Buying a home especially if it is your first one can be a pretty intimidating process. I wanted to show in a brief article that it is not as bad as one might think.

1) Ask the question should I buy or should I rent http://fayettevillehomefinder.com/?p=98 If you come to the conclusion that you should buy the next steps are for you.

2) Make a budget and find out what is a comfortable payment.

3) Locate a Real Estate Broker, They can send you info on homes available, and give all kinds of helpful information before you are actually ready to start looking. They can assist with any property for sale in the area. In Fayetteville and surrounding areas call me

4) Get pre-qualified, By doing this in the first few steps we take all the guess work out of What payments will run and how much home can you afford. Stick to your initial budget even though you might qualify for more. Compare rates and costs with a few different companies.

5) Get together with spouse and make a list for each of you with 5 things your new home must have, and 5 things you would like to have. This is how we score the homes we look at.

6) Talk with your agent and narrow your selection down to just homes located in areas that meet your pre set criteria. Don’t try to look at every home available. Don’t look at homes that are higher in price.

7) Once you find your new home it is time to write an offer.

In our next article we will go over the steps that lead up to closing on your new home.

The answer is yes to all buyers. I have included this in the articles for sellers also for good reason. I am a true believer unless you are a experienced home inspector or a general contractor licensed in electrical, heating, air and plumbing you need someone familiar with all of these systems to look at your home you are getting ready to buy. You never want to buy something with out all of the information. Buyer beware or Caveat emptor allot of us have heard this term in cars and Real Estate and it still rings true. The problem could be something that the seller had no idea about, something they were not trying to hide.

The purchase of a home, be it for personal use or investment, is a major purchase and expense so it is best to take all the precautions you can. When you first get ready to buy go ahead and start interviewing home inspectors. They will be an important part of your team. Research the area for them, talk to your agent, ask friends that have just made a home purchase and then interview them in person. Find out their qualifications and experience, get references of past clients. Check and make sure they are licensed. Never use someone who is not licensed. Make sure you understand their policies and limitations don’t just go for the cheapest - make sure you feel comfortable with them.

I would like to point out now that the sellers will not repair all the items found on a home inspection report, but any operating system and safety problems should be taken care of. Make sure you understand the paragraphs that cover home inspections in your offer to purchase. The 2-4 hundred dollars you spend now could save you 2-4 thousand and up down the road. Most foreclosure, bank and VA owned homes are bought as-is where is (make sure you understand all the forms you sign) I still recommend doing a home inspection to get an accurate picture of the condition.

Why would I recommend a seller do a Home Inspection? So they are aware of any operational or safety issues. A lot of items I have seen are loose screws or items easily repaired by the seller. When I am the seller I want to know if there is anything that needs to be taken care of.

I’m sure that everyone has heard about what is happening in the mortgage markets around the country. You’ve heard about major mortgage companies going out of business and are probably asking yourselves a couple of questions. What are rates going to do? Which mortgage company should I go with? Is the company I am with now going to be in business? Should I buy now or wait this situation out? Fortunately the answers are fairly simple.

What are rates going to do? For the last 4 years interest rates have been between 6% and 6.5%. We have had very little movement over the last couple of years. Unless the economy starts to heat up and inflation increases rates should remain fairly stable.

Which mortgage company should I go with? I always recommend that a homebuyer go with either a local mortgage lender or a national retail lender. For the most part, stay away from mortgage brokers. There are some great brokers out there, however a mortgage broker has to work under another company’s umbrella. Usually, your loan is processed and underwritten by another company. The time from origination to closing can greatly increase when working with a broker. The best scenerio is to work with a local mortgage lender. Your loan will be processed, underwritten and funded locally. You will have greater control over the processing of your mortgage and will be able to have all of your questions answered quickly.

Is the mortgage company I am with now going to be in business? This is a question you need to ask at the time of origination! This also goes along with; How long have you been in business and is your company a mortgage lender or a mortgage broker. If the company you are with now has been in business at least 10 years you can safely assume they will be in business today, tomorrow and probably another 10 years down the road.

Should I buy now or wait? I look at it this way, the Fayetteville market has been shielded from the national market for as long as I can remember. Yes, we do feel the affects but not to the degree the rest of the nation does. Rates are very good right now. If you sit on the fence and wait for them to come down you could very easily fall off the wrong side of the fence!! Why take the chance for rates to come down and then have them go up and now you have possibly lost your dream home because you no longer qualify at the higher rate? Take your time to find the right home. That makes more sense. I would not rush into and offer to purchase because your worried about rates. You may end up with a house you really do not want.

One big misconception that I have to explain to clients allot is how companies determine the list of foreclosed properties. Most people guess that they can buy a foreclosure for what is left owed on the original loan that was foreclosed on, or that the price it sold for on the court house steps is what you can get it for. Both of those are good guesses, but they are wrong.

The list price is determined by a number of things that happen right as, or after a property is foreclosed upon. When an agent that works with and list foreclosures gets an assignment they give the companies a Market analysis on the property along with adjustments for repairs. The companies then get an appraisal on the property or get a back up opinion of value. They compare all the information to determine where they will initially list at.

If all the homes in a neighborhood are selling at 100k, and a foreclosure becomes available be sold as-is with no repairs being made needing 5k worth of repairs and all homes selling in under 30 days on the market more than likely it would come out at 96-98k because of low days on the market shows a high demand. The same home in area with the same prices but the homes stay on the market 90 or more days on average would be listed at 92-96k. They will lower the price to try to get it sold quicker because of the cost of maintaining the home.

The Companies with the foreclosures want to sell the property but they will not give it away if they can recoverer some of their expenses because they understand just as well as the investors buying them what they properties can be worth. Check back tomorrow where I will go over some offer strategies.

I wanted to give my take on this. I get asked more than once will mortgage rates go up or down when the feds meets. The big date right now is 18th Sep, 2007. The rate everyone is talking about is the rate that the Fed charges banks on money they loan overnight. If you remember, in ‘04 and early ‘05 when the fed would drop rates, mortgage rates would go up for a week or so and then go down. I think then it had to do with good employment reports and consumer spending.

My opinion on it this time is a lot different, the employment report last week was not good, everyone is screaming, and the new housing starts are very slow throughout most of the country. This affects a lot more people than we think about. The people in the factories making all the goods for homes down to pictures that go on the wall and the goods to clean them with, the surveyors, people who put in streets, construction workers, the sales and advertising people. A good friend of mine told me today that the word on the street, and I am sure he meant Wall not Hay, was that there was a 100% chance of a 1/4% drop to an 80% chance of 1/2% drop. I think we will see rates drop a little to try to stimulate things. I think we are still fine it will just make it that much better for us.

Buying Versus Renting

This is one of the most commonly asked questions I hear, so I am going to cover what I have found to be the best way to determine what is right for you by breaking it down into categories.

My area has a lot of military buyers so I will cover them first with questions they should ask themselves to determine if buying is right for them:

1. How long will I be in the area?
   If your answer is a 3 – 4 year period then Yes, and I will cover why after we ask our selves all the questions.
2. Will I be deploying a lot for extended periods of time and relocating my family closer to loved ones in a different state or extended distance from my home?
   If you will be, then no, buying may not be right for you. Upkeep and maintenance will become a problem, If you decide to buy and rent it while you are deployed and your family is out of state most tenants will want a yearly lease and it could present problems if you return early. Your home will be rented and your family will be ready to return also.
3. How is the area appreciating?
   This is a biggie remember most Military buyers use a VA loan that means they pay a funding fee ( 2.2 % of loan amount for the 1st time you use your entitlement, 3.3 % of loan amount every time after the 1st.) which usually gets tacked on top of their loan amount. A good way to look at it is a $100,000.00 home purchase price will result in a loan amount of $102,200.00 loan amount. You are able to pay the funding fee up front if you want. ***Another tip if you have prior military service and receive 10% or more in disability from the VA you do not have to pay any funding fee*** All of this can result in a negative equity position making it harder to resell and make a profit when you leave or transfer.

These are the main questions to ask yourself and family. If the answers are favorable to buying then please read on for some of the reasons to buy.

In our area you can usually buy with less money out of your pocket than you can rent. I will break this down for you. I am going to use the $100,000.00 home as an example again. A home with $100k of value for 3 bedrooms, 2 baths, double or single car garage in an area with good schools and close to amenities usually translates to a rental amount of $850-925 a month. If you have some small dings on your credit they can increase your security deposit to two months, to where if it is minor issues you can still buy using your VA entitlement.

COST TO RENT:
CREDIT CHECK AND APPLICATION $40.00
SECURITY DEPOSIT $900.00
FIRST MONTHS RENT $900.00
PET DEPOSIT $200.00
RENTERS INSURANCE $25.00

Total out of pocket is $2065.00 and you do not get any deductions for your taxes (however, the landlord can). When you decide to leave you will have received nothing in return (tax deductions, appreciation). The only thing you may get back is your security deposit.

Now I will cover the cost of buying the same home. I will break the monthly payment down here first on $100k purchase price based on an interest rate of 6%: Principal and interest $612.74, Taxes $120.00, Insurance $50.00. Total monthly payment $782.74. You have saved $117.26 a month already on comparable homes.

COST TO BUY:
CREDIT CHECK AND APPLICATION FEE PART OF CLOSING
SECURITY DEPOSIT NONE
BUYERS SHARE OF CLOSING COST $1200

You will only need your earnest money up front (typically 1% of purchase price). Depending on what part of the month you close it maybe up to 6 weeks before 1st payment is due.

Now lets cover what you get when you leave based on a modest amount of appreciation (3% a year) and your yearly tax deduction. Average of $5976.90 a year additional tax deduction for interest paid (based on owning for 4 years). Your remaining loan balance on the home will be $96,696.05. Your home will be worth $112,550.00

Now I am going to cover your proceeds from the sale based on realtor commissions and closing costs:

COMMISSIONS $6753.00
(*remember a good realtor will price your home correctly, appreciation could be higher and save you money in the transaction)
CLOSING COST $3375.00
TOTAL COST $10,128

You still pocket $5725.95 and you saved $5628.48 between rental amount monthly and your mortgage payment. Also, don’t forget to add back in savings every year from the additional tax deductions.

Rent vs. Buy Calculator
Use this calculator to determine if renting or buying it best for you.