Home Ownership – Five important questions to ask yourself.

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Planning on purchasing a home? Do you have a plan for what comes after? Five questions that will help you look ahead to home ownership.

Buying a home comes with a huge financial stake, a lot of responsibility, and even more fine print. While investing in the American dream is exciting, it’s important to reflect on your current and future plans before buying. Here are five questions to consider:

What are your goals for the next 5 – 7 years?

Are you happy with your job and feeling content with how life is going? Do you anticipate any career, family, or financial changes in the next few years? If you’re considering growing your family or changing careers, factor into your budget any anticipated changes, such as extra room for a baby or an income cut. That’s better than taking a financial loss by having to turn around and sell your property.

What will it cost to both purchase and own your new property?

A general rule of thumb is to keep your PITI (principal, interest, taxes and insurance) costs below 28% of your gross monthly income, while your overall debt-to-income ratio should be no more than 36%. Are you buying a bigger space than what you currently have? Don’t forget to factor in increased heating and cooling costs. Also, plan for homeowner’s association dues if applicable. In addition to the funds you have for your down payment, don’t overlook the following expenses you’ll incur once you purchase your home:

Moving costs
Closing costs
Home repairs
Painting
New Appliances
Fixtures
Furniture

I recommend opening a separate savings account in addition to your down payment fund to save for these expenses.

What’s your credit score?

Your credit score is your financial report card, except it will follow you long after college. This number can either save or cost you thousands of dollars when it comes to locking in an interest rate on your mortgage. The lower your score, the higher your interest rate and the more you’ll pay to borrow from a lender. The higher your credit score, the lower your interest and the more money you’ll keep in you pocket. If you have any issues on your credit report, tackle them as soon as possible.

How will you handle home repair and maintenance?

Is there a lawn to mow or pool to clean? Do you enjoy fixing things around the house? Consider if you’ll do that work yourself or hire a contractor/trades person if so, make sure there’s room in your budget.

How will your ideal location affect your monthly nut?

It’s important to consider more than just the home price in your desired community. Will you be farther from or closer to work? How will your home’s location affect your commuting costs? In addition to transportation costs, consider whether your food and utility costs will increase or decrease, and whether you’ll enroll kids in the local school district or opt for private schooling.

Buying a home is a complex undertaking, please take the time to do your due diligence. Enjoy the process and you’ll be happy with the outcome.

Home Buying Process

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Home Buying Process

Hire a buyer’s agent who will represent only you and have a fiduciary responsibility to look out for your best interests. You will be asked to sign a Buyer’s Agency Agreement—Connecticut Real Estate Law requires that a Buyer Agency Agreement be signed by prospective buyers before realtors can show properties listed on the MLS. As your buyer’s agent I will show you properties that meet your needs. Develop a negotiating strategy with your best interests in mind. Provide a comprehensive market analysis to substantiate appropriate pricing in the marketplace. Keep all conversations and personal information confidential.

Before you start looking for a home, you will need to know how much you can actually spend. The best way to do that is to get pre-approved for a mortgage. A pre-approval is when a mortgage lender reviews your credit—which involves providing your financial documents (W-2 statements, paycheck stubs, bank account statements, etc.) so your lender can verify your financial status and credit. This will tell you the price range of homes you should be looking at.

Now you are ready to start looking at homes. We will discuss what is important to you in a home/property – wants verses needs, location, style, size, interior and exterior specifications and schools etc. It is helpful to take notes on all the homes you visit, this way you will remember everything. You will view lots of houses! Take as much time as you need to find the right home.

In negotiating the purchase of your new home, the initial step will be to instruct Barbara to make an Offer to Purchase. This offer is in writing and accompanied by a deposit check (1% of the purchase price) to show “good faith”. This check will be deposited in the company’s escrow account within 24 hours of acceptance of the offer. The offer should include:

  • The amount you are willing to pay
  • Closing and occupancy dates
  • Any contingencies, including obtaining a mortgage, appraisal, building and pest inspections
  • Any personal property specifically included or excluded from the sale
  • As soon as both the buyer and seller agree on a price and terms, the Offer to Purchase Agreement is signed by the seller and the 1% deposit is held in escrow

Once the buyer and seller agree on terms:

The buyer immediately follows up with their mortgage broker re: financing and appraisal of the property, arranges for building, pest, septic, well and any other agreed upon inspections with the expert guidance of Barbara. These inspections protect you by giving you a chance to renegotiate your offer or withdraw it without penalty if the inspection or appraisal reveals significant issues. The buyer can then decide if they want to ask the seller to fix anything on the property before closing or offer a credit at closing to take care of any issues/problems.

The seller arranges with his/her attorney for the drawing of the Contract of Sale, based on the agreed upon terms. In Connecticut, the banks will generally only release funds to an attorney. It is required that a buyer be represented by a Connecticut attorney.

The Contract of Sale should always include, the following:

  • Purchase price
  • Mortgage contingency, appraisal and dates, if any
  • Quality of Title to be conveyed
  • Date of possession
  • Itemized list of personal property included or excluded in the sale
  • Satisfactory building and pest inspections, etc

The contract is prepared by the seller’s attorney and forwarded to the buyer’s attorney. The contract will be signed by both parties, the remaining 9% of the agreed upon sales price is due by the buyer to seller’s attorney, to be held in escrow until closing. It is local custom to release the 1% deposit check to the seller’s attorney’s escrow upon signing of contracts. Just prior to closing of the deal – buyers will perform a final walk-through inspection of the home to make sure it’s in the same condition as when you agreed to buy it. If you find a serious issue, it will need to be addressed before signing the final closing documentation.

A closing of the sale will most likely take place at the seller’s attorney’s office or other mutual agreed upon location. In addition to the keys, the seller will convey the deed to the buyer. At this time, the conveyance taxes to the municipally and state will be paid off in addition to satisfaction of any applicable mortgage. Your attorney will record the deed and property transfer in the Town or City.

Costs on the Purchase of a Property (typically incurred by the Buyer):

 

Costs of Various Inspections (Buyer):

 

Mortgage Documents

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Items you will most likely need for a mortgage application are:

  • Name, social security number, date of birth, and marital status of all applicants
  • Residence addresses for the last two years
  • Employment history: Name, job title, start date, address, and phone number for all employers in the last two years
  • Most recent pay stub
  • W2’s for all employers in the last two years
  • Complete bank statements for the last 2 months with all pages (for monthly accounts) or the most recent quarterly statements. Includes savings, checking, investment accounts, mutual funds, money market, 401K/403B/TSP, IRA, Annuity, or other financial accounts. Any large deposits other than payroll will need explanation.
  • Signed purchase agreement, as available (purchase transactions only)
  • If income other than salary will be used to qualify (bonus, self employed, 1099, rental income, or commission income, etc), provide signed copies of the last 2 years personal tax returns including all schedules
  • If self employed, additional income documents may be required depending on the corporate structure
  • Copy of the most recent Social Security, Disability, and/or pension award letter or statements, if applicable
  • If child support/alimony/separate maintenance is to be counted, copy of court order, history of receipt (bank statements/copy of canceled checks), and likelihood of continuance must be verified.
  • Copy of a divorce decree or legal separation agreement, if applicable.
  • List of other real estate owned along with the estimated market value, property type, financed amount, taxes and insurance amounts (if not escrowed), association fee (if applicable), rent received, and complete property address
  • Copy of Driver’s License and one other form of ID
  • Other items may be needed depending on the individual application

Things to consider before buying a Condo

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Condos were once thought of as homes that attracted singles or couples, often without children. But today, condos are growing in popularity and attracting families of all sizes.
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Condos can be an excellent choice for the right buyers. Here are a few things that should considered before purchasing a condo. Most buyers start with the condo itself. That may be a good place to begin but, before they buy, buyers should also consider other factors outside of the condo.

Some developers are building condos that have a look and feel like single-family homes. These modern condos have great rooms and open, flowing floor plans that look and feel like a single-family home rather than an apartment or condo.

One of the major attractions of condos is the low maintenance. The community area is maintained by an association funded by the dues that homeowners pay into it.

That’s why buyers’ first consideration should be to explore the development and make sure they like the look and feel of the complex and surrounding community. There are codes and restrictions, often referred to as CC&Rs (covenants, codes, and restrictions) that buyers will have to abide by once they purchase a condo. Buyers should ask to review them before making an offer to purchase a condo. These regulations help ensure that the community maintains its general appearance and any necessary repairs of the external areas.

Review the association’s budget. It may be necessary to get the seller to provide this information because it may not be released to a non-owner who is only a potential buyer. However, in considering buying into a development, it’s almost like going into business with the neighbors in the complex. It’s important to make sure that the association is running properly and has enough of a reserve for necessary expenses and maintenance. The budget and CC&Rs will give an idea about how stable the association is and if increases in the homeowners’ association dues are likely each year.

Find out how many owners in the development are delinquent on their dues. A condo complex that has a high level of delinquencies can cause problems for buyers when it comes time to get a loan or sell the condo. Some loans are not approved if delinquency rates are higher than 15 percent.

Review the minutes from the association’s board meetings. They will reveal the day-to-day issues that occur each month and give an indication of how the development is run. For instance, lots of complaints and filings about noisy residents, loud parties, or dog droppings on the lawn reveal potential problems with neighbors. The minutes will also reveal if the development is engaged in any lawsuits.

Understand what your responsibilities are for the upkeep of the condo. Find out what the association takes care of and what the homeowners have to maintain. Look at the association’s property management team and see how many times the association has changed management companies. Find out why. This will may reveal how responsive the association will be should residents need its assistance.

Ultimately, buyers need to ensure that when they purchase a condo they’re not buying into any legal battles the association is in the middle of and that they will be able to live in their condo the way they want. Study the CC&Rs and do due diligence before buying.

Why you should hire a Real Estate Professional

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Approximately 85 percent of home sellers use a real estate professional to sell their homes. But did you know that buyers who are represented are also more likely to have a successful transaction?
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Getting a purchase closed in today’s market is complex. Buyers face many more hurdles including stricter financing and a confusing marketplace of listed homes, for-sale-by-owner homes, foreclosures and short sales.

You might be in a buyer’s market with lots of inventory available and falling prices, or you may be in a seller’s market with homes selling out from under you before you can write an offer. Either way, you’ll be better off navigating the market with an experienced guide.

To take advantage of today’s near-record low interest rates, attractive inventory levels, and price rollbacks from decade highs, you need a sales professional to help you close the deal.

A good real estate professional understands the current market. He or she has house-by-house neighborhood experience and help you obtain the right house at the best price and terms. Professionals share their knowledge of homes coming on to the market, through the multiple listings service and through networking.

You can search for homes online, but do you know about the homes coming onto the market? Your real estate professional will tell others about you to make sure you learn about upcoming homes for sale before they hit the online sites. Many homes are bought and sold this way, without a sign ever going into the yard.

Real estate professionals work primarily on commission. If the deal of the century is about to come on the market, who do you think your agent will tell? The buyer who thinks he’ll get a better deal by working every agent, or the buyer who is loyal?

Here are some tips on how to work with your own agent:

If you want great service, show appreciation and commitment. Get prequalified with a lender by sharing your financial records so you know exactly how much home you can buy.
Work with only one agent. It’s customary in our area, to sign a buyer’s representation agreement.
Stay in contact. If you want to look at open houses or builder homes, invite your agent to come along. If she’s not available, show your loyalty by telling the salespeople you meet that you are already represented.
Don’t hide pertinent information from your agent, or she will be in the dark about key issues that could impact your transaction negatively.

Once you find the house you want, the work really begins. You’ll need help navigating negotiations, loan approval, seller’s disclosures, inspections, repairs, and much more. Your agent will share your risk, and will make sure you go into any home purchase with your eyes wide open.

Take advantage of the greatest homebuying resource available – your trusted real estate professional.

Do and Don’ts while you’re shopping for a New Mortgage

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Do Not:- Obtain and new credit after the pre-approval. This includes any debt consolidation, balance transfers, or credit accounts. Avoid pulling your credit.
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Do: Keep all pages of your financial statements accessible including bank statements, tax returns, pay stubs, W2’s, and other financial documents.

Do Not:- Make any large deposits into your bank accounts other than job wages. The source of any large deposits will need to be documented. If you transfer funds, you will need to supply statements from both accounts to document the transfer.

Do Not:- Withdraw any large sums of money from your bank accounts after applying for the mortgage other than the deposits(s) on the home. Updated bank statements may be needed prior to closing.

Do:- Notify your Loan Office immediately of any changes to income, employment, assets, or liabilities as they could affect your approval status.

Do Not:- Make any changes to your employment. We verbally verify that your employment status has not changed just prior to closing.

Cash Home Buyer Checklist

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It’s a great time to buy! If you’re in the market for a home without the hassle of a mortgage and have wisely saved your money to pay cash for your next home or investment property, you’ve definitely got a powerful advantage in today’s market. However, just because you’re not subject to the same rules and regulations that are required from mortgage lenders – doesn’t mean you should just sign on any dotted line.
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To protect your rights and best financial interests – be sure to consult with a real estate professional and attorney and follow this important checklist:

Title Search: This will show any liens on the property or title problems you might face

Title Insurance: A must-have for the cash buyer – especially when considering distressed or foreclosed properties

Home Inspection: Never buy a property without one – it’s the only way to ensure you know what you are purchasing

Termite Inspection: Tiny bugs=big problems with big repair bills – don’t risk not knowing

Property Tax Estimate: Know in advance what your estimated annual tax will be

Appraisal: This will help you ensure that your purchase price is at fair market value

Survey: Another important way to ensure you have accurate documentation of your property

Flood Zone: If you are in a flood zone, your insurance company may require additional coverage.

Property Disclosure Form: This form should reflect any known property damage, lead based paint, Chinese drywall, etc. Ask your Realtor for what’s appropriate for your area.

HOA Dues/Fees: You’ll want to know what you’re getting into cost wise in terms of community dues.

Mortgage Calculators

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