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Category Archives: First Time Buyer

Six Things to Consider Before You Buy Your First Home

Six Things to Consider Before You Buy Your First Home

Buying a home is probably one of the biggest purchases most people ever make. It is certainly an important part of a life-long financial plan. If you’re thinking about becoming a homeowner, there are at least six things to consider before you buy your first home:

1. Your creditworthiness

Is your credit healthy? In today’s mortgage environment solid lenders are interested in your credit history.  If you have more than a couple of blemishes Six Things to Consider Before you buy your first homeon your report, some lenders may still provide you with a loan, but you may just have to pay a higher interest rate and fees.

You can request a free copy of your credit report from each of three major credit reporting agencies – Equifax, Experian, and TransUnion – once each year at AnnualCreditReport.com or call toll-free 1-877-322-8228. You are entitled to one free credit report per year.

If you have low scores or very little credit, you can work with a credit specialist to enhance your scores to the level that will help you not only be able to apply for a mortgage, but get better interest rates. [we have recommendations for credit counselors]

2. Determine How Much You Can Afford

To determine how much home you can afford, you can to online and use a “home affordability” calculator, but the results will only be a general figure which may or may not be very accurate. Good calculators will give you a range of what you may qualify for. Then you’ll need to call a lender to get pre-qualified and get a more accurate loan limit. This will also give you an estimate of what the monthly payment will be. Contact us for a list of preferred lenders.

The advice that buyers get ranges, some advise not to borrow as much as you qualify for because it’s wiser not to stretch your financial boundaries. The other school of thought says you should stretch to buy as much home as you can afford, because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow.

This is a decision only you can make. Are you in a position where you expect to make more money soon? Would you rather be conservative and fairly certain that you can make your payment without stretching financially? Make sure that whatever you do, you are comfortable with it. Consult a financial adviser to see how home ownership fits your long-range goals.

3. How long you plan to live in the home

If you buy a home and get a job transfer or decide to move after only a short time, you’ll probably end up paying money in order to sell it. The value of your home may not have appreciated enough to cover the costs that you paid to buy the home and the costs that it would take you to sell your home.

The length of time that it will take to cover those costs depends on various economic factors in the area of the home. In a normal market, most parts of the country have an average of 3-5% appreciation per year. In this case, you should plan to stay in your home at least 5-7 years to cover buying and selling costs. If the area you buy your home in experiences an economic up turn, the length of the time to cover these costs could be shortened, but the opposite is also true.

4.  How long the home will meet your needs

What features do you want in a home to satisfy your lifestyle now? What about five years from now? Depending on how long you plan to stay in your home, you’ll need to make sure that the home has the amenities that you’ll need. For example, a two-bedroom home may be perfect for a young couple with no children. If they start a family, they could quickly outgrow the space. Therefore, they should consider a home with room to grow. Could the basement be turned into a den and extra bedrooms? Could the attic be turned into a master suite? Will you have money to do renovations, to the best of your knowledge? Having an idea of what you’ll need will help you find a home that will satisfy your needs for several years.

4.  Where the money for the transaction will come from

Most homebuyers will need some money for a down payment and closing costs, unless using a VA loan, which requires no contribution from the buyer. With today’s range of loan options, having a lot of money saved for a down payment is not always necessary.  FHA loans require a 3.5% down payment, making them a top choice for first-time buyers. Some loans allow contributions from parents, some have lender grants attached. Your lender will should have various options for you to consider.

In some cases, seller contributions are allowable. If that is necessary, make sure your buyer’s agent knows that upfront, so they can do their best negotiating for you. [contact us for buyer representation]

5.  The ongoing costs of home ownership

increase your home valueMaintenance, improvements, property taxes and home insurance are all costs that are added to a monthly house payment. If you buy a condominium, you’ll have a condo fee. If you buy in certain neighborhoods, a monthly homeowners’ association (HOA) fee might be required. If these additional costs are a concern, you can choose neighborhoods without these fees.

Make sure to do your research. Your lender and your real estate agent should be good resources for the information you need to make the best decisions.

Consult A Financial Planner

You may want to consult with an accountant or financial planner to help you decide how a home purchase fits into your overall financial goals. As Realtors, we are not financial advisers, nor is any content on our blog to be considered financial advice.


Search for Homes in Central Maryland


Chris Highland
eXp Realty
301-401-5119

Explaining the Difference Between A Buyer’s Market or A Seller’s Real Estate Market

Explaining the Difference Between A Buyer’s Market or A Seller’s Real Estate Market

Buyer’s Market or Seller’s Market In Frederick Md? OR Transitioning Market?

In the Frederick real estate market a three-to-six-month supply of homes is normal. Every market is different, so these statistics might not be true for your market. In NW Washington D.C. for instance, four weeks is considered a long time for a home to be on the market.

We call it a buyer’s market when there is a large inventory of homes, more than there are buyers. A buyer then has many more choices and not a lot of competition. A market with more than a 6 month inventory is a buyer’s market. [meaning that it would take six months to sell the inventory, given no more new listings came on the market] Or, in other words, more than an average DOM, Days on Market, of 180 days.

buyers market or sellers market?
A market with an inventory that is below three months, (fewer than 90 days on market) is what we refer to as a seller’s market, with more buyers in the market than homes available. There are usually competing offers on the most desirable homes and we often see some appreciation, depending on other factors.

A balanced market is usually considered when we have 4-6 months inventory. These are generally accepted numbers. [note: In other markets, the numbers would be different, but the “days on market” statistic is the important number to know.]

A Little Market History

In Frederick Md, a “normal” market has an inventory of about 1200 – 1400 homes to be considered a balanced market. For the 2013 year, we saw a very low inventory, around 600 to 800 homes for most of the year. W saw some appreciation during 2013, about 10-11%. In 2014 the inventory grew to about 1000 – 1100 during most of the year and we saw values increase about 2 – 3%, depending on the neighborhood. In 2015, the inventory grew to an average of 1200 and we’re seeing that inventory gradually tick up to a similar number in 2016. As well, we’re seeing a pent-up demand! [to see current inventory statistics, see our latest entry in the market statistics category]


2016 is turning out to be a Balanced Market


frederick real estate

A Market in Transition

Most of the time we’re seeing the market transition. Just when you get used to a market with low inventory and high demand, then very soon the resulting appreciation changes the dynamics, and you see many more sellers listing their homes…then suddenly the see-saw tips and you are in a buyer’s market. It’s worth mentioning that the term “buyer’s market” and “seller’s market” are usually not very useful at best, and misleading at worst.

All Real Estate is Local…Even Micro-Local

Within your own city, wherever you are, there are differences in the various neighborhoods, communities and zip codes. We often see a “buyer’s market” in one community, and a “seller’s market” in a neighborhood only a few miles away. Local businesses and schools, growth and industry…they all have an affect on the local real estate market. All real estate is local.

  • We might see a particular townhouse neighborhood in demand because the local hospital is expanding. The townhouse development on the other side of town languishes.
  • We can see in certain neighborhoods that were constructed during the height of loose lending practices now have a large number of short sales. This affects the prices in that neighborhood negatively, while just a few blocks away, another neighborhood is showing appreciation.
  • Price ranges play a roll in what kind of market we see. In most of our neighborhoods, we are not seeing appreciation in the higher price ranges (above $500,000). We are seeing a longer time on the market and more price reductions to get a home sold.

So, even within the same city, neighborhood trends can create a hyper-local demand that varies from one to the next, for a lot of reasons. Supply and demand still determines the local market.


Search for Homes in Frederick Md


 

Dealing with Multiple Offers

In an appreciating market with low inventory, we naturally see multiple offers on homes that are well-priced and in good condition. How does a buyer navigate a situation with multiple offers?

A few years ago, a buyer had time to consider a home, but didn’t worry about it if they missed out on a house, because more than likely, another home they liked would come on the market soon. Not so today. When the inventory is tight, but the demand is healthy, buyers often don’t have the luxury of time. They may find themselves in a multiple-offer situation.

When a buyer is in a market like this, there are some things to consider:

  • Buyers need to understand that the days of getting a steal are over. Having that expectation will just assure that they miss out on more homes.
  • Buyers should be flexible. Remember that even though you might win the bid with a higher offer, the home still needs to appraise for that amount.
  • Buyers should consider offering their best offer when they are in competition for a home. Having an experienced agent is a big help in planning your strategy.

Keeping a cool head and being flexible are the keys to a successful home purchase when the market is in transition. Is it A Buyer’s Market or A Seller’s Market? It’s most often a market with some aspect in transition.

At the Highland Group, we’ve been maneuvering through buyers and sellers markets, and transitions for over 24 years. We’re here as buyer’s representatives to help you make the best of this transitional Frederick real estate market. Contact Chris Highland for buyer’s representation on your home purchase.

Is it a buyer’s market or a seller’s market? It’s all about supply and demand.

 

Do I Need to Be Pre-Approved For A Mortgage to Make an Offer on a Home?

Do I Need to Be Pre-Approved For A Mortgage to Make an Offer on a Home?

APPROVAL, PRE-QUALIFICATION AND LENDER LETTERS

Buying a house is not an event, it is a process. Most of the time in today’s post-bubble, post-TRID real estate market, the process is a little more complicated and takes longer.

As the process gets more complicated, the anti is upped for everyone, including the buyers. Having a pre-qualification letter from a local, reputable lender is a must before most sellers will consider a buyer’s offer.

  • Bank-Owned properties, or Foreclosures, will not consider an offer from a buyer without a letter from a lender pre-qualifying that buyer for the amount offered. Many times, the bank will insist that the buyer get pre-qualified with their own lenders before they will consider the offer.
  • A short sale requires the approval of the third-party(s), the lender(s) who hold the note on the home. They will want to be assured that the buyer will be approved for the loan, so they don’t have to have the home back on the market if that buyer doesn’t qualify for the loan.
  • Traditionally marketed homes without the encumbrances of bank approval have the choice as to whether or not they will require a pre-qualification letter with the offer. In this environment a homeowner would be crazy not to require a lender letter along with the offer from a potential buyer. Any listing agent will advise their seller client to require a pre-qualification letter. A seller wants to be assured that the buyer can make good on their offer before tying the home up in a contract and taking it off the market.

HOW TO GET A PRE-QUALIFICATION LETTER

A buyer can get a pre-qualification letter in a short time, initiated with a phone call, most of the time. Your lender should tell Frederick Md Lendersyou precisely what you need, but be prepared to include:

  • W2 statements (or 1099 income statements) for the last two years
  • Federal tax returns for the last two years
  • Bank statements for the last few months
  • Recent pay stubs and proof of other income
  • Proof of investment income

When a buyer gets a pre-qualification letter, the buyer isn’t obligated to borrow from that lender; it’s just a conditional promise that the lender is willing to make the loan. We always advise buyers to get pre-qualified with a strong local lender.

Remember, it does no good to hide information, it will eventually come out anyway. Borrowers must be completely forthcoming when it comes to their finances from the beginning to avoid any last minute surprises and disappointments.

PRE-APPROVAL

Pre-approval is exactly that. A buyer can apply for a loan and go through the process of getting approved by the lender before they even make an offer on a home. In a competitive sellers’ market, it can be a good idea. Then when a buyer finds a home they want, they can make an offer with not just a pre-qualification letter, but with a stamp of approval. The extra leverage of having the proof that the buyer can get financing may just be the additional tool that makes them stand ahead of the pack when there are competing offers.

As a buyer, if you’re a planner, this preliminary step of pre-approval might make sense. However, if you are looking in today’s highly competitive sellers’ market and find your dream home…don’t hesitate. If the home is in great condition and priced well, it may not be available for long. There is always a balance between keeping a cool head and knowing when to jump on the right home. (That’s why you need an experienced agent as your trusted adviser…I know, I seem to say that a lot!)

In today’s times where the process is more complicated, it’s a good idea to get the loan process started as soon as possible. Lenders tell us all the time, the best scenarios happen when buyers are prepared and prompt with their paperwork. With the changes in the process because of new legislation (TRID) it is absolutely necessary to be prompt on the paperwork.

Contact us for our list of Professional Local Lenders. Search for homes in central Maryland.

Financing Your Condominium – FHA Rule Changes

Financing Your Condominium – FHA Rule Changes

Buying a condominium has gotten more complicated since the housing crisis.   The effects of so many condos in foreclosure have made financing your condominium difficult. FHA financing for condos is a challenge in many Frederick condominium communities. Conventional financing can also be a challenge, depending on the particular product. Here is the latest info on FHA Financing for Condominiums in Frederick:

FHA Rule Changes

The latest effort of FHA to lower its risks has affected condominiums. Unlike single-family home ownership (fee simple), condo ownership has stricter rules for mortgage insurance. The entire condominium project must meet certain standards for a single condo unit to get FHA financing. As of October 1, 2010, the standards got tougher, with FHA’s rules. Then in November 2015, FHA eased up on some of the rules. financing your condominium

The two rules that particularly apply to our current housing distress are:

  • At least 50 percent of the units of a project must be owner-occupied or sold to owners who intend to occupy the units. (used to be 10%)
  • No more than 15% of units can be arrear more than 60 days. (used to be 30 days)

Because of all the condos in foreclosure or in a short sale, the HOA dues are not paid, and several associations have a large number of their units in arrears. This means that the condos in that entire project cannot be purchased with FHA loans. Financing your condominium in Frederick may take a conventional loan product in many condo communities.


Related: What’s the Difference Between Conventional and FHA Financing?


The second issue is that many units are being purchased by investors, so the percentage of owner occupancy is decreasing in many condominiums.  No FHA financing there. In some cases, even conventional financing won’t work.

Other Basic FHA Guidelines

  • No more than 50% of property can be used as commercial space
  • No more than 50% concentration of FHA Loan
  • At least 10% of the budgeted income of the HOA must go toward a reserve account (with the shortage of condo association funds due to arrears, often this is a struggle to maintain)
  • Insurance must comply with several conditions (expanded with the Nov. 2015 rules)

Where in Frederick?

The HUD Website has a list of Condominium Developments and their current status as far as FHA approval.

As of Spring 2016, the FHA approval has been rejected for one Condominium Development in Frederick: Avington Park

FHA approval has expired for

  • Park Place at Mill Island
  • >The Overlook
  • Audobon Terrace North
  • The Commons of Avalon
  • Riverview
  • Monocacy Overlook Garden
  • Overlook Condominium
  • Ballenger Creek II
  • Stuart Mechanic II
  • Liberty Garden Condominium
  • Amertown Antietam
  • Frederick Heights
  • San Souci

This list is fluid and could change at any time.

Onerous Application Process

The process for applying for FHA approval has become very complicated. Over stressed condominium associations often don’t have the resources to complete the process, so that’s why you see the large number of expired condo communities in the above list. Many times we see that the process of renewing the application for approveal is so onerous, that even condominium communities that are eligible, haven’t completed the process.

NAR Lobbies for FHA Legislation

The National Association of Realtors® (NAR) continues to lobby for more reforms of FHA condominium rules, supporting a current bill, H.R. 3700, the “Housing Opportunity Through Modernization Act of 2015.”

The legislation includes provisions intended to help expand housing opportunities in the marketplace, including measures that would reform current Federal Housing Administration restrictions on condominium financing.

“Condominiums are often the most affordable homeownership option for first-time buyers, small families, single people, urban residents, and older Americans.” NAR President Chris Polychron said in last year’s testimony before the U.S. House Financial Services Subcommittee on Housing and Insurance.  “Unfortunately, current FHA regulations prevent buyers from purchasing condominiums, harm homeowners who need to sell their condominiums, and limit the ability of condominium projects to attract resident buyers.”

Current Status of HR 3700 – Passed and Signed into Law

This legislation is sponsored by Reps. Luetkemeyer (R-MO) and Cleaver (D-MO). It passed the House with a unanimous vote of 427-0 in February 2016, then passed the Senate, and was signed by President Obama on July 29, 2016.

HR 3700 contains provisions to ease FHA restrictions on condo sale and purchase; provides permanent authority for direct endorsement for approved lenders to approve Rural Housing Service loans; and makes reforms to federally assisted rental housing programs to streamline the program.


Search for Your Frederick Condominium


 

Buyer Question: Do I Need to Get Title Insurance?

Buyer Question: Do I Need to Get Title Insurance?

What is Title Insurance?

Owner’s title insurance is purchased when you buy a home, and it protects your right to your home for as long as you or your heirs own your property. It protects the homeowner, and the lender, after settlement from any losses that may result from issues or title defects that were unknown before they purchased the home. Many buyers ask, do I need to get title insurance?

Without title insurance buyers would have no way of knowing if the seller’s actions may have caused future problems for the next homeowner. For example, the seller may have:

  • avoided disclosure of using the property as collateral for an unpaid loan
  • frauduelently claimed to be the sole owner
  • failed to pay real estate taxes
  • even a simple mistake in the recording of legal documents

Owner’s Title Insurance Protects Your Rights

If ownership of the property is ever challenged, the insurer defends your possession of the property. If a challenge to your property title is ever legitimate the insurer will pay for your losses, as your title insurance policy specifies.

  • It protects you against false title claims by previous owners or lien holders.
  • It protects you as long as you have an interest in the property.
  • It insures against events that occured before the policy is issued, unlike other forms of insurance.

How Title Insurance Works

title insurance research
Searching the public records is a lot of work, since only about 15% of public records have been digitized.

As property changes hands, mistakes and irregularities can place your ownership of the home in dispute. The mistakes are often made long before you made the purchase.

The title company searches the public records for documents associated with the property and provides the buyer with an expert, interpretive view of the impact of all recorded matters on the property’s title. If the search reveals recorded defects, liens or encumbrances on the title, such as unpaid taxes, unsatisfied morgages, easements, or restrictions, etc., these are reported prior to purchase, and solutions are put in place to resolve the impediments.

Even when the title search is extensive, problems can still arise after the home is purchased. This is when title insurance prtects the new owner from hidden defects, and protects the owners interest in the property.

29 Issues Where Title Insurance Saved the Day

Owner’s title insurance protects you as well as your heirs from financial loss caused by title trouble. Compared to the damage any of these troubles can cause, the one-time premium is small. Here are 29 title troubles that really do occur:

  1. False impersonation of the true owner of the land
  2. Forged deeds, releases, etc.
  3. Instruments executed under fabricated or expired power of attorney.
  4. Deeds delivered after the death of the grantor or gratee, or without the consent of the grantor.
  5. Deeds to or from defunct corporations.
  6. Undisclosed or missing heirs.
  7. Misinterpretation of wills.
  8. Deeds by peoplee of unsound mind, or by minors, or by aliens.
  9. Deeds by people secretly married.
  10. Birth or adoption of children after the date of the will.
  11. Surviving children who were omitted from a will.
  12. Mistakes in recording legal documents. (human error, it happens)
  13. Errors in indexing.
  14. Falsification of records.
  15. Claims of creditors against property sold by heirs or devisees.
  16. Deed in lieu of foreclosure given under duress.
  17. Easements by prescription not discovered by a survey.
  18. Deed of community property recited to be separate property.
  19. Errors in tax records. (for example, listing a payment against the wrong property)
  20. Deed from a bigamous couple.
  21. Defective acknowledgements.
  22. Federal condemnation without filing of notice.
  23. Descriptions apparently, but not actually, adequate.
  24. Corporation franchise taxes, a lien on all corporate assets.
  25. Erroneous reports furnished by tax officials.
  26. Administration of estates of persons absent but not deceased.
  27. Undisclosed divorce of spouse who conveys as the heir.
  28. Marital rights of spouse purportedly, but not legally divorced.
  29. Duress in execution of intruments.

The Cost of Title Insurance

Many home buyers question whether the purchase of title insurance is really worth the cost. The costs and details of who pays for the owner’s title insurance policy differs from state to state, depending on state laws, local customs and agreements made in the real estate contract.

the cost of title insuranceThere are title insurance calculators on most title company websites; you can get a rough estimate of what title insurance costs will be. To get a general idea, as a very rough estimate, for a home in Frederick Md with the average price of $300,000, basic title insurance will be in the neighborhood of $1400 to $1600, depending on details. An enhanced title ensurance package will be About 10% more. [these are not quotes, but rough estimates]

Even when the title company does a careful search of the public records, title troubles which weren’t disclosed, or mistakes in public records – called hidden hazards – are all possible. Even if your abstract is perfect, your title could be worthless because of any and more of these common issues. Your title attorney’s examination may be the absolute best, but your title may still be fatally flawed. The best remedy is title insurance.


 

Thanks to Salisbury, McLister and Foley, LLP for the information above. We’ve been happy to refer Pat McLister for 24 years, and are never disappointed in the settlement company’s service. They’ve never been late, and always go a step above to provide our clients steller service.

for Buyer Representation in Central Maryland. 301-401-5119. Search for Homes in Central Maryland.

Buyer Questions: Should I Get A Home Inspection?

Buyer Questions: Should I Get A Home Inspection?

Should I Get A Home Inspection?

The question of whether to get a home inspection or not pops up regularly in conversations about real estate. Rewind the RE memory a decade ago, when the market was hot; buyers dared not ask for a home inspection. When they were in competition with 5 other offers, they had better offer more than the list price, and forego as many contingencies as they could feel comfortable with. In some markets today, the same conditions are causing buyers to ask the question again: Should I get a home inspection?should i get a home inspection?

A home inspection is your right, and is almost always a good idea, even in new construction. Most real estate agents will encourage buyers to get a home inspection. Let me relay a couple of stories to illustrate why:

A.   Falling Skies

The buyer’s had ratified an offer on a newly constructed townhouse, with the help of a buyer’s agent. Fortunately the buyer’s listened to the agent’s advice and had a home inspection contingency written in the offer. The afternoon of the inspection, the buyers were sitting in the living room with the inspector as he was finishing up with the last details of the report.   They were jolted out of their metal folding chairs with the sound of a series of loud crashes and clangs  from the garage. They all rushed into the garage to see the jacuzzi tub from the master bath sitting amongst the wet drywall rubble.   With mouths gaping open, they raised their wondering gaze to the huge hole in the ceiling.home inspection

As it turned out, the plumber had neglected to attach the drainage pipe from the tub to the main in the wall. When the inspector filled the tub, then unplugged it, all that water drained into the floor and drywall. One hour later, the floor gave way. Who would have suspected it in a brand new house? There is always the possibility of Human Error.

B.  Fixing the Fix of the Fix

I recently spent 2 hours with a first-time buyer and a home inspector in an historic home, one of my favorite inspection opportunities…I learn so much. The home had over  $50,000 in renovations, all beautifully done. When examining the electric system, we discovered, because a series of fixes had been done by different electricians over the years, that the electrical wiring do i need a home inspectionwasn’t even grounded. Keep in mind, all the electrical work was done by a licensed contractor. He had just missed the fix of a previous fix which altered what had originally been a grounding line. Who would have suspected a licensed electrician would have missed it? Again, Human Error.

The cost of a home inspection can be anywhere between $400 and $500 on the average house. It is so worth it when you find something major. If you discover something that you just can’t live with, ie. a cracked foundation, the inspection is the contingency that gets you out of having to buy the home…off the hook, and gets your deposit back. If you still want the house, the inspection is the contingency that you can use to get the seller to address it.

It’s Just Good To Know

I would also argue that it’s worth it even when you don’t find something major. It is worth the peace of mind. It is worth having a licensed professional going over your future home with a fine-toothed comb, teaching you all about the inward workings of your number one investment. Understanding the systems and physical aspects of your home is important for a homeowner. At the very least, you’ll get an idea of what will need future expenditures.

The home inspection is your safety net. If at all possible, write that contingency in to the purchase offer. At worst, you’ll give yourself an out. At best, you’ll give yourself peace of mind.

Don’t Just Take My Word For It…

  • In his article Tips for Buying A New Construction Home, Cincinatti real estate agent Paul Sian gives an excellent tip to new home buyers:  “Many builders will give a one year warranty on new construction homes, so it is a good idea during the 11th month after moving into your new home to have a home inspector come out and look over the home again.” If the home inspection reveals anything that needs attention, it will most likely be under the builder’s warranty.
  • In this Realtor.com article, Seven Things Your Home Inspector Wishes You Knew, author Jamie Wiebe wisely points out to buyers that anything can be fixed. Some things sound scary, especially after so many news reports, but there is a solution for every problem. All can be negotiated after the home inspection report, if that’s what a buyer chooses. The only issue that might be worth stressing about is a water issue, and the only stress should be that the issue is dealt with before settling on the house..
    .
  • Bill Gassett, Metrowest Mass real estate agent, gives some sound advice that I heartily agree with: “…the purpose of the home inspection contingency is not to get a better price on a home because of minor issues found during the home inspection…this is one of the biggest things a buyer can do that real estate agents hate” (btw, sellers don’t like it much either). Depending on the type of financing and terms of the contract, major deficiencies found during the home inspection may be used as a reason for a reduction in the price or a concession from the seller towards closing costs, if the buyer decides that course of action. Be sure to check out Bill’s extensive article: How to Negotiate a Home Inspection.
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  • Seven Important Things to Look for When Viewing a Home is a great resource for home buyers. Kyle Hiscock, Rochester Real Estate Agent, lists the seven most costly system fixes in a home, the items that buyers need to watch out for when they are considering a home for purchase.
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  • And finally, here is some Real Home Inspection Advice from a Real Home Inspector. Mike Chamberlain, owner of MC2 Home Inspections LLC, explains in great detail what a home inspector is ACTUALLY required to do during a home inspection. This is according to the standards of practice from the largest home inspection organization in the world, InterNACHI (International Association of Certified Home Inspectors). This will be an excellent resource if you’re a buyer asking the question, Should I Get A Home Inspection?

home inspectionIf you’re in the market, give us a call to get buyer representation and sound advice about today’s Central Maryland real estate market. Feel free to contact us for our pick of superior local home inspectors.

Chris Highland – 301-401-5119.

Four Simple Steps Before You Buy Your First Home

Four Simple Steps Before You Buy Your First Home

Simple Steps Before Buying Your First Frederick Home

Buying your first home in the Frederick real estate market can be exciting, exhausting, fulfilling, overwhelming, exhilerating, and yes, even scary. But every single time we work with first-time buyers, the end result is thrilling! [for the buyers too!]
Buying a home is never an event, it is a process.  The steps in that process have not changed significantly over the years.
 

1.Make sure you have good credit. Gone are the crazy days of the ‘mirror-fog’ test loans. (“If you can fog a mirror, you’ve got a loan!”) We are back to the good old days of 1992 financing.

  • You need to have a job with verifiable income,
  • you need to have some cash for a downpayment, (maybe not as much as you think you need)
  • and you need to have good credit.

Credit Score first time buyersMonths before you get into your Realtor’s car, you can work on your credit score by making payments on time.  Don’t open any new credit accounts right before you apply for a mortgage, it could hurt your credit score.

If you need more help with your credit score, consider a credit counselor. They know how to get the job done in the least amount of time. See the following resources.

Additional Resources:

Check out my earlier post, Understanding Your Credit Score . Or, this informative video: How to Build A Credit Score Lenders Will Love. See our Credit Score Category for several informative videos and articles.

2. Make a list. A list of the things you must have in a house.  Whittle it down to 6 to 8 must-haves, then prioritize them from most important to less important. Make a list of your wants. This is a separate list. The reality is, you’ll more than likely not find your dream house and will have to compromise one or more of the things on your lists.  Most people do.  Keep an open mind. You’ll be ready to X things off of the list as you get out there and see what is available. first time buyer tips

Many times over the years, we’ve watched as first-time buyers go through the searching process. When they actually see what’s available in their market, they often change their minds on what they thought was so important. They are many times introduced to styles and home features that they had not even thought of before.

Additional Resource for Your Home Search:

As you tour homes, you’ll want to find out about neighborhoods and schools, you’ll want details about living in an area. You’ll also want to document the homes you see. There are several apps that will help with the process of searching for a home. Check out my article Mobile Apps for Your Home Search.

3. Work with an experienced buyer’s agent.  If the agent is newer, make sure they are on a team and have the support of an experienced agent.  A buyer’s agent is much better equipped to help you navigate the present market if they have experienced both a buyer’s market and a seller’s market. Realtor

People spend an average of 15 hours researching their next car purchase, but less than 3 hours researching which Realtor they will use.  Ask friends and co-workers for referrals, and do your homework.  Your agent needs to be a trusted advisor on what will probably your largest and most important purchase, your home. [Read our Testimonial Page]

4. Get pre-qualified… and pre-approved.  Before you even start looking, find out how much you can afford.  It makes no sense to fall in love with a house and then find out you can’t afford it.  Getting a pre-qualifying letter involves a phone call to a local, reliable lender. In today’s seller’s market, we recommend not only getting pre-qualified, but starting the process of approval before you even start looking in earnest.

How much house can I afford?Pre-Approval takes a little more time, but when you find the home of your choice, and you run into the possibility of competing in a multiple offer situation, you’ll stand a better chance of winning if you are already approved.

Get a referral for a lender from your Realtor; chances are they have several that they have relationships with and trust.  DO NOT use an internet lender.  DO NOT pick up the phone book. As real estate agents, the last thing we want to see is you sitting at the settlement table, with your kids, the dog, the cat and the goldfish, all packed up with your every earthly possession in the moving van, hearing that your loan didn’t fund.  That is an ugly sight that we cannot tolerate.

Use a local lender with a good reputation to get pre-qualified.  You don’t have to use the lender to get your loan, but they will have clout with local sellers when you want to present your offer.  The “Pre-qual” letter is your first step.  Here’s a tip:  Be candid.  Hiding information only delays the inevitable.  for our list of preferred lenders!

After you are pre-approved, go over your budget and decide what price range you are comfortable with.  Then enjoy the hunt with your trusted Realtor and Loan Officer, and take advantage of one of those great deals out there in the Frederick real estate market!

For an Exhaustive Resource, Peruse these First-time Buyer Articles:

Here is a curated list of some excellent articles written by top real estate bloggers, specifically for first time home buyers.

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Search for Homes: To see homes for sale in the Frederick real estate market: Use our Mobile Friendly Real Estate Search App
The Highland Group
Chris & Karen Highland – 301-401-5119
eXp Realty – 410-777-5714

What is the Difference Between FHA and Conventional Loans?

What is the Difference Between FHA and Conventional Loans?

What is the Difference Between FHA and Conventional Financing?

For first time home buyers the terminology of loans can be confusing, and sometimes the answers are misunderstood when explained in real estate jargon. The three basic categories of financing are either FHA, VA, or Conventional. Here’s a brief rundown:

1. FHA – Insured Financing. 

FHA stands for Federal Housing Administration and was created in 1934. The Federal Housing Administration doesn’t actually lend FHA Loansmoney to home buyers. Rather, it insures the loans that are given to qualified home buyers, by FHA-approved lenders. FHA loans are a type of government assistance and have lending standards that are less stringent than other types of loans.

The minimum credit score of 580 is a bit lower than that required by lenders of conventional loans. [And 580 is just the FHA’s guideline – individual banks and mortgage lenders still need to agree to offer such loans. So there’s a very good chance you’ll need an even higher credit score.]

Also, the credit score isn’t the only aspect of the buyer’s credit-worthiness; FHA takes into consideration the buyer’s payment history, and what they refer to as common sense lending standards. If you have had credit problems in the past, the FHA recommends a Consumer Credit Counseling program to avoid being denied an FHA loan.

The downpayment required on an FHA loan is 3.5%, this is less than conventional loans. The maximum seller contribution allowed is 6%.

Historically, FHA-insured loans have made it possible for lower income Americans to purchase a home that they otherwise wouldn’t have been able to afford. FHA loans are the most popular choice of first-time home buyers, mainly because they often don’t have the money for a higher downpayment. They also don’t have the mortgage history which so often helps in building a higher credit score.

In today’s real estate market, with historically low interests rates that are poised to go up as the economy recovers, many first time buyers are opting for FHA loans with lower down-payments. Rather than waiting to save enough for a 20% downpayment that is necessary for many conventional loans, taking advantage of an FHA loan at today’s interest rates is a smart move. In the time that it would take to save that amount, interest rates will very likely rise and mitigate against the monthly savings from a higher down-payment.

FHA loans require private mortgage insurance to protect lenders from possible default. Every month, a mortgage insurance premium, MIP is added to the monthly payment. This mortgage insurance was just lowered in 2015  from 1.35% of the premium amount, to .85%. This will save an average of $900 a year.

The other change that just took place is that the MIP is now a permanent part of the loan. Previously, the MIP was dropped from the monthly payment when the loan was paid down to the point where the buyer owed less than 78% of the original loan. The UPMIP (upfront MIP) is currently at 1.75% of the base loan amount.

FHA has loan limits, which are different, based on local markets. In Maryland: in Montgomery and Frederick Counties, the limits is $625,500, while in Howard and Carroll Counties, the limit is $517,500, and in Washington County the limit is $271,050, for a single dwelling.

More information: FHA Connection

2. VA Loans – Loans for Veterans.

Since 1944, introduced in the GI Bill of Rights, the Housing Administration has been providing VA guaranteed loans for our Veterans. Like FHA loans, VA loans are made through approved private lenders. The guaranty to lenders means thatFHA or VA or Conventional loans in both VA and FHA loans, the lenders are protected against loss in case of the default of the buyer.

VA loans are the only loans today which offer a no-down payment loan, no MIP, and often have a lower interest rate. VA loans require no private mortgage insurance, and allow financing up to 103.3% of the value of the home.

The VA does not have a minimum credit score used for pre-qualifying for a mortgage loan, however, most Lenders require a minimum credit score of at least 620.

 

The maximum amount of a VA home loan is typically $417,000, although it can be higher in certain “high-cost” counties. In Hawaii and Alaska, for instance, the limit is $625,500.

Both VA and FHA have their own guidelines which describe all allowable loan traits, as well as the going terms of an Federal Housing Administration-backed loan. The rules can differ regarding closing cost help, property condition, and type of property that can be financed, as well as other items.

3. Conventional Loans.

Conventional loan products are not guaranteed by the VA or insured by the FHA. A non-GSE loan, non-government sponsored entity. Private, conventional loans are secured by investors. Thus, the requirements are often more stringent than FHA or VA loans.

Unlike FHA loans, conventional loans can be used for second homes and investment properties. The minimum credit score is typically 620.

historic mortgage ratesConventional loans have various terms and loan-to-value ratios. Loan-to-value ratio (LTV) means  how much you are borrowing compared to the overall value of the home. The more you put down, the lower the LTV. The higher the LTV, the more risk the lender is taking, and the more costly the loan for the buyer, in terms of interest rate.

The down-payment required on a conventional loan can vary. The Conventional 97 program only requires 3% down, and is available to U.S. homebuyers through Fannie Mae and Freddie Mac. Conventional loans can cover much higher loan amounts than FHA, called Jumbo loans, and offer more types of loans.

If the LTV is lower than 80%, the lender often requires that borrowers pay for private mortgage insurance, or PMI. The PMI is only a single premium, whereas with FHA, there are both upfront and monthly premiums, and the PMI with FHA loans never drops off. The term of the loan can be longer or shorter, 15 years, or 30 years or even 20 or 40. With each there are different interest rates.

Ask Your Lender

Your lender can help you determine which loan product is best for your needs. Your loan officer will be able to tell if you qualify for both types of loans, and determine which will cost less both short and long-term.  Ask for a side-by-side cost analysis.

Contact us for our list of preferred lenders in Central Maryland.

Home Ownership is Key to Wealth Building

Home Ownership is Key to Wealth Building

Home Ownership in America

It has been an established financial principle that home ownership is a key to wealth building. While the economy is in recovery and the housing industry is poised for a comeback, it is a good time to reevaluate whether home ownership is the right choice for those who have been on the fence.

The Joint Study for the Nation’s Housing of Harvard University is an institution that studies and reports on housing’s critical role in the American economy and in communities. Here are some key points from the most recent study of housing in 2014.

A Home of One’s Own

Owning a “place of one’s own” has long been integral to the American Dream. Among every demographic today, home ownership is a desirable path for the majority of people. When most of us investigate the potential of buying a home, we have intrinsic, esoteric reasons, and we have analytically calculated reasons. We use both sides of our brains to make housing decisions.

What Americans Think About Buying A Home

The Case-Shiller Report of Home Affordability shows that in 2015 it is cheaper to buy than to rent in 94 of the 100 metropolitan areas in the country. Add to that the fact that rents have increased over the last few years, and are projected to increase another 3.3% throughout 2015. Rents are increasing more than home values.

Historically low interest rates combined with reasonable home values has maintained the affordability of real estate. While home values have increased by 3.7% nationally over last year, these values will only continue to increase. Buying a home will be a better option for those who are capable.

Home appreciation is happening in most areas of the country, at a pace that is normal and healthy, and also at a pace that is higher than wage growth in 76% of the U.S. As economic conditions improve, more Americans have job stability and savings to seriously consider home ownership.

What Americans Feel About Home Ownership

The Harvard housing study reveals the top five reasons why home ownership is a value to Americans.

  • Home is a place to raise children and provide a good education.
  • Home is a place of safety.
  • Owning a home provides more space for your family.
  • Owning a home provides control over your own living space.
  • Home ownership is a good way to build wealth to pass on to your family.

Wealth-building is a value that crosses from right-brain to left-brain very easily. Having wealth to pass on to family makes sense to both the rational mind and the heart. The number one way to build wealth for most Americans is home ownership.

Case Study: My Parents

When my dad retired from the Navy, my parents bought a 2.5 acre parcel in a small town in Florida. They built a house, then subdivided the lot, then built another house. They sold the first house. Then they sold the 2nd house, bought a fixer-upper (for cash) and moved into it, and fixed it up. Two years later, they sold that house for double what they paid for it. (it was 2006, the top of the market…what excellent timing!) They bought a home that my mother now lives in, and all along the way invested extra money in stocks. (the stocks haven’t done very well…the real estate did.)

All of this took place over 45 years, of course, but that’s what real estate is…a long-term wealth-building asset. It’s not an ATM, to be refinanced at every opportunity.

If you’re ready to make the step to home ownership, give us a call, we can help you through the process.

Chris Highland, 301-401-5119. Or Contact Us Here.