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Mistakes to avoid as a first-time homebuyer

Mistakes to avoid as a first-time homebuyer

The home buying process can be extremely complicated and occasionally drawn out, even for shoppers who have been through it before. As a result, it's understandable that first-timers would have more difficulty in dealing with these issues, and can occasionally make mistakes. Fortunately, it doesn't have to be that way.

There are plenty of common mistakes among first-time buyers but most of those are extremely avoidable. Here are just a few:

Aiming too high

One of the biggest issues for first-timers is believing they can afford to buy a more expensive house than is reasonable based on their finances, according to NerdWallet. Before getting into the market, it's important to crunch the numbers, pay down debts, build savings and doing all the basic legwork of determining exactly "how much home" they can afford.

Trying to save up front

One of the ways in which people make a long-term mistake when buying a home is keeping the size of the down payment low just to get a sale completed, NerdWallet noted. While there are certain situations where that strategy makes sense, lower down payments lead to more interest charges in the future. While it may seem like a good idea to save a few thousand dollars now, one must keep in mind that the difference can add up to tens of thousands over the life of a loan.

Not getting pre-approval

One way for shoppers to avoid targeting homes that aren't actually affordable, and to expedite the bidding and sales process when they find something they like, is to get pre-approved for a mortgage, according to Investopedia. By doing so, they will know exactly how much credit lenders are willing to extend them, and really lock themselves into a deal that makes sense for them.

Overlooking other costs

Ongoing homeownership costs aren't just the mortgage itself, Investopedia added. They may also include mortgage insurance payments (which go away after a while), increased utilities costs in many cases, homeowners insurance and so on. Furthermore, buyers should always budget for the thousands of dollars they're likely to face in closing costs.

Not doing homework

While it's tempting to dive headlong into the market, finding a lender and real estate agent as quickly as possible, that's not a good idea, according to U.S. News and World Report. It's always a good idea to shop around for the best possible deal on a home loan, and to find agents who have experience helping people in similar situations find something that works.

Falling in love with a home

Finally, people who really get excited about buying a specific home may get themselves into trouble when it comes to overbidding, U.S. News and World Report pointed out. Especially in today's market, most homes for sale are going to receive a lot of attention, and it can hurt for sellers to go with another shopper's bid. Unfortunately, that's life in today's real estate sector.

Working with a qualified and experienced real estate professional will help first-timers avoid these common pitfalls, and the same is true of finding the right lender.

For more information about this article, call 866-614-5959.

How much home is 'too much?'

How much home is ‘too much?’

Cost is perhaps the most important consideration when it comes to buying a home because of just how much people have to invest – both up front and over the course of decades – in making a purchase. Typically, this is going to be the single most expensive purchase of a person's life, and it looms large over personal finances for years. As such, it's important for buyers to make sure they're buying a home they can actually afford, and are careful to avoid talking themselves into buying "too much house."

There are a few basic rules of thumb that will help people avoid buying a home they can't really afford, and the simplest one is to set a hard and fast line, according to personal finance expert Dave Ramsey. As with anything else in the mortgage process, it's important to crunch the numbers and determine how much the monthly mortgage payment would be for any given home, based on the size of a buyer's down payment. If the mortgage payment exceeds 25-28 percent of their take-home pay, that's probably too expensive for shoppers to really afford.

It's worth noting, of course, that higher down payments will lead to lower mortgage payments going forward, and can end up saving homeowners five figures over the life of a loan thanks to reduced interest charges and so on, the report said. But if that's not an option in a short period of time, homeowners would be wise to move on to more affordably priced properties in their home search.

Doing the math
Of course, that homework doesn't have to be done for each individual property – and in fact, it shouldn't be, according to Forbes. Instead, would-be homeowners are likely to be better off if they do all that math before they even start shopping, and then seek pre-approval on a mortgage. Working with financial professionals will help them determine exactly what's affordable based on factors such as their debt-to-income ratio and down payment size, and that will inform decisions about the price range they should be shopping in.

Often, it's a good idea to pay down existing high-interest debts like credit card balances before starting the mortgage process at all, because this not only frees up some money every month that can go toward savings instead, but also makes applicants more attractive to lenders overall.

Avoiding a classic mistake
One of the issues that is all too common in the housing market, which any financial or real estate professional would warn against, is shoppers falling in love with a house and deciding they will exceed their carefully calculated limits to buy it, according to The Motley Fool. It's up to each individual to determine what they're comfortable with, of course, but avoiding that temptation to go above and beyond what they've determined is the most reasonable price point is vital to keeping a mortgage affordable for years to come.

With all that in mind, working carefully with a real estate agent or financial professional is vital to people understanding exactly what makes sense for them, especially if they're first-time buyers.

For more information about this article, call 866-614-5959.

What is a closing disclosure?

What is a closing disclosure?

When first-time shoppers are working toward completing the home sales process, there may still be many questions they have about what's required of them or what they'll need to know. The fact is that there's a lot of jargon that goes into every step of obtaining a mortgage, bidding on a home and closing a sale, so if people have questions or are unsure of certain things, it's important to get the answers sooner rather than later.

One of the big questions people may have as they move toward wrapping up a sale is what is meant by "closing disclosure." In short, it's a five-page document that provides all the details of a mortgage deal in what is supposed to be clear and easy-to-understand terms, according to the Consumer Financial Protection Bureau. Lenders are required by law to provide mortgage applicants with this disclosure at least three days before they are scheduled to close on a loan, so that they have time to study the details and truly understand it.

A closer look
On the first page of a disclosure form, lenders must include basic information about the date of the loan and its general terms (i.e. how long it lasts and whether it's a fixed- or adjustable-rate loan), as well as the value of the loan, the associated interest rate, the size of monthly payments, prepayment penalties and so on, according to Home Closing 101. That includes what monthly payments look like in the first several years of the loan – with mortgage insurance costs factored in – and then what costs will drop to in the few decades beyond that period.

Also included on the first page is a breakdown of closing costs, the report said. But on the second page, there is a more detailed breakdown of what goes into those closing costs, such as underwriting and application fees, title details, taxes and so on. Along similar lines, the third page includes a summary of the cash needed to close the deal.

According to Interest.com, the closing cost details will also include information about whether borrowers will be charged points on the loan as a means of "buying down" the mortgage rate they pay over the life of the loan. While this can add hundreds of dollars or more to their costs – depending on how much they want to cut their rates – buyers are often wise to make that investment.

The last two pages
Finally, on pages 4 and 5 of the closing disclosure, there's additional information about the loan terms, including issues like whether lenders will accept partial payments or if there will be an escrow account associated with the mortgage, Home Closing 101 noted. Finally, on the last page there are a number of other disclosures such as how much of the loan will be financed, the total cost of the mortgage over the life of the loan, and basic contact information for others involved in the sale, such as real estate agents or brokers.

Because of these issues, first-timers should never be afraid to talk to their real estate agents or financial professionals to make sure they can get a better handle on all aspects of the mortgage process.

For more information about this article, call 866-614-5959.

What is a conventional mortgage?

What is a conventional mortgage?

When first-time buyers are shopping for a home, they are likely presented with a dizzying array of potential loan options. From jumbo to FHA mortgages, the lingo can get a bit difficult to follow for those with little experience in real estate. To that end, figuring out what the various mortgage types are and what each entail will help shoppers find the home loan product that works best for them given their unique financial circumstances.

Perhaps the best-known mortgage type is all in the name: Conventional home loans are those that don't need to be backed or insured by the federal government through the Federal Housing Administration, U.S. Department of Agriculture's Rural Housing Service or the U.S. Department of Veterans Affairs, according to NerdWallet.

Instead, conventional loans will often be backed by the government-sponsored entities Fannie Mae or Freddie Mac. They come with a greater risk for lenders than those backed by the federal government specifically, which will often change how lenders view applicants.

Digging in
One thing to keep in mind about conventional mortgage is that they simply won't be available for all homes, the report said. Specifically, the Federal Housing Finance Agency sets a maximum price level for homes conventional mortgages can be used to be; in 2018, that number is $453,100 – well above the national median.

However, there are exceptions in areas where homes are particularly expensive, so it's best for first-time buyers to check in with a lender to see what the limit is in the areas they're shopping in. Moreover, people looking to buy more expensive homes than conventional mortgages will allow may still have some options with jumbo mortgages.

Because of the higher risk involved with these mortgages, shoppers will need to keep in mind that they will face potentially higher rates and tougher qualification standards, according to Investopedia. Lenders may also allow borrowers to apply "points" on the mortgage, so that they can artificially lower their interest rates by paying a certain amount above and beyond the purchase price.

Further, that level of risk will typically require borrowers to provide a lot of documentation related to their income, assets, employment and identity, the report said.

What else to keep in mind
When consumers are thinking about going with a conventional mortgage, rather than some of the more forgiving federal loans (such as FHA or VA), borrowers will typically have to have credit scores of at least 680, according to Bankrate. However, lenders will probably want to see ratings that are even higher than that, in excess of 700. They will likely also have to carry relatively low debt-to-income ratios. The good news is that these loan types may be ideal for some shoppers because they carry shorter turnaround times for approvals.

As with anything else in the homebuying process, would-be borrowers should always work in careful conjunction with their real estate agents and the professionals at their lenders to make sure they're finding the loan options that work best for them and what they will need to do every step of the way.

For more information about this article, call 866-614-5959.

Tips for buying a home with area schools in mind

Tips for buying a home with area schools in mind

That old saying about the most important thing in real estate – "Location, location, location!" – is as true today as it ever was. Over the past few decades, one aspect of that central tenet has grown significantly in importance: the quality of the school district.

With so many young adults now looking to buy homes because they're starting families, the strength of educational options remains a huge determining factor in buying a home, meaning homes in places with great schools can get pricey in a hurry. Here are a few tips to help homeowners avoid paying too much while ensuring their kids get access to the best educational opportunities:

1) Be prepared

Any time people are shopping for a home – particularly if they've never done so before – the most important thing for them to keep in mind is that they're likely to face competition, so they need to put their best foot forward, according to U.S. News and World Report. That means making sure they have enough money saved for a sizable down payment, have already obtained preapproval on a mortgage and know exactly how much they're willing to spend before entering any negotiation.

That can help grease the skids of getting a bid approved quickly and easily.

2) Look for fixer-uppers

Because nice houses with lots of amenities are likely to garner the most interest, buyers might be wise to go off the beaten path a little bit, the magazine advised. By looking for homes that might need some repairs or renovations – and would therefore likely also have lower price tags – shoppers might be able to avoid some of the competition. But they would need to do so with the knowledge that they'll also be required to put in a bit of work on their own.

3) Be flexible

Shoppers should also keep in mind that there's a trade-off here, according to Squirrelers. Finding less expensive homes in districts with great schools isn't always easy, so being willing to shop in places where schools are only pretty good, or finding less attractive homes in more promising districts, could be important.

4) Know what to look for

Finally, it should be noted that not all metrics for ranking schools are created equal, according to Boston.com. Some parents may want to look at measurements like average local test scores, while others look for the number of high-achieving kids, but experts say that's not always the best way to determine how much learning opportunities kids will have. After all, many schools today "teach to the test" and leave it at that, so looks can sometimes be deceiving.

"Average test scores, or the percentage of students who score above the state's proficiency standard, are not always a very good measure of how much students learn while in school," Sean Reardon, professor at Stanford University's Graduate School of Education, told Boston.com.

Of course, working with a local real estate agent will help inform good decisions from prospective homeowners, simply because those pros will often be able to provide honest, on-the-ground advice about what's good and bad about local school districts based specifically on information parents are looking for.

For more information about this article, call 866-614-5959.

What can shoppers do to avoid bidding wars?

What can shoppers do to avoid bidding wars?

The idea of buying a home can sometimes be a little stressful – especially for first-time shoppers – because the likelihood of a bidding war in today's market is so high. However, there are plenty of things shoppers can do to avoid those concerns and buy a house with relatively little fuss. With that in mind, doing a little bit of homework and preparation to sidestep the issues that usually lead to bidding wars is always a good idea.

One thing that many buyers in today's market have already done is linger until the activity starts to cool down a bit. Spring and summer are always the busiest times of the year for homebuying, so waiting until the fall or winter means there will simply be fewer people shopping and bidding on homes.

But when it comes to actually having decided to bid on a home, the best idea for shoppers is to not lowball sellers, according to the San Francisco Chronicle Home Guides. Any shopper – working in conjunction with a real estate agent and financial professional – will be able to determine exactly how much they can afford to spend on a home (and they should always get preapproval on their mortgage before they even go shopping). Therefore, if people are eager to buy a home, they should submit their best bid first, and potentially wow sellers into agreeing to a sale without taking other bids.

Likewise, the fewer contingencies attached to that sale – such as those related to inspections and how quickly a mortgage can be closed – the better off bidders are likely to be, the report said.

Getting it right
Of course, would-be buyers could fall in love with a home and want to submit a big bid as quickly as possible, but that might not always be a good idea, according to Ryan Homes. For instance, even if the home is great, if it's priced in a way that's out of line with properties carrying similar features, amenities and so on, real estate agents should be able to advise clients that going big on a bid isn't a good idea.

With that in mind, it's a good idea for buyers to look at properties as dispassionately as they can, the report said. This can help ensure that they're making rational decisions and not overlooking potentially big issues that could lead them to jump in with both feet before they look where they're likely to land.

The road less traveled
Finally, shoppers should keep in mind that if they want to live in trendy neighborhoods, they're far more likely to run into competition for just about any property, according to The Mortgage Reports. For that reason, finding homes that are near those hip areas but a little off the beaten path could help them lock in a good deal sooner than later.

Any time first-time shoppers have questions or want to take the next step with a home purchase, they should always consult with their agent or mortgage professional to determine the best path forward.

For more information about this article, call 866-614-5959.

How to avoid purchasing a home with declining value

How to avoid purchasing a home with declining value

While the housing market today is more or less guaranteed to keep home values rising for potentially years to come, there are certain things that would-be buyers will be wise to watch out for. Over a long enough time period, issues can arise that hinder a home's value, or at least slow the rate at which it rises relative to the properties around it, so knowing what to look for is vital.

For instance, if homes are relatively close to high-tension power lines, they are less likely to see their value increase at the same rate as similar homes in their areas, according to Max Real Estate Exposure. While there is no definitive link between proximity to power lines and any negative health consequences, the perception that there might be can pose real problems for homeowners where property values are concerned.

Other issues
However, there is a clearer hurdle when it comes to properties that are relatively close to train tracks or highways, the report said. These issues can arise simply because of the potential for noise pollution and perhaps even physical risk, particularly when trying to sell to certain buyers, such as those with children. Even something as unexpected as proximity to billboards can have a negative impact on a property's value growth going forward, especially if located near busy thoroughfares in a city or town.

In addition, it's wise for buyers to ask about their potential new neighbors, according to Investopedia. If they find that some people living on their street might be at risk of foreclosure, that can have a significant negative impact on their property's value. But this is also true if neighbors are noisy, don't tend to take good care of their yards as well as they probably should, allow the houses themselves to fall into disrepair, and so on. Furthermore, if those neighbors are older, that might be a turn-off for families with young kids who might be moving into the neighborhood.

Of course, buyers and sellers alike don't get to choose their neighbors, but it's nonetheless an issue to be cognizant of throughout the shopping process, the report said.

Appraisal considerations
At the same time, it's also important for would-be buyers to get the properties appraised before they sign on the dotted line, according to Bankrate. The reason doing so is a good idea is relatively simple: This will not only help shoppers more ably determine the right price to pay for the property, but also aid them in identifying potential issues that could negatively impact the property's value potentially years down the line. Moreover, shoppers should ensure that whatever appraiser gets hired is from their community, or at least county, so they know what the local housing market is truly like.

There is so much to consider when looking at a home, but for some shoppers, the long-term prospects of price appreciation may be particularly difficult to ignore. Talking with a real estate agent about the issue is vital to understanding what market forces might impact the home for potentially decades to come.

For more information about this article, call 866-614-5959.

Patience is key when purchasing your first home

Patience is key when purchasing your first home

Many first-time homebuyers are going to have a lot of questions about the process as they enter and move through it, and because of the level of competition now present in just about every local market, they may have to wait for some time before their bids are finally accepted. With that in mind, one adage shoppers might be particularly wise to keep in mind when they enter the market is that patience is a virtue.

One of the first things any first-time buyers will want to do is talk to a local real estate professional about the current conditions in the market because that step will help them craft reasonable expectations for how quickly they are likely to find a suitable property and have their bids accepted, according to Inman. After all, agents know their markets inside and out and will be able to give people a clear idea of what to expect from the shopping and sales processes.

A better understanding
When people have open lines of communication with their agents, they're far more likely to feel good about how bidding or potential sales are going. That assertion may be especially true even after their bids are accepted, the report said. After all, there's often at least a few weeks between when a purchase price is agreed upon and when the sale closes, and this delay, too, can sometimes leave first-time buyers anxious. However, it's often wise to trust that everything will work out, and agents will be able to provide critical advice if snags arise.

In general, shoppers can expect their house hunts to last at least a month but usually no longer than three, according to Bill Ness, a member of the Forbes Real Estate Council. To help expedite that process, taking steps such as preparing all financial data and documentation in advance as a means of getting preapproval on a mortgage, can go a long way. That effort, in turn, can give buyers more confidence when it comes to making a bid and getting the sales process expedited.

Simply put, having realistic expectations for how long this process can take will help shoppers feel good about their prospects even if they're not sure they can get a sale completed within just a few weeks, the report said.

Don't go overboard
Experts stress that it's also important for buyers not to "fall in love" with a home they may try to buy, especially those they find when searching for properties online, because that emotional investment can only lead to additional frustration and anxiousness about the bidding and sales processes, according to Magnify Money. Houses found online, in particular, may not always be what they seem, so tempering expectations is another great way to practice patience throughout the home search.

Again, seeking the advice of a seasoned real estate pro is likely to help shoppers stay realistic about their prospects for finding the right home based on their personal and financial needs and wants.

For more information about this article, call 866-614-5959.

How hard is it to find a starter home?

How hard is it to find a starter home?

One of the big trends in the housing market over the past few years is that, as more millennials try to buy homes, they are scooping up lower-priced properties in mass quantities. Coupled with the fact that relatively few homeowners are selling these kinds of starter homes, and construction companies can't put up new houses fast enough, this is creating an incredibly tight market at the lower end of the housing sector, and it's not likely to change any time soon.

Starter homes – those priced in the bottom one-third of home values in the market – still make up a relatively small share of all houses being put up for sale these days, coming in at just 22.4 percent of all properties on the market in the first quarter of the year, according to new research from Trulia. That was down from 22.8 percent on both a quarterly and annual basis.

At the same time, premium-priced homes – those valued in the top third of the market – made up 52.5 percent of all listings, the report said. That left mid-priced properties making up a mere 25.1 percent of all homes on the market.

Why is that a problem?
Obviously, not all would-be homeowners are trying to purchase properties priced in the top third of the market, so there is a bit of a disconnect between what shoppers may be able to afford (or at least what they want to buy) and what's actually available, the report said. That gap is shrinking these days, but nearly 29 percent of all home listing searches are focused on starter homes, and about 30 percent are looking for mid-priced homes.

What's happening?
Many experts believe young shoppers are not just bailing on the housing market when they can't find a starter home, but rather putting in the legwork to be able to boost their buying power into the mid-range "trade-up" houses, according to USA Today. Many young adults have spent so long renting and saving up for a down payment that the additional several thousand dollars they need may not be all that difficult to put together. This might be particularly true thanks to the improving economy and rising pay.

Meanwhile, many millennials could now also be thinking of themselves staying in their homes for longer than they might have expected, given the tightness of the market. Starter homes are usually just that: A place for new buyers to spend a few years, build equity, then "trade up" for a higher-priced home, according to Nerdwallet. That might not be in as many young shoppers' plans because of current conditions and long-term economic forecasts.

With these issues in mind, it's worth noting that prices (particularly for starter homes) and mortgage rates are only expected to keep rising. As such, shoppers would be wise to get into the market sooner rather than later to lock in the best possible deals.

For more information about this article, call 866-614-5959.

Finding the right property

Finding the right property

When first-time buyers are starting the process of searching for the right home to bid on, they may not know exactly what they're looking for. However, experts in the real estate industry typically note that this is one of those things shoppers just "know" when the moment is right and they visit a home for the first time.

Certainly, shopping online or in person with an agent for houses that carry many of the features they're looking for – whether it's a spacious back yard, the right number of bathrooms or bedrooms, modern amenities, etc. – will help buyers whittle down the number of open houses they need to attend, but they usually won't know a home is just right for them until they visit it themselves, according to The Balance. One of the best indicators of this "something special" quality is when shoppers quickly start to envision themselves in the home and feel great about those images.

All about excitement
Indeed, when people get enthusiastic about a home, even if it's just the first one they've visited, it might be wise to consider placing a bid sooner than later, the report said. If they can see themselves repainting the various rooms to their favorite colors, arranging furniture in the living room just so, or simply feel "at home" in it, getting involved in the bidding process is vital in today's hyper-competitive market. 

However, there are more things to consider than that first feeling, especially for people who plan to stay in their homes for some time to come, according to Home Finder. For instance, if young married couples without children are planning to have kids in the near future, it might be wise to consider whether the house that feels right for two people will be big enough to comfortably fit three or more. Moreover, it's important for buyers to think about the location of the home in proximity to their offices, various attractions or supermarkets and other stores. While a 40-minute commute or 20-minute drive to the grocery store, for instance, may not sound like much now, it's vital to think about what that will feel like almost every day for years.

Even if a home meets all current needs, or potential concerns can be brushed aside initially, it might be important for shoppers to take a more holistic look at their situations, the report said.

Missteps to avoid
Meanwhile, consumers also need to make sure they don't get wowed by homes they might not be able to afford, while also being realistic about being able to find something that's going to be absolutely perfect at the exact price they're able to pay, according to Investopedia. Again, this is a competitive market for buyers – homes typically receive multiple bids – so while it's not necessarily wise to "settle" it's still vital to be pragmatic about what's going to be available.

Typically, working closely with a real estate agent will help would-be buyers come to the right decision about the homes available to them, and find a property that reasonably balances their wants with their needs.

For more information about this article, call 866-614-5959.