When do I need to get prequalified?

If you are starting to look at homes, your first step should be to get prequalified. Unfortunately, many homebuyers decide to wait to get prequalified until they get more serious about purchasing. Often this is once they have found a property they are interested in going to see. This is a mistake because once you are interested in a property there is very limited time to make improvements or corrections to your credit.

You may have stellar credit, but as a former affiliate of Wells Fargo, I have seen more than a few people be disappointed when they had their credit for a mortgage – even those who were using a credit monitoring service. What many people don’t realize is the algorithm used for a mortgage is not the same and often more stringent than say applying for credit card or the soft pull of a credit service.

You may be concerned having your credit pulled now and then again later when you feel more ready might lower your score. The credit agencies actually factor in that people shopping for a mortgage may have their credit pulled multiple times. This should not lower your score if done within reason.
The truth is if you are like most, you try to money where you can. So if you try to save money on groceries or with fuel points, why would you not try to what is advised to save on your mortgage? With a little extra time, you might be able to help you boost your score to the next threshold. Even lowering your rate by 1/8 or .125% would save you $22 a month on a $300,000 loan. It may not sound like a lot but in 5 years that is $1,320 or $7,920 over the life of a 30 year mortgage.

You are going to have to do it anyway, and you need to precisely what you can afford. So why not do it now while you still have time to let us help you potentially save some money. There could easily be an item you are unaware of or something that needs to be corrected. Stop putting it off. Don’t let procrastination cost you thousands or worse a missed opportunity at a deal of a lifetime.

Contact us to set up 20 minute phone appointment our preferred lender.

Buying a Home with Zero Down

There are still several programs available that allow certain buyers to purchase a home or with little to no money payment. They are great way for buyers to break into the housing market and stop wasting money paying someone else mortgage. Some buyers feel they should put off purchasing a home until they are able to save for a more substantial down payment. They feel maybe it would be better wait until they can avoid paying mortgage insurance.

The truth is it takes most people a while to save up 20% for a down payment, and in that time they home could purchase now will be appreciating. If a home that cost $300,000 today appreciates at 5% per year in 3 year will cost $347,287. Also in that time, a homeowner would be making payments toward their home and their future – not somebody else’s.

No one like mortgage insurance, but it what it does is enable you to get a hedge on inflation. It allows you purchase at today’s value instead of years down the road. The good thing about mortgage insurance goes away once you pay down 20% of your note. You could also make it go away sooner by refinancing once your home appreciates and is worth 20% more than you owe.

The good news is there are currently some great programs that offer reduced or no mortgage insurance. Stop letting opportunities to invest in your future pass you by, contact us today to see what programs might be available to you.

Comparing Mortgage Quotes

When shopping for a mortgage, it is recommended that you obtain zero-zero quote from the lenders you are comparing. This means their quote will not have any buy down points or origination fees. This is a much easier way to compare who is providing the better quote.

If you try to compare quotes with varying points or origination fees, it can get messy real quick. I’ve seen it confuse seasoned real estate agents. Mortgage companies know this so some try to use to their advantage to make their quote seem better than it really is.

You also want to be certain you are comparing quotes on the same type of loan. If a mortgage originator introduces you to a different type of loan that might also work for you, by all means compare it to your first quote, but remember you are now comparing different programs. If you want to compare rates, you should obtain the same quote from the other lender.

If you need help deciphering mortgage quotes, contact me. As a former mortgage affiliate of Wells Fargo, I can help.

Prepaid Taxes and Insurance

If you intend to obtain a mortgage to purchase your next home, you will be required to pay homeowner’s insurance as part of your note. You will select the insurance company and the policy details prior to closing and also be required to pay one year in advance. You will then pay your lender monthly and they will pay your insurance company.

They do this to ensure their interests are always protected and your policy never lapses. You can at a later date change insurance companies, but you will need to coordinate it with your lender. Also when you decide to sell your home, your mortgage servicer is required to pay you back the one year you have in escrow.

Property taxes are usually due in December depending on the county. At closing the current tax bill will be prorated to the day. You will be required to pay that amount at closing. If your down payment if less that 20% your property taxes will also be collected as part of your note. You will also be required to escrow one year of property taxes at closing. Lenders require this to protect their interests by ensuring your property taxes get paid.

In some cases, a portion or all of your prepaid can be paid for as a seller concession. This would need to be negotiated in the contract. In doing so however it is very important to get accurate figures because any money not used on seller concessions will go back to the seller. If you have questions or need help structuring this, please contact us.

What is Title Insurance & How Much is it?

A title search is done to investigate past transfers of title and claims on a piece of property. If there is an issue, it usually shows up here. Title insurance is then issued for the rare chance it does not. You might think we live in a day where most if not all claims on land titles have been resolved, but unfortunately this is not the case. They are however few and far between.

So do not be worried, the chances of you purchasing a home and later claim getting a judgment to move you off of your property are almost unheard of. This is what title insurance is for. It protects you and the lender against these types of claims. If there ever was an issue, the insurance would kick in and pay for any damages. Almost all real estate transactions require a title search and title insurance (99.9% that have a mortgage).

Title search and insurance cost vary somewhat by state and county. A title search should be around $350-$750 and title insurance should between .05% to .07% of the purchase price or $500-$700 per $100,000

Should You Buy Mortgage Points?

A buy down point is a way to lower your interest rate by paying for interest upfront. An origination is often a similar mechanism used for the same purpose. You pay an upfront fee to lower your interest rate. Some lenders even include these into their quote without properly explaining them sometimes to make their quote seem better than their competition.

Do not be confused. Some loan products such as VA, USDA funding fees built in. So if this is the loan type you choose, you will have the same funding fee regardless of the lender you choose. These are not the same as buy down points or origination fees.

The cost for buy down points and origination fees can vary. However, a general rule of thumb is 1 point buys down the rate 1/8 or .125% and cost 1% of the mortgage balance. To put that in perspective, on a $300,000 mortgage .125% would lower your month payments by $22 and cost $3,000 upfront. So it would take 136 payments to make back up the cost.

If you are payment sensitive or you know you will be in this home for a long time, this might make sense. Builders are also sometimes known offer rate lowering promotions such as this. You could also have this paid for you part of a negotiated seller’s concession. Some lenders might even let you roll this back into mortgage.

It also is worth noting, that sometimes the price difference between rates is minimal. In such case, a buy down point might cost a lot less. Using the same example, if you could buy a 1 point buy down for .5% and get in rolled back into your mortgage it might make a lot more sense. Your payment $22 lower, no upfront cost, and you would make up the difference in 5 ½ years.

A good loan officer will check into these sorts of savings opportunities for you. If you have questions or we can help match you with a loan officer specific to your needs, someone we trust, please contact us.

One or Two Story Floor Plan?

This is a question many homebuyers contend with. On a practical note, split level homes are great for growing families and those who are looking get the most size for their money. Two story plans also have a smaller building footprint which means a larger yard. They also can provide some separation if that is something you are looking for say from your kids.

You do however lose some usable square footage on the stairs as well entry and exit landings. Split level homes tend to feel a little more broken up when compared to the openness of a one level. Some feel they do not offer the same curb appeal as a single level. They also do not appeal as much to the aging population.

However, this is often a question that boils down to cost specifically cost per square foot. Generally speaking, split level offers considerable more square footage for the money, but why is that? When considering which option best suits your needs, it is important to consider where the savings is coming from.

The most obvious savings are in the foundation and in the roof. In a true split, you only need half as much materials as you would for a comparable sized single level. You also can expect up save up to 35% on materials for the foundation. The other less evident savings is in the lumber.

Single level homes especially newer designs tend to be more open style floor plans. These tend to include larger rooms with fewer walls than a two story homes. This generally means the span or overall length of the wood beams is longer. This also means they probably will also have to be thicker to be able to support the same weight as would a shorter distance.

If you’ve ever been to you local hardware store to buy lumber, you know the price of goes up exponentially. While a common stud 2”x4”x8’ might only cost $3, a double in length 2”x4”x16’ would cost you $10 where as 2”x12”x24’ might be $55. Then you also have to remember building code may require specific grades of lumber for certain applications.

It can be a lot to think about. The point is comparing these two can sometimes feel like apples and oranges, especially when you throw in a few hybrid variations such as the popular single level with a bonus. As former new homes agent and sales manager, I know. If you need someone to help you see though the fluff and assist your process to make a solid decision for your family, please contact me.

Home Valuation by Roof Styles

You probably are not the type of buyer that looks at the roof, and you are in good company. Many buyers simply inquire about the age and possibly have it inspected. But unless it is unique or has something wrong with it, most do not give it much thought.

However, a brief moment examining the roof can tell you a lot about a home. This is not to for you simply look at the quality or condition of the shingles. It is more to get you to step back and see the quality of the build. If you are comparing two similar homes with differing roof styles and do not assign that a value, it could cost you thousands when it comes time to sell.

An open gable is a common and inexpensive style roof.

 

A hip roof is more labor intensive and requires more skill to build.

Now place either of there next to a hip and valley roof you easily see a big difference not only in the roof but also the structure of the home.

There really is no comparison when it comes to curb appeal of this home.  Also notice how the more appealing building features come at cost namely the loss of potential square footage when compared to other designs. It is easy to see why this style of home is more attractive and why it would cost more to build.

On a typical 2500 square foot home, an upgrade from a gable to a hip roof might add an additional $10,000 in value.  A similar upgrade to hip and valley roof might add $20,000 or more depending on the detail and added cost to the structure. While it may not be exciting, looking at homes from the top down should help you to see past some of the décor and provide a glimpse into the real craftsmanship it took to build a home.

If you need help evaluating a prospective home you are interested in please contact me.

Which Lot Should I Choose?

When looking for a home many buyers set out to the perfect home on the perfect lot, but as you might imagine it doesn’t always work out like that. Often times buyers fall in love with a home and compromise on the home site. This is quite understandable as for most prospective homeowners the home itself is first and the lot while important is a few down on the list.

Even if a view or premium home site is not at the top of your list, you should still consider it in your selection process. While the benefits are often aesthetic, they are tangible as well. Studies have shown people who live in a home with a view are generally happier and are less stressed. Home with a view also typically appreciate faster and sell quicker than comparable home without.

For many homebuyers, this decision comes down are these benefits worth the additional cost? For example, let’s say a home that backs up to a preserve would cost you additional $10,000. Although it might sound like too much, at 4% on a 30 term that is only $48 a month. Similarly, a stunning vista that is $25,000 more actually only cost an additional $119 a month.

Aside from that you have a few options.

Cul-de-sac: These are situated as the end of the street so they usually have less traffic and no through traffic. Also many of these lots are pie shaped.

Corner: These usually come with more land, a side entry, and are great for showing off your curb appeal. Obviously, you may have more traffic.

Interior: These are simply lots between the corner and cul-de-sac lots. Often many of the better views are on the interior lots. This is typically due to lay of the land and because developers want to maximize profits by having more than just a few premium lots at the ends of the streets.

In the curb: These are homes on the bend of a curb. They can be great lots but you need to pay attention to traffic flow. You don’t want to always be nervous pulling out of your driveway. So are inverted pie shaped lots which often make for sizeable backyards.

Funky: These might seem like a deal, but they are usually discounted for a reason. They have an irregular shape, a view of the side of the neighbor’s house, are steep, or something else undesirable. Be very wary of these because when it comes time to sell, it might take a special buyer and/or a special price to sell one of these.

If you can afford it and it is not overvalued, most experts would agree it is a good idea to purchase a premium home site. It can be a view of anything a mountains, the ocean, a lake, river, a pond, or one that back up to preserve. Almost anything is better than a view of your neighbor.

Future buyers will appreciate this added benefit as they always have. On a payment, the added cost will likely be minimal, and pay you back dividends when it comes time to sell. If you would like to set up a search for a homes with a specific type of home site contact me.

How Much Acreage do I Need?

This is very important question. If you do not buy enough, you will always be wish you had more. If you buy more than you need, you will not only have paid more but also have to continue to pay more for maintenance, taxes, and insurance.

The truth is many buyers have a hard time conceptualizing the size of land. You really need to see the difference between a five, ten, or even fifty acre parcel before deciding.

Think about what your plans are for the land. How does adding another acre or two or ten help you achieve your goals? There is no wrong answer, but it is one I would encourage you to really think through.

Perhaps just as important of a question is the shape of a property. Parcels come in all shapes and sizes. Do you need a more square lot or would the same size narrower lot work as well?

You also need to consider the distance and cost to run utilities to your property. If you plan on putting in a septic, you will also need to do a percolation test before you close. If you plan on drilling a well, is a good idea see what the depth are for nearby properties.

If you would like for us to check into these on cost for a specific parcel or area, please contact us.