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Thinking About Buying Your First Home?

Thinking About Buying Your First Home?

Several factors should be considered when purchasing a home

Your Financial Health … your credit & home affordability

Is now the right time financially for you to buy a home? Would you rate your financial picture as healthy? Is your credit good? While you can always find a lender to lend you money, solid lenders are more skeptical if your credit history is not good.

Generally, a couple of blemishes on a credit report will make you a good credit risk and could qualify you for the lowest interest rates. If you have more than a couple of blemishes on your report, lenders like e-Loans may still provide you with a loan, but you may just have to pay a higher interest rate and fees. Some say that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries. The other school of thought says you should stretch to buy as much home as you can afford, because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow.

This is a decision only you can make. Are you in a position where you expect to make more money soon? Would you rather be conservative and fairly certain that you can make your payment without stretching financially? Make sure that whatever you do, it’s within your comfort zone. To determine how much home you can afford, talk to a lender or go online and use a “home affordability” calculator. Good calculators will give you a range of what you may qualify for. Then call a lender. While some may say that the “28/36” rule applies, in today’s home mortgage market, lenders are making loans customized to a particular person’s situation. The “28/36” rule means that your monthly housing costs can’t exceed 28 percent of your income and your total debt load can’t exceed 36 percent of your total monthly income. Depending on your assets, credit history, job potential and other factors, lenders can push the ratios up to 40-60% or higher. While I’m not advocating you purchase a home utilizing the higher ratios, its important for you to know your options.

How long you plan to live in the home

If you purchase a home and get a job transfer or decide to move after only a short time, you may end up paying money in order to sell it. The value of your home may not have appreciated enough to cover the costs that you paid to buy the home and the costs that it would take you to sell your home. The length of time that it will take to cover those costs depends on various economic factors in the area of the home. Most parts of the country have an average of 5% appreciation per year. In this case, you should plan to stay in your home at least 3-4 years to cover buying and selling costs. If the area you buy your home in experiences an economic up turn, the length of the time to cover these costs could be shortened, and the opposite is also true.

How long the home will meet your needs

What features do you require in a home to satisfy your lifestyle now? Five years from now? Depending on how long you plan to stay in your home, you’ll need to ensure that the home has the amenities that you’ll need. For example, a two-bedroom dwelling may be perfect for a young couple with no children. However, if they start a family, they could quickly outgrow the space. Therefore, they should consider a home with room to grow. Could the basement be turned into a den and extra bedrooms? Could the attic be turned into a master suite? Having an idea of what you’ll need will help you find a home that will satisfy you for years to come.

Where the money for the transaction will come from

Typically homebuyers will need some money for a down payment and closing costs. However, with today’s broad range of loan options, having a lot of money saved for a down payment is not always necessary – if you can prove that you are a good financial risk to a lender. If your credit isn’t stellar but you have managed to save 10-20% for a down payment, you will still appear to be a very good financial risk to a lender.

The ongoing costs of home ownership

Maintenance, improvements, taxes and insurance are all costs that are added to a monthly house payment. If you buy a condominium, townhouse or in certain communities, a monthly homeowner’s association fee might be required. If these additional costs are a concern, you can make choices to lower or avoid these fees. Be sure to make your realtor and your lender aware of your desire to limit these costs. If you are still unsure if you should buy a home after making these considerations, you may want to consult with an accountant or financial planner to help you assess how a home purchase fits into your overall financial goals.

Top 10 Home Buying Actions

Top 10 Home Buying Actions

There are a few things that you can do to help make the process go as smoothly as possible

Check your credit

Before you apply for a home loan, regardless of your credit, it’s a smart idea to obtain a copy of your credit report from the three major credit bureaus and review the information. If there are errors or things that need to be addressed, it’s easier to address them before you have found a house, than after you have found a house and are trying to close your loan. If you know that there are a few blemishes on your credit, let your lender know what they are, why they are there, and why you are a still good credit risk. Lenders look at your credit to determine how likely you will pay back the loan. If you had extenuating circumstances – like a loss of a job or medical bills – let them know so that they understand that it is not likely to happen again in the future.

Get approved before you buy

An approval means that a lender has reviewed your credit history, verified your assets and employment, and has approved your loan before you have found a home to purchase. As long as the home appraises for at least the purchase price, the loan should close. Getting approved also gives you an advantage over other buyers. Your firm approval makes it easier for you to negotiate on the price of a home, than a person who is not approved or is pre-qualified. While getting pre-qualified may sound official, it is really just getting an idea of what you can afford. Its having a person plug in a few numbers that you give them – your monthly income and your monthly debt – and getting an approximate payment calculated. From the payment, the calculator can approximate the house price range that you can afford. No information is verified. Because your assets, income or credit is not verified, a pre-qualification has little value when purchasing a home.

Sell first … then buy

If you have a house to sell, sell it before you select a house to buy.  I’ve rarely seen a contingent sale work in the last few years, unless it’s with a new home builder who has other houses to sell and can afford to put one on a contingency.  Imagine this scenario. We go house hunting, find the perfect house, and make an offer to the seller. You want the seller to reduce the price and wait until you sell your house.  The seller figures that’s a risky deal (if he’s willing to consider it even at all), since he might pass up a buyer who doesn’t have to sell a house while he’s waiting for you. So he says ok, he’ll do the contingency but it has to be a full price offer!  So you see, you paid more for the house than you could have because of the contingency. And to add insult to injury, you have to sell your existing house in a hurry and maybe take an offer that’s lower than you could get. Otherwise you lose your dream house.   Here’s the cold, cruel reality … buying before selling might cost you tens of thousands of dollars.

Find a great buyer’s agent

Traditionally real estate agents represented the sellers in a transaction. If you are not working with a buyer’s agent, the seller’s agent is less likely to negotiate the best price or contingencies for you. A buyer’s agent’s job and fiduciary responsibility (meaning legal duty) is to you, the buyer. Before working with an agent, establish if they are a buyer’s agent or a seller’s agent. After spending a lot of time with a Realtor, it’s natural to feel like you’re a team. But if they are not negotiating for or representing you (a buyer’s agent),  then they are not on your team. You want a skilled realtor, but you also have to feel some level of comfort and connection with them. If you’re not comfortable with your agent, seek out another.

Make a list and stick to it

Before house hunting, make a list of the several things you want in the new place. Then make a list of the several things you don’t want. I’ll be glad to make copies of the list and we can use this list as a scorecard to rate and evaluate each property that we see. The one with the biggest score wins!  Many buyers do this informally, but I like the scorecards because they help avoid confusion and keep things in perspective when you’re comparing dozens of homes.

Separate the “Skin” from the “Bones”

When house hunting, I want you to keep in mind the difference between “skin and bones”. The “bones” are things that cannot be changed such as the location, view, size of lot, noise in the area, school district, floor plan, etc. The “skin” represents easily changed surface finishes like carpet, wallpaper, color, counter tops, and window coverings. Buy the house with good bones, because the skin can always be changed to match your tastes.

Shop until you think you’ve seen enough

I will show you everything available that meets your requirements. In doing so, I highly recommend that you don’t make a decision on a house until you feel that you’ve seen enough to pick the best one. The average for my most recent sales has been about two dozen homes.  And before you ask, you can’t really effectively see more than seven homes in a day. Even if you take good notes and the listing agents provide detailed property sheets, your memory will play tricks on you if you try to get an encyclopedic overview of the entire local market in a day.  By the way, if you have kids under six to bring along, that number drops to about three homes before their distraction may cause you to miss key features.

Learn about the neighborhood

Often times the house you find may be in a neighborhood that you’re not familiar with, which is ok. It just means that you’ll have to do a little more research. If you find a house that you like, ask for a list of the neighborhood properties that sold in the last year. How does your home rank? Is it at the top of the price range? If so, it might be hard to resell. Is it average or on the low end? If so, great – as the other home prices go up in value, they will pull your home’s value up as well. Check out the schools – are they sought after? A good school district means your neighborhood will always be valued by families which is a great reassurance to purchase, not to mention the value-add if you have school-age children. Next, contact the police station and obtain crime statistics? Are they acceptable to you? Sometimes, if they won’t give them to you, it could be a cause for alarm. Talk to the neighbors. The more people you talk to, the better sense you will get of who makes up the neighborhood and how they will effect your time spent in it. Check out the location of the shopping, police and fire stations, schools, and air traffic overhead. These are all things that might affect your property value or quality of your life.

Don’t by a home that you’ll have trouble selling when you eventually move

Sometimes a house has some very unique features or a setting that many buyers might find undesirable, so the seller sets a “bargain” price. Although it may be a good deal now, that bargain may be your headache in a few years.

“Caveat Emptor”

Don’t be afraid to ask questions and investigate the neighborhood around the house you’re looking at. You want to know if there’s a kennel on the block behind your backyard that you can’t see, but you’ll surely hear all summer. Having a Buyer’s Agent helps tremendously with this, since our priority is to help you rather than working for the seller.

Don’t buy the most expensive home on the street

You want a house on a street where many of the houses are fairly comparable.

Protect Yourself

Ask your Realtor for a copy of the documents you will be asked to sign if you decide to buy the house. Read them ahead of time so that you’ll understand the questions that you will be asked, the things you need to know, and the decisions you will need to make.

Have reasonable expectations

There is a lot of money at stake. No house is perfect. Understanding and remembering these two statements will help diffuse the negotiation stage, the inspection stage and the closing stage. Emotions are high for both buyers and sellers. – The seller may have loving memories and years of sweat equity in the house. Maybe they are being relocated and don’t want to go. Understanding their motivations for selling will help you appreciate their situation and predicament during these emotional times.

There is a lot of money at stake for all the parties involved (and that includes the realtors) …

Just remember that market value (the value of a home) is the price that a willing buyer and a willing seller can agree to. If you can not agree on a price, ask yourself: Is there something you missed? Are there comparables that support the price that they want? Are there motivations that might factor into the price they are demanding? In the end, does it matter? What is the house worth to you today and what do you think you can reasonably sell it for based on the amount of time you plan to spend in it? Think about the answers to those questions before you make your move.

When you find a house you love, put in a reasonable first offer

In the late 1980’s, homes were selling quickly, usually a few days after listing. In that kind of market, we always advised our clients to make an offer on the spot if they liked the house. That was good advice at the time. Today, in spite of what the listing agent will tell you, there isn’t always this urgency, and unless a home is kissy perfect, under priced, rare or has extremely desirable “bones” you have some time to think things over and compare with your lists of “wants” and “don’t wants”. If it’s one of those truly rare offerings, you’ll know it (you know what I’m talking about) and I’ll tell you not to wait and you’ll believe me.

Don’t wait too long to make an offer when you find a house you love

While you don’t want to be impulsive, being overly cautious can cause you to miss out on the house you want. Also, remember that there’s no law saying that the right house for you can’t be one of the first ones you see.

No house is perfect – Always get an inspection

It might be a few hundred dollars, but it’s worth it. It’s the inspector’s job to find any problems with the house that could cost you thousands to repair down the road. This is your only opportunity to have an expert point out any structural, mechanical or environmental problems before you buy your house. Some inspectors have a tendency to over play the importance of their role and the items that they find. Get objective opinions that you trust before making a decision on an inspection report. Likewise, if an inspector says a foundation is cracked but its nothing to worry about – get a second opinion. Ask a handyman for an idea of how much repairs will cost and how complicated they are.

The home buying process is an emotional, complex and time-consuming process, but it is worth it. Nothing compares to owning your own home in a neighborhood you love.

 

A Story About Foundation Plantings

A Story About Foundation Plantings

My first house was a 1920’s colonial with a tiny lot with the worst set of foundation plantings I’ve ever seen on a house. In addition to planting inappropriate species, they were planted too close to each other and the house and were allowed to overgrow about twenty years too long. Especially troublesome were a couple of evergreen yews that were covering the windows and trimmed to an ugly shape that was not flattering to the cute house. They also severely restricted access to the front door. So what’s a new homeowner to do?

You guessed it, you get a couple of friends together on the hottest weekend of the year and decide to rip the suckers out. We started with what seemed like the least amount of work, putting a chain around the base of the plant and hooking it to my 1974 Volkswagen beetle. Then I got a running start and when the chain tightened the car leaped off the ground about 6 feet and stalled. Once my heartbeat slowed down below stroke speed, I checked the car to see that the rear end hadn’t been ripped out, unhooked the chain, put the car away and went to see how the yew was pulled out of the ground. Now you would think that having had a crushing 1500 lb. car with a whopping 65 horsepower going 20 mph play tug of war with it would have the yew looking pretty sad. As you can probably guess the plant hadn’t budged and in fact there wasn’t even any damage.

So next we took a handsaw, a particularly rusty and dull handsaw, and started cutting the trunks of the bush off about a foot from the ground. Once the entire bush was cut we discovered that first, the painters hadn’t painted behind the bush for about thirty years and in fact our gray house had once been a lovely mustard yellow, and second, the cutting of the upper part of the bush is the easy part – you’ve still got to get the roots out. Proceeding along we dug around the roots and with a combination of chopping with an axe and digging with a shovel finally got a 10’ diameter crater with the ugliest 300 lb chunk of gnarly yew roots anchored firmly in the center. By now it was getting dark, so we called it quits and started back on the project about three weeks later with sharp tools and an upcoming housewarming party deadline looming. The yew finally yielded to steel and muscle that day, but not before teaching us a very good lesson – choose the right foundation plant and take great pains to trim it and keep it looking right.

Foundation plants came about out of necessity. A pretty home would be built on a stone and mortar foundation and something was needed to hide it. In colonial times the foundation plants were a combination of things you could eat and things you could make stuff out of – such as herbs, vegetables, lilacs and if you could get seeds some strawflowers or sunflowers. Wild junipers and bayberries were also dug up and planted near the foundation for candle making. Current thinking on foundation plantings has evolved from this completely practical beginning. Today’s plantings are used as a design element to transition the eye from the low, soft, fine horizontal texture of the lawn to the hard, vertical form and scale of the home. They also can introduce seasonal colors and flowers and varying shades of green to bring the beauty of the outdoors right up to and sometimes into the home space.

If you’re a beginner gardener and putting in some foundation plants this fall do yourself a favor and remember two things: first, space the plants for their mature form and size, not their cute little form in the container at 1 year old; and second, this is New England and it snows here. Also good to remember is that the sun rises in the east and sets in the west, and that full sun exposure is south.

In the years when my first home was built, very formal, symmetrical, high-maintenance foundation plantings were de rigueur. In those days if you planted something on one side of the door you planted another one on the other side of the door and it had better have a conical shape and be an evergreen. Nowadays with many homes having multiple rooflines and irregular foundation shapes I like to combine a variety of shapes, sizes and textures not only to hide the foundation but also to tempt the senses. And even though I make fun of yews, I like to have a ratio of 1 evergreen to 3 deciduous plants, and yews do provide a consistent green color. However, please don’t trim them to unnatural shapes, select one with the right natural shape and give it a tuck and a trim once a year but for the most part let it be.

My all-time favorite foundation plant is andromeda. It is an evergreen shrub, grows to be about 4’ tall and 4’ around and has light green waxy foliage. It is one of the early blooming shrubs that lets you know that winter is over, and it has showy chains of white to golden flowers that cover the entire bush. Andromeda does not do well in shady locations and prefers very acidic soil, lots of peat moss (it’s native location is in the peat bogs of Europe) and lots of mulch. Never use any lime on it.

Another good plant is the dwarf rhododendron. They’re in the same family as azaleas (which are also good foundation plants) and have slightly larger evergreen leaves, will grow only about 3’ high and don’t require trimming until they’re about 50 years old. Their flower colors run the gamut from white to purple, and they also love acid soil. When planting them, place them in the hole about 2” higher than they were at the nursery, they tend to be planted too low. Also mulch heavily in the fall and it doesn’t hurt to spray on some anti-desiccant spray to keep the leaves from drying out in the winter winds.

Somewhere I heard that a home without foundation plants looks like a “doll house plunked down in the middle of a pool table” and I tend to agree. If you’re new to gardening planting some of these around your home can be one of the easiest most rewarding projects for your new home.

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