Should You Schedule a Pest and Termite Inspection for the Home You’re Buying?

Whether you’re an aspiring first-time homebuyer and about to make your first offer or you have just purchased your second or third home, you’re probably excited to enjoy your new space. But wait, is that a little critter by the backdoor? Maybe it’s just an ant… nothing to worry about, right? Just to be sure there aren’t any other pests lurking about your new house, you might want to consider getting a pest and termite inspection. Here are five reasons you should schedule a termite and pest inspection before any unwanted visitors wreak havoc on your dream home.

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Why should you get a pest and termite inspection?

As a new homeowner, it’s always a good idea to cover all your bases and have a pest and termite inspection performed. Homes in more humid climates – think homes in Miami, FL or houses in Houston, TX – are more susceptible to termite infestations due to the increased moisture in the surrounding environment. If you’ve seen any signs of a termite infestation, it might be a good idea to have a termite inspection. These signs can include buckling floorboards, creaky floors, or damaged wood.

For those still in the homebuying process, if you see signs of termite damage in the house, you should consider adding a termite contingency when making an offer on a home. A termite contingency may give you the option to back out of the sale if there’s been significant damage found. Otherwise, you can try to negotiate with the seller to pay for the repairs. 

What if you’re planning on just getting a regular home inspection? Your home inspector likely won’t look for specific types of pest or termite damage. However, if your home inspector does find damage, contacting a pest or termite inspector should be your next step. A pest or termite control specialist can help you determine what the best course of action is, likely scheduling an inspection to determine the extent of the damage.

Is a pest and termite inspection required before closing on a home?

If you’ve already purchased your home, then you didn’t miss out on any required inspections. For most homebuyers, termite and pest inspections are not required before closing on a home. However, certain types of loans such as FHA and VA loans may require you to pay for a pest inspection before your mortgage approval, so it’s best to check with your mortgage lender or real estate agent. Your real estate agent will also know if your particular state or county requires a pest inspection before purchasing a home.

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5 benefits of having a termite or pest inspection

There are several benefits of having your home inspected for termites or pests.

1) Negotiating power. If the home you’re looking to buy ends up having damage from termites or pests, you’ll likely have better negotiating power. Your real estate agent can help you decide what negotiations to make. These negotiations may include asking the seller to reduce the price so you can pay for pest control services or asking the seller to pay for any repairs or fumigation services before you close on the home.

2) Peace of mind. These inspections will be able to tell you if there’s any structural damage from pests or termites. Your inspector will disclose any issues they find. Then you’ll have an idea of what kind of maintenance you might need as the home’s future owner. 

3) Save money. Moving into a new home can feel like the dream, but it’s always a good idea to know what you’re getting yourself into. Without a pest or termite inspection, you may be foregoing a critical type of home inspection that may end up costing you more money down the road if a problem is left untreated.

4) Prepare for future expenses. If your pest or termite inspector finds certain types of pests in the home you’ll have a better idea of what to look out for as a homeowner. That way, you will know if your new home or the area you’ve moved to is susceptible to specific pests. It will also help you to plan ahead for any costs associated with keeping these pests away.

5) Find a local pest control company. Say your home is more susceptible to termites because you’re buying a house in a more humid area, or that spiders or mice are more common in your county. The good news is you’ve found a local pest control company to help you schedule regular maintenance. You’ll know just who to call for help if any critters start appearing in your house.

What to expect during a pest inspection

The inspection will take roughly 30 minutes but can vary based on the size of the home and whether there’s a basement, crawl space, or any extra areas. The inspector will examine the interior and exterior of the home for any signs of damage, infestation, or specific areas that might be more susceptible to pests. They’ll check for any signs of moisture. Damaged wood or buckled paint indicate the presence of wood-destroying insects like termites. They are more likely to be found in these areas vulnerable areas.

The inspector will check for a variety of different bugs such as carpenter ants, fleas, mosquitos, and moths, among others. Where you are located may also play a role in the types of pests your inspector will look for. Some pests are more likely to be found in certain areas or are local to your region. If these types of local pests are found during the inspection, your pest inspector may recommend regular pest control to keep these critters at bay. 

The post Should You Schedule a Pest and Termite Inspection for the Home You’re Buying? appeared first on Redfin | Real Estate Tips for Home Buying, Selling & More.

Source: redfin.com

5 Key Property Features When House Hunting

5 Key Property Features When House Hunting

When shopping for a home, many of us know our basic focal points, such as identifying the right neighborhood or finding a house with the ideal number of bedrooms and bathrooms. These factors are important, but there are other home features (some very large and some very small) that can greatly contribute to the enjoyment of your new home. Let’s make sure you don’t miss any of them.

Here are five opportunities to maximize the benefits of your purchase that go beyond just the house and why each one deserves your consideration.

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Home Buying Consideration #1: The Garage

Garages are a very important feature for many homebuyers, and can even end up being a dealbreaker for some buyers. More than a parking spot, garages provide valuable storage and project space, as well as a way to protect your vehicles from all types of damage. When you are first shopping for a home, you may know that you want a garage, but you may not have considered all of the variables that go into the garage design, and which choice is right for you.

Garage Design: Why it Matters

When evaluating garage design, it’s important to start by considering what you may want to use the space for, and what external factors (such as weather) might impact your use. Here are several major garage design aspects to keep in mind as you house hunt.

Rental space: Depending on the size and layout of your garage, is there space that could be rented out full time, or used as a short-term rental to generate additional income? That extra income could be directed towards your mortgage payment.

Storage opportunities: Does the garage have room to store what you need to reduce in-home clutter? Is there space for shelves, or even room in the rafters?

Potential property value increase: According to the sales comparison approach (SCA), one of the most recognizable forms of valuing residential real estate, a “finished” garage that feels like an extension of the home’s indoor living space is one of several features that can increase overall home value. You may also want to consider the possibilities of eventually remodeling a bland garage in an otherwise perfect home.

Attached vs. Detached Garages: Pros vs. Cons

One of the biggest distinctions in garage design is whether a garage is attached or detached. Often influenced by lot shape (narrow lots on an alley often have detached garages, wider lots with a driveway often have attached garages) or the age of a home, having a detached or attached garage has both advantages and disadvantages.  

Attached Garages: Pros

  • Convenient access to your cars, storage, and other items, particularly if you live in an area with an extreme climate 
  • Attached garages are often less expensive to build, and can be climate controlled by accessing the electrical and HVAC systems that are part of the home
  • As attached garages are the most popular type of garage, having one typically increases the value of your home

Attached Garages: Cons

  • If you’re thinking of adding one, it may not be possible to fit on a narrow, urban lot
  • Since they offer direct access to the home, they can be a security and fire risk  
  • They can be hard to add onto or expand, and any additions or changes might require more expensive permits and extensive inspections
  • Adding an attached garage, particularly to a vintage home, may look strange or otherwise detract from the exterior look of the home
  • Noisy garage activities may be heard more inside the home

Detached Garages: Pros

  • More flexibility in size, layout and location, lot size and shape permitting
  • It’s easier to add room for cars, storage, and projects, and to add onto if needed
  • Less fire and security risk to your home 
  • Less of an impact to the look or curb appeal of your home
  • Can increase the resale value of your home

Detached Garages: Cons 

  • Particularly in bad weather, less convenient in terms of access 
  • Will require separate utilities, HVAC, and more
  • May not be allowed by your HOA or city permitting office

Now that we’ve examined the garage, let’s take a look at another key feature — what’s going on with the front and backyard?

Home Buying Consideration #2: The Yard

No longer limited to just a lawn, yards have now become an extension of the home. A convenient, well-designed outdoor living space is something that many homeowners desire. Yards can be great spaces for entertaining and are often much less expensive to create than comparable indoor entertaining spaces. Here are some important yard elements to consider. 

Trees and landscaping: Important for both aesthetic and practical reasons, trees and landscaping can increase your yard’s appeal. A mature, well-designed landscape is valuable, as it represents an investment of both time and money. 

Outdoor kitchen: Whether you are grilling for two or entertaining 200, an outdoor kitchen makes cooking fun and convenient. 

Fireplace or fire pit: This stylish focal point makes it easy to keep enjoying your yard, even after dark or in cooler weather. 

Automatic sprinklers, drip system, and misting system: Automatic sprinklers and drip systems can keep your yard looking lush for a low cost, and are particularly valuable in dry climates. Misting systems can also keep you cool on hot days. 

Deck or Patio: A stylish outdoor surface makes it easy to enjoy your yard, and many new construction materials require little to no maintenance. 

Shed: Well-designed sheds can go beyond storage, offering everything from a private workspace to extra space for guests to sleep. 

So, you’re considering the finer points of a yard. But what about adding a body of water to that yard for cooling off on hot days? Here’s the pros and cons of investing in a water element for your next home.

Just starting your home search? Here’s the best time to begin.

Home Buying Consideration #3: The Pool

Pools and hot tubs are perhaps the most controversial of all outdoor home features. Some homebuyers totally avoid them, and some won’t look at a house without them. Which side are you on? Here are some factors to consider. 

Backyard Pool and Hot Tub: Pros 

  • Pools and hot tubs can be aesthetically pleasing
  • Both are also useful for entertaining
  • In warmer climates, pools can provide a way to enjoy the outdoors comfortably
  • If you like to swim, engage in other aquatic exercises regularly for fitness, or use a hot tub for muscle and joint pain, having your own can be convenient
  • In hot climates where pools are common (i.e., Arizona, California, Florida), having a pool can significantly increase the resale value of your home 

Backyard Pool and Hot Tub: Cons

  • Both pools and hot tubs require regular maintenance that includes chemicals, cleaning, and repair
  • Many families with small children do not want a pool at home due to safety concerns
  • Your insurance cost may be higher, and your utility bills may go up as well, particularly for heating a pool 
  • When it is time to sell your home, there are many buyers who will not want a house with a pool

A pool is a big decision that comes with both maintenance and benefits alike. You can always opt for a different kind of water feature, like a backyard stream. But if you’re looking to streamline your life, investing in home tech devices is almost a no-brainer.

Home Buying Consideration #4: The Appliances and Tech Gadgets

As technology improves and designs continually evolve, having up-to-date appliances and other devices in your home has become increasingly important. For example, while attractive kitchens are near the top of many house-hunters’ wish lists, there are items within those kitchens that can help — and items that can hurt — when it comes to increasing a home’s value.

Appliances That Can Help Property Value

Commercial-grade appliances: Particularly in high-end properties, many buyers expect to see appliances from luxury or professional brands. 

Smart devices: Thermostats, fire detectors, carbon monoxide detectors, security cameras, door locks, and doorbells are just a few of the relatively new smart home devices that homebuyers are now beginning to appreciate and even expect.

Appliances That Can Hurt Property Value

Old and energy inefficient: These power-sucking products will cost you in both your utility bill, and the resale value of your home. 

Homes totally lacking certain appliances: Is your property missing a dishwasher, indoor laundry, or other key features? This can be a major turn-off for buyers who don’t want to have to complete a complicated remodeling and installation project. 

Mismatched appliances: Appliances from different eras or in different colors can make your kitchen look unfinished and low-quality, even if your other finishes are fantastic.

Looking to stock up on home amenities? We’ve targeted the seasonal best deals for doing so.

Now that you’ve considered the key interior and exterior components of your dream home, there’s one last important element to contemplate: the driveway.

Home Buying Consideration #5: The Driveway

Walkways and driveways connect your home to the outside world and play a crucial role in the curb appeal of your residence. Although often overlooked, they are important home features that can be messy and expensive to replace or update. 

If you are evaluating the driveway at a potential home, or considering an update at your current home, the first choice you will need to make is whether you want asphalt or concrete. Both have benefits and drawbacks that may vary depending on your climate, landscape, and usage needs.

Today, many homeowners and buyers are also looking for something beyond the basics, with driveway design trends including elaborate paving materials, irregular shapes, and additional features like extra parking for guests.

Know the Tricks, Now Land the House

Although these five features may not be your first considerations in the house-hunting process, they are important elements that you will use or interact with nearly every day. Add them to your consideration list, and you will be sure to end up in a customized home that you enjoy and treasure. If you’ve found your ideal home with all the right features, reach out to a PennyMac Loan Officer today or apply online to get pre-approved for the loan that’s right for you.

Source: pennymacusa.com

What Should My Mortgage Credit Score Be?

You don’t have a separate rating called a mortgage credit score, but lenders do look at your score, credit history and several other factors when deciding whether to approve you for a home loan. Contrary to what some people think, though, you don’t necessarily need an excellent or good credit score to get a home loan. How high your score is depends on your current financial situation, down payment and other factors.

What Does My Credit Score Need to Be for a Mortgage?

The short answer is that it depends. Mortgage lenders will do a hard inquiry on your credit to see the score and the details behind it. Your credit score is typically a good first impression on how risky of an investment you are. Mortgage lenders don’t want to be left holding the keys to your home if you don’t or can’t make regular monthly payments, or if you make late payments, on your home loan.

Factors that can impact whether your credit score is high enough to be approved for a mortgage include:

  • What type of home loan you’re seeking
  • How much other debt you have
  • The details of your credit history, such as positive and negative items reported to the credit bureaus
  • The size of your down payment

FHA mortgage loans may be among the easiest loans to get in terms of credit score requirements. Individuals who qualify as first-time home buyers under FHA (Federal Housing Administration) backed lending programs may be able to qualify for mortgage approval with a credit score as low as 580 and a low down payment of only 3.5%. In cases where buyers can put forward 10% or more for a down payment, some lenders may approve individuals with FICO scores as low as 500.

For more conventional loans—those that meet the underwriting standards put forth by Freddie Mac or Fannie Mac—approval usually requires a good credit score. At minimum, these types of loans usually require a FICO score of around 620, but that assumes other factors are in your favor. A lower down payment or higher credit utilization, among other things, could mean you need a higher credit score to secure mortgage approval.

What Is a Decent Credit Score for a Mortgage?

The answer is probably 620 or higher. You do want to minimize any surprises during the mortgage application and home buying process. Take the following steps to avoid this risk.

  • Get a look at your credit score and report. If you have bad credit, consider taking steps to improve your credit score.
  • Dispute or work with a credit repair company to fix any inaccuracies on the report before you apply for a mortgage.
  • Evaluate whether your credit history and score positions you to achieve your homeownership goals now or if you should take time to improve your score organically first.
  • Research the mortgage process so you understand how it works.
  • Consider working with a mortgage broker if you’re uncomfortable with the entire process. These pros can often help you understand which type of mortgage is right for you and how to qualify for it.

Can You Buy a House with a Credit Score of 590?

You may be able to qualify for an FHA or nontraditional home loan with a low credit score. Your chances of doing so are higher if you can tie your low score to a single issue and you otherwise have a strong credit history. You can also increase your chances by lowering your credit utilization rate, having a low debt-to-income ratio and saving up to put a large percent down when you buy the home.

Should You Get a Mortgage with Your Current Credit Score?

Ask yourself this important question: Are you so preoccupied with whether you can get approved for a mortgage with your current credit score that you forgot to ask yourself whether you should?

Your credit score impacts more than whether or not a lender approves you for a home loan. It also impacts your loan and term options, which can impact the overall cost of the home. One of the most important parts of the mortgage that may be tied directly to your credit score is the interest rate.

A good or bad credit score can mean a shift up or down for your mortgage interest rate. And even a fraction of a percent in either direction can drastically change how much you pay for your home. Consider the examples below, which are applied to a $200,000 home loan for a term of 30 years.

  • An interest rate of 3.92% equals payments of $946 per month and a total home cost of $340,427 over 30 years.
  • An interest rate of 4.42% equals payments of $1,004 per month and a total home cost of $361,399 over 30 years.
  • An interest rate of 4.92% equals payments of $1,064 per month and a total home cost of $382,999 over 30 years.

Just a difference of 1% can result in savings (or losses) of more than $40,000 over the life of your mortgage. Use Credit.com to check credit score and credit report card to make sure your credit score is as high as possible before you start the mortgage application process.

The post What Should My Mortgage Credit Score Be? appeared first on Credit.com.

Source: credit.com

The REO Guide: 10 Steps to Buying a Bank-Owned Home

The REO Guide: 10 Steps to Buying a Bank-Owned Home

Many potential homebuyers and investors overlook bank-owned properties, but for buyers who take the time to understand the REO process, these homes can be a significant opportunity.

Some homebuyers are intimidated by foreclosed and bank-owned homes because they often require more renovations — and a different type of negotiation — than other options on the market. However, some REO properties come at a significant discount, and, if you’re willing to work through some of the nuances of the post-foreclosure market, you can set yourself up for a great deal.

What is a Real Estate Owned (REO) Property?

REO, which stands for “Real Estate Owned,” is a term applied to foreclosed properties whose ownership has transferred to the bank or lender.

In order to become an REO property, it must go through these general steps:

  1. Loan Default. The homeowner/borrower defaults on (fails to make) their mortgage payments for a certain length of time, with the qualifying amount usually specified in the mortgage terms.
  2. Foreclosure. The lender initiates legal proceedings against the borrower to foreclose on the property.
  3. Auction. The property is then offered to the public at a foreclosure auction and typically sold to the highest bidder. If the property sells to a third party at the auction, the bank or lender recoups some of the cost of the outstanding loan balance, interest and fees from the sale of the property.
  4. REO Status. If the home fails to sell at auction to a third party, possession typically passes to the lender and it becomes a Real Estate Owned (REO) property. The lender prepares to sell it, which may involve evicting occupants and removing outstanding liens attached to the property.

REO properties are attractive to homebuyers or real estate investors for several reasons. In many cases, lenders are motivated sellers who do not want to sit on their REO inventory, and (depending on the bank’s history with the property) these homes may be priced at a discount. However, other factors — like the home being sold “as is” — may affect the ultimate price, so it’s important to work through the process methodically to make sure you account for every variable.

10 Steps to Buying REO Properties

The process for buying an REO home is similar to the standard home buying process, but there are a few key exceptions to keep in mind. Whether you’re buying the home to live in or as an investment, these 10 steps should help set you up for success with bank-owned properties.

Step 1: Browse Available REO Properties

Before you get too far into the process, take a look at the properties available in your target market or price range. There are several ways for prospective homebuyers to browse available REO properties:

  • Bank and lender listings: Lender-specific listings, such as PennyMac REO listings, show all available bank-owned properties from a certain lender.
  • Multiple Listing Service: Lenders and Realtors® often use the Multiple Listing Service to list REO properties, making it easy to find options from multiple lenders in one place.
  • Real estate agent: A real estate agent will be able to find REO offerings from multiple lenders in your desired area.
  • Online services: Other online services, such as Zillow, offer tools to look up foreclosures by certain characteristics or in certain areas. Some of these tools are free to use, while others may charge a fee.

Step 2: Find a Lender and Discuss REO Financing

Once you’ve found a property you are interested in, talk to a lender about your financing options. This is particularly important because of the timing of the REO homebuying process; lenders are motivated to sell and want to get these homes off of their books, so the more prepared you are with financing, the better.

One thing that can speed up the REO homebuying process is getting pre-approved by the lender that owns the home. With this pre-approval, the lender that owns the REO property will know that you are financially qualified to purchase the property, making them more likely to accept your offer.

Step 3: Find a Real Estate Buyer’s Agent Who Knows REO Homes

A buyer’s agent is a great partner to have while you navigate the home buying process. Your buyer’s agent helps make sure you are finding the best properties at the best possible prices, and they will use their experience to guide you through every stage of the process. Your agent should also be able to tell you if you need to hire anyone else, such as an attorney or an inspection service, depending on your state and situation.

If you are specifically interested in REO properties, try to find a buyer’s agent who works with REO properties frequently. This way, your real estate agent knows the ins and outs of negotiating with a lender, how to calculate the cost of necessary repairs, how to work within the lender’s timeline and how to prepare you for what comes next.

Step 4: Refine Your List of Lender-Owned Properties

Once you are working with a buyer’s agent, you can start narrowing down your list of REO properties. Some major characteristics that should be taken into account include the following:

  • Listing price
  • Significant repairs needed (and the overall impact on price)
  • Location (and proximity to a school, workplace, or other desired area)
  • Number of bedrooms and bathrooms
  • Quality of neighborhood and surrounding areas
  • Community resources in the area, such as parks, gyms, places of worship, etc.
  • Lender-specific contingencies or requirements

Once you have taken your “must have” features into account, if you are left with multiple properties, refine your list based on “nice to have“ features like a large yard, a finished basement or an in-ground pool. Share your favorite homes with your agent, who can set up tours for properties at the top of your list.

Step 5: Get an Appraisal on Your Ideal Property

Some REO homes go for a great price, but buying a bank-owned home is not an automatic bargain. An REO property may be discounted based on an undesirable location or severe damage, or it can be overpriced based on comparable sales in the area or the lender’s desire to recoup the money spent. Either way, it’s a good idea to consider getting an appraisal so you know how the true value compares to the asking price.

An appraisal will help you get an objective estimated value, which you can compare to the bank’s asking price to see if the price is fair. During the appraisal, a licensed appraiser will take inventory of major systems (i.e., HVAC, plumbing), the structural integrity of the home, and check the prices of comparable homes in the area.

Note: An appraisal, which tries to estimate true home value, is different from a home inspection, which tries to take inventory of current and potential issues. An appraisal will help you decide whether or not the asking price is fair; an inspection will help you understand the repairs and renovations needed, which is critical for a bank-owned home.

Step 6: Make an Offer

Once you’ve found a property that is right for you, it’s time to make an offer.

Your agent will help you decide what kind of offer is likely to be accepted, put together the offer and submit it to the lender. Depending on the lender, you may need to submit special contract forms or paperwork. It is also common to attach an earnest money deposit check to your offer. This check (commonly 1-2% of the purchase price) is usually held in an escrow account until the purchase is finalized.

Make sure to consider the inspection process as you are making your offer. You may choose to make the offer contingent on inspection so you are protected if the inspection uncovers significant (and potentially dangerous) issues. If necessary repairs are well-documented, you can use that documentation to make your case for a low offer. Talk to your agent to understand your options when it comes to inspection contingencies.

Step 7: Have the Property Inspected

An inspection should be part of buying any home, but it is crucial for bank-owned homes. Real estate owned properties are typically sold “as is,” meaning the homebuyer is on the hook for any repairs — including major structural issues — that need to be fixed. An REO home may have been vacant for weeks or months, it may be neglected due to the homeowner’s financial trouble, or the previous owners may have removed items or damaged the property before vacating. Additionally, it’s possible that the property has gone through non-permitted renovations.

With that in mind, you need to be 100% sure you know what needs to be fixed before finalizing the loan. Having a home inspection done is the best way to take a thorough inventory of what repairs need to be made. The cost of these repairs should be added to the asking price so you have a better idea of what the home will cost you (and whether it’s still a good deal after repair costs are factored in).

In some cases, the lender may conduct an inspection when the home becomes bank-owned. If so, make sure you get a copy of the inspection report and review it thoroughly to decide if it is comprehensive enough to help make your decision.

Step 8: Negotiate Details

For better or worse, negotiating with a lender for a bank-owned home is different from negotiating with a homeowner.

On one hand, dealing with a bank instead of a homeowner means you don’t have to worry about emotional attachments to the home influencing the decision. You are also usually dealing with a very motivated lender who wants to get rid of the property (especially if it’s been on the market more than 30 days).

On the other hand, banks typically take longer to respond to an offer (or a question) than a homeowner because the offer must be reviewed by several individuals or companies. When the lender does respond, they will expect you to respond quickly to keep the process moving.

Working with a lender also means jumping through more corporate hoops. Banks are also more likely to present a counter offer because they must demonstrate they tried to get the best possible price for the property. In addition, the lender may ask you to sign a purchase addendum (which you should thoroughly review with your real estate agent or lawyer) and your final offer may be contingent on corporate approval.

Step 9: Finalize Your Loan

Now that you have submitted an offer, several things will be going on at once: the home inspection, negotiations with the bank, and the finalizing of your loan. During this time, you will be filling out paperwork and sharing information with your lender to ensure your loan is the right fit for the offer you have submitted.

Now is also the time to verify the status of the title. The bank typically clears the title before selling a bank-owned home but you can never assume this is the case. Contact the lender to see if the title has been cleared. If not, the lender may have a title company standing by to perform these services. If you are expected to do so yourself, hire a title company to run a full, insured title search before closing the deal.

Step 10: Closing

Once all of the paperwork is in place, you’ve wired in your down payment and your loan funds are in place, it’s time to close.

Closing on an REO property is similar to any other closing, with a few notable exceptions. If you’re unable to close by a predetermined closing date, the lender may charge a penalty for each day beyond the deadline. (You can try to avoid these delays by getting pre-approved for a loan and getting assurance that your financing will come through by a given date.)

At the closing, you and the lender representative will sign the documents necessary to transfer the house into your name and to finish your mortgage. After you’ve signed everything and the money goes to the right place, you’ll get the keys and a new title: homeowner.

Is an REO Home the Right Fit For You?

A bank-owned home can be a great opportunity for homebuyers or investors to find a good deal — but only if you’re willing to be patient and thorough. Dealing with a lender rather than an individual seller may mean slower response times and a more difficult negotiation, but it can lead to a potentially lower price from a motivated seller that has already handled outstanding taxes.

Browse PennyMac REO listings to see available bank-owned properties from PennyMac, or call a PennyMac Loan Officer to discuss your options today.

Source: pennymacusa.com

First Time Home Buyer Programs for Veterans

Numerous programs exist to help veterans and service members who are first-time buyers with their closing costs and other expenses.

Indeed, it’s perfectly possible for those who are eligible for VA home loans to become homeowners with very little — or even nothing — in the way of savings.

Check today's VA rates by completing this quick online form.

Advantages of VA home loans for first-time buyers

The most famous housing benefit associated with the VA loan program is the zero down payment requirement. That can be hugely valuable for first time home buyers.

But it’s just one of a whole range of advantages that come with a VA home loan. Here are some more.

Low mortgage rates for VA loans

According to the Ellie Mae Origination Report, in October 2020, the average rate for a 30-year, fixed-rate mortgage backed by the VA was just 2.75%. That compares with 3.01% for conventional loans (ones not backed by the government) and 3.01% for FHA loans.

So VA home loans have lower rates. And that wasn’t just a one-time fluke. VA mortgage rates are lower on average than those for other loans — month after month, year after year.

Lower funding fees for first-time buyers

When you buy a home with a VA loan, you need to pay a funding fee. However, you can choose to pay it on closing or add it to your loan so you pay it down with the rest of your mortgage.

But, as a first-time buyer, you get a lower rate. For you, it’s 2.3% of the loan amount (instead of 3.6% for repeat purchasers) if you make a down payment between zero and 5%.

That’s $2,300 for every $100,000 borrowed, which can be wrapped into the loan amount. It’s a savings of $1,300 per $100,000 versus repeat buyers.

Put down more and your funding fee drops whether or not you’re a first-time buyer. So it’s 1.65% if you put down 5% or more, and 1.4% if you put down 10% or more.

Although it might seem like just another fee, the VA funding fee is well worth the cost since it buys you the significant financial benefits of a VA home loan.

No mortgage insurance for VA loans

Mortgage insurance is what non-VA borrowers usually have to pay if they don’t have a 20 percent down payment. Private mortgage insurance typically takes the form of a payment on closing, along with monthly payments going forward.

That’s no small benefit since mortgage insurance can represent a significant amount of money. For example, FHA home buyers pay over $130 per month on a $200,000 loan — for years.

Mortgage insurance vs funding fee

Let’s do a side-by-side comparison of the mortgage insurance vs. funding fee costs of a $200,000 loan:

  VA Loan FHA Loan
Payable on closing $4,600* $3,500
Payable monthly $0 $133 per month**
Paid after five years (60 months) $4,600 $11,500

*First-time buyer rate with zero down payment: 2.3%. $200,000 x 2.3% = $4,600
** $200,000 loan x 0.8% annual mortgage insurance = $1,600 per year. That’s $8,000 over five years. $1,600 divided by 12 months = $133.33 every month

It’s clear that mortgage insurance can be a real financial burden — and that the funding fee is a great deal for eligible borrowers.

Better yet, that makes a difference to your buying power. Because, absent mortgage insurance, you’re $133 a month better off. And that means you can afford a higher home purchase price with the same housing expenses.

Ready to buy a home? Start here.

Types of first-time homebuyer programs for VA loans

You may find two main types of assistance as a first-time buyer:

  1. Down payment or closing cost assistance
  2. Mortgage credit certificates

Down payment and closing cost assistance

There are thousands of down payment assistance programs (DAPs) across the United States and that includes at least one in each state. Many states have several.

Each DAP is independent and sets its own rules and offerings. So, unfortunately, we can’t say, “You’re in line to get this …” because “this” varies so much from program to program.

Some help with closing costs as well and down payments. Some give you a low-interest loan that you pay down in parallel with your main mortgage. Others give “forgivable” loans that you don’t pay back — providing you stay in the home for a set period. And some give outright grants: effectively gifts.

Mortgage credit certificates (MCCs)

The name pretty much says it all. In some states, the housing finance agency or its equivalent issues mortgage credit certificates (MCCs) to homebuyers — especially first-time ones — that let them pay less in federal taxes.

The Federal Deposit Insurance Corporation explains on its website (PDF):

“MCCs are issued directly to qualifying homebuyers who are then entitled to take a nonrefundable federal tax credit equal to a specified percentage of the interest paid on their mortgage loan each year. These tax credits can be taken at the time the borrowers file their tax returns. Alternatively, borrowers can amend their W-4 tax withholding forms from their employer to reduce the amount of federal income tax withheld from their paychecks in order to receive the benefit on a monthly basis.”

In other words, MCCs allow you to pay less federal tax. And that means you can afford a better, more expensive home than the one you could get without them.

Speak with a mortgage specialist today.

Dream Makers program

Unlike most DAPs, the Dream Makers Home Buying Assistance program from the PenFed Foundation is open only to those who’ve provided active duty, reserve, national guard, or veteran service.

You must also be a first-time buyer, although that’s defined as those who haven’t owned their own home within the previous three years. And you may qualify if you’ve lost your home to a disaster or a divorce.

But this help isn’t intended for the rich. Your income must be equal to or less than 80% of the median for the area in which you’re buying. However, that’s adjustable according to the size of your household. So if you have a spouse or dependents, you can earn more.

It’s all a bit complicated. So it’s just as well that PenFed has a lookup tool (on the US Dept. of Housing and Urban Development (HUD’s) website) that lets you discover the income limits and median family income where you want to buy.

What help does the Dream Makers program offer?

You’ll need a mortgage pre-approval or pre-qualification letter from an established lender to proceed. But then you stand to receive funds from the foundation as follows:

“The amount of the grant is determined by a 2-to-1 match of the borrower’s contribution to their mortgage in earnest deposit and cash brought at closing with a maximum grant of $5,000. The borrower must contribute a minimum of $500. No cash back can be received by the borrower at closing.”

So supposing you have $2,000 saved. The foundation could add $4,000 (2-to-1 match), giving you $6,000. In many places, that might easily be enough to see you become a homeowner.

You don’t have to use that money for a VA loan. You could opt for an FHA or conventional mortgage. But, given the advantages that come with VA loans, why would you?

The Dream Makers program is probably the most famous of those offering assistance to vets and service members. But there are plenty of others, many of which are locally based.

For example, residents of New York should check out that state’s Homes for Veterans program. That can provide up to $15,000 for those who qualify, whether or not they’re first-time buyers.

Start your home buying journey here.

State-By-State Home Buyer Assistance Programs

We promised to tell you how to find those thousands of DAPs — and the MCC programs that are available in many states.

It takes a little work to find all the ones that might be able to help you. But you should be able to track them down from the comfort of your own home, online and over the phone.

A good place to start is the HUD local homebuying programs lookup tool. Select the state where you want to buy then select a link and look for “assistance programs.”

Your best starting point is probably the state’s housing finance office though it might be called something slightly different. You should find details of programs or just a list of counties with phone numbers. Call the number where you want to buy, explain your situation and ask for advice. It’s their agents’ jobs to point you to local, state, or national programs that can help you.

If you look in the right place, you could secure some very worthwhile financial help to assist you in buying your first home.

Check today's VA rates by completing this quick online form.

Source: militaryvaloan.com

How Long Does A VA Loan Take To Close?

There are plenty of myths associated with VA loans, many of which are completely untrue and unfounded. One of these myths is that VA loans can take forever to close.

While the average VA loan takes longer than other loan programs to close, they don’t take forever to close – in reality, according to Ellie Mae’s October 2020 Origination Report it took an average of 54 days for a VA loan to close. This includes everything, from applying for a mortgage to getting the keys to the home.

In terms of home buying, 52 days is hardly forever. Overall, all purchase loans took an average of 51 days to close in the same 90-day period. When you’re getting some of the best rates available while avoiding a downpayment, one extra day is hardly a concern.

But why does a VA loan take longer, and is there a way to speed up the process? Here are some of the factors that could speed up — or slow down — your VA home buying experience.

Check today’s VA rates.

Getting preapproved

The first thing any home buyer should do is get prequalified and preapproved. These two are similar, but they play different roles. Prequalification is the first step in the process, and it gives you an estimate on how much home you can afford.

Preapproval is more in-depth than prequalification. After finding the right lender, you’ll provide them with some more information and they’ll give you an accurate estimate of how much home you’ll be able to afford.

One thing to keep in mind is that you should try to shop below what your preapproval is. This will keep your finances from straying into a dangerous territory, and it can save you stress and time down the road.

Finding a home

The unfortunate reality of today’s housing market is that there just aren’t enough homes to keep up with demand. This can stretch your home buying process on for a long time, and it can be discouraging.

You should have a good idea of what your price range is after you get prequalified, and, if you shop well, you can have a decent list of possible homes ready by the time you get preapproved. You may even have a home in mind before you begin the entire home buying process, which can also save you some time.

But there’s guarantee that any home will work out. Bidding wars are too common, and every bidding war has a loser. If you miss out on a home, this is going to set your timeline back.

Agreeing on a timeline with the seller

After you agree to buy a home from a seller, you will agree on a purchase date and a move-in date (which could be the same).

One misconception with home buying is that people selling their homes are ready to move out now. While some are, plenty are not. You might agree on a price with the current homeowner, but you could end up having to wait an additional week or two – and possibly longer – until you actually get the house. If you’re set on a specific property, understand that this might happen.

Click to begin the home buying process.

The VA appraisal

There are plenty of horror stories surrounding VA appraisals. It’s true that your appraisal can be slow and horrible, but that isn’t always the case.

To be safe, expect the VA appraisal to take around 10 days to complete. Your lender is going to hire a VA appraiser, and not all appraisers are approved for VA homes. Also, the VA has tighter standards for what’s acceptable in an approved home. A seemingly perfect home can get slowed down by the VA appraisal. Because this is all out of your control, the best thing to do is plan for the worst.

Required fixes

The worst case scenario with a VA appraisal is that the home requires fixes. Fixes take extra time and money, two things you’re trying to avoid.

Financially, you can always as the seller to reduce the cost of the home to cover the required repairs and fixes. You can also pay for these yourself – likely the quickest way to get through the process. If the repairs are extensive, this could mean a lot of money and plenty of time. You can always walk away from the home if it isn’t right.

The length of your VA loan could take longer than most

While Ellie Mae’s average time to close is 54 days, that means plenty of homes take longer to close. With some factors completely out of your control, you should prepare for the possibility of a longer loan.

On the flip side, your loan could close much quicker than the 52 days. To increase your chances of this, be sure to have everything ready. Prequalification and preapproval are important steps, and the sooner you begin those, the sooner you can begin your journey toward a new home.

Click to begin the preapproval process.

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Source: militaryvaloan.com

How Much Cash Do You Really Need to Buy a Home?

Are you ready to buy a home? You’re not alone—in 2019, more than five million people bought an existing home. And that doesn’t even include the number of people who purchased new construction.

The point is, the housing market is always bustling and busy. And if it’s your first time buying a home, it might seem a bit daunting. You might have a couple of questions—how much money do you need to buy a home? And how can you even get those funds?

Overwhelmed? Don’t be. We’re here to guide you towards saving up, so hopefully you’ll be able to afford your dream home. Keep reading to learn more!

How Much Do You Need for a Down Payment?

Let’s start with one of the first payments you might have to make—a down payment. When someone takes out a mortgage loan, they’ll put down a percentage of the home’s price. That’s the down payment.

You might’ve heard that down payments are about 20% of the total cost of your new home. That can be true, but it really just depends on your mortgage. There are mortgage options that require little to no down payment, and how much you need often depends on your eligibility for different programs. Here are some different loan options:

1. USDA Mortgage

The USDA guarantees mortgages for eligible buyers primarily in rural areas. These loans do not have down payment requirements. To qualify for a USDA loan:

  • The property must meet eligibility requirements as to where it’s located.
  • Your household must fall within the income requirements, which depend on your state.
  • You must meet credit, income and other requirements of the lender, though they may be less rigorous than loans not backed by a government entity.

2. Conventional Mortgage

Conventional mortgages are financed through traditional lenders and not through a government entity. Depending on your credit and other factors, you may not need to put down 20% on such loans. Some lenders may allow as little as a five percent down payment, for example. But you’ll have to pay private mortgage insurance (PMI) if you put down less than 20%.

3. FHA Mortgage

FHA loans, like USDA loans, are partially guaranteed by a government agency. In this case, it’s the Federal Housing Administration (FHA). A down payment on these loans may be as low as 3.5%. Requirements for an FHA loan can include:

  • You’re purchasing a primary home.
  • The home in question meets certain requirements related to value and cost.
  • A debt-to-income ratio between 43% and 56.9%.
  • You meet other credit requirements, though these may not be as strict as with conventional loans.

How much do you need to make to buy a $200K house?

Given the above information, here’s what your down payment might look like on a home worth $200,000:

  • USDA loan: Potentially $0
  • Conventional loan: From $10,000 to $40,000
  • FHA Loan: As low as $7,000

These are just some options for mortgages with low down payment requirements. Working with a broker or shopping around online can help you find the right mortgage. In addition to the down payment, you do need to ensure that you can afford the mortgage and make the monthly payments.

Don’t Forget the Cash You’ll Need for Closing

Closing costs are typically between three and six percent of your mortgage’s principal. That’s how much you’re borrowing, so the less you put down, the more your closing costs might be.

Here’s a range of closing costs assuming a cost of three percent of the low range home purchase, when buying with less than 20% down:

  • For a home purchase between $500,000 and $600,000, you’ll need at least $15,000 for closing costs
  • Between $300,000 and $500,000, at least $9,000 for closing costs
  • Between $150,000 and $300,000, at least $4,500 for closing costs

Where Can You Get the Money to Buy a Home?

These numbers should give you an idea of how much cash you’ll need for a home purchase. Acceptable sources for procuring cash to close on a house can be one or any of the following:

  • Stocks
  • Bonds
  • IRA
  • 401(k)
  • Checking/ savings
  • A money market account
  • Retirement account
  • Gift money

The key here is that the money needs to be documented. You have to be able to prove you had it and didn’t borrow it simply for the purpose of making your down payment or covering closing costs.

Don’t have cash available from any of the above-mentioned sources? There are other sources you can use as long as they can be paper-trailed, such as your tax refund or a security deposit refund on your current home rental.

Plan for Other Important Costs

While down payments and closing costs are the biggest out-of-pocket expenses involved in buying a home with a mortgage, you may need to cover other costs. There might be some additional home buying and moving-in costs. Those could include inspections, the cost of any necessary repairs not covered by the sellers and moving fees.

Are You Ready to Buy a Home?

Saving up the right amount of money is just one step in buying a home. You must also ensure your credit score is in order. Lenders look at different credit scores when they consider someone for a mortgage. Sign up for ExtraCredit to get a look at 28 of your FICO Scores to understand how lenders might see you as a borrower. Once you check your scores, you can decide whether you need to build your score or start shopping for your mortgage.

Sign up for ExtraCredit today!

The post How Much Cash Do You Really Need to Buy a Home? appeared first on Credit.com.

Source: credit.com

Buying a Home for the First Time? Avoid These Mistakes

Buying a home, especially if you’re a first-time home buyer, can be daunting and nerve racking.

But it does not have to be. LendingTree’s online loan marketplace has got you covered – at least when it comes to getting a mortgage.

A 2016 study by the Office of Research of the Bureau of Consumer Financial Protection reveals that prospective buyers who shop for a mortgage when buying a home for the first time report “increases consumers’ knowledge of the mortgage market and increases consumers’ self confidence in their ability to deal with mortgage related issues.”

The importance of shopping for a mortgage as a first-time home buyer is that it saves you money in the long term and “reduces the cost of consumers’ mortgages,” the study found.

The home-buying process can be intimidating. So being aware of these mistakes when buying a home for the first time can help you save thousands and thousands of dollars in the long term.

Tips for Buying a Home
To guide you through a major financial decision like the purchase of a home, you may want to talk to a financial advisor.

Luckily, SmartAsset’s advisor matching tool can help you find a suitable financial advisor in your area to work with.

Get started now.

10 Mistakes to avoid when buying a home for the first time.

1. Not knowing your credit score.

We are all aware that the higher your credit score, the better.
Yet, despite this fact, many people fail to check their credit score before
buying their first home.

And a low credit score can lead to a high interest mortgage loan, or even worse, a loan rejection. Given the fact that your credit score is the number 1 item mortgage lender looks at, it pays off to know where you stand.

Credit Sesame will let you know what your credit score is for free and monitor it for you. It will also offer tips on how to raise your credit score and reduce your debt.

Just sign up for a free account – it only takes 90 seconds.

2. Not shopping and comparing mortgage rates.

Mortgage rates and fees vary across lenders. In other words, two applicants with the identical credentials can get different mortgage rates. Despite this, however, many fist-time homebuyers fail to shop and compare mortgage rates before buying their first home.

The study reveals that 30 percent first time homebuyers do not
compare and shop for their mortgages, and more than 75 percent reported
applying for a mortgage with only one mortgage lender.

The study further reveals that “failing to comparison shop for a
mortgage costs the average homebuyer approximately $300 per year and many thousands
of dollars over the life of the loan.”

An easy way to shop and compare for a mortgage is with LendingTree. Their simple and straightforward platform can help you find and apply for the right loan all in one place.

3. Sticking with the first mortgage lender you meet.

While it’s tempting to work with your local mortgage lender who’s
only a few blocks away from your home, this decision requires more time. Take
time to meet with at least three mortgage lenders before picking the best match
for you.

Fortunately, LendingTree free online platform, allows you to quickly browse several mortgage rates with several mortgage lenders without visiting a dozen bank branches.

4. Not knowing what loans are available to you.

If you’re buying a home for the first time, one thing you need to address is what types of loans are available to me. Sometimes the answer to this can be quite simple: conventional loan. This is because most people know about this type of loan.

But conventional loan requires at least 20% down payment. And the credit score needs to be in the 700. *Note: You can put less than 20% down payment, but you will have to pay for a private insurance mortgage (PMI).

Sometimes it’s not feasible to come up with that type of money as a first time home buyer. So knowing if other loans are available to you is very important.

FHA loan

One type of loan that is popular among first time home buyers is FHA loan. It is so popular because it’s easier to get qualified for it. And the down payment is very little comparing to that of a conventional loan.

For example, FHA loans require a 580 credit score and a down payment as low as 3.5% of the home purchase price. This makes it easier to qualify for a home loan when you’re on a low income.

VA loans

VA loans are another great option for first-time homebuyers. However, you have to be a veteran. Unlike a FHA or a conventional loan, VA loans require no down payment and no mortgage insurance. This can save you thousands of dollars per year.

So if you’re in market for a loan to buy your first home, you need to educate yourself about the different available loans.


Not All Mortgage Lenders Are Created Equally

When it comes to getting a mortgage, rates and fees vary. LendingTree allows you to view and compare multiple mortgage rates from multiple mortgage lenders all in one place and at the same time, so you can choose the best rates for your needs. LendingTree makes getting a loan faster, simpler, and better. Get started today >>>


5. Not getting pre-approved for a mortgage

One of the first time home buying mistakes you should avoid making is not getting a pre-approval letter. You can simply contact a lender and request it. The mortgage lender will pull your credit report to make sure you have the minimum credit score requirement.

They will also need your bank statements, W2s, recent income tax returns, pay-stubs to verify your employment and ability to afford the loan.

Why this is important? A pre-approval letter means that you’re a serious buyer. It signals that you’re able to commit to the house once an offer has been accepted. It also makes you more desirable than the other potential buyers.

Get a Pre-Approval for a Mortgage Today

6. Not knowing how much you can afford

Buying a home is probably going to be the biggest expenses you’ve ever made. But buying a house you cannot afford can lead to financial trouble along the road. Paying an expensive mortgage for 15 to 30 years on a low income can be hard.

So it pays to know how much house you can afford before you start searching for your home.

The best way to know how much house you can afford is to look at your budget. Take into account your expenses and income and other costs associated with owning a home.

7. Not knowing other upfront costs

If you think that the only cost to buying a home is a down payment, then think again. There are several upfront costs associated with owning a house. These upfront costs include private mortgage insurance, inspection costs, loan application fees, repair costs, moving costs, appraisal costs, earnest money, home association dues.

As a first time home buyer, this may come to you as a surprise. So, be ready to have enough money to cover these costs.

8. Failure to inspect your home.

Although some banks would prefer you inspect your home before they offer you a loan, it’s not mandatory. But that does not mean you shouldn’t do it. Not inspecting your home can cost you a lot. Inspection discovers defects that you may not know about. Inspection costs can be anywhere from $300 to $700.

Don’t be stingy with these costs. It’s better to find out about any hidden defects , like a faulty wiring and plumbing, than finding about them later. To avoid regretting your decision or having to spend thousand of dollars on repairs down the road, consider an inspector.

9. Failure to check out the neighborhood.

Just because the street or the neighborhood your potential house is located is quiet or is not run down doesn’t mean crime is not a problem. So before buying your home, you should check out the neighborhood. Take a trip at night to get a feeling of the environment. Talk to residents. Most importantly, check with the local police station – they can be a great resource when it comes to crime rates in a particular location. This is simply one of the first time home buying tips you shouldn’t ignore.

10. Searching for a mortgage on your own.

There are several mortgage lenders available to you. But choosing one that is right for you can be tough.

The LendingTree online platform makes it easy and simple for you to find the right home loan for you. Now you can get matched up to several mortgage lenders all in one place and at the same time. And the whole process just takes a few minutes.

Follow these steps to get matched with the right mortgage:

  1. Go to www.lendingtree.com;
  2. Answer a few questions regarding the type pf loan yo need and you’ll use it. Within a few seconds, you’ll see multiple, competing offers from several lenders;
  3. You then shop and compare offers side by side.

Ready to get started? Find your best loan!

The bottom line is when it comes to buying a home for the first time, you should not take any shortcut. Doing so can cost a lot of money down the road. So before buying your first home, make sure you get the right mortgage loan, inspect the home, and have enough money to cover some of the upfront and ongoing costs associated with owning a house.

Speak with the Right Financial Advisor

Still looking for first time home buying tips? You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

The post Buying a Home for the First Time? Avoid These Mistakes appeared first on GrowthRapidly.

Source: growthrapidly.com

What to Look for When Buying a House

In this article:

  • What are the top features buyers look for in a home?
  • 1. Search for the right price
  • 2. Prioritize the location
  • 3. Think long term
  • 4. Assess property condition
  • 5. Don’t focus on minor cosmetic details
  • 6. Stick with your must-haves

While everybody knows that buyers shop based on price range, there are many additional considerations to make when looking for a home. And, most buyers end up refining their criteria once they start touring homes. Ultimately, your home criteria should depend on your personal lifestyle and needs. Regardless of what you’re looking for, here are some general rules you should follow to make sure you’ll be happy with the home you buy for the foreseeable future.

What are the top features buyers look for in a home?

Today’s buyers are juggling many different priorities when it comes to buying a home, but according to the Zillow Group Consumer Housing Trends Report 2019, here are the features that rank as very important or extremely important to most buyers.

Neighborhood wants and needs for buyers

  • Safety: 82% say a neighborhood that feels safe is very or extremely important
  • Walkability: 60% say it’s very or extremely important
  • Preferred neighborhood: 56% say it’s very or extremely important
  • Proximity to shopping, services and/or leisure activities: 53% say it’s very or extremely important
  • Optimal commute to work or school: 52% say it’s very or extremely important
  • Offers a sense of community or belonging: 48% say it’s very or extremely important
  • Close to family and friends: 46% say it’s very or extremely important
  • In preferred school district: 43% say it’s very or extremely important

Home features buyers want

  • Within initial budget: 83% say it’s very or extremely important
  • Air conditioning: 78% of buyers say it’s very or extremely important
  • Preferred number of bedrooms: 76% of buyers say it’s very or extremely important
  • Preferred number of bathrooms: 67% of buyers say it’s very or extremely important
  • Private outdoor space: 67% of buyers say it’s very or extremely important
  • Preferred size/square footage: 67% of buyers say it’s very or extremely important
  • Floor plan/layout that fits preferences: 67% of buyers say it’s very or extremely important

28% of buyers look for a home to rent out, 27% looked for smart homes, 58% of buyers looked for assigned parking

1. Search for the right price

Price will ultimately dictate what you can or cannot buy. While looking at homes above your price range can be fun, it’s not a good use of time – and it can lead to heartbreak when you realize it’s not financially feasible. Despite this, Zillow research found that in 2019, just 55% of buyers stayed on budget, while 26% went over their initial budget.

How to set your home buying budget

Use Zillow’s Affordability Calculator: This handy tool gives you an initial budget range based on your income, existing monthly bills, and down payment amount. Once you have that range, you can set up Zillow alerts for homes on the market that fit your price range, along with other criteria.

Get pre-approved: Once you’re ready to really start your home search, you’ll want to get pre-approved by the lender of your choice. They’ll approve you for a loan up to a specific amount, based on your income, debt and credit history.

Forecast your mortgage payment: Even if you are pre-approved for a large loan from your lender, you should make sure you’re comfortable with your estimated monthly housing payment. When you use Zillow’s mortgage calculator to estimate your monthly payments, be sure the taxes, insurance, and HOA fees are accurate – those items can make a big difference in your monthly costs.

2. Prioritize the location

Next to budget, location is one of the most important things to consider when buying a house. The 2019 report uncovered that 24% of buyers found it difficult or extremely difficult to find a home in their desired location. If you can’t find or afford a home in your ideal neighborhood, you’ll want to ask yourself a few questions (and enlist the help of your agent) to find a location that fits your lifestyle, needs and budget. Remember – your home’s location can’t be changed, so take the time to really identify a neighborhood where you’ll be happy live.

Proximity to downtown

Unsurprisingly, homes closer to core downtown areas have better resale value, thanks to their shorter commutes. According to Zillow research, in 29 of the country’s 33 largest metro areas included in the analysis, buyers should expect to pay more per square foot for a home within a 15-minute rush-hour drive to the downtown core. That may be why 15% of buyers who compromise to stay within their budget add time to their commute.

Community attributes

If you like being able to walk to restaurants and shops, try walking the distance to town to see if it’s doable. Spend some time exploring the area, checking out nearby parks and figuring out what kinds of attractions are nearby.

Alternatively, if you’re someone who likes a more solitary life and doesn’t mind driving, you might prioritize a home that offers more privacy, perhaps in a location that’s off the beaten path.

School district quality

If you have kids (or are planning on having kids in the future), you want them to get the best education possible. Checking out the school district ratings is a starting point, but you should visit the local schools to gather your assessment of the education and programs. Even if you don’t have children, the school district that your home is in can impact your future resale value.

Flood zone status

Homes located in flood zones require additional insurance, and buying a home in a flood-prone area means you need to be prepared if a flood actually happens.

3. Think long term

According to the Zillow Group Report, the typical homeowner stays in their home for 14 years before selling. When shopping for a home, don’t just think of your immediate needs. Make sure the home you select will meet your long-term goals, so you won’t have to move again in the near future.

Bedrooms and bathrooms

If you plan to expand your family in the near future, make sure the new home can accommodate your plans, whether it’s an extra room for a new baby, an in-law suite for parents, or a guest bedroom if you’re moving out of state and anticipate lots of visitors. The same goes if you are planning to downsize or you have grown children who will be moving out soon.

Outdoor space

As mentioned above, most buyers rank outdoor space as important. If you have a dog (or plan to get one), have kids who need a safe place to play or are an avid gardener, you’ll want to make sure the home’s outdoor space meets your needs.

Potential to personalize

Many buyers look for a home that’s move-in ready, so they can avoid costly repairs and updates (especially right after moving in). But at the same time, it’s nice to be able to add some personal flair to make a house feel like home. If you’d like to add some of your own style, be sure to steer clear of homes that you won’t be able to change enough to fit your preferences.

Lifestyle amenities

Ideally, your new home should enhance your current lifestyle – and you’ve probably already envisioned what your life in a new home will look like. As you evaluate houses, consider your hobbies and what makes you happy. For example, if you love spending time outdoors, you probably want a home with a nice yard. If you love to cook, maybe a nice, big kitchen is on your wish list. And, think about your current living situation: What things do you wish were different?

4. Assess property condition

TV makes home renovations look easy, but in reality, they’re anything but. If you’re a first-time buyer who has never undergone a renovation, you may want to steer clear of a home in serious disrepair. The costs can add up quickly, and if the home needs structural work, it could delay your move-in, causing unnecessary stress. Here are the three major categories of property condition.

Move-in ready

A move-in ready home is new, close to new, or has been recently renovated. Zillow-owned homes are move-in ready homes that have been recently renovated by a licensed contractor, and are ready for new owners to start their lives.

Minor updates

A home that needs minor updates might have cosmetic issues you’d like to change, or have some dated mechanical systems that could be updated for energy savings. Learn more about minor cosmetic details below.

Major renovation

A home that needs major repairs is usually priced lower due to the work that needs to be done. One upside to a major renovation is the opportunity to personalize the home to your tastes. Keep in mind that the return on investment for a major renovation isn’t 100%, and you risk a delayed move-in if the repairs are more extensive than anticipated.

Check condition of costly systems

No matter the condition of the home you’re buying, make sure your inspector checks to make sure major systems and mechanicals in the home are functioning properly. If issues are uncovered, you’ll want to ask the seller to either repair them before closing or offer a credit so you can fix them yourself. Look out for the following costly issues:

  • Damaged roof
  • Older furnace or HVAC system
  • Flooding, water damage or mold
  • Old insulation
  • Plumbing issues
  • Exterior cracks
  • Uneven floors

5. Don’t focus on minor cosmetic details

No house is perfect, so try not to get hung up on little imperfections. For example, don’t eliminate a home from your list just because you don’t like the interior paint color. Cosmetic changes are fairly easy and affordable to make. Don’t let the following minor issues keep you from buying a house you would otherwise love:

  • Paint
  • Hardware
  • Furnishings
  • Landscaping

When you attend showings and open houses, or even when you’re just browsing through pictures online, it’s easy to get distracted by clutter. Try not to pay too much attention to the seller’s stuff – it’ll all be removed by the time you move in. Put in the effort to picture the house as a blank canvas for all of your belongings.

6. Stick with your must-haves

There’s a big difference between wants and needs, so create two different lists when searching for a home. For instance, a shorter commute may be a must-have, but smart home features are a nice-to-have. Practicality and functionality should always take priority over the bells and whistles.

Things to consider when buying a house: needs vs. wants

For example, your list of needs might look like this.

  • Need: shorter commute
  • Need: specific number of bedrooms and bathrooms
  • Need: parking

Other items might fall to your list of wants, like these.

  • Want: updated kitchen
  • Want: upstairs washer and dryer
  • Want: smart home features

The post What to Look for When Buying a House appeared first on Home Buyers Guide.

Source: zillow.com

My home buying story: How VA loans helped this service member buy a home

 

 

Name: Chris V.

Year: 2004

City: Kapolei

Occupation: Army

Age: 21

Salary: $20,000 + $1,300 a month housing allowance

Home Price: $160,000

Chris and his wife, Nichole, had only been married for a couple of years when they bought their first home in 2004. Like most young couples, they didn’t have enough income for a giant mortgage or pile of cash for the down payment. To make matters worse, Chris and Nichole were house hunting in Hawaii, the most expensive housing market in the nation.

The median housing price in Hawaii then was $460,000, a big number for a couple of 21-year-olds living on an Army salary. But Chris and Nichole had an edge: a Veterans Administration loan, or VA Loan. This is a type of home financing guaranteed by the federal government that helps current and former military families buy a home or pay for home improvements.

Here’s how a VA loan helped them reach their homeownership goals.

It got them into the market with no down payment.

Chris and Nichole made a home-buying budget work for one reason: they didn’t have to pay a dime for a down payment. One of, if not the best thing about a VA home loan is that it allows veterans to buy without putting any money down. As anyone who has bought a home knows, you can spend half your life saving enough cash for some mortgages. Chris and Nichole would have needed $32,000 for a 20% down payment on a $160,000 mortgage—more than his entire salary for 18 months.

But with zero down, they were able to budget for a $160,000 home. Chris was stationed at Schofield Barracks outside Honolulu, so he looked at housing in nearby Kapolei, a planned community developed in the 1950s. They looked at condos because a single-family home was not in their budget. He and Nichole ended up buying a 660-square-foot condo home.

A couple stand outside of a condo near Honolulu

Chris and Nichole in front of their first home—a condo outside Honolulu.

It earned them great terms.

Plenty of young home buyers know they can be trusted with a mortgage, but lenders don’t take people’s word for it. You know whose word they do trust? The government’s. While many first-time home buyers end up paying extra fees and interest until they can prove themselves super credit-worthy, VA loans help veterans and active service members get into homeownership without those extra costs.

Since VA loans are backed by the government, lenders consider them to be less risky and grant favorable terms to buyers with a good credit score and the ability to repay the loan. Chris and Nichole got a competitive interest rate and didn’t have to pay closing costs or get PMI (private mortgage insurance). “We got cash back at closing,” Chris says. “And not having PMI knocked quite a bit off our monthly payment compared to a traditional loan.”

VA loans helped them grow—even during the recession.

Fast forward to 2009. Chris was a Bronze Star recipient back from a tour of duty in Iraq. He has left the Army and is working for a software firm in Hawaii. Nichole is pregnant with their first child, so it was time for them to look for a bigger place to live.

There was one problem. The Great Recession had hit two years earlier, and housing prices had collapsed. It wasn’t a great time to sell, so they wanted to hang on to their condo and rent it out, but they weren’t in a position to both keep it and make a down payment. Once again, a VA loan saved the day, even though Chris was now a civilian. Veterans can get VA loans after they leave the service. It’s a benefit they keep for the rest of their lives.

They bought a 1,400-square-foot house in Waipahu, an area of Honolulu, for $575,000, with no money down. And instead of selling the condo and taking a loss, they refinanced it with a traditional lender and turned it into a rental property. “We had to refinance with a regular lender to stay under the VA lending limit with the house,” he says.

Chris and Nichole celebrate their second home with their first child on the way.

Two years later, in 2011, his job took him to the East Coast, where they decided to rent. They also rented out their house in Hawaii, along with their condo because it still wasn’t a good market for sellers.

“We owed $25,000 more for the house than we could sell it for, and we would have agent fees on top of that,” Chris says. “We definitely didn’t have the cash at that point to make up the difference.”

A third VA loan allowed them to arrive at their ideal home.

In 2013, Chris took a job as a software engineer in the San Francisco Bay Area with Trulia. Nichole was pregnant with baby number three, and she sent Chris off to California with clear instructions. “She told me ‘Buy me a fricking house,’” Chris says. “She did not want to live in a hotel.”

It took him just three weeks. “I looked at thousands of places online, but only a dozen in person,” he says. He ended up buying a 2,336-square-foot house in Pleasant Hill for $700,000—a great deal in a town with a median sale price of $813,500. Again, he bought with a VA loan.

The neighborhood, Gregory Gardens, is vibrant and full of trees. “You felt like you were in the forest, even though you were in a neighborhood,” Chris says. There’s a Bay Area Rapid Transit station nearby for easy commuting. His three kids have a big yard and plenty of neighborhood children to pal around with.

Between Chris’s career taking his family through some of the priciest housing markets in the country and the housing market crash nearly derailing their finances, VA loans truly came to the rescue for Chris and Nichole—an appropriate benefit for the veterans, active service members, and their families who come to their nation’s rescue all the time.

“(VA loans are) one of the best military benefits,” Chris says. “We couldn’t have bought our first home without it, and we wouldn’t be where we are now without them.”

Wondering what homes you might be able to buy with a VA loan? See what’s available now on Trulia.

The post My home buying story: How VA loans helped this service member buy a home appeared first on Trulia's Blog.

Source: trulia.com