Tips for Home Buyers
|Typical Time Frame||Here are the steps you will take to find and own the home of your dreams.|
|1 to 2 days||1. Seek pre-approval for a mortgage You must know how much you can spend before you spend it. Banks and mortgage companies typically require a down payment of 5%.|
|3 to 6 months||2. Find your home Depending on what you are looking for, the length of your search will vary and a broker can save you time and money by focusing on your needs.|
|2 days to 3 weeks||3. Negotiate on your selected property Everything is negotiable, so inquire about assessments, fixtures, air conditioners, rugs, floors, curtains, washer/dryer, etc. Condominiums are delivered in ‘broom clean’ condition.|
|within 10 days of accepted offer||4. Have a home inspection The buyer, at their own expense, may have the property inspected.|
|within two weeks of accepted offer||5. Review documents The buyer’s attorney does ‘due diligence’, reading condominium documents and budget of the building.|
|within two weeks of accepted offer||6. Sign a Purchase and Sale Agreement (contract) Generally, in a sales transaction, a Boston real estate attorney represents each buyer and seller. The seller’s attorney draws up the P&S for the buyer’s attorney. The buyers sign the P&S and forward the contract with a 10% deposit; the sellers execute the contract. The quicker the P&S can be signed, the better. A P&S is binding only after both parties sign it.|
|6 weeks||7. Apply for a mortgage Receive Commitment Letter from Lender Mortgage applications cannot be processed without an executed Purchase & Sale Agreement. If the condominium or single family house is being financed, then a commitment letter from the Lender is required.|
|1 to 2 months||8. Closing Now that you have satisfied all the contingencies, you are now ready to close. The typical time frame from the time a condominium/house is found to the time of the closing is usually 1 to 2 months.|
Tips for Home Buyers Buyer Checklist
courtesy of Street & Company Real Estate 617-742-5235
1. Evaluate your budget – know what you want to spend for a down payment as well as monthly expenditures (i.e.: maintenance or common charges and real estate taxes, monthly mortgage payment, utilities, parking, insurance etc.).
2. Obtain mortgage pre-approval.
3. Prioritize your needs – space, light, views, building amenities, etc.
4. Identify your timeline for moving.
5. Select an attorney who specializes in Boston Real Estate.
6. Explore different neighborhoods to identify your preferred needs.
7. Research schools in the selected neighborhood(s).
8. Evaluate access to transportation in the selected neighborhood(s).
9. Evaluate building amenities in terms of your needs (i.e.: washer/dryer permitted, gym in building, pet policy, storage facilities, etc.).
10. Once a unit has been selected and offer accepted, review the building financials and condo documents with your broker/attorney.
11. Have a home inspection.
12. Work closely with your mortgage company to gather materials you will need for your closing.
Reprinted from REALTOR© Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS©. Copyright 2003. All rights reserved.
They don’t ask enough questions of their lender and miss out on the best deal.
They don’t act quickly enough to make a decision and someone else buys the house.
They don’t find the right agent who’s willing to help them through the home buying process.
They don’t do enough to make their offer look good to a seller.
They don’t think about resale before they buy. The average first-time buyer only stays in a home for four years.
1. Be picky, but don’t be unrealistic. There is no perfect home.
2. Do your homework before you start looking. Decide specifically what features you want in a home and which are most important to you.
3. Get your finances in order. Review your credit report and be sure you have enough money to cover your down payment and your closing costs.
4. Don’t wait to get a loan. Talk to a lender and get prequalified for a mortgage before you start looking.
5. Don’t ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you need a second opinion.
6. Decide when you could move. When is your lease up? Are you allowed to sublet? How tight is the rental market in your area?
7. Think long-term. Are you looking for a starter house with the idea of moving up in a few years or do you hope to stay in this home longer? This decision may dictate what type of home you’ll buy as well as type of mortgage terms that suit you best.
8. Don’t let yourself be house poor. If you max yourself out to buy the biggest home you can afford, you’ll have no money left for maintenance or decoration or to save money for other financial goals.
9. Don’t be naïve. Insist on a home inspection.
1. Find a real estate agent that’s simpatico. Home buying is not only a big financial commitment, but also an emotional one. It’s critical that the agent you chose is both skilled and a good fit with your personality.
2. Remember, there’s no “right” time to buy, any more than there’s a right time to sell. If you find a home now, don’t try to second-guess the interest rates or the housing market by waiting. Changes don’t usually occur fast enough to make that much difference in price, and a good home won’t stay on the market long.
3. Don’t ask for too many opinions. It’s natural to want reassurance for such a big decision, but too many ideas will make it much harder to make a decision.
4. Accept that no house is ever perfect. Focus in on the things that are most important to you and let the minor ones go.
5. Don’t try to be a killer negotiator. Negotiation is definitely a part of the real estate process, but trying to “win” by getting an extra-low price may lose you the home you love.
6. Remember your home doesn’t exist in a vacuum. Don’t get so caught up in the physical aspects of the house itself—room size, kitchen—that you forget such issues as amenities, noise level, etc., that have a big impact on what it’s like to live in your new home.
7. Don’t wait until you’ve found a home and made an offer to get approved for a mortgage, investigate insurance availability, and consider a schedule for moving. Presenting an offer contingent on a lot of unresolved issues will make your bid much less attractive to sellers.
8. Factor in maintenance and repair costs in your post-home buying budget. Even if you buy a new home, there will be some costs. Don’t leave yourself short and let your home deteriorate.
9. Accept that a little buyer’s remorse is inevitable and will probably pass. Buying a home, especially for the first time, is a big commitment, but it also yields big benefits.
10. Choose a home first because you love it; then think about appreciation. While U.S. homes have appreciated an average of 5.4 percent annually from 1998 to 2002, a home’s most important role is as a comfortable, safe place to live.
1. Develop a wish list of what you’d like your home to have. Then prioritize the features on your list.
2. Select two or three neighborhoods you’d like to live in.
3. Decide how much home you can afford. Generally, you can afford a home equal in value to between 2 and 3 times your gross income.
4. Determine if you have enough down payment to qualify for a mortgage. Ideally, you should have 20 percent of the purchase price as a down payment
5. Consider other sources of help with a down payment. For example, if you have an IRA account, you can use money you’ve saved for buying your first home without paying a penalty for early withdrawal. Also, check with your state and local government on down payment assistance programs for first-time buyers.
6. Get your credit in order. Obtain a copy of your credit report.
7. Determine how large a mortgage you can qualify for. Also explore different loans options and decide what’s best for you.
8. Organize all the documentation a lender will need to preapprove you for a loan.
9. Calculate the costs of home ownership, including property taxes, insurance, maintenance, and association fees, if applicable.
10. Find an experienced REALTOR® who can help you through the process.
1. 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.
2. Selling or buying a home is time consuming. It usually takes 60 days or so for the transaction to close after an offer is accepted.
3. 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.
4. REALTORS® provide objectivity. Since a home often symbolizes family, rest, and security, not just four walls and roof, home selling or buying is often a very emotional undertaking. And for most people, a home is the biggest purchase they’ll every make. Having a concerned, but objective, third party helps you keep focused on both the business and emotional issues most important to you.
While your opinions on the type of home you want to own may change during the home buying process, use this easy checklist to help you set your priorities and make the shopping process less time consuming.
What neighborhoods would you prefer?
What school systems do you want to be near?
How close do you need to be to: (a) public transportation (b) schools (c) airport (d) expressway (e) neighborhood shopping (f) other
What architectural style(s) of homes do you prefer?
Do you want a one story or two-story house?
How old a home would you consider?
How much repair or renovation would you be willing to do?
Do you have special facilities or needs that your home must meet?
Do you require a fenced yard or other amenities for your pets?
|Prioritize each of these options into:||Must Have||Would Prefer|
|Formal Living Room||–||–|
|Formal Dining Room||–||–|
1. Tax breaks The U.S. Tax Code lets you deduct the interest you pay on your mortgage, property taxes you pay, as well as some of the costs involved in buying your home.
2. Equity Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home.
3. Savings Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.
4. Predictability Unlike rent, your mortgage payments don’t go up over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will rise.
5. Freedom The home is yours. You can decorate any way you want and be able to benefit from your investment for as long as you own the home.
6. Stability Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.
Condominiums and townhouse offer an affordable option to single-family homes in most areas. But consider these facts before you buy.
Storage Some condos have storage lockers, but usually there are no attics or basements to hold extra belongings.
Outdoor Space Yards and outdoor areas are usually smaller in condos, so if you like to garden or entertain outdoors, this may not be a good fit. However, if you hate yard work, this may be perfect option for you.
Maintenance Many condos have onsite maintenance personnel to care for common areas, do repairs in your unit, and let in workers when you’re not home.
Security Many condos have keyed entries and or even doormen. Plus, you’ll be closer to other people in case of an emergency.
Reserve funds and association fees Although fees generally help pay for amenities and provide savings for future repairs, you will have to pay the fees agreed to by the condo board, whether or not you’re interested in the amenity.
Resale The ease of selling your unit is more dependent on what else is for sale in your building, since units are usually fairly similar. Single-family homes are usually more individual, so even if there are others for sale in your area, they probably won’t be exactly like yours.
Freedom Although you have a vote, the rules of the condo association can affect your ability to use your property. For example, some condos prohibit home-based businesses. Others prohibit pets. Read the covenants, restrictions, and bylaws of the condo carefully before you make an offer.
Proximity You’re much closer to your neighbors in a condo or town home. Look at profile of other owners be sure you’ll be comfortable. If possible, try to meet your closest prospective neighbors.
Increase your chances of getting your dream house instead of losing it to another buyer, with these easy steps.
Get prequalified for a mortgage. In this way, 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. And call your Realtor
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 absolutely highest price you can afford, but don’t try to go too low and 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 you 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.
If the latest technology or entertainment options are important in your new home, add the following questions to your buyer’s checklist.
1. Are there enough jacks in every room for cable TV and high-speed Internet hookups?
2. Are there enough telephone extensions or jacks?
3. Is the home prewired for home theater or multi-room audio and video?
4. Does the home have a local area network for linking computers?
5. Does the home already have wiring for DSL or other high-speed Internet connection?
6. Does the home have multi-zoned heating and cooling controls with programmable thermostats?
7. Does the home have multi-room lighting controls, window-covering controls, or other home automation features?
8. Is the home wired with multipurpose in-wall wiring that allows for reconfigurations to update services as technology changes?
1. What are your qualifications? Are you a member of the American Association of Home Inspectors?
2. Do you have a current license? Inspectors are not required to be licensed in every state.
3. How many inspections of properties such as this do you do each year?
4. Do you have a list of past clients I can contact?
5. Do you carry professional errors and omission insurance? May I have a copy of the policy?
6. Do you provide any guarantees of your work?
7. What specifically will the inspection cover?
8. What type of report will I receive after the inspection?
9. How long will the inspection take and how long will it take to receive the report?
10. How much will the inspection cost?
Be sure you find a loan that fits your needs with these comprehensive questions.
1. What are the most popular mortgage loans you make? Why?
2. Which type of mortgage plan do you think would best for us? Why?
3. Are your rates, terms, fees, and closing costs negotiable?
4. Will I have to buy private mortgage insurance? If so how much will it cost and how long will it be required? NOTE: Private mortgage insurance is usually required if you make less than a 20-percent down payment, but most lenders will let you discontinue the policy when you’ve acquired a certain amount of equity by paying down the loan.
5. Who will service the loan? Your bank or another company?
6. What escrow requirements do you have?
7. How long is your loan lock-in period (the time that the quoted interest rate will be honored)? Will I be able to obtain a lower rate if they drop during this period?
8. How long will the loan approval process take?
9. How long will it take to close the loan?
10. Are there any charges or penalties for prepaying the loan?
Be sure that:
1. repairs you’ve requested have been made. Obtain copies of paid bills and any related warranties. 2. all items that were included in the sale price—draperies, lighting fixtures—are still there. 3. screens and storm windows are in place or stored. 4. all appliances are operating. 5. intercom, doorbell, and alarm are operational. 6. hot water heater is working. 7. HVAC is working. 8. no plants or shrubs have been removed from the yard. 9. garage door opener and other remotes are available. 10. instruction books and warranties on appliances and fixtures are there. 11. all personal items of the sellers and all debris have been removed.
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:
1. Down payment. 2. Loan origination fees. 3. Points, or loan discount fees you pay to receive a lower interest rate. 4. Appraisal fee. 5. Credit report. 6. Private mortgage insurance premium. 7. Insurance escrow for homeowners insurance, if being paid as part of the mortgage. 8. 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. 9. Deed recording fees. 10. Title insurance policy premiums. 11. Survey. 12. Inspection fees—building inspection, termites, etc. 13. Notary fees. 14. 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. For example, the gas company usually sends a bill each month for the gas used during the previous month. But assume you buy the home on the 6th of the month. You would owe the gas company for only the days from the 6th to the end for the month. The seller would owe for the first 5 days. The bill would be prorated for the number of days in the month, and then each person would be responsible for the days of his or her ownership.
1. Look for exclusions to coverage. For example, most insurance policies do not cover flood or earthquake damage as a standard item. These coverages must be bought separately.
2. Look for dollar limitations on claims. Even if you are covered for a risk, there may a limit on how much the insurer will pay. For example, many policies limit the amount paid for stolen jewelry unless items are insured separately.
3. Understand replacement cost. If your home is destroyed you’ll receive money to replace it only to the maximum of your coverage, so be sure your insurance is sufficient. This means that if your home is insured for $150,000 and it costs $180,000 to replace it, you’ll only receive $150,000.
4. Understand actual cash value. If you chose not to replace your home when it’s destroyed, you’ll receive replacement cost, less depreciation. This is called actual cash value.
5. Understand liability. Generally your homeowners insurance covers you for accidents that happen to other people on your property, including medical care, court costs, and awards by the court. However, there is usually an upper limit to the amount of coverage provided. Be sure that it’s sufficient if you have significant assets.
1. Raise your deductible. If you can afford to pay more toward a loss that occurs, your premiums will be lower.
2. Buy your homeowners and auto policies from the same company and you’ll usually qualify for a discount. But make sure that the savings really yields the lowest price.
3. Make your home less susceptible to damage. Keep roofs and drains in good repair. Retrofit your house to protect against natural disasters common to your area.
4. Keep your home safer. Install smoke detectors, burglar alarms, and dead-bolt locks. All of these will usually qualify for a discount.
5. Be sure you insure your house for the correct amount. Remember, you’re covering replacement cost, not market value.
6. Ask about other discounts. For example, retirees who are home more than working people may qualify for a discount on theft insurance.
7. Stay with the same insurer. Especially in today’s tight insurance market, your current vendor is more likely to give you a good price.
8. See if you belong to any groups—associations, alumni groups—that offer lower insurance rates.
9. Review your policy limits and the value of your home and possessions annually. Some items depreciate and may not need as much coverage.
10. See if there’s a government-backed insurance plan. In some high-risk areas, such as coasts, federal or state government may back plans to lower rates. Ask your agent.
Reprinted from REALTOR© Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS©. Copyright 2003. All rights reserved.
® 2011 Street and Company disclosure