Think you’re ready to buy your first house?

Pros and Cons

This is for those first time home buyers. Here are the pros and cons to weigh to know when you’re ready to buy your first house. You’ll know it’s the right time. Some things to consider, you wouldn’t even be reading this article unless you knew the benefits of owning a home. Having your own yard, your own garage, or having privacy and not having people above you that stay up all night and stuff like. Similar things may be you haven’t considered is that face that you’ll be building equity in your home. You know with an apartment you’re paying rent every month and you just never see that money again. No one is ever going to give that money back. If you’re buying a house you’re paying a monthly payment to purchase the home. That’s definitely more money spent than an apartment, but you have the option of hopefully getting that money back if you sell in good time. If you sell your home at a higher price you know you could be just getting some of your money back that you put into it because property values have risen and now your home is worth 30 to 40 to 50 grand more than it was a few years ago and you’re able to pocket some money to move forward into maybe your next purchase or perhaps you know you want to live in in the house for awhile and then you decide to rent it out and you’re getting residual income from someone else. They are basically paying your mortgage for you so there’s several reasons on that and that it would be a good idea to possibly purchase a home and another consideration or interest rates. Interest rates have been historically low for a few years now and they’re still strong in the beginning of 2018. When I wrote this article it was still a great time to buy while interest rates are low. Consider if you plan on buying and in the next few years they don’t project that they’re going to go any lower. In fact, summer forecasting is going to rise. So that makes it a great time to buy.

You also have the freedom to do what you want with your own property. With an apartment you may not be able to paint or change the light fixtures or you might not be able to have the freedom to do what you want, but in a house you can have a garden in the back. You can do a lot of things that you want to do. Some of the things that you might want for your own taste will actually help you sell the home at a higher price whenever you do go to sell and make your house more sellable. So on the flip side of things you know that some of the positive stuff that’s exciting to think about you know in your own home and some considerations I won’t say they’re drawbacks because they’re not necessarily, but when your AC goes out then you are responsible. You don’t get to call and say: Hey can you fix this right now? You have to you know that you have to make a call and you have to pay for the repairs to be done. With anything big like natural disasters your home will be covered with your homeowner’s insurance, but you’ll have to pay your deductible.

So that’s another discussion, how much does that cost look like? Does it cost more to have homeowner’s insurance than it does to have rental insurance? You know, it may be a difference of between $50 to $100 to $150 a month so it may not be as big of a swing that you think. It might be to cover a whole house for you owning it.

Another thing to consider is job stability. When you own your own house you don’t have a choice to just get out and move on like you do with leases. You own the house and you’re responsible and it’s really hard on your credit if you’re missing payments. You do stand the chance of going into foreclosure so that’s one of the more serious things. Now if something like that was to happen then perhaps you could rent out the room to a friend or family to help you to help you pay your mortgage. You can get creative and rent out your house and move out for awhile so that someone else is paying that mortgage for you, if you’re able to charge enough rent.

You know you do have a big debt that you’ve got to be aware of and responsible. If you think that your job may be taking you somewhere else that might not be the right time to buy if your job has the potential to move you around the country.

If you have to sell right away that may or may not be a good option for you. Some companies offer relocation packages to where if your house doesn’t sell in a certain amount of time they will purchase it and then sell it for you. Some companies offer incentives to help you move your stuff so it may not be as big of a thing. I see those deals all the time where someone is moving somewhere else, but you just want to be aware of that. It’s an option so be aware of what that looks like for your company. Is your company going to compensate you for a move like that?

Hopefully these few tips are going to help you. You will have to explore this a little bit more and then fill free to send me a message. I’m happy to talk through this a little bit more and maybe hear more about your specific situation and help you figure out if buying is for you. In a lot of cases if you’re renting a house already or some of these apartments you’re pretty close to paying what it would be for a mortgage payment anyway. I’m happy to put you with the lenders that I see to help you see what your payment would look like. This will tell you if it’s in your price range. Hope to talk to you soon!

Difference Between an Appraiser and an Inspector

Today we’re going to talk about appraisers and inspectors and what’s the difference.

What an Appraiser do

So an appraiser is actually somebody who comes out and does an evaluation of the property based off of the comparables that have sold recently close to you. So what does that look like, well an appraisal should be using comparables inside of the last 6 months under certain extenuating circumstances if you have a very unique property or you’re in a rural area they may push it out, but realistically in our market we’ve got 3 months. Ninety days is enough time to find a bunch of comparables wherever you’re at. Most realtors are able to do this. So there is your timeline. As far as your radius, your radius it should be less than one mile, again it depends if you’re in a rural area or a highly niche home then it’s going to be pushed out a little bit but the underwriters like to see it inside of a one mile radius preferably a quarter mile, if you’re living inside of the city.

The last piece and this is something that most people don’t even understand in my industry and it has to do with the gross adjustments. So what that means is let’s say you have a 4 bedroom 3 bath house that you’re trying to buy for $350,000 and there’s a 4 bedroom 3 bath house that’s $1,200,0000. Obviously there’s something different about it. Maybe it’s got a view of the lake, but obviously there’s something majorly different about it. Your gross adjustment shouldn’t be more than 25%, so it to make it easy on me $300,000 would be $75,000 in adjustments so it shouldn’t be too outrageous, but at the same time it should be it’s okay if it’s a little above or a little under. When you get your appraisal you’ll definitely get a copy of it because it is something that you’re purchasing. It’s required by the lender, but it’s just common sense. Don’t spend hundreds of thousands of dollars on something without knowing the real value. Your real estate agent definitely should have your interest in mind, but the selling agent is trying to sell that house for absolutely as much as possible to make their people happy so it’s important to have an uninterested third party coming and taking a real evaluation of it and tell you what it looks like.

Inspector on the other hand

Now that leads us into an inspection. It’s important to note that the appraiser does not look at the structural integrity of the house. They do by FHA standards have to do a head and shoulders inspection of the crawl space and attic which means they literally poke their head up into the attic and they look around for any kind of major problems and then they do the same thing for the crawl space, but they are not down digging around looking for issues on the house so it’s important to understand that your appraiser is not an inspector. Your inspector is the person who’s looking to make sure that everything on that house is sound that there’s no major, you know, foundational issues that you don’t have dry rot, that you don’t have a bug issue, that you know those kind of things.

I recently bought a house for my family and we had two basketball size wasp nests in the attic. They were hibernating because we bought in winter time, but it was good for us to find out because the appraiser would have never seen it. It was tucked up in around away from the access to the attic so they never saw it. The inspector is also going to be the guy to help you on the second part of your negotiation process. Your realtor should have already gone through this with you if you needed to know more about how an inspection can help you with negotiations, but basically the inspector will help you redefine the value of that house after you found everything that’s wrong with it. You want the inspector to find everything so a good little tip here is hire your inspector to come out when it’s raining because if it’s dry and there’s leaks in the roof he’s not going to be able to see it the same as if it’s pouring buckets and it’s you know seeping through the roof into the insulation. So it’s not necessarily getting into the house, but it is up in the attic somewhere, which will pose a problem for you later. What happened for my family is we bought the house and we had the inspector out when it wasn’t raining and there was a leak that occurred around one of the exterior windows. Ultimately it was a quick fix, but it’s still freaked us out for a second because we needed to figure out if it was leaking into the house it was causing issues with rot so learn from my mistakes and make sure to have your inspector come out when it’s raining if it all possible. Otherwise you have to do the best you can. Have him come out and check everything. Look for any signs of water, which is pretty standard for a good inspector.

If you have any questions feel free to reach out to me. Until next time, have a good day.

How is a Home Appraisal Generated?

I’m a loan officer and today’s topic is understanding the home appraisal process. So what is an appraisal and why is it needed in lending? So an appraisal is performed to determine the value of the current market value of your home. These are done so the bank or mortgage company feel comfortable that they can lend out a specific amount of money and that the house is actually worth that money so they can resell the property if the owner doesn’t pay back their loan. You’ll need appraisals and different times while you own your property. The first appraisal is giving when you first get your mortgage. Your mortgage will likely include PMI or private mortgage insurance. To remove the PMI from your mortgage you’ll likely get another appraisal to ensure the home value hasn’t dropped in value and that the lender is comfortable to remove the mortgage insurance.

The way the appraisal is performed is by sending out an appraiser to actually check the physical property and the method that they use is the comparison approach or sales comparison approach model. So what they do is they will compare your home to 3 to 4 sometimes 5 other properties that are similar in square footage and these homes are preferably within a one mile radius of your property.

Sometimes if they can’t find homes that have similar square footage to your home they do actually go out a little bit further maybe 2 miles if there have been recent comparables. The other factor is that the comparables need to have sold within 3 months to give an accurate comparison to your property. That way they aren’t comparing your house to a home that sold years ago when the market wasn’t doing very well because this would undervalue your property.

Most of the time, most of the time this process is performed on closed properties, however sometimes if home values are going up so quickly like they may use active or pending sales to justify the increase in value. So they’ll use about 4 to 5 closed comparables in the neighborhood and compare to the subject property. They’ll go within a one mile radius and they choose 4 to 5 properties that are similar in square footage and they don’t have to have the exact square footage as your property. They can range up or down by about 25%, so on a 2000 square foot home they can go up to 2500 square foot and down to 1500 square foot if there is not similar comparables that are exactly 2000 square foot.

They will make adjustments for the square footage, so if it’s 500 square foot less they’ll make the adjustments on the appraisal and if it’s say a 4 bedroom and 2 bathroom and the comparable has only has 3 bedrooms and 2 bathrooms they’ll make adjustments as well. They’ll also make adjustments for the condition and conditions typically range from C1, 2, 3 and 4. Where if it’s a condition 4 that means it’s in the best condition versus a condition number 1. They’ll make adjustments for that. They’ll also make adjustments for upgrades. Have you done upgrades like granite countertops, hardwood floors, new painting. They’ll make adjustments for that too.