Buyer & Seller Tips
Types of Loans
Fixed Rate Mortgages:
With a fixed rate mortgage the interest rate and payments remain the same throughout the term of the loan. This offers you the advantage of knowing that the amount you owe each month
will never change. However, the lender sets the interest rate on a fixed higher than that on an adjustable rate mortgage as protection against losing money. This increases monthly
payments and may make it harder for you to qualify for a mortgage.
Adjustable Rate Mortgages (ARM's):
With this type of mortgage, the loan period is fixed but the interest rate varies as inflation and financial markets fluctuate. The adjustments in the interest rate on the loan are
set at regular intervals, typically six months or one year. Often, these loans have a cap on how much the interest rate can be adjusted at each interval and how much it can vary over
the term of the loan.
An Adjustable Rate Mortgage may also have a payment cap. This guarantees that the monthly payment will not change by more than a preset amount. If the interest rate rises to a point
where the total interest per month is greater than the maximum payment permitted by the cap, the payment won't rise, but you still owe all the interest. The interest you do not pay
is added to the principal of the loan, increasing the total amount you owe. This is called negative amortization.
Graduated Payment Mortgage:
A variation on the fixed rate mortgage, this type of loan has a fixed interest rate and loan period. The payments, however, start low and increase over the first 5 to 10 years of the
loan before becoming constant.
If you expect your income to rise significantly in the first few years after your home purchase, you should investigate the graduated payment option. Be warned: you may accumulate
negative amortization if your low initial payments do not cover the interest on the mortgage. The total amount you owe may actually increase during the first couple of years!
These combine the characteristics of fixed rate and adjustable rate mortgages. Some offer 3, 5, or 7-year fixed terms before reverting to an adjustable rate mortgage.
Lenders offer a lower interest rate on a loan with a shorter period because they are less likely to loose money due to dramatic market fluctuations. The traditional loan is a 30-year
fixed. But in recent years, 15 year loans have become also popular.
For other real estate advice, call CENTURY 21 Nason Realty, Inc. 207-873-2119
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What is Private Mortgage Insurance or PMI?
Private Mortgage Insurance or PMI is insurance that protects the lender in case a buyer defaults on a loan. Most lenders require PMI whenever a buyer is putting down
less than 20% of the purchase price of a home and then pass the cost on to the borrower.
PMI does not, as some people believe, provide protection for a buyer, such as paying off the mortgage balance in the case of death, disability or unemployment. PMI is
required by lenders in most cases where the buyer's equity position is less than 20% of the home's value, because the less equity a buyer has in a home, the more risk
there is that s/he may default on the mortgage.
If PMI protects only the lender, how does it benefit the buyer? The most important benefit of PMI is that it opens the door to homeownership for many buyers, enabling
them to buy a home sooner (often by several years) than they otherwise could, because they don't have to wait until they save a 20% down payment. Even buyers who can
afford a 20% down payment may opt to put a smaller amount down - usually for tax or investment reasons.
In the past, PMI premiums were fairly consistent, ranging from .005% to .0025% of the loan amount per month depending on the level of equity the borrower had in
the home. Recently, PMI insurers made a beneficial change providing an alternative to the large up-front premium that borrowers traditionally paid when the loan
closed. Now, borrowers have the option of paying an up-front fee or paying a slightly higher monthly premium.
A few lenders - Prudential Home Mortgage is one of the most prominent - offer buyers an alternative to PMI. Basically, the lender self-insures, offering a loan to the
buyer at a slightly higher rate, which compensates the lender for added risk of a low down payment loan. Going with the lender who self-insures has two advantages:
First, PMI companies sometimes turn down borrowers who lenders have already approved. With a self-insuring lender, this risk is eliminated. Also, the extra interest
paid may be tax deductible, unlike PMI payments, which are not.
There are three main types of mortgage insurance:
Veterans Administration (VA)...
VA insured loans are available to military veterans and certain other government workers for a 1% fee. If you qualify, you can get a loan with no money down.
However, lenders are unlikely to make very large loans since they are guaranteed reimbursement only up to $36,000.
To apply for a VA loan, you need a "Certificate of Eligibility", available from the local VA office. For more information, contact the VA office in
the Federal Government listings in your phone book.
Federal Housing Administration (FHA)...
Under FHA insurance, anyone can obtain financing with less than 5% down. This is an attractive proposition for first time home buyers. If you are interested in
this option, check with your lender. Some lenders will not work with FHA loans because of the tremendous paperwork required by the government.
The maximum loan amounts FHA insurance will cover are geared to the prevailing values in an area but typically do not exceed $125,000. Borrowers must pay a
one-time insurance premium of 3.8% of the loan total. This can be paid at closing or added to the amount of the loan.
Private Mortgage Insurance (PMI)...
Borrowers can get a loan with as little as 5% down through PMI. There is no limit on the amount of the mortgage.
The premium varies from .3% to 1.2% at settlement and .3% to .55% a year thereafter. The rate depends on the size of the down payment and the type of mortgage.
The more you put down, the lower the premium. The change is lower for a fixed rate mortgage than for an adjustable rate mortgage. As an alternative to paying
monthly premiums, you can pay the entire fee in a lump sum payment. This amount can also be financed.
Once the amount due on your loan has dropped below 80% of the purchase price or appraised value (whichever is less), you no longer pay premiums. You must tell
your lender and insurance provider this has occurred. They do not automatically stop requiring payments.
Your loan officer can provide additional information about private mortgage insurance.
Latest Breaking News! PMI will now be dropped automatically by your lender, but do check with your loan agent, once your home
equity reaches 20% of its fair market value.
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Should you appraise your home before putting it on the market?
It isn't necessary, because rarely does an appraisal have anything to do with the price the seller will actually get for his or her property. Here's why:
First, to determine the asking price, a seller's agent will look at the "comps," - the price for which "comparable" homes in the area have recently
been sold. Based upon these prices, the seller should adjust what they are asking. For example, if similar properties in the area are selling for $210,000, then trying
to get $250,000 usually does not make sense. Thus, before putting the house on the market, a seller should review the "comps," which can be obtained from
a local real estate agent.
The appraisal process used by a licensed appraiser is more theoretical than a "comp," and does not predict what a buyer will be willing to pay. Why
would anyone ever get an appraisal then? Although rarely needed by buyers or sellers, appraisals are normally required by lenders who are considering making a loan.
However, sellers of expensive, custom homes may get appraisal, because there may not be any home in the area that compare. Buyers of these one-of-a-kind homes
will also have more confidence in an asking price that is supported by an appraisal.
Before determining an asking price, sellers should give their agent a list of major improvements done to the home, such as a new roof or upgraded heating system.
This will help the agent consider all the factors when recommending a price. It will also put him or her in a better position to sell the house - and all of
its features - for the best possible price.
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Negotiating the Deal
One of the first things you might want to consider doing as you begin searching for a new home is to get pre-approved for a mortgage. A pre-approved buyer is
one who has completed the mortgage process and has actually been approved for a mortgage up to a specified amount.
A pre-qualified buyer is one that has submitted certain income information that a lender uses to say they are qualified to borrow up to a specified amount. However,
the lender has not verified any of the information that has been submitted and may also require additional information before final approval is granted.
Generally, mortgage companies and banks look for a monthly mortgage payment that is 28% or less of your gross monthly income and total debt including bank loans and
credit cards that is less than 36% of your gross monthly income.
Being pre-approved is useful for a number of reasons. First, it lets you know just how much you can afford to spend on a home purchase. You'll know exactly what the
bank will finance, you'll know how much you need for a down payment, and finally, you'll know just how much closing costs will be. Once you've been pre-approved, you
can also sleep at night knowing that as you shop for your new home, there won't be any obstacles to financing the purchase.
Secondly, pre-approval will aid you in your purchase negotiations. Most offers to buy property are contingent on being able to finance the purchase. A pre-approved
buyer is a fully qualified buyer which the seller is often more willing to negotiate the price with.
You've been pre-approved for a mortgage and you've found the house you want to buy. You like the neighborhood, the schools, the community facilities, the shopping
and the roads into and out of the neighborhood. Now it's time to negotiate the price. It is important to remember that the seller has made a valid, legal offer to
sell his or her home at a specified price and inclusive of specific personal property. In reality, you are presenting a counter offer or proposal.
When considering the seller's initial offer you should keep in mind several key factors:
- The offering price as it compares to your budget,
- The price of similar homes in the area,
- The prices you've seen on other similar homes you've considered.
- The age and maintenance needs of the property
- Any personal property that stays with the house like appliances, spas, window treatments, furniture, etc.
Given your consideration of all the above topics, you're ready to make a counter offer. In doing so, try not to criticize the furnishing of the individual's home. You
may not like the color of the carpets, walls, or wallpaper; but, saying so will only alienate the seller and make them less willing to negotiate. Unless they are
in poor condition, something you've already considered in the inspection phase, their aesthetics do not detract from the value of the home.
Likewise, a low ball offer will almost always be rejected and can only serve to alienate the seller, making them less willing to negotiate in good faith. Be reasonable
in your offer and you are more likely to get a fair price. There is nothing wrong, however, on countering with a low offer on a home that you feel is grossly
overpriced based on your research. Finally, your counter offer should be for a very short time duration; often 24 hours. This prevents the seller from shopping
your offer to another buyer and using it to get a higher price.
Elements of an Offer:
- Price: the amount of money you are willing to sell or pay for the home
- Deposit: the amount of money that must be deposited in good faith to show a buyer is serious about a deal. The money is applied towards the purchase price at closing
- Terms: includes the price of the deal and the financing details
- Conditions: conditions either the buyer or seller must meet prior to the contract being finalized and the deal closed.
- Inclusions or exclusions: those items that either remain or don't with the house after it is sold.
- Closing date: the date the financial transactions are completed and the title to the property is legally transferred.
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Tips For A Quick Home Sale
Making your home inviting to Buyers...
First Impressions are Lasting Impressions. The front door greets the prospect. Make sure it is fresh, clean and scrubbed looking. Keep lawn trimmed and edged and the yard free of refuse.
Decorate for a quick sale. Invest in new paint, clean carpets, green plants and flowers for a fresh look and added color.
Let the Sun shine in. Open draperies and curtains and let the prospect see how bright your home can be.
Fix any leaking faucets. Dripping water discolors sinks and suggests faulty plumbing.
Repairs can make a big difference. Loose knobs, sticking doors and windows, warped cabinet drawers and other minor flaws detract from value. Have them fixed.
Neat closets look bigger. Organize your closets to enhance space.
Bathrooms help sell homes. Check and repair caulking in bathrooms and showers. Make your bathrooms sparkle!
Arrange bedrooms neatly. Remove excess furniture, use attractive bedspreads and freshly laundered curtains.
Can you see the light? The potential buyer will feel a glowing warmth when you turn on all your lights for an evening inspection.
When an agent shows your home...
Help your agent. Make your house as accessible as possible. The more your house is shown, the better the odds are that it will sell.
Three's a crowd. Avoid having too many people present during showings of your house. The potential buyer will feel like an intruder and will hurry through the house.
Music is mellow. But not when showing a house. Turn down the blaring radio and turn off the television. Let the salesperson and buyer talk, free of disturbances.
Pets under control? Keep them out of the way - preferably out of the house.
Mum's the word. Be courteous and do not force conversation with the potential buyers. They want to preview your house - not pay a social call.
Be it ever so humble. Never apologize for the appearance of your home. After all, it has been lived in. Let the trained salesperson answer any objections. They are good at it.
Your agent is at the forefront. The salesperson knows the buyer's requirements and can better emphasize the features of your home when you do not tag along. You will be called if needed.
A word to the wise. Let your Realtor discuss price, terms, possession and other factors with the potential buyer. The Realtor is eminently qualified to bring negotiations to a favorable conclusion.
Maximize your profit. CENTURY 21 Nason Realty, Inc. Agents are trained experts. We can help you get the best price for your home.
Preparing Your Home For Showing
- Be sure the entrance to your home is clean and inviting.
- Keep the lawn mowed and steps swept.
- Store hoses neatly and be sure sprinklers do not water the walkways.
- Remove exterior vehicles from curb view.
- Keep the floors clean and swept.
- Put away all clothes if laundry is done in the garage.
- Polish the floor, mirrors and fixtures.
- Replace shower curtain if necessary.
- Hang your best towels and open a fresh bar of soap.
- Freshen up with plants and flowers.
- Put away personal items.
- Keep the lights on and doors slightly open.
- Hang clothes neatly and box your shoes.
- Be certain counters and floors are neat and clean.
- Wipe away fingerprints and be sure the garbage is taken out.
- Keep all lights on and doors to main rooms open.
- Open drapes and be sure windows are cleaned inside and out.
- Eliminate unpleasant odors.
- Place fresh flowers throughout.
- Play soft music during showing.
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If you're thinking about selling your home, how can you make it "bigger and better" looking without spending a cent?
One sure way for your house to appear larger - and more appealing - is to eliminate clutter, and furniture and household goods are reorganized.
In fact, the time to have a garage sale is before you put your house on the market, not after it is sold! When you decide to sell, start going through your closets
and cupboards, eliminating items you don't want to keep. Do the same in the garage and in your side or backyard. Get rid of or store the odds and ends. It's
interesting to note that the longer someone lives in a home, the more used to the clutter they become. Unfortunately, closets, cupboards and garages brimming
with "old treasures" make a home look smaller and cramped to a prospective buyer. Sellers should also carefully examine their furniture, and consign
items that are not needed to the storage or the garage sale. Most homes occupied by the same owner for several years tend to be somewhat overfurnished. Erring
on the side of space, not clutter, makes for a more marketable home.
Another "item" that adds to the clutter of a home is excess knickknacks. Scrutinize the kitchen for rarely used utensils/gadgets; miscellaneous items
in closets and cupboards, even small furniture and throw rugs, that can be neatly stored. Pack or give away clothing that will not be worn as well.
Rearrange and organize. Remove as many articles as possible from the kitchen and bathroom counter-tops to the cupboards below - they will still be within handy
reach in the newly created space. Organize the closets. Clear off your night-stands and bureaus. Size up the arrangement of your furniture - any room for improvement there?
Examine the walls and windows. Do they need repainting or new window coverings? For some expert, objective advice, have a CENTURY 21 Nason Realty, Inc. real estate
agent go through the home. Our agents know what enhances a property's appearance - and what hinders it. One last hint - don't forget the outside. Sweep the
garage and sidewalks, trim the lawn and bushes, wash all the windows, inside and out. It all helps to make your home look fresher, lighter... and larger.
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Commissions A to Z
Homeowners attempting to sell their home without the assistance of a real estate professional generally do so for one and one reason only: to avoid paying a
commission fee. Is it worth it? Well, only the homeowner can answer that, but experience has shown that many For Sale By Owners find that it is not! Before
making a costly mistake, consider the benefits, from A to Z, you will receive from working with a CENTURY 21 Nason Realty, Inc. real estate professional:
Advertising - CENTURY 21 Nason Realty, Inc. pays all advertising costs.
Bargain - Research shows that 77% of sellers felt their commission was "well spent."
Contract Writing - Our Agents can supply standard forms to speed the transaction.
Details - CENTURY 21 Nason Realty, Inc. frees you from handling the many details of selling a home.
Experience and Expertise Our Agents have experience and expertise in marketing, financing, negotiating and more.
Financial Know-How - CENTURY 21 Nason Realty, Inc. is aware of the many options for financing the sale.
Glossary - Our Agents understands, and can explain, real estate lingo.
Homework - CENTURY 21 Nason Realty, Inc. will do homework on how to best market your home.
Information - If you have a real estate question, CENTURY 21 Nason Realty, Inc. will know (or can get) the information.
Juggle Showings - Our Agents will schedule and handle all showings.
Keeps Your Best Interest In Mind - That's CENTURY 21 Nason Realty, Inc.'s job!
Laws - Our Agents are up-to-date on real estate laws that affect you.
Multiple Listing Service - The most effective means of bringing together buyers and sellers.
Negotiation - CENTURY 21 Nason Realty, Inc. can handle all price and contract negotiations.
Open Houses - A popular marketing technique.
Prospects - Our Agents have a network of contacts that can produce potential buyers.
Qualified Buyers - Avoid opening your home to "curiosity seekers."
Realtor - CENTURY 21 Nason Realty, Inc. is a member of the National Association of Realtors and subscribes to a strict code of ethics.
Suggested Price - Our Agents will do a market analysis to establish a fair price range.
Time - One of the most valuable resources in a CENTURY 21 Nason Realty, Inc. agent.
Unbiased Opinion - Most owners are too emotional about their home to be objective.
VIP - That's how you will be treated by CENTURY 21 Nason Realty, Inc.!
Wisdom - CENTURY 21 Nason Realty, Inc. can offer the wisdom that comes with experience.
X Marks the Spot - CENTURY 21 Nason Realty, Inc. Agent is right there with you through the final signing of papers.
Yard Signs - CENTURY 21 Nason Realty, Inc. provides a professional sign, encouraging serious buyers.
Zero-hour Support - Selling a home can be an emotional experience. CENTURY 21 Nason Realty, Inc. can help.
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