MOVING THE MITTEN BLOG
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Real Estate 101
November 8th, 2016
When I take on a new client with dreams of owning a home, they cannot wait to start looking for it. After we discuss their wants I start talking to them about loans, deposits, being qualified and other important terms buyers need to know when buying a home. I find out that many people are not aware of what it takes to buy a home. My advice to anyone that is ready to get into the real estate market is to educate yourself with some basic terms. An informed buyer is a smart buyer!
Pre-Approved/Pre-Qualified - Contacting a lender and giving them information about credit history, employment and debt to see how much home (price) the bank says a person can borrow. Very important to note-An offer cannot be made on a home without a person being prequalified for a loan. It is best practice to get qualified before even seeing homes.
Mortgage - A loan a person qualifies for with a lender to purchase a home. There are different types of loans a person can take out.
Cash Offer - When someone comes to closing with the funds to buy the home and no mortgage is necessary.
Conventional Loan - This is a typical loan, not insured by the government. A Conventional loan requires a minimum of 5% down. Sellers really prefer a buyer to be qualified for this kind of loan when they consider an offer. Talk to a lender for more details.
FHA Loan (Federal Housing Administration) - This loan allows a borrower to put a minimum down payment of 3.5% and it is insured by the government. This protects the lender from losing the money if the borrower defaults on the loan. The borrower will need to pay for mortgage insurance (PMI) for the lifetime of the loan. There are restrictions with this type of loan. Talk to a lender for more details.
VA Loan (Veteran Affairs) - This loan allows a borrower to put ZERO down to buy a home and it is insured by the U.S. department of Veteran Affairs. There are restrictions with this type of loan, as well as lenders that offer this loan. Talk to a lender for more details.
Rural Development Loan - This loan is for suburban and rural homebuyers that allows them to put ZERO down on the loan. An RD loan is backed by the U.S. Department of Agriculture. You don’t need to be a farmer for this loan, the property that a person is interested in simply must qualify under the rural development guidelines. There are restrictions on who can qualify for this loan. Talk to a lender for more details. Go to this website to see if a property you are interested in qualifies: http://www.rd.usda.gov/mi
MHSDA (Michigan State Housing Development Authority) - Another loan that is associated with your mortgage. A person can take up to $7,500 that helps borrowers with down payment and closing cost. There are restrictions with this type of loan. Talk to a lender for more details.
Purchase Agreement - A contract between the buyer and seller, that offers $XXX for purchase of real estate property.
45-60 days - The average time it takes from the time your offer is accepted to the time you receive your keys to your new home.
EMD (Earnest Money Deposit) - A deposit made with the purchase agreement that shows a seller that a buyer is willing to give up if they decide to just walk away. When a person makes an offer, an EMD must come with it. Usually a good EMD is 1-2% of the price you are offering to pay for the property. Please note, there are ways to receive you EMD back if something happens during the inspection, appraisal, the loan falling through, or if the seller backs out. If you decide to walk away or you find another home you like, chances are you will not get your EMD back.
PMI (Private Mortgage Insurance) - When you put less than 20% down on a conventional loan, a lender requires private mortgage insurance. This protects them from losing money if you stop paying on the loan and foreclose. Once a home has 20% of equity into it, PMI will go away but you would need to get another appraisal done on the home to determine this.
Inspection - As soon as your offer is accepted, you or your realtor will find a reputable inspector to come out to the home and look it over from top to bottom. This will need to be done in the first 7 days after the offer is accepted. The buyer will need to pay for this at the time of service. The average cost is around $300-$400.
Appraisal - Once an offer is accepted an appraisal will be ordered by the lender. The buyer pays for this at closing. Average cost is around $400-$500. This tells the lender how much the home is worth from other homes that have sold like it in the area and the highest the lender is willing to lend to the buyer.
Closing Cost - Before you get the keys to your new home there are some fees you will need to pay as well as your down payment. Title Insurance, escrow(taxes), home insurance, appraisal and other fees. Your lender and title company will explain. Your EMD will be included in paying for these fees.
Title Company - When it is time to close on your home, a title company will work with the lender to produce all necessary paperwork to transfer the deed to the buyer.
Title Insurance - A buyer pays for this in their closing cost to protect them or a lender from fraud, title defects, liens and other matters that could be attached to the home.
These are just some of the terms you will need to become familiar with when looking for a home. A home is a big investment, knowing as much as you can will help you make smart choices.
Happy House Hunting!
Moving The Mitten Realtor
Our Recommended and Preferred Lender:
October 24th, 2016
Home Inspections: Why do we recommend them?
A home inspection is recommended for every home we help our clients buy. “Why do I need one?” This is a question we hear often. Generally the answer is, to protect you, the Buyer, from hidden issues that may have not been disclosed or known by the seller. Additionally, the Purchase Agreement has a clause in it to include a private inspection as a condition that must be met to fully execute the agreement. They can be waived, however it is not recommended. At Moving the Mitten, we always recommend a private home inspection in order to best serve our clients. We want you to be aware of the condition of your most expensive investment, your new home.
Ok, so what gets “inspected” during a home inspection? We would like to say every square inch, but that’s just not feasible sometimes. What does get inspected includes the following major systems in your home:
- Electrical system and Electrical Panel
- Heating and Cooling systems
- Plumbing system
- Attic area including an insulation assessment
- Exterior and the surrounding Grounds
- The Garage (if applicable)
- General Interior
- including kitchen appliances, all rooms, and all bathrooms
A good inspector will operate all windows to ensure they are opening and closing appropriately, test each electrical receptacle for proper grounding, and runs appliances where appropriate to be sure they are operational at time of inspection. Additionally, the water will be run in sinks and tubs to check for adequate pressure and proper drain flow. Where available and accessible, the roof will be inspected for loose or missing shingles, and adequate ventilation. Sometimes due to height and safety this is done from the ground. The basement will be inspected for evidence of water leaks or damage (past and present). The furnace should be checked for operation. The same for the air conditioning system, weather permitting.
Afterward, the Inspector will discuss with you any concerns they may have about your home and where appropriate point out items that are in need of immediate repair and those that could be “on the list” to fix or improve once you take possession of the home.
In addition, a full written report with pictures and descriptions of each photo will be sent to you for your records.
A good home inspector can help a new or even a seasoned buyer feel more at ease in the home buying process. Their job is to find potential issues and point them out to the home buyer. They are not there to scare buyers, just make them aware of the overall condition of their home.
Best of luck in your home search,
Moving The Mitten Realtor