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How Much Do I Pay Out Of Pocket For That Home Loan?

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Home Mortgage BasicsMortgage Fees A Go-Go

When you are buying a home and using finance, as most people do, there is a whole host of fees at closing that you will have to pay out of pocket. Which is to say, the amount of cash at closing you have to contribute.

Financing Brings Flexibility To Closing

Although there will be costs at a real estate closing, even if you pay all cash, a significant portion of these are generated by the lender. It helps to look at what those costs are and how flexible the lender is in how you pay them.

Even though you will have to make trade-offs to achieve it you can significantly reduce the cash you need to pay at closing when finance is involved. Consider it safe to say that the lender is going to get the fee from you somehow. After all, they are lending money as a business; they have an expectation that the more money they lend, the more they should make to do it.

Borrower Break Down

The most significant part of the cost of borrowing comes in the form of origination fees and points. The loan origination fee goes to paying the commissions and salaries of the people working to sell you the loan.

Points are prepayments of interest on your loan; they range from zero to four points. Not having any points (zero points) will save closing costs for you at the expense of paying a higher interest rate over the term of the loan.

Paying more points at closing will save you from paying higher interest over the long term. Because of the way that interest is calculated the savings will be much higher than the cost of the points.

List Of The Costs Related To The Loan

  • Appraisal fees
  • Home inspection fees
  • Lenders title insurance fees
  • Credit report fees
  • Loan origination fees
  • Prepaid interest points

Other Closing Items That Pile On The Expense

At the time of signing the contract the buyer pays an earnest money deposit, which is usually around one percent of the sale price of the property. Title insurance also comes in owner’s policies.

  • Earnest money deposit
  • Owner’s title insurance
  • Title transfer fees
  • Et cetera

When you finally choose a home to purchase and apply for finance for the property, the lender is obligated to give you a detailed written estimate of your costs within three days. So before you sign the contract you will have an accurate breakdown of the costs that you will have to clear at closing.

Lenders Can Save You At Closing At A Price

A buyer’s costs at closing will likely fall in a range of between two and five percent. However, costs are not fixed at a statutory rate. Part of making the real estate sale happen is finding the funding to make the closing process go to completion.

Lenders can provide a lender credit; an upfront payment at closing that offsets the cost of the many items of closing and can even give you a no-cost closing. This will, of course, cost you in the long term, with a higher interest rate that will be far more expensive over time.

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Prepare To Sell By Lining Up Your Support Team

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Home Selling TipsLine Them Up And Knock Them Down

Ever heard the expression “Get your ducks in a line”? As corny as it sounds it is a great principle to follow when you are preparing to sell a property. Whether you are making a move because of work, moving up to house a growing family, downsizing because of an empty nest or determined to become the local real estate mogul, you need to have a network of professionals and contractors on call to make the transaction go quickly and smoothly.

If you have a buyer who wants to close quickly it can be very enticing. You want the cash price or generous terms that they offer so it is all too easy to fall into a trap of ceding control in the process and putting yourself in a weak negotiating position. That would leave you open to any number of crafty negotiation maneuvers.

When you have a network of all the people who will facilitate closing you help to bring back negotiating power in your favor. So here is a quick run down of some of the most helpful people you can work with to sell that home.

Some Great Members For Your Team

Realtor – You are going to need a good realtor to list and sell your property. This may be the same one who acted as your buyer’s agent when you bought the home in the first place or it might be someone in his or her network. It really comes down to finding a realtor in whom you are confident and with whom you can have a great working relationship.

Real Estate Broker – The broker is always there in the background because they provide the realtor’s network and MLS. It helps if they are someone with whom you can communicate and trust. It helps them if they also act as the listing agent.

Escrow Company – It is normally the seller’s choice as to which company handles the escrow.

Pest Inspector and Building inspector – These are not strictly necessary on the seller’s side as the buyer will be sending their own in when the decide to buy. However, you don’t want to get caught with defects that kill an otherwise great deal. Don’t let issues that could easily be handled before the buyer even sets foot in the property blow the deal for you. Send in the inspectors to save time and effort later.

Attorney – Having a real estate attorney watching from on high will do wonders to make everyone in the process behave. Having an attorney review documents will ensure that all is above board and truly in your best interest.

Photographer or Videographer – There’s nothing like the unfair advantage of having the best pictures and video to catch the eye of the premium buyer. The cost of these services is not so much for the few minutes they spend but the years of training that go into the refined picture composition that really stands out on websites and in printed media. Pictures and video are an investment that sells houses. You can even have a drone fly over and do a spectacular video flyby, which will stand out in even the fanciest high-end real estate markets.

Staging Company – Finally, if there is no furniture in the house, hire a staging company to bring in some furnishings and features that look good. Alternative exchange your shabby old interior for one that will create the ambiance to build the desire to live in your property for the future owners. Get some curb appeal and push it all the way into your home to create a dramatic affect.

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Cloudy Days, Cloudy Titles And The Stormy Weather They Bring

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Title Insurance BasicsWhat Could Possible Go Wrong In Real Estate?

There is an unspoken fear in the back of the mind of every owner, seller and buyer of real estate in the U.S.A. That fear is best expressed as the good old question that catches all risks and has too often been the famous last words of those who undertook dangerous endeavors too lightly: What could possibly go wrong?

Defects In The Title

There is one specific thing of which buyers particularly need to beware: The possibility that some previously unknown party could come forward with a legitimate legal claim to the property that you have purchased, who takes control of your interest, either the whole or in part. That would be very upsetting to say the least.

Real estate, meaning land and the improvements on it, always has a history. Title to a property can have conflicting and minor claims that have been forgotten for any number of reasons and that interest may only come to light years later. It might even happen at the most inconvenient time, such as just after you have taken possession of the property by paying your hard earned savings and taking on huge financial debt.

Professionals On The Lookout

Fortunately the real estate industry is configured to make this as remote an outcome as possible. Selling a home includes title search as a normal part of the process, title search is designed specifically to catch any possible conflicts or a cloud on the title before you close on the sale and to convey the asset free of liens and encumbrances.

Now, there is always the very remote risk that the cloud on the title will not be found. A title search really just reduces this risk to the absolute minimum. To prevent a costly court battle that results from any defect to the title it is standard for the buyer to purchase title insurance to protect himself or herself.

Two Types Of Title Insurance

There are two forms of title insurance. The first is an owner’s policy, which is largely self-explanatory: It assures you retain the wealth behind your interest in the property. The second is a lender’s policy: It protects the interest of any lender, assuming you had to raise finance to buy the property.

If a claim to title is discovered during the search the remedy is to obtain a quitclaim deed, which may require a legal action. When the cloud comes to light after certification by the title company, your title insurance policy will cover the cost of the legal actions to clear the title.

Clouds Are Rare But Expected Occasionally

There is always the possibility that some sort of defect of the title to real estate can arise. Fortunately, the real estate industry has learned over the decades how to prepare for such contingencies and to insure against them.

As long as you follow the standard guidelines, perform the required searches and secure the policies that protect you a cloud on your title will be unlikely or be dealt to ensure that you have everything that you need to enjoy your new home.

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Condo Owners And The Power Of Politics

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homeowners-association-basicsGetting Involved With Your Community Association

Have you ever wanted to get involved in your community and maybe even run for office locally? Well, if you live in a complex that has a homeowners association you might just be in luck! Joining the association board of directors is a great way to learn politics at the entry level.

The Importance Of Active Members

Alternatively, and more likely, it might be a matter of concern that you get involved and take control over your fate by joining in.

  • If you don’t get involved you don’t have the option of influencing the outcome of votes.
  • If you don’t get involved you effectively relinquish your right to control outcomes that affect your pocket book and quality of life.

So, there is that; it’s a matter of practical urgency for most condo board members.

Your homeowners’ association, co-op or condo association, if you have one where you live or in the home you want to purchase, has power over your life to the extent that they can set restrictive rules for your community and they can spend money and increase your HOA fees accordingly.

You do have some ability to respond and to do something about it and that is by getting involved. So the question is: where do you start? The management company operates your HOA on a daily basis but the power resides with the HOA board of directors.

Step 1: Go To Meetings

When you first move into an established community that includes an HOA or condominium association you may not be aware of the politics and the activities of the members. Take time to get to know HOA’s annual report in detail and the structure and the schedule of meetings.

It is always helpful to attend HOA meetings to get an idea of what is going on. From that initial involvement you can determine if you want to become involved further or if you have concerns about plans and future developments.

Step 2: Hatch A Clever Plan

Once you have learned the ropes, developed a feel for the culture of the organization and introduced yourself to the key players it becomes a waiting game. Prepare yourself for the next election and start politicking early.

You can make it fun and friendly but you will likely face entrenched competition. So be prepared to work through a couple of election cycles of lost elections before you win; this is definitely an ambition for the long term.

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Veterans Administration Loans And What They Can Offer

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va-loan-basicsService to country is one of the most honored traditions in the United States. It is only fair that veterans who have sworn to defend our nation are given some rewards in return for the risks and sacrifices they have undertaken. That is the ethos behind the program of government backed home loans offered by the Veterans Administration.

An Actual Benefit For Service

To be eligible for a Veterans Administration home loan you must have served in the Army, Navy, Air Force, Marines or Coast Guard. Active service members are eligible during and after service and Reservists or National Guard also can qualify.

The ultimate proof of service is your DD214 separation form, which states your record and dates of service and, most importantly, your terms of separation; what type of discharge you received at the end of service. If you are currently serving in the military a VA loan may still be a good option but it will also serve you to investigate other options such as FHA and conventional loans as well.

Much like other government backed programs such as FHA the VA home loan program allows a low down payment. In fact you may be able to forgo the down payment completely and, if they agree, sellers can pay many of your costs.

VA Loans Have Exceptional Terms

Your repayments will be lower due to no insurance premium requirement. Private lenders provide the loans and the VA provides a guaranty. The guaranty enables lenders to offer very favorable terms. Loans can be for the purchase of a home or refinancing to get better terms or to cash-out to pay off additional debts.

The VA also offers other benefits to qualifying homeowners such as grants to adapt your home for special needs. You will need to go through the qualifying process of the VA’s eBenefits Gateway and obtain a certificate of eligibility. You can do this part yourself or have your lender fill it out as part of your application process.

Much of what make this program work is the participation of lending institutions and you will need to work with one that handles VA lending. You will pay a VA Loan funding fee as a percentage basis. However you will not have to make a down payment or pay monthly mortgage insurance. It is up to the lender to set the interest rate, points and closing costs. These rates are not uniform so you might get a better deal by shopping around.

If You Are A Vet It Is Worth Checking Out

VA backed home loans are a great way for the nation to thank veterans and for deserving vets to establish homeownership more affordably. If you think that you might be eligible then you owe it to yourself to ask your real estate professional how you can initiate the process. And thank you for your service.

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Does It Pay To Hold Off And Rent For Now?

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Rent vs Buy BasicsFinding Better Quality Questions

For the potential first time buyer there is always the pressure of making a committed decision to buy a home or not: Would it pay to hold off on buying and rent? This has an obvious short answer: It depends on your situation and the local housing market.

As a statement that answer does not hold very much information of value at all, the question deserves an answer that breaks it down into economic, personal financial and lifestyle choices.

The Local Real Estate Market And You

In the long-term owning tends to be less expensive than renting. But first time homebuyers should be concerned with the possibility of real estate price bubbles and overpaying because of property market hysteria. The problem with that is nobody recognizes this sort of bubble market until after it has burst.

If prices are racing upward and it is actually cheaper to rent then it may be better to continue renting. Taken in this way, it may be the simplest situation to analyze because you just need to determine rents versus the monthly cost of owning.

Your Personal Finances And You

If you are considering homeownership and you can determine that it is cheaper to buy your home you will need to determine your personal budget and your credit situation. When you look at what you spend in a month it may surprise you what costs are frivolous and could be reduced. Ask yourself the following questions:

  • Do I need a cell phone and a home telephone?
  • Do I need a premium cable package?
  • How much do I spend on vacations?
  • How much do I spend on eating out?
  • Could my family survive with one car instead of two? How about switching to public transport?

As brutal as these questions sound, they could be the difference between owning your own home renting from to landlord for the rest of your life.

If you have been getting by without careful budgeting then very often you will find that a detailed review and a newfound financial discipline will free up cash to save up for a deposit or pay down debts every month.

Have you reviewed your three credit reports in the last year? Find out what you credit status is, both in terms of your FICO Score and the reported items in your reports from all three agencies.

Your Core Values And You

When it comes to values and lifestyle choices, it is a matter of how settled you are at the present. If you are renting you can give one month’s notice and leave to travel or just change your surroundings when it suits you.

As a property owner, subject to loans, insurance and taxes, you will find that moving either requires listing and selling your home, with all of the stress and cost involved or becoming landlord, either making the effort to manage it yourself or trusting an agency to manage your home on your behalf.

However if you are seeking stability, you have found the community and home that you wish to live in for an extended length of time, ownership will likely be much more appealing. Real estate is expensive to dispose of because of the high financing and closing costs for both buyers and sellers at the point of sale.

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Why Are New Homes So Big?

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Before You Purchase Your HomeA Tale Of Two Markets

If you have your heart set on purchasing a home that is spacious and newly built you are sure to be in luck. The real estate market abounds with large houses of recent vintage. On the other hand, those of us who would prefer to live in something that is compact and modest, yet we yearn for a home that is newly constructed at the same time, might not have such a large selection to choose from in the marketplace. So, that begs the classic question: What’s up with that?

In A Word It Is Economics

Builders and developers live in a reality that is brutally wracked by the oscillations of the market. One year they cannot build homes fast enough to satisfy buyers and the next they have no buyers to be found. So they tend to drive hard for the profits when they can get them. The developers who supply the market have it burned into their experience that they must maximize profits at all times.

That is the force that is behind the supply of the market. How it shapes the market is interesting to see and good to understand if you are house hunting. It helps to know why the market is being fed with a supply that might not match with what the average consumer wants or can afford.

New Build Pricing Is Different From Resale

The majority of home sales in the United States are the resale of properties that have been previously occupied either by owners or tenants. The value of properties is calculated by simple measures such as square footage and a comparison to similar properties that have recently sold in the local market.

Developers face an entirely different set of economics when they are building new homes to add to the market. Quite simply they earn higher profits when they put fewer and larger homes on a given piece of land.

What builders have to pay to build a home gets a little bit complicated. There is the cost per square foot and then there is the fixed cost per unit. It turns out that fixed costs are significant enough to make a difference in the calculations that developers make.

The Breakdown Behind The Method

Those fixed costs include such things as adding utility services and amenities such as heating, ventilation and air conditioning. Most homes have one kitchen that includes a standard range of features and appliances. All of these things are examples of the elements of a home that remains relatively fixed price regardless of the size of the home.

So when you are building homes, it pays you to have less fixed costs. That is why you put twelve 4,000 square foot homes on a plot of land rather than twenty at 2,400 sq. ft. each. This is the practical impact of profit maximization on the modern suburban landscape.

The Meaning For Homebuyers

This appears to have nothing to do what so ever with the accommodation that the median income family can afford in most parts of the United States. It is great if you have the need for a large home. Those larger homes are going to be expensive and more suitable for families than singles or more mature buyers. If you have an empty nest you may find that it is more difficult to find smaller detached homes and those that are available will likely be older and command a premium.


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How to Get Help Purchasing Your First Home

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Home Purchase BasicsMore Help Than The Average Mom And Dad Can Give

If you are not familiar with the ins-and-outs of real estate in its central role to the American Dream you could be forgiven for thinking that homeownership is out of reach of the average person.

Conventional practice without any help is to have a deposit of twenty percent, a host of professional services and agents as well as records and printouts of every detail of your life to date. It sounds exhausting and overwhelming. Fortunately there is a reason that homeownership is part of the American Dream. You will find it is actually still surprisingly accessible, once you start to dig into the details.

Homeownership Gets A Helping Hand

If you have never owned a home before but you have a job history, been renting your home and not too much debt, you can get into home ownership with the help of one of several government programs that are designed with the first time buyer in mind. You can call upon programs such as FHA form the Federal Housing Administration. If you have served honorably in the military the Veterans Administration has an excellent home loan program for veterans.

These programs are designed to get you into a home, even if you don’t have a huge pile of cash for the deposit. You can make a small down payment and just cover the costs of closing. This will save you thousands on what you might otherwise be expected to pay to get your hands on the door keys.

Low down payments on FHA loans are possible because of private mortgage insurance; VA loans have no such requirement (making them a great deal if you can qualify). PMI is an added cost. However, even including it, you may find that it is less expensive than renting an equivalent property.

Easy To Use Lending Practices

Your lender will also help to keep it organized by handling the PMI payments and property taxes as part of your monthly payment. PMI is due monthly but property taxes are normally due twice a year. Your lender sets aside the amount so that you don’t have to worry about calculating and saving the monthly share of a semi-annual payment.

When you start to look into the issues you will find that you need to get in good enough financial shape to make payments and clear off any excessive credit balances before you begin house hunting. You will need to get pre approved for finance and then find a realtor or broker that you want to work with to find your first home.

Once you are at that point the professionals will help to get you through the biggest purchase of your life to date. You don’t need to feel overwhelmed by the process because your agent and lender, as well as the government program that you join, will do all of the heavy lifting for you.

Dream The American Dream And Start Saving Up Today

Given and reasonable income stream and not too much personal debt it is still very possible to get your own piece of the American Dream. Government backed loan programs, private mortgage insurance and tax payments through your lender will take the burden off you as you become a new homeowner. Speak with your local real estate professional today and get ready to get enthusiastic about joining in the adventure of homeownership in America.


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The Front To Back Fix Up Strategy

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Home Selling TipsThe Good Karma of Instant Curb Appeal

When you buy a home with the intention of fixing it up to realize the full value you have to make choices about how much work you should do yourself. You need to proceed based on a plan and there are a few things that you can do to make the most impact as rapidly as possible.

After all, if you intend to stay you need to make it look homey and presentable when the in-laws arrive to inspect (always sooner than you would like). If you are hoping to flip it for a quick profit then you want it to be presentable pronto for possible buyers.

There is one principle in DIY rehabilitation that will help you get there and keep the stress manageable too. You should work from the front to the back of the property to first get the curb appeal pumped up. You should get going by clearing up the front and start working your way to the back.

Preparation By Demolition

Get the demolition and clear-out out of the way as a preamble to the main event. Any project like fixing up a home will require a little bit of planning or a lot and you will get much further faster with a clear site and a simple plan. That is why it is a great idea to base that plan o the principle of starting at the curb and working your way back.

That is not to say that you can do this without some preparation. Before you start at the curb you will need to take care of all of the demolition and junk removal. Get the heavy, dirty moving and smashing out of the way and then you are clear to push to the back fence.

Planning Is Everything

Even before you commit to buying a fixer-upper you should have a plan of action. That is the only way that you can have enough information about what it will cost and how long it will take. You definitely need that for your own estimates and most likely your bank will want to know what you intend to do as well.

So, to avoid becoming overwhelmed at the thought of turning the neighborhood dump into the envy of the block, get a plan and make it simple. For residential property rehabilitation demolish dismantle and remove all of the junk. Once it is cleared out start at the curb at the front and work your way through the home and out to the rear boundary, creating charm and sparkle as you go.

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Is It Safe To Start Hunting For A Home Yet?

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Before You Purchase Your HomeTiming Is A Personal Thing

The right time to hunt for a home is when you are ready. That is a different time for everyone. The time that you are ready is when it is a point in your life to change your home or to buy your first home. That is a personal issue and a financial one; the two sides are interrelated.

The state of the economy and the housing market are things that cause tremendous fascination and intimidation. The certainly do have an impact on whether it is time to purchase a home or not. But it still comes back to how it impacts you as a potential buyer, this is why:

The State Of The Nation And The Markets

If the economy is going to cause you to lose income or lose your employment altogether it can be extremely traumatic and put your home at risk. This was the cause of many foreclosures in the last downturn.

The whims and surges in the housing market can also be a real hazard to the homebuyer. In the mid 2000s when prices soared and credit was easy many buyers were roped in on the belief that huge obligations to adjustable rate financing could be overcome as prices continue up and refinancing would be the way out of future high payments.

Conversely the downward turns in the housing market present opportunities to those who are positioned to take advantage. When the housing market collapsed in the late 2000s investors who had piles of cash to spare had a field day investing in properties at discount prices.

The personal financial cycle is never the same as that of the economy and the housing market. Unless you are a fictitious person that is exactly on the average, and nobody really is, you will have some factors in your personal situation that make timing in home buying a very specific and personal experience.

Three Questions For Home Buyers

The true way to determine the right time is first, to ask yourself if it is a personal choice that you would favor? Is it the right time to be tied into the obligations of home ownership and would you thrive in the lifestyle? Second, are you formally in the right financial situation to qualify for home homeownership in the community of your choice? The way to determine this factor is to speak to your bank or finance company to find out what and how much you can get pre-approval for.

Finally, can you find a suitable home in which to settle? This is down to the affordability of the market in the location where you would like to settle. Alternatively, if nothing is in your price range it might be time to cast a wider net. You’ve already decided that you want to buy a home and assuming you are pre-approved for something then it is just a matter of an affordable market.

The Short Answer To The Question

The answer to the question of whether it is safe to start hunting for a home is that it depends on you as much as anything else. As long as prices grow steadily in line with inflation there is probably not a real estate bubble to worry about. So, the true focus should be on your financial condition and then matching your pocketbook to the marketplace for homes where you would be happy to live.

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