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 Take the Mystery Out Of Buying A Home
If you are like 99.9% of Americans, you don't just up and buy a house by paying for it in full with all that cash you've been stuffing in cookie jars over the past umpteen years. Most likely you'll mortgage it instead. This is where many home buyers become somewhat confused about mortgages, interest, points, and how to be qualified to buy a home. It is the purpose of this article to make all this crystal clear.
Let"s begin with the most logical step: You can"t buy a home until you find one you like, and it is for sale. For this step, a qualified real estate agent will give you access to more homes on the market.
Once you do find a house you want to call your own, there is another person to assign to your new home team. This is an attorney who specializes in everything real estate. He (or she) will walk you through all the twists and turns of real estate law as it applies to your situation, including buyer, seller agreements, liens, inspections, abstracts, title transfers, promises made, promises kept, and recording of the deed.
Now comes one of the most important players: the financier. This is either a banker or a mortgage company and it is their role to help you buy your home. With his expertise, and your attorney at your beck and call, a purchase offer is drawn up and presented to the owners of the home. Included in this offer can be the highest amount you wish to pay for the house, when the transaction will take place and how the various costs (for taxes, insurance, utilities and so on) are to be prorated between buyer and seller. You may also choose to insert a statement that the whole deal is contingent on you getting the proper financing.
While it is possible for someone to pay cash for the home, it's not that likely to happen. In most cases, however, homes are mortgaged in one of three ways:
1) The buyer obtains a new mortgage loan,
2) the buyer assumes the sellers mortgage or
3) A "wrap-around-mortgage" or land contract is put into play.
An interest rate is what you will be charged for the money you borrow to pay for the house. Current interest rates can be obtained by asking various financial institutions, mortgage brokers or real estate agents. Some mortgages are available at fixed rates which means the rate stays the same for the length of the loan. Adjustable rates, also available, mean that rates may go up or down depending on the economy.
Points are the fees paid at the time of closing the sale, and are based on the amount of money you borrow. Points help to determine the cost of your loan and how much you will have to pay at the closing.
Although there are different ways to mortgage a home, one of the most popular methods has been through what is called a conventional 30 year mortgage. Here the longevity of the loan keeps the monthly payments down. But today, many lending institutions have switched to 15-year loans, offering cheaper overall paybacks, and in most cases, a sharp drop in interests.
Wrap around mortgages can work for people with not-so-good credit, limited funds or who have little or no collateral.
In this instance, the owner of the house retains the title until the amount is paid in full. If the buyer defaults, the owner has an easier time to repossess the house.
If your credit is impeccable, if any credit and background checks will sing your praises or if you've been doing well financially for several years, you will most likely be qualified for a mortgage before you take your first step in searching for a home. Ask your real estate agent for the right documents to help lenders make that decision.
If none of these options to mortgage your newfound home look as if they are going to work for you and your present financial situations, relax: All is not lost. There are other "creative financing" methods out there. But you may have to explore other mortgage companies and lending institutions before you find one that works exactly for you.
About Appraisals >Fair Market Value
What is the best price for a piece of real estate? Mortgage lenders, appraisers, and real estate brokers use what is called the "fair market value" (FMV). FMV has been defined as "the price that a buyer is willing to pay and the seller is willing to accept, when both parties are knowledgeable about the property and neither is under any time pressure to buy or sell". Sounds great, but how is this price determined?
The starting point for determining a fair price may be an opinion of the value or "comparative market analysis". Such an analysis uses information on similar properties which are: 1) currently for sale, 2) already sold, or 3) expired properties (those which did not sell). Local, national and international trends and market conditions must also be evaluated.
By comparing similar properties in each of the three categories and the market conditions, appraisers, lenders and agents come very close to the maximum price that buyers would be willing to pay for a house.
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| Q |
How much does a celebrity's name boost the price of a property?
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| A |
Typically no more than 5 percent, but there are exceptions--the greater the fame, the higher the price!
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