Category Archives: home buying tips

10 Questions to Ask When Choosing a Mortgage Lender

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choosing a mortgage lenderThe first step in searching for a home is to choose a mortgage lender to set your home search budget. In a world of advertisements, both online and off, it’s easy to feel overwhelmed by options. Mortgage lender ads are everywhere! It’s also invaluable to know yourself, because the mortgage lender that’s right for one person, or couple, may not be right for another. Ask yourself these questions:

  1. How much do you know about mortgages? Are you a first-time home buyer or a seasoned real estate (or financial) professional? Or a household that has bought and sold many homes?
  2. Do you need someone to educate you about your loan options (i.e. the pros and cons of fixed rate vs. adjustable mortgages)?
  3. Are you more comfortable meeting with someone face-to-face or are your comfortable with phone and online interactions?
  4. Who do I know—and trust—to refer their mortgage lender to me? Or who can I talk to about a lender they would not recommend?
  5. Which lender offers the best customer service? What are their response times?

Once you know your preferred mode of communication (face-to-face vs. virtual), and the amount of assistance you need navigating through the home buying process, now it’s time to narrow your options. Let’s make one thing clear: though you do need to apply to get the exact mortgage rate, you do not need to apply to get possible mortgage rates and a list of fees. Make a list of possible mortgage lender possibilities and screen them by asking these questions:

  1. What are your current mortgage rates (be aware that mortgage rates, even fixed rates, do change over a period of time and that buyers get different rates based on their credit)?
  2. Can you get me a complete (COMPLETET) list of fees?
  3. What kind of loan is the best option for me? (If you are interested in a loan specifically for veterans or think that a HUD loan is the best option, be aware that not all lenders can assist you.)
  4. What kind of documents do you need to approve my loan (if I decide to proceed with you)?
  5. How long does the home sale process take? What can I do to expedite the process?

Have any questions? Contact your local real estate agent for a list of local mortgage lenders that their past clients have worked with. Once you’ve selected a mortgage lender, and have selected a home purchase price that fits your budget, your real estate agent can guide you through the rest of the process: finding the right home that fits your approved budget.

8 Real Estate Terms to Know Before You Buy

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home buyingFor most buyers, buying a home—a house, condo or townhouse—is the biggest purchase of their lives. That’s why it’s so important to “know your stuff” BEFORE you jump into the purchase. A little bit of knowledge, and choosing a good real estate agent, can be the key to finding the right property and saving thousands of dollars in the process.

Buyer’s Agent

A buyer’s agent is working for you, the buyer, during your home search and home-buying process. However, you as a buyer don’t pay them for their work; their commission comes from the seller. In most home purchases, the seller also has a real estate agent representing their interests called the seller’s agent.

The seller’s agent is paid by the sellers when they put their home on the market. Their home—whether it’s a condo, townhouse or house—becomes a real estate listing. Once you’ve narrowed down your criteria on your must have list for your ideal home, you’ll start to receive listings from your agent. Each listing includes important information such as estimated square footage, address, number of bedrooms, lot size, etc. If you receive a listing and find you are interested in the property, contact your real estate agent to set up a home tour or showing.

Condition Report

In 1992, Wisconsin became one of the first states requiring sellers to fill out a document disclosing defects that could affect the value or structure of a property. The Condition Report needs to be part of all transactions involving 1-4 properties and has more than 20 categories of disclosures, including important items such as unsafe well water, roof defects and problems within the electrical system. If the property does not have a defect in that category, and has never suffered damage as a result, the seller can indicate that the property is clear in that area.

So what do sellers have to include in the report? Everything—and what was done to fix it. If a problem occurred on the property, even for an insignificant length of time, it needs to be included in the report. Include the issue, what was done to fix the problem, and that it never happened again. For instance, if the basement flooded with a foot of water for a just a few hours 10 years ago, the flooding needs to disclosed. Also write down that the problem was caused by a faulty sump pump that was replaced that same day.

The report cannot be completed by a seller’s real estate agent. Truly, the Condition Report is not protecting the real estate agent, it’s protecting the sellers. That’s why sellers need to fill this important document out—and fill it out completely with full disclosure. A completed Condition Report is more than just a piece of paper. It’s a shield for sellers now—and after the sale is complete.

Earnest Money

Earnest money is a deposit included with your offer that shows you’re serious—earnest—about purchasing a property. The amount of earnest money is applied to the purchase price at sale. For example, if you include an earnest money amount of $5,000 in your offer of $115,000, you will pay $110,000 at closing. Earnest money is the edge that sets your offer apart, and shows your offer is genuine and committed. Including earnest money up front shows the seller you are making a down payment not only on a property, but also in the future.

To determine the amount of earnest money you should include, ask your real estate agent for their recommendation. The amount of earnest money varies nationally, and even among communities and counties in Wisconsin. If the purchase falls through due to contingencies included in your offer, such as an issue found in the home inspection report, the buyer should receive the earnest money in full. If the buyer defaults on the sale, an agreement can be made to compensate the buyer while still giving the buyer a partial refund.

Home Inspection

A home inspection is typically requested by a potential buyer, though a pre-listing home inspection also makes sense for anyone thinking of putting their home on the market. During a home inspection, a hired home inspector examines the interior and exterior of a house and compiles a report detailing issues that the potential buyer may need to remedy. For example, the home inspector may spot a roof that needs replacement, a gas leak from a furnace, electrical issues, plumbing problems or any other issues that may come up after the home sale. A good inspection is invaluable for buyers for several sound business reasons:

  • Some of the most expensive repairs can be hidden, such as structural and electrical issues. Buying a home is a sound investment, and should remain as such. You don’t want to sick more money into the property than you have, or than it’s worth.
  • A home inspector can tell you if work done by the previous owner—even if you can’t tell the work was even done—was done correctly, or can recommend professionals that can inspect the structure or foundation.
  • If the home inspector finds any issues, you can go back to the owners and ask for funds to fix the house, or ask them to fix the damage. If your offer is contingent on the home inspection, you can also back out of the sale.
  • Home inspectors can give you a list of future repairs that need to be made and a timeline. If the house needs a new roof, for example, he can give you his opinion on the damage and when it needs to be repaired or replaced.

For buyers, the most important item that any home inspector can give you is peace of mind and an education about your future investment. To find a good home inspector, talk to your agent. They can recommend a home inspector with the experience and knowledge that you need to make an informed decision about your home—and the amount of work and money needed to make it the perfect home, both aesthetically and structurally, inside and out.

Foreclosure

Foreclosure is a legal process used by a lender when a previous owner stops making payments on their property. In today’s market, the term “foreclosure” can also be used to describe properties that are owned by the bank—though technically, these properties are “bank-owned.”

The process of buying a bank-owned property can be lengthy, with some buyers enduring more than a year of paperwork before they can buy a foreclosed property. However, because lenders are eager to sell these properties, bank-owned properties promise the biggest bang for your buck, as properties are often sold for an incredible value. It is important to note when buying a bank-owned property, however, that all properties are sold “as is.” “As is” means that the lender that owns the property will not pay for any repairs that may be needed. In addition, if a bank-owned property has sat vacant for a lengthy period of time there may be unforeseen problems after you take ownership of the property. One buyer I knew even encountered a flood in her basement. The bank had turned off the water to the property but had not drained the pipes properly, leading to a swimming pool in her finished basement. Foreclosed properties are great values, but be prepared for the possibility of a long buying process and unforeseen repairs.

Mortgage lender

A mortgage lender is the entity that is borrowing you money to purchase a property. One of the most common home buyer mistakes is looking for a home without knowing how much you can afford. Don’t assume that you are going to be approved for a certain amount without talking to a mortgage lender. There are many factors that mortgage lenders use to determine the amount you are approved for, and a simple online calculator is not going to be 100% accurate. Don’t be afraid to “shop around” and find out what mortgage lender offers the best rate. Make sure that you are asking about more than just the mortgage rate, however, as some lenders add additional fees that can offset the low rate.

Before your first visit to the mortgage lender, be prepared. Ask your mortgage lender what documents to bring to your meeting so you can expedite your approval process. Depending on your lender, you need to bring documents such as your W-2, past tax returns, profit and loss forms if you own a business, documents that pertain to your debts, etc. Based on their research from the documentation you provide, the mortgage lender can either decline to give you a loan or approve you for a loan in the amount they specify. If you are approved, your mortgage lender will give you a pre-approval letter. How do you find a mortgage lender? Ask your realtor for information about local mortgage lenders.

Offer

Once you’ve decided you are serious about a property, it’s time to submit an offer (otherwise known as a purchase agreement). An offer contains a price and any contingencies, or conditions, of the sale. For example, a common contingency is a financing contingency which means your loan must go through for the sale to be final. Another common contingency is an inspection contingency where the house must pass a home inspection or both parties come to an agreement on how to handle an issue that arises during the home inspection. There are other contingencies that can be included in your offer; discuss your options with your real estate agent.

An offer is not a binding agreement until both parties have agreed upon the price and contingencies included in the purchase agreement. So how do you decide on the price to include in your offer? Use comparable sales as a compass. The best way to determine a fair price for the property is to compare the home to all area homes for sale, or that have sold, with comparable lot sizes and square footage. A real estate agent can assist with the process, and use their experience to hit upon a fair sales price. Just remember to compare apples to apples, and oranges to oranges. For some properties, especially in rural areas, this can be challenging because of the low inventory of homes for sale in the area; ask your agent to help you navigate through the offer process fairly and affordably.

Short Sale

Short sales are properties that are often owner-occupied. A short sale occurs when an owner owes more for the property than the value of the property. For example, an owner owes $150,000 for a property that is appraised at $120,000. During a short sale, the lender—the institution who is owed the $150,000—agrees to sell the property for (let’s say) $120,000, less than the amount of the loan.

During a short sale, the owner and the lender have to approve the offer made by a buyer. This can mean a lengthy buying process, but, as with foreclosures, the value per square foot can be higher than a traditional sale.

Have any questions? Ask us on our Facebook page or send us an email. We’re experienced real estate agents with a passion for assisting buyers through the home-buying process. We’ll help you navigate through the real estate terms so your home purchase is a knowledgeable and satisfying buying experience.

Home Buying Tips

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home buyingBuying a home is a major decision, and probably one of the most expensive purchases you’ll ever make in your life. That’s why it’s a good idea to use a “look before you leap” strategy BEFORE you sign the paperwork. In this case, the “look” part not only means doing a home tour, but following these home buying tips—for the sake of your heart and your pocketbook:

  1. Buy a house you (or someone else) is going to stay in. Home prices rise and fall, so look at a home purchase as a long-term purchase. If you think you’re going to be getting a job transfer, or moving to a new city in a few years, don’t purchase a home unless you’ve accepted the risk. With closing costs and other transactional fees associated with buying and selling a home, there’s a good chance you’ll lose money from a quick buy-and-sell.
  2. Talk to a mortgage lender before you start looking. One of the most common home buyer mistakes is looking for a home without knowing how much you can afford. Don’t assume that you are going to be approved for a certain amount without talking to a mortgage lender. There are many factors that mortgage lenders use to determine the amount you are approved for, and a simple online calculator is not going to be 100% accurate.
  3. Be comfortable with your budget. Don’t automatically assume that the amount you are approved for is the maximum budget you set for your search. Just because you are approved for a $200,000 budget doesn’t mean that is the amount of money you can afford to part with on a monthly basis. Write down all your present expenses on a piece of paper—car payments, medical costs, etc.—and be comfortable with your budget, and that you can still live while making your monthly home payments.
  4. Budget for the expected expenses of home ownership—and the unexpected. We’re going to be honest with you: homes cost money even after you’ve signed the paperwork. At some point, you’re going to need to replace the furnace, buy a new roof, repave the driveway, install new windows—in addition to the annual maintenance your home needs to stay in good shape. Set aside money for annual home maintenance costs, and for those unexpected breakdowns that come with home ownership.
  5. Know what you’re looking for. Make a list, or use a checklist. Where do you want to live? How many bedrooms do you want or need? How much maintenance do you want to take on? Do you want a lot of land? Prioritize this list, and expect that you’ll make changes to the list as you look at homes.
  6. Know what red flags to look for during your home tour. Don’t fall in love with a money pit. Be cautious and look for issues that could cause issues later, such as electrical issues, water damage, and a decomposing roof.
  7. Get a home inspection. Unless you have a huge budget that can handle a huge unexpected expense, get a home inspection. We’ve written about the benefits of hiring a home inspector in the past, and what to do if you get a bad home inspection report from your dream home. A home inspection can save you thousands of dollars of trouble, and can also point to safety hazards (such as a gas leak) that you might not have noticed during your home tour.
  8. Hire a real estate agent. Hiring a real estate agent is a good first step to learning what to do and what not to do when navigating through the home buying process. They’ve been there, and they can give you advice about what to do and not to do. Contact a good, experienced realtor who has bought and sold houses in your area, and take their advice to heart. Their advice can be the difference between a wise or poor home buying decision in the largest purchase of your life.