The Pros And Cons Of Closing At The End Of The Month

If you are in the process of buying a house, you are probably wondering when you should close on your new home.  You may have heard that it is best to close at the end of the month.  Setting your closing date for the end of the month is a very common practice.   However, there are pros and cons for closing at the end of the month.  So let's discuss both so that you can make an informed decision.

Pros for closing at the end of the month:
1.  This will lower your initial out of pocket costs because it minimizes the amount of prepaid interest you will have to pay on your mortgage loan at closing.
• the interest on a mortgage starts the day your transaction closes but almost all loans are due on the first so when you close you are essentially prepaying the interest that has accrued between your closing date and the end of the  month
• if you close on the 28th of September,  you will only prepay three days of interest to cover the last three days of the month
• example:  if you close on the 28th of September you will prepay three days of interest which covers the September interest - then your first payment will be November 1st in which you will actually be paying for Octobers interest

Cons for closing at the end of the month:
2.  Closing at the end of the month is only a short term benefit.
• if you close towards the beginning of the month you will have to pay more money up front.  If you close at the end of the month,  your first mortgage payment will be due sooner than if you had closed toward the beginning of the month
• example:  if you close on the 28th of September, your first payment would be due November 1st.  This is not a very long period of time between your closing and your first mortgage payment; however, if you close on the 3rd of September, your first payment would not become due for almost two months later.  Your mortgage will still be due on November 1st but you have a longer period of time between your closing and your first mortgage payment


So how do you decide whether to close towards the beginning of the month or at the end of the month?  Well, it depends on how much up front money you have.  It will take less initial cash if you close at the end of the month which is a huge benefit for most people.

Talk to your realtor about your situation and ask them for their advice about what type of closing would be best for you.  Your realtor deals with all kinds of closings every month and will be able to help you with a recommendation.

To Buy or Rent

Its a buyers market, therefore we say BUY! Home prices have dropped and will only go up. Minimal interest rates and the cost of rental properties on the rise, now is the time for renters to really consider buying house. HouseSavvy, a premier real estate relocation organization agrees with us.

When housing bubble burst in 2006, the cost of buying a house was higher then renting, but now the tables have turned. Rental cost had remained on the higher side in many communities. If you combine the decrease in home prices, high rental costs and historically low interest rates; the time may be ideal for renters to consider buying.

Deutsche Bank recently did a study that reported the share of income Americans are now paying to own their homes is 9.8% after mortgage, further says that in 28 out of the country's 54 major markets, its now less expensive to pay a mortgage and other major housing costs than to rent the same house.

If you are still on the fence, make your own analysis. Make a list of the total cost to rent a home or apartment, include tenants insurance, and maintenance/association fees. Then make a list to determine the cost of buying a house. You are going to have to do some research, search for houses for sale in your price range and find out the prices of comps or similar homes that have been selling recently. Your Realtor can also help you to do this. Once you figure out a price for the home ask you Realtor to estimate what the real estate taxes and utilities and insurance cost for a home at this price. Then lastly talk to a local bank or mortgage broker to find out the cost and availability of the mortgage needed to buy the home.

Common Misconceptions About A Home Appraisal

If you have ever bought a house or are in the process of buying a house, you are probably aware that you will need a home appraisal.  However, many people have some misconceptions about how the appraisal process really works.

Here are some of the common misconceptions about real estate appraisals.

Misconception #1:  The purpose of the appraisal is so a buyer doesn't pay too much for the house.

Truth:  The appraisal is to protect the lender so they don't lend too much money on an overpriced property.  That is why the appraisal is done before your loan is approved.

Misconception #2:  Appraisers use an exact formula to determine the value of the house.

Truth:  There are many different things that factor into the home appraisal.  Each appraisal will have different circumstances that will determine the value of that particular home.  Such as the location, how close it is to schools,  the size of the lot, the condition of the home and the market comparables for that area  etc.

Misconception #3:  A realtor's input about the condition of the home will influence the appraisers final decision about the value of the home.

Truth:  The appraiser's final determination about the value of the home cannot be influenced by the realtor.

Misconception #4:  A clean home will improve the appraised value of the home.
Truth:  An appraiser does not look at the cleanliness of a home.  However, they will look for signs of neglect.

Misconception #5:  Anyone who knows a little something about houses can be an appraiser.

Truth:  Federal law requires states to have minimum standards and licensing practices in place for all appraisers.  In some states an appraiser will have to take several courses, pass an exam and complete thousands of hours of on the job training before they will be issued their license.

Misconception #6:  Appraisers are not obligated to disclose every  known home defect to the buyer.

Truth:  If the home will be insured by the FHA, then the appraiser must disclose all possible defects to the buyer.  However, if the mortgage is a non-FHA mortgage, then the appraiser has no obligation to disclose his findings.

Misconception #7:  The appraisal is the same thing as the home inspection.

Truth:  The appraisal is formulated for the lender.  The home inspection is a report of the homes condition that is formulated for the buyer.

Misconception #8:  If the appraised value comes out to be lower than the sale price of the home the loan will not be approved.

Truth:  There are several ways to overcome a low appraisal.  The seller could lower the price of the home, the buyer could put down a larger down payment.  Talk to your realtor about the other options that are available for overcoming a low appraisal.

10 Decorating Tips for A Stress-Free Home

Create a Clutter Free Environment-

Most people tend to store stuff they don’t really need such as piles of newspapers or trash bags full of garbage or outgrown clothes. Take a little time to designate a specific area or container for items that need to be taken out of the house and another container for you to place items that you bring home. Do you really need a lot of end tables and clutter in your living room? If you confined, then you most likely will feel stressed. Also, re-arrange areas that limit your walking ability such as a coffee table that fits close up to your couch. You will lessen the chance of stubbing your toes while trying to relax.

Have Less Lighting-
Everyone knows that low lighting can be more relaxing. Rather than have a bright overhead light on in your living room or bedroom, bring in a few lamps to place around the room. You will instantly feel more at ease thanks to the softer glow of lamp lights.

Be Less Bold in Your Color Choice-
If you truly want a relaxing stress-free home to come home to then you should consider keeping bright colors and bold patterns to a minimum. If you want to add a little color that is fine, a bright red throw pillow or something on the couch is fine, but your walls should be painted a more neutral earthy tone. If your eyes are busy focusing on all the bright colors in the room, you will have a harder time relaxing. If painting a room isn’t something you want to do, then focus more on pale colored lamp shades, throw pillows, and other decorative items.

Express the Nature Lover in You-
One very important decorating tip for a stress-free home is nature and incorporating natural elements into your home. House plants, mirrors across from windows and natural landscape artwork will bring a relaxing and fresh feeling to any room inside your house.

Surround Yourself with Home-
You may also want to consider putting a favorite item such as an old cabinet with photos of your family on it, a vase of flowers etc. near your front door or the main area you walk into when you first get home. This will remind you that you are home as soon as you walk in the door and you will instantly feel more relaxed. This idea can also be incorporated into other areas of your home. It is always good to “feel at home”, your photos and other favorite things will emphasize the “home” feeling.

Say Good Night to Electronics-
If you have a TV in your bedroom or a computer that stays on all night or blinks while in standby mode, you are telling yourself to stay awake and not relax. This will increase your stress level throughout the night cause you didn’t get the sleep you should have and the next morning, you will start the day filled with tension.

Create Your Idea of Paradise-
In your bedroom, living room; bathroom, etc. wherever you want to feel at ease, surround yourself by the essence of paradise for yourself. If you love walking on the beach during the summer months, why not surround yourself with things that remind you of those long walks? If your idea of heaven is a mountainous terrain or a cabin in the woods, bring in rustic furniture or paintings of trees and mountains, gentle streams, etc.

Pets Help with Relaxing-
Incorporating a fish tank into your home will also serve to create a stress-free area. You will enjoy sitting back watching your fish swim around their tank and it will calm you. If space allows, other pets can relax you as well. Everyone loves to come home to a welcoming committee and your beloved dog or cat can do as much for you as your spouse and children
A Corner for Yourself-
Create a corner or a special area inside your home for you to go to when you need a moment to unwind. This can be in the bedroom or a spot in the living room. Tell your kids that when you are in this area that you are taking time to relax and ask them to not bother you while you are there.

Natural Lighting Sooths the Soul-
Eliminate the dark window blinds and curtains in your home, even in the bedroom. You will feel more at ease and peaceful waking up to natural light coming in the windows. You will also be more willing to wake up when the alarm clock starts buzzing because your body will see the morning light and take it as a clue to get the day going.

When considering all the tips for decorating stress-free home, it can be as simple or as complicated as you want. Nothing has to cost you a fortune and there is nothing you shouldn’t do while creating your haven as long as you feel relaxed when you’re surrounded by it.

Author Bio- This post has been written by Tresssy Jones. She loves to write about Home Improvement. She is evangelist at Atlanta Ductless Air Conditioning. They provide best heating and air conditioning services.

Spring Season Starting Early for Home Buyers

Realtor.com just recently posted its February and March data on the U.S. housing market. 

February:

National Data

• In February, the total number of single-family homes, condos, town homes and co-ops for sale in the U.S. (1,494,218) increased by 1.15 percent month-over-month. On an annual basis, however, inventory was down by 15.97 percent.

• The national median list price for single-family homes, condos, town homes and co-ops ($189,900) increased by 1.01 percent year-over-year and 1.55 percent month-over-month in February.

• The median age of inventory of for sale listings fell to 98 days in February, down 9.26 percent from January and 11.71 percent below the median age one year ago (February 2012).

Local Data

• Nearly all of the markets with the largest year-over-year declines in their for sale inventories in February were in California, where declines averaged 48 percent. The list includes Sacramento, Stockton, Oakland, San Jose, Orange County, Los Angeles, Seattle, San Francisco, Riverside and Ventura. These markets also experienced a dramatic decline in the median age of inventory, falling to an average of just 31 days, or 53 percent lower than it was one year ago.

• On an annual basis, February median list prices were up by 5 percent or more in 51 markets while they were down by more than 5 percent in 11 markets. The number of markets experiencing a year-over-year list price decline in February (39) is significantly below the number of declines observed in January (50). California markets continue to dominate the list of areas experiencing the largest year-over-year increases in their median list prices, representing nine out of the top ten best performers.

• The ten markets with the longest time on the market continued to include the coastal areas of the Carolinas and the resort communities of Santa Fe, NM and Ashville, NC. In addition, five older industrialized areas also appear on the list: Reading, PA; Portland, ME; Albany, NY; Philadelphia and Trenton, NJ. California markets continued to dominate the list of top ten areas with the shortest time on the market, although the median age of inventory was also at record lows in Denver and Seattle. Median time on market in these areas averaged just 28 days, 51 percent lower compared to one year ago.

March:

March data on the U.S. housing market shows growing optimism and confidence among potential sellers. Realtor.com's March 2013 data indicates that while national housing inventory decreased 15.22 percent since last year, the number of listings increased 2.36 percent since February 2013. This month-over-month increase indicates a renewed willingness in sellers to put their homes on the market as list prices increased .05 percent both year-over-year and month-over-month to a national average list price of $190,000. The data also showed that the median age of inventory dropped to 78 days—a decrease of 20.41 percent since February.

A month-over-month inventory increase of 2.36 percent reflects a rise in new property listings since February 2013, but there are drastically fewer homes on the market compared to this time last year (15.22 percent less). While the median age of housing inventory continues to decline year-over-year by 12.35 percent, the amount of time houses are sitting on the market has decreased dramatically by 20 days since February, suggesting that a broad-based housing recovery is beginning to take hold.

A new trend in median list price has emerged in 2013. Since the beginning of the year, a growing number of the 146 markets realtor.com monitors have experienced an increase in list price year-over-year, while the number of markets that have experienced a list price decrease since last year declined. The March data shows that out of the 36 markets that registered a year-over-year decrease in median list price in the month, only six markets had a decline that was more than 5 percent, implying that these markets appear to be within easy striking distance of experiencing house price appreciation in 2013.

Mastering the Art of Negotiation

Before the Negotiation
Before you enter any kind of formal negotiation, make sure you know exactly what the expectations are. It helps to put down on paper exactly what you will do and accomplish. You should map out every scenario out to your client, but remain optimistic. 

Also finding potential weaknesses in the opposing part is ideal, to negotiation tactics. Knowing the opposing's weaknesses shows that you have done your homework and it shows you have valid information to back up your points, or why the negotiation should lead in your favor. This may also help both parties to find a middle ground. Another tip, is to come up with a list of reasons why your proposal would be beneficial to the opposing party. For example, one Realtor may bring up that their offer is more favorable, although it is offering a lower price, it is an all-cash offer, as opposed to a riskier financing. By specifically laying out the advantages  the negotiator increases the odds of getting the deal done in their favor. 

The NegotiationIn Person
Ideally, each party should state exactly what their objective is coming into the negotiation. This allows each party to understand where the other stands. It also establishes a basis for a give-and-take conversation. At this point, each party may then offer its fall-back proposals and counter proposals in order to hammer out a deal.

Body language analysis can help you to understand how the negotiation is going. Was your proposal well received? Positive signs include nodding of the head and direct eye contact. Negative signs include folding of the arms (across the chest), aversion of the eyes or a subtle head shake as if to say "no". 

By PhoneNegotiation by phone, can be a little more difficult, because body language can not be determined. This means that the negotiator must do his best to analyze his counterpart's voice. But this also means, their is less emotion and you don't have to sit face to face with one another, and makes it easier to stand your ground. As a general rule, extended pauses usually mean that the opposing party is hesitant or is pondering the offer. However, sudden exclamations or an unusually quick response (in a pleasant voice) may indicate that the opposing party is quite favorable to the proposal and just needs a little nudge to seal the deal. 

By MailHere are some tips for negotiations done through the mail (such as residential real estate transactions):

• Words or phrases that leave ambiguity may signal that a party is open to a given proposal. Look specifically for words such as "can", "possibly", "perhaps", "maybe" or "acceptable". Also, if the party uses a phrase such as "anxiously awaiting your reply" or "looking forward to it", this may be a signal that the party is enthusiastic and/or optimistic that an agreement may soon be reached.
• When the opposing party makes an initial offer or a counter proposal, see if you can incorporate some of those ideas with your own and then ink a deal on the spot. If compromise on a particular issue is not possible, propose other alternatives that you think would be favorable to both parties.
• Finally, while all agreements should be sealed with a hand shake, a more formal contract memorializing the negotiation is a must. To that end, have an attorney draft a formal contract soon after the negotiation process is completed and make certain that it is signed by all parties in a timely manner.

No Agreement? No Worries

If an agreement cannot be reached in one sitting or phone call, do not panic. It may take sometime for both parties to think about the offers on the table. Leave the door open for future negotiations or plan another meeting, this will come across as though you sincerely believe that a deal can be worked out and you are willing to work to make that happen. Maybe all it takes is for the party to realize that there are no other offers or that your party has provided the best possible offer. Regardless, never under any circumstances, burn your bridges.

Celebrating Earth Day

Happy Earth Day!
What does this mean for you and your household. It can simply mean turning off the lights when there not in use, or don't keep the water running when not being used. Today you can make the decision to go a little more green and save money along the way, here are some household tips to achieve that: 

Power off

• The screensaver on your computer uses the same amount of power as when it's on and being used. Switch your PC off if you're going to be away for a while.
• Turn down your water heater. By lowering the temperature on your water heater from 140 to 120 degrees will reduce your water heating costs by 6-10%
• 50-70% of a household energy costs come from heating & cooling according to the Department of Energy.
• Installing a programmable thermostat will save you approximetly $150 a year.
• Aim for 78 degrees of higher when you are at home while reducing your cooling loads 10-20%. When you are away from home make it 85 degrees, and save an additional 5-12%.
• In cold weather for every degree you lower the thermostat you will save between 1 and 3% of your heating bill. 

Unplug

• Unplug unused chargers, plugged in cellphones, laptops or anything for that matter. Americans throw away about 8% of our annual electric bill from having objects just simply plugged in.

• The easiest way to save is to buy a surge protector that can plug in multiple units, that way you can turn off more than one charger in one switch.

Light Fixtures

• Install CFL's, the spiral-shaped bulbs known as compact fluorescents use less than a third of the energy regular bulbs use and last 10x longer. 
• If every household in the U.S. replaced just on regular bulb with a CFL, the amount of energy saved could light 2.5 million homes for a year.

Water Fixtures

• Buy low-flow toilets, they use less than a gallon of water, brands such as American Standard, Toto and Kohler. Toilets used to use about 5 gallons per flush, so if your toilet is outdated it may be time to make this change.
• Buy low-flow shower heads, which can decrease water usage by 50-70%. They only cost about $8
•  install low-flow faucets.
• Wash clothes in cold water whenever possible. As much as 85 percent of the energy used to machine-wash clothes goes to heating the water.
• Use a drying rack or clothesline to save the energy otherwise used during machine drying.

Upgrade to Energy Star Appliances

• Look for the blue and white label which means the item uses at least 10-50% more efficient than standard models. more than 18,000 products have the Energy Star design.

Other

• Use a water filter to purify tap water instead of buying bottled water. It will save you money & help you live a more green lifestyle.
• Bring a reusable water bottle, preferably aluminum rather than plastic, with you when traveling or at work.

By making these small changes you can save money & make for a cleaner earth one household at a time

7 Tips on Deciding a Listing Price

Yesterday we posted about "Submitting a Fair Offer Price" to make a purchase, but today we are focusing on the aspects of making a listing price to sell your home.

 

1) Research Comparable Properties Recently Sold

Find any comparables properties, that are similar in size, condition, neighborhood & amenities that have recently sold. This is where your Real Estate Agent comes in to do the major research, they can find the most accurate, and up-to-date information. Don't forget to look at comps that are in escrow as well.

 

2) Comparable Properties still on the Market

Follow the steps above, but also take advantage of the fact that you can go and visit homes in this category and get a sense of how their size, condition and amenities compare to your home your selling. Your Realtor most likely should be seeing these homes and doing this for you, but don't hesitate to put in your own work, it will only help you to better understand the market and compare prices.

 

3) Comparables that did not sell

This could mean a few things; it was overpriced, other issues with the home, or personal reasons. 

Check out the unsold inventory index for information about current supply and demand in the housing market. This index attempts to measure how long it will take for all the homes currently on the market to be sold given the rate at which homes are currently selling. 

4) Market Conditions

Are prices going up or down in the market? In a sellers market, properties could be somewhat overpriced and in a buyers market they could be under priced. Talk to your Realtor and do some research about the Housing Market, and what kind of market you'd be put into. You can never over educate yourself about the market.

 

5) Real Estate Agent's Opinion & Your Opinion

Talk to your Realtor about what you think your home should be listed for, a good Realtor will tell you realistically if the price you are aiming for can be accomplished or not. They will also give you advice as to why think they the listing price should be lower or higher in their opinion and with their experience. Regardless your Realtor should do everything in their power to market and sell your home, if you are not willing to drop your price this may mean a longer time on the market. These are factors you must consider. 

 

6) Location

What kind of area is your home located. Is it close to freeways, close range to shopping and businesses, or is it secluded. Are their many businesses within range that are being opened and developed or are many businesses closing down. This will make a difference in your price expected.

 

7) Appraised Value/ Home Inspection

Once under contract, the lender will require and appraisal of the property done, to protect them. In case you stop making your mortgage payments, they can get back a reasonable amount of money if they needed to foreclose your home. A home inspection which is completed after you're under contract will also give you a way to change your offering price. This is when you negotiate and can ask the seller to make repairs or decrease the price.

When you're shopping for a home, it's important to understand how homes are priced so you can make a sound investment and reach a fair agreement with the seller. 

Goodluck

How To Submit A Fair Offer Price

The first thing our team does when we are interested in a property, is we do our homework & research by looking up comparable properties. This does not just apply for submitting a price but also when deciding on a fair price to sell your home. People want to know where you got your number from, and by showing you've done your research and can show proof of other comparable properties in your area provides knowledge and trust.

 Here are a few steps you can take to determine a fair offer price.

1.  Look at what recent homes have sold for in your area.  Don't look at what they listed their home for but what they actually sold for.  Also look for properties for sale in your area, that have not sold yet and have been on the market for a long time. This shows that their property price could be too high or there could be some major problems with the house.

2.  Remember as you are looking at this data to also look at the condition of the homes, the improvements that were made to those homes, the current conditions of the market and the reasons for the sale of those homes.  For example, was the seller desperate for the sale etc. as this can play a major role in the sales price and can skew the numbers if you are not careful.

3.  Check the current competition in the area.  Are the comparable homes close to the one you are looking at, is the home comparable in square footage, the number of bedrooms and bathrooms.  Is the garage the same size.  Is the property lot the same size.  Also, look at the type of home it is - is it the same type of construction.  If it is a tract home with many other exact same homes in that area, you will be better able to compare it against an exact match for the most part.

This is where your Realtor comes in, they know the market inside and out and can advise you on how to put together a fair offer price. They will be able to efficiently look at the comparables, your Realtor has access to resources that you don't to help determine what should be factored into a good offer, but it is good for you to make sure you do your research as well to better understand the market.

Triple your Amount of Real Estate Deals

First order of business, is to gain leads and market your brand, and be able to negotiate with sellers to get deals done.

Your Attitude
What is your purpose in this business? It is to help others, teach others and educate other. Many people need a real estate agent because they do not understand the market themselves, you are there to open the doors for them to this new world. Understand what you want and what the seller wants . A simple question you can ask the seller is, "What would like to see happen?" By knowing exactly what their expectations are you know exactly what your goal is and how to reach it.

Build Rapport with the Sellers
Rapport- Noun

A close and harmonious relationship in which the people or groups concerned understand each other's feelings or ideas and communicate well. Basically build a connection with the sellers, it is not all business, these families are trying to sell a home which can be very emotional for them. If they feel a connection, their more likely to pick you if there are multiple offers on the table. Find things you have in common with the sellers, look at their house; compliment them on what you love about the home. Establishing a level of trust will help you accomplish your goals, and also make your reputation for yourself a good one. Take classes and educate yourself on becoming a better negotiator, the keys to negotiating is Sympathy, Empathy, and Compassion. The Dirty Word...Real Estate Investor This tip Rubels says is to never use the word "investor" when negotiating with the seller. He believes Investors have been badly portrayed by the media, as people who steal, and take advantage of people in financial troubles. Although this is not true, you are trying to connect with your seller, and by saying your an Investing company, screams to the seller that you want to tare there house apart and sell it for more than they purchased it for fast.  Rubels suggests instead of investor, try using provider of housing solutions or try to come up with something more friendly. Their House is their prized possessionPeople become emotionally attached to their homes, this is where their kids were born and grew up. This is their first home they bought together when they were young. So don't disrespect their home by saying it is ugly, try saying "ready to renovate" or "ready for your new touches" rather than "old" or "worn-down". Great negotiation skills will make the difference. Our biggest advice is to educate your selves, you should never stop reading up on things or going to classes and attending seminars it will only benefit you & your business. Just this week our team went to Las Vegas to attend the Luxury Homes Retreat, the more we continue to educate ourselves the better we can perform & deliver. Read more on this topic: http://www.creonline.com/blog/how-to-triple-the-number-of-real-estate-deals/#ixzz2QfNtEzje

Student Loans affecting the Housing Market

With home prices and mortgage rates at their lows, it seems like the perfect market for young people to buy. What's holding these young families from buying a home is they are still paying off their student loans. The consumer Financial Protection Bureau says U.S. students have amassed $1.1 trillion in load debt- double what it was in 2007 and greater than any other consumer debt not tied to a mortgage.

This effects the market overall because we will see a decrease in the number of first-time home buyers.
First time home buyers usually make up more than 40% of the market, during the recovery this number has dropped to below 30% (National Association of Realtors). Many of these young families and students are forced to rent or move back in with their parents.

Most young adults face up to $100,000 in student loan debt. An estimated 1/3 of student loan borrows are late on their debt payments, according to the Federal Reserve report. This will affect their credit score, and their future mortgages. Many of the jobs that highly educated young adults are coming out with after their education, are working minimum wage jobs. The Center for College Affordability and Productivity reports that almost 50% of the college graduates from class of 2010 are in jobs that don't require a bachelors degree, while 38% are in jobs that don't even require a high school education. 

Now, the Federal Reserve Bank of New York has found evidence that student loan debt may prevent a large chuck of an entire generation of college graduates from securing a mortgage and owning a home. Bloomberg, report that 2/3 of student loans are held by Americans under age 40. From the third quarter of 2012 to the fourth quarter, the number of people in that age group who own homes fell by 4.6%, the steepest drop since 1982.

What Is Escrow And How Does It Work?

What is Escrow? 

Escrow is a deposit that is held by a third party or escrow agent.  So in other words, an escrow deposit, is the money you put down on your new home.  Your escrow deposit is held in a secure location by a neutral third party.

The escrow agent works for both the lender and the buyer and their purpose is to carry out the instructions that both parties have agreed on.  The escrow agent will release your money once all of the terms of your agreement have been upheld.

Your mortgage lender will more than likely require you to open an escrow account to make sure there is enough money to cover your insurance and taxes.  The way this works is you will make an initial deposit to your escrow account followed my monthly installments.  Most lenders will arrange to have this included in your monthly mortgage payments.  When your taxes and insurance premiums come due the escrow agent will release the funds to the appropriate party.

The reasoning behind having an escrow account is to protect the lender in the event you default on your payments.  The lender is then protected from external perils that could arise as a result of you not paying your taxes or your insurance causing the lender to be left with no collateral.

An escrow account also helps the buyer because it allows you to spread your payments  evenly over a 12 month period.  Just imagine if your yearly taxes were $3000 and your yearly insurance was $1400, that would leave you owing $4400 in one lump sum.

Your escrow amounts could change from year to year due to the possible increase in your taxes and insurance.  Therefore, your lender will review and adjust your escrow amounts annually and you will be given a revised mortgage payment if your taxes or insurance go up.   On the same token; however, if your taxes or insurance rates go down, you will be given a refund.

Sometimes an escrow requirement can be waived.  Some buyers prefer to pay all of their taxes and insurance directly.  Your lender may allow you to do this if your down payment is more than 20% but they will more than likely raise your interest rate slightly to compensate.   One thing to remember is that once you begin putting your funds into an escrow account, it can be difficult to cancel this process so make sure that you fully understand what your options are before doing anything.

What To Do If You Find A Home Defect After Your Closing

After finding your dream home, what happens if you find a home defect that you did not know about prior to buying?

Let's look at what you can do -

1.  Look at your inspection reports.  Does the defect show up on the inspection report?  If so, then you are liable for the repairs.

2.  Look at the homes Seller Disclosure report.  Does the defect show up on the Disclosure report?  If so, then you are liable for the repairs.

3.  Did you accept the home in "as is" condition?  If so, then you are liable for the repairs.

4.  If the defect was a repair that was fixed prior to the closing, simply call the contractor that completed the work and have them come back to re-address the situation.  It is important to get the contractors information for any repairs that were done prior to closing.

5.  Were you told by the sellers and/or the home inspector of any required routine home maintenance such as overhanging trees, gutters etc?  If so, then you are liable for any repairs caused by your deferring of any of the routine home maintenance such as tree trimming.

6.  If you were improperly informed of a potential problem, such as "a little" water intrusion in the basement.  Then you find out that the basement will completely flood after a hard rain, rendering it "not usable".  You may, in this case, be able to pursue the seller for repairs and damages.

Some contracts will require that all disputes be mediated through arbitration.   In any case, you will need to consult with a real estate attorney to help you define who is responsible for what defects and what recourse you have.

Make sure your purchase contract specifically states exactly how disputes will be handled if they cannot be resolved by the parties involved.   A good home inspector is worth their weight in gold because they will be able to identify potential problems or attempts at covering up existing problems before you sign on the dotted line.

Our biggest recommendation is Do Not Skip The Home Inspection Process!

Your Home Buying Journey

Here is a step by step guide to help you in your home buying journey

1.  Talk to an experienced realtor who will help you learn what you need to know about the home buying
      process. You may need to interview several realtors before deciding on the best one for you
2.  Decide if you want to Rent or Buy

3.  Check your credit and begin improving your credit score. Check out our blog from yesterday on the      

     importance of your credit score & tips on how to improve it.

4.  Make a budget and determine exactly how much you can afford to spend on your new home.  Don't
      forget that there will be closing costs and other associated fees in addition to the purchase price of your
      new home
5.  Study the different types of mortgages and how they work and then decide which one is right for you
6.  Think about where you want to live.  What location is best for you and your family
7.  Do you want to buy a conventional home, a foreclosure, a fixer-upper etc.
8.  You will also need to decide on a mortgage company, home inspector and possibly a real estate attorney
     or a financial adviser depending on your situation
9.  Research the area you have decided to buy a home.  Drive through the neighborhood at varying hours,    
     check the current prices of the available homes and notate their condition.
10.  Check the crime statistics for that neighborhood
11.  Does the neighborhood have the conveniences you are going to need, such as child care, your bank,
       your favorite grocery stores and restaurants etc.
12.  How far is your chosen area from where you work now and where you may potentially be working in
       the future?
13.  Talk to your chosen realtor about supplying you with some home listings that meet your specified criteria
14.  Once you have looked through the home listings, go and look at all the homes you would like to see
       with your realtor.
15.  After you have chosen a house, your realtor will help you submit an offer
16.  Be prepared to negotiate the deal
17.  After your offer has been approved, you will need to set up a home inspection
18.  You will now need to get your mortgage loan approved
19.  Set a closing date and then close on your new home
20.  Now all you have to do is get moved and enjoy the home of your dreams

How To Restore Your Credit Score Quickly

The first thing you need to do when purchasing a home, before you continue your journey, is to get a copy of your credit reports. You need to get a copy of your credit reports from all three credit reporting agencies -  Trans Union, Equifax and Experian.

Credit reports are extremely important in gaining an approval for your new home.  The mortgage companies are more concerned about your recent buying and repayment history than what may have happened years ago. FHA policy requires a minimum credit of 530 to buy a home or refinance. But most lenders prefer a score of 620 or higher. Borrowers with credit score above 580 require a 3.5% down payment. The down payment funds can be the borrowers own funds or a gift from a family member and up to a 6% seller's concession is allowed. If your credit score is below 580 new FHA changes require a 10% down payment. Negative data typically remain on your credit reports for seven years. 650 or higher was considered excellent by most mortgage lenders. 

If your credit report is not looking to do good, there are many things you can do to restore your score. So that way in six months to a year you can start applying again for a home mortgage and get your approval. 

1.  Check your credit reports for errors.  Again , that is plural so check all three of your credit reports for errors.  If there are mistakes on your credit reports, you will need to start an investigation with the company or the source of the derogatory information.  Contact them in writing and make sure you include all supporting documentation proving the information is in fact an error.

2.  Set up a timely repayment schedule.  If you have any accounts that you have been late in paying, you will need to begin paying all of them on time.  Paying your bills on time for a minimum of six months will go a long way in improving your credit rating.

3.  Collections.  Try to avoid having your accounts turned in to collections.  A collection is the most damaging of all credit issues.  So work out a re-payment plan before your account turns into a collection.  A credit improvement agency may be able to help you get your collections erased; but only if the creditor did not abide by all of the laws of the Fair Credit Reporting Act.   However, this is generally not the case because most creditors know the laws and how to follow them.  So don't count on this as a quick fix .  Most collection accounts will stay on your credit report for a minimum of seven years.

4.  Keep a low balance on all of your revolving credit accounts.  Try to keep your balances below 50% of your limit.  The lesser the balance the better it looks to  potential creditors.

5.  Do some soul searching.  Try to determine what caused your credit status to get out of control in the first place.  Then do whatever you have to to amend your bad habits - if any.

6.  Get a secured credit card.  Secured credit cards can be very helpful in improving your credit.

Real Estate Terms Everyone Should Know

Take a look at this glossary of Real Estate terms, everyone should know when selling or buying a home.

Affidavit of title: A written statement that sellers make under oath certifying that they are in possession of the property, and that since the examination of the title on the date of the contracts no defects have occurred in the title. Marital status is also stated.

Agent: The licensed real estate salesperson or broker who represents buyers or sellers.

Appraisal: The estimated current market value of a property, as determined by a professional appraiser -- usually by comparing the property to recent sales of similar ones.

Assessed value: The value of real estate property as determined by an assessor, typically from the county.

"As-is": A contract or listing clause stating that the seller will not repair or correct any problems with the property. 

Back on market (BOM): When a property or listing is placed back on the market after being temporarily removed.

Back-up offer: When an offer is accepted contingent on the fall-through or voiding of an accepted first offer on a property.

Bidding war: When two or more buyers compete for a property by submitting higher offers than the first.

Brokerage: A firm engaged in buying and selling real estate for clients, using brokers and real estate agents to handle the deal.

Broker's tour: A set time and day when real estate sales agents come to view listings by multiple brokerages in the market.

Buyers Agent: The agent who shows the buyers the property and negotiates the contract for the buyer through closing.

Buyer's market: A market condition characterized by low prices and a supply of properties that exceed demand.

Capital gain: Profit earned from the sale which is above the original purchase price.

Chain of title: The document that shows the succession of conveyances, from some accepted starting point to the current holder of title.

Closing: The end of the transaction process, in which the deed is delivered, documents are signed and funds are dispersed.

Closing Costs: Expenses above and beyond the purchase price of a house and land (such as agent fees, taxes, etc.) that is paid by the buyer or seller at the completion of the sale.

Closing statement: A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made and all cash paid out in the transaction

Commission: The compensation paid to the listing brokerage by the seller for selling the property, a percentage of which is also paid to the buyer's agent (although in some cases a buyer may be required to pay his or her own share of the commission).

Commission split: The percentage of commission which is split between the real estate sales brokerage and the real estate sales agent or broker.

Comparable: A property used in an appraisal or comparative market analysis (CMA) report that is equivalent to the seller's property.

Competitive Market Analysis (CMA): A comparison of the prices of recently sold or listed homes that are similar to a seller's property in terms of location, style and amenities. This is usually prepared by a listing agent for the property's seller.

Contingency: A provision in a contract that requires certain actions before the contract is binding or the transaction can be finalized or "closed."

Contract for deed: A sales contract in which the buyer takes possession of the property but the seller holds title until the loan is paid. Also known as an installment sale contract.

Cost approach: Determination of the estimated value of a property that comes from adding, to the estimated land value, the appraiser's estimate of the replacement cost of the building, less any depreciation.

Counteroffer: An offer made in response to an offer received from the buyer (which, in effect, rejects the buyer's offer).

Curb Appeal: The visual impact that a property projects from the view from the street.

Days on market: The number of days that a property has been for sale on the market.

Depreciation: A loss of value in property due to physical or functional deterioration.

Disclosures: Federal, state, county and local requirements of disclosure that the seller provides and the buyer acknowledges.

Down payment: The amount of cash put toward a purchase by the borrower.

DOM: Days on market -- the number of days that a property has been listed for sale.

Dual agent: A state-licensed individual who represents the seller and the buyer in a single transaction.

Earnest money: The money given as a good faith deposit to the seller at the time the offer is made. Once accepted by the seller, it is held in a trust account until closing.

Escrow account: The trust account established by a broker for the purpose of holding funds, such as the earnest money, on behalf of the seller or some other person until the closing.

Exclusive-right-to-sell listing: A listing contract whereby the owner appoints a real estate broker as his or her exclusive agent for a designated period of time, to sell the property on the owner's stated terms, and agrees to pay the broker a commission when the property is sold.

Expired listing: A property listing that has expired per the terms of the listing agreement.

Fiduciary relationship: A relationship of trust and confidence between the real estate agent and client, as under the terms of a listing contract or buyer agency agreement.

Flat fee: A predetermined amount of compensation received or paid for a specific service in a real estate transaction.

For sale by owner (FSBO): A property that is for sale by the property owner and not represented by a real estate agent.

Inclusions: Fixtures or personal property included in a contract or offer to purchase.

Installment sales contract: A sales contract in which the buyer takes possession of the property and pays the purchase price in periodic installments, even though the title is retained by the seller until the loan is paid off. The same as: contract for deed.

Lease option: When a lease gives the tenant the right to purchase the property during the lease term.

List date: Actual date the property was listed with the current broker.

List price: The price of a property through a listing agreement.

Listing agreement: A contract between an owner-seller and a real estate broker to have the broker find a buyer for the owner's real estate in exchange for the owner paying a commission.

Listing appointment: The time when a real estate sales agent meets with potential clients (who are selling a property) to secure a listing agreement.

Lockbox: A device with a combination or keypad that hangs from the doorknob and stores the keys to the property for sale, so that agents can gain access for showings.

Market value: The estimated price that a property is likely to sell for under normal conditions on the open market.

Multiple-listing service (MLS): A group of member brokers who agree to share their listing information with one another in the hopes of procuring buyers for their properties more quickly than they could on their own.

National Association of REALTORS® (NAR): A national association of real estate sales agents.

Net listing: A listing contract between the seller and the seller's broker which sets a baseline price for a property; the broker nets any funds above that price when it sells. This type of listing is illegal in some states.

Open listing: A listing contract under which the broker's commission is contingent upon the broker bringing in a buyer before the property is sold by the seller or another broker.

Parcel identification number (PIN): A county or city tracking number for a property.

Pending: The status of real estate under an accepted contract that has not yet closed its transaction.

Preview appointment: When a buyer's agent views a property alone to see if it meets his or her buyer's needs.

Quit-claim deed: A document that releases the grantor/seller from whatever interest he or she has in the real estate.

Real estate agent: An individual who is licensed by the state and who acts on behalf of his or her client, the buyer or seller.

REALTOR®: A registered trademark of the National Association of REALTORS® that can be used only to refer to its members.

Re-list: Property listed by a broker that formerly was listed with another broker.

Severalty: Ownership of real property by one person only; also called sole ownership.

Staging: Preparing a home for sale through the neutral but appealing placement of furniture and accessories.

Survey: The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions and position of a house on a lot, including the determination of any existing encroachments or easements.

Temporarily off market (TOM): A listed property that is taken off the market for a short time.

Title search: The examination of public records relating to a real estate parcel which determines the current state of its ownership.

Transaction: The purchase process from offer to closing or escrow.

Under contract: A property that has an accepted real estate contract between a seller and a buyer.

Walk-through: A showing before closing that permits the buyers one final tour of the property that they are purchasing, typically so that they can check for any changes or defects.