Home Buyer Resources
Buying a Home in a Buyer's Market
When is the best time to buy a house? With many markets reporting an abundance of homes for sale, and interest rates remaining at near historic lows, now might be one of the best times in recent memory. While today's real estate market does offer advantages to buyers, consumers still need to be savvy in order to get the best deal they can.
Following are some things that the professionals at Coldwell Banker® Real Estate Corporation think every homebuyer should keep in mind:
Don't Try to Time the Market. When home prices are lower, it is very tempting for potential buyers to try to wait as long as possible in the hopes that prices will decline even further. This strategy can be detrimental because when there is high inventory, smart sellers price their homes properly - not according to past sales but according to current conditions - so their homes will sell in a timely fashion. Once a home is priced to what the current market will bear, buyers will make offers.
Shop Around. But Don't Wait Too Long. The National Association of REALTORS reports that, on average, homes stay on the market for 7.5 months. The increased inventory gives homebuyers a great opportunity to compare homes that meet their needs. However, this does not mean that homebuyers should procrastinate. If you find a house you love, put in your bid and negotiate. Don't provide an opportunity for another buyer to make an offer.
Watch Mortgage Rates. Studies such as the 2006 Coldwell Banker® Homeownership in America Index revealed that the majority of people move based on lifestyle changes such as new job, marriage, divorce or family expansion. Pay attention to the mortgage rates and recognize that buying a new house will likely result in a change in mortgage rates. How much? A monthly payment of a 30-year fixed 5.875 mortgage rate on a 300,000 loan is $1,774.61. The monthly payment at today's 6.381 rate is $1,872.79, representing a $98.18 increase.
Negotiate on the Incentives. Sellers eager to move their homes may offer you a variety of incentives such as cars, trips, and even credit card bill payment. If you accept an incentive, make sure it makes sense for you. Instead of having your bills paid, you may opt to have the seller renovate the master bathroom or install new flooring. Of course, you can always ask the seller to simply deduct the amount in question from the list price.
Planning for Home Maintenance Costs
You don't think about future maintenance costs when buying a home, but you should. Whether buying an older home or a newly constructed home, equipment can be faulty and costly to repair.
Usually a home's purchase price can be used to project maintenance costs. The recommendations for annual maintenance costs range from 1.5 to 4 percent of the home's original cost. While this is not always true, especially when the purchase price of a home is three-quarters of a million dollars, it is a good rule of thumb for the average home buyer.
Since most home buyers are focusing on making the down payment and not saving for future repairs, a home warranty provides a good back-up plan.
Most home warranties cost between $300-$400 and will cover many major home systems and built-in appliances for one full year after close. A home warranty will either pay to repair or replace a covered item and the homeowner pays a minimal deductible rather than the full cost of repairs. It's an easy way to manage your home's finances and plan for those unexpected repairs.
Why Do I Need A Home Inspection
The purchase of a home is one of the biggest investments people will make in their lifetimes. But it is also among the greatest sources of anxiety. A home inspection helps ensure homebuyers of the quality of their investment by making them aware of its condition and alerting them to any concerns. This can serve to relieve stress, increase confidence and even reduce the threat of legal action in the future.
Some of the benefits of a home inspection are:
- Knowledge: Understanding exactly what you're buying - old or new
- Peace of mind: Helps in making a sound buying decision
- Savings: The home inspection reveals the need for repairs or replacements before you buy
- Fewer surprises: The home inspection limits the number of problems you may discover after you move in
- Education: A good home inspection also gives you invaluable details about your new home in addition to information about the condition of the property. You'll learn where the main shutoff valves to the utilities are located, how the house operates and more!
How do I find a good home inspector?
Not all inspection companies are alike, and selecting the wrong company could cost you thousands of dollars in repair and replacement costs. Consider the following when shopping for home inspection companies.
Experience: How much experience do the inspectors have and how long have they have been in the business? The best home inspectors have been in business for years and have seen thousands of homes.
Home Inspection Training: Have the inspectors gone through any extensive home inspection training? In many states inspectors can simply call themselves home inspectors without any training or licensing.
Association Membership: Is the inspector a member of a professional home inspection organization? Companies that are affiliated with professional organizations are serious about what they do, and know about all the new developments in their fields. Some well-known trade associations are: American Society of Home Inspectors (ASHI) and National Association of Home Inspectors (NAHI). Inspectors in your area can be located through these associations.
Liability Insurance: Does the inspector carry Professional Liability Insurance (Errors and Omissions Insurance)? If you ever need to collect on a legal judgment, an inspector without insurance my not be able to pay your claim.
What if I'm buying a newly constructed home?
An inspection on a new home is important for the buyer to level the playing field. As in any industry there are shortcuts and tricks of the trade in the construction business, and someone who is unfamiliar with them can easily miss them. A home inspector is better able to see nuances that may not be readily visible to an untrained eye. You also need an inspector to offset the builder's or contractor's interest. Much of the information about homes is either taken for granted by people, or remains unfound.
For newly constructed homes, an inspection of the house before the drywall is installed, otherwise known as a "preclosure inspection," provides a level of quality assurance for the buyer that many builders don't usually provide for their contractors. This inspection gives you a better chance of identifying and correcting potential problems when they are much easier and less expensive to fix, before they become physically or financially prohibitive. For example, this inspection may prevent the need for moving a wall so that kitchen cabinets don't protrude into a doorway opening, or moving electrical receptacles so they are placed where you need them.
U.S. Inspect, America's leading national home inspection company and part of the Coldwell Banker Concierge® Service Program, has been in business since 1986 and has over one million inspections of experience - by far the largest number in the industry. Each inspector is put through a rigorous in-field and classroom schedule that can take up to 3 months to complete, including technical, communication, and interpersonal skills. All inspectors are affiliated with ASHI, or an equivalent trade organization and their inspections meet or exceed the standards of practice recommended by those associations. The company carries full E&O coverage.
If you would like more information, or would like to order a home inspection, please call (888) US-INSPECT, or visit their Web site at www.usinspect.com.
*This material is provided by US Inspect; it does not express the views of Coldwell Banker® Real Estate Corporation.
Ready To Take the Home Ownership Leap
The Coldwell Banker® Network Offers 10 Tips to Making the American Dream Come True
Buying a first home is one of the most important decisions a person can make, but it can be a complex process. Coldwell Banker® Real Estate Corporation offers tips for first-time homebuyers with a checklist of the 10 essential steps to help make the process smooth and successful.
Step #1 - Ask Your Lender About Available Mortgage Programs: An experienced mortgage company should be able to work with you one-on-one to determine exactly which mortgage programs will meet your individual needs and what you can qualify for based on your personal information. Applicants with higher credit ratings and/or higher levels of financial reserves generally receive more competitive mortgage rates. But with hundreds of available mortgage programs, there is usually one to meet the needs of almost any homebuyer. For those with excellent credit, there is even a way to get a mortgage with 0% down. (For more information on this and other mortgage programs, check out http://www.coldwellbankermortgage.com.)
Step #2 - Research the Terms of the Mortgage: Different mortgage lenders have varying price structures that can affect the amount that you pay for your home. An annual percentage rate (APR) includes the actual interest rate on the loan, as well as certain fees and costs associated with the loan. Because a customer may be paying points and other closing costs, the APR disclosed may appear to be higher than the actual interest rate quoted for the loan. Not all lenders calculate APR identically; however, it does give customers a relatively fair method of comparing price on their potential loans.
Step #3 - Get a Pre-Qualified Loan Commitment: Even before the house hunting begins, homebuyers need to determine how much they can afford. Mortgage companies or other lending institutions provide pre-qualified loan commitments. Sellers often don't take an offer seriously unless the prospective first-time buyer has some assurance of creditworthiness from a mortgage company. Coldwell Banker® Mortgage goes one step further, offering qualified consumers pre-approvals, which carry more weight than a pre-qualification. A pre-approval with Coldwell Banker® Mortgage means more because a full credit report is ordered on the customer so that a true loan decision can be made the same day a customer applies. Shopping for a home with a pre-approved mortgage enables a customer to negotiate as a cash buyer and submit an offer on a home with confidence that the mortgage will be issued and the sale will be completed.
Step #4 - Do Your "Home-work": Be sure to go online to sites such as coldwellbanker.com to check for listings, neighborhood information, current mortgage information and home ownership services. The right amount of research will help you to better understand the marketplace and homes available in your price range when you're ready to work with a real estate professional.
Step #5 - Make a Checklist: To help make the home buying process a little easier, homebuyers should create a checklist of the important features they want in a home. Location and the number of bedrooms and bathrooms are usually important. Other important questions to answer: What will the commute to work be like? Are there shopping centers, parks, and schools located near the home?
Step #6 - Find a Buyer's Broker: A buyer's broker or agent represents the buyer's interests and helps identify homes that are for sale and in the right price range. The broker also can help with such tasks as writing contracts, negotiating the asking price, and closing the purchase.
Step #7 - Make an Offer: Once you find the right house, make an offer. Make sure that your offer is contingent on two items: 1) You're able to obtain adequate financing (if you haven't done so already), and 2) you can pull out if the property doesn't pass the home inspection, and the owner can't come to terms about how to fix the problem. Be prepared for counter-offers from other buyers and some negotiation with the seller. Make an earnest money deposit, which is a check that you'll give your agent to indicate that you're serious about buying the house. The check will apply toward the sales price if the deal goes through; if not, you get it back. You should also set a time limit with your agent that the offer you've made is good for three days. If an offer is accepted, it goes to the contract phase.
Step #8 - Hire A Home Inspector: Making an offer contingent on an inspection by a registered home inspector can save thousands of dollars by avoiding unseen problems. Inspectors will check the house for any structural damage. In the contract with the seller, it should state any necessary repairs that must be made before closing on the house. Prior to closing, walk through the house and check that such repairs have been completed.
Step #9 - Buy Homeowners Insurance: Lenders require homeowners insurance to protect the new homebuyer's interests as well as their own. There are many providers so shop around for the best rates.
Step #10 - The Closing: This is where the seller and buyer sign settlement-closing papers to transfer the ownership of the home and all transactions are finalized. Congratulations, you achieved the American dream and you are now a homeowner!
Finding the Right Home
Your Coldwell Banker® Sales Associate can provide detailed information on almost any property currently listed for sale, whether it is listed by a Coldwell Banker® Affiliate or another real estate company.
If you see a "For Sale" sign or an ad in the newspaper that interests you, we have access to all the
data. So call your local Coldwell Banker® Sales Associate for all the details:
- The listing price
- The description
- The special features
- The financing terms
If your property is currently listed with a real estate broker, please disregard. It is not our intention to solicit the offerings of other real estate brokers. We are happy to work with them and cooperate fully.
How Much House Can You Afford
Understanding The Related Costs of Home Buying
According to Will Rogers, property is a great investment because nobody's making any more. That is as true today as it was in the early 1900s when Will Rogers made the statement. Today, however, you'll need to think about more than a mortgage payment to determine if you can afford a home. To assure you are purchasing a home within the confines of your budget, you must consider closing costs as well. How much can you afford? Coldwell Banker® professionals provide some insight.
First calculate the estimated mortgage payment
Several formulas exist to help determine how much a lender will allow a consumer to borrow. One of the more accurate formulas is a front- and back-end ratio. It states that the buyer can afford as much as 28 percent of his or her gross-monthly income toward the monthly mortgage payment, assuming that the consumer's other debt payments (credit cards, car loans, student loans, etc...) are less than or equal to 8 percent of his or her gross-monthly income.
To better understand this formula, assume a gross-family income of $5,000 a month. The front-end ratio or maximum monthly mortgage payment is (28 percent of $5,000) $1,400. The back-end ratio is (8 percent of $5,000) $400. Therefore, the buyer can afford a $1,400.00 monthly mortgage payment as long as monthly debt payments are less than or equal to $400. If debt payments exceed the back-end ratio, it will reduce the monthly mortgage payment dollar for dollar. For example, if debt payments are $500, the maximum monthly mortgage payment a person could afford would be reduced to $1,300.
Visit our Mortgage Calculator page to project your monthly mortgage payment.
Down Payment and Closing Costs
These terms refer to how much money the buyer will have to pay out of pocket and up-front to purchase a home. Down payment is simple; it refers to the amount of money the buyers needs to invest at closing toward the price of the home. Most lenders request a down payment of at least 20 percent of the cost. For first-time homebuyers, this may be difficult to achieve. Several programs are available and relatively easy to qualify for that allow buyers to make down payments of as little as 3 percent of the price of the home. Consumers can evaluate their options with the Coldwell Banker® Mortgage program or their lender.
Closing costs vary from state-to-state, city-to-city and even from home-to-home. Closing costs can include attorney fees, home inspection costs, title search fees, bank fees, termite inspection fees, and radon inspection fees, to name a few. The mortgage lender requires some of these services and others are legally necessary depending on where the buyer lives. To better understand the necessary closing costs in the area they are looking to buy in, consumers can contact their local Coldwell Banker office. For the sake of estimating, closing costs can range from 1 to 5 percent or more of the value of the home.
While up-front costs are more than one would pay for renting, homeownership can still be a sound investment and certainly an emotionally rewarding experience. After all, a cozy home and a piece of land to call your own are as much a part of the American landscape as Will Rogers is.
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