Home Buyer Frequently Asked Questions:
HOME BUYER FAQ #1: Why should I hire a Real Estate agent?
HOME BUYER FAQ #2: Are condos a good investment?
HOME BUYER FAQ #3: What rules and regulations do associations regulate?
HOME BUYER FAQ #4: What kind of insurance do I need?
HOME BUYER FAQ #5: What do I need to know about mortgages?
HOME BUYER FAQ #1: Why should I hire a Real Estate Agent?
They will help you determine how much home you can actually afford. Often, they can suggest additional ways to accrue the down payment and explain alternative financing methods. They can also introduce you to a mortgage counselor and arrange to have you "pre-approved" which can improve your negotiating position and enable you to achieve your home-buying objectives faster and with less stress.
Providing client level services, they can work for you as a buyer's agent and help negotiate the best price and terms for you. Or, they can serve as a seller's sub-agent (or disclosed dual agent), acting as a liaison between you and the seller to present offers and counteroffers until an agreement is reached.
They will help you work out a realistic idea of the home best suited to your needs - size, style, features, location, accessibility to schools, transportation, shopping, and other personal preferences.
They have access to a listing of all available homes in the multi-list system, can evaluate them in terms of your needs and affordability, and will not waste your time showing you unsuitable homes.
They can often suggest simple, imaginative changes that could make a home more suitable for you and improve its utility and value.
They can supply information on real estate values, taxes, utility costs, municipal services and facilities, and may be aware of proposed zoning changes that could affect your decision to buy.
Although the law does not normally require an attorney to review documents or oversee real estate closings, they can provide you with a list of law practitioners to choose from if you would like to use the services of an attorney.
They can help familiarize you with the closing process and they will obtain closing figures in advance of closing for your review.
They can provide you with a list of qualified home inspectors, pest inspectors, surveyors, and help to coordinate inspection appointments.
HOME BUYER FAQ #2: Are condos a good investment?
Condominiums have held their value as an investment despite economic downturns and problems with some associations. In fact, condos have appreciated more in the past few years than when they first came on the scene in the late 1970s and early 1980s, experts say.
While there are lots of reports about homeowners association disputes and construction-defect problems, the industry has worked hard to turn its image around. Elected volunteers who serve on association boards are better trained at handling complex budget and legal issues, for example, while many boards go to great lengths to avoid the kind of protracted and expensive litigation that has hurt resale value in the past.
Meanwhile, changing demographics are making condominiums more attractive investments for single homebuyers, empty nesters and first-time buyers in expensive markets.
HOME BUYER FAQ #3: What rules and regulations do Associations regulate?
Typical covenants, codes and restrictions (CC&Rs), which govern condo associations, give the board authority to make and enforce reasonable rules for the use of common property. But that would not apply to interior spaces owned by smokers themselves.
A homeowners association's board of directors can restrict smoking if it applies to indoor common spaces such as hallways or recreation rooms. Outdoor spaces are a different story, say legal experts. Any restriction would probably hinge on local laws (i.e. if a city banned smoking outdoors, a homeowners association probably could restrict smoking in its outdoor spaces).
The 1990 Americans with Disabilities Act does not require strictly residential apartments and single-family homes to be made accessible. But all new construction of public accommodations or commercial projects (such as a government building or a shopping mall) must be accessible. New multi-family construction also falls into this category.
In all states, the Federal Fair Housing Act provides protection against discrimination for people with physical or mental disabilities. Discrimination includes the refusal to make reasonable modifications to buildings that aren't accessible to the disabled.
HOME BUYER FAQ #4: What kind of insurance do I need?
A standard homeowners policy protects against fire, lightning, wind, storms, hail, explosions, riots, aircraft wrecks, vehicle crashes, smoke, vandalism, theft, breaking glass, falling objects, weight of snow or sleet, collapsing buildings, freezing of plumbing fixtures, electrical damage and water damage from plumbing, heating or air conditioning systems, according to the Insurance Information Institute, a Washington, D.C.-based nonprofit group for the insurance industry.
Such policies are "all-risk" policies, which cover everything except earthquakes, floods, war and nuclear accidents.
A basic policy can be expanded to include additional coverage, such as for floods and earthquakes and even workers' compensation for servants or contractors. Home-based business-coverage, an increasingly popular rider, does not cover liability associated with the business.
Insurance experts recommend that homeowners obtain insurance equal to the full replacement value of the home. On a 2,000-square-foot home, for example, if the replacement cost is $80 per square foot, the house should be insured for at least $160,000.
For personal items, homeowners can increase their coverage beyond the depreciated value of items such as televisions or furniture by purchasing a "replacement-cost endorsement" on personal property.
Some experts recommend an inflation rider, which increases coverage as the home increases in value.
HOME BUYER FAQ #5: What do I need to know about mortgages?
The modern mortgage market offers a variety of mortgage loans catering to the needs of homebuyers. The titles and details of these plans can become confusing, especially as new types are introduced continuously. You can make sense of these loan types, however, if you understand the basic principles that govern all mortgage loans. Again, you can look to your real estate professional for assistance. I am happy to get you in contact with outstanding mortgage lenders who can walk you through each step of the mortgage process.
Basic Principles of all Mortgage Loans
The home is used as security to back up the loan. A lender can force sale of the home if the borrower defaults by failing to make scheduled payments.
The larger the loan compared to the value of the home, the more risky for the lender and, often, the more expensive the loan will be.
Interest earned by the lender always is equal to the periodic interest rate times the outstanding principle balance of the loan. The periodic interest rate is the annual interest rate divided by the number of payments in the year (usually one per month).
The required payment usually is a bit larger than the interest due so that some of the loan principal is repaid with each payment. This process is called Amortization and is why most mortgage loans can be retired when all the monthly payments have been made.
All mortgage loans have one of the following features:
Fixed payment and fixed interest rate - fixed rate mortgages
Fixed rate but variable payment - graduated payment mortgages
Variable rate and variable payment - adjustable rate mortgages
As you learn more about the types of financing available, you will notice that some loans appear to have more favorable terms. That may indicate that those loans are, indeed, bargains (and it does pay to shop around), but usually it means that those loans could have some feature that is less appealing to borrowers. For example, shorter-term loans often have slightly lower interest rates compared to longer-term loans. However, the monthly payment for the same amount of principal may be higher because of the shorter term. Variable rate loans usually have much lower interest rates to compensate for the risk the borrower accepts that interest rates will rise in the future.
