PI and PITI stand for?
A: The bulk of your monthly mortgage payment goes toward paying off the principal and interest of your loan. (You may hear lenders refer to this as "PI", for Principal and Interest). In addition, most lenders require that you pay a sufficient amount to cover your local real estate tax, plus your homeowner's or hazard insurance. (You may hear this "total" payment referred to as "PITI", or Principal, Interest, Taxes & Insurance.) This amount is placed in an escrow account, from which your lender then pays your tax and insurance bills as they come due. When shopping for a loan, it is important to ask the lender if the monthly payment you are being quoted is PI or PITI.
Q: How can I find out what my property tax bill will be?
A: Usually, the total amount of the year's property taxes is included on the listing information sheet for the home you're interested in. Remember, tax rates change from year to year, so the previous year's bill should be considered simply as a "ballpark" figure of what you would pay. For a more precise projection, call the local assessor's office for assistance, or simply ask us.
Q: What is the difference between pre-qualifying and pre-approval?
A: Pre-qualifying for a mortgage up to a certain amount is an increasingly popular practice among buyers who don't want to worry about going through the approval process after they've found the home they want. It's a verbal exchange in which the lender tells you in advance approximately how much money the buyer is able to borrow, based upon the information you provide the lender on your debt and income. A pre-approval is the best thing to get from your lender prior to house hunting so you will have a better understanding of what you can afford. A pre-approval can also help in the negotiating process. |
