Tag Archives: New Home Buyer

Step-By-Step Homebuying

1. Get a REALTOR®

In the maze of forms, financing, inspections, marketing, pricing, and negotiating, it makes sense to work with professionals who know the community and much more. It is always best to use an Experienced local REALTOR® who serves your area.  The REALTOR® is the “Hub” of the transaction and will refer clients to the best lenders, home inspectors, closing/escrow companies, and moving companies.  A good REALTOR® will know who is experienced, professional, licensed (when necessary), insured and provides great service to his/her clients.

2. Get a Mortgage Pre-Approval

Most first-time buyers need to finance their home purchase, and a consultation with a preferred mortgage lender is a crucial step in the process. Find out how much you can afford before you begin your home search.  You will need a mortgage pre-approval before you can submit an Offer; we will show you homes as soon as you receive a pre-approval.  **In Fact, due to COVID many Sellers instruct listing agents to only show their home to individuals that are pre-approved for a mortgage.

Get the Right Mortgage for Your Situation

  • There are many different types of mortgage programs out there, but as a first-time home buyer, you should be aware of the three basics: adjustable rate, fixed rate and interest-only.
  • Adjustable rate mortgages (ARMs) are short-term mortgages that offer an interest rate that is fixed for a short period, usually between one to seven years. After that, the interest rate can adjust every year up or down, depending on the market. These are good for people who don’t plan on living in their home very long and/or are looking for a lower interest rate and payment.  I would STRONGLY advise against an adjustable mortgage now.
  • Fixed-rate mortgages are more traditional and offer a fixed interest rate (and thus a fixed monthly payment) for a longer period, usually 15 or 30 years, though they’re available in 20 or 25 year terms. These are good for people who like a predictable payment and plan on living in their home for a long time.
  • Both fixed and adjustable rate mortgages can have an interest-only payment. What this means is that for a certain amount of time during the loan term, you’re allowed to pay only enough to cover the interest portion of your payment. You can still pay principal when you wish, but don’t have to if your budget is tight. There is a myth that with interest-only mortgages, you don’t build equity. This is not necessarily true, since you can build equity through home appreciation. The benefit to interest-only mortgages is that you increase your cash flow by not paying principal.

3. Look at Homes

A quick search on our site https://www.homes4saleinri.com/ will bring up thousands of homes for sale.  Educating yourself on your local market and working with an experienced REALTOR®, can help you narrow your priorities and make an informed decision about which home to choose.  Good REALTORS® will ask you questions about what you want and need in a home and compare that with what you can afford.  When you receive listings to consider, before scheduling an appointment drive by them to see if you like the neighborhood.  The housing inventory is tight in southern New England, so don’t get frustrated if other buyers get an offer in before you, or they offer more money.  That happens A LOT in this market.

4. Choose a Home

While no one can know for sure what will happen to housing values, if you choose to buy a home that meets your needs and priorities, you’ll be happy living in it for years to come. Once you and the seller have reached agreement on a price, the house will go into escrow, which is the time-period it takes to complete all of the remaining steps in the home buying process. 

Don’t forget people make money in real estate when they buy it, NOT when they sell it.  A good, experienced REALTOR® will help you determine the best “Value” for your situation.

5. Home Inspection

Typically, purchase offers are contingent on a home inspection of the property to check for signs of structural damage or things that may need fixing. Your real estate agent usually will help you arrange to have this inspection conducted within a few days of your offer being accepted by the seller. This contingency protects you by giving you a chance to renegotiate your offer or withdraw it without penalty if the inspection reveals significant material damage.

Remember, a Home Inspection is a “snapshot” of the condition of home on a specific day at aa specific time. Home inspectors typically don’t have access to 2/3’s of the home so they cannot be expected to inspect/observe conditions for areas they cannot see. They cannot see behind paneling, inside walls, or around boxes stacked up in a basement or garage.

You will receive a report on the home inspector’s findings. You can then decide if you want to ask the seller to fix anything on the property before closing the sale. Before the sale closes, you will have a walk-through of the house, which gives you the chance to confirm that any agreed-upon repairs have been made.

6. Funding

The cost of financing your home purchase is usually greater than the price of the home itself (after interest, closing costs, and taxes are added). Get as much information as possible regarding your mortgage options and other costs. Your Lender will take care of all of the financing details, paperwork, arrange the appraisal and keep you informed.

7. Make an Offer

While much attention is paid to the asking price of a home, a proposal to buy includes both the price and terms. In some cases, terms can represent thousands of dollars in additional value—or additional costs—for buyers.

8. Find Insurance

No homeowner should be without insurance. Real estate insurance protects owners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime.  Joe can recommend a good insurance agent who is experienced in working with home buyers – especially first time home buyers.

9. Movers

It is highly recommended that you use the services of a licensed, insured, experienced mover.  Whether moving across town or across the country, utilize the services of a professional mover.  The potential cost of moving yourself or with “amateur” movers can be significant.  Damage to furniture, floors, walls, the cost of renting a truck, quilts, dollies, straps, etc, quickly add up.  Then there is always the possibility of bodily injury; hurting your back or someone sustaining serious injury that could involve lawsuits.

The fees charged by a professional mover usually are less than the above potentialities.

The Moving Company by preferred Luca & Marano

10.  The Closing

Before the Closing, the Buyer’s REALTOR® should arrange for a Final Walk-Through, of the house to confirm that all of the Seller’s belongings that should have been removed, and those that should remain are still in the house, and that no damage transpired overnight.

Preferred by Luca & Marano

The closing process, also known as “settlement” or “escrow,” is increasingly computerized and does vary in different areas. In practice, closings bring together a variety of parties (Buyer and Seller, Closing/Escrow Representative, and sometimes a Seller’s Closing Attorney) who are part of the real estate transaction.

10. Post Closing

Don’t forget to have the utilities, internet access, landline telephone service etc switched into your name.  It is much easier to switch service while it is still “on” compared to after it has been terminated.

Millennials First Generation Worse Off Than Parents? What Gives?

Many things have been said about the millennial generation (Born 1981-1996) over the years.  The negative generalizations that are frequently applied to this generation in the media are “entitled,” “narcissistic” and “lazy.” (Incidentally, they are tired of being blamed for just about everything.)  However, there are some facts worth considering

 

In 1992                                                            In 2018

Average Home Cost:

$80,626                                                            >$265,000

Average Student Debt:

$5,200                                                               >$35,000

Average Family Income (after taxes)

$59,000                                                              $86,419

Fixed Mortgage Rate:

9.71%                                                                  4.65%

 

Today the average home costs 300% more, student debt averages almost 700% more but family income is only 46% greater than in 1992.  The good news is that the average fixed rate mortgage is about half what it was in 1992.  Unfortunately, the average millennial, due to high student debt, has a credit score of 625  (per NerdWallet) so they may not qualify for the lowest mortgage rates available. A Millennial today is worth 21% less than his 1983 counterpart while the net worth of a 60 year old is twice what it was in 1983.  So young folks are getting poorer while older folks are getting richer.  Is it any wonder that New Home Creation by this generation after graduating from post-secondary educational institutions has been delayed 2-3 years? The Quick Answer is “No”.   These are the contributing factors that support the statistics that show millennials are worse off than their parents.

GOOD NEWS: This generation is not willing to engage in profligate spending like some preceding generations.  They are more likely to move back home to save money to pay down student debt.  Contrary to messages on late-night comedy shows, they do not want  to move back home into their parents’ basement to play video games.  In fact, my personal experience with Millennials is that they are not likely to purchase a home for a price as high as their mortgage pre-approval will allow.  Other generations frequently spend every dollar that their pre-approval will permit.  It is not uncommon for millennial buyers to have a mortgage pre-approval for an amount that is 10-20% greater than what they actually want to spend.  Why? these buyers witnessed first hand when friends, neighbors, or family members were unemployed, and/or under-employed, and had to Short Sale their homes, or worse, experience a foreclosure.  That experience is still very fresh in their memory, so they are willing to take the steps necessary to lessen the chance that they will have such a traumatic experience.

Can anything be done to mitigate this situation? Possibly.  The National Association of REALTORS®  has a Federal Policy Position that would provide tax relief to student debt holders and employers who assist their employees’ student loan debt burdens.  In addition, the National Association of REALTORS® supports policies that provide tax relief to those borrowers with forgiven student debt.  We need to convey to our political representatives in Washington DC that there are things that can be done to address the student debt issue…if we work together.

Not all is “gloom and doom”.  This is the most educated generation, and the most tech-savy generation, in history.  As the economy rebounds real wages will increase, and due to their fiscal discipline, these consumers will be well-positioned to save money at a rate that has not been seen “in generations” 😉

The millennial generation is fantastic for the housing industry because their shear  numbers indicate that demand for homes will not abate for years.  So all of my REALTOR® colleagues across the country can rest assured that the demographics favor a sustained positive environment for home sales.  For everyone else this is also good news because when the housing market is strong the economy is not likely to falter.