Buyers

Because of the crash of the housing bubble and the economic slump, many Americans find themselves with a home that costs way less than what they paid for. It’s worse for families who are troubled financially on top of this. Foreclosure seems to be the most logical option. Let’s discuss details and other options.

During the housing bubble, many people were compelled to join the bandwagon and purchased a house. But now they find that their houses are worth far less than what they paid for. There are many reasons why this happened. During the bubble, constructions companies built massive housing projects and a lot of them stayed vacant. Neighborhoods stayed empty. Some neighborhoods that were populated evetually became empty as homeowners turne/d to sub-prime mortgages, causing the entire neighborhood to fall in value. Houses in neighborhoods like this are hard to sell even at low rates. They are even hard to put up for rent.

On top of the crash of the housing bubble, a lot of Americans find themselves out of work or they have reduced work hours. Both cause families to lose part of their income. This makes bills harder to pay.

At that time, buying a house with low interest rates was so appealing. Despite their financial capacity, many American families turned to lenders to purchase a home. But now keeping a job has become tough and paying for mortgage has become such a challenge. The value of the house has depreciated so much that even if you sell the house, it won’t be enough to pay for the mortgage.

The first thing that people think about when faced with a situation like this is foreclosure. However, you must first think hard about it because they come with consequences. Having a record of foreclosure will give you a negative credit rating. and it will stay that way for years. When you need to apply for a loan, you might not be approved because of it. Even renting a house might be difficult if the landowner requires a credit report. Credit options is expected to be lower and there can be tax implications. If payment for mortgage has been continuously late, the homeowner may already feel the consequences mentioned above.

One of the advantage of being foreclosed is  that you can continue living in the house without having to pay for rent. Depending on your state, it could be a year or longer. You can also talk to the bank to ask for new terms. Especially if the property is in a difficult market. Be careful and be sure to know what you’re getting yourself into. There are some lenders who foreclosed homes illegally. 

If you’re not quite sure about foreclosure, you can also consider a short sale. A short sale is an agreement with the bank that they can sell the house at an amount much less than what was borrowed. Through this, the homeowner can get off the hook with minimal costs or be given terms that are easier financially. However, going into a short sale can also put you in a bad light in terms of your credit score.

Usually, families who are facing this difficult situation are advised to find a more affordable housing set-up; like living with relatives or having the house rented. But keep in mind that having your place rented can present problems of its own. You might find yourself with troublesome tenants that might lead you to more costs on repairs. 

If you are convinced that having your house rented out is the best option for you, research on what you need to know before putting up that sign. You need to first establish if your house can be rented out. Some homeowner associations do not allow rental. There could also be restrictions you should be aware of. Like in many college towns for example, laws have been passed to prohibit no more than two non-related adults to live in one single-family house.

The best thing to do is to seek legal advice from a lawyer. Each homeowner’s situation is unique. And different conditions apply so there is no one-fit solution to the problem. Just be open to various options and seek professional help so you can make informed decisions.

According to HouseMaster, a major home inspection company with offices in more than 390 cities in the United States and Canada, 40 percent of previously-owned homes have atleast one damage. Kathleen Kuhn, CEO and president of HouseMaster says, “Virtually every ‘used’ home needs some repair or improvement.” “That’s to be expected. But with today’s high prices, you want to make sure that you are aware of any major problems in a house you are considering purchasing, and what it will take to remedy the situation.”

From over one million home inspections, they’ve concluded that these are the most serious home defects to look out for:

• 1. Cracked heater exchange
• 2. Failing air-conditioning compressor
• 3. Environmental hazards including radon, water contamination, asbestos, lead paint, and underground storage tanks
• 4. Moisture in the basement
• 5. Defective roofing and/or flashings
• 6. Insect infestation — termites or carpenter ants
• 7. Mixed plumbing
• 8. Aluminum wiring
• 9. Horizontal foundation cracks
• 10. Major house settlement
• 11. Undersized electrical system
• 12. Chimney settling or separation

As per Kuhn, most of these damage can be repaired. But, depending on the gravity of the problem, it might cost you a lot especially if the problem is part of a major system. This is something that needs to be thought of before buying a house.

Roof repairs or a new roof could cost you at least thousands of dollars. A new air conditioning compressor could cost up to $1,200. To repair a basement will cost about $5,000. If you are already in the negotiating process, your agent should advise you to present a provision for renegotiating or backing out of the contract in the event that the inspector finds serious problems.

“If the property inspectors find that little or no corrective work is required, you have little or nothing to negotiate,” say Eric Tyson and Ray Brown in their book, Homebuying for Dummies. “Suppose, however, that your inspectors discover the $200,000 house you want to buy needs $20,000 of corrective work for termite and dry-rot damage, foundation repairs, and a new roof. Big corrective work bills can be deal killers.”

If however you are really bent on buying the house despite the problems, they offer these advises:

• The sellers can leave enough money in escrow to cover the cost of repairs, with instructions for the escrow officer to pay the contractors as the work is completed.
• The lender can withhold part of the full loan amount in a passbook savings account until the work has been done.
• The sellers may give a credit for the work. Lenders may disapprove of this last alternative because there aren’t assurances that the repairs will be made.

Get a qualified inspector. Their service costs between $250 and $400. If you want to ensure his credibility, ask for referrals from groups like organizations like the American Society of Home Inspectors or the American Association of Home Inspectors. New members are certified before they could join the group. You can also ask referrals from friends who has had to go through the same experience. But don’t leave everything to the home inspector. Invest a few hours with them asking them to explain the problem (if there are), what to look out for, how to keep your house well-maintained.

As Kuhn of HouseMasters say, “A pre-purchase inspection is your best protection against buying a home based more on emotions, rather than as a sound investment.”

Being a homeowner has its perks and privileges but it also comes with a lot of responsibilities which all involve money. You need to think of repairs, taxes, insurance and maintenance. Not to mention city maintenance and repairs for streets, sewers, curbs and sidewalks near your home. If your house is in the corner of the block, these costs are doubled. 

But don’t let these costs discourage you from becoming a homeowner. If you have the desire and enough funding to purchase a home, you should also have a good understanding of government policies so your house becomes a good investment. Consider it as a business with the city and state financial departments so your chances of making a promising investment is high.

Know what it takes to become a homeowner. Learn the ropes from completing and filing paperwork and getting in touch with necessary agencies. All the hassle involved in the process can be confusing and discouraging.

Your role is an investor. Your responsibility is to own and maintain your property. But you are not expected to know everything including the business side of owning a home. You need to team up with people you can trust who can help you ensure your house’s value will increase. This team should be able to guide you in making prompt payments, tax assessments, insurance, maintenance,( H.O.A. requirements, when applicable), upgrades and necessary repairs or maintenance. If these sounds all too overwhelming for you, you ight as well stick to renting.

Through renting you are giving business to the owners. Being a renter, you don’t need to come up with a large amount of money and no need for taxes.

Think about these things:

• How much is my income?
• How much is my rent?
• What is your credit rating?
• How much do you spend and how much do you save?
• How well do you handle your money?

You need to think about these things to determine if you’re ready to be a homeowner. You should also consider the economy. Do you know the current market climate? Do you believe it’s looking up? Are you knowledgeable when it comes to government regulations.

So ff you want to buy a property and work towards increasing the value, you as homeowner needs to be knowledgeable about finances, real estate, taxes, government policies and regulation, city building codes and restrictions and have good credit rating. If you know these things, you can make your investment grow and start other investments for your family’s future.

After some time, the value of the home you invested in will increase. This is the measure of your success as a financial wizard. You were able to take advantage of the government tax system and policies and borrowed against it. The money you borrowed is tax free and your earnings from it is tax-deductible.

People who used this method was able to finance other things like school tuition, payment for a new home or a new investment.

If you bought a home for $600,000 and you sell that same home for  $1,000,000, you can have the gain tax-free for up to $500,000 for a married couple. Real estate transactions like this is the only one that have a no tax income advantage. You may want to consider them for your retirement fund.

When it comes to investing, no time is better than now. But don’t do it in haste. Careful planning is required. And do it with a team of professionals who can help you with financial and legal matters.

A real estate agency is really a team that lead you to good investments and they teach you how you could maximize your earnings – tax free.

Renting versus Buying

Renting	Buying
no tax deduction	tax write -off
rental fee can go up anytime	house expensie will not go up
not free to make changes	you can make physical changes as you please
you can be evicted	home value increases over time
temporary	your home for as long as you want

Readines when it comes to buying a home takes more than just money. There are other factors involved – factors not involoving money but can be as important. People make decisions not just based on financial issues but on other things as well like your personality, abilities and values.

Probably one of the most important consideration you’ll have is the environment. What kind of place or neighborhood do I want to live in?

• City Versus Suburbs

  Your personality influences your choice of where to live. Do you want to live in a quite neighborhood? Or do you prefer livnig in a busy city? Are you looking for a place near malls, the night life or are you looking for a place away from all these? Do you want to live within walking distance from your office or your children’s school? or you prefer to take the subway or ride the train? The environment you choose, spells the quality of life you will have. If your preferences go with properties that are too mch for your budget, consider these options: postpone buying a house until you can afford your dream house in your ideal neighborhood or pursue having your own home now and just compromise on your preferences?

• Amenities Versus Customization

  If you buy a home with amenities like a tennis court, basketball court, gym, olympic-sized swimming pool, you’ll be paying a lot for it. Your mortgage rate will be very expensive compared to renting a house with these amenities. There are many apartments in cities that have these amenities available but you don’t have to pay as much. Another option you could consider is to find an affordable house and just customize it according to your preference.

• Flexibility Versus Stability

  Renting allows you to leave anytime without much ado. Of course there is a contract but the problem can be fixed by paying up to what is agreed. But as a homeowner, if you want to move, you’ll need to face the hassle of selling your house and finding a good buyer. And while you are waiting for a buyer, you need to continue paying your mortgage and keep the house well-maintained. This process will take months or even years. Unless money is not an issue and you could afford to move without having to sell your old house. However as a tenenant, there is always the possibility that your landlord will raise your rental fee or ask you to move anytime even when you don’t plan to move anytime soon. As a homeowner, you can live in your house for as long as you want.

• Personalized Aesthetics Versus Less Work

  Owning a house gives you the freedom to customize the look of the house according to your liking. But this privilege also comes with the responsibility of takiing care of maintenance and repairs. If you think you are not the type to spend time and effort into fixing a leaky faucet or cutting grass, you might not be ready to own a home yet. Unless you can afford to simply pay someone to take care of this for you.

  A tenant on the other hand, does not have control over the aestheitcs of the place but you also have liberty from dealing with maintenance or damages from poor construction. What you can do though is change the furniture and interior decorations to suit your liking. If there is a leaky faucet, just call your landlord.

• Emotional Satisfaction Versus Less Worry

  Having your very own home is considered the “American dream”. This means growing roots and being involved in the community. If you’re the kind of person who only wants a place to stay and is out most of the time, renting may be a better choice for you.

Deliberating about your readiness to own a home is something that only you can answer. What you can afford to buy can be done by online calculators but when it comes to intangible things like your personality, values and priorities can only be determined by you. Take time to think about considerations listed above before you make any decision regarding home ownership.

Moving in the summer when a lot of people do can be such a challenge. But if you prepare well, moving will be definitely easier for you.

Here are ten tips you can follow for an easier move:

• Think about this: Can I handle the move alone? or do I need to hire a licensed moving company for a full-service or partial-service move? The answer to this depends on your family’s budget, available time and lifestyle. Before you choose a moving company to help you, get quotes from atleast three companies so you can compare and get the best deal. Packing calculators can help you gauge the number of boxes and packing materials you will need.
• Plan where each box or furniture will be placed in your new home before you pack them. Taking pictures of each room in the new house can make this task easier. Write down where each item should go and what needs to be assemled first. Make sure to bring this list with you on moving day. Cross out from the list each item as it is placed in its new room. This will making moving orderly and smooth.
• Create a system when packing and start early. This will enable you to move within your time frame in an organized manner. Go to Moving.com to complete a free change of address and to schedule utilities. Go through your things one at a time – one cabinet, one storage box, one room at a time. Divide your things among these categories: for charity, give to a friend, recycle, trash, pack now, or keep handy until moving day. With each room or bin you clear out, the task of packing becomes less overwhelming. 
• Plan on what to do with the kids on moving day. Think if you’ll leave them in daycare or if you’ll have a friend or family member take care of them. Dont forget to thank them or give them a thank you gift. Another option would be to set up a corner where they could play or entertain themselves on your new home on moving day.
• If you have a pet, make plans for them too. All the hustle and bustle can be stressful for man’s bestfriend. Bring them to a pet daycare or leave them with a willing friend on moving day.
• Secure small items. Some big things (furniture, appliance) need to be disassembled. You’ll need to have a container for small parts like screws. Make sure they’re sealed and marked so nothing gets lost.
• Packing cleaning products and toxins (such as pesticides or bleach) can be quite hard to manage. Get rid of as much as you can But be careful in doing this. Dispose of them in an eco-friendly way.  If you don’t know how, get information from your city’s waste disposal department. For those that need to go with you, pack them securely. Put them in a sealed container and make sure they’re marked clearly. Keep them away from other stuff especially like your children or pet’s stuff.
• Think about getting full value insurance. This insures the protection of your belongings. In the event that something will be lost or damaged, that item will be replaced or there will be cash settlement based on the current market value regardless of the age of the item. It may cost more with a professional mover but the peace of mind that it can give you will be worth it. Do not settle for the required minimum coverage of 60 cents per pound. If something bad happens, it won’t be able to cover what was damaged or lost.
• Know your rights as a consumer. For interstate moves, do you research in the Federal Motor Carrier Safety Administration (FMCSA) or contact the state agency in your state. FMCSA requires interstate movers to offer arbitration to settle disputed claims. If you’re having a hard time with the moving company or they threaten to hold your belongings for an illegal reason, report them to the Better Business Bureau (BBB).

According to HouseMaster, a major home inspection company with offices in more than 390 cities in the United States and Canada, atleast fourty percent of homes in the market have at least one major flaw. Kathleen Kuhn, CEO and president of HouseMaster says, “Virtually every ‘used’ home needs some repair or improvement,” “That’s to be expected. But with today’s high prices, you want to make sure that you are aware of any major problems in a house you are considering purchasing, and what it will take to remedy the situation.”

Based on HomeMaster’s findings from more than one million home inspections, here’s a list of the most serious home defects to look out for:

• Aluminum wiring
• Cracked heater exchange
• Chimney settling or separation
• Defective roofing and/or flashings
• Environmental hazards including radon, water contamination, asbestos, lead paint, and underground storage tanks
• Horizontal foundation cracks
• Insect infestation — termites or carpenter ants
• Major house settlement
• Mixed plumbing
• Moisture in the basement
• Undersized electrical system

Most of these defects can be repaired, says Kuhn. But it might you cost you a lot depending on the gravity of the damage, especially if it involves major systems. This is one of the factors you housld consider in buying a house. For example, buying a new air conditioning compressor will cost you about $1,200. A basement with damaged plumbing can cost you about $5,000 to fix. If you decide to start negotiations with a house you want to buy, there should be a provision for backing out in case the home inspector finds too many or too much problem.

Eric Tyson and Ray Brown, authors of Homebuying for Dummies says, “If the property inspectors find that little or no corrective work is required, you have little or nothing to negotiate.” “Suppose, however, that your inspectors discover the $200,000 house you want to buy needs $20,000 of corrective work for termite and dry-rot damage, foundation repairs, and a new roof. Big corrective work bills can be deal killers.”

If however you really want to buy the house despite the needed repairs, there are several ways to proceed:

• Ask the seller to allot enough money in the escrow to cover for the expense for repairs nad instruct the payroll officers to pay the contractors when the work is done.
• The lender can withhold or part or all of the loan amount in a passbook savings account until the work is completed.
• The sellers may give a credit for the work. Lenders may disapprove of this last alternative because there aren’t assurances that the repairs will be made.

Hire a qualified home inspector. Their fee usually ranges from $250 and $400. Look for home inspectors who are affiliated with organizations like the American Society of Home Inspectors or the American Association of Home Inspectors. These groups require their members to meet professional qualifications, and adhere to specific business ethics. You can also ask referrals from friends.

When you make an appointment with the home inspector, make sure you’re home. The money and time you spend on this is a wise investment for the future. As he goes throught the inspection, ask him about potential problems to expect and what warning signs to lookout for. Learn how they work and how to properly maintain them. “A pre-purchase inspection is your best protection against buying a home based more on emotions, rather than as a sound investment,” says Kuhn of HouseMasters.

When you see a house that seems exactly what you’re looking for, you’ll feel the impusle to make an offer right away. A beautiful, airy and relaxing house can make buyers easily fall in love with it. But don’t allow your emotions to make you forget about what’s real.  Leslie Levine, author of “Will This Place Ever Feel Like Home?”  says, “Sometimes we want something so badly, we’re not willing to ask all the questions we should.”

A beautiful house may only mean a beautiful facade. A closer inspection is necessary to ensure that this is really the house you want. You may see a basketball hoop over the garage and assume the neighborhood is great for kids. But a closer inspection may show that it’s rusted and hasn’t seen a ball in a decade, and that other yards in the neighborhood have no jungle gyms or tire swings out back, Levine says.

• Visit the house at different times of day
  One of the features you may love about the house is its large windows. But it can be a big problem at night when you have a peeping neighbor. If the house is beside or across a school, you may think of it  as an advantage. Visit the house during school hours so you can find out if you can handle the hustle and bustle that the school brings. You could visit a house in the middle of the day and think it’s a quiet neighborhood but it could be noisy and busy during morning or evening rush hour.
• Go through recent newspaper archives
  You might find out that the neighborhood’s water supply has a high level of contaminant; or they’re thinking of putting a high voltage line through the house  you’re eyeing. Levine suggests,  “Make sure you’re getting information on what you can’t see.” It’s also a good idea to check with the county or city for proposed projects in the area.
• Talk to neighbors
  How many of the people around you are actually homeowners? It will be hard to tell at first if most are rental houses.
• Ask the neighbors if they have an association
  “Is there a newsletter for it? How often does the neighborhood get together? Do they have a block party every year?” According to Levine, “Even if you don’t plan to attend, the fact that they’re having a gathering says they care about their community, that they want to get to know each other, that they’re willing to socialize that way. People who behave that way are building a community. They’re going to look out for your kids; they’re going to look out for your house. It’s a nice, safe way to celebrate something.”
• Ask the sellers
  The house may have had past problems that you need to know of. Even if they’ve been fixed, it’s still worth knowing so you won’t do anything that could damage it again. The house may have had water damage years ago because of an ice dam. Knowing this will allow you to prepare and take preventive measures. You might find a landscaping which might seem to be unlikely to you. But you might find out it was actually made to prevent basement flooding.
• Get a home inspection
  According to National Association of Exclusive Buyers Agents, all houses have defects. Some may be obvious and most of it can be fixed. Being aware of the damage or potential problems of the house allows you to prepare for future expense or help you negotiate for a lower price. You should also consider having your house inspected for lead, radon and wood-eating pests.
• Ask for records of past improvements
  If the house went through renovations or repainting. Ask if they could show you the receipts. If the whole project cost just $1,000, it means cheaper paint was used. Be prepared to repaint it soon. Getting these records isn’t always porrible but it’s worth the try.
• Don’t assume remodelling will be easy
  If you talk to the seller about your ideas for future improvements, they might tell you more details you need to know. For example, you might notice a shower in an unexpected place. You’ll probably discover that there’s a structural problem that would’ve cost the previous owners a lot if they put a shower where it’s supposed to be.
• Consider the view
  Levine says, “So many neighborhoods now have teardowns. So look at the two houses on either side of you. If this neighborhood has had some teardowns, one of those houses might be a candidate. And they may build some behemoth structure that affects your light or the way your house looks or your view.”
• Check the utility bills
  You may love the house for its high ceilings, walls of glass or perfectly beautiful green lawn. But it might cost a lot to maintain them. The previous owner may have paid a so much for heating or cooling.
• Consider the taxes
  It’s not enought that you look at the latest tax bill. Ask what the previous years tax bills were. In some areas, houses are re-appraised and taxed higher frequently. The house may seem like a good deal but with taxes that keep going up, you might want to reconsider. If you can’t get the information from the seller, you can also look for it in newspaper archives or ask your real estate agent about this. In some areas, the school’s funding come from property taxes. If this is the case, taxes will increase faster than in other areas.
• Check with city hall
  NAEBA suggests checking the zoning of the neighborhood. You might also want to check any potential easements, liens or other restrictions that has something to do with your property. The seller should be able to tell you this but it’s better to do your own research. You can also ask your real estate agent about this.
• Reconsider the bells and whistles
  Are you okay with a one-car garage? Are you comfortable with on-street parking?  You may consider a house with a pool as a perk but can you really afford one?
• Explore the surrounding area
  This is especially important if you’re new to the city or state. Make sure you’re not moving into an ugly part of town. I’m also certain you don’t want to move in a noisy area. Find out if the property is near an airport, fire station, police station, hospital or railroad track. You might also want to live away from agricultural or industrial areas as they are prone to air pollution.

Most first-time home buyers are eager to have their very own home but it has to be at a price they can afford. Smaller homes, fixer-uppers and cheaper commutes to work are the best options to look into.

The problem is, most firt-time home buyers expect more than what they can actually afford in a home. Coldwell Banker conducted an online survey with 150 of its brokers. The result of the survey yielded a strange trend among first-time home buyers.

Almost of the survey respondents said affordability was their top concern first time buyers. Yet, 81 percent are looking for move-in conditions. Only 7 percent are considering fixer-upper homes. The real estate company suggests looking into fixer-upper homes if you want affordability.

“In the past, first-time home buyers were willing to purchase older, more basic houses in an effort to save money and bhttp://www.doctilo.com/article_writing/index.php?e=33reak into homeownership,” said Jim Gillespie, president and chief executive officer, Coldwell Banker Real Estate, LLC. He adds, “It is important for first-time homebuyers to remember that by considering a fixer-upper for their first home purchase, they can build equity over time and later move up and into their second-stage home that better reflects their expectations.”

Buyers who choose to go with fixer-ups homes should have the house inspected by a professional home inspector. Buyers need to find out how much it will cost you on repairs. You might end up spending more than what you saved. Homes that need basic fixing or improvement can give already give you a lot of savings but you can even save more on houses that need major work. Again, buyers need professional help so you can determine if your savings on the house is more than the cost of repairs.

Another surprising discovery was that most first-time buyers wanted affordability yet they looked for bigger houses within the metro. The survey shows that 71 percent of first-time buyers wanted bigger houses than they were 10 years ago. A smaller home is less expensive because of smaller footprint and square footage. 41 percent were considering proximity. They were looking for a house near their workplace so they could save on gas. However, houses around economic centers are expensive. These properties bank on the value of convenience. Those who live in areas like this can save on travel time and gas money.

A good alternative to this is finding an affordable place far from economic centers but near a transit oriented development (TOD) or low-cost public transit. There is also the option for carpooling or car-sharing communities.

The survey also showed that most of these first-time buyers looked at five to ten homes before they decided on a house. But if you want to get the most for your money, invest more time in looking at houses. More houses, more opportunities for savings. Look at at least 10 houses. You can usually find big discounts from these: houses that had been on the market for at least 90 days; houses being sold by long-time homeowners; houses for sale from flipping investors who got unlucky; and houses from we-want-to-sell-real-estate banks.

Usually, spring and summer is the busiest time in residential real estate. Most families want to take advantage of the good weather and the children’s summer break. However in most regions, spring is also when houses are most expensive. During this time, there are a lot of buyers and competition is tough.

Here are some measures you can take that can give you an advantage over other buyers:

• If you plan to work with a real estate agent, start early. Interview three to four agents and talk to their references as well. Once you have chosen, let the agent know exactly what you’re looking for. Be specific and detailed. 
• Get your loan pre-approved. By doing this early, you have one less task to think about. You’ll also know how much you can borrow. This will save you from looking at houses you can’t afford. And when you make an offer with a pre-approved loan, the sellers know that you’re serious.
• Determine how much you can afford for downpayment. According to NAR, first-time buyers usually make a down payment of 6 percent on a home purchase, and 24 percent of down payment funds were gifts from relatives or friends. If you don’t have this option, you can turn to loan programs that accept 5-3 percent downpayment. Closing costs typically range from 2-7 percent of the property cost. 
• Always be ready for your agent’s call. If the competition is tight, as soon as your realtor finds a good deal that is up to your criteria, they’ll notify you. Be ready to visit the house and once you determine that it’s going to be a good buy, make an offer. 
• When you look at houses, consider the potential. There are some things you cannot change like the neighborhood, proximity to job centers and schools, the basic floorplan of the house, and size of the back yard. But don’t turn your back on a house because you don’t like the color of the paint, the design of the carpet or wallpaper. These are things you can change according to your taste. Try to imagine the house with the furniture and carpet which you think goes best with the house.  Do you ike it now?
• If you’re in a seller’s market consut your real estate agent on how much you should offer. If there’s competition, consider offering more than the listing price. Avoid asking for a long closing date or extras like carpet allowances. 
• Start thinking about home insurance now. Start by checking that your credit report is accurate. The accuracy of your credit repor is very important. It will determine if a company will cover you and for how much. According to the Insurance Information Institute, you should get a copy of your loss history report like a CLUE report from ChoicePoint or an A-PLUS report from Insurance Services Office. They record home insurance claims. If you weren’t able to file a claim in the past five years, you won’t have a loss history report. This gives you a better report and a lower premium. If you previously rented, you should have renter’s insurance. Your insurance history will be helpful when you apply for insurance for your new home. 

Asking for a home loan from a friend or family member is difficult; even if they are people close to you. The money involved is big and you probably see each other frequently or at least once a year. If they turn you down, you might feel uncomfortable with each other. But if you could show them how it could also work for their advantage, you’ll achieve a favorable result.

• Asking for the loan

  Thomas Fox, community outreach director at Cambridge Credit Counseling said borrowers should approach a private home loan the same way they would a mortgage from a bank. Before you come talk to a relative or friend asking for a loan, you should come up with a plan or proposal.

  “Borrowers should be realistic about what a practical repayment plan would be and not try to borrow more than they can repay. You have to treat it the same as any kind of loan and be realistic,” he says.

  When you have a contract for the loan, even if it is with your parents, they can sue you for missed payments.

• What private home loans have in common with traditional loans
  Private home loans or private mortgages are also called intrafamily mortgages. They are not very different from a loan you could get from a bank or credit union.
  • Both parties – lender and borrower, sign a promisory note or a mortgage note. This note contains the terms of your agreement.
  • The promisory note states the following: amount that was borrowed; the interest rate; frequency and date of payments.
  • There will be a deed of trust which gives the lender the right to foreclose the property when the borrower fails to pay according to the payment plan.
  • The lender holds a lien on the mortgaged property.

  This set-up is also for the protection of the borrower. The lender cannot ask for full payment abruptly or foreclose on the property because of personal reasons. Your friend or relative can’t just change the payment plan because they changed their mind and want the money back.

• How borrowers can benefit from private home loans
  • You can get better interest rates. You can negotiate with the lender interest rates that is more reachable for you. The lender can still benefit from this arrangement even if the interest rates you propose is less than what the banks apply.
  • You can propose a payment term that’s doable for you. It can be monthly, semi-weekly or any other. But even if your lender is generous, don’t take advantage. Live up to the terms you agreed on. 
  • Federal tax deductions that apply to institutional loans can also be applied to private home loans.
• How Lenders Benefit from private home loans
  • Even if the interest rates your proposed are less than what the bank applies, they can still get more compared to other investments like a savings account in the bank or other investment.
  • This will give your friend or family extra income. The promisory note gives them a sense of assurance that they can expect a certain amount from you based on what was agreed upon.
• What happens if you miss payments?

  Sometimes unexpected things happen that will cause us to miss payments. You might suddenly lose your job or accumulate medical costs that you didn’t financially plan for. Discuss this situation with your lender. This also applies to institutional loans. The loan can be modified like lowering or postponing the payments but for a longer loan term. But don’t avoid your lender’s calls. It might lead to more problems.