Category Archives: Buyer Information

First-Time Homebuyer Guide

“This is a good high level overview of the steps and process of buying a home.  There are more steps once you start working with a Realtor and put an offer in on a home, but this is a great starting place.”

Denise Buck & Ed Johnson – DC Metro Realty Team 

Avoid First-Time Homebuyer Mistakes with This Checklist

By Jennifer Nelson, published on HouseLogic

A real yard. Closets bigger than your average microwave. The freedom to decorate however you darn well please! Making the switch from renting to owning is exhilarating, but many rookie homebuyers find the process trickier to navigate than they expected. This is why we created our First-Time Homebuyer Checklist. The 12-month timeline will help you sidestep common mistakes, like paying too much interest or getting stuck with the wrong house. (Yep, it happens!)

12 Months Out

Check your credit score. Get a copy of your credit report at annualcreditreport.com. The three credit bureaus (Equifax, Experian, and TransUnion) are each required to give you a free credit report once a year. A Federal Trade Commission study found one in four Americans identified errors on their credit report, and 5% had errors that could lead to higher rates on loans. Avoid last-minute bombshells by checking your score long before you’re ready to make an offer. And work diligently to correct any mistakes.

Determine how much you can afford. Figure out much house you can afford and want to afford. Lenders look for a total debt load of no more than 43% of your gross monthly income (called the debt-to-income ratio). This figure includes your future mortgage and any other debts, such as a car loan, student loan, or revolving credit cards.

There are plenty of calculators on the web to help you determine what you can afford. If you’re pushing the limits, start reducing your debt-to-income ratio now. To get a reality check on what you may actually be spending every month, use this worksheet.

Make a down payment plan. Most conventional mortgages require a 20% down payment. If you can swing it, do it. Your loan costs will be much less, and you’ll get a better interest rate. If, however, you’re not quite able to save the full amount, there are many programs that can help. FHA offers loans with only a 3.5% down payment. But they require mortgage insurance premiums, which will drive up your monthly payments. The U.S. Department of Housing and Urban Development (HUD) provides a list of nonprofit homebuying programs by state. Also check with credit unions; and your employer might even have an assistance program.

As you’re planning your savings strategy, keep in mind that banks like you to “season” your money. That is, they like to see that you’ve had stable funds in your account for 60 to 90 days before applying for a loan. Don’t worry: You can still use a financial gift from a family member or bonus received near the time you buy.

9 Months Out

Child exploring a closet at an open houseImage: Emily Dunham

Prioritize what you most want in your new home.
What’s most important in your new home? Proximity to work? A big backyard? An open floor plan? Being on a quiet street? You’ll make a much better decision on what home to buy if you focus on your priorities. If it’s a joint decision, now is the time to work out any differences to avoid frustration and wasted time. Perhaps most important: Know what trade-offs you’re willing to make.

Research neighborhoods and start visiting open houses. But now’s when the fun begins, too. Use property listing sites, such as realtor.com, to find out about neighborhoods, public transport, and cost of living.

Start visiting open houses to get an idea of what kind of homes are in your price range and what neighborhoods appeal the most. Seeing potential homes will also keep you motivated to continue reducing your debts and saving for your down payment.

Budget for miscellaneous homebuying expenses. Buying a home has some miscellaneous upfront costs. A home inspection, title search, propery survey, and home insurance are examples. Costs vary by locale, but expect to pay at least a few hundred dollars. If you don’t have the cash, start saving now.

Start a home maintenance account. Speaking of saving, start the good habit now of putting a little aside each month to fund maintenance, repairs, and home emergencies. It’s bad enough to have to call a plumber. It’s worse if you’re paying credit card interest on that plumbing bill.

6 Months Out

Collect your loan paperwork. Banks are very particular when it comes to mortgage loans. They demand a lot of paperwork. What they’ll want from you includes:

  • W-2 forms — or business tax return forms if you’re self-employed — for the last two to three years
  • Personal tax returns for the past two to three years
  • Your most recent pay stubs
  • Credit card and all loan statements
  • Your bank statements
  • Addresses for the past five to seven years
  • Brokerage account statements for the most recent two to four months
  • Most recent retirement account statements, such as 401(k)

If you start collecting these documents now, it’ll lessen the stress when it’s time to get your loan. Bonus: Looking closely at your loan documents each month will also help you stay focused on saving for your down payment and keeping your debt-to-income ratio low.

Research lenders and REALTORS
®. Start interviewing REALTORS®, specifically buyers’ agents. A buyer’s agent will work in your best interest to find you the right property, negotiate with the seller’s agent, and shepherd you through the closing process. Your agent also can be instrumental in finding a lender who’s familiar with first-time homebuyer programs.

Even better, look for a mortgage broker, who will shop for a competitive loan rate for you among multiple lenders, unlike a bank, which can only offer its own products.

3 Months Out

People touring an open houseImage: Jesse Keen

Get pre-approved for your loan. At this point, if you’ve been following this timeline, your credit score, paperwork, and down payment should be on track. You’ve done your research on lenders and buyers’ agents. Now it’s time to start working with them. First you’ll need to get pre-approved for a mortgage.

Make an appointment with your lender or mortgage broker and bring all your paperwork. He’ll run a credit check on you and tell you how much of a loan you’re approved for. It often makes sense to borrow less than the maximum the lender allows so you can live comfortably. Draft a budget that accounts for mortgage payments, insurance, maintenance, and everything else you have going on in your life.

Start shopping for your new home. One you’re pre-approved, the buyer’s agent you’ve chosen will be able to target homes that meet your priorities in your price range. This way you won’t be wasting time looking at homes you can’t afford.

2 Months Out

Make an offer on a home. It usually takes at least four to six weeks to close on a home. So if you have a firm move-out date, allow enough time to deal with any hiccups that can delay closing.

Get a home inspection. One of the first things you’ll want to do after an offer is accepted is have a home inspector look at the property. If the home inspector finds something that needs repair, that’s a common example of something that can delay closing.

In the Last Month

Triple-check that all your financial documents are in order and review all lending documents before closing. You’re in the home stretch! If you’ve been keeping your documents up to date, and your down payment is in reserve, these final steps are the easiest. Reviewing the mortgage documents is probably the most difficult. Your agent can help guide you through them.

Get insurance for your new home. Don’t forget to secure insurance before closing. You’ll need to bring proof of insurance to closing.

Do a final walk-through. Do a final walk-through of your new home, usually a day or two before closing, to make sure the home is in the shape you and the seller have agreed upon.

Get a cashier’s check or bank wire for cash needed at closing. Make sure you get an exact amount of cash needed for closing. You’ll get that number a few days before closing so you can secure a cashier’s check or arrange to have the money wired. Regular checks aren’t accepted.

That’s it. Congratulations!

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Making Your Move Easier for Your Family

“Moving to a new home is both exciting and stressful on everyone.  But there are some things that you can do to help everyone through the move.”
Denise Buck & Ed Johnson – DC Metro Realty Team
Moving into a new house is so much more than simply relocating to a different place. When we leave behind a home, especially one we’ve lived in for a long time, we also leave behind all those years spent enjoying it. Children who were tiny when you moved in have grown into strapping teenagers under its roof. Friends have visited, meals have been shared, and the small dramas of everyday life have been played out in it, so it can be emotional to walk away.

Settling into a new home that carries traces of its previous owners also can take time. So in the rush and chaos of moving, take time to celebrate the home you’re leaving and get set to enjoy the place you’re moving into with these tips for easing the transition.

Originally published on HOUZZ, by Joanna Simmons

Buying a Home in the Right Neighborhood

Small Front Yard“How do you know when you’re in a great neighborhood for you?  There are several tips that can help you know when you’ve found the right one.”

Denise Buck & Ed Johnson – DC Metro Realty Team

 

A great neighborhood sells a home, real estate agents say. It also helps your home hold value and makes it easy to sell when you decide to move on.

With all the pressure and excitement of home shopping, how can you know if a neighborhood is truly great?

Here are 20 clues that help you determine if you have the right neighborhood.

1. It meets your specs

Make a list of what you want and don’t want in a neighborhood and shop for those qualities.

Describing his ideal neighborhood, Jay Walljasper, author of “The Great Neighborhood Book: A Do-it-Yourself Guide to Placemaking,” says he looks for “the invincible spirit of neighborliness (that’s) apparent even to a casual visitor.”

But what is ideal varies. Your ideal could be a close-knit community with trees, playgrounds and great schools. Mine might be a downtown block of clubs, shops and condos.

2. You like what you hear

Become an expert on the neighborhood that interests you. Get a feel for it by attending open houses, walking the neighborhood’s blocks, spending time in restaurants and coffee shops, and looking for community gardens.

Have a home in mind? Knock on doors and chat with neighbors on that street. Ask everyone who’ll talk with you about the crime, noise, traffic, neighborhood issues, and general pros and cons.

3. You can get a latte

Upscale chain and independent retailers are signs a neighborhood is well-established or on the way up. These businesses signal a degree of affluence. Also, they’ve typically done market research to assure themselves the neighborhood is stable and worth the investment.

4. You see home improvements

Especially in the warm months, look for activity that shows owners are keeping up or investing in their properties. Improvements like new gutters, painting, re-roofing, gardening and landscaping, replacement windows, new fences and decks tell you they have pride in their homes.

5. Neighbors are organized

Block watches and neighborhood meetings are signs of a tight community. If you find a neighborhood group, attend a meeting or two to meet people and ask questions. Subscribe to any neighborhood newsletters.

Dennis P. Rosenbaum, director of the Center for Research in Law and Justice at the University of Illinois at Chicago, told MSN Real Estate:

“Crime is lower where people say they feel more attached to the neighborhood, more social connectedness, more responsibility for what goes on around them and a greater willingness to intervene when they suspect criminal activity.”

6. People are out on the streets

People on sidewalks and children walking to school and playing in parks tells you they feel safe. An article at Veterans United asks:

Are there people sitting on their porches? Walking dogs? Taking their kids on a walk? If residents are willing to get out and walk around the neighborhood, that’s a good sign of its vitality and safety.

7. It passes muster after dark

Don’t think you know a place if you’ve only seen it in the middle of a weekday. Return repeatedly, at night and on weekends, to get a realistic picture.

8. Crime numbers are low

Don’t buy into a neighborhood without checking its crime statistics. City police department websites often publish them. In Chicago, for example, weekly crime statistics are reported by police district.

9. School scores are strong

Where school test scores are strong, home prices are high. Search GreatSchools.org for the schools’ scores in the neighborhood you’re considering. Ratings are based on performance on state standardized tests. (GreatSchools’ rating system is explained here.)

10. It’s walkable

Do cars dominate? Or do sidewalks and streets encourage pedestrians and bicyclists? Sidewalks wide enough for outdoor cafes, benches and strolling give a place a neighborly feel.

Put an address or ZIP code into Walkscore.com to obtain a “walkability rating” for neighborhoods or cities. Scores, ranging from zero (“car dependent”) to 100 (“walker’s paradise”), reflect the ease of life without a car.

11. Bus stops abound

Can you easily find buses? And subways? And rail lines? Homes with easy access to public transit fetch higher prices than similar homes without it, says a 2013 study commissioned by the American Public Transportation Association and the National Association of Realtors. Homes within a half mile of “high-frequency” public transit were worth 41 percent more, on average.

But don’t get too close. Locations adjacent to rail lines and bus stops lose value, Portland real estate broker Rob Levy told Bankrate.

12. It’ll work for you for five to seven years

So, a hip, edgy, gentrifying downtown district is your dream location right now? But will it work later, if you want children? Or if you change jobs? Don’t count on being able to sell and move quickly.

I remember talking during the recession with a young couple who’d bought a condo in what they hoped was an up-and-coming neighborhood. After a while, though, they grew tired of hearing gunshots at night. When she became pregnant, they felt stranded. They wanted to move but could not because their home was worth less than they had paid.

The lesson: Make sure the neighborhood suits your needs for at least five years.

13. Ownership is high

Neighborhoods with high homeownership rates are more stable. However, there are exceptions. For example, you can expect renters to outnumber buyers in expensive cities like New York and San Francisco.

Typically, renters are more mobile than homeowners. Longtime residents watch out for each other, making for a safer community.

Statistics on homeownership in neighborhoods can be hard to find, although some real estate agents may have them. You can get a sense, though, by asking agents and locals about the renter-owner balance. Also, watch for apartment complexes that dominate a neighborhood, or large numbers of “for rent” signs.

14. Homes sell quickly

Fast turnaround of homes for sale indicates a neighborhood in hot demand. A real estate agent can run “comps” (comparative home analyses) to tell you how quickly homes are selling.

Other clues to a neighborhood in demand include employers moving in with new jobs, a growing population, and a limited supply of homes for sale.

15. Homes hold value

In the housing crash, home values held up better in some neighborhoods than others. You can find historical sale prices in your county’s property tax records. Many counties put these online. (NETRonline, a title company, has links to online county property tax records.) Or ask your real estate agent for neighborhood sales trends.

If you’re considering a bargain home in a neighborhood of foreclosures, consider whether home buyers will want this neighborhood when you are ready to sell. Even if you don’t care about school quality or how many playgrounds are nearby, the next buyers of your home probably will.

16. The commute is not bad

Homes located close to major employers and in city centers are in high demand.

“The Driving Boom — a six-decade-long period of steady increases in per-capita driving in the United States — is over,” says a 2013 transportation report by the nonprofit advocacy group U.S. PIRG.

A New York Times article adds: “Younger people are less likely to drive — or even to have driver’s licenses — than past generations for whom driving was a birthright and the open road a symbol of freedom.”

17. City services are good

Is the trash picked up? Are streets paved and well-maintained? Beware of broken streetlights, cracked sidewalks, and lots of vacant homes with cracked windows and an overgrowth of weeds.

18. You see plenty of churches

You don’t have to be religious to appreciate that churches, mosques and synagogues are signs of community strength, and evidence that residents are connected and invested.

19. It’s got police and fire stations

Find the nearest fire and police stations and fire hydrants. Nearby public safety services add to a sense of neighborhood security. Also, a firehouse nearby might mean lower homeowners insurance premiums.

20. (Good) change is coming

Major economic development can change neighborhoods dramatically. According to Trulia:

“From Google and Microsoft building cloud storage data centers in Des Moines to a new light rail station going live in Denver, one large-scale employer or infrastructure development can be a very early, very strong sign that an area will see its real estate fortunes rise.”

Bathroom Designs that are Trending in 2015

“Beautiful Bathrooms are hot right now.  Seems that everyone wants something more than just the builder grade basics.  Here are some interesting ideas that are trending for 2015.”
Denise Buck & Ed Johnson – DC Metro Realty Team
If you’ve been thinking about giving your bathroom an overhaul but aren’t sure how, one way to start is to look to the latest design trends for inspiration. We’ve made it our mission to find out what design ideas are expected to make a splash in 2015 to help make planning your bathroom makeover project a little bit easier. To compile our list, we enlisted the help of four award-winning designers, who share here their predictions for the looks, finishes and features they think will be on everyone’s radar next year. They also reveal how they would work these ideas into their own projects.

9 Questions to Ask When Planning a Pantry

“It seems we are always looking for more storage these days.  Here are some great ideas that can help in just about any pantry design that you may have.”
Denise Buck & Ed Johnson – Dc Metro Realty Team
Some pantry design dilemmas don’t seem obvious at the time of planning but become apparent later. Doors that open inward onto shelving, badly arranged racks and compartments, small cubbies with no room for appliances, a lack of hooks for towels and aprons, and poorly positioned lighting are all mistakes that can be circumvented. Use this quick guide to address the most obvious blunders before they happen. The suggestions may also inspire you with some fresh design ideas.

Fun Features for Family Rooms

“Family rooms are so important these days.  They serve as the center of the home (after the kitchen) and need to be able to handle all the various needs that each family has.”
Ed Johnson & Denise Buck – DC Metro Realty Team
The Family Room is where you go to relax, watch movies, play games and hang out with friends — which makes it a great place in which to loosen up, decorating-wise. Create a fun, welcoming atmosphere in your family room by incorporating one or more of these 15 playful features, from photo murals to game tables.

5 Things to Consider about Wood Floors

Hardwood Example

“Often our Buyers and Sellers will ask us what type of hardwoods are best to install.  The answer like most things is ‘It depends’.  Different rooms have different uses and can require different woods.  Floors can also set the tone for the room, so you need to give it some thought.  Read these tips for some things to think about before making the final decision.”

Denise Buck & Ed Johnson – DC Metro Realty Team

Homeowners evaluating new flooring owe it to themselves to consider the benefits and beauty of wood. Wood floors are comfortable, durable and surprisingly affordable, and nothing quite compares to the character and warmth they bring to every room in the house. While there are a myriad of choices available, not every type of wood flooring is suitable for every application. If you are shopping for a wood floor, here are five things to keep in mind.

Type of Wood Flooring
There are primarily two types of wood flooring products—solid hardwood and engineered hardwood. Solid wood flooring is milled from solid wood logs, and is joined with a traditional tongue and groove along both the long and short edges. Solid wood is available prefinished or unfinished, in strips and planks ranging in thickness from 5/16″ to 3/4″. Strips are 1-1/2″ to 2-1/4″ wide and planks are 3″ to 8″ wide.

Engineered wood flooring is comprised of multiple layers of plywood and composite material, and topped with a layer of solid hardwood. Engineered wood flooring comes in thicknesses ranging from 3/8″ to 3/4″ and from 3″ up to 10″ wide; the hardwood layer on top ranges in thickness from .6 millimeters to 4 millimeters.

While both types offer the same beauty of real hardwood, the primary difference between solid hardwood and engineered flooring is in the floor’s composition. “Since solid wood flooring is subject to expand and contract relative to a home’s humidity it needs to be installed on the ground floor or above grade,” explains Bill Schlegel, Chief Merchandising Officer for Lumber Liquidators. “Engineered flooring, which is more stable due to its multi-ply construction, can be installed on all levels of the home,” adds Schlegel, “making it perfect for basements and bathrooms where dampness and moisture can be issues.”

Select Red Oak Solid Wood Flooring

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Choice of Wood Species
There are many different woods used in flooring, but some are harder and therefore more durable than others. “Day to day wear and tear is what concerns most people when shopping for a wood floor,” says Schlegel, “and the benchmark for hardness in the U.S. is Red Oak.” While Red and White Oak are the most common domestic wood floors, Hickory and Maple (harder than oak) and Walnut (softer) are also popular choices. Top selling exotic woods such as Brazilian Cherry, Brazilian Koa and Cumaru are among the hardest species available. “Naturally, the harder the wood, the better it will be for wear and installation in high-traffic areas of the home,” Schlegel notes.

Grain, Color and Appearance
Because wood flooring comes in so many different species, styles and finishes, it is fairly easy to select a floor to match any room décor. If you have a country-style interior, wide plank floors with highly defined wood grains and a distressed appearance will be a good fit.  For Colonial homes, consider wide, random plank width flooring in Oak and Maple.  For traditional interiors, hardwood flooring in widths of 2-1/4″ to 3-1/4″ in Oak, Maple or Walnut, or parquet flooring, will be smart choices. Virtually any type of wood can be used in a contemporary setting, depending on what stain or finish is used—for example pewter, dark charcoal or whitewash finishes can transform any wood species into a modern masterpiece.

Casa de Colour Select Pewter Maple Hardwood Flooring

Casa de Colour Select Pewter Maple 10032461-crop

Type of Finish
The finish is the real determining factor in the overall appearance of a wood floor. The same wood species will look completely different finished in a clear gloss, versus a distressed, hand-scraped or wire-brush finish. “There are different gloss levels and finishing techniques that change the overall look of the wood floor,” Schlegel notes. “Our Bellawood solid and engineered wood flooring in a mid to high gloss looks completely different in a low gloss matte finish,” explains Schlegel; the latter imitating the look of an oil-rubbed European finish, but without the constant care and maintenance.  Distressed, hand-scraped or wire-brush finishes will also be something to consider when shopping for a wood floor.

Flooring is sold either “unfinished” or “pre-finished.” Unfinished floors are sanded and finished on-site, which provides for a consistent seal and prevents dirt and moisture from penetrating the seams between boards (floors typically receive one to three coats of sealant). Pre-finished flooring is factory-applied in a controlled setting, and typically receives seven to eight coats of sealant. “I definitely recommend pre-finished flooring, because it ensures a superior and consistent finish, and comes with a warranty,” Schlegel asserts. “All Bellawood pre-finished flooring comes with a 100-year, transferable warranty, which can be a selling point to future buyers—since the warranty transfers to the new owner.”

Cost and Installation
The cost of wood flooring depends on the type, the wood species and the finish. Typically, solid prefinished wood flooring runs from $2.49 to $12.69 per square foot. Prices on engineered prefinished wood flooring range from $1.69 to $8.79. The average cost of installation usually runs about half as much as the flooring but depends on the type of flooring and installation for your home.

Both solid wood and engineered wood flooring are installed by nailing, stapling or gluing planks to a subfloor. There are, however, a variety of new “click” engineered products available that can be installed easily and “floated” above the subfloor.

“Installation can definitely be an expensive proposition, especially with unfinished flooring,” says Schlegel, “but competent DIYers can save money by doing the job themselves and purchasing prefinished flooring.” Lumber Liquidators offers all of the tools and materials that a homeowner would need to install a wood floor.  He adds, “I recommend saving money on installation and buying a better floor.” This article is sponsored on behalf of Lumber Liquidators.  Its facts and opinions are those of BobVila.com.

New Homeowners – Don’t Spend Money Here

Moneydowndrain

“We love helping our buyers, but especially our first-time buyers.  We want to get them started on the right path so they get the most for their 1st big purchase. Here are some things to try and ‘NOT’ spend money on when you are a New Homeowner.”

Denise Buck & Ed Johnson – DC Metro Realty Team

 

You’ve just moved into your first home. For the first time in your life, it’s all yours – no more landlord, no more renting, no more leases.

It’s an exciting time, but it’s also a time filled with a lot of sneaky expenses new homeowners often aren’t prepared for. Add those new expenses to the expensive monthly cost of a mortgage, insurance, property taxes, homeowners association fees, and so on, and it’s not hard to see a budget pushed to the breaking point.

Here are six expenses new homeowners often face that can easily be reduced or eliminated with some smart choices.

Expensive home furnishings. Often, a person’s first home is much larger than the places they’ve lived in before. For example, my wife and I moved from a tiny two-bedroom apartment to a three-bedroom house with twice the square footage, and it seemed enormous.

That leaves a person with a lot of empty space and the tendency is to fill that space with new furnishings. Many homeowners follow their first day in a new home with a day at the local furniture store, often buying more new furniture than they can afford.

If you’re considering new furnishings, give it some time first. Buy low-end items if you really want to fill the space, and then gradually replace them as your savings allows. Don’t fill up your credit card with expenses from the local furniture store.

Private mortgage insurance. Many first-time homebuyers are saddled with this terrible expense that comes from buying a home without a 20 percent down payment. Often, this adds $100 or more to your monthly mortgage payment with nothing in return.

Get rid of this as soon as you can. The best possible time to make a few extra mortgage payments is in the first few years of the mortgage. You’ll not only get rid of that PMI early, you’ll also greatly reduce the lifetime interest you pay on your mortgage.

Appliance insurance. Many new homeowners are offered a “deal” on appliance insurance, in which they pay some insurance company a certain amount each month to “insure” their appliances against natural failure.

Why is this a bad deal? It’s far more expensive than just saving that same amount in a savings account. Rather than buying an unnecessary insurance policy, simply put an amount equal to the monthly premium into a savings account. Within a year, that savings account will cover any necessary appliance replacements.

Lawn care services. The idea of a lush lawn outside of your beautiful new house sounds appealing, and lawn care services know that. They’ll hit you hard right after you move in, showing you gorgeous images of what your lawn might look like.

In essence, they’re just charging you a lot for what you could easily do yourself with a bit of fertilizer, a bit of natural herbicide and a simple dispenser. It costs far less per year to care for your lawn yourself, and it doesn’t take much time, either.

You may decide later that you do want the service because it will serve your lawn better than what you can provide. That’s fine, but find out what you can actually do first. You’ll probably find you can handle it well on your own.

Energy inefficiency. Like it or not, energy inefficiency is a real expense for new homeowners, and it’s often one they overlook. Newly purchased homes often come with cheap, inefficient light bulbs in the sockets. They also often come with older windows and walls that offer poor insulation. On top of that, homes that aren’t air sealed allow warm air to escape in winter and cool air to escape in summer.

One of the most important things you can do to curb your future expenses as a new homeowner is to perform an energy audit on your home. There are many guides to performing do-it-yourself energy audits online, like this one from the Department of Energy. Finding areas where your home is energy inefficient, and fixing those issues sooner rather than later can save you a lot of cash.

Insurance. In the rush to buy a home, many homeowners fail to adequately shop around for homeowners insurance. Instead, they just get a policy from the group recommended by their real estate agent, who is often just helping an insurance salesperson who happens to be a friend.

As soon as you’re settled, take some time to shop around for homeowners insurance. If you spend that time effectively, you can usually knock as much as 30 percent off your insurance premium, which is a lot of cash back in your pocket.

Taking some smart steps when you first move into your home can cut your bills and minimize your expenses for the time you own that house. Make these smart moves now, and your wallet will be happy.

Originally published on Yahoo! by Trent Hamm

Pay More or Less – Is an ARM for You?

More or Less GraphicA few years ago, right before the housing bubble burst, Adjustable Rate Mortgages (ARMs) were everywhere.  The problem was they weren’t the right answer for everyone who was using them.  Due to a number of factors at the time; decreased home values, increased unemployment, just plan bad luck, a number of homeowners were negatively impacted by having an ARM.  Consequently ARMs got a bad reputation.  But if used wisely, they can be a great way to purchase a home.

Denise Buck & Ed Johnson – DC Metro Realty Team

Paying more for your house payment does not make your home more valuable. It does mean that the mortgage rate may be higher than it has to be.

Even though fixed rates may never again be as low as they are currently, an adjustable rate mortgage may provide the lowest cost of ownership depending on how long a borrower plans to own a home. There are different types of ARMs but the one in this example is a 30 year mortgage with the rate fixed for five years and can adjust every one year after that based on independent indexes.

Another feature of a FHA ARM is the maximum rate change in one period is 1% and the maximum lifetime cap is 5% over the initial rate.

In the example below, the payment on the adjustable is $153.48 lower for the first five years or 60 payments. Another interesting thing is that lower interest rate loans amortize faster than higher interest rate loans. In this example, the ARM has a lower unpaid balance at the end of the first five years by $4,239.

The total savings on the ARM at the end of the first period is $13,477. If a borrower felt confident they would sell the home prior to the breakeven point of 8.5 years, the ARM would produce a lower cost of housing even if the mortgage rate escalated the maximum at each adjustment period.

To help determine whether you pay more or less, consult with a trusted mortgage professional and your real estate agent to learn the advantages and disadvantages of different programs. To try your own comparison, check today’s rates at the Freddie Mac Mortgage Rate Survey and plug your numbers into an Equity Accelerator

ARM comparison2.png.jpg

FHA or Conventional?

FHA v Conventional“This is such an important decision.  During the last couple of years Conventional was really the only way to go.  However, recently FHA has altered their guidelines and they have become a viable option again for some buyers.  Make sure you know all the options when you talk to your lender.”

Denise Buck & Ed Johnson – DC Metro Realty Team

Buyers with a minimum down payment are generally faced with the decision of whether to get a FHA or a conventional loan. With the new 3% down payment program on conventional loans, it may become more confusing which loan to pursue.

The two loan programs have mortgage fees that can differ greatly. FHA has a 1.75% up-front mortgage insurance charge in addition to the monthly mortgage insurance charge which was recently lowered by .5%.

FHA’s mortgage insurance is a fixed amount where conventional mortgage insurance providers’ fees are determined by individual companies and according to the credit score of the borrowers. A borrower with a good credit score will be charged less than a borrower with a marginal credit score.

Mortgage insurance on conventional loans can be cancelled when the equity in the property reaches 20%. FHA mortgage insurance in most cases, is paid for the life of the mortgage. Once a borrower has a 20% equity in their home, to eliminate the monthly FHA mortgage insurance, they would need to refinance the home with a conventional loan and would not be eligible for any refund of the up-front fee paid at closing or added to the mortgage.

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If a borrower has a low credit score, FHA may be the better choice because conventional underwriters may have a higher minimum score. FHA loans also tend to be more lenient than conventional loans when a borrower’s total monthly debt exceeds 45% of their monthly income. FHA tends to allow borrowers a shorter time frame after foreclosures and bankruptcies.

The decision-making factor is which mortgage will provide the lowest cost of housing including payment and all loan fees. A lot of information is necessary to make a good decision and typically, the borrower isn’t able to acquire it on his/her own.

A trusted mortgage professional is very valuable in not only providing the information but guiding the borrower through the entire process. Your real estate professional is uniquely qualified to make such a recommendation.