|
Over the years, we at Lake
Landing Realty have found that our clients like the idea of
being well informed. Because of this, we have compiled
this webpage to help answer some of our more commonly asked
questions. Please click on any of the links below to
view the bookmarked information. When you are done
with a section, please click on the "Return to Top" link at
the bottom of the article.
How Much Can You Afford?
Before you can
begin to search for a new home, you need to determine
your budget and estimate how much you can afford. One of
the most important factors in figuring out your
financial budget is getting pre-approved for a mortgage.
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.
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.
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.
For the sake of estimating, closing costs can range
from 1 to 5 percent or more of the value of the
home.
-
Return to Top -
What is a Mortgage?
The first step
towards financing a new home is getting pre-approved for
a mortgage. A mortgage is an advance of money from your
lender that will cover the finances of your new
property. Over an extended period of time, you (the
mortgagee) must pay the bank back each month a
percentage of the money they lent you plus interest,
until the total sum is paid in full. This is how most
homes are financed.
-
Return to Top -
Documents Needed
When you apply for a
mortgage, you will need to furnish information regarding
your income, expenses and obligations. To save time, have
the following items available for each borrower:
- Two most recent pay
stubs
- W-2s for the last two
years
- Federal tax returns for
the last two years
- Last two months' bank
statements
- Long-term debt
information (credit cards, child support, auto loans,
installment debt, etc.)
-
Return to Top -
Repairing Credit Problems And Establishing Good Credit
At one time or another, most
people have put blemishes on their credit reports. If your
credit report is tarnished, here are a few suggestions you
can do to repair the damage.
Examine the credit report
thoroughly and make sure it's accurate. If there are
mistakes on the report, contact the credit report agency and
ask them to remove the mistakes immediately. Here are some
other helpful tips:
Begin to Pay Your Bills on Time and in Full
- Only use two to
four credit cards so that you can keep track of them
and do not spend more than your budget
- Keep a separate
checking and savings account
- Keep the same job
for a few years, the longer you stay put, the better
Now that you've examined your credit report and are
confident that you're in good shape, you're ready to
choose between getting pre-approved for a
mortgage or pre-qualified for a mortgage.
Here's the difference:
Pre-approval
uses basic information as well as electronic
credit reporting to determine whether a lender
will loan you money. If you are pre-approved for
a mortgage, the lender has given you a
commitment to support your new purchase.
Pre-qualification is not a mortgage approval
but simply an estimate of what you can afford.
When you pre-qualify for a mortgage, the lender
also collects basic information regarding your
income, monthly debts, credit history and
assets, and then uses this information to
calculate an estimated mortgage amount. The
lender has not yet committed to supporting your
financial needs and, therefore, you have not
received an actual guarantee of funds.
People who are
pre-approved for a mortgage are more attractive
candidates to the seller and have a better chance of
getting the property when they make an offer. Of
course, a lender will only lend you money if they're
sure your credit is strong and they're confident you
have the ability to pay them back. A bank checks
your credit by studying your financial history,
income, federal tax returns, pay stubs, and
long-term debt information (such as credit cards,
auto loans, child support, etc.) to determine if you
are a good candidate for a loan. If your credit
report is good, then you have an excellent chance of
obtaining a mortgage. If not, then you must take the
appropriate steps to improve your credit rating.
Getting Approved Deciding
Of course, a lender
will only lend you money if they're sure your credit
is strong and they're confident you have the ability
to pay them back. A bank checks your credit by
studying your financial history, income, federal tax
returns, pay stubs, and long-term debt information
(such as credit cards, auto loans, child support,
etc.) to determine if you are a good candidate for a
loan. If your credit report is good, then you have
an excellent chance of obtaining a mortgage. If not,
then you must take the appropriate steps to improve
your credit rating.
-
Return to Top -
How to
Make an Offer... and be Successful
When the demand for houses
in a sizzling marketplace outweighs the supply of houses
available, many consumers think the highest offer is a
sure-fire way to claim ownership of their dream home. In
today's fast-paced market you should know that bidding for a
house doesn't always require upping the stakes.
Accommodate the
Seller's Needs
As a buyer, you have
to be flexible and willing to sacrifice a bit.
Whether it's being willing to close one month
earlier or later, do your best to meet the seller's
desired closing time. Additionally, be willing to
overlook the more minor and but less-than-perfect
characteristics of a given home because other
prospective buyers may not be able or willing to do
so.
Be Prepared
If you are willing
to make the investment, then you must be a
qualified, solid, desirable buyer. Get a copy of
your credit report and settle any debts that may be
outstanding. Get pre-approved for loans and
mortgages. If you go into the negotiation process as
a pre-approved buyer, it will put you at a major
advantage.
Make a Connection
with the Seller
Create a rapport
with the seller and let them know why you prefer
their house to others. Homeowners tend to be
emotionally attached to their home. Even when
selling their home, they often feel tied to the
integrity of the house. Because the seller loves the
house, they are usually inclined to sell it to
someone who will love it too.
Eliminate What Ifs
Eliminating as many
contingencies as possible will give you an advantage
when involved in a bidding war. If you have a home
to sell before purchasing, sell it first. Reducing
uncertainty makes the buyer more appealing to the
seller and will create leverage for the buyer.
Show the Seller That
You Have the Money
Be willing to
increase the size of your down payment or make an
all cash offer. Sometimes the best way to win a
bidding war and avoid paying a higher price is to
increase your down payment. Sellers favor strong
buyers. If you can afford to make an all cash offer,
do so. That's almost always a definite way to close
a sale.
-
Return to Top -
How to
Increase the Value of Your Home
A home is
arguably one of the largest financial investments a person
will make in their lifetime. While property values over time
are determined by national variables, the economy and local
market conditions, the care and upkeep of a property is also
a crucial element toward achieving a solid re-sell. Whether
you are planning on adding more rooms to create extra space,
upgrading your kitchen with new appliances or are thinking
of putting your home on the market, here are some essential
home improvement tips that might increase the value of your
home.
Remodel
the Kitchen:
Out of
all the rooms in the house, the kitchen is the most
popular to remodel. According to Remodeling
Magazine, money spent to upgrade a kitchen
produces the highest return on investment. "Hot"
kitchen makeover trends include adding dual sinks,
cooking stations, extra-long dishwashers,
under-cabinet lighting, warming ovens and wine
coolers.
Upgrade
the Bathroom:
Upgrading a bathroom is also a sound choice and will
usually provide a significant return on investment.
Large bathrooms are typically on the top of the list
of priorities for those seeking to purchase a home.
Adding skylights, glass block windows, ceiling fans
and sunken whirlpool baths are also attractive
selling features. If you don't have the room to
expand or to accommodate larger appliances, or you
don't think you'll be living in your home long
enough to enjoy the changes and/or see a return on
this kind of investment, stick with neutral,
mid-builder level updated cabinetry, refreshed
flooring and shower/tub, or a new sink and toilet.
Create
New Space:
Adding
a room or two, such as a spare bedroom or a study,
is a significant home improvement that you will be
able to take advantage of every day. In addition to
the much-needed extra space, it can also potentially
provide you with a good return on your investment
when it comes to selling the property.
Landscape for Curb Appeal:
A
professionally landscaped yard can certainly
increase the "curb appeal" or desirability of a
home. In fact, beautifying your lawn can be one of
the most inexpensive home improvements. Additional
simple landscaping projects include trimming and
edging the grass, manicuring the trees and shrubs to
open up the view of the house, removing any dead
plants and planting flowers to brighten up the yard.
Make
Necessary Repairs... Prioritize:
While
many homeowners may want to update and remodel their
kitchen, if the roof needs fixing or the chimney has
to be reappointed, then they should prioritize these
necessary repairs over any cosmetic changes. This
applies to both sellers and those who plan to stay
in the home for years to come, as these essential
repairs must be taken care of before they cause the
house to lose value. It is vital to look after the
minor problems such as a leaky faucet or a loose
cabinet to ensure that your house doesn't undergo
any long-term damage. As soon as you notice a
problem, fix it since this will help avoid a larger
expense later on.
Spic &
Span... Cleanliness Sells:
A paint
job, new double-paned windows and new carpeting will
increase the price of a house virtually
dollar-for-dollar. Neutral colored paint and
eliminating clutter can make a world of difference.
However, don't go overboard with home improvement
projects that will push a house too much above the
current average value of homes in your neighborhood.
It is important to make sure that your home has
standards that are in-line with the other houses in
the neighborhood, but you do not want to price
yourself out of the market.
Exterior
- Keep grass
mowed
- Shrubs
trimmed
- Pick
up lawn tools, toys
- Sweep front
walkway
- Clean
up after pets
Interior
- Pick up
toys and shoes
- Make beds
- Put clothes
away
- Prepare
tables with flowers and place settings
- Set out a
game or “coffee table” book
- Turn
off the television
- Play soft
background music
- Tidy
up bathrooms; set out show towels
- Open
drapes and shades
- Turn on
lights
- Make house
look bright and cheerful
- Do
a quick dusting and give the carpets a
once-over with the vacuum
- Straighten
rugs
- Empty
wastebaskets
- Keep
pets out of the way; make sure all pet areas
are clean and free of odor
Research
Before You Hire:
Whether
you need an architect, gardener, interior designer
or contractor, it is always important to do a
background check prior to hiring a professional. Get
references from family or friends and interview them
- checking is critical. The most important quality
to look for is trust, not initial price.
-
Return to Top -
|
