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When you're in the market for a home, I'm here to help you find the best mortgage terms around. But I also want you to be a fully-informed consumer!
As you already know, buying a home may be the largest purchase of your life so you should go into it with eyes wide open! In this article, I'd like to provide you some proven and common-sense guidelines that can save you time, money and hassle during the mortgage-hunting process.
Guideline 1: Look Beneath the Surface of the Interest Rate!
If you're like most prospective home buyers, you call lenders or use the Internet to shop for the best interest rates. That's a good first step, no doubt about it! But, the mistake many buyers make is that they stop there and don't consider the fees that may be added on to the loan later by the cheapest lender.
In other words, it's the lenders' game, and they may want you to play by the rules you're not even aware of. The answer, of course, is to know those rules ahead of time so you know exactly what you're getting when you buy that mortgage. More on this subject later!
Guideline 2: Chose the Type of Lender That Works Best for You!
There are several different sources of lenders - banks, credit unions, mortgage brokers, etc. They all have their advantages and disadvantages in terms of the rates and services they can offer you. For example, credit unions often provide the best value and service, but, of course, you have to belong to one in order to receive their services.
Regular banks and "big lenders" (Bank of America, Citigroup, etc.) also provide competitive rates and services. Of course, they only offer products their companies provide. You can also use a mortgage broker. This person is a "wholesaler" who uses several lenders to give service to their customers. The advantage of a broker is that he or she offers a greater selection of rates and products. However, they also tend to be more expensive than regular banks and big lenders.
Brokers make money in two ways. One is origination fees ("yield spread" or "rebate"). Essentially, the origination fee is a commission paid by the bank to the brokers to encourage them to use their firm. The second way is by selling a higher interest rate to you. This means there's room for you to negotiate that interest rate down!
When a broker quotes you an interest rate, ask him or her to tell you what the origination fee, rebate or yield spread on that rate is. For a broker, a reasonable amount would be a total of 1% of the loan amount from yield spread, origination or combination of the two. Most brokers usually want to make at least 2%.
Tip: Don't pay an origination fee unless the broker informs you that he or she isn't getting anything on the back end of the deal.
The bottom line: you can (and should) shop among all these lenders to find the lowest rate. It can save you thousands of dollars over the life of the mortgage.
Guideline 3: Review the Good Faith Estimate with an Eagle Eye!
By law, lenders are required to provide you with a Good Faith Estimate or GFE. In essence, the GFE gives you a general summary of all the costs and expenses you'll incur at the time you close on your new home. The document should cover closing costs and the amount of cash you need to close on the agreement. It should also spell out which if any prepaid expenses must be handled and the average monthly payment you'll have to make in order to keep up with the loan.
Most lenders provide complete and straight-forward information on these forms; however, there's no reason for you to accept the GFE at face value. Comb through the information and if you don't understand a particular item or fee, ask for an explanation. If you still don't understand them, you may want a lawyer to review them for you so you have complete understanding.
Remember: A GFE is only an estimate. Changes may occur through no fault of the lender. A reputable lender will let you know if fees are going up substantially. In general, however, if those fees go up by more than approximately 16%, then a red flag should go up in your mind.
Guideline 4: Negotiate, Negotiate, Negotiate!
When confronted with the expertise and "prestige" of banks, we all have a tendency to think they know best, and we should, therefore, agree to their terms. Never think this way! Banks are like any business; you can and should negotiate with them!
Want more information on banks and other lenders? Contact me today!
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Everyone needs to value and protect his or her assets, especially with the current economic situation. One of the best ways to do this is to maintain, manage and make strides toward constant betterment. In a house this can mean any number of things. Whether you choose to enhance an existing bedroom, extend your kitchen, install new flooring in the basement or even replace the garage door – all these and significant others – are excellent ways to strengthen the value of your property. With these home improvement projects, you will enjoy continued returns on the investment that you make in your most cherished asset.
How Does ROI Work?
In real estate it is the formula that is used to compare the cost of remodeling projects with the value those projects will retain at resale. With a little time, energy and effort, you will undoubtedly get back lasting value, increased enjoyment and an enhanced return on your investment. In terms of home improvements, making adjustments to outdated areas of your home, will not only make the space more enjoyable to live in, but it will also increase the resale value of the property. So while it may seem costly to redo the entire kitchen cabinetry and countertops, the chance that you will recover most of the monies spent on the improvement are very high.
Home Improvement Projects Yield Great Returns
Kitchens
Since the kitchen is usually the area in a home that gets the most traffic, it is often one of the first aspects of a home that is judged during evaluation by buyers. Updated, modern and functional kitchens are an important selling feature. If yours is lacking in any of these areas, by embarking on a kitchen remodel project you will could see significant ROI. While the cost of improving a kitchen can be relatively high, the returns of as high as 72% make the initial investment bearable.
Doors and Windows
One of the easiest ways to change the look of a home while increasing its value at the same time is to update the doors and windows. Considering the growing penchant for energy-efficiency in homes, the installation of doors and windows with high-end, energy-efficient sealing and construction will be a welcome addition to any home. When you look at the amount of money saved each year on energy bills, that alone makes the decision to update this aspect of your house an easy one.
Also with the growing security concerns many people are feeling these days, the confidence level of homeowners (and prospective buyers) will soar with the inclusion of solid, quality entry-exit points and windows. While there is a fluctuation based on the type of doors and windows on costs recouped from the initial expense, in general the returns are significant.
A new and improved garage door is a significant change for the better in most homes and one that has seen a ROI of as much as 84%.
Systems Upgrades
In many cases the core systems of a house, like the heating/cooling system or plumbing – tend not to be changed until they break down. When considering ways to improve a property, examine the condition of these systems and, if applicable, maintain or manage them to a level of improved function. If possible, replace parts or entire ensembles. The returns on these investments will be impressive.
Cosmetic Changes
A fresh coat of paint can do more than just spruce up the look of your home. If you are in the market to sell your house, a simple yet highly impacting project like repainting the walls or installing new flooring in your home, can have an immediate impact on prospective buyers. The additional bargaining power you will get from making such adaptations will be more than worth it.
Outdoor Elements
Not surprisingly, many people give great important to the quality and condition of decks and other outdoor spaces in a home. Whether this means your patio and recreation area, the landscaping or even the type and style of boundary fence – an often underestimated aspect of properties is outdoor care. According to Realtor Magazine, a deck addition can yield as much as nearly 73% return on investment.
Structural Enhancements
This is an often overlooked part of a home since it’s not really visible as much as the elements inside the house. As is the case with system-wide functions, the structural aspects are usually tended to when there is a need for major repairs. Prevention is one way to keep a roof, for example, in top condition and ready for any sudden burdens that may arise such as a storm. Siding is also important when determining a home's overall condition and one that cannot be ignored, especially when you plan to put your house on the market. The difference between having quality vinyl siding installed versus a less-than-desired state can be significant. With an ROI of as much as 70-80%, there is an excellent financial incentive to improve these areas as well.
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No matter which area of your home you decide to improve, the results are unmistakable. Not only will the quality of your life be greatly enhanced but also when it does come time to sell, the value of your home will be significantly increased, giving you an exceptional ROI as a result of those home improvements.
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There’s no doubt about it – there are a great many bargains in the real estate market today if you’re a person looking for a new home. However, we highly recommend that you don’t get dazzled by all the opportunities and make a potentially expensive and poor decision. To that end, I’d like to offer you some common-sense guidelines to follow.
Guideline 1: Pay Attention to Your Budget
Before beginning your search for that new home, sit down and come up with a monthly payment you can handle with ease and then look for the house that fits that budget.
Guideline 2: Save Up for a Down Payment
Due to the “mortgage meltdown,” lenders are currently much more cautious about giving out money. Depending on the situation, they may insist on a minimum down payment of 10% or one that’s all the way up to 25%. So, start saving!
Guideline 3: Improve Your Credit Score
A good credit score is a great way to make the whole process easier when you apply for a loan. Today’s lenders scrutinize such scores more closely today than in the past. If you don’t have a good score, work hard to get it up into an acceptable range. It’ll save you money on interest charges and down payments in the long run!
Guideline 4: Get a Pre-Approved Mortgage Loan
If you’re a first-time home buyer or simply a buyer who wants to make sure you stay within your means, it’s a wise idea to get a pre-approved mortgage.This is simply the process of applying for a mortgage and getting approval for the loan prior to buying a home.
A “pre-approval” is an indication that the lender is ready to extend a mortgage to you once you’ve located the right property. And it has several benefits. First of all, it saves time and energy. Once you have a pre-approved loan amount, you’re required to stay within the limits of that loan in terms of the price you’ll pay for a house.
First, when working with a realtor, ask him or her to limit the choices to those stated in the loan. This prevents the agent from showing you properties which are out of your range. By the way, they’ll really appreciate those parameters because it’ll help them zero in on properties with the best chance of sale!
Second, you can spend more time looking at homes you really like and, simultaneously, not wasting time on houses that aren’t within your budget. This allows you to focus on the details of the homes you do like in order to make sure you select the right one; for example, kitchens, baths, garages, etc.
Third, you can bargain more effectively with sellers once they know you’re pre-approved. In the current market, that’s a great relief for many sellers because they realize they have a reasonable certainty of selling their property when working with a pre-approved buyer.
Fourth, you can close faster with a pre-approved loan because there’s no time lost in the usual processing period for loans. For example, an appraisal can be ordered right away, and you have the potential to cut a 30-day closing to two or three weeks.
Finally, the seller will prefer to deal with you, particularly if he or she needs to move quickly.
Now, you have some common-sense guidelines to follow when seeking a new home in today’s market! You can learn even more by contacting us today.
