Advice For Buyers
Owning vs. Renting
Benefits of Renting – More flexibility in length of occupancy and location of residence, landlord is responsible for most repairs and maintenance
Benefits of Ownership – Build Equity through gradual principal reduction and appreciation, tax advantage of being able to deduct mortgage interest and property taxes from income taxes. Tax benefits alone may make more financial sense than renting depending on your income level and tax bracket. If you rent your rent may be increased over time, but if you finance your home with a fixed interest rate loan then your payment will remain exactly the same for the term of the loan, usually 30 years.
Determine Your Needs
- Narrow your search by separating reality from fantasy.
- Create a basic requirements list of true needs and a wish list of wants.
- Needs = number of bedrooms and bathrooms for size of family, one story house if accessibility is a factor, good schools for children, enough parking for vehicles
- Wants = pool, updated design, large rooms, extra space, fancy landscaping, etc.
Consult a Lender
- Mortgage lenders will want to review your credit report.
- Equifax, Experian, and Trans Union sell your credit report to banks so they can review your loan applications.
- Credit Score –indicates your ability and willingness to repay a debt based on your record. Your credit score will be an important factor in determining whether you are approved for a loan.
- Mortgage Brokers will help you find a loan that you qualify for
- A written pre-approval letter from a lender will impress a seller and help avoid the disappointment of trying to purchase a home that you cannot a afford. Costs for pre-approval are generally low and are often included in closing costs.
Building Your Credit
- Pay your bills on time.
- Always pay at least the minimum balance due.
- Keep overall balance low.
- Don’t apply for too many loans or credit cars.
Affordability and Costs
- Down payment generally ranges from 3% to 20% of the purchase price. If you put less than 20% down, then you may be required to have Private Mortgage Insurance (PMI Homeowner’s Insurance)
- Closing Costs generally range from 2% to 7% of the purchase price. It includes points, taxes, title insurance, financing fees, escrow fees, and other settlement costs. The lender will give you an estimate of total costs after you are approved.
- Purchase of major appliances and other home furnishings
- Organize Your Search
- Highlight maps of area of interest.
- Keep a file of properties of interest.
- Use a pen and notepad as you search.
- Use a digital camera and/or video camera to take many photos of properties and neighborhood.
- Learn as much as possible about your area of interest: School info, crime statistics, shopping, parks & recreation, transportation, employment, politics, and any other info that will be pertinent to life in your future home.
Making an Offer and Closing Escrow
- Your real estate agent should guide you through most of this process, but be aware of the following:
- Include inspection and financing contingencies in written offer.
- Have home inspected by professional inspector.
- Request a second walk through prior to the close of escrow to make certain no major changes have taken place.