6 Things You Need to Know When Buying Home Insurance

Whether you’ve just begun searching for a new place or you’re waiting to close on your dream home, one important aspect of moving you can’t ignore is insuring your investment.

Enter the homeowner’s best friend: the homeowners insurance policy.

Just like any other kind of insurance, there’s no such thing as a one-size-fits-all policy. Home insurance policy costs typically depend on the home’s location and age, the size of the deductible, and the coverage level. You’ll have to look at these and other variables to figure out what kind of home insurance is right for you—and how much you’ll shell out for it.

To make sure you purchase the perfect policy that fits your budget and coverage needs— and to avoid potential pitfalls—we’ve pulled together a list of the most important things you should consider. Let’s take a look.

1. It’s all about location, location, location

Along with size, construction type, and overall condition of the house, location plays a big role in the cost of insurance and types of policies available. But unlike home buyers, insurance companies aren’t checking out school districts, awesome nearby restaurants, or your commute time.

But others factors do come into play. Homes located near highly rated, permanently staffed fire departments (and even fire hydrants), for example, may cost less to insure, says Loretta Worters, vice president of communications for the Insurance Information Institute.

And of course, proximity to the coastline is also weighed heavily. You’re likely going to pay a pretty penny for that idyllic spot near the coast.

“Because of the increased risk of catastrophic weather events resulting in claims, it will generally cost more to insure,” Worters says.

On top of a higher policy cost, coastal home insurance policies could include a separate hurricane or windstorm deductible based on the fees to rebuild a home.

2. You might want flood insurance—even if you think you don’t need it

Damage from flooding isn’t covered by typical home insurance policies. Any home located in an area prone to flooding requires separate flood insurance to cover these kinds of claims. (Flood insurance is available from the federal government’s National Flood Insurance Program as well as a handful of specialty insurers.)

Don’t live in a flood zone? Don’t assume you’re off the hook. Flood insurance may be a smart option for any homeowner, regardless of zoning—and if you’re not in a high-risk zone, you can probably snag some lower premiums.

“Ninety percent of all natural disasters in the U.S. involve flooding,” Worters says. “However, 25% to 30% of all paid losses for flooding are in areas not officially designated as special flood hazard zones.”

3. That goes for earthquake insurance, too

Californians aren’t the only ones who have to worry about earthquakes—in fact as many as 39 states have experienced tremors, according to data from the Insurance Information Institute. And the resulting damage usually isn’t covered by traditional home insurance policies.

Homeowners need to purchase an addition to their home insurance policy to cover

any earthquake-related claims. The cost varies by location, insurer, and the type of structure being covered as well as age of the building, Worters says.

4. Have a pool? Dive into extra protection

Ahh, your new home has a fabulous swimming pool and hot tub. Yay for you! We’d love to come over—but before we do, you should look into bumping up your liability insurance.

Liability coverage is the part of a home insurance policy that may pay court costs or other expenses if you’re found responsible for an accident, such as someone drowning or suffering a serious injury after doing a cannonball into the shallow end of your pool.

Another option: You can purchase an umbrella liability policy to provide a level of protection not typically available with standard home insurance policies.

5. Your home’s claim history matters—even from when you didn’t live there

Whether you’ve just begun your home search or lived in your home for years, it’s never too late to get familiar with your home’s claim history—and how it might be affecting your homeowners insurance rates.

It’s all summed up in a nifty database called the Comprehensive Loss Underwriting Exchange, or CLUE. Essentially the equivalent of a credit report for your home, the CLUE contains all kinds of records of insurance claims on the house.

That’s important to know because a claim filed for the property in the past five years could cause your rates to inch upward, even if you didn’t own the home at the time of the claim.

But take heart, dear home buyer—not all prior claims have a negative effect.

“Some recent claims can have a positive impact, because replacing a roof damaged by a windstorm could make the house more desirable to an insurance company,” Worters says.

If you’re looking to buy a home and want a copy of the CLUE report, check with the sellers (only the owner of a property may access its CLUE report). There’s no guarantee they’ll fork it over, but there’s no harm in asking. If you already own the home, you can get a free report from database giant LexisNexis.

6. A high deductible can really pay off

It should come as no surprise that you’ll want to shop around before committing to a policy. Compare the rates, deductibles, and coverage options of at least two to three companies to make sure you have adequate coverage for your situation.

Pro tip: Pay close attention to the size of your deductible.

“It’s recommended to opt for the highest deductible you can afford because most people only file a claim every eight to 10 years,” Worters says. “A higher deductible saves money year after year and encourages only using insurance in catastrophic situations when it’s truly necessary. And that also helps keep your costs affordable.”

(reprinted from Realtor.com)

Good Fences Make Good Neighbors

I recently had an issue arise when a buyer had a survey done and a fence that was thought to have belonged to one property owner actually sat partially on the property of their neighbor. This caused the sale of the home to be postponed while they tried to sort out the issue, which was stressful for all parties involved.  In light of that, I thought I would share some pertinent info on the subject.  This is also the part where I say GET THE ENHANCED TITLE POLICY when you purchase a home! It helps protect you in situations like this!

1. A neighbor builds a fence and a portion of the fence is on the owner's property.  What should the owner do?

• Request that fence owner move the fence onto their property, or

• Enter into an Easement Agreement allowing the fence to remain, but the owner retaining the right to request the fence be removed at any time the owner requests.

• Nothing.  This may result in the loss of property over time.

2. An owner wants to build a privacy fence.  How high can the fence be?

• Most all jurisdictions have limitations on the height of fences, usually six feet for back and side yards and four feet for front yards.

• In order to build higher, a "variance" would have to be applied for and approved.

 3. A neighbor has built a fence higher than allowed by the local ordinance.  What can an owner do?  

• Inform the neighbor of the fence ordinance.  The neighbor may not otherwise know the law exists.

• If the neighbor still does not conform the fence to the local ordinance, call the local zoning or planning office and they will take action to seek conformance.

 4. A neighbor's fence is unsightly. What can an owner do?

• Check the local ordinance to see if the fence is in conformity.  If not, see (3) above.  

• If in conformity, but ugly to you, there is nothing that can be done unless:

• There are restrictive covenants in the subdivision restricting fence designs, or

• The fence poses a danger because of its design or condition, or

• The fence is dilapidated.

In these cases you may have the ability to have the fence removed or redesigned. 5. An old fence used by both owners sits directly on the Property line?  Who owns the fence?  

• The fence belongs to both parties, neither can remove it without the others permission and both are responsible for maintenance.

If a conflict arises over any fence issue, the first step is to try to understand the law and then to contact the neighbor to discuss remedying any situation.  In any of these cases, a lawsuit should be your last resort.  

8 Avoidable Mistakes 1st Time Buyers Make

Some good tips in this HousingWire article! In particular, I see first time buyers make mistake #5 quite a bit, which is why I always stress Location, Location, Location! It is a cliche for a reason: location is the ONLY thing you cannot change about a home after your purchase it, and it has the longest and most significant impact on both value AND consumer happiness down the road.

The last thing a first-time homebuyer wants to do is mess up the entire homebuying process by doing one of these common mistakes. 

Yet, they continue to make them.   

Listen, buying a home is one of the biggest financial decisions a person will make,  and all it takes is one bad or misinformed decision to mess up the entire process. 

So, stop. 

Movoto complied a list of 10 common mistakes first-time homebuyers make.
After perusing the list, HousingWire condensed the mistakes into 8 things that could ruin the homebuying process: 

1. They don’t watch their finances before buying a home
This would include watching your credit, taking on too much debt right beforehand or making a big purchase right before closing. 

Debt-to-income ratio is a huge deciding factor on credit scores and it’s one of the first things that lenders look at when putting your mortgage together. Lenders want to know how much debt borrowers have already accumulated against their income. The more debt the borrower has, the less of a loan they will be able to get. 

Many people don’t realize that lenders look at all financial information again before closing occurs to make sure that nothing has changed. And that debt-to-income ratio that they used to create your mortgage in the first place is one of the first things they’re going back to check. So, hold off on any plans to buy a new car to park in that new driveway or furniture to fill the house. 

2. They don’t take the time to get pre-approved before house hunting
It’s easy for homebuyers to assume what they can afford and to just start looking without taking the steps through the lender first, but it’s not the smart move. Most real estate agents won’t show potential homes without a prequalification letter to in hand. And some won’t do anything without the pre-approval. 

3. They take on more than they can handle financially
Many first-time homebuyers make the mistake of assuming that just because they can afford the house that means that they can afford to live there. That’s not always the case. There are many extra costs associated with homeownership that often get overlooked by someone who is new to the game. 

4. They get into a fixer upper they don’t have time or money to fix
Fixer uppers can often seem like a great savings. Home renovation shows can do that to anyone. The problem is, though, that most people don’t have a production company budget and a huge crew behind them working around the clock to get the jobs done. Without money and time, fixer uppers stay fixer uppers. Not only can the novelty wear off fast, but what seemed like a huge savings quickly starts to look like a giant money pit. 

5. They prioritize the home over the neighborhood
When people start looking for that dream home in their dream neighborhood, many realize just how far outside their budgets dream homes can be, especially in big cities and affluent suburbs. It’s tempting to continue to look for that same dream home, just in a neighborhood that might not be as good. 

6. They put all their eggs in the online basket
The Internet has become an invaluable tool for home buyers. Searching through homes, researching neighborhoods, getting your credit score, and finding out what lenders are prepared to give has never been so easy. However, it’s still not as good as getting a reputable team of professionals who can physically meet with or at least speak with you in your corner. 

7. They spend all their money on the down payment
Putting down a 20% down payment on a home is often mandatory these days unless you’re interested in paying mortgage insurance. Many people save and scrape every last dollar they can get together for years in order to meet that 20 percent down payment figure and then as soon as they reach it, they go through the home buying process. Many people empty out their savings in order to meet the down payment, leaving themselves with nothing left over. 

8. They skip the home inspection
Skipping the home inspection might seem like a quick and easy way to save money for some people. The novelty and excitement of a new home make some people feel like there’s nothing that would possibly change their minds about wanting to buy it. That is until you’re moved in and realize that there are major and very costly maintenance issues such as mold, termites, a leaking roof, electrical issues or foundation problems

Title Insurance

Great article about the importance of owner's title insurance from the Washington Post! Here are a few key excerpts, but please read through the entire article here.

A frequent refrain we hear from our clients is “Why do I need title insurance when you have already done a title search?”  Not only does title insurance cover mistakes made during a title search, it also covers a gamut of issues that even the best title search cannot reveal.  For example, a title search cannot detect a forged document, or definitively identify a faulty legal description, or account for the indexing mistakes and tardy record-keeping at the government clerk’s office.

Title insurance claim rates are approximately 5 percent, relatively low when compared to other forms of insurance, which often invites skepticism among prospective homebuyers.

However, missing from this statistic, are the title snags we encounter that do not result in direct claims by an insured home seller. In many cases, the seller is not even aware of the behind-the-scenes curative work that has been done for the seller to convey insurable title to their buyer. 

Without an owner’s title insurance policy, the legal costs to hash out a title claim would be in the tens of thousands of dollars paid directly out of your pocket. Not to mention you could lose the money you’ve invested in your property such as your down payment and any improvements you’ve made. 

Personally I can attest to the fact that my closing attorney puts in a ton of overtime clearing titles in all but the cleanest of closings.  This hard work usually happens without my client ever knowing, and it is just another aspect of what makes my "team" so great - I can trust my closing staff to do a great job, quickly and professionally.  But there are instances when even the most diligent amount of digging does not reveal a decades-old title issue, and that is exactly what title insurance is for: to protect one of the biggest financial investments you will ever make. 

WAIT TIMES TO PURCHASE AFTER A FORECLOSURE, SHORT-SALE, AND BANKRUPTCY

In the ever-changing lending landscape, it is hard to keep up with what the ramifications are of a short sale or foreclosure on your future purchasing options.  In general, you must wait 7 years after a foreclosure, 4 years after a short sale, and 2-4 years after a bankruptcy in order to purchase a new home. However, there are more nuances to the process than that depending on what loan product you are using, which is explained in these charts.

There are also tax ramifications of both a foreclosure and short-sale, which is why it is critical to speak with an attorney and CPA well versed in Georgia law before considering either option. 

The IRS views unpaid debt -- including mortgages -- as income. Foreclosures are treated as the sale of property for federal tax purposes. Homeowners going through a foreclosure will need to calculate their gain or loss for tax purposes, as well as consider any income tax that might be due on the forgiveness or cancellation of debt. These are two separate issues: gain on the sale of the property and imputed income from any debt forgiveness. In official tax parlance, it's known as "cancellation of indebtedness income."  The Internal Revenue Service has a special section on its website for people who have lost their homes through foreclosure. The IRS also reminds homeowners that although mortgage workouts and foreclosures can have tax consequences, special relief provisions may reduce or eliminate the tax burdens for borrowers who lose their homes. This information is available at: http://www.irs.gov/  

Similarly, with a short-sale, after closing a homeowner will probably receive a 1099 in the mail from the sale of the home.  Regardless if the homeowner is fully released from the debt or not, the IRS considers this unpaid debt as extra income to the homeowner. Georgia law allows mortgage companies to pursue homeowners in court for a deficiency for unpaid debt.  So even if a homeowner completes a short sale, there is the possibility of legal action in the future for the mortgage company to try for more money, if the “demand letter” includes such verbiage.  HOWEVER - if the mortgage company sends a 1099 to the homeowner after closing, they have given up the right to sue for a deficiency.  The mortgage company either goes for recovery of the balance through a judgment or writes off the debt and sends a 1099.

FAQ: I had my inspection and I'm afraid the house is falling down!

One of the most stressful parts of the buying process for a first time buyer is the inspection. Everyone is afraid that the house they have fallen in love with has some sort of hidden Major Problem that will either kill the deal or create a long-term money pit.  Obviously it is critically important to have an inspection done to uncover precisely those situations. That being said, the vast majority of the time the seller's have done their due diligence before putting their home on the market and addressed any truly serious items. 

It is just as important to make sure you have a great inspector, one who goes the extra mile and doesn't miss a thing.  However, hand in hand with a great inspector is the fact that they are going to find stuff.  A lot of stuff.  If an inspector it doing his job properly, he is going to come away from your inspection with a substantial list of items, regardless of how great of shape the house is in.  My best of example of this is when my (amazingly thorough) inspector did an inspection on a new construction home for one of my clients.  The home was brand new, had never been lived in, and had just received the Certificate of Occupancy from the City inspectors.  He still came away with a list of about 30 items that the City and builder had not caught.

What I try to prepare my buyers for is this: the inspector is going to come away with a list of items, anywhere from 30 to 130 things, and that is 100% normal and not a reason to panic.  Included in the inspection reports are items that do not meet today's building code (the building code changes every year or so, so 99% of homes on the market will have a bunch of items that don't meet today's code, nor are they required to), items that simply need clarification or possibly future maintenance, and a long laundry list of very typical and minor items that come up in every inspection.

My job is to lend my knowledge and experience to filter through the report and discern which are the normal, typical, minor items - and which are not. There are literally a bunch of items that come up in 99% of the inspections I do.  They are completely normal.  Just about any home you were interested in purchasing would have the same items.  

Then there is the group of items which are not quite as typical but still very minor.  Items that either a homeowner could fix themselves or pay someone else to do relatively inexpensively.  Often these are things that are good to know about but do not need to be repaired in order to live safely in the home.

Finally, there is the group of items which are out of the ordinary, could be big-ticket repairs, or are vital to making the home safe to live in.  These are the things we are looking for.  Normally there are very few of these (if any) that come up, but it is critical that we identify them and determine if it is something that is reasonable to ask the seller to repair, or something so major that it is a deal-breaker.  In my experience, there are only a few deal-breakers: serious structural problems and extensive interior water damage (which typically goes hand in hand with structural issues), or completely non-functional systems come to mind.  

My job is to help the buyer determine what those issues are, and what makes sense to ask the seller to repair.  99% of my inspections have a laundry list of electrical items, a lack of insulation based on today's standards, some exterior water damage, minor mold, structural settling, and evidence of past termite damage.  These are normal and not deal-breakers.

All this being said, I know it freaks buyers out when they get that loooong report from the inspector and leads them to panic and fear the worst.  Don't worry!!!  This is normal, I promise.  I will work with you to figure out what is *really* a problem and what is totally typical.  No house is perfect, especially if it is an older home.  They all have issues, even if they are brand new.  It's my job to help you determine if those issues are serious and what to do about them.  I promise I'll do my absolute best to make sure you don't buy a money pit.   =)

I do have a caveat: there are, of course, things that can get missed.  By having a great inspector, you are drastically decreasing your chances of that happening.  However, part of home ownership is that eventually stuff breaks.  And it may be that when you have your inspection done, all the plumbing & drains are functioning perfectly.  And then a month after you close, a pipe bursts.  There is nothing an inspection can do to predict that kind of thing.  It is just bad luck, and it is part of owning a home.  But by covering all your bases and truly doing your due diligence, you are putting yourself in the best possible situation to succeed. 

Good luck!

FAQ: When Can I buy again after a Bankruptcy, Short Sale, or Foreclosure?

These guidelines have changed quite a bit over the past three years (becoming more strict) and are accurate as of the date of today’s post (March 9, 2012) –

2011 FHA Waiting Guidelines

• Bankruptcy – You may apply for a FHA insured loan after your bankruptcy has been discharged for TWO (2) years with a Chapter 7 Bankruptcy. You may apply for an FHA insured loan after your bankruptcy has been discharged for ONE (1) year with a Chapter 13 Bankruptcy
• Foreclosure - You may apply for a FHA insured loan THREE (3) years after the sale/deed transfer date.
• Short Sale / Notice of Default – You may apply for a FHA insured loan THREE (3) years after the sale date of your foreclosure. FHA treats a short sale the same as a Foreclosure for now.
• Credit must be re-established with a 640 minimum credit score

2011 VA Waiting Guidelines:

• Bankruptcy - You may apply for a VA guaranteed loan TWO (2) years after a Bankruptcy
• Foreclosure - You may apply for a VA guaranteed loan TWO (2) years after a foreclosure
• Short Sale - You may apply for a VA guaranteed loan TWO (2) after a short sale, unless it was a VA loan then restrictions apply
• Credit must be re-established with a minimum 620 credit score

2011 Conventional Waiting Guidelines (Fannie Mae):

• Bankruptcy – You may apply for a Conventional, Fannie Mae loan after your bankruptcy has been discharged for FOUR (4) years.
• Foreclosure - You may apply for a Conventional, Fannie Mae loan SEVEN (7) years after the sale date of your foreclosure. Additional qualifying requirements may apply,
• Short Sale / Deed in Lieu of Foreclosure - UPDATED 12/16/11 Currently treated the same as a foreclosure with a waiting time of SEVEN (7) years before you can buy again using a Fannie Mae conventional home loan.
• TWO (2) Years up to Maximum 80% Loan to Value | 20% Down Payment
• FOUR (4) Years up to Maximum 90% Loan to Value | 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.
• SEVEN (7) Years above 90% Loan to Value | with less than 10% Down Payment – Subject to Private Mortgage Insurance underwriting guidelines.
• Credit must be re-established with a minimum 660 credit score.
• Fannie Mae has reduced waiting periods in cases of extenuating circumstances – The death of a primary wage earner seems to be the only one I have been able to identify up to this point.

Preparing to Buy Again after BK, Short Sale or Foreclosure:

You should begin re-establishing your credit again immediately after a bankruptcy, foreclosure, or short sale and start really looking at your credit at least six (6) months before you are ready to buy again. Quite often there are things left over on your credit report that can delay your ability to qualify.

With a little head start, you can get your credit in line, qualify for financing and buy again in the lowest priced real estate market that we have seen in years!

Thanks to one of my favorite lenders, Kim Jones with Brand Mortgage, for putting this together. Kim is one of the best in the business!

FAQ: I'm Under Contract! Now what?

No matter if you are a first time buyer or have owned 10 homes, with the ever-changing landscape of the lending world it is hard to keep up with how the home-buying process works. It seems to change on almost a weekly basis! One aspect that I think the majority of buyers are unprepared for are all the requirements and restrictions that the lenders currently have to adhere to. I find clients becoming frustrated as we get closer to closing and the lender keeps asking them for additional documentation, further explanations, and more and more copies of things.

So, in light of that, I want to provide a few notes on what to expect, a few key DO's and DON'Ts, and generally help set the expectations realistically up front so that you aren't frustrated down the road. I promise that the lenders are not requiring all these things arbitrarily! In most cases they are federally mandated to do so, and as annoying or redundant as it may seem, it is genuinely just part of the process to qualify for a loan in these crazy times.

The state of the lending industry and new Federal laws are making this much harder than it used to be! Here is an important point that will he help you through this process: Do not try to use common sense to understand this process, there is absolutely none of that in the lending industry at the moment. The mantra is “rules over risk” which means that they are not concerned whether your loan represents a risk or not, it is all about whether you are able to meet their guidelines.

The lender is going to ask you for a whole list of financial documents, ranging from tax returns to pay slips to bank statements. There is no getting around this: they must have all of them, and you need to get them to the lender ASAP after going under contract. If your closing gets delayed more than a few days (and closings get delayed all the time these days), there is a chance that they will need updated versions of everything.

The lender will have a bunch of documents (like the loan application) that they will need you to sign. Again, do this as soon as they ask and get it back to them quickly.

Once they have all these items, the loan will go into processing. The loan processor acts as a second set of eyes to make sure that they have all the documents and signatures they need. At this point if anything is missing, they will ask you for it.

Once it clears processing, it goes into underwriting. The underwriter has the final say in whether the loan is approved or not. Underwriters have an unpopular but crucial job. They keep lenders in business by ensuring they are complying with the thousands of pages of underwriting guidelines now required. Fannie Mae, Freddie Mac, FHA and VA all have gotten very, very strict. Underwriters have very little leeway to be discretionary with what documentation must be in a loan file. If they do not follow the rules they will lose their jobs. After they review what you have sent to them, they will typically approve the loan with “conditions”. That means that there are additional things that must be satisfied before the loan is fully approved or “cleared to close”.

• One example of a condition might be “a satisfactory appraisal”. If the lender turns in all your documentation, and there is nothing further needed from you, your loan might still be “conditionally approved” until the appraisal comes back for the underwriter to review and approve.
• Another example of a condition might be “explain the $2000 deposit into your checking account last month”. They are not being nosy or difficult, the guidelines clearly state that all large deposits that are not payroll must be explained and proven to be your own money (i.e. "sourced"). This is why we tell you not to move money around or make large deposits without speaking to us first during the loan process.
• Please be aware, that as information comes in regarding the conditions, this could create MORE conditions. For example, let’s say the underwriters ask for the source of a $2000 checking account deposit and you tell them it was transferred in from another savings account that you have. Let's also assume that you did not provide a copy of that savings account statement in the initial loan submission. They would now have to get a copy of that savings account statement to show the transfer of the $2000 into your checking account from this savings account. Finally, let's assume that the new Savings account statement shows the $2000 transfer that they needed, but on the same statement there is also a $4000 deposit. Now, the process starts all over again because now they have to "source" the $4000 deposit into your savings account! – That is crazy but it is the current state of the industry. This is also the part of the process that tends to frustrate buyers the most.
• This is where the work you put in up front pays off. If everything was complete in the "Gathering Documents/Processing" stage, then there are typically very few issues as described above. But, if you missed providing information in the beginning there can be a lot of back and forth and that gets stressful as closing starts approaching. When the lender sends you additional items they need from the underwriter, they need those back in 48 hours.

Once all Conditions To Close have been cleared, the loan is sent to the closing department so that they can create the Loan Package, which is what you sign at closing. The package is typically over a hundred pages and if there are ANY changes (i.e. closing is delayed by even a day), the entire package has to be re-done to reflect that. It takes about 48 hours to get a package through the closing department and out to the closing attorney with full approval.

Once the attorney receives the closing package from the lender, they will draft up the final numbers for closing – commonly called the HUD-1 or Settlement Statement. THIS IS THE FORM THAT WILL GIVE YOU THE EXACT AMOUNT OF MONEY YOU NEED TO BRING TO CLOSING AND ALL THE FINAL NUMBERS. The lender cannot provide you with the final amount you need for closing until all the steps prior to this have been completed. Once the attorney/title company gets the Settlement Statement drafted they will send it to the lender to approve and then they will forward that to you for your review.

Now we are ready to close!

The most critical part of this to understand is that it is imperative that you get the lender every single item they ask for, as soon as they ask for it. In addition, ANY changes that are made to either your finances or the contract can mean a delay in the closing due to the need to document everything. So before you make ANY changes, check with your lender or Realtor to determine what the best course of action is.

Some examples I have dealt with of things that will delay closing and require additional documentation from you:

• you open a new account or credit card
• you run up the balance on an existing credit card
• you buy a car or new furniture
• your dad gives you a check for $1000 as a housewarming gift
• you change jobs
• you move money from one account to another
• you make a late payment on an existing account
• you switch an existing account at your bank to a different type of account that has a different account number
• you file your taxes for the year
• your parents pay off your student loans
• you pay off a credit card
• your credit score drops or you have new inquiries on your credit report (which can be from something as simple as applying for financing at Rooms To Go for the new furniture you want, EVEN IF YOU DON'T ACTUALLY BUY ANYTHING)

So, long story short: the lending process can be a headache, but it is necessary if you wan't to buy a home. The best scenario is to be as informed as possible so that you know what to expect, and I hope this has helped with that some. I'd like to thank one of my favorite lenders, Mark Moore with Home Lending Source, for helping put this together. I have said it before and can't say it enough: having a great lender who really knows what he is doing makes ALL the difference, and Mark is one of the very best in the business!

FAQ: Buying a Home

Q: Speaking of down payments, do I need one? 

A: I hesitate to even answer this question as the lending laws seem to be changing on almost a weekly basis but the short answer is YES. The days of 100% financing and interest-only loans are in the past. As of today (4/14/09) the best option for most people is an FHA loan, which allows you to only put 3.5% down and typically has the best rates. However, FHA loans have more stringent requirements for both the borrower and the house so not everyone qualifies. If you cannot do an FHA loan, your next best option is a conventional 30-year fixed, which requires at least 10% down. 

Like I said, the requirements are constantly changing which is why it is SO important for you to work with a really good lender. The are the most up-to-date on what is currently going on and the good ones will work their tail off to find you the best possible scenario. I have several great lenders that I work with a lot which I am happy to recommend to you, just ask!

You can find out more info about FHA requirements here.

FAQ: Buying a Home

Q: What is earnest money and why do I need it?

A: Think of earnest money as a deposit to show the seller you are serious about buying their place. Earnest money is typically 1% of the sales price and not less than $1000, but the more earnest money you put down, the stronger your offer is. This is your money and it gets subtracted out of your down payment at closing, it is not in addition to any funds you need to close. You do not lose your earnest money unless you default on the contract. If that were the case then the seller would get to keep your earnest money (again, like a deposit) as recompense for the time they took their home off the market and made it unavailable to other potential buyers....similar to the way hotels take a deposit for a room and only credit it back to you if you cancel within a certain time frame. 

You submit the earnest money in the form of a check made out to either the listing or selling broker along with your initial offer. Once you and the seller reach an agreement on terms and have a binding contract, the earnest money is deposited into the broker's escrow account and held there until closing. If you terminate the contract within your specified Due Diligence period - for any reason - you get your earnest money back in full. If you terminate after the Due Diligence period, in most cases the seller will get your earnest money since you likely would be in default of the contract. There are very specific laws regarding earnest money, escrow accounts, and what happens to that money. 

For you numbers oriented people, an example: You are purchasing a $250,000 home with 10% down. A typical earnest money amount would be $2500 (1% of the sales price) which would be deposited immediately into the broker's escrow account as soon as you have a binding contract (which means you need to have this money in a liquid account before you start house hunting). If all goes well, at the closing table you would need to bring $22,500 for your down payment and your $2500 earnest money would go towards the balance. 

Let's say things don't go well and something comes up in your inspection that makes you want to terminate the contract. As long as you do so within your Due Diligence period (which is typically about 14 days) you get all your earnest money back. 

If your Due Diligence period ends and then 2 days later your financing falls through, or your job decides to transfer you to Timbuktu, or you just decide you no longer want the house.....you can terminate the contract but you will lose your earnest money. 

I have never had that final scenario happen, luckily!

FAQ: Buying a Home

Q: Do I need to get pre-qualified?

A: Yes! This should be your first step in the home-buying process and I am happy to recommend a good lender to you. The pre-qualification process is important for a few reasons. 

First, it lets you know how much house you qualify for and what that equates to in a monthly payment. Note that what you qualify for and what you feel comfortable paying on a monthly basis may not be the same. Often you will qualify for more house than you feel comfortable with. A good lender will create a GFE (good faith estimate) which breaks down a potential home price into a monthly payment, taking into account things like your down payment, property taxes, homeowners insurance, and HOA fees. This is what you need to pay attention to. Once you figure out what monthly payment you are confortable with, let me know the price point that corresponds with so we can make sure you are only seeing houses that you can afford. It is no fun to look at $300,000 houses only to find out that you only feel comfortable with a monthly payment that equates to a $250,000 house! 

Second, we will need your pre-qualification letter in order to submit an offer, especially if the home is a foreclosure or short sale. With the mortgage business the way it is right now, we want to show the seller in every way possible that you are the most qualified buyer possible so they are more likely to accept your offer.

I have a list of lenders that I know and trust, whom I would prefer that you work with. If you have a lender you have worked with before and trust, that is fine. But I have had too many clients get burned by bad lenders that promised things they could not deliver, which causes a lot of undue stress. My preferred lenders are all fabulous and very good at what they do.....and most of all, they are honest. They don't hide fees, they don't promise something they cannot deliver, they will let you know if you can get a better deal somewhere else, and most of all: they get my clients to the closing table quickly, easily, and great service! (and no, unfortunately they do not pay me to say this!)

Thanks guys!

FAQ: Buying a Home

Q: I am thinking about buying my first home. Why should I use a Realtor? Isn't it expensive?

A: Obviously, I am a bit biased, but in my opinion there are a multitude of PRO's for working with a Realtor and not really any CON's. I have found that first-time buyers tend to have a lot of misconceptions and confusion about the buying process which makes them hesitate to work with an agent. The irony of course is that a good agent will remove those misconceptions and help walk you through what is often an intimidating and confusing process. 

First, (and I get this a lot) is the issue of cost. As a buyer there is absolutely no cost to you for working with me. My fees have been negotiated between the seller and the listing agent of any property I show you before we ever walk in the door, and they are responsible for paying me. These are standard, industry-wide fees and any house with a sign in the yard has already agreed to pay me for representing you. Often people think that if they don’t have an agent representing them that means they, the buyer, are entitled to those fees. Unfortunately that is not the case and it is illegal in Georgia to do so. There is no direct financial benefit for you to work without an agent. 

However, there are indirect financial benefits for working with me. As a real estate professional statistics show I will be able to negotiate a better sales price on your behalf than you would be able to do on your own. In addition, I can save you a lot of time and energy. I have access to a much larger and more up-to-date database of available homes and can run specific searches based on your exact parameters. Once we get a list of potential homes narrowed down, I can take you to see each one, arranging all the appointments ahead of time so that we can be as efficient with your time as possible. With my lockbox key I can get you into any home that is for sale so you are not having to call each listing agent and try to arrange showings yourself. Once you find 'The Home' I will draw up all the paperwork and negotiate on your behalf until we have a deal that is suitable to you. I will then arrange all the inspections, termite clearance, appraisal, and title work, getting you to the closing table with the minimum amount of stress.

What I think is most valuable about working with me is my knowledge and experience. This is my job, I have extensive training, and I have done it a million times before. I know what I am doing and I do it well. I can help guide you through the entire process with an experienced eye to make sure you are getting a good house for a good deal. I know which questions to ask and which issues are serious ones. I have extensive contacts for other excellent professionals that you will need throughout the process, from lenders & closing attorneys to inspectors & appraisers, which will make sure the process is as smooth as possible. Most importantly, I put all of this to work for you and your best interests. I am on your side, looking out for you, fighting on your behalf to get you into a great home as easily and stress-free as possible.

So, like I said, I think there are tons of reasons to work with an agent and not really any not to. My business is based on referrals. That means that is it my job to create lifetime clients. It does me no good to give you only 50% service…..I want to do the best possible job for you, to make you as happy as I am able, so that you become that lifetime client and you want to refer your friends and family to me. My goal when I started in this business was to do 100% of my business via referral and by focusing on that and the service required to attain that goal, I quickly rose to one of the top agents in my office, which would not have been possible without creating happy, lifetime clients. That is exactly what I would love to do with you!