Posts Tagged ‘first time homebuyers’

If you are hoping to become a homeowner, it is highly likely that you’ll need a mortgage. Before house-hunting ever begins, it is good to know just how much you can afford to borrow. All prospective homeowners must go through the process of getting pre-approved to see if they qualify for the loan and to determine how much you can afford to invest in a new home. New buyers can be understandably overwhelmed by mortgages in general, but knowing how to go about getting a mortgage before diving in is a good first step. Getting pre-approved is not as daunting a task as you might think.

Understanding your finances and the total cost of owning a home is key to determining your home budget. When figuring out what kind of mortgage payment one can afford, other factors such as taxes maintenance, insurance, and other expenses should be factored. Usually, lenders want borrowers having monthly payments exceeding more than 28% to 44% of the borrower’s monthly income. For those who have excellent credit, the lender may allow the payments to exceed 44%. There are many websites available to assist you in determining what the mortgage payment would be based on the amount borrowed and the interest rate. If you adjust the loan amounts and hit the search button, the monthly payment numbers will automatically update. Another factor in determining how much you can borrow is a direct function of how much cash you have to put down on the property.

Have you heard the terms “pre-qualified” or “pre-approved?” It’s important to know the difference. With a pre-qualification, the borrower and lender have discussed income, assets, and credit, but it is not formally verified. A pre-approval, however, is a formal review of the same things as a pre-qualification, as well as a review of the borrower’s full credit report. Having the pre-approval documentation is better because it is a true representation of the mortgage loan you are eligible for and is often required when submitting an offer on a home.

Through the credit report, lenders acquire the borrower’s credit score, also called the FICO score and this information can be acquired from the major credit bureaus TransUnion, Experian, and Equifax. The FICO score represents the statistical summary of data contained within the credit report. It includes bill payment history and the number of outstanding debts in comparison to the borrower’s income.

The higher the borrower’s credit score, the easier it is to obtain a loan or to pre-qualify for a mortgage. If the borrower routinely pays bills late, then a lower credit score is expected. A lower score may persuade the lender to reject the application, require a large down payment, or assess a high interest rate in order to reduce the risk they are taking on the borrower.

Many people have issues on their credit report, which they are unaware of. The first step in determining if you have any outstanding issues is to get a copy of your credit report. AnnualCreditReport.com allows you to see your credit reports from Experian, Equifax & TransUnion for free.

Next, it’s time for the paperwork. Gather and keep every piece of financial paper in the two months leading up to buying a house. That means pay stubs, bank statements for savings, checking and investment accounts, W-2s, tax returns for the previous two years, canceled rent checks and any mortgage or property tax statements for other property you own. Put these in PDF format to make it easier to send to your mortgage broker or bank.

In the months leading up to your home purchase, keep your hands off your finances. That includes moving money from a savings account into a certificate of deposit, or CD. It also means no cashing in investments from stocks, retirement accounts or CDs. Otherwise, you will create a huge headache for yourself as you try to show the bank the paper trail of where that money came from. In a similar vein, avoid paying off debts with savings because that could cause your lender to worry about how you will pay for closing costs.

Once you’re ready to start the pre-approval process, you’ll need to fill out the mortgage pre-approval application itself. Make sure you complete it as accurately as possible. The standard application asks for personal information such as financial account numbers and the desired borrowing amount, which is also called the target loan amount. It might seem unnerving to disclose your personal finance information and work history, but this is standard information that lenders use to assure you are financially responsible enough to undertake such a large loan. Working with a lender you trust will make sharing this information more comfortable. After you’ve completed and signed the forms, your lender will need to review and sign them and begin the loan approval process.

Once you get the Preapproval that means the lender will actually loan the money on a property based on your current financial situation after an appraisal of the property and a purchase contract and title report has been drawn up.

After you’ve finished your application and it is approved, you can begin to look for a home. Most mortgage pre-approvals are open for 60-90 days and after this time it expires. If your search extends beyond that, simply resubmit your application to refresh this term if you haven’t started the purchase process yet. Although getting a mortgage can sound like a lot of work, understanding what to do before starting your home search will only help ease the stress. The mortgage pre-approval may very well be the most important aspect of looking to purchase a home, as it helps define your price range. There are a few steps to the mortgage pre-approval process, so shopping around and working with a helpful lender you trust will only make the process easier and more productive for you.

Filed under: Blog, Exclusive Buyer Agent, First Time Homebuyers, Florida Real Estate, Home Buyer Advice, Home Buyers, Home Financing, Mortgage Information, Real Estate by Kim Bregman
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If you’ve been thinking about replacing your water heater soon, you will want to read up on how the new water heater efficiency standards, effective April 16, 2015, will affect your options.

The U.S. Department of Energy recently mandated sweeping changes in the energy efficiency standards of this water-heating appliance. The new standards call for much higher Energy Factor (EF) ratings on all water heaters manufactured with larger than 55 gallons in capacity.

New water heater regulations mean huge changes in how larger capacity water heaters are manufactured, distributed and installed.

While the new mandates will add up to long term energy savings for all, the initial cost of replacing your old water heater may quickly become significantly more expensive.

For example, the average cost of conventional minimum-efficiency 60-gallon gas and electric water heaters is approximately $675 to $1,500 a unit. While in comparison, the new units manufactured after April 16 will cost anywhere from $1,200 to $2,450 each.

That’s not all. Water heaters manufactured after the new energy efficiency standards go live will require a different heat-pump design and will take up more space than your model now.

This means that if your current water heater is located in close quarters, like a 3 foot x 3 foot water closet or attic, you may be looking at a small home remodel to accommodate the larger units as well.

Water heaters contribute to a significant part of your monthly electric or gas bill. When replacing a water heater you should consider a tankless unit. These space saving units heat water on demand, only when you need it. The tankless technology offers endless hot water – you’ll never take a cold shower again! Because the water is only heated when it is being used, tankless water heaters are a great energy efficient solution for heating the water in your home. You’ll enjoy energy savings, better performance, extended life, fresh water, space savings and more capacity than traditional “tanked” water heaters.

If you are planning on purchasing a home or investment property that will need a new hot water heater, you should figure in these higher cost estimates in addition to the cost of retrofitting the space, if needed.

Filed under: Blog, Exclusive Buyer Agent, First Time Homebuyers, Home Buyer Advice, Home Buyers, Home Maintenance, Real Estate, Uncategorized by Kim Bregman
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One of the costs of owning a home that buyers need to consider in their budgeting is the cost of insuring the home. A standard policy will cover exterior and interior damage from incidents like vandalism, fire, wind and lightning. It also covers loss of use expenses, damage to structures like sheds or gazebos, and liability and medical costs if someone is injured on your property.

Common exclusions are flood, hurricane and earthquake damage, but you may be able to buy additional coverage for these if desired or required.

Policies vary widely, but in general, homeowners insurance covers the following areas:

Your Structure – Your home itself is protected against damage from fire, wind, smoke, lightning, theft, vandalism and just about anything else that isn’t specifically excluded.

Your Possessions — Your belongings are also covered under your homeowners policy, including losses that happen away from home, for example, if your camera is stolen while on vacation. Keep an inventory everything you own so any claims can be handled accurately and efficiently. Write down serial numbers as well as the date of purchase and original cost of the items, or document on video. Keep the inventory in a fireproof safe or somewhere outside your home, where it can be accessed if your home should be destroyed.

Liability — This aspect of your homeowner’s insurance protects you against lawsuits arising from damage you, your family members or your pets may cause to other people. Liability coverage would pay not only for the actual damage, but also for the cost of defending you in court and for any court-ordered damage payments.

Replacement Cost Coverage – Your insurance would pay what it costs to replace the property with an identical or similar item. For example, if a bicycle was stolen from your garage, your insurance would pay to replace it with a new bicycle of the same or similar make and model (less your deductible).

Actual Cash Value – Your insurance would pay what it costs to replace the property with an identical or similar item, once that item has been devalued for deprecation. To continue the example above, instead of paying for a new bicycle, your insurance would give you the cash value of a used bicycle of the same make and model that was stolen (less your deductible).

Extended Replacement Cost — This type of coverage applies only to the structure of your home. Even though it has the word “replacement” in the name, you’re covered only up to set limits, which may not be enough to pay for the entire value of your home. If you want the assurance that the full replacement value of your home would be paid in the event of disaster, ask for “guaranteed replacement cost”.

If you’ve purchased a condo, or townhouse, ask your insurance agent about specific homeowner policies designed for these types of homes. You’ll want to purchase coverage above the association policy, but the additional coverage is usually very affordable.

Work with your insurance agent to determine how much and what type of coverage is right for your family and your new home. Be sure to ask what discounts may be available, such as rate reductions for smoke alarms, fire extinguishers, security systems and nonsmoking households.

After purchasing your homeowners insurance, make it a practice to review your coverage every year to be sure that it’s keeping up with increasing real estate values and any additions or improvements you may have made. Projects like building a porch or another bathroom can add significant value,  so you may need to adjust your policy if you’re planning to renovate your new home. Upgrades (like a new roof) can lead to discounts if they mitigate risks, but potentially hazardous features (like a pool) may require up to $500,000 in coverage.

It may seem costly, but protecting what’s likely the largest investment you’ll make in your lifetime is worth it – and peace of mind is priceless.

Filed under: Blog, Exclusive Buyer Agent, First Time Homebuyers, Home Buyer Advice, Home Buyers, Real Estate by Kim Bregman
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