Understanding a Good Faith Estimate

couple-with-child-in-front-of-new-homeA Good Faith Estimate or GFE is an estimated approximation of the closing costs that you, as the buyer will be responsible for when the transaction is completed. Because of the Real Estate Settlement Act, your mortgage lender is required to provide you with information that is as accurate as possible. The GFE must be given to you no more than three days after you have submitted your loan application to the lender.

A Good Faith Estimate is considered a standard form that is used by potential homebuyers to compare different quotes from different mortgage lenders. As the buyer, it is in your best interests to obtain at least two or more quotes from separate mortgage lenders. Be aware that closing, or settlement costs can vary from state to state and even county to county. That is why it is of vital importance that you thoroughly research the closing process and have an experienced real estate attorney make sure that everything is in order. As you obtain these quotes, ask for an explanation when there are large monetary differences in the itemized lists of closing costs.

When you buy a home, the closing costs include all of the expenses incurred during the sale of the home and implementation of the mortgage. Be aware that it is not uncommon for the closing costs to be as much as 5% of the home’s sale price. As a potential buyer, it is best to wait and see what the settlement costs are before signing any loan contracts.

There are a variety of expenses associated with the settlement costs, such as fees for a credit report, title insurance, document preparation, the survey, mortgage insurance application, attorney, city and county tax stamps, and underwriting. Please note that the previous example is not a complete list of closing cost items. Also there are charges that cannot change at closing, charges that can increase up to 10%, and charges that can change at the time of closing.

For a detailed explanation of closing cost fees, please visit www.hud.gov

5 Ways to Save Up for a Down Payment

family-with-kidsSince the typical down payment for a home purchase is 20% of the agreed upon price, setting that much cash aside can take some time and careful planning. For example, if you were buying a $200,000 home, the amount to put down would be $40,000. Here are
5 tips to get your down payment piggy bank started!

1. Establish a monthly budget – Without setting some spending guidelines; securing a lump sum of cash will be difficult. Go over all of your monthly expenses and review how much cash is coming in, and which bills you are absolutely responsible for. It may be helpful to meet with a financial planner to devise a budget strategy.

2. Pay off your credit cards – Do not let credit card debt be an obstacle. Strive to pay off any existing balances, and then put the plastic away for good! Doing this should also improve your credit score which will be a plus when you apply for a mortgage.

3. What can you do without? -This is really the meat of the issue. Taking a look at all of your non-essential expenses, doing away with them and putting the extra cash aside is the best way to make headway on your goal of home ownership. If you are serious about saving up for a home you may want to:
-Cancel your gym membership, warehouse club card, magazine subscriptions, and cable.
-If you are making car payments, consider selling your car and using mass transit. In many cities, it’s a definite possibility.
-Use the library to check out books, cd’s, and dvd’s, rather than buying them.
-Stop paying retail prices for clothing and look to consignment and second hand stores for alternatives to over priced, trendy apparel.
-To save on your grocery bill, use coupons and sign up for free, online weekly sales alerts. Also, try to purchase produce from local farmer’s markets, where the items are local, fresher, and usually a bargain.

4. Dine at home – The web site 24/7 Wall St. reported that in 2009 the average US household spent $2,619 on meals away from home. It is a habit that many of us depend on, however, the benefits of dining at home far outweigh the convenience of most grab and go grub. In addition to saving hundreds of dollars each month, dining at home is usually healthier and a great way to bring the family together!

5. Who needs a vacation? – When you are trying to save up for a home purchase, post phoning your annual ski trip or week at the beach house can also save you a few thousand dollars. Be creative, consider a staycation, and know that the sacrifice is worth it in the long run.

Home Search Checklist: Designate Features As Must Have, Nice To Have, Don’t Want

couple-with-child-in-front-of-new-homeSearching for your dream home can take time, patience and persistence. It can help to have a workable house hunting plan before you even take your first look at an MLS database. Once you’ve established your budget, take some time to create a home search strategy. Doing this can help you avoid getting overwhelmed and discouraged.

A lot of buyers are eager to move into a new home, so they try to cover as much ground as possible in the quickest amount of time. While there is something to be said about leaving no rock unturned, you could easily exhaust yourself before you find a good home. This can lead to rushed decisions and, unfortunately, major buyer’s remorse. One way of avoiding this is by narrowing down your search by neighborhood.

Start by making a short list of 3-4 communities that you would like to live in. Have your real estate agent focus on finding listings in those areas alone – at least at first. Once you’ve gone through the top choices, then try expanding your list to include neighborhoods you may not be crazy about, but would still be willing to live in. If you still haven’t found anything you love, you might want to take some time off from active searching and just keep a lookout for new listings in your desired neighborhoods.

Are you in a hurry? Maybe relocating due to a job transfer, or experiencing an unexpected family change? Talk to your real estate agentfor more tips on creating a home search strategy. He or she can offer advice that is personalized to your situation.

Home Search Checklist: Choosing A Neighborhood

house-on-waterSearching for your dream home can take time, patience and persistence. It can help to have a workable house hunting plan before you even take your first look at an MLS database. Once you’ve established your budget, take some time to create a home search strategy. Doing this can help you avoid getting overwhelmed and discouraged.

A lot of buyers are eager to move into a new home, so they try to cover as much ground as possible in the quickest amount of time. While there is something to be said about leaving no rock unturned, you could easily exhaust yourself before you find a good home. This can lead to rushed decisions and, unfortunately, major buyer’s remorse. One way of avoiding this is by narrowing down your search by neighborhood.

Start by making a short list of 3-4 communities that you would like to live in. Have your real estate agent focus on finding listings in those areas alone – at least at first. Once you’ve gone through the top choices, then try expanding your list to include neighborhoods you may not be crazy about, but would still be willing to live in. If you still haven’t found anything you love, you might want to take some time off from active searching and just keep a lookout for new listings in your desired neighborhoods.

Are you in a hurry? Maybe relocating due to a job transfer, or experiencing an unexpected family change? Talk to your real estate agent for more tips on creating a home search strategy. He or she can offer advice that is personalized to your situation.

Being Prepared for a Financial Emergency

nice-homeFinancial emergencies can happen to anyone. Even people who think they have steady jobs and good health can be caught by surprise when their hours are cut or they become seriously injured. The two best ways to deal with a financial emergency is with financial preparation and financial responsibility.

1. Be proactive, not reactive

The best time to start preparing for the unexpected is well in advance. Because you have no idea what life has in store for you, you should have some money set aside at all times. A lot of people foolishly think they can rely on their relatives or their credit cards for emergencies. While borrowing from family does sometimes happen, and sometimes we do need to use credit for certain situations, you should not presume that those safety nets will always be there. If you get laid off from your job, chances are you won’t be able to live off your credit card for six months until you find a new job. And chances are equally good that your family won’t want to support you for that long, either.

2. Practice self discipline

Once you’ve made the decision to start a savings plan, stick to it! Think of the money you’re putting aside as already spent. Don’t dip into the emergency fund unless there really is an emergency. If you find yourself having to use emergency money for day-to-day items like gas, grocceries or bus fare, there’s something wrong. Chances are you’re either spending too much of your income on unnecessary purchases, or you aren’t bringing in enough income in the first place. If the latter is the case, there might not be much you can do about it right away. The best thing is do whatever you can to cut back on your spending. Clip coupons, carpool with coworkers, ask for a raise… basically, refer back to number one. You should also try to store several months worth of mortgage payments in a bank account to help you bridge the gap if you are a home owner.

Remember, while you don’t have much control over the problems life gives you, you do have control over how you handle them. If you need help, talk to a trusted financial advisor or take advantage of a free financial counseling service.

When To Start Looking At Real Estate Listings

couple-with-child-in-front-of-new-homeBefore you begin searching for your dream home, take a good look at your current situation. Is your lease going to expire soon? Will you be starting a new job? Moving out of town? Depending on these and other factors, you may or may not want to dive into a real estate listing search.

The last thing you want to do is make a rushed decision. If you wait too long to begin your home search, you may not have enough time to find a home that suits your needs and your budget. If you start your search too early, you might end up finding a home you love but aren’t ready to move into.

So how do you know when to begin looking at real estate listings?

Here’s a good rule of thumb: Allow yourself 30-60 days to search, and plan on 45-60 days from offer to closing. Be aware that buying a house is not a quick and easy process. Being a smart home shopper means taking your time, not getting overwhelmed and not buying on a whim. Once you do finally find a home, there’s paperwork to be signed, legal documents to be filed and inspections and appraisals to be made. Many people find the process exciting, but it can also be difficult and exhausting. One thing that would likely make the home shopping process less stressful is getting prequalified for your home financing so that you do not waste time and energy looking at properties you cannot afford.

It can be especially difficult for people who are trying to buy a new home on a timer. For people who need to move out on a certain day, (starting a new job in another state, lease about to expire, etc.) it may be wise to allow yourself even more search time, to avoid making a hasty decision.

If things begin moving too fast, just remember that you are never going to be forced to buy something. The thought of renewing a long-term lease at your apartment might make you cringe, but it would be better than having regrets later. If you’re moving to a new area, keep in mind that you can always rent there, too. A lot of people choose to rent for the first few months after relocating. This can help you get acclimated to the area and get a feel for the local market.

If things are moving too slowly, (you’ve found your dream home but you still have 6 months left on your lease or the sellers can’t move out soon enough) you may need to go back and reevaluate the situation. Would you be willing or able to buy out the remainder of your lease? Would you be willing to stay where you are and charge the sellers rent while they occupy your new home? These are all things to seriously consider. If you find yourself unable or unwilling to handle these types of situations, it might be better to go back a few steps and keep browsing.

The truth is, you can begin looking at real estate listings any time you want. The sooner the better, in most cases. Just look with caution. Remember that with home purchases, time is always of the essence and you need to be prepared and ready to make this major transition

House Hunting? 5 Things to Look for in a Real Estate Agent

house-on-waterThe good news is that the current real estate market is excellent for prospective buyers. However, with so many homes available, finding the one that meets your needs can be like finding a needle in a haystack. Choosing the right real estate agent can make your house hunting experience a breeze and get you into your dream home even quicker! Before you begin the process of selecting a realtor, here are 5 things to consider.

1. Reputation -Ideally, if you do not already have a realtor contact, the best situation is to have a friend, colleague or neighbor refer you to an agent. Buying a home is a huge commitment and it is important to work with someone that you trust who possesses a high degree of experience and expertise. When someone who knows you makes the referral, chances are that you and the agent with have a good rapport.

2. Good Listener - One’s home is typically their most personal possession, which is why it is of vital importance to have an agent who is an excellent listener. Part of their job is to get to know you; understand your needs, your likes, dislikes, and future goals. If your agent makes several appointments for homes that just don’t meet your criteria, their listening skills could be in question, and a switch may be in order.

3. Knows the Neighborhood – Another part of the real estate agent’s job is to be familiar with the local market. They should be well versed in what has been selling, where, and for how much. Good agents often provide their clients with a list of comps. That is, a list of recent home sales that are comparable to what you are looking for.

4. Effective Communicator – In a nutshell, your realtor should be clear and concise about how you will communicate with each other. With so many options these days, from e-mailing to texting, communicating with a realtor should be a piece of cake. Quick responses to questions and concerns can also be a factor in securing a purchase.

5. Accountability – Research the company your real estate agent represents to ensure they are an ethical, well-respected firm. It’s not a bad idea to check if there have been any complaints filed against them with your local Better Business Bureau and Board of realtors.

Remember that your real estate agent works for you. If you feel that they are not doing a good job, do what any boss would do! When a realtor client relationship works, you’ll know it, and feel good about your choice.

You Have the Home Inspection Report-Now What?

house-on-waterA home inspection is an optional procedure that is performed prior to closing on a home purchase. Inspections are designed to disclose property defects that could potentially affect the home’s safety, livability, or resale value. Although they are not typically required, it is virtually unheard of to purchase a home without conducting an inspection by a qualified home inspector. It is also recommended that home inspections take place with new construction as well, to safeguard the potential buyer against any major defects or construction issues.

Typically a home inspector is contacted immediately after the property is placed under contract. There is usually an inspection clause in the sales contract, which makes the final purchase, or closing, contingent on any findings brought to light in the inspection. The clause should also state whether or not discovered issues will be repaired to the buyer’s satisfaction or monetarily compensated for.

After you receive the home inspection report, make sure that you understand any of the issues or defects noted in the report. Speak directly with the inspector to obtain clarification on any of the items that you are not clear on.

Next, communicate with your realtor and attorney to discuss any issues with the home that must be corrected. They should bring any of those concerns to the attention of the seller’s agent and their attorney. Your decision to close on the home should also be contingent on either the repair or price concession for the problems in question. Examples of complications that frequently occur are problems with the roof, wiring, plumbing, HVAC systems, and foundation. To obtain an accurate cost assessment to repair any of the points in question, you will need to contact a licensed contractor for an estimate. You should also have the inspector look at the security system and check to see if it is up-to-date and appears to be in working order. ADT security systems and other home security brands change their technology periodically and you’ll want to see how much an upgrade may cost.

When it is all said and done and all of the financial and repair adjustments have been made, it is still necessary to do a final walk-through prior to signing a purchase agreement. Often, a significant amount of time can elapse between the initial inspection and the closing. Further damage caused by severe weather and during the moving out process can result in new issues.

Do your self a favor from the beginning and hire an inspector that is an active member of the American Society of Home Inspectors, or ASHI. Finally, be diligent and take the time to conduct a final walk-through before you close on your dream house.