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Five hidden costs of buying a home

7/30/2014

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So you found your dream home in a neighborhood you love, it's in your price range, and you're ready to get the keys and move in ASAP. Everything is perfect - that is, until you realize that there are additional fees that could put a damper on your home-buying experience.

According to Lindsey Michael, a mortgage loan consultant at Kinecta Federal Credit Union in San Diego, California, the hidden costs of buying a home can be extremely complex.

"Typically the seller of the home and the lender fronting the money are not always the ones charging all these fees, so the more a buyer can educate themselves on what to expect, the easier the closing will be," says Michael.

One thing is for sure: Knowing about these hidden costs can help you know exactly how much of a loan you'll need to cover all your bases. Read on for five things you should add into the bottom line of your home purchase to avoid any surprises.

Hidden Cost #1 - Property Tax

No matter what type of mortgage you have, you'll most likely have to pay property taxes. Your property taxes could either be calculated as a percentage of the purchase price or the estimated value of the home, says Jeremy David Schachter, an Arizona-based mortgage advisor and branch manager at Pinnacle Capital Mortgage.

"The best way to get a grip on this charge and stay ahead of the game even before you put in an offer on a new home or begin a refinance, is to speak with a title or escrow representative," says Michael. "They can give you an accurate breakdown of what to expect to pay, because these fees change all the time."

One other piece of advice: Michael says you can get certain property tax breaks as a homebuyer that you might not have prior knowledge of.

"If the property is classified as a historical property, in many states, there is a giant tax break to take advantage of," says Michael. For example, "In California, the Mills Act guarantees low taxes for those that have been approved, and many other states participate in similar programs which would save thousands per year on taxes."

Other tax exemptions that could save you thousands, she says, are available for things like installing solar panels on your new property. The bottom line is to take the time to research and see what tax breaks may be available to you in your area.

Hidden Cost #2 - Home Association Fees
If you buy a home within a homeowner's association, often you'll be required to pay a monthly or quarterly fee, known as a homeowner's association fee (HOA), that covers things like maintenance of your neighborhood's shared spaces, gatherings, and other miscellaneous expenses. Generally, the more expensive and frequent the services the neighborhood board provides, the higher the HOA will be.

"HOA fees are very common," says Schacter. When looking for a new home, he says the listing should state if there is a homeowner's association or not in the neighborhood. If so, there will be an HOA fee for you to pay.

Schacter adds that once your offer is accepted, there should also be an addendum you sign to acknowledge the HOA fee. However, "some fees that might be a surprise at closing might be HOA transfer fees and other processing fees," says Schacter. "The title company usually orders a HOA buyer package for the transfer and can give a more accurate picture of the fees before the buyer goes to the closing table."

Best to hone in on this number before you close so you're not blindsided by it, advises Schacter, and be on alert for rises over the duration of your homeownership, as fees can rise or be amended as needed for communal repairs or new provisions. Unfortunately, short of moving, you have no choice but to pay your HOA. There's no negotiation here, and no real restrictions on increases. Your best recourse is educating yourself so you can add this payment into your bottom line and budget for it.


Hidden Cost #3 - Home Inspection Fees

Before you put in an offer on a house, Michael says you should always schedule a home inspection, where a professional walks through your space looking for structural issues and potential housing problems. Typically, you'll have to front this cost out of pocket, but Michaels says it's worth every penny.

"Even if an inspection is not required, it's worth paying a professional to evaluate the house so you can avoid spending hundreds of thousands on a train wreck disguised as a house," she says. But how much will it add to the upfront cost of your home?

According to Michael, home Inspections can run anywhere from $100 to close to $1,000 depending on the city, square footage, number of structures on the property, and property type. Schacter says pools, spas, and guest houses will also drive up the cost of your inspection, as will the need for any type of roofing, radon, or pest control inspection hired out to an additional company.

While most professionals will give you a ballpark inspection cost estimate, Michael has a few tips for potentially lowering the fee for this service.

"A great way to cut costs on a home inspection is to put an ad in a free local classified section offering a gig to a local inspector, and put the price you are willing to pay," says Michael. "Then let the 'applicants' come to you! Inspectors occasionally may offer half off specials when their business is slowing down, so why not beat them to the punch."

Having to pay this one-time inspection fee may be a bummer, but it does have it's benefits, says Michael.

"There are simply things that you might not think to check, such as if every light switch works, if there is moisture under the sinks or hidden pipes, or if there is any sign of water damage under the house," she says. "If anything like this is found, you can use the report to get up to thousands of dollars knocked off your sale price or to get the seller to perform the repairs. Definitely show up to the inspection and ask away!"

She advises having the pro point out the details of any issue to you in person so you can explain it when the time comes to fix it. "For any repairs needed, call up a licensed contractor, and have them come over and give a bid on how much it will cost to repair it."

The next important step is to get that quote in writing so that you can negotiate it off the price of the home, she says. If you don't have a quote on hand, the seller may lowball your discount (because they think it should cost less to fix) or try do it themselves, but not according to code. If a discount selling price is agreed upon, then you should inform your lender to be sure your loan takes that change into account.

Hidden Cost #4 - Private Mortgage Insurance

Schacter defines private mortgage insurance (PMI) as an insurance policy paid by the borrower (you) for the lender's protection in the event that the borrower defaults on the loan. Depending on the type of loan you're using to purchase your home and the amount of cash you have for your down payment, you may or may not need PMI. According to Schacter, a well-educated and honest lender can give you an accurate PMI estimate based on your loan program, credit score, and down payment.

"FHA loans have different PMI rates versus that of a conventional loan," says Schacter. "Depending on what program you go with, your PMI amount can vary. For FHA loans, PMI is required on loans no matter what down payment you put. For conventional loans, PMI is required for any loan with less than a 20 percent down payment. If you are putting down 20 percent on a conventional loan, you would not have PMI."

Looking at the above criteria, if you now know that you will have to pay PMI, you're probably wondering how much PMI will cost. Schacter says rates for conventional loans have actually come down in recent years. "If you have fairly good credit, the rates are not that high," he says. "It is based on the payment you will be putting down, your credit score (the lower your score, the higher your PMI), and the length of the loan."

Another silver lining, says Michael, is that one day, you can get rid of your PMI payment entirely if you have a convention loan. Once the loan-to-value ratio (LTV) is at or below 80 percent, Michael says PMI is no longer required because you are no longer considered a risk of defaulting on your loan. If your home increases in value, that could help you get to the magic LTV number faster, she says, as well.

Hidden Cost #5 - Lender's Fees

If we've established anything thus far, it's that getting a mortgage can be a complicated and nuanced process. It's important to remember that a lender is performing a service for you by guiding you through the mortgage application process and approving your loan. And for that guidance and work, lenders charge a fee which can be quite pricey.

"The lender has underwriting fees, possibly processing fees, and maybe some additional costs," says Schachter. "Depending on the lender, costs can vary." As a result, Schachter recommends getting at least two estimates from different lenders to compare interest rates, fees, and closing costs.

"Depending on the loan program and interest rates, some lenders can even offer a credit towards closing costs," so be sure to inquire about that as well, says Schachter. However, while shopping around is a great, he also cautions against picking a lender solely on costs.

"Service, reputation, and recommendations always should be taken into consideration," he says.

A final way to reduce fees, he says, is by being a repeat customer, either by refinancing on your current home with your original lender (if your interest rate was negotiated when rates were sky high before) or by working with your previous mortgage lender when buying a new home.



Original article; 
https://homes.yahoo.com/news/hidden-costs-of-buying-home-055210678.html

Author: Danielle Blundell



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8 big mistakes first-time homebuyers make

7/17/2014

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The housing market is hot, thanks to favorable interest rates and home prices that remain relatively low around much of the country. 

According to the National Association of Realtors, pending home sales rose sharply in May, with lower mortgage rates and increased inventory pushing home sales upward in all four regions of the U.S.

And as underwriters start to ease their standards—the secondary mortgage market is starting to come back for buyers with "squeaky clean" finances, according to John Barrentine, co-founder and CEO of RED Real Estate Group—industry experts are expecting the market to continue to make significant gains in the second half of the year.

But along with a hot housing market comes increased competition for homes.

"There's not a high volume of home inventory out there," said David Norris, president and COO at non-bank mortgage lender loanDepot. "And many of the lower-priced homes are going for cash."

Given the complexities associated with the costs of buying a house, jumping into the market and effectively competing with aggressive bids can be daunting. If done wrong, a home purchase can result in enough financial regrets to last a lifetime for first-time homebuyers.

Here are eight of the most common mistakes made by first-time buyers—and how to avoid them.


1. They don't even consider renting as the better financial decision.

Despite all the good that comes with owning a house—home equity, tax benefits and comfort in knowing what your housing costs are going to be over a period of time—when it comes to the heap of costs associated with buying, it may be a better deal financially to rent. (Buyers can find help with online calculators that compute home costs into equivalent monthly rents.)

The first question is, "How long do you expect to be there? The average young person is at their job for two to four years, and when you start to amortize closing costs over that period of time, it just doesn't make sense," said Brad Wheelock, a senior vice president and branch director at RBC Wealth Management. "What's the likelihood that you'll get out of that home without too much financial damage?"

Buyers need to realize that all of the expenses renters never have to worry about, such as homeowner's insurance and closing costs, may end up being as much as a down payment. And that's not even including all the unseen maintenance fees.

"Lawn care can be fun, but you may decide that it's not a good use of your time and you need to find someone else to pay to do it," said Art Carden, assistant professor of economics at Samford University's Brock School of Business.

2. They’re not prepared to compete in an all-cash market.

Not every homebuying market today is as competitive and expensive as New York, L.A. and the San Francisco Bay Area, where housing prices are exorbitant, demand far outstrips supply and all-cash offers are common. But given the expectation that mortgage rates and home prices will continue to rise around the country over the next few years, the most important thing prospective buyers can do is be financially prepared as early as possible.

Buyers must be ready to make very quick decisions as their markets heat up. "Much of the lower-priced stuff goes quickly," said loanDepot's Norris.

Before even starting your search, save as much as possible for a down payment, clean up any blemishes on your credit report and get preapproved for a loan. "The first-time homebuyer needs to be very savvy and have an upfront preapproval letter that will help give the seller confidence that [the buyer] can close the loan and obtain the funds," Norris said.

A fault of many first-time buyers is impatience, said Cara Pierce, a certified housing counselor with ClearPoint Credit Counseling Solutions. "[Buying a home] is really like finding a job—it's going to take a lot of time to prepare. That way, when the deal comes along, you're ready to pounce on it."

3. They put the car before the home.

Your debt-to-income ratio is one of the first things lenders look at when it comes to assessing how well you'll be able to afford mortgage payments. "It's a big deal for folks not to load themselves with debt before they buy a house," said Glenda Gabriel, a neighborhood lending executive at Bank of America. "[Debt] could be the difference between approval and not being approved."

According to loanDepot's Norris, customers' debt—attributed today mostly to student loans followed by things like car payments—has gone on average from $40,000 in 2010 to $51,000 today. "It would be much easier to own a home if you can show a history of saving and not have gotten yourself into too much debt," he said.

4. They put too much faith in online loan information.


While many credit counselors and financial advisors advocate researching mortgages online—it's a good place to check with the city or county where you want to buy to see if you qualify for products like VA loans and FHA loans—interviewing and working with lenders in person can greatly help demystify the lending process. The process can differ based on a buyer's qualifications, how a mortgage company operates and current market economics.

Although half of borrowers claim to grasp basic loan terms and conditions, more than 2 out of every 5 bad experiences stem from misunderstandings over fees, terms and ownership costs, according to a recent survey by PricewaterhouseCoopers.

"Go to different places and talk to loan officers to get a feel for what the differences are between similar types of loans," said ClearPoint's Pierce, who suggests attending first-time homebuying classes. "Sometimes a company won't charge an origination fee, but then the interest rate is higher … and in some cases you can put many of the upfront costs—closing costs, title insurance—into the loan, which makes your balance larger."

5. They put too much faith in online home values.

When it comes to checking out houses and neighborhoods online, real estate agents have become wary of what clients find at sites like Zillow (Z) and Trulia (TRLA), which can give buyers a false sense of home values.

"My rant of the moment is Zillow and what we have to undo," said RED's Barrentine. "If a buyer believes that the actual value of the property is $1.1 million [as listed online] when it's really $1.3 million, it's a real disservice to the client. You really should [spend time] with someone that understands the market, someone who's there day in and day out."

Driving around neighborhoods with an agent highlights the subtleties of a given market, things not easily represented online—like how one side of a canyon gets darker earlier, making it less valuable than the other side. "How would someone [searching these sites] know that at the top of El Granada, California, there's a million-dollar ocean view when the price on Zillow is $700,000?" said Nate Serdy, a Realtor with Alain Pinel Realtors in the San Francisco metro area.

Kirsten and Darrell Becker, co-owners of Becker Studios in Santa Barbara, California, suggest buyers step out of their comfort zone and drive by prospective houses at night. "Hear what it's like when not everyone is at work ... hear the roosters and the crows" that may live in neighbors' yards, Kirsten Becker said.

6. They skip the home inspection.

About 10 percent of recently bought homes weren't inspected, according to Bill Loden, president of the American Society of Home Inspectors. These buyers were trying to cut costs, forgoing the fee that inspectors charge to perform a two- to four-hour search to flag material defects of the property, but those defects can result in thousands of dollars of damage down the road. Inspection rates start at $450, on average, and vary depending on a home's size and how it was built, according to Loden.

"It takes a trained eye to be able to see the problems that can exist in a home," Loden said. "The inspection can also give the first-time buyer a bit of a schooling on the house and how to maintain it."

While buyers should tag along with the inspector and ask questions about cracks, water stains and odd smells, Loden cautioned that there are always "latent defects that inspectors cannot see."

Buyers should inspect basements, attics and mechanical rooms to see how well maintained they are and ask about conditions specific to certain areas—radon in the Midwest, sewers in California and active clay soils in Dallas, which can cause problems for foundations.

When looking to buy a home in an area with such soil issues, home inspectors urge buyers to call on specialists who perform foundation inspections, which run from $350 to $500 but can head off costly repairs down the road. 

"In a case where the home inspector recommends a foundation inspection, 85 percent of the homes are likely to need foundation stabilization," said Adam Green, president and principal engineer at Crosstown Engineering. "The foundation of the home is the most important structural component, bearing the weight of the entire structure. If it fails or is unstable, it will cause all kinds of damage. Costs [to fix foundation problems] can be high and ongoing if the cause isn't identified and remediated." 

Also, don't be afraid to "follow your nose," Kirsten Becker said. Mold, gas leaks and long-term dry rot can often be detected by their smell, she said.

7. They forget to check the (wrong) emotions at the door.

In a competitive market where multiple offers may essentially be the same, "the sellers will choose almost every time to sell their home to someone who [appears to] really love it," said Amy Mizner, principal of real estate firm Benoit Mizner Simon & Co. "Most buyers don't realize they are being 'interviewed' by the listing broker, and if they complain the whole time or get exasperated about what are ultimately small-ticket items, they will make a bad first impression."

While it's important to note cracks and inquire about things like potential rodent problems in wooded areas, Mizner said buyers should not become fixated on these things while seeing the home. Save those questions for a broker, who should help clients do due diligence after a home tour.

Becker said lots of factors—the house's façade isn't to your taste, for example—turn out to be relatively cheap, easy fixes. She added, "If you're being overwhelmed by red flags, often that's when you can renegotiate your deal or take advantage of an amazing location with a house that may have a functional issue that [may turn out to be] a very easy fix." 

8. They expect their home’s value to appreciate over time.

Many first-time homebuyers invest their life savings into a home, hoping to turn a healthy profit when they sell five, six or seven years down the road. "I think a lot of people got burned doing that in the 2000s," Carden said. "And while to a certain degree it's really nice to get home equity for money you'd be paying for rent, it's a large asset that's not very liquid."

Buy a house to live in, Carden said, and be prepared for lots of unseen upkeep costs that range from mowing the lawn to emergency repairs. "Stocks are far better investments than real estate," he said. "I've never had to call a plumber because a mutual fund started leaking."

Author:Maggie Overfelt
Original Article: http://www.cnbc.com/id/101837611#.

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How to Live Alone for the First Time (and Love It!)

7/7/2014

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Living alone for the first time in an apartment can be an exhilarating experience. You are free to make your home your own. You can choose the décor, which TV shows to watch and what music to play.

For many people, living alone can make them feel anxious. But there are plenty of ways to get comfortable with being on your own.

Start With a Budget

Worrying about money isn’t uncommon, but when you live alone the household expenses are all on you, which can generate some anxiety when you are new to the experience.

Skip the stress and set up your household budget before you start looking for a rental. Browse rental ads to get a feel for average rent prices, research utility and food costs in your area, and compare those expenses to your income. Once you have a budget set up, you will know how much rent and household costs you can afford and you won’t have to stress it later.

Look for Security Features

At first, living alone can have its spooky moments. Unusual noises, late nights and even scary movies can make you a little jumpy. Typically, the nerves fade as you get used to living by yourself, but a bit of security can help keep your fears at bay from the beginning.

When you are apartment hunting, look for rentals with added security features like:

  • Gated complexes
  • Exterior security doors
  • Deadbolt locks
  • Interior door chains
  • Alarm systems
Make the Place Your Own

Living alone should be fun. Before you even move in, start planning how you want to decorate each room. Choosing color schemes and décor themes ahead of time can help calm your nerves and make you excited to get into your new place.

When you are packing, don’t forget to bring a few cherished items from your old home. Blending these items with your newly purchased belongings will help make your rental feel like home.

Finally, once you have moved in, spend a weekend or two decorating. Hang pictures on the walls, add curtains in the living room and bedroom to give the space warmth, and use funny refrigerator magnets to hold up your favorite photos (and take out menus) in the kitchen. If you spend the extra time decorating early on, you’ll start to appreciate your new space.

Meet Your Neighbors

Having a sense of community really helps make a rental feel like a home. After you have given yourself time to adjust to your new rental, take some time to meet the neighbors.

If you have a community pool, visit on the weekend when people are likely to be out. If youhave a dog, take walks around the neighborhood and introduce yourself to the other pet owners. Before long, you will know everyone in the neighborhood and feel right at home


Author: Angela Colley 
Original Article:  
http://www.realtor.com/advice/live-alone-first-time-love/
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