SHOULD I TALK WITH A BANK BEFORE LOOKING AT HOMES?

YES!  There are many reasons why you should get pre-approved before looking at homes.  First of all, you need to find out exactly how much you can afford to spend on a home so you don’t waste your time or your agent’s time looking at houses outside your budget. There is no reason to look at homes that are listed for $250,000 if you can only afford up to $200,000.

My First Home Program

Part of Howard Hanna’s First Time Homebuyer Initiative, this program makes it easier and more affordable to become a homeowner, enabling borrowers to finance many of the closing costs associated with purchasing a home. The program is offered in conjunction with an FHA mortgage and is available to potential homebuyers who have not owned a property within the past three years.

Another important reason to talk with a mortgage professional before looking at homes is so you understand exactly the costs associated with buying a home.  Your mortgage professional can give you advice on the type of financing you should be looking to obtain and also whether or not you should request the seller to contribute towards your closing costs, also known as a seller’s concession.

SHOULD I BUY OR CONTINUE TO RENT?
Buying a home can be a very solid investment.  That being said, renting may be a better option, depending on the circumstances.  The current interest rates are incredible.  A 30-year FHA mortgage can be locked in at a rate of around 3.5%.  Since the interest rates are so low, it actually can be cheaper to pay a mortgage right now than paying rent.

There are questions that you should ask yourself before deciding to buy a home.  First, how long do you plan on staying in a home if you were to purchase?  If the answer is only a few years, it’s likely a better decision to continue renting.  Are you ready to take on the additional “responsibilities” of owning a home?  When owning a home there will be general home maintenance that should be done … you ready for that?  Buying a home is a great option in many cases for a lot of people, but not always.

CAN I FIND A RENT-TO-OWN PROPERTY?

You can, but the probability isn’t very high.  And if you do, it’s usually not too good of a deal for the potential buyer. When an owner is offering “rent-to-own” as a possible financing option, they are taking on a high risk since in most cases, a rent-to-own buyer has a credit score that is not the greatest.  Since an owner is taking a higher risk, the terms for a rent-to-own must be considerably favorable for the owner which often leads to less than favorable terms for the buyer.  When looking at a rent-to-own as an option, you can expect to provide a considerable down payment and a higher interest rate than what a lender is currently offering. If you can purchase a home by financing through a bank or lender, you will be better off because the terms will be more favorable.

SHOULD I SELL MY CURRENT HOME BEFORE MAKING AN OFFER ON A NEW ONE?

There’s no “correct” answer to this question, but there are pros and cons to buying a home before selling your current home and the same can be said about selling your current home before buying another.

Buying a home before selling your current home

The biggest benefit to buying a home before selling your current home is the fact that you have a property lined up which can reduce the stress and pressure of having to find a home once your current home is sold.  But … this can also create disappointment and heartbreak.  If you are unable to purchase a new home without having to sell your current home, you’re purchase offer is going to be contingent upon sale and transfer of title of your current home.  If your current home does not sell in a timely manner, this can lead to you losing out on the home by getting “bumped” by a non-contingent buyer, which can, as you can imagine, be devastating.

Selling your current home before buying a new home

You can’t predict how long it will take for your current home to sell.   Selling your current home before buying a new home will put you in an ideal position to negotiate on the new home you’re purchasing due to the fact you are purchasing without the sale contingency of your current home.

One risk of selling your current home without buying a new home first is the chance of not being able to have a place to live.  There are options if your current home sells before buying another though.  A “rent-back” can sometimes be negotiated with the buyer of your current home, which would allow you to retain possession of your current home for a certain number of days after closing by paying the buyers mortgage.  A “rent-back” allows for additional time to find a new home.

DO I REALLY NEED A REALTOR WHEN BUYING A HOME?

When Buying a Home Hire a Realtor

When buying a home, it’s strongly recommended you have a Realtor.  A Realtor has your best interests when buying a home.  Keep in mind, though,  all Realtors are not the same!  When choosing a buyers agent, make sure you know how to properly interview prospective Realtors when buying a home.

Attempting to buy a home without a Realtor can make the home buying process much more difficult.  Having a Realtor is always recommended when buying a home.  One thing not to do when buying a home is calling the listing agent because you don’t want to “bother” your Realtor.  The listing agent’s loyalties lie with their client, the SELLER, whereas a your Realtor represents YOU, the BUYER, and has your best interest at heart.

 

WHO PAYS THE REALTOR FEES WHEN BUYING A HOME?

One reason why buyers ask the question about the need of having a Realtor when buying a home is because they don’t understand who pays the Realtor fees when buying a home.  In some cases, however, there are no guarantees the seller pays the Realtor fees.

When a seller wants to sell their home, they call up a real estate agent and agree on a fee.  Lets say that amount is 5% of the sale price.  Most real estate agents are part of a Multiple Listing Service (MLS) where they agree to compensate the Buyer’s Agent (the agent who represents whoever buys the home.)

When your Buyer’s Agent helps you purchase the home, that 5% total commission is split between the Listing Agent and your Buyer’s Agent (your agent may get 2.5% of the sales price.)  Your agent gets compensated through the transaction but only represents you and best of all, you don’t have to pay them out of your own pocket.

As a home buyer, you can choose any real estate agent in the city to work for you at no expense to you. For first time home buyers, this is very important information. Since there are many steps in the home buying process, it makes the most sense to start finding a Realtor as soon as you are ready to pursue home ownership. Their services are free to you, so you might as well use them to their fullest potential. Ask them as many questions as you can.

IMPORTANT NOTE: The seller’s agent may try to get you to use them, so they’ll get the entire 5% fee and you won’t have your own agent- just say NO!

You also may be asking yourself “doesn’t that mean my Buyer’s Agent will want me to pay more for the home so they’ll make more money??” Let’s look at that for a moment. If you pay $5000 more for a home, your Buyer’s Agent will make an extra $125. I’m not going to risk losing the trust of my client over $125! Choose your Buyer’s Agent wisely and this will never be a concern.

WHAT IS A SHORT SALE?

What is a Short Sale?

A short sale is when a homeowner wants to sell their property, but they owe more on their mortgage than the home is worth, and they can’t afford to pay off the remaining balance in one big payment. In order to short sell a property, a homeowner must prove to the bank that they have encountered financial hardship and are unable to pay the remaining balance. If they are approved, the bank will allow them to sell the property as a short sale instead of going into foreclosure, which can be more costly for the bank due to processing fees.

According to Redfin.com, some of the PROS to purchasing a short sale home are:

  1. You could get a good deal.

    Often times, banks (and homeowners) are highly motivated to find a buyer for a short sale  so will list the home at a low price so it  moves quickly which usually means you can get a good deal.

  2. There’s less competition.

    Short sales take awhile to be finalized, and many house hunters aren’t willing to wait which means there will be fewer people you need to compete with to buy the home. In areas where there are a lot of people who want to buy and not a lot of homes for sale, bidding wars can drive up prices, so less competition can mean a lower price.

  3. It can be less risky than buying a foreclosure.

    Most homeowners continue to occupy the property while offering their home as a short sale which means the occupants aren’t as likely to neglect or destroy the property before the sale is final, which can be the case with foreclosures. There’s also less opportunity for vandals to cause damage to the home.

Redfin also lists some CONS of purchasing a short sale as:

  1. It takes forever.

    You should be prepared to spend months waiting for your offer to be accepted and all the paperwork to be finalized. Despite their name, short sales are typically not short because the creditors have to approve the offer in addition to the seller, and escrow often drags on for months.

  2. Sometimes it’s not worth the wait.

    Don’t assume that because a home is a short sale that the asking price is an offer you can’t refuse. The bank is going to try to recoup as much of their money as possible, and will often set a competitive price.

  3. The home may require costly repairs.

    The owners of a short sale have most likely encountered financial hardship, which often means they haven’t done any maintenance or repairs on their home. In many cases, you’ll be able to do a home inspection before committing to buying the property, but if major issues are discovered, there is no option to ask the bank for a concession or a lower sale price to help cover these costs.

For more information about short sales, visit FreddieMac.com.

HOW IS THE NEIGHBORHOOD/AREA?

When buying a home, a common question home buyers have is regarding the neighborhood/area.  As a real estate professional, there are rules against steering and providing personal insight into specific areas and neighborhoods.  This doesn’t mean that your Realtor cannot provide you with tips to help you choose the right neighborhood when buying a home.  Many buyers wonder about the growth of the local economy, crime statistics, taxes, and local amenities.  If you have a top Realtor when buying a home, you should be able to receive all of the pertinent information to allow you to make an educated decision on areas and neighborhoods.

Check the Crime Maps

You don’t want to live in a neighborhood riddle with crime, petty or otherwise. Thankfully, there are several websites that allow you to get a clear picture of how prevalent criminal activity is in your new neighborhood. These crime maps break down incidents by category, so you can tell what’s really going on in the area.

A few car break-ins in an urban area probably aren’t a major worry – most places have at least some crime. But a spate of violent crimes should give you pause.

Search the Sex Offender Database

Sex offenders have to live somewhere, but you probably don’t want them as neighbors, especially if you have or plan to have kids. Sex offenders are required to register their addresses, and you can find sex offender databases online.

Find Out If Everyone’s Selling

Do you see a lot of for sale signs in the neighborhood? It could be that longtime residents are cashing in – “selling high” with the intention of “buying low” elsewhere. Or, it could be a sign that they want to get out of the neighborhood as soon as possible. Too many listings in the immediate area could signal trouble.

Take a Walk Around the Neighborhood

Driving around in a car, there are things about a neighborhood that you might miss. Plus, you’re bound to feel safer in a protective bubble that can get you out of a bad situation in a hurry. To really get a feel for the neighborhood, take a tour on foot.

Chat With Potential Neighbors

Chatty neighbors are one of the best resources for prospective homebuyers. If you look hard enough, you’ll likely find one or two older residents who can give you the lowdown on the area, from proposed infrastructure projects down to any neighborhood spats.

Rent Vs. Own

There’s nothing wrong with renting – most of us have rented our home or apartment at one point or another. But a neighborhood where a majority of the residents rent is an indication that the people who own the homes in the area don’t want to live there – something to consider.

Check the School Scores

When an area has excellent schools, it’s a sign that the locals take education seriously, and that the neighborhood kids have the opportunity to be challenged and inspired by great teachers. Lackluster schools tend to have higher dropout rates, and that means more kids roaming around with nothing to do. They might not be looking for trouble, but there’s a chance it could find them – and you if you happen to live nearby.

Call Your Insurance Provider

Insurance companies rely on the laws of probability all the time. The better the neighborhood, the less likely it is that they’ll have to pay insurance claims for clients who live there. Check with your local insurance agent to get their scoop on the neighborhood. Choose a part of town they recommend, and as an added bonus, your insurance rates might be lower.

Look for Signs of Vandalism

Vandalism can happen anywhere, but it tends to occur the most in places where the odds of getting caught are slim. If you see lots of walls covered in hastily painted tags or destroyed public property, you might want to think twice.

Trust Your Gut

Sometimes a neighborhood checks out but you still just don’t feel right about it. It could just be pre-purchase jitters, but it might be something more. If your instinct is telling you this isn’t the right neighborhood for you, be sure to trust it. There are plenty of fish in the sea.

WHAT IS AN APPRAISAL?

What is an appraisal?

A house appraisal is an estimate of a property’s value. Mortgage lenders require an appraisal on your home before they’ll provide a loan for the simple reason that the property is the underlying asset that serves as collateral for the loan. If for some reason you run into financial difficulties and lose your home to foreclosure, your lender would need to sell the property to repay the loan. A lender will only approve a loan for a property that appraises for the full sale price of the home—or more.h

A home’s appraised value is based on such factors as square feet, number of bedrooms, number of bathrooms, the location and age of the property, and interior improvements. These facts about your home will be compared with other homes that the appraiser considers comparable to come up with your home’s value.

WHAT IS AN INSPECTION?

What is an inspection?

A home inspection is a limited, non-invasive examination of the condition of a home. Home inspections are usually conducted by a home inspector who has the training and certifications to perform such inspections. The inspector prepares and delivers to the client a written report of findings. The client then uses the knowledge gained to make informed decisions about their pending real estate purchase. The home inspector describes the condition of the home at the time of inspection but does not guarantee future condition, efficiency, or life expectancy of systems or components.

WHAT IS A FORECLOSURE?
Foreclosure is what happens when a homeowner fails to pay the mortgage.

More specifically, it’s a legal process by which the owner forfeits all rights to the property. If the owner can’t pay off the outstanding debt, or sell the property via short sale, the property then goes to a foreclosure auction. If the property doesn’t sell there, the lending institution takes possession of it.

In Ohio, your mortgage lender must go through the court system in order to foreclose on your home. As a homeowner, this means you have the right to contest a foreclosure complaint filed against you. If a foreclosure complaint is filed against you, you should consult an attorney right away. Here’s what to expect:

  • Day 1: You miss your first mortgage payment.
  • Day 16: Your mortgage lender adds late fees to your mortgage bill.
  • Days 45 – 60: Your mortgage lender sends you a “demand” or “breach” letter.
  • Day 90: After you have missed three payments, your mortgage lender will file a foreclosure complaint at your County Court of Common Pleas. You will then receive a copy of the complaint and a summons. You should contact an attorney right away.
  • Day 118: Your answer to the summons is due within 28 days. You also may request mediation during this time. Your mortgage lender will move quickly to default judgment and sheriff’s sale.
  • Days 118 – 150+: If you have filed an answer to the summons, you may be granted additional time to work on a resolution with your mortgage lender. If you do not file an answer or reach a resolution, your mortgage lender will file a motion for summary judgment. If the court grants the motion, your mortgage lender will contact your local Sheriff’s Office to schedule a sale.
  • Sheriff’s Sale: The day of the Sheriff’s Sale, your home will be placed up for auction. You are not required to leave your property at this time.
  • Redemption Period: After the sheriff’s sale, the sheriff has up to 60 days to inform the court that the sale took place. The court must confirm the sale within 30 days. The time between the sheriff’s sale and the confirmation is called the “Redemption Period.” The Redemption Period may be as long as 90 days or as short as a couple of days. You have the right to buy back your home during the redemption period. If you choose to do so, you will owe any fees and costs incurred as a result of the foreclosure.
  • Execution of Writ: You will be given a notice by the sheriff that you must leave your home. The amount of time varies by county.
 AvoidForeclosureOhio.org

The AvoidForeclosureOhio.org website is designed for the Ohio homeowner who is struggling financially and evaluating whether to keep the house. If you are buying a house with a typical loan and mortgage, then the Pre-Foreclosure and Foreclosure sections are for you. There are many helpful foreclosure avoidance programs and options but not every option is the right choice or even an available choice for every homeowner.

 

WHAT IS A SHORT SALE?

A short sale occurs when a lender is willing to take less money to pay off the balance owed on a mortgage loan so that the sale of real property can move forward to closing.

Sellers often find themselves “under water” when they owe more on their mortgage loans than their property is worth. For example, a seller may owe the bank $150, 000 on property that is worth only $100,000. In such a case, the seller may have to ask the lender (a bank or mortgage loan company) to agree to a short sale. Lenders know that many customers are “under water,” and may decide that it is better to receive less money in a controlled short sale than to risk a default on the loan or foreclosure. You can contact your lender directly, but most sellers work with a real estate agent or a real estate attorney who has experience in working with lenders in short sale situations.

In a short sale, several weeks before closing, the lender will ask to see a proposed closing statement that shows any anticipated seller costs, including a real estate commission, conveyance taxes, deed preparation fees, tax proration credits and other typical seller-paid closing costs. This proposed closing statement allows the lender to see how much money will be netted from the sale of the real estate. The lender will issue a “short sale payoff demand statement” that spells out the minimum amount the lender must be paid at closing. In such a case, the seller usually is not entitled to receive any money from the sale.
Disadvantages to doing a short sale is getting “dinged” on your credit report. The lender will issue a negative report to credit agencies, which will significantly lower your credit score. The lender may also require you to sign a “reaffirmation of debt agreement,” in which you agree to pay the lender some of the money still owed on the original debt. Finally, you could owe federal and state income tax on the amount of debt the lender has forgiven. Because of these possible tax implications, you should always consult a competent tax advisor before asking for a short sale. 
If you have a second mortgage or home equity loan, the lender may end up getting paid nothing from the short sale. If any such lender does not agree to release the lien of its mortgage after closing, a short sale cannot proceed. Sometimes, the first mortgage lender will agree to share some of its net closing proceeds with other lenders, or you, the seller, may have to bring some money to closing in order to satisfy or partially payoff a second mortgage or home equity loan.

 

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