Friday, January 27, 2012

How Much Does It Cost To Buy A House?

"Exactly how much money would that be with closing and other cost?"

This is a question from an actual email I received this week, and it's not the first time I've addressed the question. The answer is not as simple as you might think, because it depends, it depends on a lot of things. But here goes, here's my answer, if I've been vague or left you with questions, call me. I'll answer your questions and edit this post for clarity. I have always said these things should be taught in High School, but until they are, let's work together.

How  much exactly will depend on several things, and it will largely depend on what kinds of loan you qualify for. The loan I told you about is an FHA Loan. I put a mortgage calculator on my blog, just for you, so you can play with different scenarios. .

Now, remember when you’re looking at this PITI. The acronym, p-i-t-i, stands for principal, which is the principal amount of the loan, the first i stands for interest, that’s what you’re going to see with a fully amortized loan, that’s the figure the calculator on my blog will give you, the principal and interest. But there’s more… the t stands for taxes, which in this case (on $114,000) is $551.00, and the second i is for insurance.

The lender will escrow – in other words collect and hold – money to pay interest, taxes, and insurance. They don’t want you to get behind, they want to start you out ahead so when you buy the house and go to closing they will hold 3 months. They'll break it down into a monthly amount… let's take the taxes: $551 divided by 12 = $46.00 which will be added to your payment. And so will your homeowner’s insurance (required on a mortgaged home). I don’t know how much that will be without calling your insurance provider or calling one for you. That's another thing that depends. I have a nice deal with Allstate because I have my cars and my homeowner’s with them. My lender, Bank of America collects the taxes and insurance from my payment and pays those bills on my behalf. You’ve heard people talk about their house payments changing? This can be because insurance and taxes fluctuate. There’s another reason a loan amount may fluctuate it's called an ARM, which stands for an adjustable rate mortgage. That’s when you get a super-duper interest rate, but the rate adjusts with prime. And right now prime is  low so ARM’s are not a good option. There’s also an interest only loan, again, that’s not a good option for an average home buyer either.

Another thing how much will depend on is how much are you going to put down on the home? If you put down the minimum to qualify assuming you paid full price for this house (and we’ll talk more about that when you hire me as your Buyer's Agent) at $114,000 the down payment would be $3,990. There’s may also be a fee, called a loan origination fee, aka points, on a bank loan.

I found this really super link to the Federal Reserve Site: with a Settlement Costs Worksheet! Have a look at that.

Here’s the thing, buying a home seems like an awful lot, but in an effort to cover every little thing, well, you have to cover every little thing. A real estate agent should be well versed in these things and should be able to help you make a good decision.

Have you ever heard of Truth in Lending? Each and every real estate transaction will have a HUD Statement. This breaks down the exact costs. The closing attorney, the attorney you pay to handle the transaction, he’s YOUR attorney by-the-way, he or she will prepare a closing statement, and cover it line by line to make sure you understand exactly what each cost is. Your real estate agent should cover these items, too, so there are no surprises at closing.

If your grandmother is going to give you some money for closing, that’s OK as long as it’s a gift and does not have to be repaid. Mortgage companies do not allow you to borrow your down payment. You have to have some cash on hand, to buy a house. $5 or $6,000 on a house in this price range ($100,000) will take you a long way.

Now, it's time for you to go to your bank. That's the best place to start. Call your bank and find out if they loan money for mortgages. If they don't I can send you somewhere else. Even if they do you might want to check around and see if you can get a better interest rate or a lower loan origination fee.

So, how much does it cost to buy a house? It depends, it depends, it depends.

Tuesday, January 24, 2012 - Research Commentary

Wrapping up 2011, NAR chief economist, Lawrence Yun, reports the rise of existing-home sales. Record low mortgage interest rates and lower sales prices have continued to entice buyers. Are we on our way to a sustained recovery? See Lawrence Yun in this 2011made for REALTOR TV video.

And in this YouTube video, a commentary by Yun following the unpresidented housing boom and bust "700 billion here, 800 billion there..."  Now, the mortgage interest deduction has become an issue.

Thursday, January 12, 2012

Reasons People are Buying Homes Today

The second most common reason people cite for buying a home now is affordability. What's the first reason? Find out here:

Primary Reason for the Recent Home Purchase

On January 11, 2012, in Did You Know, by T.J. Doyle, Marketing & Communications Manager a blog post was added to the Economists' Outlook Blog, which follows housing stats from the National Association of Realtor's esperts.