7 Ways To Save Money To Buy A House
Start Saving to Buy a House Now
There are literally thousands of ways to save money to buy a house. With many ways to buy a house, purchasing a home is not as difficult as you may think.
First of all, you must understand that you “can’t have it all,” so discontinue that form of thinking. You must make sacrifices to buy a house and think of it as an investment for life. This should help to motivate you
You must make some sacrifices if you want to save money to buy a house. There are many ways to purchase a home with a number of home buying programs.
You must curtail your spending in other areas. Home prices are up all over the country. But you can still find affordable housing in the way of a cosmetic fixer (that is a fixer with no major repair problems), or a home with an anxious seller.
It takes skill to buy a house, but you can find that in these tips.
To buy a house understand the monthly payment of P+I+T+I, translated, this is the principle, plus interest, plus taxes, plus insurance, which, added together, equal the total monthly payment.
In order to buy a house, you must put down a down payment and pay additional escrow costs. Learn more here.
Understanding the P+I+T+I for different loan amounts will enable you to better prepare for homeownership. For example, if you could afford $1400, the total for a P+I+T+I monthly payment.
Determine what home cost would fall into this price range. Your mortgage broker will assist you.
Search the Internet or anonymously call mortgage companies for quotes. To purchase a home there are home loans that require 0%, 3%, 5%, and 10% down, plus the closing cost. There are many different home buying programs available.
The lower the down payment, the better your credit should be, to get a reasonable interest rate. The standard down payment is about 10% plus escrow and closing costs. It is a good idea to calculate escrow or closing costs upfront.
You will either pay a down payment or points (toward interest rates). The lower the down payment the higher your points to buy a home or vice versa, depending on your home buying program.
Ideas for saving for your new home could include:
1. Selling a car or furniture for the new home buyer
Many of us have an extra car or a car with excessive monthly payments, insurance, and gas. Sell the car you are not using, or in the case of the overly expensive car, sell it to purchase an affordable model.
2. Get a part-time job and save the money as your new home buying check
You can create income for your home purchase. Even if the job is every other weekend, it will help. The money adds up fast, adding an additional $400 a month will end up adding $4800 to your home buying fund.
That amount of money is substantial for a new home buyer in many of today’s markets.
3. Temporarily discontinue a whole host of unnecessary things for serious homebuyers:
Saving money for home buying is a serious endeavor. If you are serious, you will not miss any of the things that bring you immediate joy. You will instead think of the long-term joy you will get as a new homebuyer.
Here is a list of things to discontinue if you are a serious homebuyer. Movies, parties, vacations, clothes, cable TV, voice mail, newspaper, and excess clothes shopping. You can think of more.
4. Use your tax return:
Put your tax return in the bank toward a down payment on your new home. After purchasing your new home, speak with an accountant. Find out how many more exemptions you can take during the year with your new home.
The accountant will tell you how to adjust your exemptions in order to get the money during the year to help with your new home payment if you are over-paying your taxes during the year.
You can use your future excess taxes (or home deduction) toward your current monthly payments.
5. Use a windfall, such as an inheritance or large bonus:
Take this money and place as much as you can afford toward your down payment. There are many unexpected windfalls, everyone has them at various times. Be ready to save your windfall toward buying a house, just in case.
6. A few of you can live with your parents or in-laws while saving money for your homebuying fund:
There are a few parents or in-laws who will be willing to work with you. If you are willing to give your family a low monthly rent, this helps them and you.
That is, if you are not willing to live with them for free it takes a burden off of both of you, and you don’t feel like you are freeloading.
For example, if regular rent is $1200 dollars a month, offer your relative $600 a month and save the additional $600 a month. In a year you would have $7200 to contribute to your homebuying fund.
7. Ask for cash as gifts to add to your homebuying fund:
When you have a birthday, graduation, wedding, or any other celebration, explain to family members in advance that you are saving for a home. Request that you prefer cash gifts.
You can do this over and over and in no time you will have a substantial amount of money to add to your homebuying fund.
Summary
Purchase a home when you understand financing options and costs to buy a house. Your down payment and escrow costs can vary depending on many factors.
There are many ways to save money to buy a house, so don’t be dismayed. There are many home buying programs to assist you in buying a house the right way. Use this information too.
3 Best Factors to Consider In Order To Buy a Great Home
There are many reasons you should buy a home. This article applies to owner-occupied ownership when you buy a home, only. Rental real estate is quite different than owner occupied home ownership. I will walk you step-by-step through key elements of the home buying process.
The loans are more difficult to qualify for than owner occupied. Tax deductions are much treated differently. If you do not hold home investment long enough, you could be required to pay short-term capital gains taxes. These home buying tips will enable you to understand the most important elements of home buying you should know before your search.
The More You Know, The More You Grow In Useful Facts
Here Are 3 Factors to Consider Before You Purchase a Home:
1. Home prices are low or reasonably priced for your area, which makes the area affordable
Home prices fluctuate about every 7-10 years. Occasionally, due to a catastrophic event where there are a lot of foreclosures, the prices go way down. When the event is over, and people are back to work the prices usually go back up.
The prices fluctuate from low to high for several reasons. Some of the reasons are:
1) If there is a big layoff in a town, everyone is trying to sell at the same time and there are few buyers, home prices may take a nosedive.
2) A major industry has moved out of a town and there are few buyers for a home, prices will go down, 3) Interest rates have spiked up and it is hard for buyers to qualify for a mortgage and therefore prices of homes may correct down.
On the other hand, prices go up sometimes when:
1) Loans are easy to qualify for (as in the real estate crises from 2003-2008), and people got loans who should not have them, this causes many loan defaults in a short period of time.
2) A new high paying company may move into the area and there is a shortage of homes to buy, people start bidding up homes, as in some areas of the U.S. that have high employment and low inventory of homes.
3) New homes are not being built, and new companies move into the area quickly, so there is a shortage of homes.
You get the picture. Real estate does not go up constantly, as some beginner home buyers tend to think, there are sometimes corrections in a high market, and low markets go high for various reasons.
Never Rush to Buy a Home:
The point here is that you do not want to rush and buy a home in an area that you are not familiar with; the prices may be high and at the top of a market. For reasons unknown to you, prices are starting to come down.
This is important to know because, if you must sell in a short period, you may have to sell for less than you paid for the house. This is called, being under water with a mortgage, you will lose money.
Typical appreciation for a well-kept home usually runs around 3-5% per year, according to the National Association of Realtors.
Know what is going on in your area, make sure you are not buying at the top of a market, unless you know you will be in the area for a long time, otherwise, you could be stuck with a home you can’t sell for more than you paid.
You Will Have the Best House, for The Best Price Possible, if You Follow the Home Buying Process; When You Buy a Home.
2. Buy a home when you have had a steady job for a while.
It goes without saying that income is what pays the bills. Make sure that the company you work for is stable or your business is on sound footing before you buy a home with a mortgage.
Most mortgage companies will want to see 2 years of tax statements, in addition to that. They will usually also order their own copy directly from the Internal Revenue Service. If you are self-employed, agents will ask for actual bank records of your small business deposits.
During this time also make sure you have savings in place for a down payment, and escrow and closing cost. It is also a good idea to have additional savings to keep in place in case of a job layoff.
3. Buy a Home when you plan on living in the area for several years.
As I discussed in number 1, real estate goes up and down. When prices get high, many times there is a correction and prices come down for a while.
If you happen to NOT do your homework and buy in a real estate market that is about to come down, for a variety of reasons, you may find yourself upside down with your loan for a while.
This will take more years to make a profit on your loan. You will have to ride out the correction, and get back your escrow and closing cost as an initial investment. Normally it takes about 4 years just to get back your escrow and closing cost as the home value increases.
Corrections in the Real Estate Markets:
If you must ride out a correction it could take many years longer. If you happen to buy at the bottom of a real estate market, you could get lucky enough to ride up the value of your home, and you could sell much faster or a profit. It is important the house is well-kept and affordable for you.
In any case, you should study your area, study the real estate market, study the economy or the changing of the economy in the area, and know when to buy. That is; know if you are at the bottom or top of a market. Real Estate works best when it is held long term, a key factor in home buying tips.
In normal cases, it could take as long as 8-10 years to make a profit from your real estate purchase. Use this calculator to find out the home you can afford.
This will take more years to make a profit on your loan. You will have to ride out the correction, then get back your escrow and closing cost as an initial investment. Normally it takes about 4 years just to get back your escrow and closing cost as the home value increases. The home buying process tighly weaves, escrow, title, costs, mortgages and time.
In any case, you should study your area, study the real estate market, study the economy or the changing of the economy in the area. And know when to buy, that is; know if you are at the bottom or top of a market.
Use all of these great home buying tips to buy a great home, but first understand the home buying process.
Lois Center-Shabazz| Money Strategist | Course Delta Agency
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Should You Sell Your Home With a Real Estate Agent or Sale by Owner
Sell Your Home With a Real Estate Agent and Avoid Major Mistakes
Here are major issues you may face selling your home by owner:
- Real estate agents know the process and documents you need to execute the entire selling process properly.
- The real estate agent will understand how to fill out all the real estate documents correctly.
- The real estate agent can monitor the process and make sure everything is done in a timely manner. They will get the right documents, and help you find the right mortgage and escrow company, title company or real estate attorney.
- Sometimes the real estate agent can negotiate a higher price for your home, than you can since they know the price trends in your area.
- Safety is a major concern when you do a “sell by owner”. When a real estate agent brings someone to your home, they have usually vetted them and met them at the real estate office in advance. Most of the potential buyers you let into your home will drop in randomly from the sign in your yard, so they may have sinister ideas when they come visit, and are not actually looking for a home.
I don’t recommend that anyone sell their home by owner unless you have a buyer you know already as a friend, relative, neighbor, or close associate. Make sure you research the process thoroughly before you start.
The only reason I can think of that anyone would want to sell a “home by owner” to the greater is that 1. You MUST sell to move 2. Don’t have enough equity to pay a real estate agency (the fee is as much as 6%-7% of the sales price).
I have sold two homes as a “for sale by owner” seller. So, it is possible to do a “sell your home by owner” home sell, but It wasn’t as easy as I thought it would be. If you sell you home with a real estate agent you will avoid mistakes that can cost you later.
I made the decision since I had not owned the one home long enough to generate enough equity to pay a real estate agent commission, they other home I wanted all of the equity for a down payment on my next home.
These are the things I learned from my actual experience, my research, talking to real estate agents, and talking to others who had sold a home. I spoke with two friends who are ex-real estate agents, and they helped me quite a bit.
I also took an appraisal course many years ago in anticipation of starting a real estate appraisal business. I did not start the business, but I learned a lot about appraising homes.
Get all the basics of home buying with The Ultimate Home Buying eBook For Women
First, expect to be bombarded by real agent’s eager to list your home, when they see your, “For Sale by Owner” sign. They will contact you over and over hoping that you will become frustrated with the whole process, throw up your hands and say, “where is that pesky real estate agent? I’m listing my house with her or him, yesterday!” Unfortunately, sometimes you will feel like that, but don’t give up too soon.
The following “for sale by owner” information should be helpful:
- There are many legal forms, those dreaded forms! They are dreaded but necessary for the legal transfer of your property to another person. You will need legal real estate sales and disclosure documents for your home sale.
You can get these documents from a title company or you can pay a real estate lawyer to do the work for you. The real estate lawyer will provide you with the documents and fill them out correctly, for no more than an hourly fee. Verify his/her fee, the time it will take, and agree on a fee before he/she fills out the documents.
- Then you need to decide how much to sell your house for. If your asking price is too high, your home could stay on the market a long time. If your asking price is too low you may lose money you deserve. There are several ways to find out the right sales price. If the homes in your neighborhood are very similar, i.e. square footage, number of bedrooms (bathrooms), and similar size yard, you can use the recent sales from the last two homes like yours, in your immediate neighborhood. It gets a bit more complicated when the homes are all different, but appraisers use a similar method.
- You will have to find homes with your similar square footage, number of bedrooms, number of bathrooms, and if the home is on a lake, gulf course or ocean, or has a lot of land. You can also pay for a sales appraisal, use your local yellow pages for a listing of real estate appraisers. The next option is to check city or county records. Just call your local city records office and ask them where you can find information on the most recent home sales in your area. Verify which of these homes are like yours and use those comparisons to price your home.
- Fix up your home to make it presentable to sell. That includes electrical and plumbing in tip-top shape, clean carpet, clean walls, clean doors, an attractive front door, and well-groomed landscaping, and maintenance painting, just to name a few.
- Let the buyer know that he/she can pay for an independent inspection of your home, and put it in writing. The new buyer can have an inspection for plumbing, electrical, and structural soundness as well as other things. To be on the safe side, I paid for an independent inspection on my home sells, I had several things fixed as a result, before I sold the home.
- Let them know that they need to choose a mortgage company, you can also talk to mortgage companies up front. Both buyers in my case had never purchased a home. So, I did some research on the best mortgage companies in the area and gave them several to choose from, this just helped to speed up the process.
The mortgage company gave them title companies to choose from or they can search for their own title company. For safety purposes, you could have the person go to your mortgage company of choice and get pre-qualified, before you show your home. This way you will know, who the person is, and that they are serious about purchasing your home.
- Talk to escrow companies before your put your home up for sale, (in the case of fee simple states-talk to a title company or real estate lawyer for closing).
- Now let’s get back to those pesky real estate agents. There may be an aggressive real estate agent or two who will present you a buyer. If that agent is willing to take 3 or 4%, which very few can, and they have a buyer, then you may want to talk, if your equity covers that reduced commission.
The problem you may experience is trying to negotiate with an experienced real estate agent, they will most likely try to get you to reduce your price for their buyer. Make sure you add up your cost, 4% to the realtor, fixing up the home for sale, your mortgage sellers cost (sellers usually pay around 2%), and your moving cost. This is one of the disadvantages you face when you sell your home with a real estate agent and you don’t have much equity.
Do you have enough equity in your home to pay these costs and still have a substantial amount to put down on another home? Most homeowners who sell their own home, do so because they don’t have enough equity to pay a real estate agent cost of 6 or 7%.
So, don’t let an experienced real estate agent come along and talk you into decreasing the price of your home, and giving them 3 or 4% real estate commission, in that case you could have hired a real estate agent to do everything to begin with, and the agent could get full commission for your home. If there is not enough equity to pay the commission, you will have to come out of pocket to pay the commission, using an agent.
- Keep yourself safe. Consider “for sale by owner” only when you can’t justify the real estate agents commission (6-7% of sales cost). Take appointments from interested buyers, get caller ID and ask for their name and address first. Send a postcard to the address your potential buyer gives you to remind them of their appointment. If the postcard comes back, “not at this address” cancel the appointment.
10. Ask lots of questions on the phone of your potential buyer. Get their name, address, and employment and salary, if they are pre-qualified for a loan or if they will pay in cash, before you give them an appointment. Ask to see an ID before they look. Verify information you are given by searching the internet for their presence. Use a private investigator to authenticate information if you can afford it.
You May Benefit from This eBook Bundle for home buying, car buying and student loans information:
Doing a “for sale by owner” can also be done by companies that help with the process. In other words, most areas have “for sale by owner” real estate agencies that assist you with the process to make sure the sells process is done right and they will help to keep you safe. These agencies usually charge a flat fee. Here you can “have your cake and eat it too”, you will sell your home with a real estate agent, but do it at a greatly reduced cost. The process and the contracts are different for each state, be sure to research your state.
If you have plenty of equity in your home, a real estate agent should be your first option. Make sure you get references on which real estate agent to use, don’t choose one at random. There are good agents and bad agents.
Lois Center-Shabazz | Course Delta Agency
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Owner-Occupied Real Estate Now and in The Future as A Personal Investment
Owner occupied real estate now and in the future
Your owner-occupied real estate now and in the future, is one of the best long-term investments one can make. Time has shown that owner-occupied real estate can produce tremendous long-term returns. In a few areas of the country the tremendous returns have even been short-term. In some cases, homeowners have sold homes held 30 or 40 years, for 30 to 40 times their original cost.
The least expensive for maintenance cost is the owner-occupied real estate investment, simply because most owners correct problems as they arise.
The hardest part of real estate investing is to know when prices are inflated or low. To understand this, you must do a lot of research or endure a lot of pain until prices stabilize. Residential real estate as an investment requires, skill, intelligence, research, intuition, a lot of time, very hard work, and luck.
Here are items to look for before and during your owner-occupied real estate now and in the future home search, for a successful property.
Good Credit Score
Before you start to look for a home the first steps are to;
Get a copy of your credit report
Go over it closely, make sure all the credit listed belongs to you
If you Find credit that does not belong to you, write Experian.com and challenge the reporting with them.
Stop charging, and start paying off credit you already have
Pay off anything that is past due, and maintain your bills monthly
Quality loan
Do not get a loan until your credit is cleaned up to the best of your ability, this may take months to a few years. Save for a down payment or get a no down payment loan and pay more points (or higher interest rate). Research any mortgage company you plan to use and make sure they are legitimate.
If you are a first-time home buyer consider FHA loans, or NACA (naca.com) to help with the qualifying process. Every city has a first time home buyers organization in town to help with the buying process.
Quality home – Well inspected
Make sure you are getting a quality home, by getting quality inspections from plumbers, electricians, HVAC, and carpenters. There are many home buying nightmares where buyers used a lone home inspector who missed most if not all the problems. If you find problems in an inspection, you will know what you are up against. You can either: 1. Find another home, or 2. Ask for a reduction in price so the problem can be fixed in your increased loan amount.
Home purchased at the bottom or middle of a market
Know if your home buying market is in a bubble or if your home is over-priced. If it is you may not be able to sell the home for several years, even if you must move.
Affordable price
An affordable price is a home that fits your budget and is generally around 30% of your gross. Create a sustainable “overall budget” before you buy.
Well maintained
Look for signs the home has been well-maintained. Inspect the heating and air conditioning units well, the roof should stand the test of a heavy water hose. The floor should be level when you place a marble on the floor it should not roll, if it rolls, you may have a serious foundation problem.
Value increases over time: The more jobs or tourism there is in the area, the more valuable the area may be in terms of increase in home value over time. Then an area with no jobs or tourism can transform in several years when something valuable is added. As well as places that go under due to a decline in an area that has no jobs or amenities. It is best to look at an area with amenities at the time of sell.
No monthly house payment or rent
After the mortgage is paid off, you will have no house note or rent to pay. This is a tremendous savings. But, you will still have maintenance and taxes. It is important to factor in taxes as you age. Will your retirement check be enough for taxes and home maintenance?
The advantages and disadvantages of owner-occupied real estate is listed below:
Key advantages of owner-occupied real estate are:
• You can qualify for the lowest interest real estate loans available
• You can qualify for low down payment consideration, of 5%-10%. There are also extra low-down payment loans for first time buyers who qualify, as low as 3% down.
• You qualify for a full array of owner-occupied tax deductions. IRS Homebuyers Credit
• Most owner-occupied homeowners take pride and joy in maintaining their own home, so the long-term maintenance is usually reasonable.
• Owner-occupied real-estate profits have been tremendous when held long-term.
• There is a capital gain exclusion for taxes up to $250,000 if you have lived in the house for 2 of 5 years.
Key disadvantages of owner-occupied real estate:
• The debt carried when a home is leveraged with a mortgage loan.
• The responsibility of up-keep, for some this is an advantage, since they enjoy the up-keep.
• You are responsible for taxes.
Your owner-occupied real estate now and in the future, has many more advantages than disadvantages.
Lois Center-Shabazz | Course Delta Agency
Author, Blogger, Course Creator, Investor, & Money Strategist
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Get a Quality Home or Mortgage With Big Thing Buying Skills
Home or Mortgage; Buying an Affordable Low Maintenance Home and Get a Quality Mortgage
YOUR BUDGET
The first thing you have to ask is, “How much house can we afford” The payments include P+I+T+I (principle+interest+taxes+insurance). Most of your payment will be principle and interest, taxes vary according to state, and insurance is not a very big cost.
But, you can figure it out with most online calculators. You have to know how to calculate P+I+T+I to get a quality home or mortgage.
You should be stable in your job or with your business before you decide to take the leap to sign on with a mortgage.
Most banks want you to be on your job or in your business for a solid two years. Set up a file system for steps 1-8, don’t rush and do your research.
Step 1
MORTGAGE COST
Below is a typical cost analysis of a home or mortgage with average tax state, always find out how much typical insurance and taxes are in your state before you decide your budget.
Choose a home price you think you can qualify for based on total payment. You will keep adjusting home price until you can find one that is close to your budget. Use my mortgage amortization calculator at LiveRichCalculators.
Say your home or mortgage costs are as follow:
$300,000 price of home
at, 4% interest
30 year
Taxes=6000/yr
Insurance=500/yr
Monthly Payment and Interest=1,432.5
Monthly Taxes and Insurance=541.67
Total Payment=$1,973.92
Step 2
DOWN PAYMENT AND ESCROW COST
Find out what a typical down payment is at your credit union, bank, or mortgage company. Now, make sure you have the savings or start a savings account with the down payment and escrow cost.
If you find a buyer who is anxious to sell and they have a lot of equity in their home sometimes you can negotiate that they pay your buyer’s escrow cost.
For the example above the downpayment is:
5%=$15,000
A 1% escrow cost = $3000
Step 3
MAINTENANCE COST
Allow a monthly saving account for maintenance cost, most homes have maintenance repairs from time to time.
Old homes usually have a higher maintenance cost than newer homes, unless all electrical, plumbing and other major items replaced. The important aspect of a good home is a good inspection, preferably by tradesmen.
I prefer hiring an actual plumber, electrician, and carpenter to inspect your new home instead of one single home inspector. Some of those home inspectors only take a 6 month home inspection course.
The tradesmen work in the field every day for years. You should also do your own inspection with a moisture meter and electrical meter to see if there are any glaring defects.
If you place a marble on the floor does it roll or stay put, if it rolls you could have a damaged foundation. That is extremely expensive to repair. If you know the repairs you may be able to add those into your mortgage and fix after your move in.
Step 4
CREDIT REPORT
Get a copy of your credit report before you start to look for a home. Read it carefully. Some people are shocked at the mistakes that get on their credit report. Make sure you document the mistakes on your credit report and challenge them with Experian credit bureau.
Experian will usually send the corrections to the other bureaus. When all corrections are in place, get another copy of your credit report, and credit score. Getting an affordable, quality home or mortgage starts with a good credit report and high credit score.
Step 5
PAY OFF BILLS
You know what your bills are, and you know if they are excessive. You will need to find room in your budget for a mortgage. You don’t want a mortgage that increases your current bills per month too much.
Like you don’t want to get from $500 per month of rent to $1900 per month for a mortgage unless you have been saving at least $2500 per month so that savings will go into your mortgage.
You should also still have room for a savings account or two after you get a mortgage. You will need savings for home maintenance, car maintenance, and general emergencies. Pay off as many bills as possible before you start a mortgage.
Step 6
SAVE FOR A DOWN PAYMENT AND CLOSING COST
Down payments are ranging anywhere from 5% to 10% down. The more you put down, of course, the lower your monthly payment will be. Then, there are buyers closing cost you must pay also. This is usually a surprise to new home buyers.
Closing cost is typically 2 to 5 percent of the purchase price. So, for a $300,000 home, the closing cost would be about $9,000.
Step 7
MORTGAGE RESEARCH
Before you decide to use a financial institute, do your research. If you have a credit union or local bank you do business with and you have good credit, it is usually relatively easy to get a loan at one of those places and you will save on additional cost that is charged by mortgage companies.
If you can’t get financing from your credit union or bank, research the best mortgage companies in your area. You can also ask friends and family who they had good luck with.
Before your visit anyone for a mortgage. Research mortgages, make absolutely sure you understand what a quality mortgage is. Know what the current rates are for a 15 year or 30-year mortgage.
Don’t allow anyone to give you a low-quality mortgage, if they think you have not done your research, some will try to give you a low-quality mortgage, even if you qualify for a high-quality mortgage.
If you qualify for a low-interest high quality conventional low-interest rate 30-year mortgage, make sure you get one. The industry is full of nice, dishonest people, protect yourself.
Step 8
MORTGAGE RATES AND QUALITY
Call your local credit union or bank to get current rates on quality mortgages.
Use my mortgage calculators at LiveRichCalculators.
Use the department of housing website to read about various types of Mortgage Issues.
This is most of the information you need to purchase a quality home or mortgage if it is your first home or your second or third.
Get all the facts to buy a quality affordable home with low maintenance.
Lois Center-Shabazz | Course Delta Agency
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Summary
Remember that buying a home is a serious process. You should take your time and be very methodical.
Some places have home prices that are outrageous – in that case, you may have to drive a long distance to get to work, by living in an affordable area further from your center of town.
Some towns have affordable housing compared to income. Take your time it may take anywhere from 6 months to 5 years to go through the process I list above. Article Updated 2019
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P.S. Remember…you don’t need to panic. I don’t expect to sell out immediately. However, if you want one of those spots at my Course For Fantastic Finances Live Workshop, then please don’t delay. They’re going to go fast.
Lois Center-Shabazz | Course Delta Agency
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How To Buy a Home So It Last For Decades
GET A GOOD HOME LOAN TO BUY A HOME
Affordable Payment (P+I+T+I = principle,interest,taxes,insurance)
Your payment should be within the limits of your income to buy a home. If it is at all possible, base the payment on one income. It’s best to keep it at about 30% of income, before taxes, but you can go higher as you decrease other bills such as no car note, purchasing a home with low utilities, having a short commute and low gas usage, carefully budgeting groceries. The 30% is about what lenders look at also to buy a home.
Research articles about predatory lending and avoid it, if at all possible. It is called predatory because the requirements to qualify are low and the risks are high.
COST OF A LOAN TO BUY A HOME
Many people don’t know that loans cost money. This is covered in the escrow and closing cost fees and is extra from the down payment. There are 50 states and several cities within each state. Every state and the city within the states have their own closing cost schedule. Here is an example showing one city, within one state. The city is Los Angeles and the state is California, on a $200,000 loan.
LOS ANGELES CLOSING COST–LOAN AMOUNT $200,000, TO BUY A HOME
Origination fees charged by lenders $1,030
Third-party fees $1,196
Taxes $0
Total $2,225
Loan amount $200,000
ITEMIZED ORIGINATION FEES CHARGED BY THE LENDER
Origination points $586
Commitment fee $370
Document preparation $58
Broker, originator or lender $920
Processing $1,195
Tax service $76
Underwriting N/A
ITEMIZED THIRD PARTY FEES
Appraisal $461
Attorney, closing or settlement $639
Credit report $25
Flood certification $11
Postage/courier $100
Survey $500
Taxes
Borrower’s share of state and local transfer taxes and fees $0
Mortgage tax $0
If you have sellers that are badly in need of a sell, sometimes they will agree to pay your sellers cost. Sometimes you can bundle the sellers cost in your loan.
THE AVERAGE COST OF HOMES
Some places in the country average home prices are $50,000 and Some $1 million. It depends on where you live. In places where there are several high-income jobs and a shortage of home inventory such as San Jose, California the cost of the average home is almost $1 million dollars. In contrast, the cost of the average home in Houston, Texas is less than $200,000.
WHAT TO LOOK FOR WHEN YOU SHOP FOR A HOME
INSPECTION
Many general inspectors do quick inspections and leave major work for you to discover after you buy. You can get inspections from actual tradespeople for a reasonable fee. The trades would include electricians, plumbers, air conditioning, roofing, and carpenters. They would be more likely to find major problems than a general inspector.
When you do find, problems wrong you have two options 1. Ask the sellers to fix them, or 2. Ask them to lower the price so you can fix them with extra money from the loan.
MAINTENANCE
This is difficult, but try to get copies of the electrical, gas, water, and other utility costs. Some homes have high utility cost and some have low cost. The larger the home, the more the utility maintenance cost are. Some high maintenance comes with old or malfunctioning equipment.
DISCLOSURE FROM SELLERS
Some states have strict disclosure laws and others don’t. Request that your seller discloses all potential problems with the home, neighbors, or the neighborhood.
CONTINGENCY CLAUSES
Make your home sell contingent on everything you ask for, otherwise, the deal is off. This will motivate the sellers, real estate agent, and lender to be honest and do everything in a timely manner. It also gives you an out if something is found to be wrong during the process and you can get your deposit back.
TAXES
Get a copy of the taxes paid for the year. Also, the real estate agent or lender can usually tell you what the home taxes are for your home.
ESCROW ACCOUNT TAXES AND INSURANCE
If you don’t want to have to pay a tax bill bi-yearly or worse yet yearly, you can request an escrow account, where you pay your taxes and insurance monthly with your payment. This is much easier than the lump sum, for most homeowners.
DOWN PAYMENT
Your down payment is in addition to your escrow and closing cost. Most lenders want a down payment of 10% to get a good interest rate to buy a home. There are some no-down loans, but generally, your interest rate and payment are more. I prefer the down payment loan, and lower interest rate – it is less risky for the homeowner.
MOST REQUESTED INFORMATION
You will be asked for proof you can purchase a home or secure a loan. You will be asked for 1. proof of income from a job or business, 2. proof of income from income taxes provided by you and the Internal Revenue Service, 3. credit reports that show credit score and credit history. 4. proof of source of downpayment 5. proof of rent history or payment history of current loan.
LOAN BALANCE LIMITS COMMUNITY AND JOBS, TO BUY A HOME
Start with and affordable home. Don’t let a real estate agent or a lender talk you into getting more home than you know you can afford. Sometimes they don’t consider your existing bills or obligations you know you will have in the future, like the need for a better car or a kid going to college.
Look for a good neighborhood. There is no such thing as perfect people or a perfect neighborhood. But, you can search schools, crime and jobs nearby. The searches are not always accurate, but they will give you an idea.
Lois Center-Shabazz | Course Delta Agency
Personal Finance: Author, Blogger, Course Creator, Money Strategist
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