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A Powerful Suggested Technique for YOUR Home & Property Search
A Powerful Suggested Technique for YOUR Home & Property Search
by Jody Hudson
You can be a pro at buying a home: Whether you are buying your first home or you are an experienced home buyer who owns more than one home, there are some things that can help you get faster results and get more professional and pleasant help from your Realtor.
A home or property purchase is one of the most important and exciting events to experience. Owning a home can help you build equity while reducing your income tax.
Land of any size requires minimal maintenance and is one of the best long term investments, even compared to gold or diamonds. However, along with the low maintenance, there is seldom any income to offset the cost. There are exceptions, mobile home parks, parking lots, and land rental under a shopping center are wonderful investments with relatively low maintenance if any.
Those who own land and property, as opposed to those who rent or lease, are historically considered to have a measure of stability, success and personal merit in addition to the obvious personal financial worth. This is so true that our Founding Fathers, who were dedicated students of all recorded human history, decreed that to be eligible to vote in our country a person must be a freeholder -- that is one who owned property mortgage free. They knew that the most responsible citizens would be the most responsible voters. Few of us would meet that criteria today. A person who held his property debt free, that is with a free and clear title, a Freeholder, was considered to have made good decisions, had good self control and managed his affairs well. Therefore, that person was considered to have obtained a level of maturity and responsibility -- that proved an ability to manage personal affairs and money as well as a priority to think of the future. The person who owned property with no debt, thus had obtained a sufficient ability to be allowed to vote on the management of our government and the public trust.
We are a nation of home and property owners more than any other nation on earth. However, most of us have a mortgage these days. If you, like most of us, need a mortgage on your new property, we hope you will find value in this article and that it will help you understand the advantage of planning your mortgage as a prerequisite to your purchase of a home. Having completed the mortgage acquisition step, a Realtor can help you organize your home search, as you begin browsing through the housing market.
Determining what features you want in your ideal or dream house and what payments you can afford are the important first steps. We ask that you consider the entire cost of home ownership, that is a total of the principle and interest payment, taxes, insurance and maintenance. Most folks are aware of the first four P.I.T.I. or Principle, Interest, Taxes and Insurance. There is another cost of home ownership that is not often figured in. It is property maintenance.
Maintenance is usually about 5% of the value of the improvements per year, if the average is taken over a long period of time, such as forty years. Many people think that 5% is too high a figure and prefer to use 2-3% instead. Whichever you use, make sure you figure in the cost of maintenance or you will end up not easily able to afford the upkeep on your property. This is very important to realize whether you are buying a new home or an older one. And, the older home will usually have a lot of deferred maintenance -- that is things that should have been done and haven't been!
If, for example, you purchase a home and lot where the vacant lot would sell for $50,000, and the home could be replaced for $250,000 and the landscaping value is $20,000 -- a rule of thumb is that you should figure $12,000 per year in maintenance of the home and another thousand in the maintenance of the grounds. We see properties all the time where the improvements have what is known as deferred maintenance. That work that should have been done and hasn't been, soon will need to be done. Deferred maintenance, maintenance not done that should have been done, is subtracted from the value of a home by those in the market, even if it is subconsciously done.
Home maintenance includes painting, caulking, re-carpeting, floor sanding refinishing, re-roofing every 15 to 50 years, depending on the composition of the roof and even replacing of windows, trim and siding. Outside there are sidewalks, the driveway, out buildings, decks, mulching, shrubbery maintenance, fertilizing, reseeding and replanting and of course the regular cutting and similar lawn care expenses. The reason we bring all this up about maintenance is that we hope you figure in the cost of it in addition to your home cost. If maintenance is not figured in you will end up with a mortgage plus maintenance cost or have to borrow more money to do the work that is needed, and that makes it more difficult to afford your new home.
It is important to figure in all the appropriate costs, expenses and other pertinent things, and to get a mortgage that you are able and willing to afford. It is important to your Realtor too. Some Realtors, in order to conserve their time and have more available for serious buyers, require that a person or couple be pre-qualified for the price range in which they seek to purchase a property first, before they begin to show properties. This is a good idea for the buyer as well as the Realtor and some sellers even ask us to NOT bring any prospective purchasers, unless they are financially prequalified -- in writing!
Mortgage brokers will gladly pull your credit report and get you a letter of pre-qualification or even a loan commitment letter for the amount you need to purchase a home. If you have a written loan commitment in hand when you first contact a Realtor, you will get considerably more and better attention.
One of the most difficult situations for a Realtor is that some percentage of the prospective purchasers that come to see properties for sale are not able to purchase those properties. Roughly 95% of a Realtor's time is preparation, paper work, promotion, marketing, web site modification and maintenance as well as maintaining contact with our most qualified buyers and sellers. When we spend two or three hours with a prospective purchaser, and it's usually far more, we are taking away from all the other things we are responsible to do for our other buyers and for our sellers. That time has to be made up.
For properties under $200,000 perhaps half of the folks that come to see us for a home are not able to buy the one they want to see. For properties under $100,000 about 75% of the folks who ask us to see properties are not able to purchase those properties. And, for those folks who come into our offices or call us regarding properties under $100,000 the percentage who can't purchase what they want is greater and greater as the price goes down.
Interestingly enough, a fairly high percentage of those who seek a property over a million dollars are qualified to purchase those properties without the help of our mortgage broker. Either they have their own banker, or they are able to obtain the funds on their own from other investments, or perhaps they even have a liquid assets account such as a money market account.
If you wish to be a shining light, and of greatest interest to your chosen Realtor, you are well advised to seek a mortgage broker or mortgage banker first and get a response in writing to bring with you. Your mortgage banker will probably ask for copies of prior years' tax returns. If you have copies of your credit reports, tax returns, lists of assets and all liabilities, and your bank statements are organized, you're ready to start exploring the housing market and shopping for a mortgage.
By the way, as I write this, our in-house Mortgage Broker or another lender of our choice, is able to give you a better rate and better terms than any other mortgage banker or broker in the market. Whether you use us as your Realtor or not, and if you are planning to purchase in our area we hope you will use us; you will get the utmost attention from your Realtor when you show up with a loan commitment!
Now SHOP! And, have fun!
Copyright 2004 by Jody Hudson www.JodyHudson.com
Jody Hudson has been a Realtor since 1972 and in the real estate business as a member of a family real estate business even before that.
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