Like most things in life, when you purchase a home, there are a number of costs aside from the actual cost of the home that must be taken into account. These can quickly add up and it is common for a person to spend several thousand dollars in closing costs.
Closing costs are the things that one must pay before taking ownership of a home. This includes things like attorney fees, title searches, and loan origination fees. A lot of people don’t realize it, but when you purchase a home, in addition to the down payment, it is common to spend between $2000 and $4000 in closing costs.
Since closing costs can add up so quickly, it is very important to take each cost line by line and determine if it is necessary and if there is anything you can do to mitigate it. Your lender and real estate agent should be able to provide you with estimates of closing costs before the actual closing day, so that you should not wait until the day of closing to question each cost.
There are many costs, which are simply part of buying a house. For example, you will need to hire a lawyer to prepare the paperwork and a legal assistant will need to be on hand during the signing of the contract. Other costs, such as a title search or a home appraisal are also par for the course.
However, it is also common for junk fees to be included with the loan, which are often negotiable. For example, often a lawyer may include a very high charge for sending the contract by courier. This is often unnecessary or highly inflated, so it should always be questioned. The lender themselves will also often add on a number of junk fees, such as extra points or certain loan fees, so each and every charge from the lender should be questioned.
For non-junk fees, such as lawyer costs, even though they are required, it is often possible to get a better deal simply by asking or doing a little calling around. So, once you have received an estimate of the costs, ask your real estate agent if you can get it any lower and if they can not help you, do a little calling around to real estate lawyers to see if you can find a better deal. In most cases, you can use your own lawyer, so it may be possible to save several hundred dollars. However, in certain cases, such as when buying a bank owned or foreclosed property, you may not have as much freedom when it comes to choosing your lawyer.
Closing costs add up very quickly and it is common for loan originators and lawyers to include a number of junk fees, so it is important to carefully examine and question all costs before going to your closing meeting. This can often save hundreds of dollars.
When purchasing a home, finding the right home is very important. One must consider the location in relation to not only work and shopping, but also the types of schools that are in the area. Often, this means selecting a home that is not exactly where you want, just so you can make sure your children are at the best school. While these decisions are quite important, equally important is the choice of the mortgage lender.
A mortgage is a type of loan that is used to help make it possible for people to purchase a home, even if they do not have the entire balance up front. Mortgages vary by lender and there are several different options, but the most common is the thirty year fixed rate mortgage. This means the mortgage is for a length of thirty years and the interest rate is fixed, so as long as payments are made on time, it will not change over the course of the loan.
Another popular type of mortgage is the Adjustable Rate Mortgage. Like the fixed rate, the most common length is thirty years. An adjustable rate mortgage has, as is implied by its name, an interest rate that changes over time. Usually they are described as 5 Year ARMs or 2 Year Arms, which describes how often the rate is adjusted. So, for example, in a 5 year ARM, every five years, the interest rate will be adjusted in relation to the current market. It is important to plan for it to always go up, but with the way the current financial market is, many with quality ARMS have actually seen decreases in their interest rates over the last few years.
The main advantage of an ARM is that it has a lower initial interest rate, but it is important to understand the terms of the loan. Some things to watch out for are early pay off penalties and rates that can be adjusted by more than 1% at a time. Adjustable Rate Mortgages have gotten a bad rap, in part because many of those offered during the buildup to the financial meltdown were actually subprime adjustable rate mortgages.
Just like finding the right location is important, it is also very important to find the right mortgage lender. Those with good credit are at a big advantage here, as they will be able to pick and choose which lender they want, with banks and lenders being motivated to get their business. However, getting a mortgage with no-credit or even bad credit is also possible, but it is essential to avoid predatory lenders, who offer subprime mortgages to those who don’t have many options.
The best place to start looking for a loan is your local bank. This is because they already have a working relationship with you and can often provide you an answer one way or the other very quickly. Even if they turn you down, it is still a good idea to find out what types of mortgages they offer and their terms, as well as their interest rates. Most brick and mortar banks will have a very standard mortgage options, so they can be used to compare other offers to.
Once you have an idea of what your bank can offer, it is usually a good idea to speak with a mortgage broker. Mortgage brokers are basically middle-men who usually have a working relationship with several different mortgage banks. They will be able to check their resources and offer you a few different options. However, it is very important to carefully consider their options, because they only get paid if you buy a loan through them, so are motivated to make a sale.
Once you have received a few offers, don’t be in a rush to jump into a loan. Instead, carefully evaluate each mortgage, its terms, and requirements. This way, you can avoid falling into bed with a predatory lender, who offers a subprime mortgage, such as having an early payoff penalty.
Purchasing a home is a big investment and like all big investments it is one that should be made carefully. There are quite a few advantages to owning a home, but there are also a number of disadvantages, especially if it is something you rush into.
One of the biggest disadvantages of owning a home is that it in many ways reduces your freedom, as most people are financially and legally tied to a home. This means that if you do not like your neighbors, you can not just leave, and if you do not like the city regulations, you can’t just move a little further out. This translates to a lot of reduced freedom, which is often taken for granted by renters, who whether they know it or not, are in most cases at most going to loose their deposit if they decide they would like to change location.
However, for many, this is not a disadvantage at all, as it does provide a strong sense of security and really helps the homeowner understand that it is more than just a few rooms and a bath, but it is actually some place you can call home. Still, it is something that should be considered and fully understood before buying a home.
Another disadvantage to owning a home is that if things break, you have to fix it, either by doing the work yourself or by paying someone, but ultimately, when the AC goes out in the summer, you can’t just call up and complain to your landlord. There are a number of federal and state regulations in place to protect renters, which ensure that rental properties meet a certain set of standards, so if your rental property isn’t meeting these standards, such as not having a heater, you have the power of the law behind you to ensure that the landlord meets these requirements.
While this can be a disadvantage for some, it is also a positive things for others. This is in part because it means you get to decide how you use and change your home. For example, if you do not like the living room, you can simply tear out the wall and start over, presuming it isn’t load bearing anyway. Along the same lines, if you would rather have a tank less water heater or a more energy efficient heat pump, you can install one and will not be held to whatever your landlord decides to install. Of course, this does mean it comes out of your pocket, but most of these types of improvements help improve the value of the home, so ultimately it ends up being, at least partially, a long term investment.
As the above examples show, there are not only advantages and disadvantage to owning a home, but it is never simply black and white either, with there usually being a positive side to most negatives. However, buying a home is a big decision and one that bears thought, so it is essential to consider all of the aspects associated with buying a home, including the mortgage or other loan sides.
In today’s turbulent market, buying a home is not a choice that should be made quickly, nor taken lightly. It is true that home prices are extremely low, certainly the lowest in the twenty-first century, and interest rates have never been lower, with some mortgage lenders offering interests rates between 3.5% and 4.5%. However, many fear that we have not reached the bottom yet and that with the troubles in America’s economy, it is hard to know when is the right time to purchase a home.
While we may not have reached the bottom of the housing market, it is safe to say that it is currently a buyers market. This is not a good thing if you are trying to sell a home, nor is it good for housing developers, with most areas in the United States having multiple empty lots that may not actually have a house built on them for years, if they ever do. However, while this is not good for real estate investors, it does work out well for the home buyer.
One thing to keep in mind is that there are many foreclosures available all over the country. Some cities, like Detroit, have a disproportionate number of foreclosures and empty homes, but this can be seen in almost all cities in the country. What this means is that there are thousands upon thousands of Bank Owned Homes, which are basically dead weight on the banks ledgers. So, the sooner the banks can get rid of the bad debt, even if it means taking a considerable loss, they will look better and more secure, at least on paper.
So, the buyer has a lot of flexibility when making an offer on a foreclosure, as well as having many homes to check for. Also, where once buying a foreclosure meant investing in a home that had holes in the wall, the wiring ripped out, and no AC, more and more we are seeing quality homes that are in excellent condition being foreclosed on. As a result, there is no need to get stuck with a fixer upper, unless you want one. Of course, the flip side to that, is that as a result of so many good condition foreclosures, if you do go for a fixer upper, you will likely be able to get it for much less.
Not only does the high number of foreclosed properties on the market mean that there are many low cost options out there, but this also has an effect on the price of regular homes, driving the prices lower. Again, while this isn’t a good thing in for those selling a home, it is a good thing for home buyers.
While the number of foreclosures, low home prices, and excellent interest rates make it a buyers market, most lenders have gotten much more strict about how they lend out credit. This is, of course, at odds with the fact that Congress and President Obama decided to transfer billions of our dollars to the bank, but this is besides the point. The fact is that even after this transfer of the public wealth to the major banks, they are not lending. So, getting a loan becomes a problem, especially for those with less than perfect credit.
One of the best things you can do is speak with your local credit union, as more often than not, most credit unions have been practicing much less risky lending practices and are more connected to the community.
It is also important to check your credit report and clean up and problems before applying for a loan. Remember that having a line of unused credit is often looked at as a good thing, so after paying off your debt, don’t immediately cancel your credit line, unless there is a charge for keeping it.
Getting credit is not impossible now, but it is much harder, so make sure that you look as attractive as possible before applying for a loan.
Buying a home is a big investment, in many cases the biggest investment a person will make in their life, so it is not a decision that should be taken lightly. It is very important to carefully weight the pros and cons of home ownership, to determine if it is right for you.
There are a number of advantages to owing a home, but one of the biggest ones is that instead of paying rent each month, a portion of your monthly payment is actually going towards the cost of the home. At first, the amount that goes towards the principal of the loan is very small, with most of the monthly mortgage payment going towards interest, but after about five to eight years, this slowly reverses.
Assuming the home increases in value over time, this means that even if you have not completely paid off the mortgage yet, you should be able to sell the home, getting back some of your investment and hopefully even turning a profit.
One of the other main advantages of owning a home is that there are a number of tax benefits to home ownership. For example, all of the interest you pay on your home can be deducted from your taxes, which can have a major effect on how much you get back at the end of the year.
Also, repairs and renovations can also be claimed as a deduction, so there is a big motivation to fix and renovate ones home. Not only does this make living in the home more enjoyable, but it also helps to increase the value of the home, which is a win-win situation.
In addition to the regular tax deductions, there is also a First Time Homebuyers Tax Credit Available offered by the Federal Government, which provides up to $8,000 that does not need to be paid back. This is currently available to those who have purchased a home in 2009 and the first part of 2010. In the past, there has traditionally also been a tax credit available that is basically a no-interest loan, but it has to be paid back.
One of the other main advantages to owning a home is the freedom to renovate and modify the home without having to ask anyone. This means if you want to knock down a wall to make your bedroom bigger, you don’t have to ask permission, only ensure that it can safely be done without affecting the homes structure. This applies to smaller changes too, such as changing the color of a room.
While there are many advantages of owning a home, there are also some disadvantages. One of the main disadvantages is that you are effectively tied to the home through a mortgage. This means you can’t just pack up and leave if you get a job in a different part of the country or if you don’t like your neighbors. Instead, you must always consider the mortgage when you are thinking about moving or leaving the area.
Also, while the ability to do pretty much whatever you want to the home can be very nice, this comes with responsibility. If a pipe breaks or there is some other sort of emergency, you can not call your landlord up like you would if you were renting. Instead, it is necessary to handle the situation on your own, including the cost.
There are also some risks of owning a home, with the main risk being that the home will loose its value. Sometimes, as can be seen in the current economic crisis, the home looses its value as homes flood the market and there end up being more low cost options available, driving the value of homes down across the board. In the case of subprime mortgages, it is also possible for the terms of the mortgage to cause how much is owed to the bank to increase faster than the value of the home increases. For this reason, it is essential to spend some time shopping around for loans and make sure to steer clear of subprime mortgages, which have higher interest rates and bad terms, such as penalties for paying the home off early.
Buying a home is a very big investment and not one that should be taken lightly. It is important to consider both the benefits and drawbacks to owning your own home, while comparing these to your personal situation. This will help you decide whether it is better to rent or purchase a home.
When you rent a home or an apartment, the monthly payment is paid to a landlord. Often, this will be the actual owner of the home, but property management companies are also popular. In either case, the rent is due at a set point each month and is paid to the property owner. As a result, money paid is not an expense each month, which comes out of pocket for the renter.
One of the major advantages of renting is that as a renter, you are not responsible for repairs or any other maintenance, aside from things like mowing the lawn or perhaps changing the filters. This doesn’t mean that you aren’t responsible for damage, but it does mean that the renter is not responsible for repairing things like the roof or the air conditioner. So, if the plumbing burst in the middle of the night, you can simply call up the landlord and by law they must come and repair the problem.
Another advantage of renting a home is that there is usually little tying the person to the home. So, for example, if they decide they want to move to a new city or a new area, they can do so with few repercussions. In the worst case scenario, assuming there is no damage to the apartment, the renter will loose their deposit, but this only happens if they break their lease.
However, there are several downsides to being a renter. One of the biggest ones is a general lack of privacy. This is because the home owner or rental property can come into your house basically whenever they want, providing they follow a few basic rules.
Also, while not having to worry about repairing things, such as a broken washer, can be nice, you can not actually modify the home as you please. Sometimes the homeowner may allow a renter to paint the walls, but this is usually it and requires the approval of the landlord.
Another disadvantage is that since a renter does not own the home, living in the home is a privilege. A disagreement with the landlord can lead to an eviction and if the landlord dies or sells the home, there is no way to guarantee you will be able to stay after the lease expires.
Buying a home has a number of advantages and can be a wonderful experience, but since most people don’t have the money for the home upfront, they must take out a rather large loan called a mortgage. This means that even though you technically own the home, the bank has a lien on it and if you miss too many payments, you risk loosing the home and being foreclosed upon.
The level of debt can be a little overwhelming, but since part of each months payment is going towards the principal of the loan, you are not paying out of pocket in the same way as when you rent a home.
Of course, during the first 5 to 8 years, most of the payment is going towards the interest of the loan. During the first few years, it is common for less than 10% of each payment to actually go towards the principal of the loan. However, with that said, you are not simply throwing your money away in the same way as when renting, as ultimately, assuming the home does not loose value, some of the money paid towards a mortgage is retained.
One of the other main advantages to buying a home is the many tax credits available to a homeowner. From the first time home buyers tax credit, which is a credit of up to $8,000 that does not need to be paid back, to simply being able to claim all of your interest and maintenance costs on your taxes, there are many tax benefits to owning a home as opposed to renting.
Another advantage of owning a home is that you can do pretty much whatever you like to it. This means if you don’t like the carpet, you can simply tear it up and put down a wood floor. If you want to make the living room bigger, you can knock down a wall and don’t have to ask anyones permission.
Of course, the flip side to this is that if something breaks, it will be the homeowners responsibility to fix the problem. So, there is no one to call when the plumbing breaks at 3AM, well except perhaps for a plumber.
It is also not possible to simply walk away from a home if you do not like the area or your neighbors. It will either be necessary to find someone to buy the home or damage your credit rating. This can mean much less freedom, as most people become tied to their mortgage.