In the real estate world, there are a number of questions that our clients often ask us when they are buying or selling a home.
Each client has their own individual circumstances that creates a unique set of conditions for their transaction. Below are some of the most commonly asked questions that we hear at AZRC Realty. We would be happy to answer any of these or any other questions that you may have when buying or selling a home or commercial property.
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Your mortgage loan professional is the right person to answer this question. A general rule of thumb is you can afford to buy a home equal in price to twice your gross annual income, but there are many variables:
1. Your income
2. The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender.
3. Your outstanding debts
4. Your credit history
5. The type of mortgage you select
6. Current interest rates
Lenders will analyze your income in relation to your projected cost of the home and outstanding debts. This will determine the size loan you can qualify for. Your housing expense-to-income ratio is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your loan, property taxes and hazard insurance. These costs is referred to as "PITI."
Monthly homeowner association dues and private mortgage insurance are added to the PITI. Your housing income-to-expense ratio should fall in the 28 to 33 percent range. 28 percent of your gross monthly income is allotted toward PITI. 33 percent of you gross monthly income is allowed for PITI and all long term debt. Some lenders will go higher under certain circumstances.. Your total income-to-debt ratio should not exceed 34 to 38 percent of your gross income.
This information is presented as examples for demonstration purposes only and your circumstances may be different. Please contact your mortgage loan professional to understand your specific situation.
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Sales price increases in either type of housing are strongly tied to location, growth in the local housing market and the state of the overall economy.
Some people feel that buying into a new-home community is a bit riskier than purchasing a house in an established neighborhood. Future appreciation in value in either case depends upon many of the same factors. Others believe that a new home is less risky because things won't "wear out" and need replacement.
"Existing homes have been appreciating a little more than new homes but every once in awhile they're at the same level and sometimes the new home prices go up a little quicker" according to the National Association of REALTORS (NAR).
NAR figures show the median price of existing homes went up 3 percent between 1994 and 1995; projections are that prices will increase 3.2 percent in 1996 and 1.2 percent in 1997.
New home median prices went up 0.8 percent in 1995 and are likely to increase another 0.5 percent in 1996. For 1997, the group predicts a 1.1 gain in median new home prices.
Distressed properties or fixer-uppers can be found everywhere. These properties are poorly maintained and have a lower market value than other houses in the neighborhood.
It is often recommended that buyers find the least desirable house in the best neighborhood. You must consider if the expenses needed to bring the value of that property to its full potential market value are within your budget. Most buyers should avoid run-down houses that need major structural repairs. Remember the movie " The Money Pit?" Those properties should be left to the builder or tradesman normally engaged in the repair business.
Various types of loan programs exist. Some may require a minimum of 3.5 percent down payment (FHA Loans) or 5 percent on conventional loans. Veterans can purchase with no money down (VA Loan).
Putting down as little as possible allows buyers to take full advantage of the tax benefits of home ownership. Mortgage interest and property taxes may be deductible from state and federal income taxes. Buyers using a small down payment also have a reserve for making unexpected improvements. It may be more prudent to make a larger down payment and thereby reduce the amount of debt that must be financed.
Mortgage insurance is a requirement on all loans, with the exception of veterans guaranteed loans. That means a full years premium for the insurance is collected "up front' at the closing of escrow, plus you will be paying monthly premiums on top of your PITI, principle-interest-taxes-insurance. Once a buyer puts twenty percent or more as a down payment on their desired home, the requirement for mortgage insurance is usually waived.
This information is presented as examples for demonstration purposes only and your circumstances may be different. Please contact your mortgage loan professional to understand your specific situation.
It is strongly recommended that home buyers are prequalified or pre-approved for a loan as their first step in the process. By being prequalified, a buyer knows exactly how much house they can afford. They can make more informed decisions in the market place. This does not mean they will definitely get the loan because their credit reports, wages and bank statements still need to be verified before you can receive a commitment from the lender for the loan.
Almost all mortgage lenders prequalify people at no charge. Many of them will even do it on the internet. In order to be pre-approved, an application will be taken. For a fee, your credit report will be pulled, your employment and income will be verified, your checking and savings accounts will also be verified. In other words, all the necessary documentation will be completed in order for you to obtain a loan. The only things remaining will be for you to find a home, obtain an appraisal on it to prove its value to the bank and perform whatever inspections you may want on the property. This process considerably shortens the time frame to closing.
First and foremost it is strongly recommended that you hire a professional person to inspect the home. Many inspectors belong to the American Society of Home Inspectors (ASHI). They attend seminars and stay abreast of the latest developments.
Secondly, sellers are required to complete a Seller’s Property Disclosure Statement (SPDS), revealing everything known about their property. They are required to indicate any significant defects or malfunctions existing in the home's major systems. The checklist includes questions regarding interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems.
The form also asks sellers to note the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachment of easements, room additions or repairs made without the necessary permits or not in compliance with building codes, zoning violations, citations against the property and lawsuits against the seller affecting the property.
Also look for settling, sliding or soil problems, flooding or drainage problems.
Buyers must also be told about covenants, codes and restrictions or other deed restrictions, if the homeowners association has any authority over the subject property and ownership of common areas with others. Be sure to ask questions about anything that remains unclear or does not seem to be properly addressed by the forms.