first time buyers

DO’s & DONT’s When Applying For a Mortgage

DO’s & DONT’s When Applying For a Mortgage

Okay, you’ve found a great home to purchase, but you’ve got to replace your car and your furniture is hand-me-downs from your grandparents. Before you start doing your duty to the God of Consumerism, here is some wise advice to follow:

DO’s

  • Notify your mortgage broker of income changes … any changes from when you applied need to be above board
  • Keep documentation of any large deposits … lenders will need to verify where you received the money from
  • Pay all your bills on time … keeping current on all existing accounts is extremely important
    (a single late payment 30 days could affect your credit score between 50 and 100 points and may change your mortgage rate)

DONT’s

  • Apply for new credit of any kind … credit scores will be requested and this will be recorded, your score could be adversely affected
  • Go over your limit on credit cards …try to keep your balance below 50% of your available credit limit on any/all of  your cards
  • Consolidate your debt over 1 0r 2 credit cards … appearance is reality, it will look like you’re maxed out on the remaining cards, again could adversely affect your credit score
  • Change or quit jobs … if anything – especially your employment changes from your initial application your approval may change or be revoked.

Your mortgage company will verify your employment and credit score approximately 2 days before the closing, so keep everything steady and calm and you’ll be fine and get that great home you wanted.

Buy or Rent, What Makes More Sense for You?

Buy or Rent, What Makes More Sense for You?

Why It Makes Sense to Own Your Own Home

You’ve probably seen lots of financial arguments about why you should own your own home rather than rent. This includes budgeting (no rent increases) and the tax savings you’ll most likely have. Here are some reasons you probably haven’t heard.

Freedom to pursue other goals in life once the major goal of home ownership is achieved: Strange as it sounds, many of my first-time buyers have told me that once they bought the house, other things in their life started to fall into place. It’s as if not owning took so much of their mental energy that other goals were not worked on until that big goal was reached. So buy a home and get on with your life.

A greater sense of belonging to the community: Once you own a home, you feel more attached to the city in which you live. You’re more interested in what happens in town, to the roads, schools, and shopping areas. Some people even become involved in local politics, which you seldom see a renter do.

A commitment to something, a sense of stability: Home ownership is an anchor, something that cannot be pulled out from under you. You’ll never get a notice that you have to move. You’re kids will never have to change schools. It gives you freedom to plan years ahead.

You can change things, a feeling of being in control: It’s your home. You can add to it, remodel it, change the landscaping, do whatever projects you want. You have a feeling of being in control of something in your life. At work we don’t always have control of what happens, but your home is your castle that you have dominion over. You can see what you’re building take shape before your eyes.

More control over the children than in an apartment complex: In a neighborhood, kids usually play in the yards or go to friend’s houses a few doors away. My clients have told me that in an apartment complex they never knew where the kids were. They could be in any of hundreds of apartments, doing who knows what. In a home you get to know the neighbors and watch out for each other’s kids.

Children do better in school and feel more secure: This one surprised me, but buyers have reported to me that their kids calmed down in school after they bought a house. I don’t know why, but it seems to work that way. I remember a single mom watching her son play in the yard, making steps in the slope and building things. She didn’t have to tell him to leave everything alone, like she did at the apartment complex. I guess kids feel the same need for control we adults do.

Time and money saved by not going to the Laundromat: A small point, but if you have kids, you know the value of this one. You gain a whole evening a week when you buy a house! The wash gets done in between other things, or while you’re at work. What would you do with the extra evening you’ll have? How about going out for dessert with your spouse with all those quarters?

Why It Makes Sense to Rent Your Home

It seems that buying a home is more costly – and time demanding – that renting a home. However, if you can comfortably afford to do so, and you have plans to stay at your location for a while, buying a home has significant advantages.

Financially, owning a home is often promoted as a better choice than renting. Currently, there are significant federal and state tax breaks … homeowners can claim deductions for real estate property taxes and for the interest paid on their mortgage each year. In addition, long term homeowners build equity both by paying down their mortgage and when their home appreciates in value.

Many savvy home buyers increase their equity more quickly by buying homes that need cosmetic improvements (such as decorating) rather than structural renovation (walls need moving). These minor improvements can significantly increase the value of a home over a relatively short period of time with a modest investment.

However, there are times when renting a home is the more sound choice to make. For example, if you are only going to be at your place for a couple of years, it makes no sense to buy the home, as this would be the more expensive endeavor. If you buy or sell in a short period of time, you may actually lose equity.

Also, renting also makes good sense if you’ve identified the general area in which you want to live but haven’t made a final decision as to the specific neighborhood. If you don’t know whether you’ll feel comfortable in a particular neighborhood, it may be better to rent a house or an apartment there for 6 months or a year, to get more comfortable with it.

Home Buying is a Process … How it Works

Home Buying is a Process … How it Works

The complete process is simple once you understand the steps

Preapproval or Pre-commitment Letter

Provided by a lending institution to indicate the mortgage amount you qualify for. This process is best accomplished prior to beginning the search for a home, and a copy of the letter should be in your possession for use during the offer to purchase phase.

The Offer

A preliminary but legally binding contract that covers the basic terms of your agreement with the Seller: price, occupancy, financing, and inspection contingencies, and the date for signing the Purchase and Sale Agreement. Each contingency has a cut-off date that must be met. The customary deposit with the agreement is $1000.00 in Middlesex County, other counties may vary.

Inspections

Include a structural, pest, radon, well water, lead paint, and radon gas. These must be done within seven days of signing of the Offer and are conducted at the Buyer’s expense. The Buyer should be present for these inspections.

Purchase and Sale Agreement

Should be entered into ten working days after an accepted Offer, since it is more specific, and therefore protects both parties more fully. The customary deposit with this agreement is 5% of the purchase price although a lesser amount may be acceptable under certain circumstances.

All Deposits

Maintained in a separate Escrow account usually by the listing Broker or one of the Attorneys. Any interest accrued (if any) is split 50/50 between the Buyer and the Seller unless agreed otherwise. Both parties must sign a release for any funds to leave the Escrow account.

Financing

It is usually the only contingency to survive the Offer form (remain on the Purchase and Sale Agreement). Your application must be filed within 3-5 business days of the accepted offer and the loan commitment must be received within a stated time period … currently can be gotten easily within 21 business days of filing the application.

Appraisal

The lending institution hires a licensed appraiser to determine the value of the property and to give a professional opinion of the collateral for their investment. This must be conducted prior to the loan commitment being made, and is coordinated with the listing agent.

Title Search

Ownership of the property in Massachusetts is customarily transferred by a quitclaim deed – the Seller transfers all his/her rights in the property to the Buyer. It is the responsibility of the Buyer and his/her lending institution to determine the validity of the seller’s  title to the property, and is reviewed by the Attorney for the lender and paid for by the Buyer. The responsibility for clearing any clouds on the title rest with the Seller. Title insurance is required for the lender but you can purchase your own title insurance, and I generally recommend that you get it as the cost to clear any title items can get expensive in he future.

Closing

Also referred to as paper passing or simply “passing”. It is conducted by the Attorney for the lending institution, who searches the title to the property and guarantees to the bank and to you that it is clear. The location of the closing is usually at the office of the lending institution’s Attorney, but can also be at the lending institution or the appropriate Registry of Deeds. The closing should take place 45-60 days after signing the Offer.

Possession

Customarily immediately after the closing. Technically it can’t take place until the change of ownership is filed at the County Registry of Deeds.

Attorneys

It is strongly advised that you retain the services of an Attorney to represent your interest prior to signing the Purchase and Sale Agreement and throughout the entire process.

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