Determine How Much You Can Afford

When you turn to lenders to acquire a house, they determine how much you can borrow based on computations. But do they really know your financial capacity? They can count your income and concrete expense but they don’t know exactly how much you’re regularly spending? You’re the only one who knows if your income can support your lifestyle. Do you have enough to fund housing costs? And don’t forget to leave room for new furniture’s, appliances, landscaping, repairs and maintenance.

Banks have been using the 28/36 ratio in determining how much they should let you borrow. The approved housing loan should be no more than 28 percent of the borrower’s gross monthly income. 36 percent should be the maximum total debt load of the buyer. This includes credit card payments, loans, car payments.

Canada uses a similar formula. Buyers can borrow up to 32 percent of their gross monthly income. And their total debt load should not be more than 40 percent.

But due to rising rates lenders are willing to stretch the housing loan to as much as 50 percent of the gross monthly income. But before you commit to this loan, think and rethink if you can really afford it.

Evaluate your spending habits. Think if there are areas where you can save so you can sustain the mortgage and keep a well-maintained house. After all it’s not just a matter of keeping your house. It’s also about having peace of mind.

8 Good Questions to Ask An Agent

One of the keys to finding a good home without hassle is through a good agent. More than a good resume, they need to have a good track record and a good reputation. They should be effective as an agent. Here are eight good questions to ask an agent before hiring their services. 

  • Why compelled you to become a real estate agent?
  • Why would I want to work with you?
  • What sets you apart from other real estate agents?
  • What are the things you will do in order for me to find the home that I want?
  • What are the common problems encountered in real estate transactions and what will you do to avoid or fix them?
  • What are the common mistakes that people do in buying their first house?
  • What other professionals do you suggest we work with?
  • Are you able to provide me testimonials from your previous clients?

Eight Steps Towards A New Home

  • 1 – Decide to purchase.

    There are many good reasons why it’s beneficial to buy a home. Wealth building is one of them; perhaps the most important. It is often considered an accidental investment. But it is actually a good intentional investment if it is done correctly. The financaial benefits of owning a home are: value appreciation, equity buildup, and tax benefits. Before you decide to buy a house, think about these things. Make your decision based on facts, not hopes or fears.

    • If you are currently paying rent, you are also financially capable of paying for a house of your own.
    • Don’t wait for a perfect timing. There is never a bad time to buy a good house. What you need to do to prepare is to find a good deal and ensure that you have a steady source to keep on paying for the house.
    • Do not lose hope if you do not have enough cash for downpayment.
    • Don’t worry if your credit score is not perfect. It won’t stop you from buying your home.
    • The first step towards owning your dream house is to purchase it now.
    • Buying a new house should not give you trouble. There are professional agents who can help you.
  • 2 – Hire a professional agent.

    In the process of looking for a house, inspecting it, applying for a loan and closing the deal, you will need the help of several professionals – insurance assessors, mortgage brokers and underwriters, inspectors, appraisers, escrow officers, buyer’s agents, seller’s agents, bankers, title researchers, and probably more. Coordinating with all these professionals is one of the tasks of your real estate agent. Their major responsibility is to protect your interest as a buyer and as their client.  Their main roles are the following:

    • Educates you about your market.
    • Negotiates on your behalf
    • Analyzes your wants and needs.
    • Guides you to homes that fit your criteria.
    • Coordinates the work of other needed professionals.
    • Checks and double-checks paperwork and deadlines.
    • Solves any problems that may arise.

    One of the keys to finding a good home without hassle is through a good agent. More than a good resume, they need to have a good track record and a good reputation. They should be effective as an agent. Here are eight good questions to ask an agent before hiring their servit aces. 

    • What compelled you to become a real estate agent?
    • Why would I want to work with you?
    • What sets you apart from other real estate agents?
    • What are the things you will do in order for me to find the home that I want?
    • What are the common problems encountered in real estate transactions and what will you do to avoid or fix them?
    • What are the common mistakes that people do in buying their first house?
    • What other professionals do you suggest we work with?
    • Are you able to provide me testimonials from your previous clients?
  • 3 – Secure financing.

    Thinking about owning a home is exciting. But when you continue with the process and think about the financial aspect, you will start to feel nervous. The thought of taking on a mortgage can be intimidating. It can be confusing and it’s a long-term commitment. Here are 6 steps that can help you understand the procedure.

    • Choose a loan officer (or mortgage specialist).
    • Make a loan application and get preapproved.
    • Think of what you want to pay and choose a loan option.
    • Submit to the lender an accepted purchase offer contract.
    • Get an appraisal and title commitment.
    • Receive funding at closing.
  • 4 – Finding your home.

    Most people think that this part of the process starts with looking around. A lot of people will agree that this is the most exciting part of the journey. However if you have been doing this for quite a long time, the excitement will start to wane. To avoid unnecessary dissapointments and wasted time, start by thinking about these things – the things you value, things you need and things you want; now and in the future. As you ponder on these things, you can use these questions as a guides

    • What do I want my home to be near to?
    • How big do I want my house to be?
    • Which is more improtant for me? location or size?
    • Am I interested in a fixer-upper?
    • How important is the property’s potential value appreciation for me?
    • Is a good neighborhood important for me?
    • Am I interested in a condo?
    • Do I want a new home construction?
    • What features and amenities do I require?
  • 5 – Make an offer.

    Making an offer should be done with a cool head and a realistic understanding of your market. There are three basic components in making an offer: price, terms, and contingencies (or “conditions” in Canada).

    • Price – When you make an offer, the true market value of the property should be considered. Your agent should be able to educate you on this.
    • Terms – they refer to financial and timing factors that can be involved in the offer. These terms can be:
    • Schedule – a schedule of events that has to happen before closing.
    • Conveyances – the items that stay with the house when the sellers leave.
    • Commission – the real estate commission or fee, for both the agent who works with the seller and the agents who works with the buyer.
    • Closing costs – it’s standard for buyers to pay their closing costs, but if you want the costs to be included into the loan, you need to write that into the contract.
    • Home warranty – this covers repairs or replacement of appliances and major systems. You may ask the seller to pay for this.
    • Earnest money – this protects the sellers from the possibility that the buyer might cancel the deal and makes a statement about the sincerity of your offer.
  • 6 – Perform due diligence.

    Once you buy a property, you can’t simply return it if something is damaged. Property inspections and a good home insurance is very important. If you’re covered under a home insurance, it can protect you in case of loss or damage on the property. And it can protect you financially against liability in case people got injured while they were on your property.

    Property inspection can detect problems that you might not see. A thorough inspection can expose damage that are not readily seen. Your biggest concern should be strucural damage. Minor damages can be repaired. If through the inspection a potentially serious problem, ask a specialist to check on it. Depending on the gravity of the problem, you might not want to push through with the sale. 

  • 7 – Closing the sale.

    The last stage of the home buying process is the lender’s confirmation of the property’s value and legal statue, and your continued credit-worthiness.This involves survey, appraisal, title search, and a final check of your credit and finance. You have nothing much to do during this stage. Your agent will inform you of updates. But here are a few things you can do:

    • Stay in control of your finances.

    • Return all phone calls and paperwork promptly.

    • Communicate with your agent regularly.
    • Several days before closing, double check with your agent that all your documentation is in place and in order.
    • Acquire certified funds for closing.
    • Conduct a final walk-through.
  • 8 – Protect your Investment.

    After the deal is closed you might think there is no more need to keep in touch with your agent. But your agent can still help you with the following:

    • Find professionals you might need for home repairs and maintenance.
    • Take care of your first tax return as a homeowner.
    • Monitor the market value of your home.
    • Help your friends search and buy properties.

    Taking care of your house means taking care of a good investment. A property that is well maintained adds to the value of your property. If you fix damages before they get worse will save you money in the future.

Co-buying a House

Buying a home is expensive. A lot of people want to have a home of their own but do not have enough cash or can’t get enough funding to afford a mortgage. On the other hand some people are looking for ways to be able to take advantage of tax benefits from being a home owner. So they turn to co-buying.

“Neither of us had a big enough chunk of money to put down for a home in a desirable neighborhood,” Brian Free told the U.S. News & World Report about his decision to purchase a home with his friend. “However, aggregating our resources allowed us to find a home that suited our needs.”

However, co-owning anything with a friend or relative comes with risks. But there are things you can do to reduce the risk of running into problems. Careful delibiration and planning is a must.

  • Think about how you will hold title

    The decision on how to hold title will affect your say in legal documents. Unmarried co-buyers can share a title as TIC (tenants in common) or as JTWROS (joint tenants with right of survivorship). Co-owners who are married can take title via community property or tenancy by the entirety.

  • TIC versus JTWROS

    With JTWROS both owners have equal shares in a home. When a co-owner has passed away, his share will go to the other owners. Consequently this means that the last surviving owner gets all the shares. In a TIC, the shares may or may not be equal. Each co-owner has its own title. Right of survivorship doesn’t work in TICs. When a co-owner dies, his share will not go to surviving co-owners. Each co-owner can pass their share to their family members or whoever they want to will it to. TICs can be dissolved if a co-owner buys out the share of the other co-owner/s. Or to sell the home, one co-owner can file a partition action.

  • The similarities of a TIC and JTWROS

    In both ownership arrangements, owners have rights to the property. If it is rented or sold, co-owners each receive each will receive a part of the money that is according to their shares.

  • Secure a co-ownership agreement

    It is important to lay the ground rules and protect your share. It is wise to make things clear for all parties involved before problems arise. No matter how close you are with the co-owners, there is always a possibility that ownership issues will be challenged. A co-ownership agreement can help resolve the issue.

  • What are the ownership percentages?

    Joint tenants have equal shares. Co-owners in a TIC agreement can divide the shares based on the amount that each has put in for the downpayment.

  • How are ongoing costs divided?

    They refer to ongoing costs like mortgage payments, property taxes, insurance, utilities and maintenance. The division of expenses like this should be part of the co-ownership agreement. Co-owners may divide this according to their shares or according to the amount of time each co-owner will put in in maintaining or improving the property. You may want to open a joint checking account so each co-owner can withdraw from this account to pay for ongoing expenses.

  • What if a co-owner wants to sell?

    The co-owner who wants to sell does not need to get the approval of the other co-owner as to whom they could sell it to. However, the other co-owner can object to the sale because of their right of first refusal.

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