Category Archives: For Buyers

Can You Really Afford to Buy a House?

The scenario: Your landlord keeps hiking up your rent, and you’re tired of reworking your budget to accommodate the other areas of your life — or worse, searching for a new rental. You want to invest in a home for sale, but you’re not sure if now is the right time.

buying a house

There are two likely reasons for your hesitation: time and money. Deciding if you should rent or buy can be determined in part by your commitment to an area — you could have legitimate concerns about job relocation or you may wonder if the space you can afford now will be flexible enough that you won’t grow out of it just a few years down the road. And on an economic level, perhaps you’re not sure you can afford all the costs that a down payment, mortgage, and home maintenance entail.

The first step? Do some homework. Consider these questions to help you decide if the answer to “Can I afford a house?” is yes.

Should you buy before home prices climb higher?

In most parts of the U.S., home prices have been climbing steadily for the past few years. Does this mean you should rush to lock in the current prices before they rise even higher? The best answer: not necessarily. Do what’s right for you. If you’re planning to stay in one spot for a decade or more, short-term fluctuations in the house’s underlying value shouldn’t make a difference. After all, the primary purpose of a home is to provide a place to live, coupled with an opportunity to grow equity over time. Don’t over-analyze the market when deciding to buy a house. If the time is right for you, there’s no reason to wait.

Do you have a 20% down payment?

One of the major factors in determining if the time is right to buy a house: whether you have the finances to purchase one. Many lenders require a 20% down payment before they’ll grant you a mortgage. If you can’t come up with such a hefty down payment, it’s possible to secure a loan, but you’ll probably have to pay private mortgage insurance, or PMI, to make up the difference.

PMI rates vary from lender to lender but generally cost 0.05% to 1% of the total loan amount. At 0.05%, you’ll pay $41.50 per month for every $100,000 worth of loan that you carry. If you’re holding an FHA-insured loan, you pay two different mortgage insurance premiums. The upfront premium is 1.75% of your loan size, and it will be added to your borrowed amount (thus increasing your monthly costs). You’ll also pay a second premium, which is assessed annually and billed monthly. This second fee, often known as monthly mortgage insurance, will cost 1.3% annually if you carry a 30-year mortgage and put down at least 5%.

The bottom line? Not having a 20% down payment on hand can be a very expensive proposition. If you borrow $200,000, for example, and you’re charged 1% PMI, you’ll hand over $166 per month — not an insignificant sum.

Hands holding a  piggy bank and a house model. Housing industry mortgage plan and residential tax saving strategy

Can you budget for recurring monthly expenses?

Your mortgage payment is the heftiest of all monthly payments. It comprises four items: principal, interest, taxes, and insurance. (Together, these are known as PITI.) If you have a fixed-rate mortgage, your principal and interest will remain a flat monthly fee, regardless of what’s happening in the overall economy. However, your taxes and insurance may change, so even with a fixed-rate mortgage, your payment could fluctuate. Taxes are set by your county government and are based on its assessment of your property, so this expense is subject to increase at any point — either if your county reassesses your home at a higher value or if your local government decides to boost its tax rates.

Ask yourself: Do you have the space in your budget to accommodate that type of tax increase? If your budget is so tight that this will cause you to miss payments, you’re probably not in a strong enough position (right now) to buy a home. Likewise, you might decide to buy a home in a community that’s governed by a homeowners’ association, or HOA. This HOA can assess mandatory “dues” and put a lien on your house if you don’t pay the bill. And the HOA can decide to raise its dues at any point. Do you have enough wiggle room in your budget to accommodate a fee hike?

Do you have savings for maintenance and repairs?

Your mortgage isn’t the only housing expense you’ll need to meet in your budget. When you move from a rental to a home, you have new responsibilities (and the related costs), such as cleaning the gutters, replacing or repairing the roof, fixing and maintaining the HVAC, refinishing the floors, hiring a plumber, installing a new dishwasher, and repairing a broken garbage disposal.

As a very broad rule of thumb, you should budget 1% of the home’s purchase price annually for repairs and maintenance. For example: If your home is worth $300,000, set aside $3,000 per year, or $250 per month. You probably won’t spend this amount each month. Some months, you’ll spend zero. But another month, you may need to replace every window in your home — and could rack up a $7,500 bill.

How long will you stay in your home?

Buying and selling a home incurs thousands in closing costs — including inspections, title insurance, transfer tax, attorney fees, and real estate commissions. If you’re going to hold on to your home for several years, those costs will spread themselves out over time. But if you might be selling your home after two or three years, those costs (in addition to property taxes, homeowners insurance, mortgage interest, and maintenance) might add up to more than what you would have paid in rent.

Adding a Deck: What You Need to Know

Good weather should be enjoyed to its fullest extent. To do that you have to actually go outside. But if your home lacks an enticing outdoor living space, there’s little incentive to venture out.

Outdoor living is seeing a bit of an explosion lately: Adding a deck is one of the most requested home projects today, and demand is steadily rising. In a recent survey, more than 80 percent of people undertaking a landscaping project said they were adding a deck or a patio.

New durable outdoor materials, furniture and accessories plus unique shade options and smart tech that lets us watch movies and have full kitchens have no doubt fueled the interest. So if you’re hoping to make the most of good weather in your area, a new deck has likely crossed your mind. Here’s what you’ll need to know about finally getting one.

Why You Should Use a Realtor

It’s a slow Sunday morning. You’ve just brewed your Nespresso and popped open your laptop to check out the latest home listings before you hit the road for a day of open houses.

You’re DIYing this real estate thing, and you think you’re doing pretty well—after all, any info you might need is at your fingertips online, right? That and your own sterling judgment.

Oh, dear home buyer (or seller!)—we know you can do it on your own. But you really, really shouldn’t. This is likely the biggest financial decision of your entire life, and you need a Realtor if you want to do it right. Here’s why.

why use a realtor

1. They have loads of expertise

Want to check the MLS for a 4B/2B with an EIK and a W/D? Real estate has its own language, full of acronyms and semi-arcane jargon, and your Realtor is trained to speak that language fluently.

Plus, buying or selling a home usually requires dozens of forms, reports, disclosures, and other technical documents. Realtors have the expertise to help you prepare a killer deal—while avoiding delays or costly mistakes that can seriously mess you up.

2. They have turbocharged searching power

The Internet is awesome. You can find almost anything—anything! And with online real estate listing sites such as yours truly, you can find up-to-date home listings on your own, any time you want. But guess what? Realtors have access to even more listings. Sometimes properties are available but not actively advertised. A Realtor can help you find those hidden gems.

Plus, a good local Realtor is going to know the search area way better than you ever could. Have your eye on a particular neighborhood, but it’s just out of your price range? Your Realtor is equipped to know the ins and outs of every neighborhood, so she can direct you toward a home in your price range that you may have overlooked.

3. They have bullish negotiating chops

Any time you buy or sell a home, you’re going to encounter negotiations—and as today’s housing market heats up, those negotiations are more likely than ever to get a little heated.

You can expect lots of competition, cutthroat tactics, all-cash offers, and bidding wars. Don’t you want a savvy and professional negotiator on your side to seal the best deal for you?

And it’s not just about how much money you end up spending or netting. A Realtor will help draw up a purchase agreement that allows enough time for inspections, contingencies, and anything else that’s crucial to your particular needs.

realtors

4. They’re connected to everyone

Realtors might not know everything, but they make it their mission to know just about everyone who can possibly help in the process of buying or selling a home. Mortgage brokers, real estate attorneys, home inspectors, home stagers, interior designers—the list goes on—and they’re all in your Realtor’s network. Use them.

5. They adhere to a strict code of ethics

Not every real estate agent is a Realtor, who is a licensed real estate salesperson who belongs to the National Association of Realtors, the largest trade group in the country.

What difference does it make? Realtors are held to a higher ethical standard than licensed agents and must adhere to a Code of Ethics.

6. They’re your sage parent/data analyst/therapist—all rolled into one

The thing about Realtors: They wear a lot of different hats. Sure, they’re salespeople, but they actually do a whole heck of a lot to earn their commission. They’re constantly driving around, checking out listings for you. They spend their own money on marketing your home (if you’re selling). They’re researching comps to make sure you’re getting the best deal.

And, of course, they’re working for you at nearly all hours of the day and night—whether you need more info on a home or just someone to talk to in order to feel at ease with the offer you just put in. This is the biggest financial (and possibly emotional) decision of your life, and guiding you through it isn’t a responsibility Realtors take lightly.

Buying a House to be Renovated

Renovation-Tips-HERO

With the cost on home renovations increasing year-on-year, when looking for a house to renovate you need to be smart and forward thinking. Otherwise, you may find yourself with more work than you bargained for, sending you broke and over budget.

Make a list of your wants and needs.

When buying a house there is the obvious advice such as, don’t rush, do your homework, look around and don’t buy the first house you fall in love with.

Before you set out on the house hunt create a brief, outlining what you are looking for, a wish list so to speak but be realistic.

Be wary of already-renovated houses.

You also want to be careful not to buy something that has undergone previous work where you will be paying a premium for a renovation that isn’t to your taste and that you will want to change at a later date.

Consider how much work you really want to sign up for.

Structural work is when the bills start rolling in, you need a house that just needs a face lift and doesn’t require moving the stairs, knocking out structural walls or large additions in the form of another story.

We suggest finding a house that already has character as it will be generous, enabling you to create an interesting aesthetic with less effort and expense.

Weigh up the pros and cons of each house you view.

At the open house take photos and notes so you can return to them when comparing the properties you have viewed to weigh up the pros and cons of each. Compare all potential properties against your initial brief.

Create a budget that includes costings for each renovation.

Be realistic when identifying the extra costs involved, such as maintenance, aspects that will need replacing and possible structural changes you may intend to do in your renovation. Calculate these proposed costs.

Your Inspection Checklist

Be aware of how to identify possible issues that may be expensive. Here are some things to look out for:

  • Are there cracks in the interior and exterior? Cracks in the walls are usually a sign of subsidence.
  • Did you notice any damaged walls? Bubbling or peeling paint is a sign of a damp area.
  • Are there signs of water penetration that can be identified by water stains or corrosion around wet areas such as the bathroom and laundry?
  • If there is mould in the bathroom there could be a ventilation problem.
  • What is the condition of the floor e.g. what is under the carpet? Does it need replacing?
  • Are the windows and doors in good condition and working order?
  • Does the house have heating and cooling? What condition is it in?
  • Has the house been recently painted? If so, be careful of what the paint could be masking.
  • Is the ceiling sagging? What do the rooflines look like from an external perspective? Are they straight or deflecting?

The Final Step

Before signing any contract it is wise to obtain a professional termite check and to contact a qualified building inspector to provide you with a full report on the property, ensuring you are not biting off more than you can chew.

Have your builder provide you with quotes for all the work and renovations you want to make – you may choose to do some yourself but it’s good to compare how much it will cost to do it yourself or get a professional to do it.

Category Archives: For Buyers

Can You Really Afford to Buy a House?

The scenario: Your landlord keeps hiking up your rent, and you’re tired of reworking your budget to accommodate the other areas of your life — or worse, searching for a new rental. You want to invest in a home for sale, but you’re not sure if now is the right time.

buying a house

There are two likely reasons for your hesitation: time and money. Deciding if you should rent or buy can be determined in part by your commitment to an area — you could have legitimate concerns about job relocation or you may wonder if the space you can afford now will be flexible enough that you won’t grow out of it just a few years down the road. And on an economic level, perhaps you’re not sure you can afford all the costs that a down payment, mortgage, and home maintenance entail.

The first step? Do some homework. Consider these questions to help you decide if the answer to “Can I afford a house?” is yes.

Should you buy before home prices climb higher?

In most parts of the U.S., home prices have been climbing steadily for the past few years. Does this mean you should rush to lock in the current prices before they rise even higher? The best answer: not necessarily. Do what’s right for you. If you’re planning to stay in one spot for a decade or more, short-term fluctuations in the house’s underlying value shouldn’t make a difference. After all, the primary purpose of a home is to provide a place to live, coupled with an opportunity to grow equity over time. Don’t over-analyze the market when deciding to buy a house. If the time is right for you, there’s no reason to wait.

Do you have a 20% down payment?

One of the major factors in determining if the time is right to buy a house: whether you have the finances to purchase one. Many lenders require a 20% down payment before they’ll grant you a mortgage. If you can’t come up with such a hefty down payment, it’s possible to secure a loan, but you’ll probably have to pay private mortgage insurance, or PMI, to make up the difference.

PMI rates vary from lender to lender but generally cost 0.05% to 1% of the total loan amount. At 0.05%, you’ll pay $41.50 per month for every $100,000 worth of loan that you carry. If you’re holding an FHA-insured loan, you pay two different mortgage insurance premiums. The upfront premium is 1.75% of your loan size, and it will be added to your borrowed amount (thus increasing your monthly costs). You’ll also pay a second premium, which is assessed annually and billed monthly. This second fee, often known as monthly mortgage insurance, will cost 1.3% annually if you carry a 30-year mortgage and put down at least 5%.

The bottom line? Not having a 20% down payment on hand can be a very expensive proposition. If you borrow $200,000, for example, and you’re charged 1% PMI, you’ll hand over $166 per month — not an insignificant sum.

Hands holding a  piggy bank and a house model. Housing industry mortgage plan and residential tax saving strategy

Can you budget for recurring monthly expenses?

Your mortgage payment is the heftiest of all monthly payments. It comprises four items: principal, interest, taxes, and insurance. (Together, these are known as PITI.) If you have a fixed-rate mortgage, your principal and interest will remain a flat monthly fee, regardless of what’s happening in the overall economy. However, your taxes and insurance may change, so even with a fixed-rate mortgage, your payment could fluctuate. Taxes are set by your county government and are based on its assessment of your property, so this expense is subject to increase at any point — either if your county reassesses your home at a higher value or if your local government decides to boost its tax rates.

Ask yourself: Do you have the space in your budget to accommodate that type of tax increase? If your budget is so tight that this will cause you to miss payments, you’re probably not in a strong enough position (right now) to buy a home. Likewise, you might decide to buy a home in a community that’s governed by a homeowners’ association, or HOA. This HOA can assess mandatory “dues” and put a lien on your house if you don’t pay the bill. And the HOA can decide to raise its dues at any point. Do you have enough wiggle room in your budget to accommodate a fee hike?

Do you have savings for maintenance and repairs?

Your mortgage isn’t the only housing expense you’ll need to meet in your budget. When you move from a rental to a home, you have new responsibilities (and the related costs), such as cleaning the gutters, replacing or repairing the roof, fixing and maintaining the HVAC, refinishing the floors, hiring a plumber, installing a new dishwasher, and repairing a broken garbage disposal.

As a very broad rule of thumb, you should budget 1% of the home’s purchase price annually for repairs and maintenance. For example: If your home is worth $300,000, set aside $3,000 per year, or $250 per month. You probably won’t spend this amount each month. Some months, you’ll spend zero. But another month, you may need to replace every window in your home — and could rack up a $7,500 bill.

How long will you stay in your home?

Buying and selling a home incurs thousands in closing costs — including inspections, title insurance, transfer tax, attorney fees, and real estate commissions. If you’re going to hold on to your home for several years, those costs will spread themselves out over time. But if you might be selling your home after two or three years, those costs (in addition to property taxes, homeowners insurance, mortgage interest, and maintenance) might add up to more than what you would have paid in rent.

Adding a Deck: What You Need to Know

Good weather should be enjoyed to its fullest extent. To do that you have to actually go outside. But if your home lacks an enticing outdoor living space, there’s little incentive to venture out.

Outdoor living is seeing a bit of an explosion lately: Adding a deck is one of the most requested home projects today, and demand is steadily rising. In a recent survey, more than 80 percent of people undertaking a landscaping project said they were adding a deck or a patio.

New durable outdoor materials, furniture and accessories plus unique shade options and smart tech that lets us watch movies and have full kitchens have no doubt fueled the interest. So if you’re hoping to make the most of good weather in your area, a new deck has likely crossed your mind. Here’s what you’ll need to know about finally getting one.

Why You Should Use a Realtor

It’s a slow Sunday morning. You’ve just brewed your Nespresso and popped open your laptop to check out the latest home listings before you hit the road for a day of open houses.

You’re DIYing this real estate thing, and you think you’re doing pretty well—after all, any info you might need is at your fingertips online, right? That and your own sterling judgment.

Oh, dear home buyer (or seller!)—we know you can do it on your own. But you really, really shouldn’t. This is likely the biggest financial decision of your entire life, and you need a Realtor if you want to do it right. Here’s why.

why use a realtor

1. They have loads of expertise

Want to check the MLS for a 4B/2B with an EIK and a W/D? Real estate has its own language, full of acronyms and semi-arcane jargon, and your Realtor is trained to speak that language fluently.

Plus, buying or selling a home usually requires dozens of forms, reports, disclosures, and other technical documents. Realtors have the expertise to help you prepare a killer deal—while avoiding delays or costly mistakes that can seriously mess you up.

2. They have turbocharged searching power

The Internet is awesome. You can find almost anything—anything! And with online real estate listing sites such as yours truly, you can find up-to-date home listings on your own, any time you want. But guess what? Realtors have access to even more listings. Sometimes properties are available but not actively advertised. A Realtor can help you find those hidden gems.

Plus, a good local Realtor is going to know the search area way better than you ever could. Have your eye on a particular neighborhood, but it’s just out of your price range? Your Realtor is equipped to know the ins and outs of every neighborhood, so she can direct you toward a home in your price range that you may have overlooked.

3. They have bullish negotiating chops

Any time you buy or sell a home, you’re going to encounter negotiations—and as today’s housing market heats up, those negotiations are more likely than ever to get a little heated.

You can expect lots of competition, cutthroat tactics, all-cash offers, and bidding wars. Don’t you want a savvy and professional negotiator on your side to seal the best deal for you?

And it’s not just about how much money you end up spending or netting. A Realtor will help draw up a purchase agreement that allows enough time for inspections, contingencies, and anything else that’s crucial to your particular needs.

realtors

4. They’re connected to everyone

Realtors might not know everything, but they make it their mission to know just about everyone who can possibly help in the process of buying or selling a home. Mortgage brokers, real estate attorneys, home inspectors, home stagers, interior designers—the list goes on—and they’re all in your Realtor’s network. Use them.

5. They adhere to a strict code of ethics

Not every real estate agent is a Realtor, who is a licensed real estate salesperson who belongs to the National Association of Realtors, the largest trade group in the country.

What difference does it make? Realtors are held to a higher ethical standard than licensed agents and must adhere to a Code of Ethics.

6. They’re your sage parent/data analyst/therapist—all rolled into one

The thing about Realtors: They wear a lot of different hats. Sure, they’re salespeople, but they actually do a whole heck of a lot to earn their commission. They’re constantly driving around, checking out listings for you. They spend their own money on marketing your home (if you’re selling). They’re researching comps to make sure you’re getting the best deal.

And, of course, they’re working for you at nearly all hours of the day and night—whether you need more info on a home or just someone to talk to in order to feel at ease with the offer you just put in. This is the biggest financial (and possibly emotional) decision of your life, and guiding you through it isn’t a responsibility Realtors take lightly.

Buying a House to be Renovated

Renovation-Tips-HERO

With the cost on home renovations increasing year-on-year, when looking for a house to renovate you need to be smart and forward thinking. Otherwise, you may find yourself with more work than you bargained for, sending you broke and over budget.

Make a list of your wants and needs.

When buying a house there is the obvious advice such as, don’t rush, do your homework, look around and don’t buy the first house you fall in love with.

Before you set out on the house hunt create a brief, outlining what you are looking for, a wish list so to speak but be realistic.

Be wary of already-renovated houses.

You also want to be careful not to buy something that has undergone previous work where you will be paying a premium for a renovation that isn’t to your taste and that you will want to change at a later date.

Consider how much work you really want to sign up for.

Structural work is when the bills start rolling in, you need a house that just needs a face lift and doesn’t require moving the stairs, knocking out structural walls or large additions in the form of another story.

We suggest finding a house that already has character as it will be generous, enabling you to create an interesting aesthetic with less effort and expense.

Weigh up the pros and cons of each house you view.

At the open house take photos and notes so you can return to them when comparing the properties you have viewed to weigh up the pros and cons of each. Compare all potential properties against your initial brief.

Create a budget that includes costings for each renovation.

Be realistic when identifying the extra costs involved, such as maintenance, aspects that will need replacing and possible structural changes you may intend to do in your renovation. Calculate these proposed costs.

Your Inspection Checklist

Be aware of how to identify possible issues that may be expensive. Here are some things to look out for:

  • Are there cracks in the interior and exterior? Cracks in the walls are usually a sign of subsidence.
  • Did you notice any damaged walls? Bubbling or peeling paint is a sign of a damp area.
  • Are there signs of water penetration that can be identified by water stains or corrosion around wet areas such as the bathroom and laundry?
  • If there is mould in the bathroom there could be a ventilation problem.
  • What is the condition of the floor e.g. what is under the carpet? Does it need replacing?
  • Are the windows and doors in good condition and working order?
  • Does the house have heating and cooling? What condition is it in?
  • Has the house been recently painted? If so, be careful of what the paint could be masking.
  • Is the ceiling sagging? What do the rooflines look like from an external perspective? Are they straight or deflecting?

The Final Step

Before signing any contract it is wise to obtain a professional termite check and to contact a qualified building inspector to provide you with a full report on the property, ensuring you are not biting off more than you can chew.

Have your builder provide you with quotes for all the work and renovations you want to make – you may choose to do some yourself but it’s good to compare how much it will cost to do it yourself or get a professional to do it.