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Earnest Money Deposits Show How Serious You Are

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Home Purchase BasicsHow Much Earnest Money Deposit And When?

When real estate holdings transfer from a seller to a buyer, earnest money deposits get the ball rolling, they’re the good faith payment that says the purchaser means business. As a buyer, the usual practice is that you offer an earnest money deposit between $1,000 and two percent of the sale value.

The law of contracts and the principle of caveat emptor govern real estate, which means be careful and don’t believe anything until you get it in writing. For sellers, that means you don’t do a deal until you’ve got a signed contract. You need to confirm that the buyer has deposited the earnest money into the appropriate escrow account.

Lenders And Sellers Understand Deposits Differently

Don’t confuse the earnest money with the deposit your bank wants you to put down. Your earnest money locks the seller into the sales contract. Although this payment contributes to your equity and therefore the full deposit, you’ll have to provide additional funds to fulfill the lender’s requirements when you close.

Banks expect buyers to provide a deposit of at least twenty percent of the sale price. You can reduce the deposit if you can join a government-backed loan program. If you don’t have the equity, you can also purchase private mortgage insurance for the excessive portion of the loan.

Once you’ve hammered out the details of the deal and signed the contract, you send a check or wire transfer to escrow for all or part of the agreed earnest money deposit. The amount you agree to put down depends on how well you negotiated. If the seller has other offers, your realtor may advise you to provide a larger sum as earnest money than you would if no one else is bidding.

Getting Your Funds Back When Agreements Fall Through

As the buyer, you are making a serious commitment and parting with funds when your realtor posts the deposit. Real estate transactions are always suspenseful, with a significant chance that even the simplest deal will fall through. Financing is the most notorious culprit; changes in terms demanded by the bank on a whim or of some flaw discovered in the property can stop the sale in its tracks.

Here are the three most likely outcomes when a deal doesn’t go through:

  • If the seller pulls out of the deal, then the buyer is likely to get the funds back
  • The purchaser changes their mind and cancel the transaction; they’re probably not getting the earnest money back
  • When it’s the lender that backs out the question is more complicated and may come down to timing
  • In any case, you should get advice from your Realtor

Only hand over the deposit when you are sure that you want the home and understand the risks. As with many other aspects of real estate sales, your individual state sets the laws that determine the finer details. Earnest money deposits are no exceptions how states regulate property transactions. Consult your realtor to confirm their personal approach and the process in your state.

Rising Real Estate Prices And Stretching To Buy Your First Home

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Before You Purchase Your HomeHow Do You Respond To Rising Real Estate Prices?

Buying a home is once again becoming less affordable, but so is renting. Even with rising real estate prices, buying your home is still a less expensive option in the medium to long term. So, how can first-time buyers make a move to home ownership when it’s such an extreme reach to do so?

As it turns out, surging housing prices aren’t a problem for all regions of the country, some areas are affordable, others not so much. The price of houses and condominiums connect to other factors. The desirability of the region and the demands of the job market; residential real estate affordability relates directly to the quality of life and economic strength of your area.

Options That Make Home Buying More Affordable

Your choices in the face of high real estate prices are only limited by your imagination and determination. Granted, some of those choices sound a little like strong medicine. But, as prices go up, earning extra capital will require that you commit to investing sweat equity.

Here are some things you can do in response to high housing prices:

Move to a more affordable region – Harsh, but if you live in one of the most expensive parts of the nation, there are homes of equal size and quality that are less expensive elsewhere. If you’re retiring or can work remotely, you may find that other regions have much to offer.

Begin the process early – If you decide to buy your first home in an expensive community, you have to take longer and work harder to gather the necessary resources.

Get a second job – If you can save the income from a second job it could add up to a down payment, or at least enough to cover your closing costs. Five to eight hundred hours of work extra in a year adds up to a chunk of change, even at minimum wage. Also, keeping busy will help you avoid spending extra cash on entertainment, making your nest egg even bigger.

Explore Government loan guarantees – If you aren’t already checking out programs that offer government-backed financing. FHA and the Veterans Administration are two such examples. One of these programs might get you a smaller down payment and a lower interest rate than you could qualify for otherwise.

Lower your expectations – Well that just sucks! Or does it? Perhaps a more modest home-buying option could be a happier one. A smaller house or one further out from town might come with peace of mind included.

Tips For Would-Be Investors

Invest in more affordable regions – Like moving to cheaper regions, investing in residential and commercial investments can provide bargains. Smart investors can find less expensive options with which to expand a property portfolio. The returns will be proportionally smaller and growth slower, but over time, you can attain substantial equity.

Join a real estate syndicate – When investors of modest means want to tackle ambitious projects they form syndicates, legal entities pool assets. Ask your real estate broker or business-banking manager for local opportunities.

Buy shares in REITs instead – Larger syndicates can apply for special tax treatment, as real estate investment trusts. Many of the largest REITs are listed on the stock market and pay substantial quarterly dividends. Publicly traded REITs are the most hands-off real estate investment, available from your stockbroker.

Here Are The Seller Financing Good And Bad Points

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selling-your-home-easy-wayVery occasionally, the party that sells a home to you will lend you some of the money to make the purchase. Seller financing rarely happens because there are usually other alternatives. However, for one reason or another, it could work out that the seller provides a loan for a part or the entire amount that you borrow.

An Extra Avenue To Home Ownership

The most common terms are for five years with a balloon payment. The payments only cover the interest due and a small fraction toward the principal. The balloon payment recoups the outstanding balance for the seller at the end of the term.

As the buyer, you will most likely use a conventional loan to refinance at the end of the loan and pay off the balloon. Your equity should have grown enough in the intervening time to make bank lending a comfortable fit. Seller financing helps you buy a property that would be out of your reach.

Seller Financing Can Help To Close The Deal

Sellers will sometimes agree to provide the funding because, by offering to carry a second mortgage, they can liquidate a portion of the sale proceeds as cash. They might need the cash for a down payment on a new property or to pay off other loans and obligations. Once the deal closes and you begin making payments, the seller still has an interest in the home. They may choose to sell the loan on to someone else or hang in for the duration.

Real estate transactions are all about titles, deeds, and contracts. Organizing seller financing is a matter of paperwork as part of the closing process, in line with the real estate laws of your state. The buyer and seller exchange a promissory note that specifies the interest rate and terms. The parties agree on how to include a schedule of payments of interest and principal, and any balloon payment due at the end.

The Downside For Buyers

Although buyers gain advantages from seller financing, such as quicker closing, lower closing costs, and more flexibility about the down payment, there are still plenty of things that can keep you up at night worrying. The terms will likely include a higher interest rate; sellers have the right to sell the promissory note to a third party, and you’ll still need to prove credit worthiness. Additionally, if a bank holds a note that the seller hasn’t disclosed, you will be on the hook if the bank decides to foreclose; you need to be very confident that the seller owns the property free and clear.

Always get professional advice from your real estate agent or attorney before you sign any such agreement. Seller financing is relatively uncommon in the United States at present because of widely available institutional credit on terms and conditions that suit almost any situation. If seller financing comes up as an option, talk to your realtor or broker to find the best way to acquire the home that you want.


5 Tips For Homebuyers Seeking The Perfect Mortgage Solution

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Home Purchase ProcessBecoming a homebuyer is of the most trying consumer activities that you will ever experience. One of the things that make purchasing a home rewarding is finding the right loan to make it happen.

A little extra effort up front will help you get the best possible mortgage terms for your situation. Small adjustments to your home loan terms can save you thousands of dollars overall.

Three Different Mortgage Routes

There are three main channels through which to obtain real estate funding for homebuyers these days; these are banks, brokers, and online.

Banks and other financial institutions – Companies that have the capital to provide the funding provide the capital for lending directly. Your bank might be the first institution that you go to for financial advice and services. Pre-qualifying with your bank is one way to make realtors and sellers see you as serious about finding a deal.

Mortgage brokers – The advantage that agents who can bring lenders together with buyers are the diversity of loan packages they can offer. Even if your bank seems to have the right offer for your home buying needs, you might get a considerably better deal from a broker that has access to many different lending sources.

Online mortgage sites – The possibilities of online lending are just getting started. While many of the online lenders stick to the same practices as brokers and banks, a few digital mortgage lenders are rewriting the rules on how to approve a home loan.

The lesson is to shop around to make sure you get the best deal on a mortgage that you can. Lenders will vary the terms they offer and may even respond to requests for alternative terms. If you choose carefully, you can save tens of thousands of dollars over the life of a home loan.

5 Tips To Find The Right Home Loan

Build a budget – Work out your household budget; add up all of your monthly expenses and your income. The numbers you write down may confirm your understanding of your finances or it might turn out to be an eye-opening experience. In any case, writing down a budget will help you to understand what you can afford and what to do before you can buy a new home.

Look at your credit report – If you have not done so in the last year, go to AnnualCreditReport.com and pull your credit history, it is the only official website authorized by Federal law to provide the information to consumers.

Get preapproval – Once you have a sense of where you are and what you can afford it is time to get pre-approval from a lender. You already know what you think about your circumstances, pre-approval will give you some critical feedback and tell you what lending professionals judge your situation and how much home you can afford.

An abundance of options – Home loans are usually either fifteen or thirty-year terms, beyond that and the laws of your state and nation almost anything goes. Lenders will give you different interest rates and points to pay at closing.

Fees are not all written the same – As with interest and points; lenders are businesses, they work on many different business models. The origination fees a lender will demand depend on how they wish to build their portfolios of loans.

Bonus Tip For Stressed Out Home Buyers

Rejections don’t matter – One rejection does not mean all will reject you, sometimes it’s you, and sometimes it’s them. Lenders write their company policies differently, and they seek to lend to consumers that fit the specific criteria of their lending policies. Try to find out the reason, adapt, and keep going. Buying a home is an intense but rewarding experience.

Remember that lenders and Realtors earn a living when you succeed in purchasing your home. Don’t hesitate to discuss your questions and desires with your Realtor or real estate broker and get the ball rolling today.

3 Ways Homeowners Can Get A Lower Mortgage Payment

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Mortgage Payment OptionsWould a lower mortgage payment make a difference in your lifestyle or family budget? If you have a burdensome pile of bills each month, these tips might help save a little on your budget.

Three Lower Mortgage Payment Options

The one most hopeful choice, with multiple variations, is refinancing your loan. The longer the time since taking out the loan you wish to replace, the more you can save by refinancing.

Leverage your equity – You might get lower mortgage payments by taking out a new conventional mortgage. This option requires that you find a cheaper package than the original loan or smaller due to your previous payments of principal that now have increased your equity.

Alternatively, you might be able to save on the mortgage insurance. If your equity has increased, either by repayments, rising home values or both, you can apply to end your policy, stopping the payments. If you can refinance with equity for a combined smaller payment and without premiums, you will double the savings.

Interest only – Loans for real estate usually combine repayments of principal and interest on the outstanding balance. Refinancing with a loan that only pays interest every month is a short-term solution at best.

A few lenders may offer an extended period of interest only payments. The down-side is either a future balloon payment or payments of interest and principal.

Adjustable rate mortgages – Lenders love loans that give them a chance to adjust to the current market rate periodically. In return for future uncertainty, lenders offer lower interest rates, fixed for some time after the start of the loan.

The initial fixed period may be as much as five years followed by yearly changes, relative to some index. If interest rates stay low, you pay a lower mortgage payment every month. On the other hand, the interest could become a burden if the rate goes up significantly. You trade short-term savings for medium and long-term risk with an ARM.

Pay More Monthly Instead

Here is a thought; maybe you want to pay less interest over the long run. If you have increased your equity and your payments are not so bad, perhaps you can refinance for a shorter term. Lenders love to get paid fast. So, if you make larger payments over fifteen years instead of thirty, you get a lower interest rate. The payment may be higher, but not by much, and you will pay much less over the lifetime of the new loan.

Issues When Seeking Lower Mortgage Payments

The one consideration when you are refinancing a home loan is that you will have to pay fees for the new loan. Your lender will tack on some combination of up-front costs and fees added to the new balance of the loan. These costs can be significant, and they vary from lender to lender. So, shop around carefully and make sure that you understand all of the costs involved clearly.

Once you have a home and making payments, your creditworthiness grows and so does your equity. The longer you keep making your payments on time, the better your position in refinancing. So, if you need to tighten your household budget, it may be an option to look around for a lower mortgage payment.

Don’t Depend On Your Last Pay Statement To Get That Mortgage

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Home Purchase ProcessThe Sixty-Day Seasoning Rule

When you are waiting for approval on your home loan, you need to prepare for this one important detail. Your lender is unlikely to regard your most recent pay deposit as part of your contribution at closing. That means your paycheck is not eligible to form part of your deposit.

Conventional home loans require a substantial deposit of twenty percent of the purchase price. If you intend to take advantage of a government-backed loan program, your deposit may be as low as 3.5 percent instead. However, even if that covers most of your deposit, your lender won’t see it that way.

Instead, mortgage lenders prefer to count only funds that posted to your accounts more than sixty days ago. The term for such balances is that they are seasoned.

To Qualify For A Mortgage Be Prepared

As the Scouts say, “Be prepared” which is an excellent motto for the stressful time that you spend house hunting and negotiating with sellers. Getting to the point of agreement is not the end of the process; as the buyer, both you and the home must qualify for mortgage funding with your lender.

By this point you will be pre-qualified, otherwise, the sellers and agents would not have taken you seriously. You will also have sought pre-approval from a lender. This all serves to put you in the position to negotiate the best deal and close on a house. However, even when you have preapproval, your lender will still have to formally propose the loan to their underwriters, who look at everything very carefully before agreeing to release the loan funds.

Get Your Borrowing Stance On Ahead Of Time

Finding out that your bank balance is somehow inadequate, even when the funds are there, is a jarring experience. Your Realtor will gladly help you prepare your finances for final approval. After all, they depend on your success to stay in business. You still need to begin the process ahead of time. The longer before you intend to purchase that you can start to gather the resources, the more smoothly the home buying experience will go for you.

If you are just now thinking about entering the home buying marketplace be patient, buying a home is a major life event, and you need to take your time to do it right. There is no point in rushing because of two significant risks. You will either regret purchasing the property after you choose it too quickly or you will hit roadblocks. These obstacles are such things as sellers passing over your offer or loan applications rejected by lenders.

In the time you spend to prepare, work to improve your credit score and put away enough funds to make a reasonable offer on a home that you like. If you do this before you begin house hunting, you will have properly seasoned cash in the bank when it is time to close the deal, pick up the keys, and start making payments on your new mortgage.

Had Enough Of Renting? Maybe It’s Time To Buy Your First Home

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First Time Buyer BasicsSo, you think you’re ready to end your time as a renter and buy your first home. In the long-term, it’s an excellent choice, but when you begin investigating the short-term costs and labor involved it becomes much more complicated.

Buy your first home, and you’ll find that there is work to do to get there and responsibilities that renters never have to consider. The process of purchasing real estate can be stressful, and it takes time and energy.

Steps Into The Home Buying Process

First take a detailed look at your personal finances and check your credit reports. You will need to know your budget and whether you have the funds for a twenty percent deposit. Fortunately, there are FHA-backed loans with 3.5 percent down payments plus costs. You may qualify for even better terms if you are a veteran or serving member of the United States military.

Once you understand your budget and credit, speak to your bank about how to pre-qualify for a home loan. Pre-qualifying marks a milestone in home buying because it shows realtors, lenders, and sellers that you’re serious and, in principle, you have the capacity to purchase a home. From this point, you’re beginning the real journey of finding a home, which warrants a complete post.

The Issues When You Buy Your First Home

You have more payments to make as a homeowner. You have to make your loan payments every month; this usually includes payments toward principal, interest, property tax, and insurance. If you go FHA and make a small down payment, you’ll also pay mortgage insurance premium on the extended loan each month.

The fifth payment type is for homeowner association fees or condo fees. If you are buying into a community or building that has shared responsibilities you pay HOA fees. HOA covers the cost of maintenance, some utilities, and the property management contract. An HOA fee is a given for condos, if you are purchasing a house, you should still budget a similar amount for the cost of maintenance and repairs and set it aside each month.

Do Homeowners Have Lower Living Costs?

The magic of real estate is that every property is unique and that’s also a nuisance if you want to compare your options. Look at how much house you can afford to pay for a monthly mortgage payment for your current rent amount. You should then consider how much it would cost you in down payment and closing costs.

If you can save for a larger down payment and improve your credit score to qualify for lower interest rates on your mortgage the investment will pay off well in the long-term. In five to ten years you will accumulate equity and have a more settled lifestyle. It is expensive to get through the home buying process, and you will have responsibilities as never before, but you will also be a home owner, and that pleasure will make it worth struggling to buy your first home.

Position Your Offer To Purchase For Home Buying Success

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making-an-offerThe Dance of Offer and Counter-Offer

Any offer to purchase a home begins a process that is both formal and chaotic at the same time. The home buying process goes through stages that are regular and predictable. State regulations, precedents, and contract law govern real estate transactions in the United States.

Real estate buyers and sellers negotiate the prices and terms that suit them, as long as they use the right forms and legal procedures along the way. This back-and-forth exchange of documents between the parties ends either with or without a sale.

The Tools Of Powerful Negotiation

Buyers who have cash and sellers who have patience are more formidable real estate negotiators. Cash offers have the strongest appeal to selling owners because they remove the greatest element of uncertainty in the transaction, which is whether or not the lender will approve the financing for the deal. Mortgages require time for paperwork, which raises the risk of any number of surprises or bank objections that delay or disqualify the transaction.

Sellers who have the time to be patient have the advantage, the resources to create charming, move-in ready show homes. Flexibility in receiving payment, the attention and interest of multiple buyers puts the power in the hands of purchasers, assuming their pricing expectations are realistic.

When sellers are impatient to sell, the negotiating power goes to the savvy buyer. When property owners need to dispense with a piece of real estate they are much more likely to acquiesce to the demands of bargain-hunting buyers.

A Multitude Of Reasons For Counter Offers

Haggling over the price of purchase is not a typical part of daily activities for most consumers. That is why, as a buyer, you look to your real estate agent for the knowledge and experience to make an offer to purchase suit your intention; it might be your best offer or a low-ball offer. What happens next depends on how motivated the sellers are, and whether they have other offers.

The extremes are that the seller will either accept your bid or reject it. Alternatively, if they think they can get a better deal than anything that’s on the table, they may make a counter offer. A counter offer can be for any number of reasons. The most important choice is working with a Realtor; a property professional will organize the sale of your home or find the right one to purchase, often doing both for clients. When you find a property that appeals to you, put in a bid.

Your Options To Respond To A Counter Offer

You can refuse a counter offer and make a counter to their counter offer, but as a buyer, you want to have one thing in mind. You need to be ready with an exact price and terms that work for you. Otherwise, you should either accept or reject the counter offer and get on to the next step. The final step is either to move on to the next prospect or close and pick up your keys.

Your agent will help you all the way through the process; they will advise you and submit all of the forms that go with the negotiations. The flow of offer and counter offer is fast-paced and exciting and usually end quickly once started. If you can anticipate objections and counter offer from sellers, you can be a strong negotiator and your offer to purchase will make the adventure of buying your home a rewarding one.

Having A Mortgage Payment Emergency – What Do You Do?

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Mortgage Payment Issues?Alarms Will Sound When You Miss A Payment

Financial challenges, such as making mortgage payments every month, are stressful facts of modern life. If it should happen that you find family in the position of being short of the monthly payment, there are things that you can do and some other things not to do.

A Little Caution Up Stream Goes A Long Way

The best time to deal with an emergency situation with your home payments is before there is a problem. If you can proactively start your home loan to be affordable with some enough left over and a contingency plan, then you are less likely to struggle during the repayment period.

A better initial plan for your mortgage might be to buy less home than you can afford. Say, your bank will lend up to $180,000, and you can make a deposit of $45,000, for a purchase price of $225,000. Instead of financing all the way, buy a home that is more affordable. Purchase a $200,000 home, make a $40,000 deposit, keep $5,000 in savings and live with a smaller monthly payment.

Just because a lender will pre-approve you for a higher amount doesn’t mean you have to take the full amount. At least part of the extra savings on your monthly payment should also go into savings as well.

What To Do When The Mortgage Payment Is Due

In the real world, consumers often need to use all of the credit they have to get on the home ownership ladder; they find it is difficult to save for a rainy day. So, what do you do when your mortgage payment is due and the savings is gone? First, don’t attempt to ignore the situation; delaying will only make it worse when you are forced to face up to it.

As soon as you realize, talk to your lender and confess that you will be late with your payment. You are not entirely alone, the government pressures lenders to be fair and there are regulations and rules to support that goal. Because of this, you may be in a position to refinance or modify your loan.

Respond To Challenges Proactively

As soon as you find you will pay miss the payment or make it late, again, contact your lender to discuss a forbearance, modification, or a refinance package. The bank may be helpful or not, but it is in their interest to keep the payments going smoothly; you won’t know their policy until you ask. If you miss a payment without communicating with them, your lender will begin the foreclosure process.

Do some research to learn what resources your state has to help you get through the tight spot. At the same time, start looking to replace the lost income or enhance the cash flow that you have. The sooner you act and the more information you can find, the more likely you will get a positive outcome that carries you through the tough times.

Buying A Home To Retire In It? Careful How You Do It!

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Retired Mortgage StrategiesBuying a home is an important life choice; buying one to retire in is even more momentous. Where you will choose to spend your retirement years is an important part of the rhythm of life; when your nest is empty, it is time to start thinking about downsizing and preparing to cut loose.

Buying A Home Benefits From Buying Time

In ideal circumstances, retirement is something that requires planning ahead. Buying a home in which to spend your retirement works best if you can start early. Begin the process at leas five years before, or even ten years ahead of the big date, if possible. The earlier you start, the better your situation when it comes to the actual transition.

Buying a new property while you still have another home and using it as an investment property is an excellent strategy. Then once you do decide to move into it use the proceeds of the sale of your previous home for investment income or hold onto it as a rental property.

The Key Performance Indicator For Retirement

The first concern is how you are going to fund your retirement home. If you have investments that you can cash out to pay for a new, more suitable home, that is one thing, however, even with equity in hand, you may decide to finance part or all of the purchase. That means applying for a home loan, and you will still have to qualify for the terms that a bank or other any lender will offer.

Lenders will inspect your debt-to-income ratio very carefully. So, you will do well to apply while you still have a full flow of income. If you have already retired before you apply for a mortgage, your DTI will change to where lenders will only approve smaller loans at higher interest rates.

Budget For Fixing Up The Nest

Of course, not everyone can make such decisions and investments. As a person or couple in need of a new home, how much can you downsize? There are now options that could be as small as a couple of hundred square feet.

These tiny homes make the most of your resources and leave more to invest in annuities or other plans. Another option might be to put all the equity into your retirement home and then take on a reverse mortgage that allows you to use the equity for expense such as healthcare and insurance if you need it later.

Alternatively, you may choose to rent in a seniors community and invest your capital in paying rent and your living expenses. Home ownership can be expensive, with hidden and unexpected costs coming up when you least expect them. Renting will make your costs more consistent every month, as the property management and landlords take responsibility for maintenance and repairs.

Take Action And Find A New Life In Retirement

Owning your retirement home does give you the peace of mind that a landlord cannot sell the property or convert to condominiums against your wishes. Buying a home for retirement also provides a legacy to your heirs if there is equity remaining after your partner and you have passed away. Take action to prepare to retire as far in advance as you are able, The sooner you do, the better your options for buying a home will be.

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