Our Real Estate Blog
Buying a house is arguably the most expensive purchase most people will make in their lives. With real estate prices steadily rising year after year, many Americans are finding ways to save on housing.
At the same time, rent prices too are increasing, especially around metro areas where many young Americans are entering the workforce. With costs rising and wages stagnating, it can be hard to find an affordable place to live while still building equity that can be used later on down the road.
One option that many Americans are considering is the fixer-upper route. However, it takes know-how and a lot of hard work to make this method a good choice to save you money. In this article, we’ll tell you how to make certain buying a fixer upper is a good idea and what costs you can expect along the way.
Adding up the costs
Buying a house that needs work means you’ll need to spend a good amount of time calculating costs and getting quotes from professionals. Even if you’re familiar with several home maintenance tasks, there are some jobs that are safer if left to the pros. This isn’t only a matter of physical safety, however. If you start a job that you aren’t qualified to finish you could end up paying much more than if you had just hired a licensed professional to do the job in the first place.
When estimating costs for reparations and renovations, aim high. It’s better to plan for it to be more expensive and have more left over than to underestimate your projects and go over budget.
Get an inspection report
If you aren’t sure whether or not you want to go through with a deal, make sure you have an inspection contingency clause in your contract. This will enable you to back out if the home inspector makes you aware of any costs that you weren’t told about by the seller.
Don’t forget added costs
There are several closing costs you’ll be responsible for as a buyer. Make sure you keep tabs on how much you can expect to spend closing on the home. If you’re going through a mortgage lender, they are required to give you an estimate of closing costs.
Once you know the purchase price of the home and the closing costs, make sure you account for other aspects of your renovations, such as getting required permits.
If you do plan on taking out a loan to cover the cost of renovations, be smart with how you get and pay back that money. One option is the FHA 203(k) loan or renovation loan.
Renovation loans help you save on closing costs and simplify the lending process by giving you one loan that accounts for the cost of the renovations and of the home itself.
Obtaining a home loan is a must for most homebuyers. However, there is a lot to think about to ensure a homebuyer can secure a loan that matches or exceeds his or her expectations.
Some of the key questions to consider about a home loan include:
1. What is a home loan's interest rate?
It is paramount to understand a home loan's interest rate, along with any associated loan fees. That way, a homebuyer will know exactly how much he or she will be paying over the life of a home loan.
If a homebuyer chooses a fixed-rate mortgage, he or she can lock in an interest rate for the duration of a home loan. This means a homebuyer will pay the same amount each month. And in many instances, a fixed-rate mortgage can be paid off early without penalty.
On the other hand, a homebuyer may prefer an adjustable-rate mortgage. With this type of mortgage, a homebuyer may receive a lower interest rate initially that rises after a set period of time.
Compare and contrast the different home loan options and their associated interest rates. By doing so, a homebuyer can make an informed home loan decision, one that serves him or her well both now and in the future.
2. Does a home loan require a minimum down payment?
Ask a lender about whether there is a minimum down payment required as part of a home loan agreement. Typically, a homebuyer will need to pay at least a small portion of a home's price to secure a home loan, and it certainly helps to have this information available before you start evaluating available residences.
In addition, it may be worthwhile to save as much money as possible prior to starting a home search. With money at your disposal, you may be better equipped than ever before to make a large down payment, thereby reducing the amount that you'll need for a home loan. Plus, you may even be able to boost your chances of getting a favorable home loan interest rate.
3. Will I need to provide legal documents to obtain a home loan?
Lenders will require you to provide proof of your income and assets, W-2 statements and other legal documents to finalize a home loan agreement. If you stay organized and have these documents readily available, you should have no trouble providing them to a lender as needed.
Overall, the home loan application process may vary from several weeks to many months. The time it takes to secure a home loan can be stressful, and if you need extra help along the way, it never hurts to reach out to a real estate agent.
With a real estate agent at your side, you can streamline the process of buying your dream home. This housing market professional can offer expert tips throughout the homebuying journey and ensure you can discover a great house at an affordable price.
Take the guesswork out of securing a home loan – consider the aforementioned questions, and you can move one step closer to getting the financing you need to obtain your ideal residence.
Making an offer on a home you’d love to buy is arguably the most stressful part of the buying process. You’ll be worrying about making the right offer, whether you’ve presented yourself in the best possible light, and just how much competition you’re up against.
Today we’re going to help you alleviate that anxiety by giving you the most common real estate offer mistakes to avoid, and show you how you can increase your chances of getting the perfect home for you.
1. Do your research on the house
You have a lot of research to do before making an offer on a home. You’ll want to know the price the home formerly sold for and improvements that have been made and that will need to be made if you move in.
It also helps to know the seller’s situation. Are they on a deadline and moving out-of-state? If so, they might be tempted to take one of the earlier offers they receive.
2. Know your own financial limits
Before you ever make an offer you’ll need to know how much you can spend. This isn’t just a matter of offering the maximum amount you’re preapproved for. You’ll have to factor in moving expenses, final payments on your last rent or mortgage, changes in utility costs, and more.
3. Don’t offer your full preapproval amount
Sellers who know that you’ve offered your maximum preapproval amount may be wary of selling since they know you lack room to negotiate your budget and therefore might have a higher chance of backing out of the offer. They might favor other buyers who have room to negotiate and account for unexpected changes in their budget or of rising interest rates.
4. Avoid aggressive negotiation
We know the stakes are high for everyone involved in making a real estate deal. However, sellers are more likely to accept the offer of someone they trust and like over someone who seems to be trying to gain leverage.
Always be cordial with your offers and support them with numbers--explain to the seller why you chose the number you did, so that they can understand your reasoning.
5. Don’t attempt to gain leverage by waiving a home inspection
By law, you are allowed to have a home professionally inspected before purchase. Waiving this right is sometimes misconstrued as a way to tell a seller that you trust them and don’t want to cause them any unnecessary headaches.
The reality of the matter is that if you truly do want to own their home, sellers understand that you want to know what you’re buying.
6. This isn’t the only house you can be happy in
Hunting for a home is hard work. Once you find one that seems perfect for you or your family, it can seem like everything depends on your offer being accepted.
However, the fact is there are endless houses on the market, and next week a new one could be put up for sale that is even better than the home you’re hoping for now.
If your offer isn’t accepted and you don’t feel comfortable committing to a higher price, move on to the next house knowing that you made the best decision under the circumstances.
Let's face it – the mere thought of informing family members about your decision to pursue a new home may cause your blood pressure to rise. However, there are many reasons why it often is beneficial to notify family members about your decision to kick off a search for a new residence. These reasons include:
1. You can identify and address potential homebuying hurdles.
Your family typically has your best interests in mind. As such, family members can help you plan ahead for the homebuying journey and resolve any potential conflicts.
For example, family members can help you analyze prospective home financing options. They may even be able to put you in touch with local banks and credit unions that can help you get pre-approved for a mortgage. Then, once you have home financing in hand, you can enter the real estate market with a homebuying budget at your disposal.
2. You can gain homebuying insights that you may struggle to obtain elsewhere.
Family members who previously bought homes may be able to provide you with property buying insights that you probably won't receive elsewhere. With these insights, you'll be better equipped than ever before to understand the housing market and make the best-possible homebuying decision based on your individual needs.
Of course, family members may be able to keep you informed about new houses that become available in your preferred cities and towns too. Because if family members know where you want to find a home, they can help you accelerate your property search.
3. You can receive plenty of support throughout the homebuying journey.
Your family is there for you during good times and bad. If you inform family members about your decision to pursue a new home, they can provide you with comprehensive support throughout the property buying journey. As a result, family members can work with you to help you achieve your desired homebuying results in no time at all.
When it comes to getting help in your quest to discover your dream house, you may want to hire a real estate agent as well. If you have a real estate agent at your side, you can receive expert assistance as you proceed along the homebuying journey.
A real estate agent is committed to helping you find a great home at a budget-friendly price. First, he or she will meet with you and learn about your homebuying criteria. A real estate agent next will craft a personalized homebuying strategy and notify you about new homes that become available that match your property buying criteria. And once you discover your dream residence, a real estate agent will help you put together a competitive offer to purchase this house. Lastly, if your homebuying proposal is accepted, a real estate agent will help you finalize your home purchase so you close on this residence and move into your new house.
Take the guesswork out of buying a house – hire a real estate agent today, and you can seamlessly navigate the homebuying journey.
Closing costs are usually an unavoidable part of buying a home. While there are ways to reduce some closing costs and fees, they are an expense you will likely have to consider when it comes time to save for a home.
On average, buyers can expect to pay between 2 and 5 percent of the purchase price in closing costs and fees.
In this article, we’re going to break down those costs and talk about some ways to plan for, or limit, the fees associated with closing on a home.
A breakdown of closing costs
Most closing costs in a real estate transaction are paid for by the buyer. When getting approved for a mortgage, your lender is required to provide you with an estimate of the closing costs. This is called a “Closing Disclosure statement” which overviews the details of your loan.
Different lenders will charge varying amounts in fees. Some are even willing to waive certain fees. But, we’ll discuss that later.
For now, let’s focus on the closing costs buyers typically have to pay:
Attorney fees - a flat-fee or hourly rate depending on the attorney
Origination fees - an upfront fee charged by the lender for processing your mortgage application
Prepaid interest or discount points - a payment for the interest that will accrue on your mortgage from the time you close until your first mortgage payment is due
Home inspection fee - the fee that a professional home inspector charges to inspect a home
Escrow deposits - Usually split with the seller, this is the fee charged by an escrow agent
Recording fees - fees for legally recording the new deed and mortgage
Underwriting fees - fees paid to the lender for researching your mortgage case and determining whether or not to approve your application
These are just some of the many fees that can be due upon closing on a home. Depending on where you live, which lender you choose, and the type of mortgage you secure, your closing costs will vary, so it’s a good idea to shop around for a lender and mortgage type with reasonable closing costs.
Reducing closing costs
Some lenders offer no-cost, or low-cost mortgages. However, these savings often come with a higher interest rate which, over the lifespan of your loan, can cost you more in the long run.
You should also be aware of the different loan types that you may be eligible for. FHA loans, USDA loans, and VA loans are all designed for buyers hoping to make lower down payments on their home.
Each loan type provides different amounts due at closing. Fortunately, your mortgage lender will be able to give you an estimate of costs for each loan type.
Want to get an estimate of the closing costs you’ll have to pay when you buy a home? You can use this online calculator to see an average.