Is it wise to buy a home rather than rent? - In my opinion, individuals, like companies, need to focus more on long term planning. My advice is to make the leap to homeownership. It’s a scary decision, but check out my previous blog on the subject. When you pay rent, the money is down the drain. When you buy a home, even if the home does not increase in value, you are building a nest egg, because eventually as you continue to make your monthly payments, the home will be paid for. And there are lots of other financial benefits - but most important, you’ll have a home that is your own – you can improve it and fix it up the way you want.
Is it a good idea to use a real estate agent? As a real estate broker for more than 40 years I'm sure you will expect my answer. But seriously, I would definitely advise it! A good agent can lead you through the rather complicated process, and as your agent, he has a fiduciary responsibility to protect your interests as well as making your buying experience easier. He or she can save you a lot of time and hassle in locating and viewing properties, and guide you through the paperwork. Many properties, like short sales and bank owned properties require that you be represented by an agent. And the nice thing is that you don’t have to pay the agent – they receive their commission from the seller.
How do I locate a good agent? Start by choosing to work with a Realtor that has agreed to work with the Code of Ethics and Standards of Practice of the National Association of Realtors.
How much cash will I need to have for a down payment and closing cost? This really depends on the type of mortgage you choose – FHA loans require 3 ½% of the purchase price as the down payment – so that would be $5,250.00 on a $150,000 property. You can reduce your monthly payment by making a larger down payment – and if you have as much as 20% down, you can obtain favorable conventional financing. Also, when you decide to make an offer on a home, your agent will have you make an earnest money deposit, that is a deposit that you make with your offer to buy, that is usually held in a trust account and applies toward the purchase of the home if your offer is accepted. If your offer is not accepted, this deposit is returned. Additionally, when you obtain a mortgage, you will have closing costs that can amount to around 3% of your loan that are paid at Settlement – but if you are low on cash, it is possible that the seller could pay these costs. Your agent would structure that in your offer to purchase.
Can I get a loan? It is good advice to get pre-qualified by a lender before making an offer to purchase. Letters of qualification are required on HUD homes, Short Sales, and Bank Owned properties. It also makes any offer much more attractive to have an accompanying pre-qualification letter accompanying it.
Where do I locate a good lender? Banks, mortgage companies, credit unions, savings and loans, or in some cases even government agencies can help you get financing to buy your first home. In shopping for a loan, your Realtor can help guide you through the process – but it is basically comparable to shopping for anything else. You want to compare prices which on your loan are the interest rates and the fees for closing costs. You would be amazed how much they vary.
How do I find the right home? This is where the Realtor becomes invaluable – about 80% of home searches are started on the Internet. On the Internet, you can search through hundreds of homes with virtual tours in order to narrow your choices. Your agent can even input your search parameters into the MLS so that as soon as a property is listed that matches your criteria – it will automatically be sent to your Email.
How many homes should I see? The average individual is in memory overload when you see more than six homes in a day. By doing most of their weeding out on the Internet, many home buyers often see just a few homes before they find the one that seems right for them. And when you do find that home, don’t hesitate too long – even though home prices have remained low, inventories are declining steadily, especially here in Utah. It might cost you a night’s sleep, but you’re in this for the long term – make the jump. And good luck!
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