Why a Home Inspection Is Crucial Before You Buy a New Home

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Make sure the sales contract on your new house or condominium includes a home inspection clause before you sign it. The inspection clause should clearly state that your final obligation to buy depends on the outcome of a professional home inspection.

When it comes to the largest single investment you’ll probably ever make, you don’t want any unpleasant surprises. You should know as much as you can about the house before the sale goes through and is finalized. Once you have the inspection results, you’ll have the facts to make your decision with a greater sense of confidence. A home inspection should identify any needed repairs or builder oversights. The inspection can also tell you about required maintenance needed to keep the house in good standing shape.

A professional home inspection is not an appraisal to determine the home’s market value. Nor is it a municipal inspection to confirm compliance with local building codes. A home inspection is simply an examination of the current condition of a house to describe its physical condition and identify any components and systems that may need major repair or flat out replacement.

Hire an experienced and unbiased professional inspector to carefully visually examine the building’s structure and systems. A standard inspection should cover the condition of the home’s roof, attic and visible insulation; along with foundation, basement and structural components, interior plumbing and electrical system; heating system; central air conditioning system; walls, ceilings, floors, windows and doors.

Finding certain problems doesn’t necessarily mean you should flat out not buy the house. It simply means that you now have the knowledge you need make a final informed decision. You may not want to pay for the repairs or maybe simply unwilling to face the work needed to make those repairs.  If major problems are found, a seller may outright agree to either reduce the asking price or make repairs himself.

Even if the house you are buying appears in good condition or you are taking delivery of a newly constructed home from a builder, you should still always get a home inspection. The inspector’s written report will give you the information and confidence you’ll need to make a good buying choice.

Buyers Ulitmately Pay a Price in PMI for Their Low Down Payments

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Mortgage lenders have begun requiring home buyers to either make a 20 percent down payment or buy private mortgage insurance in the wake of the mortgage meltdown. Some mortgage lenders have reduced the required down payment in the last couple of years, and they will now accept mortgage loans with only 5 percent or 10 percent down.

Even with a lower down payment requirement, mortgage lenders will require private mortgage insurance as a safety net for protection against the buyer’s possible default or failure to make payments on the loan. Lenders remain tough on borrowers as they are will require good credit and a low-debt-to-income ratio.

This is the main reason that making a significant down payment on your home is important. Private mortgage insurance is unfortunately expensive. The fees will inevitably vary based off of your credit score and the amount placed for down payment, but they can range from about 0.3 percent to 1.5 percent of the total loan amount. The amount that PMI typically adds to your annual mortgage payment is about 0.5 percent of the total loan.

Borrowers can actually pay for private mortgage insurance with a large upfront payment, but most PMI policies will require the monthly payment.

Your lender is required by law to let you know when you close on the house how long it will take to pay down the loan enough so that you can cancel mortgage insurance. This will usually take up to several years. Your lender is required to automatically cancel PMI once your outstanding loan balance falls to 78 percent of the home’s value.

Mortgage lenders must also provide you with an annual statement that tells you where to call for information about canceling your mortgage insurance.

Whether your PMI premiums are actually tax-deductible is inevitably decided by Congress and may vary by the year. Check with your tax preparer to see if your premiums can be considered deductible.

 

 

Know About Your Mortgage Loan Possibilities Before House Hunting

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Obviously, everyone should know exactly how much house they can actually afford to buy before they end up going online to shop or begin cruising neighborhoods scouting out the “For Sale” signs.

Generally, you can expect to acquire a home loan that is roughly two and a half times your gross annual salary. Your gross annual salary is essentially the total amount you earn in a year before taxes are deducted.

Mortgage lenders will use this to calculate your loan eligibility based on your income, credit and debt. A poor credit history and heavy debt will create a significant sense of unease on the amount lenders will be actually willing to risk. Another way to look at the amount you should borrow is to make monthly mortgage payments that are no higher than 36 percent of your gross monthly income.

Lenders can tell you if your other debts or financial obligations will reduce the amount of mortgage they will lend. A good way to finally get started is to get pre-approval from a lender. You will want to get a rough idea of what you can actually afford by finding an online mortgage calculator even before you begin to consult a lender. Some reputable online mortgage calculators include money.cnn.com and bankrate.com.

Mortgage calculators will tell how much your monthly payments would be based on the loan amount, loan term and interest rate. However, they don’t address the down payment you will make, and that amount is another important factor in how much you can actually afford.

A 20 percent down payment can open the door to getting a larger home loan, while one below 20 percent probably means you will need to put some effort into finding a lender. Some private lenders may actually accept less. Also, public agencies can provide you with a low down payment loan through private mortgage companies and banks. Be sure to check with the Federal Housing Administration, Fannie Mae, Freddie Mac and the Department of Veterans Affairs if you are interested in a loan with a down payment below 20 percent.

You Have to Live in New York City for 18 Years to make Buying Worth It

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The median sale price for a home in New York City is $1.2 million. A key factor when deciding whether to buy or rent with incredibly high prices like these, is to know exactly how long you plan on staying in that home.

SmartAsset calculated how long it would take to make buying a home worth your money, which for New York City was 18.3 years.  This was calculated for a household earning $100,000 a year, and used data for the average mortgage from the 2012 American Community Survey.

There are a myriad of different factors that can lead to that number changing, but for the average household it will be quite a long time before you can safely say you’re getting your money’s worth on a house in NYC.

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Tips to Paying Off Your Mortgage Faster

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For homeowners out there- old or new, finally paying off your mortgage is a dream come true. Having this huge financial burden lifted off your back will free up a lot of space in your monthly budget.

Be sure to avoid a short-term mortgage as an easy way to keep you out of a financial bind, as a 15-year mortgage can financially be much tougher to pay off than a 30 year one.

Another step to paying off your mortgage more quickly is to ensure that you’re actually paying down your principle.  This is to ensure you are not throwing money away towards only interest rates, but rather toward the actual loan itself.

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Your Credit Score Will Ultimately Determine the Cost Of Your Mortgage Loan

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Your credit score is absolutely crucial when you are applying for a home mortgage loan because a low credit score will inevitably translate to paying higher interest rates. In fact, a low credit score may even prevent you from attaining a mortgage loan at all from certain lenders.

To learn your credit score, you should obtain reports from the three major credit agencies. Equifax, Experian and Transunion track your credit history based on reports they receive from your credit card, department store, auto loan, mortgage loan and other loan accounts. Check for any possible errors, and contact the credit agencies for corrections if you find any mistakes. You don’t want to lose out on acquiring your dream home because you found out too late that there is an error in your credit report, ultimately devastating your credit score.

The law requires the three credit agencies to provide one free report to you each year. Also check out www.creditkarma.com for a free credit report at any time.

You may find your FICO score at Fair Isaac’s MyFICO.com. Fair Isaac created the formula that the credit agencies use to calculate your credit score. The FICO score is used by 70 percent to 80 percent of mortgage lenders so it is important to be aware of this. FICO scores will range from 350 to 850. A 723 score is about the median. Lenders will generally start to offer better mortgage interest rates at around the 720 range.

Some lenders actually provide mortgage loans that do not require income verification. These loans are used by home buyers who do not have consistent income or who need to obtain a home loan quickly. However, it’s important to remember that a FICO score of at least 680 is usually needed for this type of loan.

Luckily, first-time buyers can obtain a Federal Housing Administration (FHA) loan generally with a score of about 630 or higher. FHA’s 2012 standards require a FICO score of at least 580 for a 3.5 percent down payment. Fortunately, new borrowers with a FICO score lower than 580 may still qualify for an FHA loan, however they will be obligated to make a down payment of at least 10 percent.

Get A C.L.U.E. Before you Buy your New Home

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A C.L.U.E. report stands for a Comprehensive Loss Underwriting Exchange.  The “exchange” in this particular situation represents the information that the home insurance loss underwrites about home insurance claims.

Based off an article at Zillow.com, one in every fifteen homes possesses an insurance claim every year.  This is something that could potentially be very important when buying your new home, as insurance claims could show any significant damage that has been previously inflicted onto a home you are looking at and potentially considering buying.  The top five claims you should look out for are wind and hail, water damage, vandalism, theft, and fire.

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Are You Ready to Buy a Home?

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Naturally, shopping around for a new home can be a very overwhelming and especially daunting task, as it is a life decision you could be living with for the next 30 years, or even more.  Taking this search seriously is a vital part towards finding your dream home, but there are some signs that may indicate that you may not be one hundred percent ready to make the commitment.

You may be out now searching for a new home, but there is a clear difference between simply window shopping and actually seriously shopping.  Some of the following may be signs that you are not quite ready to buy a new home:

  1. You only attend open houses and no private showings.
  2. You are not exactly sure where you want to live.
  3.  You’ve looked at a house more than two times.

These are all signs that you may be too hesitant at the moment to buy a new home so make sure you have these in order before you start to seriously consider purchasing your new home.

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Recent Stock Meltdown May Help Buy Your New Home

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Because of the Fed’s recent decision to raise interest rates, along with inquiries about China’s economy, now may be a great time to buy the home you’ve always dreamed of.

Money going into Treasury’s now has mortgage rates at a two-month low. 30 year mortgages are now at about 3.92%!

The housing market has successfully been one of the strongest economic drivers in the past year.  This has ultimately led to the sales of homes finishing at an impressive new high since before the 2008 housing market crash.