Category — For Buyers

Money Isn’t Everything. Right?

When considering lenders, factor in the level of service they will provide throughout the loan process. We’ll be glad to provide a list of lenders who have successfully helped clients in the past. We also suggest that you ask friends and family in the area for their recommendations.

The same care and consideration you give to finding the right house should be applied to your search for the right mortgage lender. For most home buyers a major determining factor in selecting a lender is the cost of the mortgage loan. But how do you determine the cost of a mortgage loan?

While most buyers concentrate on interest rates, it is best to look at all the costs associated with a mortgage loan. Mortgage loans include the quoted interest rate, points and closing costs.

A number of fees are associated with the mortgage loan, including:

• Appraisal - A carefully documented opinion of value by a licensed, professional appraiser.
• Credit Report - A detailed report of your credit, employment and residence history prepared by a credit bureau.
• Principal - The amount owed on a mortgage which does not include interest or other fees.
• Document Fees, Loan Fees and Processing Fees - Miscellaneous fees charged by the lender.
• Discount Points - Points paid in addition to the loan origination fee to get a lower interest rate. (1 point = 1 percent of loan amount)
• Origination Points - the total number of points paid by the borrower at closing. (1 point = 1 percent of loan amount)
• Interest Rate - A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.

Using the Annual Percentage Rate (APR) to Compare Mortgage Loans

The APR was designed to help borrowers understand the relative costs of a mortgage loan. The APR takes into account the various fees associated with the loan, which is why it is often higher than the interest rate. Understand that not all lenders calculate a loan’s APR in the same way. That is why this should be only one of the factors used in selecting the best mortgage for you.

Another factor to consider when selecting a lender is whether the lender will lock-in the mortgage’s interest rate and points.

Real estate appreciation refers to an increase in value of your home and the property. When your property “appreciates” you have greater equity against which to borrow, and you realize a greater profit when you sell. Property values fluctuate regularly for many different reasons, so how do you know the home you’re buying is going to appreciate over the years?

By and large, the economy is the driving factor of real estate appreciation in the U.S. That includes interest rates as well as the current employment rate, business growth in the area, housing supply and demand and affordability.

Regional economic and social factors also affect real estate appreciation. Many home buyers choose to live in areas with the best and most convenient features for households to thrive, such as a close proximity to schools, jobs and commerce.

A good school district can also be an indicator of good home appreciation. It is believed that good schools help foster lifestyles associated with high levels of attainment at the individual, household and community level.

Demographics also play a role in real estate appreciation. For example, during the 1980s, much of the baby boomer generation (People born between 1946 - 1964) was buying real estate, causing homes to appreciate at a faster rate than inflation and made real estate a profitable investment. The group referred to as Generation Y – born roughly between 1980 and now – is the biggest generation since the baby boomers. Their contribution to real estate is expected to be far greater than their older siblings of Generation X (born between 1965 and 1979).

There are some aspects that significantly contribute to real estate appreciation, which you may want to ask your agent about when shopping for a home:

Recent sales. Ask your agent or retrieve public records on real estate sales in the neighborhood you wish to live in. How many home sales have there been in the past year? What are the asking prices? Do the final sales exceed the asking prices?

Appreciation history. Have home prices risen or declined over the past 5 to 10 years? Is the neighborhood considered desirable because of its location, amenities or affordability?

Local business economy. Is there a good mixture of business or does the area rely on one industry? Have any new industries moved into or out of the area? Is there a lot of new development nearby? Economic changes such as a large factory going out of business can dramatically affect demand for housing in a particular area.

It is important to note that while appreciation is nice to have, it should not be the reason you decide to buy a home in a particular area. Even if you buy a house in a rapidly appreciating area, there is no guarantee that its value will rise by the time you want to sell it. That’s why it’s best to pick a neighborhood – and a home – in an area that suits your own needs.

Whether you are buying or selling a home, you should have a professional home inspection performed.

A home inspection will look at the systems that make up the building such as:

• Structural elements, foundation, framing etc
• Plumbing systems
• Roofing
• Electrical systems
• Cosmetic condition, paint, siding etc

If you are buying a home, you need to know exactly what you are getting. A home inspection, performed by a professional home inspector, will reveal any hidden problems with the home so that they may be addressed BEFORE the deal is closed. You should require an inspection at the time you make a formal offer. Make sure the contract has an inspection contingency.

Then, hire your own inspector and pay close attention to the inspection report. If you aren’t comfortable with what he finds, you should reconsider the deal.

Likewise, if you are selling a home, you want to know about such potential hidden problems before your house goes on the market. Almost all contracts include the condition that the contract is contingent upon completion of a satisfactory inspection. And most buyer’s are going to insist that the inspection be a professional home inspection, usually by an inspector they hire. If the buyer’s inspector finds a problem, it can cause the buyer to get cold feet and the deal can often fall through. At best, surprise problems uncovered by the buyer’s inspector will cause delays in closing, and usually you will have to pay for repairs at the last minute, or take a lower price on your home.

It’s better to pay for your own inspection before putting your home on the market. Find out about any hidden problems and correct them in advance. Otherwise, you can count on the buyer’s inspector finding them, at the worst possible time.