Does Moving Up Make Sense for You?
Before you list your home for sale, we think it’s important that you understand whether a move is in your best interest. This topic specifically deals with moving up to a bigger home. Answer these questions to help you decide whether moving up makes sense.
- How much equity do you have in your home? Look at your annual mortgage statement or call your lender to find out. Usually, you don’t build up much equity in the first few years of paying a mortgage, but if you’ve owned your home for a number of years, you may have significant unrealized gains.
- Has your income increased enough to cover the extra mortgage costs and the costs of moving?
- Does your neighborhood still meet your needs? For example, if you’ve had children, the quality of the schools may be more of a concern now than when you first purchased.
- Can you add on or remodel? If you have a large yard, there might be room to expand your home. If not, your options may be limited. Also, do you want to undertake the headaches of remodeling?
- How is the home market? If it’s good, you may get top dollar for your home.
- How are interest rates? A low rate not only helps you buy more home, but also makes it easier to find a buyer.
6 Reasons To Hire a REALTOR®
- A real estate transaction is complicated. In most cases, buying or selling a home requires disclosure forms, inspection reports, mortgage documents, insurance policies, deeds, and multi-page government-mandated settlement statements. A knowledgeable guide through this complexity can help you avoid delays or costly mistakes.
- Selling or buying a home is time consuming. Even in a strong market, homes in our area stay on the market for an average of ____ days. And it usually takes another 60 days or so for the transaction to close after an offer is accepted.
- Real estate has its own language. If you don’t know a CMA from a PUD, you can understand why it’s important to work with someone who speaks that language.
- REALTORS® have done it before. Most people buy and sell only a few homes in a lifetime, usually with quite a few years in between each purchase. And even if you’ve done it before, laws and regulations change. That’s why having an expert on your side is critical.
- REALTORS® provide objectivity. Since a home often symbolizes family, rest, and security, not just four walls and roof, homeselling or buying is often a very emotional undertaking. And for most people, a home is the biggest purchase they’ll ever make. Having a concerned, but objective, third party helps you keep focused on both the business and emotional issues most important to you.
- REALTORS® are members of the NATIONAL ASSOCIATION OF REALTORS®, a trade organization of nearly 1 million members nationwide. REALTORS® subscribe to a stringent code of ethics that helps guarantee the highest level of service and integrity.
10 Steps to Prepare for Home Ownership
- Decide how much home you can afford. Your mortgage broker can assist you by getting you prequalified for a loan.
- Develop a wish list of what you’d like your home to have. Then prioritize the features on your list.
- Select three or four neighborhoods you’d like to live in. Consider items such as schools, recreational facilities, area expansion plans, and safety.
- Determine if you have enough saved to cover your downpayment and closing costs. Closing costs, including taxes, attorney’s fee, and transfer fees average between 2 percent and 7 percent of the home price.
- Get your credit in order. Obtain a copy of your credit report.
- Determine how large a mortgage you can qualify for. Also explore different loans options and decide what’s best for you.
- Organize all the documentation a lender will need to preapprove you for a loan.
- Do research to determine if you qualify for any special mortgage or downpayment-assistance programs.
- Calculate the costs of homeownership, including property taxes, insurance, maintenance, and association fees, if applicable.
- Find an experienced REALTOR® who can help you through the process.
Tips on Buying in a Tight Market
Increase your chances of getting your dream house instead of losing it to another buyer, with these easy steps.
- Get prequalified for a mortgage. You’ll be able to make a firm commitment to buy and make your offer more desirable to the seller.
- Stay in close touch with your real estate sales associate to find out first about new listings that come on the market. And be ready to go see a house as soon as it goes on the market.
- Scout out new listings yourself. Look at Internet sites, newspaper ads, and drive by the neighborhood frequently. Maybe you’ll see a brand-new “for sale” sign before anyone else.
- Be ready to make a decision. Spend lots of time in advance deciding what you must have so you won’t be unsure when you have the chance to make an offer.
- Bid competitively. You may not want to start out offering the absolute highest price you can afford, but don’t try to go too low to get a deal. In a tight market, you’ll lose out.
- Keep contingencies to a minimum. Restrictions such as needing to sell your home before you move or wanting to delay the closing until a certain date can make your offer unappealing. In a tight market, you’ll probably be able to sell your house rapidly. Or talk to your lender about getting a bridge loan to cover both mortgages for a short period.
- Don’t get caught in a buying frenzy. Just because there’s competition doesn’t mean you should just buy anything. And even though you want to make your offer attractive, don’t neglect inspections that help ensure that your house is sound.
Common Closing Costs for Buyers
In addition to your down payment, as a home buyer you’ll pay certain “closing costs”. These are costs of the transaction that are typically paid at close of escrow. A rule of thumb is to set aside 2.0% of the purchase price for such costs. This is not a hard and fast rule, however. For example, if you have less cash on hand for a down payment or for closing costs, your Realtor® and lender can often still help you put together an offer that will work.
The lender must disclose a good faith estimate of all settlement costs. A check to cover your closing costs will probably have to be a cashier’s check. The title company or other entity conducting the closing will tell you the required amount for:
- Downpayment
- Loan origination fees
- Points, or loan discount fees, you pay to receive a lower interest rate. (Note — we generally advise against paying points, and we don’t recommend lenders who push them).
- Appraisal fee. Note that often the lender will require a check for the appraiser up front. Typically this will cost about $350.00.
- Private mortgage insurance premium (if applicable).
- Insurance escrow for homeowners insurance, if being paid as part of the mortgage
- Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and insurance in escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you.
- Deed recording fees
- Title policies.
- Survey (if applicable).
- Inspection fees. Generally in our service area it’s traditional for the buyer to pay for whole house inspection. The price for this depends on the size of the home. Paying this at the time the inspection is done can often save you money. The seller generally pays for the pest inspection.
- Notary fees.
- Prorations for your share of costs, such as utility bills and property taxes
A Note About Prorations: Because such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for services used by the sellers before they moved. Proration is a way for the sellers to pay you back or for you to pay them for bills they may have paid in advance.
The Buying Process
Get Pre-qualified for a home loan
The first step to take in buying a home is to get pre-qualified for a home loan, which lets you know what price home you can afford and the maximum loan amount that you qualify for. Being pre-qualified also gives you a clear picture of what to expect as you move forward with the transaction, the documentation you may need to provide and any other issues you may need to resolve prior to moving forward with the transaction.
Get Home Loan Pre-Approval
After you have been pre-qualified for your home loan, you are now ready for step two: getting pre-approved for the home loan you choose. This will give you the peace of mind of knowing that, once you find the home of your choice, you are already qualified to purchase it.
Getting pre-approved also gives you an advantage over offers other people may present. Basically, a pre-approval is almost the same as being a cash buyer because you, the borrower, are already approved for a home loan prior to making an offer. This means that your financing is in place and the lender has given you a written conditional loan approval, subject only to an appraisal, title report and purchase contract.
Locate a real estate agent
The third step is to locate a real estate agent. Taking time to locate a good one is very important: this may be one of the largest purchases you will make in your lifetime, so hiring someone who is experienced and has your best interests at heart is of great benefit to you. A good real estate agent will help you to find the property you want to buy, negotiate the purchase price, make sure all the proper contracts and disclosures are signed, and inspections of the property are performed. In addition, they will ensure that any repairs that need to be made to the property are performed and that all this is accomplished in the time frames agreed to in the original offer.
We believe that referrals are always good and can assist you on this issue.
Find your new home
The fourth step is the fun step … looking for your home or property. Now that you have been qualified to buy and you have a pre-approval letter, your real estate agent can be of great help in locating the right property for you.
Make an offer
Once you’ve found the property of your choice, you and your real estate agent will get together to write an offer.
Open Escrow
After you have reached an agreement with the seller and your offer is accepted, escrow will be opened and your deposit check will be deposited into the escrow trust account. “Escrow” is a system by which a disinterested third party handles legal documents and funds on behalf of the seller and you, the buyer.
Order an appraisal and preliminary title report
I will receive a copy of your accepted offer, order an appraisal of the property you are purchasing and request a preliminary title report from the escrow company. After your loan company receives these items, they will submit your home loan for final approval.
Final approval of your home loan
We will notify you that your home loan has received final loan approval.
The rest of the papers
Upon receiving an okay from escrow, your loan company will order your loan documents, which will be delivered to escrow. The escrow officer will review the documents and prepare an estimated closing statement reflecting any loan charges, escrow fees and title fees associated with your home loan transaction.
Funding your loan
After you sign the loan documents and escrow documents and have brought any required money to escrow, your loan will fund, a deed to the property will record — and you’ll be a homeowner!
Tags: buying, closing, equity, home, income, interest rates, loan, market, mortgage, move, realtors, sale, selling, title
