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Financial Mistakes to Avoid When Buying a House

A home is one of the largest purchases you’ll ever make, so be sure to make the most knowledgeable financial decisions you can.

  • Don’t change your job before you submit a home loan inquiry (if you can help it). Lenders want to see stability. And your paystubs.
  • Don’t change banks. This falls under the “stability” category.
  • Don’t buy a car, boat, or anything you’ll have to finance; your debt-to-income ratio is something you don’t want to worsen before you buy a house.
  • Don’t buy furniture on credit before buying. That pesky debt-to-income ratio again.
  • Don’t charge too much on your credit card, or increase your debts too much.
  • Don’t skip out on or be late on payments. This is one of the most important elements of your credit score. You need to show you can responsibly manage money.
  • Don’t make abnormally large (cash) deposits into your bank account. Two months is the amount of time lenders prefer your down payment to have already been sitting in your account.
  • Don’t lie on your loan inquiry. Be honest about all of your income, debts, and liabilities.
  • Don’t co-sign a loan for anyone. even if you’re not the one making those payments, it increases your debt-to-income ratio.
  • Don’t have inquiries made into your credit. Searching for new credit makes you look risky to lenders.
  • Don’t apply for new credit. Applying for credit can lower your credit score, which is something you don’t need right before a lender will be looking at it.
  • Don’t close an credit accounts. It may seem like the right time to get a better balance of your finances, but it can lower your credit since you’ll have a higher usage of debt compared to your limit on one card and to your overall credit availability.
  • Don’t transfer money around without having proper paper documentation. Your lender requires the most recent bank statements, and if you have any unusual deposits, they’ll need to see the origin of funds. If you can, put all of the necessary funds for your home purchase into one account before applying for a mortgage. If you can’t, make sure the funds are available somehow.
  •  Don’t give an earnest money deposit directly to the seller. A neutral party will hold that money until closing in case anything happens to deter the sale of the home.
  • Don’t forget to line up home-owner’s insurance. Your lender will want to see that you’re covered.
  • Don’t forget to have money for closing costs set aside.
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A Timeline of Things to Do Before Buying Your First Home

The home-buying process may be a bit overwhelming for those who are shopping for their first home; they don’t know what to expect yet. However, there are plenty of resources to help you out, including your Realtor.

12 Months Before

  • Check your credit score. The three credit bureaus (Equifax, Experian, and TransUnion) are required to give you one free credit score per year. Sometimes there are mistakes, (and that’s why you want to request your credit score so far ahead of time) so be sure to check for these.
  • Figure out what you can, and want to, afford. Lenders usually want to ensure your debt-to-income ratio, which includes your mortgage and all other debts, is not higher than 43%.
  • Ensure what you can pay for the down payment. There are various plans and loan types available, so don’t feel too scared to figure it all out.

9 Months Before

  • Make a checklist of priorities you want met in your new house. If you can keep these at the front of your mind when you start searching for a home, you’ll be able to weed out what you don’t want, and communicate what you do want with your Realtor better. If you’re making these decisions with a partner or spouse, be sure to establish the things that each of you won’t bend on, and also the things that you can compromise on. It could become a point of contention later on, if it’s not established early in the game.
  • Research areas, neighborhoods, school districts, etc. (But don’t forget that your Realtor will know all of this info too as well!)
  • Start saving for extra home-buying expenses. Buying your first home might present more miscellaneous costs than you previously thought, so be aware early on. Also, It’s always beneficial to have extra money set aside for emergencies or unexpected needs that may arise. Create a home maintenance funds account for that.

6 Months Before

  • Gather your paperwork for the loan. This will include your W-2’s and personal tax returns from the past 2-3 years, bank statements, your most recent pay stubs, credit card and loan statements, addresses from the past 5-7 years, and most recent retirement account statements (like a 401K.)

3 Months Before

  • Get pre-approved. Meet with your lender, and he/she can inform you of how much you can afford, after looking at your credit score.
  • Meet with your chosen Realtor. Once you discuss the amount you were pre-approved for and what you want in a house, you can start shopping for your first home together.

2 Months Before

  • Make an offer on a house. It usually takes around 4-6 weeks to close, so this will give enough wiggle-room just in case.
  • Get a home inspection. Anything that is discovered unexpectedly can delay closing, or at least make things a bit more complicated in terms of costs.

One Month Before

  • Ensure all your financial documents and lending paperwork are correct, and in perfect order.
  • Get home insurance, and bring proof of it to the closing.
  • A couple days before closing, do a final walk-through to make sure everything looks the same as agreed upon.
  • Make sure you have the required funds to bring to the closing, such as wired money, cash, or a cashier’s check.

 

Congratulations on your new home!

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Why You Should Always Hire a Realtor When Buying or Selling a Home

With so many house-hunting resources available nowadays, it may seem like hiring a Realtor isn’t necessary. However, this is most certainly not true in the slightest, and here’s why.

  • They know what they’re doing. They are experts at buying and selling homes, and are trained to understand and speak real estate jargon that’s vital to know for understanding the process of buying/selling a home. They also have the technology and resources to handle the forms, contracts, reports, disclosures, and anything else that they’re trained to handle. Realtors also know the best time to allot to handle each contract, inspection, etc. They know the areas you’ll be dealing with like the backs of their hands. They know the housing market/conditions, and comps for surrounding houses and neighborhoods (and their crime rates and school systems), and will know how to strategically use all that information.
  • Realtor®s are licensed real estate salespeople who adhere to a strict code of ethics. Licensed agents aren’t held to as high of a standard.
  • A Realtor has connections. They know so many people because they make it their business to. They can give you their list of preferred vendors, such as home staging companies, mortgage brokers, home movers, real estate attorneys, inspectors, etc. They also know other agents and Realtors who can take a look at homes they list, or can show them homes their clients are looking for.
  • They have more resources. While it may seem that there’s an endless amount of websites available to search for homes, Realtors have even more websites and multiple listing services to search. They also have more places to market their listings; a good Realtor has a marketing plan that includes flyers, social media accounts specifically for his or her business, and more.
  • They’re expert negotiators. They’re well-practiced at handling bidding wars, and know the psychology of a deal.
  • A Realtor can handle a lot. There are a lot of variables of things that could change or go south in a deal. They are great at handling these curve balls that are thrown at them. They work long hours so that they can work with their clients’ off-hours. Realtors also know when to filter out “lookie-loos” (non-serious buyers.) They’re also there for emotionally you when you become overwhelmed by the process of buying or selling a home.
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Here’s What Can Happen To Your House in a Divorce

Going through a divorce is a hard process in itself, but having to deal with the house you both shared can make things even more difficult. The home you shared is a source of memories, and a valuable investment of your (shared) time and money as well.

If both people agree in the divorce: When both parties can agree that one of them will keep the home and the other will find a new one, the first step is to have the house appraised to find a market value. (unless they can both agree on the value beforehand)  Once the value is determined, any outstanding money owed on the house, such as a mortgage, must be deducted. Sometimes, real estate commissions are deducted when determining the value as well, even if the party keeping the home won’t be selling it in the near future. Once the value is determined, the person keeping the house will have to pay the other person for his or her share of it. This amount can be paid in a single amount at one time, or in smaller amounts over time. The person staying in the house will also need to refinance, or remove the other person from “exiting encumbrances” on the home.

If neither person agrees in the divorce: If neither party can decide who gets to keep the house, or if neither party can afford to keep it, then it’s common for a court to order it to be sold. This can complicate things; a real estate agent has to be agreed on or appointed. Then, the asking price needs to be set, and with a clear understanding of proceedings in the case of a price reduction. Also needed is the determination of who will pay for which expenses when the house is on the market. Next, if one of the parties is living in the home while it’s on the market, they could attempt to keep it on the market longer by preventing open houses and showings. Specific agreements and/or court orders are needed because of these factors, so that things are clear-cut and alternate consequences are in order.

The process of a divorce can be taxing emotionally and financially, but it can be made easier if both sides attempt to keep a sense of objectivity, and eliminate any pettiness or bitterness. Remember that you’re moving forward, and you’ll find a new and more fitting home sweet home.

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What Not to Say When You’re Selling Your Home

When you’re selling your home, it’s easy to get caught up in the whole process and forget the most strategic points of conversation to share with buyers.

  • Never claim perfection. To you, your home may seem perfect since you’ve lived in it and have an emotional attachment. However, 99.9% of homes are not completely perfect; there’s always something that can be improved, whether you see it yourself or not. A home inspection is necessary to give you the truth on the matter. You don’t want to end up claiming something that’s not grounded in reality when you’re selling your home.
  • Don’t explain what you wanted to fix or change but didn’t. No one wants to hear about what could be, but what’s actually not. It will only make potential buyers realize what they’re missing, and what they’ll possibly need to spend money on in the future.
  • Don’t explain what you sank a lot of money into. Even if you spent tons of money updating your kitchen or master bathroom for example, that doesn’t mean buyers will be willing to shell out a lot more money for those things you value a lot. Different people put varying amounts of emphasis on what’s important to them. Also, sometimes upgrades are valued less than what was spent on them when they’re factored into the comps.
  • Problem: telling white lies. These will come back to bite you. You will be held liable for anything that wasn’t disclosed, and discovered after the inspection when selling your home.
  • Don’t say how long your home’s been on the market. It’s already available information on home info sheets and online, so don’t be the one to bring it up first. This will just make things awkward, especially if the home has been on the market for a little while.
  • Mistake: not bending for offers’ prices. Be sure to stay realistic about what to expect and accept for offers. If you come off as un-bendable, buyers aren’t going to try and negotiate and compromise with you. Word may get out to other potential buyer about this, leading you to not get any further offers.

 

 

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Pros and Cons of Buying a Foreclosure

There are some controversial facts out there about buying a foreclosure home. There are definitely pros and cons about buying one, but in the end it’s for you to decide if it’s the best choice for you.

Pros

  • Price: Banks usually don’t want to have to “hold” foreclosures for too long because of costs on their end. This means that the asking price will most likely be much smaller than normal.
  • Variety: There is a wide range of types of foreclosed houses, and with varying price points. It probably isn’t too hard to find one that’s what you’re looking for.
  • Fixer-Upper: You can buy a cheaper, less cared for foreclosure, spend some money to fix it up, and increase its value for the future. There are actual people who spend their lives “flipping” houses, doing just this.
  • Helping the Area: If you buy one of these houses and improve it, you are doing something for the area by increasing the value of the home and the ones around it.

Cons

  • Competing Buyers: Since they’re as cheap as they are, foreclosures usually get bout quickly. Act quickly, and be ready to bid with other people who want it. 
  • Repairs: Time, effort, and money will be spent to fix most foreclosures. If the house has been vacant for a bit, then all of these might be needed even more.
  • Secret Costs: If there’s a lien on the property or something of the sort, then you might have to pay off the past owner’s debts. If they haven’t even left yet, you may end up paying for eviction fees. 
  • Neighborhood: Areas with a higher concentration of foreclosures can be hard to appreciate in value. Lots of foreclosures can weigh market values down in one area. Also, these same areas can have higher crime rates, so do some research beforehand.
  • Emotionally Draining: More paperwork, time, and energy can be spent to sort out foreclosure proceedings. Make sure you’re prepared for this.
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How to Sell Your Home Quickly

Although the housing market does have a say on the speed in which your house will sell, there are other definite ways you can help sell your home quickly.

  • Price it right: Many agents say that you should price the home slightly under value price, as to stimulate multiple buyers to start bidding on it. This in turn will drive the price back up to where it “should” be or higher. If you overprice you run the risk of no one putting an offer in, therefore keeping the home on the market for a while. Sell it quickly by staying realistic about the price.
  • Offer to finance: Since interest rates are going up, (up .25% as of December, and will continue to rise) this will make homes less affordable for some buyers. If you offer to finance the sale for your buyers, you can set up a monthly payment system with a lower interest rate than the bank’s.
  • Make your house look amazing: Put yourself in buyers’ shoes; would you like to see a house that’s been looked after really well? So would they. The curb appeal is the first thing seen by anyone. Water your plants, mow the yard, weed the flowerbeds, etc. Next, deep-clean your house before you put it on the market so that it looks great from Day 1. De-clutter it, including direct walkways in the house. De-personalize it so that buyers can picture themselves living there. Give each room a purpose if it doesn’t have one already; extra bedroom? Now it’s an office/library. Next, update or fix anything that’s needed, such as touching up paint.
  • Allow your real estate agent to host open houses: Seeing pictures of something is much different then seeing it in person. When potential buyers are allowed to fully get a grasp on the home and see it with their own eyes, it becomes much more “real” to them, and an actual option of being a place they could live.
  • Time: Try and plan to sell according to the seasons best known for houses selling quickly- spring and summer.
  • Highlight your home’s best features: Whether this means visually, the way you talk about it, or both. Also, if there are some unique features that would be popular or a “plus” to buyers, be sure and make those known as well. People generally respond with more urgency when they’re presented with an offer that they feel might not come around again.

 

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Are You Seriously Ready to Buy a Home?

It’s a known fact that the process of buying a home can be stressful, confusing, and difficult in general. However, there are certain tell-tale signs of whether you’re actually serious about it and ready to buy, or if you’re just a “looky-loo”, a non-serious buyer.

You May Want to Re-think:

  • Not having an agent: There might be a multitude of reasons you don’t want an agent, or at least yet. However, they are your true guides for the whole home-buying process. They know things you most likely don’t, such as the comps for the area. They also know more about possible price variations, and how much money can possibly be saved, etc.
  • Looking all over the map: It’s better to stick to a smaller radius than a big scatter plot of homes. Usually buyers are more serious when they have narrowed their search down to the exact area they’re looking in, and know the pros and cons of the surrounding area.
  • If you’ve been looking for a long time: Yes, buying a home is one of the biggest purchases of your life. However, the longer you’ve been looking, usually the less serious you are. If you don’t have a list of your personal wants and needs to look for in a house, it will be harder to realize when you find the right (or wrong) one.
  • If you’ve seen a house three times or more: If you’re truly ready, you aren’t afraid of going for it. If you realize that you just can’t commit to any of the many houses you’ve seen, then you may not be a serious buyer.
  • Open houses are your only viewings: You may not be ready to commit if you find yourself sticking to looking at houses in a group, and nervous about making one-on-one appointments.

You May Be Ready To Buy If: 

  • You have a lot of questions: If you find yourself asking about important questions, such as about the school systems, neighborhoods, parks, transportation, etc., then you are probably more cognizant about the buying process and every detail you need to be aware of.
  • You know what you can spend: If you have a budget, and your finances in order, you’re a (big) step closer to being a “serious” buyer. Be sure to become pre-approved as well.
  • You make appointments: If you spend more time in private showing appointments than you do at open houses, then you are probably more ready to buy.
  • Bringing other people: If you bring other people along to see houses, then you may be more serious about making that commitment to buy a home.
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How to Know When You’ve Overpriced Your Home’s Asking Price

A difference of a few thousand dollars in your asking price may not seem like a big deal, but it can really have an effect on the selling of your home. Here’s what to know about overpricing your listing price.

  • Pricing your home at or a bit below market value is the sure way to go. Statistics and seasoned Realtors have repeatedly proved that this is the best way to sell your home, and especially in a timely manner. Looking at the comps and your home’s appraisal value is definitely the best way to reach an accurate asking price point. The first few days of putting your house on the market are the most critical to getting noticed; you need to set your price well to fit inside buyers’ search parameters. Usually if you start getting offers within the first few weeks, then the asking price is good.
  • Don’t be scared about pricing your home too low. The market “decides” the right price no matter what; if the house is slightly under-priced, multiple interested buyers will place offers, and in essence bid the price back up. If you don’t care how long it takes to sell your home, then you can price your home higher. Just don’t expect it to sell for at least a few months!
  • If you refuse to negotiate with multiple offers, there may be a problem. Listen to and observe the buyers that come around; those that are both interested and not interested. Get feedback on what they like and don’t like, so that you can take this into account when dealing with your asking price.
  • However, the housing market does still have an affect on speed of sale. Look at how fast the homes like yours in your area and neighborhood sell (and for how much), so that you can get a feel for the right speed. If the inventory of the housing market is low then your home may sell faster, and vice versa (this applies to homes priced at the median level).
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Easy Fixes to Help Sell Your Home

You don’t have to spend a whole lot of money to freshen up your home in order to sell it. There are some easy fixes that can make a world of difference.

  • Check out your curb appeal. Check your gutters to ensure they’re not clogged or loose, mow the yard, trim shrubs, inspect your shutters, & power wash your driveway and/or house if needed
  • Check out your doors; if you need to replace it, then do. You can also replace just hinges and knobs if that’s the better option. Make your front door look extra attractive for a great first impression to potential buyers.
  • Give your house a nice scent on the inside
  • Spot clean/treat anything wrong with your walls, moldings, windowsills, etc.
  • Add fresh paint and/or repaint your trim
  • Check the quality of your floors; your rugs, carpets, & hardwoods
  • Organize everything- your closets, rooms, etc.; anything the buyers will see
  • Improve your window treatments; get rid of dust, stains, etc., or replace them
  • Check your drawer tracks, because you don’t want lopsided drawers
  • Shine your appliances
  • Refinish cabinets; kitchen remodels are very expensive
  • Update your hardware & light fixtures to something classic, yet attractive that pairs well with the rest of the room
  • Install ceiling fans or change them if they’re old
  • Add crown moldings
  • Install hardwoods in your living room
  • OR restore hardwood floors
  • Re-tile your bathroom floors; this has great return on investment
  • Change out your shower curtain to something literally and aesthetically fresh  sell sell sell