PMI

Everything you need to know about PMI Calculate Mortgage Insurance & PMI | Primary Mortgage Insurance & Loan

If you want to avoid paying private mortgage insurance or PMI, you’re not alone. Buying a home requires a large wad of cash and saving money where you can makes absolute sense. 

Unfortunately, having enough funds for the down payment is among the biggest struggles of many first-time home buyers. After all, fifty-seven percent of prospective home buyers believe that owning a home would be difficult with their current financial situation.

And for those who can’t afford the 20% down payment, paying the PMI provides a shortcut to buying a new home. We help you to understand how to calculate primary house loans and PMI.

Now, let’s talk about private mortgage insurance.

What exactly is PMI?

You’ve probably read about Private Mortgage Insurance or PMI if you’re planning to buy a home.

PMI protects the interest of lenders who finance borrowers who can’t afford the required down payment. When a borrower defaults on the loan, the insurance pays off a portion of the mortgage. 

But even if the insurance company pays the lender, you will not gain a lot of benefits. The lender can still foreclose the property. And it won’t save your credit score from dipping. 

While PMI reduces the risk of default for lenders, the greatest benefit you’ll get is this buying the property with a low down payment. And, if you’re qualified, you’ll get an additional home owner tax deduction for PMI premiums paid at least until 2020.

Even if you’re paying money to protect the lender’s interest, many home buyers are still willing to pay for it. In fact, about 41% of agency-backed mortgages are covered with PMI.

How much does Private Mortgage Insurance cost?

The average annual cost of PMI is between 0.5 to 2% of your loan amount. This means that if you have a $300,000 mortgage, you would be paying between $1,500 to $6,000 per year that’s $125 to $500 per month.

The actual cost of your PMI could also depend on factors like the following:

  • Loan amount. Your PMI will increase as your loan amount increases.
  • Loan type. Adjustable-rate mortgages where the rates can go up depending on market trends require higher PMI compared to a fixed-rate mortgage.
  • Credit score. Borrowers with a good credit score will pay less PMI than someone with a low credit score.
  • Down payment. The higher the down payment is the lower the PMI.

The actual cost of your PMI should be on your loan estimate and the closing disclosure.

How do you pay the PMI?

Most borrowers pay their PMI premiums every month along with their loan amortization. But some lenders give you the option to pay the PMI upfront.

 Sometimes, you can pay part of the premiums upfront and pay the balance monthly.

Then there’s also something called the lender-paid mortgage premium insurance. Here, the lender will shoulder the cost of your mortgage insurance premium.

With this arrangement, most borrowers end up making lower mortgage payments. On the downside, you can’t cancel lender-paid mortgage premium insurance. 

 There are also lenders that allow borrowers to buy insurance from a third party. In this case, you have to pay for the cost of the premiums upfront. 

Do I need to pay PMI for a government-backed loan?

Government-backed loans have their own version of the private mortgage insurance.

USDA and FHA loans require borrowers to pay for Mortgage Insurance Premium or MIP.  

MIP for FHA loans actually cost more than the PMI for conventional loans.

If you apply for an FHA loan, you have to pay the 1.75% upfront fee based on the loan amount. On top of that, you have to make annual payments which could range from 0.45% to 1.05% of the loan amount.

For USDA loans,  there is an upfront MIP of 1% and the annual cost is 0.35% of your loan amount.

VA loans, on the other hand, require another version called the funding fee which depends on how much your down payment is.

If your down payment is 10% or more, the funding fee is at 1.4%. The fee increases to 1.65% if your down payment is 5% or more but less than 10%.

For down payment amounts below 5%, the funding fee increases to 2.3% for first-time borrowers and 3.6% for other borrowers.

Do I have to pay PMI until I pay off the loan?

While PMI is an additional cost to a borrower, it is not permanent. You can cancel PMI but it usually takes two years before you can cancel your PMI. 

Here are three ways to cancel your PMI.

Method #1: Request for cancelation when your equity is almost at 20% 

You can request the cancelation of your PMI once you have at least a 20% equity in your home. Most of the time, lenders require borrowers to make the request in writing. They may also request another appraisal to check if the property value did not decline.

 Lenders won’t approve the cancelation unless your mortgage is current.  You should also have no second mortgage on the property.

Method #2: Wait until your principal balances reach 78% of your property’s original value 

Even if you don’t cancel your private mortgage insurance, your lender still needs to do it on your behalf once the loan balance drops to 78% of the property’s value.

You also need to meet another condition –your account should be current. If it’s not, you need to update your mortgage first. Your lender should approve the cancelation once you pay all past due balances.

Method #3: Stay current until the midpoint of the loan’s amortization schedule

If you’re paying your loans regularly, your lender may also cancel PMI once you reach the midpoint of your loan amortization. 

So, if your mortgage has a 30-year term and you’ve paid for 15 years, you can cancel your PMI even if you don’t meet the 78% requirement. This treatment is mostly applicable to interest-only loans. 

Method 4: Refinance your mortgage

Another approach you can take is to refinance your mortgage. This strategy works best if you qualify for a loan with a lower interest rate and your new loan amount is no more than 80% of the property’s home value. 

When you meet all the conditions, you can refinance the loan to avoid PMI and reduce your mortgage payments as a whole.

How can I avoid paying PMI?

Lenders require PMI when you can’t afford the 20% down payment but there’s a workaround. Instead of just applying for a mortgage, apply for a smaller loan to cover the down payment. The smaller loan will carry a higher interest and you have to pay it on top of the mortgage. 

Known as piggybacking, this practice may be a cost-effective option. Even if there are two loans, you can still deduct the interest rate on your tax return if you itemize.

Paying PMI Makes the Most Sense for Some Buyers

PMI is an additional cost for any home buyer. If your priority is to buy now to avoid rising costs, paying for this insurance may be the most practical option.  

By factoring inflation, you may see greater savings now even with your insurance premiums.

 

Top Real Estate Agents in Queens for 2019

Top Real Estate Agents in Queens NY for 2019

These are the Top Real Estate Agents in Queens NY for 2019 following the sales data from 2018.

Queens had the third largest residential property sales in New York City in 2018 with a total sales volume of $3.09 billion based on 4,607 properties sold. Houses sold made up 51% of the total units sold while apartments accounted for the remaining 49%.

Forest Hills recorded the highest property sales in Queens in 2018. Residential sales in the area accounted for 13% of the total properties sold in the borough. Of the 593 properties sold, 511 were apartments and only 82 were houses. Most apartments sold were co-ops. 

Jackson Heights came in second with 287 properties — 6% of the total residential units sold in Queens. Of these properties, 235 were apartments and only 52 were houses. Similar to the trend in Forest Hills, co-ops saw the highest number of properties sold. 

With 181 properties sold, most of which were condos, Hunters Point rounded up the top three. Of these properties, 178 were apartments and only 3 were houses. These units accounted for 4% of the total properties sold in the area. 

Property Type

For the year 2018, the number of houses and apartments sold in Queens was almost equal. Houses took the lead by only 2%.

Of the houses sold, there were 1,682 single-family houses. This made up 37% of the total properties sold.

Multi-family homes made up 12% of the total properties sold with 569 units. Townhouse sales trailed behind with 117 units sold , which accounted for 3% of the total property sales. 

Among apartments in the area, co-ops registered the highest sales with 1,549 units sold — about 34% of the total properties sold during the year. Condos came in next with 14%.

As expected, condops only accounted for 1% of the total residential properties sold in 2018.  

Median Price

In 2018, residential properties sold in Queens had a median price of $590K. 

Houses sold had a median price of $791K. The average apartments sold for almost half the price of one house with a median price of $385K. 

Co-ops had the lowest median price at $320K and condops came in second at $373K. Meanwhile, condos had the highest median price at $668K.

Among houses, single-family homes had the lowest median price at $725K, followed by townhouses at $864K.

Multi-families had the highest median price among all property types in Queens at $900K.

Number of Days on the Market

On average it took 85 days to sell a property in Queens — this applies to both houses and apartments. 

Among the properties in the area, co-ops had the lowest number of days in the market at 82 days followed by single-family homes with 83 days. 

It took a few more days to sell a townhouse which had an average number of days on the market of 88 days. Condos and Multi-family homes tied in fourth place with an average of 92 days. 

Condops were the hardest properties to sell. It took about 120 days to complete the transaction. 

Listing vs. Selling Price

In 2018, residential properties sold for 2% below listing price.

Houses sold at an average of 4% below the listing price. Meanwhile. apartments saw a better deal with properties selling at 1% below the listing price. 

On average, the selling price for single-family homes was 4% below the listing price. Multi-family homes and townhouses, on the other hand, sold 3% below the listed value.

The average selling price for condos and condops was at 2% below the listed price but co-ops sold at 1% below the listing price. 

Most Properties Sold 

Gabriel K. sold 103 properties in Queens in 2018 with a total sales volume of $63.14 million. Of these properties, there were 71 houses, 31 multi-families, and 1 townhouse. 

It took Gabriel about 83 days to sell these properties and the selling price was 2% lower than the listing price. 

If you want to get in touch with Gabriel click here.

Best For Apartments 

Lily T. completed the sale of 44 apartments in Queens. She stood out not just in selling apartments but also in closing an excellent deal for the seller.

It only took her 60 days to close on 42 co-ops and 2 condos which had a sales volume of $15.77 million. The selling price of the apartments was also 1% higher than the listed price. 

If you want to get in touch with Lily click here.

Best For Houses 

Once again, Gabriel K. took the lead on the number of houses sold. All 103 properties he sold were houses and his total sales made up 4% of the total houses sold in Queens.

Gabriel was also the top agent based on the number of single-family homes sold in 2018. The 71 single-family homes he sold made up 4% of the total single-family homes sold in 2018. It took Gabriel about 84 days to sell these houses at 1% below the listing price. He only sold one townhouse for only 50 days at 3% below the listing price. 

If you want to get in touch with Gabriel click here.

Best For Multi-family

Gabriel K. dominated the housing market sales in Queens in 2018. He also topped multi-family sales with a record of 31 houses, representing 5% of total multi-families sold for the year. He recorded a total sales volume of $23.84 million. 

Gabriel’s properties stayed on the market for an average of 80 days. The selling prices of these properties were typically 2% lower than the listed price.

If you want to get in touch with Gabriel click here.

Fastest Selling 

Jimmy B., Edward K., and Carol C. recorded the fastest sales at the best price. All three agents sold a property in just two days. Considering the average days on the market for multi-families in Queens, the 2-day turn around was extraordinarily fast. 

In 2018, Jimmy sold a condo in Ditmars-Steinway in just two days at 4% below the listing price.

If you want to get in touch with Jimmy click here.

Carol had the same 2-day record for a single-family home in Sunnyside which sold for $980K —2% below the listing price.

If you want to get in touch with Carol click here.

Edward also sold a multi-family home in Woodhaven at its listed price — $550K — in just two days. 

If you want to get in touch with Edward click here.

Best Negotiator

Bertha C. recorded the highest selling price versus the listed price in 2018. He sold a single-family home in Rego Park for $870K. And this price is 45% above the listed price. 

If you want to get in touch with Bertha click here.

Top Real Estate Agents in the Bronx

Top Real Estate Agents in the Bronx NY for 2019

These are the top real estate agents in the Bronx NY for 2019 based on 2018 sales data with some information about the area.

In 2018, there were 1,009 residential property sales with a total sales volume of $446.49 million in the Bronx.  Of the properties sold, 64% were apartments while the remaining 36% were houses.  

Among the areas in the Bronx, Riverdale property sales were the highest. The 247 properties sold in the residential neighborhood accounted for 24% of the total residential properties sold in 2018. Of the said properties, 213 were apartments 199 co-ops and 14 condos. 

The upper-middle-class neighborhood Spuyten Duyvil ranked second for total properties sold. Following the same trend in Riverdale, 164 of the 172 properties sold were apartments of which 154 were co-ops. 

Concourse rounded up the top three with 43 properties sold. Of the 41 apartments sold in New York’s southwestern section, 40 were co-ops. 

Property Type

In 2018, there were 580 co-op units sold in the Bronx, which accounted for 57% of the total properties sold. Condos sold accounted for 7% of the total property sales while condop sales made up less than 1% of the total properties sold in the Bronx. 

For houses, single-family homes had the largest properties sold at 216 units, representing 21% of total properties sold. Meanwhile, townhouse sales only accounted for 2% of the total properties sold in 2018. 

Multi-family homes sold represented 12% of the total property sales with 124 units sold. 

Median Price

In 2018, the median price for all properties sold in the Bronx was $365K. 

Apartments (co-ops, condos, and condops), had a median price of $249K. Of these properties, co-ops had the lowest median price of $245K. The two condop sales recorded for the year had a median price of $495K while condos had a slightly lower median price at $407K.

Meanwhile, houses in the Bronx had a median price of $590K. 

The median price for a single-family home and a townhouse were not too far at $510K  and $565K, respectively.

Multi-family homes sold for a slightly higher median price at $679K. 

Number of Days on the Market

In 2018, properties were on the market for an average of 108 days. Apartments stayed on the market for about 104 days while it took 114 days to sell a house. 

For houses, single-family homes were the hardest to sell and properties remained on the market for an average of 122 days. Townhouses ranked second with 108 days while multi-family homes remained unsold for an average of 101 days. 

Among apartments, condos remained in the market for 113 days, co-ops followed with an average of 104 days. Condops, on the other hand, only took 45 days to sell.

Listing vs. Selling Price

Properties in the Bronx generally sold at 2% below the listing price. In general, the selling price of a house in the Bronx was 2% below the listed price. Apartment sellers saw a better deal as properties sold for 1% below the listing price. 

On average, the selling price for single-family homes and multi-family homes were 2% below the listing price. However, townhouses sold for an even lower price – at 5% below the listed value.

In 2018, condos and condops were also sold at 2% below the listed price but co-ops sold at 1% below the listing price. 

Best Overall 

In 2018, Arlene T. recorded the highest number of properties sold at 36 properties. She sold all these properties for a total sales price of $31.21 million.  

Of these properties, 19 were co-ops and 15 were houses. She also sold one multi-family unit and one condo. Arlene sold the properties at 2% below the listing price and these properties stayed on the market for an average of 184 days. 

If you want to get in touch with Arlene click here.

Best For Apartments 

 

In 2018, Sanjya T. sold 25 apartments, 24 co-ops, and 1 condo unit. Combined, these properties had a selling price of $10 million.

Sanjya sold the apartments at 3% below the listing price and the properties stayed on the market for an average of 129 days. 

If you want to get in touch with Sanjya click here.

Best For Houses 

In 2018, Arlene T.  also sold 16 houses 15 single-family homes and 1 multi-family property. These properties which make up 4% of the total houses sold in the Bronx had a sales volume of $23.87 million. 

On average, Arlene sold these houses at 2% below the listing price and the properties remained in the market for an average of 267 days. 

If you want to get in touch with Arlene click here.

Best For Multi-family

Gabriel K. sold 8 multi-families in 2018. This accounted for 6% of the total multi-family units sold during the year. Gabriel had a total sales volume of $5.27 million for the multi-family units he sold. These properties remained on the market for an average of 102 days and sold at 2% below the listing price. 

If you want to get in touch with Gabriel click here.

Fastest Selling 

In 2018, Frank A. holds the record for the lowest average number of days on the market. Frank only sold 1 condo but it was only on the market for 2 days — way shorter than the 108-day average based on all properties sold in the Bronx.

Frank sold the apartment for $135K at 4% below the listing price. 

If you want to get in touch with Frank click here.

Best Negotiator

Bernie G. sold 1 co-op at 22% above the listing price in 2018. Among all residential properties sold in the Bronx for the year, this sale had the highest positive difference between the sales price and the listed price. Moreover, the apartment was sold in just 7 days for $232K.

If you want to get in touch with Bernie click here.

title search

The 3 Most Common Title Issues When Doing Your Title Search

You fell in love with a charming two-bedroom and its swanky kitchen. After negotiating with gusto, the seller finally accepted your offer. The seller happens to be a warm fellow who assured you that he has a clean title. You can’t wait to own this home but here’s the thing with buying properties — you should always cover your bases. Hence, the need for a title search.

Even if you are talking to an upstanding agent and an honest seller, there could still be title issues. The other party may have misrepresented the status of the property. Sometimes, there are liens or hidden claims against the property that the owner has no knowledge of.

To avoid entering a contract blindly, you need to do a title search. If you’re applying for a mortgage, you have no choice anyway since the lender will request one.

What Is A Title Search?

Most of the time, buyers request a title search after the seller accepts their offer. A title search is always a must before you can close on a home.

What exactly is a title search?

A title search is a process of looking into public records to determine the rightful owner of the property. By extension, it helps you determine if the seller has to right to sell it. This examination also looks for issues with the title and outstanding claims against the property such as back taxes and liens. All these findings are summarized in a document known as the title report.

Why Do You Need A Property Title Search?

Conducting a title search is necessary not just for buyers but also for sellers and lenders. Here’s why.

All Mortgage Lenders Require A Title Search

 So the seller accepted the offer and perhaps you’ve signed the real estate purchase agreement. Now, it’s time to move on to securing your mortgage, that is if you need one.

If you apply for a mortgage loan to finance your property purchase, mortgage lenders will require you to purchase title insurance. But to get approved for title insurance, the title company needs to perform a full title search.

Take note that your title insurance pays for liens and encumbrances that come up after closing. So, it makes sense for the insurance provider to make sure that there are no major issues with the title before approving your insurance application.

The title search focuses on encumbrances. Encumbrances refer to liabilities owed by the current or the former owner of the property. These encumbrances may include back taxes, liens or unpaid mortgages. Parties making a claim against the property should have filed it with the recorder’s office or courthouse. Hence, it should be attached to a property’s title.

When you sign the property deed and become the new owner of a property, you also become responsible for all the liabilities attached to the title.

Note: Deed and title mean different things. The property deed refers to the document that transfers the ownership of the property. Hence it is signed by both the buyer and the seller. During the closing, the deed should be recorded with the courthouse or the county assessor’s office.

Sellers Who Want to Make Sure They Have a Marketable Title

Sellers want to make sure that they have a marketable title before listing the property. Putting a property up for sale costs money. If your title turns out to be unmarketable, you’d be wasting your time and effort.

A marketable title means that the title is free from defects that may challenge the rights of the title owner and may lead to a lawsuit. Defects can either be encumbrances or questionable property ownership. Wild deeds, which refers to the deed executed when someone bought the property but did not officially record the title, may also cause issues. There are also cases where the land violates the zoning law and renders the title unmarketable.

Buyer Who Are Not Willing To Unknowingly Take on Expensive Issues

Buyers who take out a mortgage loan are required to do a property title search but this step is also a MUST for cash buyers. You need to know if there are liens, child support, loans, and judgments against the property which were not disclosed to you BEFORE closing. After you close on a home, the obligation of the former owner passes on to you and it will be more difficult to settle the issue.

When you buy a property, you want to have a clear understanding of its condition. Without a title search, you won’t be assured of the real status of a property

When Is The Title Search Done When Buying A House?

You can do a title search anytime. Some homeowners do a title search when they plan to refinance their homes. Potential buyers may also do the same for a property they like. However, the title search usually happens after the seller accepts your offer on the property and you sign the purchase agreement.

Lenders request for a preliminary report while you’re in escrow. Being in escrow means that you have already many your earnest money deposit as a show of good faith about your intention to buy the property. You will have a higher level of assurance that the property has no issues after a title search.

Who Performs The Property Title Search?

Anyone can perform the title search but there are professionals who are experts in this field. Title searchers know the proper way to conduct a title search. These professionals, who may also be referred to as abstractors or examiners, have access to documents that are not available online.

Can You Do A Title Search By Yourself?

Yes, there are professionals who conduct the title search, but you can also do it by yourself. The first step is to look for the legal description of the property. You can find the legal description on the deed of the property.

Once you have that information, you can do an online title search. Many states allow you to conduct a title search online by visiting the county assessor website. If you can’t find the property online, don’t worry – some of these lists may be incomplete. In this case, you may visit either the Examiner of Titles in your district court or the Recorder’s Office.

Someone from the concerned office should help you pull up a tract card in one of the computer terminals. This tract card should reveal the chain of title or the history of property transfers involving the property.

The chain of title can reveal various clues on issues with the property.  For instance, there was a deed to transfer the title from Bill to Sally. However, the next deed on file is for the title transfer from Jake to Lisa. This break in the chain of title is a major red flag.

Looking into the chain of title is actually one of the things that a title searcher does first. With the effort it takes to peruse tons of documents, it is usually more efficient to request a professional title search. Unless you have some background in the process, you may miss liens placed against the property and pending judgments against the seller.

Moreover, the agencies where you do your research may not offer legal advice.

How To Do A Title Search 

Title companies look into public records. They also do a tax search to see if there are unpaid federal and state tax liabilities against the property. And it doesn’t end there.

Searchers also look into the following:

  • Unpaid mortgages
  • Court dockets to find bankruptcy records as well as existing and pending financial judgments made against the property
  • Death certificates and estate filings to see how ownership transferred after the death of the original owner
  • Domestic relations to see if there is a lien on the property for an unpaid child or spousal support
  • Marriage Licenses and Divorce Decrees to find name changes which may affect the ownership of a marital property

Title companies compile all their findings and issue a preliminary title report. The seller, buyer, lender, real estate attorney, and the real estate agent will have a copy of this title report.

Even if there are issues with the title, the buyer may still proceed with the sale. However, these issues need to addressed first.

If there is a title search contingency and the seller doesn’t have a clear title to the property, the buyer may back out and get his or her earnest money back.

What Are The Most Common Title Issues? 

Mechanic’s Lien

When you hire a general contractor to make property improvements, your service provider typically files a lien before starting the job. This is standard practice to ensure that the contractor gets paid. After completing the project and receiving their payment, the contractor should release the lien. Most of these liens will expire after a certain date but some have an indefinite life span.

Bankruptcy

When the property owner became bankrupt or married someone who filed for bankruptcy, there are potential title issues. The bankruptcy case needs to be discharged. There are also instances where the seller needs to submit a court petition releasing the property from the bankruptcy process.

Delinquent Child Support

Sometimes divorced spouses forget to remove the lien for child support even if the debt has been cleared a long time ago. This may show up in the title search and become an issue that prevents the sale unless a surviving parent signs a “release of judgment” to attest that the amount owed has been paid.

Unpaid back taxes and delinquent spousal support are also common. It may take weeks to solve these title issues. It usually takes longer to solve title problems for properties inherited from trust issues if a co-owner or beneficiary cannot be found.

The title company does most of the legwork in removing these issues to make sure you have a clear title. Sometimes, you won’t even be aware that the company took care of some title issues prior to closing.

There are also cases where the company asks you to file a quitclaim deed to clear up the title and remove an heir, a spouse or a co-owner. You may also have to file a release of judgment or lien to get rid of liens for spousal or child support and to remove encumbrance for a paid mortgage.

How Does A Title Report Look Like?

The title report summarizes all the information searchers found in one document. This report includes the following components.

  1. Property Information. This reveals the owner’s name on county reports, the property address and the county.
  2. Legal Description. This description should be for the correct property and it should match other court documents.
  3. Deed Information. This specifies the current deed holder and the type of deed issued by the former owner. The name of the person who transferred ownership to the current owner should also be reported in this section.
  4. Mortgage Liens. This section lists mortgage loans taken against the property. It also lists details such as the origination date, the amount, and the borrower.
  5. Encumbrances and Comments. This section details all other encumbrances other than mortgage liens, It may include mechanic liens, judgments which may lead to encumbrance, litigation, and foreclosure.
  6. Property Tax Information. This part covers property tax details. It indicates if the owner pays the tax by installment or annually. It will also indicate if the owner owes back taxes.

Check out this sample title report to know how the document looks like.

A Title Search Doesn’t Uncover All Defects

While title companies exert significant effort to find all title defects, some issues may not be on the record. These title issues include legal description errors, deed executed due to fraud or duress, forgeries, claims against a property owner who used a fictitious name or “alias” and many others. This is where the title insurance comes in.

What Is Title Insurance?

Title insurance can protect you from title problems that may come up after closing. You only have to pay the title insurance premium once, but it will be effective as long as you are the property owner.

Lender’s Title Insurance

When you take a mortgage to finance the property purchase, you typically have to get a lender’s title insurance. This type of insurance protects the lender from any loss which can arise from an issue with the title. The lender’s title insurance should cover the full amount of the loan. From the name itself, this coverage is for the benefit of the lender which is why you are always required to get title insurance when you get a mortgage.

Owner’s Title Insurance

Concerned buyers who want to protect their ownership of the property should consider paying for the owner’s title insurance. Most owners’ title insurance companies offer three types of coverage which are as follows:

  • Standard policy. This protects buyers from issues like use restrictions, undisclosed easements, prior liens, forgery, impersonation, improperly recorded deeds and lack of right of access.
  • Extended coverage. This coverage includes issues in the standard policy as well as claims for adverse possession and land issues such as incorrect surveys, subdivision laws, and zoning issues.
  • Premium policy. This has the widest coverage and usually includes forgeries made after the coverage started, construction and improvements made by neighbors on the insured land.  It also covers the full dimensions and location of the insured property.

An owner’s title insurance spares you from spending money on defending your rights to the property. It will also help you recover losses because of property issues. Owner’s title insurance is optional, but it is highly recommended.

With all these benefits, you may wonder about the cost of getting title insurance.

Title insurance can cost you around 1% of the purchase price. Insurance premiums may vary depending on the insurance company and the state where you live.

How Much Does A Property Title Search Cost?

A basic title search cost can be anywhere from $75 to $150. Prices vary by state based on your loan amount and the property’s purchase price. However, complete Ownership and Encumbrance report can cost as much as $1K. This fee often includes the title insurance policy, and this is included in the closing fees.

Exercise Due Diligence In Every Property Purchase

Almost all property purchases involve a title search. In fact, doing the property search yourself is better than nothing. However, if you’re paying a significant price for a new property, hiring a title searcher is highly recommended.

Your title report dictates the next step in your home buying process. If the title search uncovers major issues with your dream home, you may have to let the property go and move on. Yes, you’ll pass up the chance of owning that home but you also dodged a bullet which would have cost you more money down the road.

closing disclosure

Reviewing Your Closing Disclosure: It’s Easier Than You Think

You have the loan approval and all you need to is close on the property.  But before you can proceed, you should wait for the Closing Disclosure.

The Closing Disclosure or CD is a notice which details all costs related to your mortgage. Your lender should send it to you for review at least three days before the closing date.

As one of the most important closing documents, you should take the time to review your Closing Disclosure.

What is the Closing Disclosure?

The Closing Disclosure is the five-page document from your mortgage lender. This is the final version of the Loan Estimate (aka good faith estimate) you received when you first applied for the loan.

Your Closing Disclosure should detail the cost of your mortgage and the terms of the loan. That’s why you have to check it thoroughly.

By the way, if you financed your home before August 2015, you may be more familiar with another type of document known as the HUD-1 settlement statement. The Consumer Financial Protection Bureau actually replaced HUD-1 with the Closing Disclosure.

Originally, the HUD-1 Settlement was only given on the closing day. Hence, buyers did not have sufficient time to review everything in the Closing Disclosure.

Some loans like the reverse mortgage still use the HUD-1 Settlement Statement but for a regular mortgage, you should receive the Closing Disclosure.

Is Closing Disclosure Important?

Of course!

The Closing Disclosure will outline the terms of your mortgage loan which usually lasts from 15 to 30 years. This document will summarize your obligation to your mortgage lender for the entire life of your loan.

This Closing Disclosure is closely tied to your Loan Estimate. In fact, Page 3 of the Closing Disclosure includes a table that shows the costs in the Loan Estimate with that of the Final Fees. By showing the fees side by side, you’ll have an easier time comparing how the costs changed.

What Is In The Closing Disclosure?

Your Closing Disclosure will dictate the terms of your mortgage in the next decades. So, it’s crucial to focus on this document. Here’s a quick summary of what each page contains.

Page 1

What’s on this page?

  • Closing Information – the closing date, settlement agent, property address and sales price
  • Transaction Information – names of the borrower (who is also the buyer), seller, and lender
  • Loan Information – the loan product, loan type, and term
  • Loan Term – loan amount, interest rate, monthly amortization for both the principal and interest, prepayment penalty
  • Projected payments – estimated monthly payments including mortgage insurance and estimated escrow and estimated taxes, insurance and assessments
  • Costs at closing – total closing costs and total cash you need at closing

Focus extra attention on:

  • Your personal details including the spelling of your name
  • Your loan amount – the amount you need to borrow should be the purchase price less any down payment you made. If you rolled in the closing costs, your lender should add those costs to your loan amount. But if you paid for the closing costs separately, your loan amount should be the total purchase price less any down payment.
  • Interest rate – If you paid to lock in your interest rate, your final rate should be the same as the interest rate on the Loan Estimate you received.
  • Can this amount increase after closing? Your Closing Disclosure should say NO if you applied for a fixed-rate mortgage. For first time home buyers, it’s better to stick to a fixed-rate mortgage.
  • Cash to Close – You need to put money on the table on the closing date. Since you have to do either a wire transfer or get a certified check from your bank, you should know how much money to bring. This amount should include your down payment and closing costs you decided to pay outright. If you financed the closing costs as part of your mortgage, you only need enough funds to cover the down payment.
  • Monthly payments breakdown which should include your principal and interest payment, applicable mortgage insurance, and estimated escrow.

Good to Know

  •  If you made a small down payment and rolled in the closing costs as part of your loan, the loan amount may be higher than the property’s purchase.
  • If you put down an earnest money deposit, you should deduct this amount to the down payment or to any closing costs you agreed to pay for.
  • Escrow payments due to your lender are different from the escrow account you opened for your earnest money deposit. At closing, your lender will open an escrow account where you make monthly payments that will cover your annual property taxes and mortgage insurance. The escrow payment may also include your homeowner’s insurance.

Page 2

What’s on this page?

  • Loan costs – fees associated with the loan which is divided into three categories origination charges, services you shopped for (title search, title insurance) and services you did not shop for (tax monitoring fees, credit report fees)
  • Other costs – all other costs to close including homeowner’s insurance, property taxes, transfer and recording fees

Focus extra attention on:

  • Other costs  – this should include fees that you would still be liable for even if you are a cash buyer.
  • All charges to make sure that fees are charged only once and that you are not billed for the seller’s past due accounts. These costs should also match the items on Page 2 of your Loan Estimate.

Page 3

What’s on this page?

  • Cash to Close – computation of the cash you need at closing and a comparison between the Loan Estimate and the Final Fees listed in the Closing Disclosure
  • Summaries of Transaction – list of borrower’s transaction and seller’s transaction

Focus extra attention on:

  • Cash to close which should be equal to the amount listed in Page 1
  • Items in the borrower’s transaction which should not include an expense you have already paid or was charged to the seller

Page 4

What’s on this page?

  • Loan disclosure – this section will include more details about your loan such as the assumption of the loan if you sell the property, late payments, and partial payments.

Focus extra attention on:

  • Late payment details to know if there is a grace period, how long it is and how much the penalty for late payment will be
  • Partial payment policy which details if the lender will accept payments that do not cover the full monthly amortization
  • Escrow account details which should indicate if you have to make escrow payments and what fees are covered

Page 5

What’s on this page?

  • Loan Calculation – this section shows how much you would be paying for the entire loan, finance charges, and amount financed.
  • Other Disclosures – this includes appraisal information, contact details, liabilities after foreclosure, refinancing, and tax deductions.
  • Contact Information – your Closing Disclosure should include the contact details of the lender, mortgage broker, real estate brokers of both the buyer and the seller and the settlement agent. The Closing Disclosure form should have their address, phone number, and e-mail.
  • Confirmation receipt – the last section in the Closing Disclosure is the section where you have to sign. Don’t worry about that right now since you can sign later.

Focus extra attention on:

  • Contact information of all parties involved. You may be surprised how often you’d need to get in touch with some parties after closing.

Is There An Easier Way To Check My Closing Disclosure? 

There is!

Before you start checking, compare the numbers to your Loan Estimate. Although there are differences between the two documents, the terms and numbers should be reasonably close. These changes should be due to the time that passed between the date you applied and your closing date. Your mortgage lender should also send a copy of your Closing Disclosure to your agent.

The Consumer Financial Protection Bureau has a Closing Disclosure Explainer that will walk you through every section of the document. Take the time to visit the website and go through each section. The sample document on the website also contains a Closing Disclosure sample that could make it easier for you to be familiar with each section.

Beware Of Closing Disclosure Rules

When you receive the Closing Disclosure, you have three business days to review the document. Business days refer to all days of the week except public holidays and Sundays. Some websites cite a 72-hour waiting period, but the law doesn’t require the actual hours, just days.

The review period should provide you with enough time to spot mistakes in closing costs and other fees that could affect your mortgage.

So, how do you count the three-day waiting period?

If you hand-deliver or sent the disclosure through a courier who obtained a signed receipt on a Monday, the earliest closing date is on Thursday of the same week. However, if the company’s courier doesn’t obtain a signed receipt, they should send out the disclosure at least a week before the closing date. This means that if the closing date is on a Monday, the lender should have mailed the disclosure on the preceding Monday.

Take note that your lender doesn’t necessarily have to mail the Closing Disclosure. Electronic delivery will suffice as long as it complies with the Uniform Electronic Transaction Act or E-SIGN Act requirements. This means that you should have consented to electronic delivery.

Changing The Closing Disclosure Can Push Back The Closing Day

During the review period, there can be changes in the Closing Disclosure to address spelling corrections or to adjust fees for prorated tax payments and agent commissions. However, there are cases where the lender may have to issue a new Closing Disclosure. And a new Closing Disclosure could trigger the 3-day requirement.

Here are the three things which could reset the 3-day Closing Disclosure rule:

  • Adding a prepayment penalty
  • Change in loan product such as changing from an interest-only mortgage to a fixed-rate home loan or an adjustable-rate loan
  • INCREASE in annual percentage rate (APR) of more than 1/8 percentage point (0.0125%) for a fixed-rate loan and ¼ percentage point (0.25%) for an adjustable-rate mortgage

Among these three, the APR has the highest impact on the cost of your loan. Even if the interest of the loan is just a few points higher, there could be a difference worth thousands of dollars over the life of your loan.

Sometimes, there’s a valid reason for the change in interest rates and the higher rate may apply. But it’s your right as the borrower to question a significant increase in the APR.

Take note that only an increase in APR can trigger a new 3-day rule. If the APR decreases, it wouldn’t require the issuance of a new Closing Disclosure.  

Can I Waive The 3 Day Waiting Period?

Truth in Lending Act – Real Estate Settlement Procedures Act (TILA-RESPA) Integrated Disclosure Rule allows borrowers who met a certain criterion to waive the three-day waiting period. However, lenders are NOT allowed to provide customers with a pre-printed waiver form. This practice is highly discouraged and should only be done if necessary.

Needless to say, you can only request a waiver if:

  • The borrower already received the Closing Disclosure form.
  • There is a bona fide personal financial emergency that needs to be addressed within the three-day waiting period.
  • The borrower can provide a signed statement explaining your financial emergency and requesting the waiver of the three-day waiting period.

After meeting all these requirements, you have to convince your lender to approve your request. Some lenders may disapprove your request since they will be exposed to legal risk if something goes wrong with the mortgage. Personal financial emergencies may include the possibility of losing your home or medical emergencies.

What If There Are Errors In My Closing Disclosure?

If you spot mistakes in your closing disclosure, take note of all those things and let your agent and/or mortgage lender know right away. By law, you have three days to review the disclosure.

During the review period, it’s your right to ask questions if there’s something you don’t understand.  Don’t hesitate to dispute charges that should not be there. Loan officers can correct these errors quickly but if you don’t say anything within the review period, those fees will be added to your loan.

When there’s something fishy about the document, talk to your agent. Addressing serious errors in the Closing Disclosure is a valid reason for delaying the closing date for a few days. 

Most lenders will work with you and your agent to resolve problems with the Closing Disclosure. However, If your lender is not willing to compromise on some errors, you have the option to cancel your mortgage. Canceling the mortgage may cost you money. But it may be the best option in some situations.

Always Review Your Closing Disclosure With Care

Receiving a Closing Disclosure is part of the normal home buying process when you purchase a property by taking out a housing loan. There’s a reason for the three-day review period and you should use this time wisely.

On the closing day, don’t forget to go over the closing disclosure before you sign. Make sure that the new closing disclosure reflects all the requested changes. If you feel like there’s something wrong with the document, discuss it with your agent or lender.  Postponing the closing date on the scheduled closing day may cost you your earnest money deposit or lead to penalties. But if the error in the closing disclosure is significant enough it may be worth the price in the long run.

If there are no issues with the closing disclosure, go ahead and sign.

And, one final thing.

Don’t let this five-page document zap your energy.

Your closing disclosure is just one of the closing documents you have to deal with and you should pay attention to all the papers you sign.

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8 Essential Facts Regarding Real Estate Purchase Agreements
How to Make a Realistic Budget for Buying a House
buyer representation agreement

Buyer Representation Agreement: The 5 Things It Covers

Real estate agents don’t just work for home sellers, they assist buyers too! Hiring an agent makes the process easier for a first time home buyer who doesn’t know what to do first. But if you are planning to hire a buyer’s agent, your agent may ask you to sign a  buyer representation agreement or BRA.

Don’t be scared when your agent asks you to sign one but don’t be hasty either! A buyer’s rep agreement is common but before you pick up that pen, it pays to know what the agreement means.

Buyer Representation Agreement Explained

Also known as a buyer broker agreement, a buyer rep agreement is a contract between the buyer and the agent. This agreement details the role of your real estate agent and what he or she expects from you in return.

Like most contracts, buyer representation agreements can be full of legalese. So, you may want to consult your lawyer. But here’s a breakdown of the most common concerns buyers like you have about BRAs. 

Why Do Buyer Agents Ask Clients To Sign A Buyer Rep Agreement?

It mainly boils down to an agent’s compensation. 

Buyer agents are paid by commission. When they work buyers like you, they spend time and money in locating properties and negotiating transactions on your behalf. Without an agreement, you can chase agents as you please. The agent who worked the hardest may not receive his or her real estate commission

Consider this scenario. 

You have been working with Agent Anna for some time. Suddenly, you meet another agent and decide to ask for his assistance to buy a home introduced by Agent Anna. If this happens, Agent Anna’s efforts will go to waste.

 At first glance, the buyer representation agreement seems to protect the interests of your agent. But you can also reap benefits from signing it.

How Does Signing A Buyer Rep Agreement Benefit The Buyer?

When you sign the buyer representation agreement, your agent would feel more confident about working with you. This means that he or she will put in more effort into helping you. You can receive a higher quality of service when you sign the agreement. The agreement also outlines your agent’s responsibility and your duties as a client. If you ever have any disagreement with your agent, you can refer to the agreement to settle the dispute. 

What Does A Buyer Rep Agreement Cover?

Each buyer rep agreement is unique but they have the same elements. So, when you receive a BRA, pay extra attention to these five areas.

#1: Exclusivity

Most agreements specify if it is exclusive or not. A nonexclusive agreement allows you to hire as many agents as you want. Meanwhile, an exclusive agreement requires you to work with only one agent or broker. In some cases, you can change the agent but not the broker unless you terminate the agreement. 

#2: Term

Are buyer broker agreements enforceable? 

Yes! Buyer rep agreements are valid within the term specified. This leads to another major question – how long is a buyer’s agent contract valid?

Most contracts have a period of six months, but it can be as short as three months or span for more than a year.

Always pay attention to the term of the agreement. The period covered is usually in the first paragraph. Aside from the term, you also have to look out for the holdover clause.

 A holdover clause extends your relationship with your agent after the term expires. The holdover clause will apply to properties introduced to you by your agent. If your BRA includes this clause, the holdover period should also be stated clearly.

For instance, your BRA has a term of 6 months and a holdover period of 60 days. You did not buy a home within those six months and your BRA has expired. Thirty days after your BRA expired you decide to buy one of the properties introduced by your agent. Since the holdover clause is in effect, your agent should still receive a commission even if the BRA had already expired. 

#3: Compensation

Sellers usually pay the agent commission not the buyer. But your BRA might include a commission agreement that stipulates a minimum commission. This commission can be a flat rate or a percentage of the purchase price. 

If there is a minimum commission, you have to pay your agent if the seller doesn’t offer a commission. Moreover, if the commission is lower than the minimum amount in the contract, you have to pay the difference.

Always pay attention to this section to avoid misunderstandings later. Take note that these minimum commissions are negotiable. It’s better to discuss this issue with your agent to know how much you’ll owe under different scenarios.

#4: Property Description

The property description in your buyer representation agreement refers to the type of property and price range you are looking for. This section matters because the description is part of the scope of the agreement. 

For example, your BRA specifies that you agree to hire Agent James to help you find a single-unit family home. Based on this agreement, you can hire another agent to look for another type of property. So, if you’re interested in a 10-unit apartment, you’re free to hire Agent Kelly, for instance. 

Some agreements also specify the location of the property. If the agreement specifies the location of the property as County X, you can hire another agent to help you find a home in County A.

When drafting agreements, it’s safer to be more specific about the property description. 

#5: Disclosures

Every buyer’s rep contract is different, and the wording may also vary by state. However, brokers are required to make certain disclosures relevant to the transaction.

Brokers should disclose if they are dual agents, for instance. Dual agency means that the broker represents both the buyer and the seller in the transaction. If your agent acts for both sides, he or she needs to make full disclosure. It also requires your consent. 

Another case where your agent needs to make a disclosure is when the property comes with a net listing agreement. In a net listing agreement, the seller sets a net price for the property. If the property sells at a higher price, the agent can keep the excess over the net price as commission. 

Net listing agreements are illegal in most states including New York, Georgia, Virginia, and New Jersey. In other states like California, this type of agreement is allowed but there are strict rules.

Do You Need To Sign A Buyer Representation Agreement?

It’s legal to hire an agent without an agreement but it is safer to have everything in writing. 

You are not required to sign a buyer’s agreement. But if you do, it means that you agree to work only with the agent for a specified period. Remember that every buyer representation agreement is different, so always read the fine print.

On the upside, buying a home is not required within the said period.

What Are The Most Common Types Of Buyer Rep Agreements?

All buyer rep agreements outline the type of relationship between the buyer and the agent. It also includes the duties and obligations of both parties. But if your agent asks you to sign a BRA, you would most likely have to sign one of these agreements.

 Nonexclusive, Not For Compensation

If your BRA is nonexclusive and not for compensation, you may hire more than one agent or brokerage.

Under the terms of this agreement, the buyer is not obligated to compensate the agent. However, the buyer can demand single agency. This means that the agent under contract should only represent one party in the transaction, who in this case is the buyer. This open buyer agency agreement can usually be revoked by either party at any time. 

Nonexclusive, Right To Represent

A nonexclusive, right-to-represent agreement allows you to hire more than one agent. However, you have to pay the agent’s commission if you buy a property shown by the agent.

This agreement usually specifies that if the seller pays the agent commission, the buyer doesn’t have to compensate the agent. Since the agreement is non-exclusive, the buyer can purchase a property with another agent as long as the property was not shown by the agent under contract. 

Like the non-exclusive, not-for-compensation contract, you can demand single agency. This way, your agent will only represent one party in the transaction. This type of agreement provides for cases for which you can terminate the agreement. 

Exclusive, Right To Represent

Most brokers will request an exclusive buyer agency agreement. Under an exclusive buyer agency, you can only hire one broker. 

An exclusive buyer broker agreement specifies the commission that should be paid to the broker within the specified term. This commission should be paid even if the buyer finds the property or if another broker introduces the property to the buyer. If another party pays the commission, the buyer doesn’t have to shoulder the agent’s compensation unless the agreement requires a minimum compensation and the commission is lower than the specified amount.

The term of an exclusive right to represent buyer agreement is usually three months to one year. Here’s a sample exclusive right to represent contract.

Should You Sign A Buyer Representation Agreement?

Signing a buyer’s representation agreement comes with obligations and responsibilities. Read the contract carefully and ask your agent if you have any questions. You can also consult a real estate attorney if you have other concerns. Never sign anything without reading the full document.

Some agents may agree to work with a buyer who is not willing to sign the agreement, but they may not give it their full effort. Since there’s no assurance that they’ll receive the commission, you may not receive top service. 

Keep in mind that everything can be negotiated. If you are hesitating because of the term, request for a shorter term. 

Don’t forget to study the grounds to terminate the contract. Check the consequences for early termination and the expiration date. 

If you’re interested in receiving a cashback, it would be great to confirm and negotiate it at this point. Even after reviewing the contract and you’re still unsure, ask for a test run. Discuss this with the agent and ask him or her to show you some properties first. This way, you can get a better feel about the way the agent operates. This can also help you decide if you should sign a BRA with that agent or not.

 Can I Terminate A Buyer Representation Agreement?

Yes, you can terminate a real estate agent contract. Ghosting your agent is never a good idea especially if you signed a buyer’s rep agreement.

Changing real estate agents as a buyer should be a formal process. Even if you never liked your agent, you should always do it right. Here are some things you can do if you are thinking about terminating the agreement.  

 Discuss Things With Your Agent And Broker

Take the time to sit down with your agent and his or her broker. Explain any concerns you have. If you can resolve the issues during this meeting, you may change your mind about ending the contract. 

If you can’t have a reasonable conversation with your agent, talk to the broker. The BRA you signed is actually with the broker, not the agent. Going directly to the boss that your agent reports to might help you resolve the issue. Brokers also have more experience in real estate. So, they may help you address any problems you may have.

In some cases, the broker may assign you another agent. The broker may also agree to terminate the agreement without the approval of your agent. 

Likewise, if your agent leaves the brokerage, your agreement may still be in force. If you like that agent, you have to terminate the old agreement. After ending the agreement, sign a new one with the agent under a new broker.

See What The Contract Has To Say

Your buyer’s rep agreement specifies situations that allow you to end the contract before the expiration. Most contracts require you to submit a termination of buyer agency form or letter. Most agreements may be terminated by either party.  

Even when changing realtors, etiquette should still be observed. Be professional but diligent – get a signed copy of the termination form.

Consult A Legal Representative

 If you’re not making any progress with the agent or the broker, you may have to seek legal help.

However, this should always be a last resort. It’s better to settle the issue without a third party since buyer agreements have a limited term. Most brokers will also agree to release you from the agreement.

Make Buyer Representation Agreements Work For You

Most real estate professionals prefer to have everything in writing and you should too! 

Signing a buyer rep agreement with the right agent can be the right move. But when your agent gives you the agreement, don’t sign right away. Always comb through your BRA with the diligent eyes before signing and do the following:

  • Understand what you’re agreeing to. If needed, ask the agent to give you more time to study the document. Go over the document with your lawyer if you have doubts.
  • Negotiate terms. Getting stuck with a buyer’s representation agreement with unfavorable terms can be frustrating. If you think the term is too long or the description is too broad, raise these concerns with your agent.
  • Ask for a test run. If you have never worked with the agent before, spend some time with him or her. Visit some properties and get to know how the agent during the process. 

Hiring the right agent can make a big difference in your home buying journey. Your agent can provide advice on many things such as the contingencies to include in the real estate purchase agreement.  Agents take care of the negotiation process and so much more.

Never sign a buyer representation agreement with an agent you have issues with. Hiring an agent requires trust. And, you have every right to choose someone you are comfortable with.

If you feel pressured about making it official with your agent, remember this –the right time to sign the buyer representation agreement is when you are confident about working with an agent.

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4 Things That Can Happen After You Send An Offer

 

Earnest Money

Earnest Money Guide for the First Time Home Buyer

After the seller accepts your offer, you may have to make an earnest money deposit before proceeding to the next step.

Earnest money deposits are part of most real estate transactions and it pays to know as much as you can about it.

What Does Earnest Money Mean?

When the seller accepts your offer, you should get in touch with your lawyer in order to prepare the real estate purchase agreement.

Also known as the purchase and sale agreement, this contract expresses the buyer’s commitment to buy the property and it usually requires the buyer to make an earnest money deposit.

Buyers deposit the earnest money into an escrow account as a show of good faith to buy the home. Because of this, earnest money deposit is also referred to as a good faith deposit.

By signing, the seller agrees to take the home off the market for a specified period. The buyer can use this time to get financing, inspect and appraise the property prior to closing.

How Does Earnest Money Differ From Other Fees?

Aside from earnest money, you may encounter other types of deposits and fees when you buy a home. Most home buyers get confused with all the payments they have to make. Here’s a list of the most common payments and deposits you’ll make and how each of them differ from earnest money:  

Due Diligence Fee

When the seller receives your offer, he or she may ask for the due diligence fee. By paying this fee, the buyer may terminate the contract for any reason within the due diligence period. Moreover, the due diligence fee is not refundable unless the seller violates the contract. 

Earnest money, on the other hand, is refundable under certain circumstances. The buyer can only benefit from the due diligence fee upon closing since the seller may deduct the due diligence fee from the closing costs.

Down Payment

Down payment refers to the upfront payments you need to make when you purchase a property. Most lenders require a 20% down payment. Some mortgages like VA loans require zero down payment. There are also programs under FHA loans which require as little as 3.5% down payment.

Unlike earnest money where you need to deposit the funds after the seller accepts your offer, you will only need to make the down payment during closing. 

Option Money

Option money or the option fee refers to a small fee which is usually between $100 to $500 paid directly to the seller’s account.

An option fee allows you to terminate the contract within the option period, which is typically 10 days. During this period, you can terminate the contract for any reason. If you decide to negotiate an additional option period, you may have to pay an additional option fee.

Like the due diligence deposit, option money is non-refundable, but it is usually credited to the buyer during closing. Option fees are more common in Texas compared to other states. On the other hand, earnest money deposits are usually part of real estate transactions in all states.

Escrow

When you provide an earnest money deposit, it will be held in a third party’s escrow account. A legal firm, a real estate brokerage, or a title company should maintain the escrow account. You should NEVER pay earnest money directly to the seller’s account. So when you say your earnest money is in escrow, it means that the deposit is with a third party.

This third party should follow the guidelines in the contract. Earnest money deposit should also remain in escrow until closing or until the period expires, you meet any contingency, or when the seller cancels the contract.

If the deal doesn’t fall through, you can deduct your earnest money from your down payment and closing costs.

Good to Know: While in escrow, your funds can earn interest. If the interest exceeds $5K, you have to file Form W-9 to receive this interest.

How Does Earnest Money Work?

The earnest money deposit is usually delivered with the purchase agreement or the sale contract. Sometimes, the earnest money contract is part of the offer to buy a home. The contract or agreement should how much the deposit is, the period covered and circumstances where you can get the deposit back. Buyers usually pay earnest money by wire transfer, personal check or a certified check.

If you don’t encounter any issues after signing the purchase agreement, the seller may deduct the earnest money from the down payment. 

Here’s a quick illustration to give you a better idea of how it works.

For instance, you need to make a down payment of $50K and your earnest money deposit is $10K. Since you can deduct the funds in escrow from your required down payment, you only need to put down $40K ($50 K less $10K) as a down payment.

In some cases, the seller may deduct the earnest money from closing costs. Loans like Veterans Association loans, for example, require zero down payment. Since you can’t deduct, apply your earnest money for VA loans to closing costs. Take note that the seller usually pays the closing costs, so some buyers may receive a refund.

How Much Good Faith Deposit Do Sellers Require?

The seller dictates the required earnest money deposit. Most sellers require earnest money deposit between 1 to 5% of the purchase price. For a $200K home, the seller may require between $2K to $10K as earnest money.

In areas where properties sell fast, earnest money can be as high as 10% of the purchase price. For hot markets, you may lose the property to another buyer if you can’t make the required deposit. Sellers may require deposits as high as $100K in areas like the West Coast.

There are also sellers who prefer a fixed deposit which is usually between $5K to $10K.

But what if you don’t have earnest money? 

Remember everything is negotiable in real estate. If you can’t afford the earnest money deposit, raise this concern during negotiation. However, sellers usually prioritize buyers who are willing to accept a high earnest money deposit. 

Earnest money makes up a small fraction of the property cost. If you can’t cough up enough funds for this deposit, the seller may doubt your ability to afford the property. 

If you’re the buyer, you can deposit more than the required amount in the escrow account to convince the seller how determined you are. However, don’t forget the risks! After all, you may lose your money under certain circumstances.

Is Earnest Money Required?

No, earnest money deposit is not required. Some sellers are willing to work with buyers even without this deposit. But most sellers require the deposit since it shows your intention to buy the property. After all, sellers have so much to lose when the buyer backs out. 

If the seller takes the property off the market and you suddenly change your mind, the seller would be at a disadvantage. 

Remember that properties sitting too long usually lose value because buyers will think there’s something wrong with it. So, most sellers shy away from buyers who are not willing to put down a deposit to make a stronger offer.

Can Buyers Get An Earnest Money Refund?

Yes, it’s possible to get the earnest money back. However, there are also cases where the seller gets to keep the deposit. Whether you get your deposit back or not depends on what happens and what the contract has to say.

There’s a higher possibility of getting your earnest money back in the following cases:

1. You completed all the necessary paperwork within the deadline specified in the contract. If you miss the date, the seller may keep the deposit.

2. The seller terminates the contract. The seller always refunds the earnest if he or she terminates the deal.

3. A reputable third party maintains the earnest money deposit. The deposit should always be in the custody of a reliable third party’s escrow account. Don’t forget to verify the existence of the account and ask for a receipt. 

4. The contract you signed includes contingencies. Contingencies refer specifies scenarios that could go wrong such as inspections and financing. You can always use these contingencies to negotiate with the seller and get out of the contract without losing your earnest money.

Here’s a list of the most common contingencies:

  • Appraisal contingency. If the appraised value of the property is below the offer price, you may terminate the contract without losing the earnest money deposit. Likewise, you may negotiate a lower price. The appraisal is usually done within 30 days after executing the sale agreement.
  • Home inspection contingency. If the inspection report reveals that the property has serious flaws, you can walk away without losing the deposit. Inspections usually last for 10 days. The buyer may also request the seller to make the necessary repairs.
  • Financing contingency. If you don’t get approved for a mortgage within the deadline, you may opt out using this contingency. This way, you’ll get your deposit back. However, you can always talk to the seller and sign a new contract to extend the deadlines. 
  • Title search contingency. If there are any liens on the title, this contingency will give you a way out of the contract.
  • Home sale contingency. Expect sellers to make a fuss with this contingency. If they have to wait for you to sell your property before making the purchase, it could put the transaction on hold. This contingency usually allows buyers 30 to 60 days to sell the property.

How Contingencies Protect Buyers

Contingencies are highly favorable to the buyer. In fact, some sellers sweeten the pot by offering a better price if you remove contingencies.

To the buyer, contingencies are like “Get Out Free” cards and you don’t want to lose this advantage. So, before you agree to exclude any contingency, talk to your agent, your real estate attorney or both. These professionals can provide crucial insights and recommend ways to address your concerns.

If the seller is not willing to negotiate, it may be better to forgo the deal and look for another property. Signing a contract without all the necessary contingencies can make you lose your earnest money. In worst-case scenarios, you may end up making a major financial blunder.

Can You Lose Your Earnest Money?

Yes! You can say goodbye to your earnest money if you don’t have a valid reason to back out of the contract.

Canceling the contract because of first time home buyer jitters is never acceptable. If you change your mind, you’ll be donating your earnest money to the seller. So, always think things through before signing a contract.

Another way to lose your earnest money is if you miss the deadline in the contract. Take note that most contracts have a deadline of 60 to 90 months.

If your time is almost up and you’re not sure if you’ll get everything done in time, negotiate a new deadline. Sticking to the original deadline can be a huge gamble. Aside from losing the property, you can also lose your earnest money.

Pro Tip:  Exercise your right to cancel the purchase the possibility of closing the deal is less than 100%.

If you back out of the contract for any reason, check what the Purchase and Sale Agreement or the contract has to say. Notify the seller of your intentions based on the requirements of the contract.

Will You Get Earnest Money Back If Your Loan Is Not Approved?

Most buyers have to get financing when they buy a new home. If you made an earnest money deposit but your loan was declined, it’s possible to get a refund.

You should also consult the Purchase and Sale agreement in this case. Most agreements include these deadlines:

  • Deadline for submitting your mortgage loan application. This deadline is usually within 5 days of executing the agreement.
  • Deadline for getting a loan to finance the purchase of your new home. This date is included in the loan contingency deadline and is usually within seven days from the date of settlement.

Your contract should include the deadlines above if it includes a financing contingency. If you missed the deadline, talk to the seller and explain what happened. Some sellers may agree to a full or partial earnest money refund depending on the circumstances. However, it’s always better to negotiate deadlines before they pass.

How Can You Request For The Release Of Your Good Faith Deposit?

The contract you signed should cover the process of releasing the earnest money deposit. Some contracts also include a cancellation fee if the buyer backs out.

On the other hand, if the seller changes his or her mind, you should receive an earnest money refund. Like buyers, sellers should have a valid reason for terminating the contract. If the seller backs out, you may seek damages from breach of contract. If this happens, it would be best to consult your real estate attorney.

Whatever the case may be, the company maintaining the escrow account will require written consent from both parties before releasing the funds. If there are any disagreements, the funds will continue to be in escrow until both sides come to terms or when there is a court order. 

Look Out for Earnest Money Deposit Traps

Earnest money deposits provide security to both buyers and sellers. This deposit is refundable, but everything is subject to the terms and conditions specified in the Purchase and Sale Agreement. 

Before signing the purchase agreement, negotiate the terms. If needed, add contingencies. While doing your own research is always ideal, don’t shoulder all the burden. Your real estate attorney and your real estate agent can help you understand what you’re signing. These professionals can also suggest contingencies that are beneficial to you.

You may care more about your hard-earned earnest money deposit than anyone else, but the right advice can help you bag an even better deal.

mortgage pre-qualification

Why You Should Get A Mortgage Pre-Qualification Letter

Going to an open house and shopping for new properties is the fun part of home shopping. But if you are serious about buying a house, you should talk to a lender first. Even before looking for a new home, you should get a pre-qualification for a mortgage.

If pre-qualification sounds foreign to you, here’s a primer on what it is all about.

What is a pre-qualification letter for a mortgage?

When buying a home, you should check your finances. While you can make a budget on your own, it’s better to know what mortgage lenders think about your financial status. This is precisely why pre-qualification can help you.

Simply put, pre-qualification is a basic review of your financial status based on what you declare. Think of this step as consulting a lender.

Through pre-qualification, you’ll know if you can apply for a mortgage. Your lender will also give you an estimate of how much you can borrow.

If you’re buying a house for the first time, it’s better to get a pre-qualification letter.

You Don’t Need to Prepare Anything for Pre-Qualification for a Mortgage

Pre-qualification should be the first step before you start shopping for properties.

To get a pre-qualification for a mortgage, you have to consult a bank or a lender. Are you curious about what you need to present to get a mortgage pre-qualification?

NOTHING!

Most mortgage lenders and brokers have a pre-qualification form that you need to fill out. This form will ask for details such as your income, assets, debt, and credit score.

Some lenders allow you to apply for pre-qualification letter over the phone. You can also get a pre-qualification online. Bankrate has a useful mortgage pre-qualification online calculator you can check out.

Lenders will not ask for any document at this stage. They would simply use what you disclosed in your form or interview. It can take a day or two before you receive your pre-qualification letter.

While getting a pre-qualification it’s also useful to go lender shopping. According to the Bureau of Consumer Financial Protection, around 30% of borrowers don’t do mortgage shopping. Sticking to just one lender can cost you $300 a year. During the life of your loan, this decision can cost you thousands of dollars.

Pre-qualification Will NOT Affect Your Credit Score 

If you’re thinking twice about getting a pre-qualification because of your credit score, don’t worry. Lenders will not do a hard pull. So, you should not see inquiries which can pull your credit score down if you get a pre-qualification.

Pre-qualification for a mortgage is an informal assessment of your finances. Lenders will use your debt-to-income ratio and other information to make an estimate. Since this is a pre-qual, the lender will not verify what you disclosed.

If you’re not checking your credit score on a regular basis, you should be doing it now. It’s better to know what your credit score is before consulting a lender. You can get a free copy of your credit report from Equifax, Experian, and TransUnion once every 12 months.

If you are applying for pre-approval, it’s another story. Inquiries related to a pre-approval may reflect on your credit score.

Here’s a useful tip if you are mortgage shopping – do everything within a 14-day window.  Even if there are multiple inquiries within the two-week period, it will be counted as one. Take note that some lenders use the new 45-day window. But it’s better to stick to the two-week period while mortgage shopping.

This technique applies not just for a mortgage but for student loans and auto loans as well.

Searching for new credit should affect no more than 10% of your FICO score. In most cases, these inquiries will have a small effect on your credit score. You should only worry about inquiries if you have been shopping for a new mortgage for months.

A Pre-Qualification Letter is Different From a Pre-Approval

Mortgage loan pre-qualification is an initial review of your finances. Getting a pre-qualification for a mortgage will not guarantee you’ll get a loan. But it can be valuable for other reasons.

After getting a pre-qualification you may or may not seek a pre-approval.  Lenders will only issue a pre-approval after vetting the income you declared.

For pre-approval, you have to submit bank statements, tax returns, and employment records. Lenders will also pull your credit records.

Mortgage Pre-Approval vs Pre-Qualification

Unlike a pre-qual, pre-approval carries actual value. A pre-approval is a conditional commitment from a lender.

As noted above, the mortgage pre-qualification process is simpler. Lenders assess your financial capacity for the details you self-declare. But in pre-approval, your lender needs to do a credit check. They will also verify your financial and employment documents. Your pre-approval shows how much your lender believes you can afford.

How long does pre-qualification for a mortgage last?

Pre-qualification is simply a letter stating you are qualified for a loan and how much. Since the pre-qualification is an estimate, there is usually no period of validity.

Mortgage pre-approval, on the other hand, has a validity of 60 to 90 days.

You are not obliged to use the lender where you got a pre-qualification or pre-approval. This means that you are still free to shop for other lenders. 

Even If You Have Been Pre-qualified Your Lender May Not Give You A Pre-Approval

In a pre-qualification, neither you nor the lender commits to anything. It is simply a way to see if you can buy a home and what your price range would be. The amount you’ll get is an estimate.

This means that pre-qualification doesn’t always lead to pre-approval. If there are issues with your documents, your lender may reject your application. If there are serious problems with your finances, a lender may refuse to issue a pre-approval.

Moreover, the amount in the pre-qualification may increase or decrease when you get your pre-approval. How much you can borrow will depend on your verified income and assets.

Sometimes, A Pre-Qualification Letter Is Better Than Nothing 

Ninety percent of serious house buyers will not have issues with pre-approval. While waiting for this document, a pre-qualification letter could help you get started. Even if most brokers require a pre-approval to make sure you can afford a property. But some agents would be willing to show you around even if you only have a pre-qual.

A pre-qualification could give you leverage especially if there are other potential buyers. If you have a pre-qualification and other buyers don’t have anything to show, you will have a stronger offer.  At the same time, you will also be making an offer within your paying capacity.

At this point, you may be curious about how a pre-qualification letter looks like.

Pre-Qualification Letter Sample

ABC Bank
Pre-qualification Letter

Date: 

Borrower Name:

ABC Bank advises all interested parties that the above-named individual is pre-qualified for a mortgage with the following terms:

  • Loan Type: (fixed rate late or variable loan)
  • Loan Amount: (how much money you can borrow from the lender based on your financial status)
  • Down payment:
  • Loan Term:
  • Interest Rate:

This assessment is based on unverified information, which although deemed to be reliable, may not be guaranteed to be accurate. This letter is not a guarantee of loan approval or a commitment to offer a loan to the borrower under the terms specified above. ABC Bank may issue a loan commitment on the loan after the receipt of the mortgage application and the verification of the relevant supporting documents.

Pre-qualification letter formats may vary from one lender to another. However, the lender would clearly indicate that the information used for the pre-qualification is not verified.

First Time Home Buyers Should Consider Getting Pre-Qualification For A Mortgage 

Unless you plan to buy a house in cash, you have to apply for a loan. So, it’s also useful to shop around for lenders and request a pre-qual.

If you’re serious about owning a home, get a pre-qualification for a mortgage. This is also helpful if it’s your first time to apply for a mortgage.

By getting a pre-qual, you will have a better idea about how much you can afford. It also gives you a chance to know if you are eligible for a loan.

A pre-qualification can also help you make a budget. If you already have one, you can compare your number with that of your lender’s.

While a pre-qualification for a mortgage has merits, you should still apply for pre-approval. Sellers and brokers prefer buyers with pre-approval because it shows your buying power. With a pre-approval, you can make a stronger offer. So, if you find a property you like, sellers would take your offer more seriously.

With all these benefits in mind, getting a pre-qualification could benefit you. Plus, the pre-qualification letter won’t cost you anything. You can even get one online!

Related Articles:
How to Make a Realistic Budget for Buying a House
First Time Home Buyer Taxes: 5 Reasons You Need an Expert
23 Real Estate Websites You Should Never Miss Out
Buyer Representation Agreements: Here’s What Happens When You Sign
real estate attorney

5 Interview Questions To Hire A Real Estate Attorney You Can Trust

Hiring a real estate attorney may not be a must in some states but talking to an attorney saves you from unnecessary stress and losses.

At some point, it would be easier to talk to a lawyer before purchasing a home to understand the whole process. You may be surprised by all the unfamiliar legalese in buying a home. Some states actually require you to hire one, but it’s still useful to hire a lawyer even if it is optional.

Before diving into the process of hiring your real estate attorney, here’s a background on what a real estate lawyer do for first time home buyers like you.

What is a real estate attorney?

A real estate attorney is a lawyer whose specialty lies with the law governing the transfer of properties. Here’s a simpler real estate lawyer definition – an attorney who practices real estate law.

Your lawyer should make the real estate buying process less stressful for any home buyer. An experienced professional will help you avoid legal issues that may delay your closing or lead to any loss on your part.

What does a real estate attorney do?

A real estate attorney can assist you in buying a property, selling a property and in refinancing. In some cases, your real estate attorney will be present at closing.

What does a real estate lawyer do at closing?

Your lawyer’s role depends on whether you are the buyer or the seller.

What does a real estate attorney do for a buyer?

After you sign the Offer to Purchase, you should hire a real estate attorney to help you understand the contract. Here are some of the things that a real estate attorney will do for a buyer:

◙ Title search. Your lawyer makes sure that there are no liens, easements, covenants or any issue which may affect your right to use the property as you wish.

◙ Get title insurance. A real estate attorney will arrange the insurance to protect you from losses because of defects in the title.

◙ Register the property in your name. Part of your lawyer’s responsibilities is to ensure that the property has been registered under your name and that you have no liabilities other than your mortgage.

◙ Facilitate financial transactions on closing day. Your lawyer should also clarify the terms of your mortgage with your bank and make changes as needed.

◙ Draw up and register all the required documents including the Statement of Adjustments.

◙ Accompany you on closing. Your attorney will be present during the closing and they have to go over the documents you need to sign.

What does a real estate attorney do for a seller?

Here are some of the things that a real estate attorney will do for a seller:

◙ Do a title search. Your lawyer needs to check for defects and to correct them.

◙ Prepare sale and purchase agreements. Your attorney may also negotiate the terms with your buyer or his or her legal representative.

◙ Draft the deed of sale, Statement of Adjustments and other legal documents. If you are out of the country or away, your attorney will also prepare a power of attorney for your representative.

◙ Arrange for security deposit transfers and insurance certificates, if needed.

◙ Be present on closing. You will need your real estate lawyer for closing because your legal representative will review all the documents at closing before you sign them. Your lawyer will also deal with all the financial transactions.

◙ Give you the check for your home’s sale. This amount would be what’s left after deducting mortgage costs and fees paid to your real estate agent and lawyer.

Aside from helping buyers and sellers, a real estate attorney can also assist on refinancing. This transaction will also require a title search to protect you and the lender. Your lawyer will also register the mortgage for your new loan and draft the Trust Ledger Statement.

Real estate attorney vs title company

A title company provides title insurance and escrow services when you purchase or sell a property. Many title companies are owned by lawyers or part of a law firm. While the company may have a legal retainer, most of its staff are paralegals and real estate experts who do not have law degrees.

A title company may be enough in a simple transaction, it cannot provide legal advice or make changes in the sale contract if there is an issue.

If there are serious problems with the contract, a title company may refer you to a lawyer to resolve the issue.

Realtor vs  Real Estate Attorney

Whether you are looking to buy or sell a home, realtors can help you find your dream home or assist you in listing a property for sale. They act as a negotiator between you and the potential buyer or seller.

A real estate attorney looks into the legal aspects of the transaction such as title issues and zoning rules. When necessary, a real estate attorney will also act as a negotiator.

Realtors may represent both the buyer and seller. Attorneys, on the other hand, can only represent the buyer or the seller.

As to payment, your realtor gets paid only when you close the sale and they usually receive 5% of the sales price. Meanwhile, your lawyer gets paid whether you complete the deal or not.

Why do I need a real estate attorney when I can just hire a broker?

Some states require the presence of an attorney during closing. Even in a simple residential sale, you may still need a lawyer to go over the documents to make sure everything is in order. The ideal scenario would involve having both a realtor and a lawyer.

There are also cases when it’s enough to have a real estate attorney. For instance, if you are selling your home and you already have a buyer, hiring an attorney may be more cost-effective as you won’t have to pay the commission to the real estate agent.

Can my real estate attorney be my realtor?

While it may be legal for a real estate to be a broker at the same time, it may not be necessarily ethical. If your broker happens to be an attorney, he or she cannot be your legal representative. Likewise, your attorney cannot be your broker.

Do I need a real estate attorney?

Hiring a lawyer is part of the real estate transaction in the following states:

  • ◙ Alabama
  • ◙ Connecticut
  • ◙ Delaware
  • ◙ District of Columbia
  • ◙ Florida
  • ◙ Georgia
  • ◙ Kansas
  • ◙ Kentucky
  • ◙ Maine
  • ◙ Maryland
  • ◙ Massachusetts
  • ◙ Mississippi
  • ◙ New Hampshire
  • ◙ New Jersey
  • ◙ New York
  • ◙ North Dakota
  • ◙ Pennsylvania
  • ◙ Rhode Island
  • ◙ South Carolina
  • ◙ Vermont
  • ◙ Virginia
  • ◙ West Virginia

The law may also vary within these states. Georgia, New York, North Carolina, and South Carolina, for instance, requires the involvement of a lawyer in all stages. In some states, a lawyer may only be necessary during closing.

Other states like in Nevada or California, title companies or brokers can close the deal although it may still be useful to hire a lawyer especially if it’s a commercial, bank-owned or problematic property.

How much does a real estate attorney cost?

Real estate attorney fees depend on how complicated the transaction is and your lawyer’s expertise. Some attorneys charge by the hour while others prefer a flat rate.

Often there is a base fee depending on the type of home you’ll buy. Prices can vary if you’re buying a condo or a detached home. Aside from that, you have to pay the registration fees and disbursements for expenses like searches, photocopying, carrier fees and faxing.

Real estate lawyer fees usually charge hourly rates between $150 to $450 per hour or a flat rate. To secure the services of an attorney, you may also have to pay the retainer upfront.

The total real estate attorney cost is usually around $1.5K. The cost of a real estate attorney may be higher or lower depending on where you live. For cities like New York, for example, real estate lawyer cost can range from $2k to $4K.

Buyers usually have to pay higher fees compared to sellers since lawyers have to perform more services for them.

Since these legal professionals get paid regardless of the outcome, you may be curious about another thing – how much does a real estate lawyer make?

The average real estate lawyer salary ranges from $118K to $160K per year depending on your expertise, experience, and state.

Hiring a Pro Bono real estate attorney

If you can’t afford a real estate attorney, you may also consider pro bono services. Some law firms and organizations provide free real estate attorney services and legal assistance. A pro bono real estate lawyer can help you throughout the process without charging you anything. Some law firms and organizations provide this service.

Here are some places where you can search for a pro bono real estate attorney.

◙ Justia
◙ Rocket Lawyer

Some lawyers may also offer free consultation and advice. However, you may have to pay their retainer fee if you engage their services in drafting contracts and other legal documents.

How to find a real estate lawyer near me

The best real estate attorney usually comes from a referral from a trusted source. You want to be working with a local real estate attorney whom a friend or family member has personally worked with.

If none of your close friends had dealings with a local real estate lawyer, you can just look up “real estate attorney near me” or some random key phrase. But if you go that route, choose the lawyer who is known to be an expert in the field.

While mulling over how to find a real estate lawyer, don’t just consider one candidate, it’s better to shop around.

What should you ask a potential real estate attorney?

Here are some real estate lawyer questions to ask potential candidates for your legal representative.

1. How many years have you practiced real estate law? In which state?

If you are looking for a real estate attorney, you want someone who has enough experience to guide you through the process. A lawyer’s experience becomes even more important if the transaction is not a simple real estate purchase.

You want to know if your potential candidate has been in the field for a year or two or is someone who has been dealing with real estate transactions for decades.

Aside from that, it would also be useful to know if your candidate practiced real estate law. Although the real estate law is generally the same across the country there are state-specific laws and legal considerations. Hence, the ideal candidate is someone who practiced in your state.

While at it, it’s also useful to hire someone who:

◙ Graduated from an accredited law school
◙ Has verifiable credentials
◙ Has not been disbarred

It would also be useful to check on the process of how to become a real estate lawyer. Someone in this field needs to earn an undergraduate degree and graduate from law school.

There is no real estate lawyer degree or a designated real estate lawyer school. So, those who enter the field usually take electives to further their knowledge in real estate law while in school. Some lawyers also do internships to have practical experience.

The journey doesn’t end after obtaining a juris doctorate degree from an American Bar Associated accredited school and passing the bar exam to get an attorney’s license. Most states require continuing education annually or every three years to practice in real estate law.

Pro Tip: Check your real estate lawyer’s credentials through the American Bar Association portal.

Real estate lawyers also seek higher education and train under seniors in the real estate field to gain experience in contract negotiations and real estate transactions. Learning the process of how to become a real estate attorney in your state may also help you assess the qualifications of potential real estate lawyers.

2. Have you handled cases similar to mine?

Each real estate transaction is unique. So, you need to find a real estate attorney who has dealt with similar cases. These lawyers would know possible issues that may arise and be on the lookout for the most important details.

For instance, when you are the middle man in a double closing, you have to buy the property from the owner and sell it to the final buyer. The simultaneous purchase and sale of the property make this transaction unique, and it may be better to have a lawyer to guide you. Cases like this require a lawyer who knows the real estate law in the state.

During the interview, it would be useful to ask how this question – how do you plan to handle my case?

A candidate who provides a brief plan addressing the main issues would most likely be better in handling the case compared to someone who assures you of success without sharing his or her plan.

What kind of procedures should you expect, what kind of outcome does the lawyer foresee, and how long will the process take. From the candidate’s answers, you can assess if you are comfortable with working with him or her.

3. How much do you charge? Can you provide a cost estimate?

When you’re looking to hire someone, you want to know how much the service will cost. Ask potential candidates for a cost estimate based on the real estate transaction you’ll need assistance for.

If someone asks for a flat rate, don’t forget to ask what is included in the package. Find out if there additional fees that you may incur during the engagement?

What if you find a lawyer you are comfortable with, but the price is over your budget?

In this case, try to negotiate for a more affordable rate. While price will always be a big factor don’t settle for a bottom-of-the-barrel lawyer who may not provide all the services you need. Paying a little more to avoid headaches later could cost you less in the long run.

4. Can you provide references?

Aside from talking to your potential lawyer to gauge their professionalism and negotiation skills, it may be useful to get in touch with other clients they’ve worked with. A real estate lawyer who can provide references such as former clients or other professionals in real estate would be preferable.

5. Will you be personally handling my case?

If your lawyer is part of a larger firm, it would also be useful to know if the person you are talking to will personally handle your case. Sometimes, junior attorneys and paralegals will do the job. This will also let you know who has access to the information involving your transaction.

You should also ask about the best way to get in touch with your attorney. If he or she is not around, who should you call or ask if you have concerns?

Communication is crucial in hiring any professional, more so when you engage the service of a real estate lawyer.

What kind of real estate lawyer do you need?

If you are a first-time home buyer looking for an attorney, you would need a residential real estate lawyer. Attorneys in small firms or those who own their practice usually focus on this field. Some of these lawyers may also be a for sale by owner real estate attorney who could help you negotiate the purchase or sale of a property.

For people interested in business, it may be better to consult a commercial real estate lawyer. These legal representatives are not just familiar with real estate laws but also of business laws and other relevant laws involving commercial properties. A commercial real estate attorney has experience beyond the expertise of a residential real estate attorney.

A real estate attorney for investors can provide more guidance issues related to investing in real estate property such as taxes, prohibitions, and drafting contracts in your favor. An investor-friendly real estate attorney will know what things to look out for, to avoid losses and legal issues.

A Reliable Real Estate Attorney May Save You a Fortune

From the moment you sign the offer to the day you receive your house keys, you should stay vigilant. During this period having a lawyer can help you with any question you may have about the home closing process. They will take care of all the legal documents you need and ensure that you meet all the conditions to receive the mortgage funds you’ll need for closing.

Your real estate lawyer will also look into issues about the on and off title. Since your real estate attorney will make sure you own the property legally and all mortgages and liens have been discharged, you’ll need a professional you can trust and communicate with.

Referrals are usually the best way to find a real estate lawyer. But you can also do your own search and interview candidates to find someone you are comfortable working with.

Related Articles:
How to Make a Realistic Budget for Buying a House
First Time Home Buyer Taxes: 5 Reasons You Need an Expert
23 Real Estate Websites You Should Never Miss Out
how to make a budget

How to Make a Realistic Budget for Buying a House

Before you start looking for your first home, you should sit down with your family members and discuss the most important thing – the budget for buying a house.   

Yes! You need to know how much you can afford to pay for a new house first!

Bring out your trusty pen and house hunting notebook, create a new spreadsheet, use an app or any method you are comfortable with and start the budgeting process. 

To help you get started, here’s a simple six-step guide.

Step #1. Compute your household income

How much can you spend on a new house?

If you’re not sure, it’s time to flex your brain muscles.

Get started by listing all your income sources.

If you are single and your work two jobs where you receive a monthly income of $2K for Job A and $3.5K for Job B, your total monthly income is $5.5K ($2K plus $3.5K). You should also include the income of your spouse in computing the gross monthly income if you are married.

Step #2. Make a list of all your household expenses

This time make a list of your monthly expenses. Include your rent, utilities, food, transportation, savings, clothing, transportation and personal, medical, and recreation expenses in the list.

Don’t forget expenses related to loans such as auto loans, credit card debt, and student loans you are paying for.

Then, add all your monthly expenses.

Step #3. Calculate your available cash

After going through the long process of listing all your expenses, it’s time to check your bank balances. You can’t just look at your gross income when you’re planning to buy a home. Assess your cash availability too because you have to pay the down payment and closing costs.

You may have heard that you have to pay the 20% down payment when buying a home but that’s not necessarily true. It’s possible to buy a house with a lower down payment like most Americans. Some even put down as low as 3% as a down payment.  

After checking all your bank balances, get the total of your available cash. Deduct your emergency fund and other funds which have already been allocated for a specific purpose. What’s left should be your free cash which could be used to pay for the down payment and closing costs. Your closing cost can be from 3 to 6% of the property’s price.

If you don’t have much cash that you can put down as down payment, add “shopping for first time home buyer or home buyer grants” on your to-do list. There are several programs for home buyers administered by the local housing department which may help you pay for the down payment and closing costs. 

You may be eligible for these grants especially if it’s your first time to buy a home and you come from a low-income household. However, don’t include these grants on your budget for buying a house! It’s always better to be more conservative when you are working on your budget. 

Step #4. Calculate the cost of owning your first home

The cost of owning your new home including any payments for insurance and property taxes should not exceed 25% of your gross income. Gross income refers to the income you see in your paycheck before any deduction.

This means that in the example above, the maximum amount you can spend on your mortgage payments is only $1,375 (25% of $5.5K).

Pro Tip: Trulia has a useful tool to help you calculate how much you can afford based on your income.

Mortgage Ratios

The 25% criteria is actually a conservative approach to budgeting. Most mortgage lenders will compute how much you can afford to pay for your mortgage based on your gross income. There are generally three types of ratios that they may look into.

The Golden Ratio

Most lenders will compute the maximum monthly mortgage payments you can afford based on 28% of your gross income.

If you have a combined income of $5.5K, your mortgage payments should not be more than $1,540 (28% of $5.5K). This ratio refers only to your mortgage payments

Housing Payment Ratio

Aside from your mortgage payment, you should also consider repair and maintenance fees, homeownership association fees, as well as repairs and maintenance.

After factoring in additional fees such as association fees, insurance, and property taxes, your total monthly payments for your new home should not be more than 32% of your gross income. If your gross income is $5.5K, your monthly payment should not be more than $1,769 (32% of $5.5K) per month.  

Debt Ratio

Let’s take those ratios one step further and look at all your other debt-related expenses. Do you have auto loans, student loans or credit card debt?

Check the list you made in Step #2 and add all your debt-related expenses. This time include your housing cost in the total. The sum of all those loans should not exceed 36% of your gross income. If you earn $5.5K per month, all those loan payments should not be more than $1,980 (36% of $5.5K).

You may also divide your total expenses by your gross income to get the percentage. For instance, your total debt including your housing payment is $2.5K and you are earning $5.5K per month, your total debt makes up 45% ($2.5K divided by $5.5K) of your income. You can do the same for other ratios.

If you don’t meet the debt ratio, most mortgage companies will reduce your loanable amount or the maximum amount you can borrow. If it’s clear that you can’t afford more debt based on your current situation, the financing company may reject your application.  

Take note that 36% is the rule of thumb but lenders process applications on a case by case basis. Some financing facilities may impose a maximum debt ratio of 40% or more.

Is your budget for buying a house too high or too low for your first home?

Now that you have your figures down, here’s some interesting facts which may help you have a better picture of how the rest of the country is doing.

There’s a standard to determine if your home is affordable or not. If you are paying more than 30% for your housing, you are most likely overspending.

The average American spends 37% of their take-home pay on housing. Some people, especially those in New York and in the Northeast spend even more than that!

The average household spent $20K on housing from July 2017 to June 2018. This boils down to about $1.7K per month. Take note that your average housing cost varies depending on where you live.

Step #5. Think about possible additional expenses 

Depending on the location of your new home, you may have to increase your transportation and utility budget.

Will your new home address be cooler or hotter than your old residence? Is it closer or further from your workplace? These costs may seem insignificant, but they can add up and you have to include these in your budget for buying a house.

Don’t just think about your mortgage, consider other costs you have to shoulder as the homeowner. These expenses could include:

Home maintenance

Every year, you should set aside 1% based on your home value for repairs. This ratio could actually range from 1 to 4% but you can take the conservative approach for the first few years. This means that if your home’s value is $100K, you should budget at least $1K for maintenance for each year.

Home insurance

The national average for home insurance in 2018 is $1,288 for a $200K home with a $100K liability and $1K deductible. Based on Insurance.com estimates, Florida has the most expensive home insurance at $3.5K – almost 200% of the national average. New York home insurance is cheaper at $935, New Jersey averages are at $711 and Hawaii residents pay the lowest insurance at $337. Depending on your home’s location, you may also have to pay for a separate earthquake or flood zone insurance.

Heating and cooling costs

Almost 85% of homes in the US have an air conditioning system which could cost you around $375 in electricity bills every year. Heating systems cost even more at around $679 annually. Heating costs may range from $1K to $2K depending on your heating system. If any of your HVAC systems break down, you may have to spend $300 to $500 for repairs.

Roof replacement

How old is your roof? The lifespan of a roof ranges from 15 to 50 years with asphalt shingles on one end and clay tiles on the other. Laminate shingles last from 24 to 30 years. Wood and metal shingles can last for about 30 to 40 years. 

Homeowners association fees

Also known as HOA, this expense may cost from $200 to $4K depending on where you live. If your building has several amenities, you would most likely pay higher HOA fees.

Foundation repair

On average, you have to pay around $4.5K for foundation repair issues. Cracks may cost you around $620 for each 10-foot crack, leaks around $2.5K to $5K, and bowed basement walls are the most expensive at $5K to $15K based on Home Guide estimates.

Property Taxes

Now that you own your home, you will be liable to pay for the annual tax to your local government. You will most likely receive a tax bill based on the assessed value of your home. You will have a better idea of how much this tax will cost while purchasing your new home. Yes, you can take a tax deduction for the property taxes you paid but only up to $10K.

Other costs to include in your budget for buying a house

Aside from these things, you would most likely spend for pest control, lawn care services, housekeeping, appliance repairs, and household furnishings. You may not have to pay all of these things all in one year but it’s better to set aside a part of your budget for buying a house for these things.

If you find a house you love that will require extensive repairs, consider those costs as part of your home’s value. If you only consider the cost of your home in your budget, you may overspend.

Another factor to consider is your personal situation. Things will not remain the same in the coming years. While you can’t tell what could happen to the future, you can predict events which are likely to happen in the coming years.

For instance, if you get married, decide to have a baby or support a family member, you may have more expenses. Include all these possible expenses in your list and allocate a budget for those items. This will help you see what the situation may be like in a few years.

Step #6. Make adjustments on your budget for buying a house

After brainstorming about all of your possible expenses, it’s time to go back to your list of expenses and include all those things. Compute the ratios again and see if your home is still affordable based on the numbers you came up with.

While at it, you may want to reduce some of your expenses to make room for others. Think about the best way to allocate your income. If you can’t finish your budget in one sitting, don’t worry. Making a budget for buying a house can be a tiring process but you have to set a deadline.

If there are some changes in your income such as a promotion or a transfer which may affect your budget, you should also review the figures and make the necessary changes.

Beware of the Payment Shock

If there’s a large gap between your mortgage payment and your monthly rent, you may have “payment shock.” While it’s possible to make a budget for your mortgage payment, you can practice ahead of time so you will have more room to adjust.

At least six months before you start making mortgage payments, pay the rent as usual. Then, compute the difference between your current rent and your mortgage payment. Transfer that amount to a separate savings account. It would be better if you could include any applicable taxes and insurance payments.

During the six-month period, you can make adjustments to your lifestyle and budget to meet your mortgage payments. The savings you accumulated may also serve as a buffer.

How to Budget for Buying a House

If you have plans to buy a home, you should always start with a budget and follow these six steps:

1. Calculate your gross income.
2. List and add up all your monthly expenses.
3. Compute how much available cash you have.
4. Find out how much you can afford to pay for your mortgage every month.
5. Forecast additional expenses.
6. Make changes on your budget based on your forecasted expenses.

You should also take the time to review your budget when necessary. 

Once you’re one with the budge for buying a house, you are one step closer to owning your first home. 

Related Articles:

Pre-Qualification for a Mortgage: Do You Need It?
Mortgage Lenders and Mortgage Brokers: How They Help You Finance Your Home
10 Tips on How to Interview a Realtor when Buying a Home
Buying A House Checklist: What Should I Be Looking For In A House?
How to Use the Home Loan Calculator Like an Expert
property tax deductions

The Top 5 Reasons To Understand Your Property Tax Deductions

Whether you are buying your first, second, or third home, you need to think about the tax consequences. First time home buyer taxes may catch you off guard. So, it’s better to have a professional guide you through the process and explain to you all the property tax deductions.

Will you be eligible for a mortgage interest deduction? By how much? What about property taxes in the first year? What about the succeeding years? 

These are just some questions you may have at the back of your mind. But when you’re buying a new home, you may get too hooked on the process and forget about finding the replies. 

Here are reasons you may want to seek expert advice on first time home buyer taxes.

Reason #1: You want to understand firs time home buyer taxes and how owning real estate impacts your property tax deductions

Real estate tax refers to the tax imposed by the local government to the owner of the property. Real estate taxes are usually a certain percentage based on the assessed value of the property. The local government determines the assessed value based on market prices. 

Depending on your state, you may also be eligible for exemptions. In New York City, for instance, there is a STAR exemption which may decrease your property taxes. Aside from exemptions, you may also be eligible for abatements.

When buying a property, real estate taxes are usually pro-rated. Most sale contracts stipulate that the seller is liable for real estate taxes up to the day before the closing date. The buyer has to pay the real estate from the closing date onwards. This split is the most equitable and convenient way to split property taxes for the buyer and seller. Plus, the IRS allows property tax deductions based on this method.

If you itemize on your tax return, you may deduct the real estate taxes you paid on the property you bought from the date of closing to the end of the year. These dates should be included in the settlement statement given to you on the closing date. This rule on splitting real estate taxes the buyer and seller can claim applies regardless of who paid the property tax. 

What if only one party paid for the real estate tax for the entire year?

In case the seller paid the real estate tax for the whole year, the buyer may reimburse the seller. If the seller did not pay any tax yet, the buyer may charge the seller for his or her prorated share in real estate tax.

While splitting the tax seems straightforward in the first year, you may have concerns about the succeeding years. Unless the local government reassessed the property, you can expect to pay the same real estate tax as the seller for upcoming years.

Your tax advisor may help you understand how real estate taxes work in your state. If you have rented all your life, you may not be familiar with the process. First time home buyers should focus on tax credits, abatements, and other exemptions which may reduce the tax bill.   

Pro Tip: Real estate taxes vary across localities. Check your city and/or state website to learn how to compute your property tax bill. The NYC Department of Finance, for instance, has a helpful guide on how to compute annual property taxes in the city. There are usually similar guides in other localities.

Reason #2: You want to minimize transfer taxes

Aside from the property tax, you may encounter other taxes when you buy a new home. These taxes may include the following.

When you buy a property, you may be liable for real estate transfer taxes. Municipal authorities, your county or state may impose this tax when you transfer the ownership of titles, certificates of deeds from the buyer to the seller. This tax is based on the assessed value of the property that has to be transferred.

Usually, sellers will pay the transfer tax as part of the closing expense, but everything is always negotiable. For instance, the buyer may agree to shoulder a portion of the cost. 

In some places like Washington, DC, it’s customary for the buyer and the seller to split the transfer tax expense. Although the transfer tax is not deductible, it can be part of the cost basis of the property.

First Time Home Buyer Taxes May Be Different From Regular Transfer Taxes

The rules surrounding transfer taxes also vary per state. In Maryland, for example, first time home buyers are exempt from paying the transfer tax if the property will serve as their primary residence. The seller can 0.25% of the actual selling price. There could be similar programs in the area where you are buying a new home.

Some States Have No Transfer Taxes

You don’t have to worry about transfer taxes if you live Idaho, Indiana, Louisiana, Mississippi, Missouri, and Montana, North Dakota, New Mexico, Utah, Texas, Wyoming, and Alaska. Unless you live in Washington County where there is a 0.1% transfer tax, you don’t have to pay any transfer tax in Oregon.

Aside from those states, people who live in Arizona only have to pay the minimal transfer fee of $2.

Other States May Have Complicated Transfer Taxes

Some states like New York has a more complicated transfer tax computation especially when you live in New York City.

In New York, there is a state transfer tax of 0.4% for properties below $2M. Above this threshold, the tax becomes 0.65%.

If you live in New York City, transfer tax is 1% for residential properties sold at $500K and under and the tax rate increases to 1.425% above this $500K. But that’s not all!

Buyers in New York City also have to watch out for the Mansion Tax which kicks in when the property is sold for more than $1M. You need to pay 1% of the sales price as mansion tax if your property is $1M to less than $2M. This tax has incremental increases and can be up to 4.15% for properties valued at $25M and up.

Depending on your situation, it may be useful to negotiate for a lower price before the higher tax bracket kicks in. Your tax advisor may also privy to some programs or strategies to help you reduce transfer taxes. Having an advisor to help you with transfer taxes could be particularly helpful for first time home buyers without an agent.

Reason #3: You want to know if it’s better to take the standard or the itemized deduction

The Tax Cuts and Jobs Act of 2017 made several changes in the tax law. Standard deduction increased to $12.2K for single filers and $24.4K for joint filers. With this increase, it’s not surprising why most taxpayers opt for the standard deduction. 

If you always took the standard deduction, it may be useful to consult an expert if itemizing can have more benefits. A new property could change how you file taxes because you can deduct mortgage interest. You can also take a deduction for property taxes.

Here’s how much property deductions you can take if you decide to itemize.

Mortgage Interest Deduction

The interest you paid for your home is tax deductible but only if you itemize. Before the Tax Cuts and Jobs Act of 2017, you could deduct mortgage interest on the first $1M mortgage. On top of that, you can deduct the interest on $100K home equity debt aka HELOC. You could use the proceeds for this home equity debt for any purpose as long as your home equity serves as collateral.  

With the new tax law, you can only deduct mortgage interest on the first $750K of your mortgage ($375K if you’re married and filing separately). As for home equity debt – the interest is only deductible if you the loan for qualified expenses such as home repairs.

State and Local Taxes (SALT) 

You can claim the property taxes you paid, your state and local income tax or general sales tax as deductions on your tax return under SALT. But all these taxes have a $10K ceiling. 

If applicable, you may also deduct the sales tax you paid for home building materials. This is applicable if you had major repairs done or if you paid sales tax for your home instead of your income tax.

There is generally no sales tax when you buy a home unless it is a mobile home or if it is prefabricated. Depending on what type of home you bought or the state where the property is in, you should consider deducting state and local general sales tax instead of your state and local income tax if you itemize. Your deduction may be higher if you opt for the general sales tax instead of the local income tax especially if there is no income tax in your state.

If you claim the sales tax as a deduction, you cannot include these expenses on the cost basis of your home. 

Your tax advisor can help you look into all your expenses and see which option could help you minimize taxes. Plus, you can incorporate all other expenses not just the ones related to owning a property. 

Reason #4: You want to know if you are eligible for a tax credit or for other property tax deductions

Who doesn’t want to pay lower taxes? 

Tax credits and property tax deductions which can be applied against your tax bill is another thing your tax advisor may help you with. First time home buyers from low-income households may be eligible for the Mortgage Credit Certificate or MCC. The MCC is a program which provides homebuyer assistance to low-income families and allows homebuyers to claim a tax credit for up to $2K per year. You need to be a first time home buyer and meet the income requirements to be eligible.

Your local Housing Finance Agency usually administers the program. So, you need to contact the agency before you apply for a mortgage and buy your home. You can claim this tax credit on your annual tax return.

There is also another type of tax credit which is applicable to energy-efficient homes.

If you have energy-efficient features in your home, you may be eligible for a Residential Energy Credit. You can claim credits of up to 30% of the installation cost for solar, wind and geothermal equipment on your principal residence. There are more limitations for fuel cell property which is $500 for half-kilowatt of the property’s capacity.   

There may be more tax credits and a tax advisor familiar with your state laws will have a better idea on all of these tax breaks.

Reason #5: Your new home is in a new state

If your primary residence changed because of your new home, your local taxes may also change. Take note that your local and state income tax is also subject to the $10K SALT limit.

Most states impose a separate income tax. But there are still a few states where you don’t pay this tax including Florida, Nevada, Alaska, Texas, South Dakota, Washington, and Wyoming. New Hampshire and Tennessee do not impose a personal income tax, but interest and dividends are subject to tax.

If you are moving another state, you may have to file taxes on both states. If you live and work on different states, tax issues may also be different. 

While you can claim a tax credit on taxes paid in one state to another, you may want to make a checklist on what you need to do to make tax filing less complicated. The best person to ask about this will be your tax advisor!

Don’t Let First Time Home Buyer Taxes Scare You. Take Advantage Of Your Property Tax Deductions

Buying a home is a major expense but you don’t have to focus only on it. Having a tax advisor can help you look at the bigger picture and manage the rest of your finances.  

A property under your name will affect your tax return from the day it becomes yours. Knowing what the tax consequences are is always a must. Sitting down with an expert to discuss these matters may save you from regrets later on.

If you are on the US on a temporary visa such as H-1B, you are a non-citizen who may return to his or her home country, you want to give the property as a gift or you have a complex tax situation, tax planning could become even more valuable.

Your tax advisor would most likely suggest changes on your finances depending on your goals. Making adjustments on your retirement contributions, taking advantage of legitimate deductions, putting funds on tax-advantaged accounts and similar strategies may help offset the cost of your new home.

While you don’t need a tax advisor just because you’re a first time home buyer having one can help you to:

  • Minimize taxes for the property you want to buy through federal and state programs and tax credits
  • Maximize tax deductions and tax credits for all applicable taxes including property tax
  • Create  a plan to help you take advantage of your deductions and reduce your tax bill legally in succeeding years 

Dealing With First Time Home Buyer Taxes: Putting it All Together

First time home buyers should allocate time to talk to a tax advisor to discuss issues such as:

  • How do real estate taxes work in your state? What deductions, exemptions or abatements can you take?
  • How do income taxes work in your new address? Are there things you have to take note of?
  • Is there a way to minimize the taxes you have to pay when buying your new home?
  • Should you itemize or take the standard deduction?
  • What can you do to offset the cost of buying a new home? 
  • Are there any changes you have to do to reduce your tax bill for the year? How about the succeeding years?

Tax planning is a highly personal process which depends on your wants, needs, immediate and long term goals. Consulting an expert, about first time home buyer taxes and other concerns can help you find the best strategy based on your financial situation. 

FSBO

5 FSBO Tips for the First Time Home Buyer

FSBO or For Sale By Owner properties may not be too common but buyers may find these homes to be more affordable than others. While most FSBO sellers make 6% more by selling the property without an agent, buyers can benefit from this too!

Most FSBO sellers are amateur realtors. Although some FSBO properties are overpriced, most of these homes sell for less than the market value. As a buyer, this allows you to buy a home at an advantageous price. But, dealing with an FSBO seller is not always a smooth journey because you’re not talking to a professional!

Here’s a list of five tips that may help you mitigate risks when dealing with an FSBO seller.

1.     Find a Real Estate Attorney to Guide You Through the FSBO Sale

Several states require the presence of an attorney during the closing of a property sale transaction. But when dealing with an FSBO seller, it’s better to hire one from the start.

For instance, you found a property which looks like your perfect home from your initial inspection, so you decide to offer for the property. If the seller accepts your offer, you would enter a contract and put down some cash as earnest money.

This earnest money, which is typically 1 to 2% of the contract price, should be with a third-party, not your seller, and placed in escrow. At the same time, you have to sign a contract. Just like most contracts, expect to encounter a document full of confusing legal terms. If you’re a first time home buyer, this guide in buying a home could be useful too.

Understanding Real Estate Contracts 

An agent can help you go through the contract but having an attorney would be better. Among the things you should look into in a real estate contract are the contingencies.

Contingency clauses refer to circumstances where you can back out of the contract without losing the earnest money. Some of the most important contingencies include the inspection and the disclosure.

Inspection Contingency

Most contracts allow buyers to back out of the contract if the inspector finds major issues during the inspection. Usually, buyers have to accompany the inspector while they assess the property. The inspector will then provide a report detailing the issues found in the property.

If the inspection finds big issues with the property, the buyer can back out without breaching the contract. The buyer can also use the inspection report to decrease the cost of the property.

Sometimes, contracts also have a cost-of-repair contingency. This contingency specifies a certain percentage or dollar amount of repairs required. If the inspector determines that it will cost more to repair the property, the buyer may terminate the contract.

Pro Tip: Never waive the inspection contingency or you might be stuck with a problematic property if you don’t want to lose your earnest money.

Ace the Bidding War Without Sacrificing the Inspection Clause

In case you’re worried about losing to other buyers, including a one to two-day inspection in your offer

While there are risks in FSBO, you may find yourself making more concessions to get the property. However, you should never waive the inspection -just because a home looks more than serviceable to you, doesn’t mean it actually is. Asbestos, HVAC leaks, and termite infestation are some things which may escape you.

If you buy a property while being blind to these problems, you could end up paying so much more for repairs and renovation along the road.

So, what can you do if there is a tight bidding war between you and other buyers?

FSBO sellers would most likely want to sell the property fast. To help them keep things moving, you can schedule the inspection as quickly as possible and include it on your offer.

Even if you are in the risk of losing the bid, you should always do your due diligence.

Take note that the results of the inspection could also be useful when you are negotiating with the buyer.

Loan Approval

Also referred to as the financing or mortgage contingency, this contingency specifies how much time the buyer has to secure financing for the property. After the specified date, the buyer may request for extension or cancel the contract. For an extension, the seller needs to agree in writing. If the specified date passed and the buyer did not request for an extension or termination, the buyer would be obligated to purchase the property even if the financing company had not approved the loan yet.  

In most cases, loan approval will take 60 days. Prior to approval, the financing company will appraise the property through the help of a third party and check the title.

Disclosures

Depending on the state where you live, the required disclosures could vary. These disclosures were designed to help the buyer learn about the property for sale. Some FSBO sellers have something to hide that’s why they are avoiding going through an agent. So, it would be best to have a disclosure contingency.

Most sellers will use the state forms or a template to list everything they know about the property and their experience in the residency.

Buyers often receive the disclosures when the seller accepts their offer. Aside from disclosures check the local building department documents for flood zones, earthquakes zones, and proximity to airports.

Before you sign the contract, it’s better to review it with your real estate attorney or an agent if you have one. These professionals can comb through the contract and possibly see things you might have missed. There could also be clauses hidden in the fine print which may be unfavorable for you.

As a buyer, you should protect your interests especially when you are dealing with a real estate contract. An attorney would be necessary if it is a short sale or if there are legal issues related to the property.

Related Article: For Sale By Owner Struggles and How to Solve Them 

2.     Request a CLUE 

Not all homes are insurable and that’s one of the worst things you can find out after getting locked into a sales contract.  This is where CLUE comes in.

CLUE stands for Comprehensive Loss Underwriting Exchange. This document is a report detailing the insurance history of the property for the past five years including claims made and the company involved.

From a CLUE report, you can see if any claims have been made for major damage like mold or water damage. If you see one, ask about any renovation or repair to the property.

So where can you get a CLUE report?

Not anyone can request a CLUE report -only the property owner and the insurer. So, you have to request this document from your seller.

The owner can even request a CLUE on your primary residence from their website. Take note that CLUE is part of LexisNexis, so don’t be surprised to see the LexisNexis logo on their website. If you are interested in a rental or vacation property, you have to make the request by mail. Every year, the property owner can get one CLUE report for free! Additional reports would cost $19.95.

If a seller is not willing to provide a CLUE report, there may be something wrong with the property. Some sellers find the information in these reports interesting especially if they did not order a CLUE when they bought the property less than five years prior to selling it.

If you are considering a property, get a CLUE as early as possible and apply for insurance coverage for contingencies. This way, you will save yourself from nasty surprises.

3.     Seek for Pre-Approval

Most FSBO properties are sold in two weeks after listing. If you like an FSBO but can’t pay the spot cash, it would be better if you have pre-approval.  

Many FSBO sellers prefer buyers pre-approved for a mortgage because it means they can do the sale quickly. This also gives you additional leverage when there are multiple offers for the property.

4.     Be Tactful During an FSBO House Tour

For an FSBO property, the owner would most likely give you a home tour. Had you been going through the property with an agent, you could comment on the design and fixtures with much freedom. However, you have to keep all your reactions bottled up with an FSBO seller. The person you are dealing with may have fond memories about the property so you should save your criticism for later.

In some cases, you may be dealing with a reluctant seller who couldn’t help but gush about the features of the property. Some sellers, especially those who are hesitant about parting with their home, may become emotional.

While the house tour process may turn out to be more personal than you expected, don’t let the owner’s presence deter you from being thorough. Look through the entire place.

 

Open all the doors, try turning the lights on and off, inspect the closets, and check all the ductwork. Don’t slack off in inspecting the property in the name of decorum. If you have questions, ask the owner although you have to choose your words wisely.

5.     Hire an Agent to Assist You in Transacting With an FSBO Seller 

Yes, you can hire an agent even if the seller does not! If you have a realtor but you decide to buy an FSBO, you may still have to pay commissions.

Why?

Real estate agents are experts in their field, and you pay them for their assistance in the whole process. If you don’t have expertise in entering real estate transactions, it’s better to have someone help you go through the sea of information.

Check the contract you signed with your agent to see if you have to pay their commission for an FSBO. For a for sale by owner transaction, you may have to pay the agent if:

  1.     You bought a home through another agent after you signed the Buyer Broker Agreement.
  2.     The seller refused to cover the costs of hiring your agent. In this case, the obligation to pay the agent lands on your shoulder.
  3.     Your seller agrees to pay a fraction of your agent’s fee. For this situation, you have to cover the fraction which was not paid by the seller.

There are also instances where agents decide to waive the portion your seller refuses to pay.

Some FSBO sellers are looking to sell their home at the most expensive price without paying fees to any third party. Given the nature of the transaction, it becomes even more necessary to have an agent to look out for you.

While an attorney can provide legal advice, your agent may know more about the property and the neighborhood. Plus, you will have someone to help you with all the paperwork. These professionals are also more conscious of disclosures which should be in the document from the seller.

Buying FSBO May Take More Work, But It Could Be Worth It

If you are buying For Sale by Owner properties, expect the entire process to take more time. Your seller would most likely be charting new territory and may struggle on how to go about with the entire process.

Based on stats from the National Association of Realtors only 3% of FSBO sellers found it difficult to make time, which may be because most of these people want to dispose of the property as soon as possible. If you do find a seller who is always busy, you may have to adjust your schedule and the paperwork encounter several hurdles due to scheduling conflicts.

Even when you have an agent, the process can take much effort from both parties. Your agent would most likely be doing the job of two people since he or she needs to impart much-needed advice for an inexperienced seller.

No matter how stressful and tiring the process can be, finding your dream home through an FSBO seller is not just possible it can be the best bargain ever. 

For Sale By Owner

4 For Sale By Owner Challenges and How to Solve Them

Are you eyeing a For Sale by Owner property?

Based on 2018 statistics from the National Association of Realtors (NAR), 91% of sellers received assistance from an agent. In the same year, FSBO homes only accounted for 7% of the total home sales.

Yes, For Sale by Owner properties are not too common. However, you may be able to purchase your new home for less by dealing directly with the owner, not the agent. If the seller has concerns about the property such as needing more time to vacate, it would also be more convenient to discuss the terms directly to the buyer.

Since the average real estate broker charges around 5% of the sales price, proceeding with the transaction on your own will save you a $10K commission for a $200K property.

Aside from the extra cash, transacting directly with the buyer can be more convenient. Unfortunately, there are risks in doing business with an FSBO seller.

Here are the top struggles For Sale by Owner Sellers and Buyers usually deal with and how you can deal with these hiccups in the home buying process.

1. Negotiating with FSBO Sellers Can Be Complicated

FSBO sellers are the best people to show you around the house and talk about its features. Unfortunately, they are not necessarily skilled in negotiating terms. As the homeowner, sellers are often emotional when they part with their property.

In some cases, the seller may have unreasonable terms or worse, they may back out in the middle of the deal. While touring you around the property, you may find it hard to express an honest opinion in front of the previous homeowner. Sellers can be unreasonable with some things and rather than deal with all of these things on your own, it is better to hire a broker or attorney to represent you.

Note that not all brokers may be enthusiastic in dealing with a for sale by owner property. Some professionals feel that representing clients who will buy the property properly will also require them to advise the FSBO seller as to their duties and obligations. This task would have been up to the listing agent had the seller hired one. In addition, some sellers are difficult and unrealistic. So, being the broker in charge who does twice the workload for half the pay is not attractive.

Your best bet is to find a broker who is willing to go through all these troubles to help you buy the FSBO property.

2. For Sale by Owner Property Prices are Often Inaccurate

For sale by owner properties are usually sold in less than two weeks. This turnaround time is quicker than homes listed under real estate agents. If you don’t act quickly when you see the sign on the property’s front yard, you may lose the chance to buy it. The quicker selling cycle is usually because the sale is made to someone related to the seller.

NAR statistics indicate that the average price for FSBO homes are usually lower than properties sold through an agent. This is a big advantage to you as the buyer.

In 2018, the average FSBO home sold for a median price of $200K as opposed to a sale coursed through an agent which had a median price of $264,900. If you know the property owner, you may get an even lower price.

While this may be the norm, there are cases when the For Sale by Owner property is overpriced. People who decide to sell their homes on their own often struggle in listing the right price.

Solution: Hire an appraiser

Property appraisal typically costs between $300 to $400. Appraisers provide an impartial opinion based on the condition and location of your home and other properties for sale with similar features as your property. The appraiser will look into these things to provide an appraised value:

  • Location
  • Size of the property and your home
  • Age and general conditions of your home
  • Features including the number of baths and bedrooms
  • Home improvements, additions, and remodeling
  • Architectural features including fireplaces and skylights

Buyers often shoulder the cost of appraising the property anyway since this document is needed if they take out a mortgage.

You can also look into the comparative market analysis from a real estate agent to determine the appropriate listing price and if the price of the property you are buying is reasonable.

Note: Appraised value is different from the fair market value. While an appraisal may help you determine the home’s valuation, you still need to consider the price of similar properties in the neighborhood to assess the home’s market value.

Top 4 Dont’s When Researching For Sale by Owner Property Values

  • Don’t use the tax assessment value as a reference. While these prices are close to the true market value of the home, it is still not as accurate as the price determined through an appraisal.
  • Don’t consider the full cost of the seller’s home improvements in estimating the value of the property.
  • Don’t rely entirely on Zillow’s Zestimate. Zillow is one of the hottest places online to list a property. But the website’s property estimating function may provide overstated values. The numbers are something sellers like to see and buyers should NOT consider these figures as the property’s market value.
  • Don’t hesitate to dispute the appraisal. Appraisers are theoretically impartial. But the process can be subjective, and it depends on several factors. If you suspect a mistake in appraising the property, don’t hesitate to dispute the figures or request for a review.

Why For Sale By Owner Sellers Fail Price their Properties Right

Most FSBO sellers chose to find the right property price to be their top concern and for good reason. Listing the property too low means leaving money on the table. On the other hand, listing for at a price too high would put your property in the market for too long. As the buyer, you should do enough research to find the most equitable price for the property.

3. Managing and Understanding the Paperwork Is Burdensome

Buying a for sale by owner property becomes burdensome when it’s time to take care of the paperwork. After receiving offers for the property, the owner has to consider the offers. Your agent may be wary of working with FSBOs because it means extra work for them. If you are doing business with a seller without an agent, the process can also be confusing.

The seller may also feel overwhelmed by the legalese involved. Instead of saving time, the entire process of selling the property becomes burdensome.

A real estate agent would have taken over this process. Without one, the seller and you as the buyer have to do everything by yourselves. When purchasing for sale by owner properties the biggest risks revolves around buying a problematic property.

Solution: Employ a Real Estate Attorney

You have to request the assistance of a real estate attorney in reviewing the contract. By having a professional review of the contract, the deed, transfer documents, and the settlement of funds at closing, you will feel reassured to have an extra security blanket if complications arise. Aside from that, you won’t enter blindly into a deal which could cause you to commit to the sale even if there are issues linked to the property.

Without an attorney, you may find yourself dealing with problems such as:

  1. Shouldering all the closing fees and expenses including transfer taxes, notary fees, appraisal costs, document preparation fees, HOA dues, delinquent taxes, title search fees, pest inspection fees, and title insurance policy.
  2. Ending up stuck with the property because your sales contract has no contingencies allowing you to back out of the sale.
  3. Losing the earnest or up-front money because you gave it to the seller for safekeeping instead of palcing it on an escrow account.

Hiring an attorney typically costs between $1 to $3K but prepare to spend up to $5K. The total attorney’s fees will depend on your situation and the attorney’s hourly rate which could be $150 to $300 an hour. While most attorneys require retainer fees, most wouldn’t charge you for small sale transactions. However, in the following circumstances you may have to consider hiring one:

  • The seller received a foreclosure notice.
  • The seller is considering a short sale.
  • There are liens and judgments attached to the property.
  • The seller inherited the property.
  • The seller is going through a divorce or separation.

Learn the Required State Disclosures

Most US states require sellers to disclose dangers, hidden flaws, and weak spots in the property.

California, for instance, requires sellers to provide buyers with disclosure listing home defects including deaths within the property in the past three years, a leaky roof, a nuisance in the neighborhood such as barking dogs among others.

Having a real estate lawyer will make sure that the seller complied with all the disclosures required by the state.

Take note that in states such as New York, Alabama, Georgia, Hawaii, Massachusetts, New Hampshire, Maine, Vermont, Rhode Island, Connecticut, West Virginia, and Delaware, you need a real estate attorney at closing. Check if your state requires you to have an attorney represent you. However, don’t expect your legal representative to do the legwork.

While an attorney can help you look over the legal aspects, you may still shoulder most of the paperwork.

4. Transacting with an FSBO Seller May Take Longer than Buying Through an Agent

Among the problems For Sale by Owner sellers struggle with is devoting enough time to the same of their home. Setting a schedule with an agent may be troublesome, but dealing with the paperwork to sell a property would require a lot of time too!

Without a representative or connections in the real estate industry, you could struggle a lot too. Finding appraisers, bankers, and inspectors could take up much of your time. It wouldn’t even stop at requesting the inspection and appraisal. You also have to study both and make sure they are satisfactory.

Given all the steps you have to observe, buying a for sale by owner property could take much longer. On top of that, the seller might need more time in the house or back out. Sometimes, scheduling issues may also make it challenging to meet with the seller to iron things out.

When you are dealing directly with the seller, you can work together to have a realistic timeline for the sale. Unfortunately, there could still be hiccups and you may have to make adjustments to meet a seller’s schedule.

For Sale by Owner Homes: The Verdict

Buying a for sale by owner property has advantages and disadvantages. Given that most FSBO sellers are not real estate agents, you may several thousands of dollars knocked out from the selling price. Depending on your goals and situation, the savings you get might be worth the extra effort.

If you are ready to deal with emotional sellers who may or may not have enough time to close the deal quickly, FSBO homes may be your best option. Without professionals to help you navigate through the process, you may find yourself at a stalemate with the buyer during the negotiation process.

Remember that the choice whether to buy a for sale by owner or not lies with you. However, if you don’t have a representative either, you may want to look into these things:

  • Arranging a home inspection
  • Putting all agreements you had with the seller in writing
  • Determining the party who will pay for closing costs
  • Seeking legal help to go over sales contracts and closing
  • Specifying the date you will take possession in the contract

While there are disadvantages in pursuing a property for sale by owner, there could be obvious advantages too.

Check out these 23 Real Estate Websites which could help you through the process. These tidy list of 11 first time home buyer grants and programs may also be useful to you!

home loan calculator

How to Use the Home Loan Calculator Like an Expert

If you are trying to buy a new home, there’s a high probability that you need to take out a loan. If that’s the case, you need to do some serious math to know what you are getting into. Fortunately, you can use a home loan calculator to know how much a mortgage will cost you.

In this post, we will go over the basics of using a home loan calculator. We also have a section on the types of calculator you can try.

Don’t worry about the unfamiliar terms, we will go over those big words too although we still encourage you to brush up your real estate vocabulary -your knowledge could always come in handy. If you are looking for resources to check out, this list of real estate websites could be useful to you.

If you have no idea how to get started on the home buying process, you to check out this 8-Step Guide on Buying a House first.

Getting to Know Your Home Loan Calculator

We know the process of buying a home can be tedious, draining, and stressful. Aside from taking a breather when you feel overwhelmed, you should also consider using a home loan calculator. Decoding the math behind a mortgage can give you a better idea about the financial commitment the loan requires.

To get you started, here are the most common terms you will see in a house loan calculator.

Home Price

Home price or home value refers to the total cost of the home you want to buy. You can also input your budget if you don’t have your eyes on a particular property yet.

Down Payment

When you borrow money to buy a home, you are most likely going to pay for the down payment. If you did a quick internet search, you have probably learned that traditional lenders require a 20% down payment based on the purchase price of your home. So, if your home costs $200k, you should pay $40,000 ($200k *20%) to the seller. The lender will cover the remaining amount of $160k.

But if you are thinking that most people actually put down 20% as down payment, you are wrong! Based on March 2019 statistics from the National Association of Realtors, 74% of non-cash buyers (those who took out a mortgage to buy their home) who purchased their first home put down less than 20% as a down payment. This could be due to having access to loan programs which allow reduced down payment requirements.

In an FHA loan, for instance, you can pay as little as 3.5% as a down payment. Some calculators, like the Zillow loan calculator, allows you to enter just the percentage or just the dollar value.

Depending on the home loan calculator you are using, you may be able to tweak down payment value by entering the percentage. You may also input the dollar value if it’s more convenient.

There are also loan programs with zero down payment such as the VA loan. Some websites offer a special VA loan calculator since there are certain benefits for people taking advantage of this program.

Pro Tip: Check if you qualify for down payment assistance programs and grants for first time home buyers.

Home Loan Amount

The home loan amount which is also referred to as your mortgage amount or mortgage value is your House Price less Down Payment. This is the actual amount you need to borrow from a bank or another financing company. Your lender can also add Mortgage Insurance to your home loan. In this case, the Loan Amount would be House Price plus Insurance less Down Payment.

Some websites also refer to the home loan amount as the principal. In the SBI Home Loan Calculator and the Axis Bank Home Loan Calculator, for instance, you can input the Loan Amount directly. You don’t need the House Price or the Down Payment value.

Loan Program or Term

This refers to how long you plan to pay for your mortgage. In some calculators, this is expressed in years, but in some, you can choose the number of months.

Most people will choose a term which is between 15 to 30 years. Some companies also refer to this as the loan tenure or the amortization period.

Amortization is the fancy term used to refer to allocating the cost of your home over a period of time. Here, you are allocating the cost of your home over the number of years you have to pay for it.

Interest Rate

If you find a real estate loan calculator online, you could input the interest rate for the loan. If you have no idea how much the interest charged to you would be, you can always use the average figures. The home loan calculator from Zillow, for instance, displays the average mortgage interest based on certain factors.

Private Mortgage Insurance

Usually abbreviated as PMI, Private Mortgage Insurance is applicable only to loans where the borrower pays a down payment of less than 20 percent. This insurance protects the lender for losses in case you default on your loan.

The PMI usually costs 0.5 to 1% of your loan amount. So, for a $100k loan, you could pay $1k as PMI. There are ways to skip PMI. You should consider options like a piggyback mortgage if you are not a big fan of PMI

What Does the Amortization Schedule Mean?

The amortization schedule is a table displaying the following:

  • Period or Term. This is displayed either in months or as numbers (1,2,3).
  • Monthly amortization or monthly loan payment. While you can determine your monthly payment without a house loan calculator, it’s easier to just use one. If you are brave enough to deal with the math behind it, The Balance lays out the whole process. We suggest doing this on Excel if you’re up for the challenge. But for those who are not a big fan of math, let the amortization loan calculator do its magic. Take note that the monthly amortization will remain the same for the entire life of your loan.
  • Interest paid during the month. This would be the loan amount multiplied by the interest rate and divided by 12. If you are computing the annual interest paid, you can simply multiply the loan amount by the interest. If you borrowed $300k at an interest rate of 4%, the annual interest will be monthly interest payment will be $1k ($300k *4% divided by 12).
  • Principal paid for during the month. This amount is actually what’s left when you deduct interest from the monthly amortization.
  • Remaining loan balance. This refers to the total loan amount less the principal payment for that month. If you look at the amortization report, you will see that most of your payments go to interest payments rather than the principal.

Homeowner Expenses and What They Mean

If you looked up a quick home loan calculator, you probably have a better idea of what the fields mean. But sometimes, you find a calculator which details homeowner expenses.

It would be better to include property taxes, Homeowner’s Association (HOA) Fees and Home Insurance when you are trying to figure out the cost of buying a new home.

  • Property Taxes – this amount will differ depending on your state. The tax is based on your home’s value.
  • Home Insurance – Most lenders include home or hazard insurance in their requirements. This insurance will provide protection from damage on your property due to lightning, fire, vandalism, burglary, explosions, and storms among others. This insurance also includes personal liability coverage which will protect you from lawsuits if an injury happens on your property.
  • HOA Fees – Are you planning to buy a townhouse or a condo? If yes, you may be required to pay HOA fees. This monthly payment will go to the maintenance of the common areas and amenities in the property such as pool maintenance, garbage collection, landscaping, and hazard insurance.

Home Loan Calculator Types

It’s not enough to know the basic terms in home loan calculators. It also pays to be familiar with the types of calculator you can find online.

Home Loan Calculator Based on Loan Type

When you take out a loan, you have two options: a fixed loan or a variable interest loan. In a fixed loan, the interest rate applicable to your loan will remain the same throughout the term. For a variable interest loan, the interest will depend on the prevailing rates as determined by your lender.

EMI Home Loan Calculator 

If you looked up house loan calculator, you would most likely send up with an EMI home loan calculator. EMI actually stands for Equal Monthly Installments. EMI is usually applicable to fixed-rate loans where you pay a fixed amount each month.

If you are using something like the home loan calculator from SBI or Zillow, all you need to do is choose the term which is in the form of years. If you are seeing something like 5/1 ARM that is for a hybrid variable rate loan.

Variable Rate Calculator

This loan usually comes in the form of an adjustable rate mortgage or an ARM. In an ARM, the loan will be fixed for a certain period. The ARM is actually a hybrid mortgage since it has a fixed and a variable component. But it is one of the most common types of mortgage today.

In some calculators, you can see the option for 5/1 ARM or something similar to it. This means that the loan will have a fixed interest for the first five years. After five years, the rate will be adjusted annually based on a benchmark or index rate. These ARMs usually have a rate cap that will limit how high the interest charges can be.

Some calculators can help you compute amortization based on an ARM mortgage. Bankrate has this FHA home loan calculator, VA home loan calculator, and first time home buyer house loan calculator that would help you figure out how much an ARM mortgage could cost.

 Refinance Loan Calculator

Refinancing refers to applying for a new loan and paying off the old one. Most people opt for refinancing when they are offered better terms.

Refinancing is also an option when you are consolidating debt. If you decide on refinancing when you are having money problems, the process is often referred to as debt consolidation.

If you are looking for a home loan calculator for this purpose you may encounter additional terms. Most refinancing calculators will allow you to key in the original loan, the remaining term, interest rate, and original term. You also have to input the details of the new loan including the term, rate, and the mortgage points.

Mortgage points or discount points is the amount you pay the lender to get a better interest rate. Each mortgage point is equal to 1 percent of your loan. If your loan value is $100k, 1 point would be equal to $1k.

Prepayment of Home Loan Calculator

What if you decided to take out a loan and chose a longer term but you are planning to make advanced payments? Well, you can actually plan the purchase of your new home while taking that advanced payment into consideration.

The Prepayment of Home Loan Calculator comes with a feature that allows you to input a prepayment amount. In some cases, you can only add one prepayment but others will have a frequency or how often you make the extra payments. There could also be features allowing you to see how much you saved by prepaying the loan.

Home Equity Calculator

While looking for calculators online, you might have come across the home equity loan calculator. Your home equity refers to how much of the home belongs to you. The part that belongs to you or the amount you have paid for through the down payment and the principal portion of your monthly installments is your home equity.

What is a home equity loan calculator?

The home equity loan calculator shows how much you can borrow against your equity. Many lenders are willing to extend a line of credit or loan based on your home equity. You will likely to receive this offer if you own more than 20% home equity. Of course, lenders will also consider your creditworthiness among other factors. This loan can be useful for emergencies or debt consolidation although it may not be the most useful to you right now.

More Calculators to Try

Aside from those calculators, there are also others which may be helpful in your quest to look for funding for your new home.

Loan Eligibility Calculator

If you are still in the process of gathering information, you might want to look for a home loan eligibility calculator. This is a qualitative calculator – so, there are no numbers. Here you can input items related to your credit rating, age, employment stability, and financial situation to see if you are eligible for a loan.

Usually, you can find the loan eligibility calculator in websites for lenders or banks with offering mortgage and other loan products.

Home Sale Proceeds Calculator

If you are planning to sell an old property and buy a new one, you should not just focus on a home loan calculator. A Homesale Proceeds Calculator will also be necessary! You can find out how much profit you can make when you sell your home using this calculator.

Pro Tip: Check out the link above to download a free home sale proceeds calculator. Don’t worry, the calculator comes with detailed steps on how to evaluate the sale of your home.

I’m Done Calculating, Now What?

Congratulations on taking full control of your finances! Looking at the figures would give you a better idea of how much you will be spending. But we suggest that you take this time to do the following.

Use the Calculator to Assess Alternative Options

Even if you have a budget, you might end up spending more than that amount. So, it is always useful to give yourself a bit of leeway. Try to mirror different scenarios with a home loan calculator, here are some of the changes you can try:

  • change the home value or the loan value
  • adjust the interest rates
  • increase/decrease your down payment
  • compute loan payments with and without PMI
  • lengthen/shorten the term

Observe Where Your Payments Go

Don’t just look at the amortization values, study where the money you would pay will go. This may also help you assess where to get a loan, what interest rates to go for, etc. You can learn so much by scanning through the amortization report.

Compare Loan Types

What kind of home can you afford? This article may help you answer that question, but we also suggest doing a comparison of different loan terms on your own.

To compare different mortgage programs, put the values for different options side by side. This will give you a better estimate of the cost of the property.

A 30-year mortgage, for instance, will have the lowest monthly amortization but it will also have the highest overall cost. If you shorten the term, the amortization will increase but the total cost of the loan will be lower.

Don’t Let a Home Loan Calculator Intimidate You

When you are planning to buy a home, you should always take the time to study your options. Part of the process you have to consider is making a choice as to your lender, the loan type, the terms, and all the small details. With terms as long as 30 years, the last thing you want is to be locked up with a bad deal.

While you have refinancing options, it’s always better to find a mortgage with agreeable terms. Doing the math may require 100% concentration but it can save you from making the wrong decisions. For starters, numbers can’t lie!

So take the time to understand what a home loan calculator is and what it does. Once you learn what everything stands for, it would be easier to review your options independently. Taking the second-guessing from the home buying process lets will help you plan ahead for the financial burden.

first time home buyer grants in Texas

The Top 10 First Time Home Buyer Grants in Texas

With median home values of around $172,000, buying a home in Texas is more affordable than most states in the country. While a property costing this much may be affordable to some people, it’s still useful to look into first time home buyer grants in Texas.

While property prices are cheaper, down payment requirements still require a substantial amount of cash. One way to offset the cost is to look for homebuyer grants applicable to first time home buyers in the state. Here’s a list of some programs you can check out when you are looking for a new home in Texas.

If you’re looking for first time home buyer grants and programs available anywhere in the state check out this list.

First Time Home Buyer Grants in Texas – Statewide

There are state-wide grants providing assistance to first time home buyers in Texas and here are some of them.

Homeownership Across Texas (HAT)

Homeownership Across Texas grants could provide up to 5 percent of your mortgage loan as down payment or closing cost assistance. This program is open not just to first-time home buyers but to anyone planning to purchase a new primary residence.

This grant covers single-family homes whether new or existing within a certain purchase price limit. The program is open to all counties in Texas except for El Paso, Austin in Travis County, McKinney, and Grant Prairie.

You may be eligible for this program if your credit score is at least 620. Aside from that, your income should be within the limit.

Homes for Texas Heroes Program

Are you a teacher, police or correctional officer, veteran, firefighter or EMS personnel? If yes, you may be eligible for a down payment assistance grant of up to 6% of your loan amount.

This program under the Texas State Affordable Housing Corporation is open to all home buyers. Whether you are a first-time homebuyer or not, this grant can be useful to you.

Moreover, there are purchase price and income limits for this program and the levels vary depending on where you live.

Home Sweet Texas Home Loan Program

Low to moderate-income earners may qualify for the Home Sweet Texas Down Payment Help for Home Buyers Program. You may receive up to 6% of your loan amount whether you are a first time home buyer or not.

In addition, you should borrow from one of the participating lenders. Similar to the Texas Heroes Program, this program is under the Texas State Affordable Housing Corporation.

Texas Mortgage Credit Certificate

Aside from receiving down payment and closing cost assistance, you can also take advantage of Mortgage Credit Certificates. MCC is available to first time home buyers. An MCC won’t help you directly with paying for your new home, but it can ease your federal tax burden.

The MCC can be deducted from your annual tax liability for the duration of your loan. In this case, your tax credit is equal to 20 percent of the mortgage interest payments you make each year. Moreover, you can claim a tax credit for the entire length of your loan as long as you live in your new home.

SETH 5 Star Texas Advantage Program

For home buyers with a FICO score of at least 640, the SETH 5 Star Texas Advantage Program could provide down payment assistance. Take note that the eligibility requirements include a maximum sales price of $484,350. Additionally, the assistance will be forgiven after three years.

For this program, you need to take the Homebuyer Education class and the maximum assistance is up to 5% of your loan amount.

My First Texas Home Program

This program which is also known as TMP 79 provides down payment and closing cost assistance of up to 5% of the loan or $8,000. The $8,000 down payment assistance is available to buyers of low-priced homes who need additional financing.

To qualify, you need to meet the area median family income limits in the area.

First Time Home Buyer Grants in Texas – Specific Area

Central Texas

Austin Homebuyer Down Payment Assistance

Are buying a condominium or a single-family home in Austin? If you are a first-time home buyer, you may be eligible for up to $40,000 assistance under the city’s Homebuyer Down Payment Assistance program.

Like most first-time home buyer grants in Texas, your income should be at most 80% of the area median family income in Austin to take advantage of this program.

North Texas

The Dallas Homebuyer Assistance Program

If the maximum sales price of the property you’re planning to buy is $212,000 (existing) or $241,000 (new), this program may be open to you. Under the Dallas Homebuyer Assistance program, you need to be a US citizen or a permanent resident holding a Social Security card. In addition, you should also invest at least $1,000 and make at least two months payment after closing the deal.

How much you receive as assistance will be based on need.

South Texas

San Antonio Homeownership Incentive Program

Also known as HIP, San Antonio’s Homeownership Incentive Program provides assistance between $1,000 to $12,000. After 10 years, 75% of the loan will be forgiven and you can use the loan for the down payment or to pay for additional costs.

A similar program, Homeownership Program for Employees or Hope provides assistance between $5,000 to $10,000. This program is open to full-time purchasing homes located in the Inner City Reinvestment/Infill Policy and the Community Revitalization Action Group Area within the city limits.

Upper Gulf Coast

Houston Home Buyer Assistance Program

Houston Home Buyer Assistance Program is open to first time home buyers considered as low to moderate income earners. Additionally, the applicant should be US citizens or permanent resident aliens whose income are within 80% of the Area Median Income.

The home buyer assistance program may receive up to $30,000 as assistance. On top of that, this grant will be free as long as you occupy the property as your primary residence for five years. You can choose any lender for this program.

Take Advantage of First Time Home Buyer Grants in Texas

Buying a home is a major financial commitment. Learn as much as you can about the process. Check out our article on the 23 Real Estate Websites You Should Never Miss Out if you need more reading material about the process of buying a home.

If you are worried about the cost, check your local housing authority or consult your mortgage broker. Applying for first time home buyers grants in Texas may be the key to finally buying your dream home without going broke.

Real Estate Websites

The Top 23 Real Estate Websites To Help You Buy Your First Home

There are tons of real estate websites to list your home or browse for properties for rent. But before jumping right into the process, we recommend taking a step back to look at the bigger picture especially if you are a first time home buyer.

Making informed decisions is always crucial in real estate.

Unless you know exactly what you want and how everything works -take the time to gather as much information as you can.

Whether you’re a buyer, a seller or an agent, we have a list of real estate sites that could help you. There’s even one for people looking for grants and programs.

To help you out, we came up not just with the top 10 real estate websites but 15 home buying sites. As a bonus, we added more websites which can be useful to anyone interested in the real estate market.

Home Buying Real Estate Websites to Find Listings and More

Mentioning real estate websites will usually make you think of a property listing complete with the property location, sales price, and floor area, among others.

These websites will help you shop for properties and most of them also provide useful information for buyers and sellers. Other websites also come with tools to help you with buying a property.

1. HomeFlow

This is our own website and it helps you understand the whole home buying process so that you can buy your home with confidence and save time and money doing so. You can access all our features in our homepage clicking here: HomeFlow

2. Realtor.com

Realtor is another destination for buyers, sellers, agents, renters, and mortgage lenders. The license from the National Association of Realtors makes this website a reliable information source. You can look up properties for sale or rent, shop for the best mortgage products. You can even find a realtor if you don’t have one yet. There’s also a home buyer app available to both iOS and Android.

3. Trulia

Trulia is a place for static listings. This website provides information through the assessment of people living in the neighborhood. Trulia also has a house searching app, making it handy for mobile users.

The edge of this website is the fact that people who actually live in that place are providing you with the information you need. Since the local scoop comes from the community, it provides you a clearer picture of the living situation is like in an area. Through Trulia, you can also connect with brokers and real estate agents from the locality.

4. Zillow

When you say real estate websites to check out, Zillow is probably one of the first things you’ll think of. Considered to be one of the best home buyer app and website, Zillow is not just for home buyers and sellers but also for renters.

You can check out estimates for home values, sales prices, and mortgage rates in each state in the US through the website. There’s also different calculators and tools from the site. These tools can help you find the most accurate price for your property. On top of that, there’s also a handy home finder app available for both iOS and Android users.

Zillow also has an app called Zillow Mortgages that can help you save for down payment and help you find the right mortgage.

If you are not too fond of a home buyer checklist app, Zillow has a downloadable handout that you can use if you’re more into a checklist on paper.

5. Redfin

When it comes to home buying websites, RedFin is also a popular choice. If you want a place that is more focused on listings and providing accurate home values, RedFin is worth checking out. This website is a brokerage firm which makes it a better place for buyers, sellers, and agents. You can check out the listings through the website or through an app. You can have your property listed for as little as 1% and this fee already includes a local agent from Redfin, professional photos, open houses, and a yard sign. If you want services such as professional staging and a home improvement plan, there’s a premium service charging of 2% per listing.

6. LoopNet

LoopNet is an app similar to Zillow but it’s for bigger properties – the type that real estate investors will be interested in.

So, it’s not surprising why this website and the app that comes with it is for property investors. You can find commercial office spaces and multi-unit residential spaces in LoopNet.

7. Xome

Xome is similar to most other websites where you can search for property, but here you can also look for auctions. Some auctions come from the Multiple Listing Service while others are Xome exclusives.

For Homes only available through Xome, you can find deals on standard home listings, bank-owned, and foreclosed properties. This feature is also useful for real-estate investors who are looking to pay the cheapest price for a property.

8. Homes.com

Finding a match is not just for Tinder, it’s perfect when you’re looking for a home too. Homes.com builds on the same concept dating apps have in matching people but this time, you’re not looking for a person but a home.

If you have a concrete idea of what kind of home, you are looking for, snap a photo. Run the image through Homes.com and you will see suggestions matching your tastes in a property while meeting your demands. Homes.com has a home buyer app but you can also use the web version of the app through their website.

9. Century 21 Global

If you’re not just looking for properties in the US but all over the world, Century 21 Global can assist you. This is one of the real estate websites which is available in several languages and you can search for homes, commercial, property, and land. This website also allows you to find a local office closes to you and an agent who can help you.

You can look forward to a walkthrough of the entire process including how to add value to increase your home’s selling price.

11. Property Shark

Whether you are a home buyer, seller, appraiser, developer, investor or agent for residential or commercial properties, Property Shark could provide invaluable information. The website lists properties for sale or lease as well as foreclosures.

Property Shark provides a comprehensive report which details crucial information about previous property owners. If the place you are interested in is owned by an LLC, the data you’ll receive will contain not just the company name but the owner’s name. The tools and maps from the website can also be handy too.

10. MLS.com

If you have a real estate firm, an insurance company, a mortgage firm, or you have any firm related to real estate, MLS.com is for you. This website is a member of the National Association of Realtors. It doesn’t do business directly with buyers and sellers, but there’s an option to find an agent in the website which actually leads to another website – Home Gain.

Positioning itself as America’s Real Estate Portal, MLS.com is also a resource for anyone looking to gain further education in real estate.

12. Movoto real estate websites

If you’re looking to increase the visibility of your listing, Movoto is the place to get a lot of foot traffic. Movoto is licensed in all 50 US states and it is also one of the largest real estate brokerage in the country.

This is one of those home buying websites with an advanced pricing tool from the website to help you calculate the value of your home in just a few minutes. Plus you can look into the market trends. While there are real estate agents on the website, the reviews available from these professionals are limited.

13. RealtyTrac

This website lists defaulter and foreclosed properties. So, listed properties at RealtyTrac are either auctions, pre-foreclosures, or bank-owned property. It’s a place mainly for buyers and sellers, but there are also a ton of information for everyone.

Some information you can find on this website includes environmental features, surrounding schools, and crime statistics.

14. RE/MAX

If you are looking for homes for sales, agents, and home estimates, RE/MAX is a useful resource. This website lists properties all over the world. Listings include luxury residences and foreclosures. There are commercial properties from RE/MAX too.

Aside from these, there are also franchise opportunities and more.

15. Craigslist

If you are buying or selling a property, you can never forget Craigslist. This website has a section dedicated to the housing sector. Adding a listing in Craigslist can be completed in a matter of minutes. You have to provide all the crucial details, however.

The biggest drawback anyone who goes on Craigslist knows is that there’s a possibility that you are dealing with scammers. The security on this website is not too tight but it’s a great place to test out the market. This place could be a supplementary marketing platform though.

Real Estate Websites Connecting You to Professionals

16. HomeLight

Having a real estate agent who understands your needs is crucial to selling your home successfully. HomeLight helps you out by connecting you with real estate agents. Plus, it provides objective performance data since it has a customer-centric platform.

HomeLight will recommend agents based on several criteria such as the area where you live and how much your home is worth.

17. Fannie Mae

Fannie Mae is a great resource for buyers, sellers, and renters. There are a lot of useful resources for home buyers. There are also guides designed for first time home buyers.

Through Fannie Mae, you can also get access to their resource guide Know Your Options and Home Path where you can find all kinds of properties for sale. Of course, you can also shop for direct loans.

18.  Freddie Mac

Freddie Mac is another company that makes homeownership more accessible. Like Fannie Mae, this website provides information to buyers and sellers on everything they need to know when buying a property.

Bonus Tip: Don’t forget to check out real estate websites focusing on a specific state

For instances, real estate websites in NYC like StreetEasy could provide significant insights. This website, in particular, receives information from sellers, brokers, brokerages, and syndications like Nestio and Realty X. Plus, it focuses solely on New York City, making the information more tailor-fit for people looking for properties in the area. If you’re interested in New York properties, you might also be interested in these 9 first time home buyer grants in NY. 

When You’re Interested About the Home Buying Process

19. Bigger Pockets

Bigger Pockets is a place to learn everything about real estate – think of it as a real estate Wiki. There are eBooks, forums, blog posts, podcasts, and guide on the website.

Aside from being a place to start learning, there’s also a place for networking on the website. There are also tools to help you analyze properties and even a marketplace to find profitable deals.

Related Article: How to Buy a House: 15 Steps to Buy a House for the First Time Home Buyer

When You Want a Better Handle on Your Finances

20. Mint

Mint is not necessarily made for real estate. But it does qualify for the best real estate websites to visit when you’re planning to buy a property. What makes Mint so powerful relates to how it tracks all your bills.

This free app can be connected to your credit card, bank account, and retirement accounts. This means that you just have to visit one place to see your current financial standing. Buying a property requires a significant cash outlay that you have to keep a close eye on your finances. This is particularly helpful when you’re saving for a deposit.

When Your Focus in on Improving Your Credit Score

21. Credit Karma

Credit Karma is a website where you can register and track your credit score. We all know how your credit score can affect your ability to take out loans. Through this website, you can track important changed in your credit reports and gain access to articles to improve your financial literacy.

You can also have access to calculators and tools and reviews of loan and credit card products. This place is a useful resource for anyone looking to compare products and make informed decisions.

Government Real Estate Websites to Check Out

22. Housing and Urban Development and Local Websites Related to Real Estate

When it comes to housing, it pays to visit government websites related to housing. Your first stop should include the Housing and Urban Development website. Whether you are a first time home buyer or not, you should visit this website. There are several government programs which could ease the financial burden of buying a home.

Aside from that, you can also find the website of the local HUD office in your locality. This place is a one-stop-shop for all things related to housing. So, failure to visit this website when you are planning to buy a home is a big mistake.

Plus, the local HUD website usually provides information on grants and programs for home buyers. If you are looking for first time home buyer grants NY, for instance, you should visit NYC Housing Preservation & Development.

23. Grants.gov

Down payment fees for property purchases cost a lot of money. The same goes for repairs and other improvements. Depending on your status, employment or location, you may qualify for a grant.

Grants come with certain terms such as using the property as your primary residence for a minimum number of years. But if you are confident about meeting the terms, you are basically accepting free money from the government when you receive a grant.

First time home buyer grants, for instance, could provide down payment and closing cost assistance.

Grants.gov is one website where you can find grants you may qualify for. Take note that there are all sorts of grants here, not just for home buyers. So, you want to make your search terms more specific.

Speaking of government websites, you can also check out more information about shopping for a mortgage from the Federal Trade Commission’s section on Homes and Mortgages.

Informed Decisions, Better Deals

Real estate can be a profitable industry, for both buyers and sellers. Before snatching the first property sold at a discount price, learn about the process first and these real estate websites can serve as a starting point. Learning more about the real estate industry allows you to make informed decisions whether you are a buyer or a seller.

Related Articles:

11 First Time Home Buyer Grants and Programs You Need to Know
How to Make a Realistic Budget for Buying a House
How to Buy a House in 8 Easy Steps
3 Essential Benefits for First Time Home Buyers
first time home buyer grants NY

The Top 9 First Time Home Buyer Grants in NY

How much does it cost to buy a home in New York? With the median home listing price for the state being $411,000, it pays to know about first time home buyer grants in NY.

Here’s a list of grants open to New York resident looking for down payment and closing cost assistance programs.

Take note that these grants are specific to the state of New York. Check out this article on 11 First Time Home Buyer Grants You Need to Know for grants available throughout the country.

First Time Home Buyer Grants NY for Home Purchases Anywhere in New York

First time home buyer grants NY can be statewide or it may be limited to residents or homebuyers in a particular city or county. For statewide grants, here are some programs you may qualify for.

NYSAR Housing Opportunities Foundation, Inc

If you are working with a realtor for an owner-occupied loan, you may be able to qualify for a grant from NYSAR Housing Opportunities Foundation, Inc for first time home buyers. The organization provides grants amounting to $2,000. Another thing to note is that this grant should be applied to the down payment and closing costs.

To qualify, your income must be within 110% of SONYMA’s defined income limit. The property’s price must also be within 110% of SONYMA’s purchase price limit.

SONYMA’s Down Payment Assistance Loan

The Down Payment Assistance Loan (DPAL) extended by SONYMA is a forgivable 0% loan with a 10-year retention period. The value of the grant is the higher amount between $3,000 and 3% of the purchase price with a $15,000 price cap.

While DPAL is attractive there’s a catch. Unless you are taking out a loan under the ENERGY STAR program, Graduate to Homeownership or Homes for Veterans, the mortgage for the attached account will be 0.375% higher.

Bonus Tip: Ask your SONYMA lender if they offer DPAL. Not all lenders offer this grant.

Federal Home Loan Bank First Time Home Buyer Grants NY

The Federal Home Loan Bank of New York (FHLBNY) offers different grants to residents of New York. Here are two programs that might benefit first time home buyers in New York.

First Home Clubs

Under the First Home Clubs program, the bank will match every $1 deposited to a members account with $4. The maximum matching funds are $7,500 per household. Matching funds should only be used for down payment and closing costs. So, the bank will not match funds deposited in another bank. Moreover, your average median income should not exceed 80% for your household size to be eligible. You can find the full guidelines for the First Home Clubs program at the FHLBNY’s website.

Home Buyer Dream Program

Home Buyer Dream Program is another grant from the FHLBNY. For this grant, you can receive as much as $14,500 for households with an income of at most 80% of the AMI. The grant also comes in the form of a forgivable loan.

You can use this fund for one-to-four family dwelling, condominiums, co-ops, and manufactured houses. The loan has a five year retention period, after which the loan will be forgiven. Check out the full guidelines for the Home Buyer Dream Program here.

Grants Open to Specific Areas in New York

When looking for first time home buyer grants, it also makes sense to start with the locality where you plan to purchase a property. Here are some first time home buyer grants for NY state residents administered through the local county or city.

Take note that this is not an all-inclusive list.

Western New York

Employer Assisted Housing Initiative Grant – Rochester

Is your employer participating in the City of Rochester’s Employer Assisted Housing Initiative (EAHI)? If so, you may be eligible for a dollar for dollar match of up to $3,000. Participating employers will have their own guidelines and the term involves living in the property for a minimum of five years.

Central New York

Home HeadQuarters Closing Cost Assistance – Syracuse

If you are planning to purchase a home located in Syracuse and your household income falls within the 80% AMI, you may be eligible for the Home HeadQuarters Closing Cost Assistance.

Under this grant, you may receive up to $4,000 through a deferred loan forgivable after five years. The home you purchase should be your primary residence. Moreover, the property should be a single or two-family home with a value of no more than $120,000.

North Country

Community Housing Innovations Renters to Owners- Westchester, Nassau, and Suffolk

Does your income fall within 112% of the Low-Income Limit? Is the property you’re planning to buy is in Westchester, Nassau or Suffolk?

If you answered yes to both questions, you may be eligible for a grant of up to $25,000 from CHI. The assistance comes in the form of a loan which will be forgiven after 10 years.

New York City

HDP HomeFirst Down Payment Assistance

Is your total household income within 80% of the area median income?

If you’re not sure, hop on to the City of New York website to do a quick search. If yes, you may qualify for as much as $40,000 assistance from the Housing Preservation & Development’s HomeFirst Down Payment Assistance. This is one of the first time home buyer grants in NY that applies to properties located in any of the five boroughs in New York City.

Moreover, this assistance comes in the form of a forgivable loan which will revert to 0 after 10 years. Aside from being a first-time homebuyer and the income limits, you also need to complete a homebuyer education course from a counseling agency approved by HDP. In addition, the home you purchased should meet the Housing Quality Standards inspection.  The HDP website provides the full guidelines on applying for this grant.

Neighborhood LIFT -Brooklyn, Bronx or Queens

Is the property you’re eyeing located in Brooklyn, Bronx or Queens? If yes, you may be eligible for the Neighborhood Housing Services of New grant which offers up to $20,000 as down payment assistance. But there’s also an income limit you need to meet to qualify for this program.

You may take the eligibility quiz for this grant here.

First Time Home Buyer Grants NY Exist For a Reason

Most first time home buyer grants in New York are for low-income households. So, there’s a higher chance that you will be eligible for a grant if you belong to this category. Needless to say, it’s still worth asking your broker or local housing authority about any grants which may apply to you.

When it comes to buying a house, expect the process to be expensive. Fortunately, there are some grants which may ease the burden but you have to comply with the terms of the grant.

If you are considering how to buy a home but you’re not sure where to start, start with this guide on How to Buy a House.