Are you thinking of buying a new home? If you are, you should know that this may very well be a really good time to buy a house. The housing market is sluggish, which means that prices tend to be much lower and so do interest rates. Also, there are more houses from which to choose. This surplus of houses on the market is good for the buyer; basic laws of supply and demand dictate that the more there is of something (in this case houses), the less it tends to be.
Terminology in the World of Property
If you are going to decide to purchase soon, however, it is important that you fully understand the terminology used regularly in the property world. Common mortgage terms include interest rates, length or term of loan, closing costs, variable rate loans, origination fees, document taxes, home equity, acceleration, amortization, conventional financing, down payment, FHA loans, fixed rate loans, points, and private mortgage insurance (PMI).
The interest rate is the amount of money the lender is charging you in order to borrow the loan. This is expressed in terms of percent. Of course, the lower the interest rate, the less the cost of the loan.
The term of the loan is also referred to as the length of the loan. This is how long you will beimagined to make payments on the mortgage. In years past, most mortgages were twenty years. Now, thirty years is most common.
Closing costs are any fees connected with the actual transaction of buying and selling a home. These include realtor's fees, title insurance fees, document stamp taxes, the cost of necessary repairs to the home (if the repair company has agreed to be paid at closing), points, and other miscellaneous costs.
Variable rate loans are the \"reverse\" of fixed rate loans. With a variable rate loan, the percent you pay in interest can go up and down according to the prime interest rate. With fixed rate loans, the interest percent remains the same throughout the life of the loan.
Points, also called loan discount points, are fees that are charged to thebuyer from the lender. These fees are prepaid interest and can add greatly of cost to your closing. One point is equal to one percent of the loan amount. If you are loaning £100,000 and are looked at one point by the lender, you will have to pay £1000 of prepaid interest when all the paperwork is done at your closing.
Private mortgage insurance (PMI) is a type of insurance that allows the buyer to put down a smaller down payment on the home. Many lenders will require that you purchase PMI if you are putting less than twenty percent down.
A down payment is the amount of cash you are paying out of your own pocket toward the purchase of your new home. The selling price of the home (plus all fees and other costs) minus the amount of the mortgage is equal to your down payment. Most lenders want you to have a down payment of twenty percent or carry PMI.
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Wednesday, 13 June 2012
Sunday, 15 January 2012
Strengthen Your Position as a Buyer
Strengthening your position as a buyer could enable you to make lower offers or to compete with other buyers negotiating for the same property. Before you even start with your property search:
- Contact your financial adviser to discuss what you can afford.
- Contact a few different solicitors for quotes on their services (preferably using one that has been recommended to you by a friend or family member). When you find a suitable company ask them which details they want from you prior to your property search to ensure they can process the purchase of your chosen property quickly.
- Find a reputable surveyor offering a competitive price who also provide a short timescale for the work to be carried out once they are instructed to do so. Its important you can rely on this company not to hold up the purchase of your property.
- Contact different mortgage companies to see what they have to offer and to possibly set up a pre-approved mortgage. Its also a good idea to contact your bank or bulidings society which might be able to offer you the best deal. Your financial advisor will also be able to help you find the best company to get your mortgage through (but remember to look into any fees they may charge for this service)
Not only will you be in a stong position as a buyer, but ensuring a quick purchase also helps to prevent gazumping.
Looking for an Investment?
If your not only looking for your ideal home but also a good investment, you need to start doing some research into the most up and coming areas around. The best way to do this, is to watch for any developments in your area with lower house prices. They could be anything from plans for a new train station (offering a short journey for commuters) to the build of a local supermarket. Basically anything that makes it an easier and more appealable place to live. Its all about seeing the potential and buying before the house prices start to rise.
When Arranging a Viewing
Its best to view a property through the week if possible. Most other buyers will be organising viewings for the weekend, and this will give you a chance to get an offer in and the property taken off the market before anymore viewings take place.
The viewing of a property is not only a good opportunity to look at the suitability of the property, but also a chance to establish the requirements of the seller and buyer, and to understand eachothers positions within the property chain. Advising the seller of your strong position as a buyer (e.g first time buyer, no chain or able to process purchase quickly) can only help your chances of any offers you make being accepted.
Helpful questions to ask during viewing:
- Proximity to local transport links?
- What are the local schools like?
- If theres no driveway, where can you park?
- How much is the council tax?
- Have they made any improvements to property?
- How long has the property been on the market?
- What would they be leaving (fixtures and fittings etc)?
- Why are they moving?
- Which direction is the property/garden facing - to establish which rooms/garden gets much sun.
Don't be put off by bad decor in a property, its more important you get the right location and size of property you need. If the property has been reduced, its more than likely everyone is thinking the same thing as you. This could be a good opportunity to put in a lower offer, save money and get to put your own mark on the place. You could also be putting value onto the property by modernising it.
Its a good idea to take notes once youve left the property regarding its good and bad points. If your viewing several properties, its helpful to be able to look back over your notes which may assist you in making a decision.
Making an Offer
Its always best to offer less than the asking price on your chosen property if your in a position to do so. Its in your best interests to buy at the lowest price possible. Give your reasons to the sellers as to why you are making this offer (e.g at the top of your budget, property needs work etc) and also remind them of the positives (how much you want the property, that you have the funds ready etc).
Put your offer in writing by delivering a letter to the seller (preferably by hand) including:
- Your contact details
- The offer you wish to make
- The reasons for the offer
- Your current position as a buyer
- How much you want the property
- The contact details of your solicitor
- Any documentation from your financial advisor or mortgage company confirming that the funds have been pre-approved.
- You may also wish to state that the offer is conditional to the property being taken off the market straight away and also subject to the survey.
Most solicitors will request a local search as part of the conveyancing process but this will not tell you about environmental problems or future developments in the locality that could effect the property you are buying.
Many buyers are now asking for an Environmental search which provides information on environmental risks such as land fill and waste sites, mining activity, flooding, contamination, subsidence etc. This search is done through Envirosearch who will advise you if the land is effected in this way and will also inform you of how much this could effect the value of the property.
Plansearch advises homebuyers of current and historical planning applications for the property and surrounding areas. This search is much more thorough than the standard local authority search which only provides information on the property you are buying. This search will inform you of plans your neighbours have to develop their properties and any close by with plans for construction etc.
Its vital when buying a property for its scenic views, that this will not change inthe future due to development of the land. Its important to research ownership/plans for the land before buying.