J.D.R. Hawkins

One bullet can make a man a hero… or a casualty.

Archive for the tag “home buying”

Guest Post by Yuriy Moshes

7 Myths About Buying a House You Can Ignore

For decades, owning a home has been a part of the American dream. The process can be quite tedious and complicated as the times, regulations and conventions change. This has brought about a number of myths and misconceptions around becoming a homeowner. In this article, we’ll walk you through 7 little-known financing facts around buying a home to help you separate real estate facts from fiction. 

Myth 1 – You Shouldn’t Buy in a Seller’s Market

“Seller’s market” is a term regularly used in real estate when a low supply of homes for sale meets a high demand of buyers. Simply put, there are more buyers than homes for sale. While this can make it tougher for you to find the property of your dreams without engaging in bidding wars or paying higher than the asking price, you should think about much more than whether it’s a seller’s or buyer’s market when deciding to buy a home. Are mortgage rates low? Is the inventory on the market high quality? Are you getting a good deal on the property? What’s your financial situation? Don’t let a seller’s market hold you back if the time is right for you to become a homeowner.

Myth 2 – You’ll Save Money by Not Working with a Real Estate Agent

Why would you spend money on a real estate agent when you have access to homes for sale on the internet? It makes more sense to save on the agent’s commission and do it all yourself, right? Wrong. Very wrong. In reality, following this myth might cost you more in the long run. Real estate agents are skilled in negotiation, and they understand the market, so they can get you better deals. Besides, it’s their job to ensure that you get a good price on your home. Choosing to forego a real estate agent could also make sellers less likely to negotiate with you or even consider your offer in the first place. The whole process is a lot easier with an experienced agent on your side. Your agent will likely work with the real estate lawyer (though it’s not required in many states, we do recommend having an attorney review the transaction) to ensure all bases are covered. Having an agent on your side streamlines the entire process and introduces you to opportunities you might not have had otherwise. 

Myth 3 – You Need to Have 20% for Your Down Payment

This is by far one of the most popular mortgage myths out there. Sticking to a budget is great, but you don’t need to have 20% ready to put down. Years ago, you did need at least 20% before you could get approved for a mortgage, however, there are many other loan options today that don’t require that much money down, including FHA loans. Sometimes you can put down only 1% and still be approved, depending on the circumstances. 

While you don’t need 20%, we recommend putting as much down as you can, as it will help you secure lower interest rates and private mortgage insurance, as well as widen your opportunities. 

Myth 4 – You Need Amazing Credit to Get a Home Loan

There is so much more that goes into your mortgage approval than your credit score alone. Lenders will also look at your income and work history, your debt-to-income ratio, your assets and your down payment. In fact, there is no minimum credit score required by any lender to qualify someone for a home loan. Depending on the lender and the type of loan, you could be approved with various scores. While institutions do get to set their own credit requirements for conventional loans, government-backed loans, like FHA loans will go much lower on score requirements– the minimum score needed for FHA loans is usually around 580. 

We recommend working on your score if it’s on the lower side. The higher the score, the more options you’ll have. People with higher scores usually benefit from the following:

  • Lower interest rates
  • More mortgage/lender options
  • Lower income requirements
  • Lower down payment requirements
  • Better rates on homeowners insurance

Myth 5 – You Should Spend the Entire Amount You Qualify for on Your Home

Just because you qualify for an amount doesn’t mean you should spend that amount. Many first-time homebuyers fall into this myth. Remember that you determine your budget, not the bank. Whether you’re buying an as-is house, a luxury penthouse or a fixer-upper, there are a few key items that can help you determine how much you can afford on your home, regardless of how much the bank approves you for:

  1. Your monthly income – How much money do you bring in per month? Knowing this number will help you establish a baseline of what you can afford to pay on monthly expenses.
  2. Cash reserves – This is how much money you have to make your down payment and pay your closing costs. This can come from savings accounts, investments, etc.
  3. Expenses and debt – What expenses and debt do you already have? What do you pay monthly on those? This can include things like car notes, credit card bills, groceries, utilities, insurance, student loans, etc.

A good guideline to determine how much house you can afford is the 28/36 rule. This rule states that you spend 28% of your gross monthly income on costs related to your home and 36% on your debt (student loans, mortgages, etc). While the 28/36 rule is a great jumping-off point, be sure to take your bigger financial picture into account when deciding how much you can afford on your home.

Myth 6 – You Should Always Choose the Loan With the Lowest Interest Rate

While interest rates are a big deciding factor, pay attention to the details of your specific loans. Interest rates may start out low and increase over time. For example, adjustable rate mortgages will reset, often falling into a higher rate as time passes. On the other hand, fixed rates may have a higher interest rate at the beginning, but you can trust that they will remain at that rate and not drastically increase on you. 

To help you select the rate that makes sense for you, be sure to go over the details of your loan with a professional. They can help you understand the ins and outs of your specific loan, which will help you to make better decisions that align with your future goals. 

Myth 7 – Your Mortgage Payment Is Your Only Monthly Home-Related Expense

Of all of the real estate myths covered in this article, number 7 could get you in the biggest of pickles. This should be estimated and factored into your initial budget setting. Your mortgage will definitely not be the only home-related expense you need to plan for. You’ll need to think about utilities, HOA fees, insurance and property taxes, landscaping fees, etc. Your real estate agent can help you calculate these expenses to help you determine the budget and locations that make financial sense for you. 

Don’t forget that owning a home also means taking financial responsibility when things break. Sometimes you’ll have to replace HVAC parts, mend the roof and repair pipes. You never know when these expenses might come, so having a rainy day fund packed into your budget is a good idea. 

Owning a Home Makes Financial Sense

Which of these is a common financial benefit of home ownership? 

  • Ability to build home equity – Your home value will increase over time
  • Tax deductions – You’ll save on taxes
  • Long-term savings – Building equity allows you to set aside money for your future
  • Control over expenses – No rent spikes

The answer is all of the above are financial benefits that come with home ownership. Owning a home, while a great responsibility, can be very lucrative in the long run. With these home-buying myths busted, we hope you have a clearer understanding on the process of becoming a homeowner, so you can reap the benefits, too. Happy home hunting!

About the Author

Yuriy Moshes is the CEO of Moshes Law and attorney with broad expertise. He has two bachelor’s degrees. Being an experienced expert, he is considered one of the most in-demand specialists in the real estate law field. Apart from that, he provides free consultation for everyone who faces foreclosure problems.


Description: We’ve addressed popular home-buying myths to separate fact from fiction. From your down payment amount and how credit score plays into approval to budget advice, and interest rates, we’ve brought truth to the myths hindering many would-be homeowners. 

Guest Post by Suzie Wilson

I decided to take a break from ranting about the destruction of Confederate monuments and heritage for the time being. It upsets me so much that I seriously need re-focus on something else for the moment. Instead, I’d like to share with you a guest post I received that might spark your interest. My husband is in real estate, so I find it fascinating and can’t get enough of HGTV! I hope you enjoy this guest post. Thank you, Suzie Wilson, for providing it.

houses

5 Tips for Buying a House During a Recession

The idea of making a large purchase during a recession can seem risky, but there are advantages to buying a home when the economy is weak, as prices are often lower and there’s less competition. That’s why first-time home buyers and investors alike should consider putting an offer on a home during a recession. However, there are a few things that buyers should keep in mind as they navigate this process. These tips will help first-time buyers and investors find ideal properties in the midst of an economic downturn. 

Financial Guidelines

Before you begin looking at homes, you should take some time to brush up on the basic financial guidelines for purchasing property. The requirements will vary somewhat between first-time homebuyers and investors, but many of the basic principles are the same. You may be in a buyer’s market, but you don’t want to be tempted into spending beyond your budget! Spend some time studying up with this helpful first house guide so that you know exactly how to apply for a mortgage and how much you’ll need to have on hand for your down payment. 

Market Research

Whether you’re buying your first home or purchasing a new investment property, you will need to conduct extensive market research before you begin looking at houses. Look up average home prices for properties that fit your requirements in neighborhoods that you like. You may find that listing prices are lower than usual, so keep an eye on areas where home values are predicted to appreciate in the coming years, especially if you want to rent out your property. And remember, if you plan to purchase a fixer-upper that will require deep cleaning and extensive renovations, you’ll have to consider those costs in addition to your initial down payment. 

Work With a Real Estate Agent

If you want to ensure that you’re getting a great deal on your new home, you’ll want to connect with a reputable real estate agent, especially if this is your first time buying property! Policy Genius recommends asking potential agents how many transactions they conduct per year, which buyers they have represented in recent months, and which neighborhoods they would suggest that you consider. Investors should seek out agents who specifically help buyers find investment properties. 

Find a Motivated Seller

The low asking prices that crop up in the middle of recession won’t last forever, so if you want to save big, you’ll need to act fast. Finding a “motivated seller” is the key to speeding up the process so that you can move in or start looking for tenants as soon as possible. According to WiseBread, you should try to connect with home sellers who are moving far away, relocating due to a major life change, or have had their home on the market for months on end. These types of sellers are generally looking to move as quickly as possible, so you’ll have better luck getting your initial offer accepted.  

Negotiate Your Offer

First-time home buyers and investors shouldn’t hesitate to negotiate on the home’s listing price. When a seller is seeking buyers in the middle of a recession, they won’t have as many offers coming in, so you may be able to persuade them to agree to a lower price! It’s often a good idea to wait until after the inspection to negotiate. That way, you will be able to factor in necessary repairs when you calculate a fair offer. Furthermore, you’ll need to conduct a property title search to ensure the seller has paid their taxes and fulfilled other legal obligations before you buy.

Buying a home can be a long, complicated process, but if you have the ability to buy during a recession, you may have an easier time finding the house of your dreams. Whether you’re planning to settle down for decades to come or rent out a home that is likely to appreciate in value, you can benefit from the real estate opportunities that are available during a recession. A recession can bring challenges, but it can also present opportunities. 

Photo via Unsplash

Post Navigation