|
|
How do you determine the value of a troubled
property?
ANSWER: Buyers
considering a foreclosure property should obtain as much
information as possible from the lender, including the
range of bids expected. It also is important to examine
the property. If you are unable to get into a
foreclosure property, check with surrounding neighbors
about the property's condition. It also is possible to
do your own cost comparison through researching
comparable properties recorded at local county
recorder's and assessor's offices, or through Internet
sites specializing in property records.
How long do bankruptcies and foreclosures stay on a
credit report?
ANSWER: Bankruptcies
and foreclosures can remain on a credit report for seven
to 10 years.
Some lenders will consider an borrower earlier if they
have reestablished good credit. The circumstances
surrounding the bankruptcy can also influence a lender's
decision. For example, if you went through a bankruptcy
because your employer had financial difficulties, a
lender may be more sympathetic. If, however, you went
through bankruptcy because you overextended personal
credit lines and lived beyond your means, the lender
probably will be less inclined to be flexible.
How much does my real estate agent need to know?
ANSWER: Real estate
agents would say that the more you tell them, the better
they can negotiate on your behalf. However, the degree
of trust you have with an agent may depend upon their
legal obligation. Agents working for buyers have three
possible choices: They can represent the buyer
exclusively, called single agency, or represent the
seller exclusively, called sub-agency, or represent both
the buyer and seller in a dual-agency situation.
Some states require agents to disclose all possible
agency relationships before they enter into a
residential real estate transaction. Here is a summary
of the three basic types:
-
In
a traditional relationship, real estate agents and
brokers have a fiduciary relationship to the seller.
Be aware that the seller pays the commission of both
brokers, not just the one who lists and shows the
property, but also to the sub-broker, who brings the
ready, willing and able buyer to the table.
-
Dual agency exists if two agents working for the
same broker represent the buyer and seller in a
transaction. A potential conflict of interest is
created if the listing agent has advance knowledge
of another buyer's offer. Therefore, the law states
that a dual agent shall not disclose to the buyer
that the seller will accept less than the list
price, or disclose to the seller that the buyer will
pay more than the offer price, without express
written permission.
-
A
buyer also can hire his or her own agent who will
represent the buyer's interests exclusively. A
buyer's agent usually must be paid out of the
buyer's own pocket but the buyer can trust them with
financial information, knowing it will not be
transmitted to the other broker and ultimately to
the seller.
How much will I spend on maintenance expenses?
ANSWER: Experts
generally agree that you can plan on annually spend 1
percent of the purchase price of your house on repairing
gutters, caulking windows, sealing your driveway and the
myriad other maintenance chores that come with the
privilege of homeownership. Newer homes will cost less
to maintain than older homes. It also depends on how
well the house has been maintained over the years.
BACK TO TOP
What can I afford?
ANSWER: Know what you
can afford is the first rule of home buying, and that
depends on how much income and how much debt you have.
In general, lenders don't want borrowers to spend more
than 28 percent of their gross income per month on a
mortgage payment or more than 36 percent on debts. It
pays to check with several lenders before you start
searching for a home. Most will be happy to roughly
calculate what you can afford and prequalify you for a
loan.
The price you can afford to pay for a home will depend
on six factors:
● gross
income
● the
amount of cash you have available for the down payment,
closing costs and cash reserves required by the lender
● your
outstanding debts
● your
credit history
● the
type of mortgage you select
● current
interest rates
Another number lenders use to evaluate how much you can
afford is the housing expense-to-income ratio. It is
determined by calculating your projected monthly housing
expense, which consists of the principal and interest
payment on your new home loan, property taxes and hazard
insurance (or PITI as it is known). If you have to pay
monthly homeowners association dues and/or private
mortgage insurance, this also will be added to your PITI.
This ratio should fall between 28 to 33 percent,
although some lenders will go higher under certain
circumstances. Your total debt-to-income ratio should be
in the 34 to 38 percent range.
What is Fannie Mae's low-down program?
ANSWER: Fannie Mae is
expanding the availability of low-down-payment loans in
an effort to help more people nationwide qualify for a
mortgage. Two new programs will help potential buyers
overcome two of the most common obstacles to home
ownership, low savings and a modest income. To address
many first-time buyers' struggles to save the down
payment, Fannie Mae developed Fannie 97. The program
provides 97 percent financing on a fixed-rate mortgage
with either a 25- or 30-year loan term through Fannie
Mae's Community Home Buyers Program.
Fannie Mae's new Start-Up Mortgage will assist buyers
with a 5 percent down payment who are at any income
level. Yet applicants do not need as much income to
qualify and less cash for closing than with traditional
mortgages. Borrowers will receive a 30-year, fixed-rate
mortgage with a first-year monthly payment that is lower
than the standard fixed-rate loan.
Freddie Mac, Fannie Mae's counterpart, also offers
low-down-payment loan programs.
What is the standard debt-to-income ratio?
ANSWER: A standard
ratio used by lenders limits the mortgage payment to 28
percent of the borrower's gross income and the mortgage
payment, combined with all other debts, to 36 percent of
the total. The fact that some loan applicants are
accustomed to spending 40 percent of their monthly
income on rent -- and still promptly make the payment
each time -- has prompted some lenders to broaden their
acceptable mortgage payment amount when considered as a
percentage of the applicant's income. Other real estate
experts tell borrowers facing rejection to compensate
for negative factors by saving up a larger down payment.
Mortgage loans requiring little or no outside
documentation often can be obtained with down payments
of 25 percent or more of the purchase price.
When is the best time to buy?
ANSWER: Here are some
frequently cited reasons for buying a house:
-
You
need a tax break. The mortgage interest deduction
can make home ownership very appealing.
-
You
are not counting on price appreciation in the short
term.
-
You
can afford the monthly payments.
-
You
plan to stay in the house long enough for the
appreciation to cover your transaction costs. The
costs of buying and selling a home include real
estate commissions, lender fees and closing costs
that can amount to more than 10 percent of the sales
price.
-
You
prefer to be an owner rather than a renter.
-
You
can handle the maintenance expenses and headaches.
-
You
are not greatly concerned by dips in home values.
Where do I get information on housing market stats?
ANSWER: A real estate
agent is a good source for finding out the status of the
local housing market. So is your statewide association
of Realtors, most of which are continuously compiling
such statistics from local real estate boards. For
overall housing statistics, U.S. Housing Markets
(meyersgroup.com) regularly publishes quarterly reports
on home building and home buying. Your local builders
association probably gets this report. Finally, check
with the U.S. Bureau of the Census in Washington, D.C.;
(301) 763-3199; census.gov. The Chicago Title company
also has published a pamphlet, "Who's Buying Homes in
America." Write Chicago Title 601 Riverside Ave.,
Jacksonville, FL 32204; (888) 934-3354; ctic.com.
BACK TO TOP
|
