Kathy Murray's Blog
You’ve never owned your own home and your thinking about buying. Transitioning mentally from renter to owner can be confusing at times. As a renter, you haven't had to deal with the ins and outs of owning your own home, and as you examine the reality of ownership, it can seem like it involves more cons than pros. You have to take care of all maintenance, repairs, insurance, upgrades and more. With all the added work to maintain only to one day resell your home, it might not seem worth it. So why is buying a good idea? Here’s why!
Consistent monthly payments
As a renter, you constantly are subject to rent increases. Depending on your city or neighborhood, this might be a small percentage annually (if your rental unit is under rent control), or an annual increase determined in your rental agreement. In many cases, your rent is subject to your landlord’s discretion at the end of each term of your lease, and if the property value and quality of living go up in your neighborhood (as you hope it does), it could price you out of your favorite living space. When you choose to purchase a home, you make a longer commitment, but your monthly payments are guaranteed to be the same throughout the repayment of your fixed-rate mortgage. Living with no surprise changes allows you to set budgetary and lifestyle goals further into the future, and the certainty to achieve them.
Equity and future cash flow
Yes, you will likely need to take out a loan to purchase your own home. The upside to ownership is that every mortgage payment you make increases the percentage of equity you have in your home. When you rent, you are only paying toward the term of your lease and the owner of the rental property gains all the equity. Investing in your own property helps your financial stability for the future. The more equity you have, the better your net worth and the more you can invest in other properties or goods. The more stake you have in your home, the more valuable it becomes to you when you want to sell your property in the future—to create cash flow, or to invest in a new home, other property, or your retirement lifestyle.
Apart from the personal value of owning your own home—taking care of it, raising a family there, or starting a new life in your place—the investment can add even more value to your life. If you’re considering your first home purchase and aren’t sure about the commitment or investment value, speak with your local real estate agent for the best advice for you. Review your current means, your interests and abilities, and your life goals and let them help you make the right decision.
A showing enables a buyer to walk through a residence and envision what life may be like if he or she purchases it. And if a buyer crafts a home showing strategy, he or she can make the most of this opportunity.
Now, let's take a look at three tips to help you plan ahead for a house showing.
1. Review the Home Listing
A home listing may include details about a house, as well as images that depict different areas of a residence. It also may feature information about various attractions and landmarks near a house.
By reviewing a listing prior to a showing, you can double-check to ensure a home falls in line with your homebuying goals. Plus, you can use a listing to understand what you may see during a showing and establish realistic expectations for a residence.
2. Make a List of Questions
There is no reason to enter a showing without a list of questions about a residence. Because if you attend a showing without questions in hand, you risk missing out on valuable insights about a house that otherwise could help you determine if a home is right for you.
As you create a list of home showing questions, consider what you want to know about a house that you were unable to learn from the residence's listing. For instance, you may want to ask why a seller has decided to list his or her house. Or, you can craft questions about utility expenses and other home costs so you can get the information you need to analyze a house.
3. Prepare Your Home Showing Essentials
A home showing is a learning experience unlike any other, so it often helps to put together a bag of must-have items for the event.
For example, you may want to bring a pen and paper so you can take notes during a house showing. Meanwhile, some buyers carry a camera with them so they can capture photos of a house and review them after a showing.
As you prepare to attend a home showing, you may want to consult with a real estate agent as well. This housing market professional can take the guesswork out of planning for a showing and help you gain the insights you need to assess all aspects of a residence.
Typically, a real estate agent will meet with a buyer prior to a showing and offer insights into a house. A real estate agent and buyer then will attend a showing together and walk through a house. After a showing is complete, a real estate agent and buyer next will discuss the house and weigh its advantages and disadvantages. At this point, if a buyer wants to submit an offer to purchase a particular home, a real estate agent will help him or her craft a competitive homebuying proposal.
Want to maximize the value of a house showing? Use the aforementioned tips, and you can plan ahead for any home showing, at any time.
Unmarried couples often find themselves surprised at the additional steps it takes to buy a home compared to their wedded friends.
This guide will help you prepare for buying a home together as an unmarried couple:
Banks will assess you differently than they would a married couple.
Whereas they look at a married couple as a single financial unit, you and your partner will be assessed individually. This certainly has its pro’s and con’s. Know that if one partner has a significantly lower credit score it can affect your eligibility for a loan as a couple.
Legal ownership of the title will be different.
Unmarried couples have three options when it comes to title ownership: sole ownership, joint tenants and tenants in common.
Tenants in common is the most popular. The difference between tenants in common and joint tenants is this:
In a joint tenancy ownership is 50/50. If one partner were to become deceased, ownership of their half of the property would carry over to the other partner.
Tenants in common ownership can be disproportionate to reflect each partners level of investment. If one partner were to become deceased, their living trust would inherit ownership of their portion of the property if another option is not otherwise specified in their will.
Sole ownership is just that. One partner owns full legal ownership of the property. This option can have tax benefits and increase your financing eligibility if one partner has a higher income or better credit score than the other.
It’s highly recommended for unmarried couples to sign a property, partnership or cohabitation agreement when buying a home together. This is a legal precaution to safeguard both partners in the future should anything happen.
If your finances are separate it is ideal to at the very least create a joint checking account from which to draw the down payment and mortgage installments. This is especially true if both partners are contributing to these payments. It create a clean, clearcut payment process each month.
Know each other's finances.
Discuss your credit scores, debt burden, savings, investments and financial goals. Get clear on where you each stand and how these factors will influence your buying process. Create a budget together as a couple to ensure you can take on not just the responsibility of a mortgage payment but also closing costs, homeowners insurance, property taxes and maintenance costs. Plan for savings like retirement, nest egg, family planning, future vacations, and emergency funds.
Buying a home together as an unmarried couple is a different process than that of married couples. However, that doesn’t mean it has to be harder. With an understanding of what to expect ahead of time and a plan in place, the process can be a smooth one.
A home inspection may prove to be exceedingly valuable, particularly for a homebuyer who is on the fence about whether to purchase a particular house. In fact, a house inspection may raise a number of questions that a buyer will need to consider to make an informed decision about whether to proceed with a home purchase.
Some of the key questions that a homebuyer needs to consider after a house inspection include:
1. What do the inspection results reveal about the overall condition of a house?
A home inspection represents a learning opportunity for a buyer. After the evaluation is finished, a buyer will receive a report that outlines a home inspector's findings. This report usually is available within 24 to 48 hours of an inspection and can make a world of difference to any buyer, at any time.
As a homebuyer, it is essential to review the results of a home inspection closely. That way, you can learn about any underlying issues with a home and map out the best course of action.
If you find that a home has a variety of problems, you may want to ask a seller to complete myriad house repairs before you finalize your home purchase. Or, if you are satisfied with a home after an inspection, you may want to continue with your house purchase.
Keep in mind that you can always walk away from a home sale after an inspection too. In this scenario, you can simply reenter the housing market and continue your search for your dream residence.
2. After reviewing the home inspection results, am I comfortable with a house?
Oftentimes, it helps to consider the prices of possible home repairs after you complete an inspection. If you analyze these potential costs and find they exceed your budget, you should plan accordingly.
Home repairs sometimes can be expensive and time-consuming. As such, if you are uncomfortable completing a broad assortment of home repairs on your own, you'll want to account for these repairs as you decide how to proceed with a house following an inspection.
3. Is a house a viable long-term investment?
The decision to purchase a home is a life-changing choice. Therefore, you should consider the results of a home inspection to ensure you can maximize the value of this potential long-term investment.
Remember, a home inspection gives you an opportunity to assess any structural issues with a house prior to finalizing a house purchase. If you have any concerns about a possible home purchase following an inspection, you should address these concerns before you complete your transaction.
When it comes to conducting a home inspection and reviewing the assessment results, it generally is a good idea to work with a real estate agent. This housing market professional can help you find an expert home inspector to analyze a residence both inside and out. Plus, a real estate agent will offer tips about what to do following an inspection and ensure you can achieve the best-possible results throughout the homebuying journey.
We all know that buying a home is a significant decision that comes with a great deal of financial planning and preparation. However, few of us are taught the ins and outs of actually obtaining a mortgage to make your dream of homeownership come true.
Mortgages are a complicated business that is always changing, both with fluctuations in market rates and with policy decisions.
But, if you’re hoping to buy a home in the near future, it’s important to understand all of your options when it comes to mortgages.
In today’s post, we’re going to address the 20% down payment myth, where that number comes from, and what your options are when it comes to applying for a mortgage.
Where does the 20% down payment number come from?
For most people, 20% of a house is a serious amount of money that would take years to save up. If you’re a first-time homebuyer and don’t have any equity to use from selling another house, 20% may seem like an impossible amount to save within the time you want to buy a home. Fortunately, there are several ways to buy a home without having 20% in cash saved up.
But first, let’s understand where that number comes from.
Most mortgage lenders will want to ensure that lending to you is a safe investment of their money. They want to know that they’ll earn back what they’re spending. To do this, they use several methods.
First, they’ll check your credit history to see how often you pay your bills in time. Then, they’ll want proof if your income and financial stability. Finally, they’ll ask for either a down payment or a guarantee that you will pay them back. Here’s where that 20% comes in.
If you don’t have 20% of the mortgage amount saved for a down payment, you will typically have to pay something called private mortgage insurance. This is an extra monthly fee, on top of your mortgage payments with interest, that you pay to ensure the lender that they’re seeing a return on their investment.
Most homeowners put much less than 20% down
If you’re feeling bad about the amount of money you have saved for a down payment, don’t be! In fact, most first-time homebuyers put, on average, just 6% down on their first home.
Since first-time homeowners don’t have the benefit of equity they’ve accumulated by making payments on their previous mortgage, they often have to come up with down payments out of pocket.
Other options besides a 20% down payment
There are several ways to secure a mortgage without putting 20% down on the home. First, check to see if you are eligible for any loans that are guaranteed by the government. These can come from the Department of Veterans Affairs (VA), or the USDA single-family home program.
The third option is to take on private mortgage insurance until you’ve paid 20% of your mortgage payment.
Private mortgage insurance can be paid to an insurance company or to the federal government in the case of FHA loans, you can put down as low as 3.5%.
Between these three options, you should be able to find a mortgage that you can afford and one that will give you the best possible financial stability in the long-term.