Buying your new home is a serious venture. It can be an absolute pleasure or a massive headache. Your house is not just your home, it is a serious investment in the dwelling, the area and your future.
When buying a home – you’re bound to have many questions. For example, “In what area can I find a home that suits my needs?”, “How much money will I need to afford the monthly payments?” and “How long will the home buying process take?”
- Advice for First-Time Buyers
- How to Negotiate with Sellers
- Types of Mortgages
- Getting the Best Mortgage Rates Online
- Surviving Escrows
- Buyer’s Guide
- The Benefits of Buying a Lakefront Home
- Connecticut housing market set for a strong year in 2021
- Making your offer on a house stand out to a seller
- Is it time to buy a second home? Consider these factors first
Advice for First-Time Buyers
- Pre-Qualification: Meet with a mortgage broker and find out how much you can afford to pay for a home.
- Pre-Approval: While knowing how much you can afford is the first step, sellers will be much more receptive to potential buyers who have been pre-approved. You’ll also avoid being disappointed when going after homes that are out of your price range. With Pre-Approval, the buyer actually applies for a mortgage and receives a commitment in writing from a lender. This way, assuming the home you’re interested in is at or under the amount you are pre-qualified for, the seller knows immediately that you are a serious buyer for that property. Costs for pre-approval are generally nominal and lenders will usually permit you to pay them when you close your loan.
- List of Needs & Wants: Make 2 lists. The first should include items you must have (i.e., the number of bedrooms you need for the size of your family, a one-story house if accessibility is a factor, etc.). The second list is your wishes, things you would like to have (pool, den, etc.) but that are not absolutely necessary. Realistically for first-time buyers, you probably will not get everything on your wish list, but it will keep you on track for what you are looking for.
- Representation by a Professional: Consider hiring your own real estate agent, one who is working for you, the buyer, not the seller.
- Focus & Organization: In a convenient location, keep handy the items that will assist you in maximizing your home search efforts. Such items may include:
- One or more detailed maps with your areas of interest highlighted.
- A file of the properties that your agent has shown to you, along with ads you have cut out from the newspaper.
- Paper and pen, for taking notes as you search.
- Instant or video camera to help refresh your memory on individual properties, especially if you are attending a series of showings.
- Location: Look at a potential property as if you are the seller. Would a prospective buyer find it attractive based on school district, crime rate, proximity to positive (shopping, parks, freeway access) and negative (abandoned properties, garbage dump, source of noise) features of the area?
- Visualize the house empty & with your decor: Are the rooms laid out to fit your needs? Is there enough light?
- Be Objective: Instead of thinking with your heart when you find a home, think with your head. Does this home really meet your needs? There are many houses on the market, so don’t make a hurried decision that you may regret later.
- Be Thorough: A few extra dollars well spent now may save you big expenses in the long run. Don’t forget such essentials as:
- Include inspection & mortgage contingencies in your written offer.
- Have the property inspected by a professional inspector.
- Request a second walk-through to take place within 24 hours of closing.
- You want to check to see that no changes have been made that were not agreed on (i.e., a nice chandelier that you assumed came with the sale having been replaced by a cheap ceiling light).
- All the above may seem rather overwhelming. That is why having a professional represent you and keep track of all the details for you is highly recommended. Please email me or call me directly to discuss any of these matters in further detail.
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How to Negotiate with Sellers
Buying a home is one of the most important purchases most people will make. In order to make the right decision the first time, potential buyers need to be prepared. Consider the following before starting negotiations:
- Be prepared Research the housing market in the target area. Once you have information about the general area, focus on the particular property and seller. Look for answers to questions such as:
- Why is the homeowner selling? (If they’re moving because they find the area undesirable, you might want to consider this issue.)
- How long has the home been on the market? (If it has been on the market for a long time, perhaps there are negative facts about the property that you need to know.)
- How much did the seller pay for the home compared to the current asking price? (If the seller paid more, find out why. Was it a general real estate trend, or did property values in that particular neighborhood go down?)
- What is the seller’s time frame for selling and moving? Does it fit within your needs?
- Are there any defects in the home or problems with the surrounding neighborhood? (For example, is the roof so old that it will likely leak during the next storm? Is there a new construction project in the area that will lead to major traffic congestion?)
As the potential buyer, you want the advantage. While you want answers to all your questions to the seller, reveal very little about your circumstances. Do not give the seller personal information such as your income, the maximum you are able to pay for a down payment or the home, or when you want to move. Make sure that your agent knows not to reveal any such information to the seller or his/her agent.
Also, do not let the seller see how much you want the property. If you appear desperate or overly enthusiastic, the seller then has the stronger bargaining position. When meeting with the seller or listing agent, keep your emotions in check.
- Establish a Timeline Find out if the seller needs to have the sale closed sooner rather than later. If the seller is feeling pressured to sell, use that to your advantage in negotiating. Even if you, the buyer, are the one with the deadline for purchasing a home, don’t let yourself be rushed into making concessions or a purchase you may regret later.
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Types of Mortgages
Fortunately for buyers, there are a variety of mortgages to choose from. It is in your best interest to investigate each of them to determine which is the best for your situation. You probably won’t qualify for all of them. In fact, you may only qualify for one. But if you do qualify for more than one, you may save yourself money (and worry) in the long run if you do your homework before signing on the dotted line.
Consider a fixed rate mortgage if either of the following describes you:
- You plan on living in your new home for many years, and/or
- You are not a risk-taker and prefer the stability of knowing how much your payment will be each month.Since most home loans are for a period of 30 years, if you want a payment you can count on for that long of a period of time, a fixed rate mortgage may be what works best for you. Once your loan amount and interest rate are calculated and locked in, a fixed rate mortgage will guarantee that you will have the same payment over the life of the loan. Making extra payments to principal will allow you to pay your loan off sooner.This may not always be the best choice, however. If interest rates are very high at the time you take out your loan, with a fixed rate mortgage you’ll be stuck with that high interest for the life of the loan (unless you choose to refinance). Conversely, if interest rates are very low, you’ll come out the winner with interest rates that will stay low no matter how high interest rates go in the future.The following are the advantages and disadvantages of the varying lengths and terms of fixed-rate mortgages:
- Pay off the loan in half the time of a 30-year loan.
- Equity builds up more quickly than in a 30-year loan.
- Payments are higher (which may be a problem if you lose your job or become unable to work).
- Pay off the loan in 2/3 the time of a 30-year loan.
- The overall interest paid is considerably less than for a 30-year loan.
- The most common choice, especially for first-time homebuyers, as it’s the easiest of the fixed-rate loans to qualify for.
- Monthly payments are lower than for 15-year and 20-year loans. This can prove especially helpful if you do not have a lot of
“padding” between the amount you can afford to spend and the monthly payment for your desired property.
- More desirable if you plan on staying in the same home for years, since equity builds more slowly than for shorter-term loans.
- For income tax purposes, this term provides the maximum interest deduction.
If you are more comfortable in taking a risk with your money or if interest rates are very high at the time you take out your loan, an adjustable-rate mortgage (ARM) may be the solution for you. You might also choose this type of loan if your planned ownership of the property is short-term or if you expect your income to increase to cover any potential rise in the interest rate.
Generally, the interest rate when you take out your loan will be lower than a fixed-rate mortgage. Please note that this is true initially, not necessarily long-term.
Since an ARM rate rises and falls depending on the prevailing interest rate, your mortgage payment will rise and fall accordingly. If your income is not sufficient to cover the highest possible payments, then this option is not for you. On the positive side, the lower initial payments will allow you to qualify for a larger loan than if you choose a fixed-rate. The downside is that your payments will increase if/when the rates go up.
Typically, ARM interest rates are tied to a specific financial index (such as Certificate of Deposit index, Treasury or T-Bill rate, Cost of Funds-Indexed Arms or COFi, or LIBOR [London Interbank Offered Rate]) and your payment will be based on the index your lender uses plus a margin, generally of two to three points. Get the formula used by your lender in writing and make sure you understand what it means.
Fortunately, the amount an ARM can increase is limited. There are “caps” on how much your lender can increase your rate, both for a period of one year and for the life of the loan. Plan ahead, and have your lender calculate what the maximum payment would be if your rate went to the highest amount allowed by the cap for your particular mortgage. If you are not confident you’ll be able to pay that amount on a monthly basis, perhaps you should reconsider this type of loan.
If neither the fixed-rate or the adjustable-rate mortgage seems like the best option, perhaps the convertible ARM will be right for you. This alternative combines the initial advantage of an ARM with a fixed rate after a predetermined number of years. Obviously, this type of mortgage has more advantages when the initial interest rate is low and the future rate is not guaranteed.
Another mortgage option available to some people is a government loan, providing that you meet the qualifications for these loans.
- VA Loans: Veterans may qualify for a loan from the Veterans Administration. There is a limit on the amount you can borrow, so this option works best for those buying a lower priced home.
- FHA Loans: The Federal Housing Association offers loans to lower-income Americans. Look for the phrase “FHA approved” when looking at ads for homes.
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Getting the Best Rates for Your Mortgage
Naturally, you want to get the best deal for the least amount of money. This holds true for mortgage rates as well.
A lower interest rate means a lower monthly mortgage payment, which can save you money in the long run. Also, it is easier to qualify for a lower payment than a higher one.
You basically have two routes to finding the best rate. The first is to do all the research on your own. The second is to use a mortgage broker.
With the advent of the Internet, much of this information is readily available online. Once you have educated yourself sufficiently about real estate loans, all it takes is the time and energy to sift through online resources to find the information you need.
Rates change quickly. That great rate you find today might not be there tomorrow. Once you find the rate you are looking for, submit a loan application and lock in that rate.
Some sources for interest rates on the Internet include:
Bank Rate Monitor (http://www.bankrate.com)
When comparing loans, make sure that you’re comparing loans of the same type. For example, you find that “Loan A” for a 30-year loan has a much lower interest rate than “Loan B” (also for 30 years). Upon further inspection, you find that “Loan A” is technically an adjustable rate mortgage. Its payment is based on a 30-year amortization, but becomes due through either payment or refinancing at the end of 5 or 7 years. These are frequently referred to as a 5-year or 7-year fixed-rate mortgage. While both said “30-year”, they are not the same type of loan.
Ask the lender for a statement detailing all fees associated with the loan. Factors such as “points” (loan fee), interest rate and “garbage fees” (extra fees which some lenders charge) can vary greatly from one lender to another.
If you do not have the time or experience to “do it yourself,” look for a qualified mortgage broker that can assist in finding the right mortgage for you. Ask friends and associates who have refinanced or purchased recently if they have a broker they can recommend. You’ll want to find a broker who is energetic, flexible and knowledgeable about finance and loans and someone who has your best interests in mind.
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You’ve Opened Escrow, Now What?
Congratulations, you are on your way to owning your very own home! Follow these suggestions (and your realtor’s advice) so that escrow and settlement with go as smooth as possible.
You will be asked for a down payment on the home you are purchasing. You can choose to put down as much or as little as you want (depending on your mortgage), but remember, the more you put down toward the total price of your home, the less time it will take you to pay off and the less your mortgage payments will be every month.
During this period of purchasing your home, you are going to need an escrow or settlement company to act as an independent third party so that you know when and who to give your money to get the deed to your new home. The escrow or settlement company will hold your deposit and coordinate much of the activity that goes on during the escrow period. This deposit check may also be held by an attorney or in the broker’s trust account. Make sure that there are sufficient funds in your account to cover this check.
The deposit check will be cashed. Assuming the sale goes through, this money will be applied to the purchase price of the home. If for any reason the sale is not consummated, you may be entitled to receive all of your deposit back, less standard cancellation fees. In certain instances, the seller may be able to retain this money as liquidated damages. Prior to executing a purchase contract, it would be wise to speak with your counsel regarding whether or not it is your best interest to have a liquidated damages clause as part of the contract.
The period that you are “in escrow” is often 30 days, but may be longer or shorter. During this time, each item specified in the contract must be completed satisfactorily. By the time you have opened escrow, you have come to an agreement with the seller on the closing date and the contingencies. Each contract is different, but most include the following:
- Inspection contingency: this should be completed as soon as possible after the contract to purchase is signed as unsatisfactory
results of the inspection may mean that you will want to cancel the contract.
- Financing contingency: once the contract is signed, you have a period of time to secure funding. If, for any reason, you are unable to secure funding during the period of time granted to you by the contract (and the seller will not provide a written extension of time), you must decide whether you want to remove the contingency and take your chances on getting a loan. You may choose to cancel the purchase contract.
- A requirement that the seller must provide marketable title.
With an attorney or title officer, review the title report. The title must be “clear” to ensure that you do not have legal issues regarding your ownership.
Check into local and state ordinances regarding property transfer and make sure that you and/or the seller have complied with them.
Secure homeowner’s insurance. This will probably be required before you can close the sale. Due to such requirements as special fire and earthquake
insurance, obtaining this insurance may require a lengthy period of time. It would be in your best interest to apply for insurance as soon as possible after
the contract is signed.
Contact local utility companies to schedule to have service turned on when you close escrow.
Schedule the final walk-through inspection. At this time, you should make sure that the property is exactly as the contract says it should be. What you
thought to be a “permanently attached” chandelier that would come with the property might have been removed by the seller and replaced with a different
You’ve made it! Once the sale has closed, you’re the proud owner of a new home. Congratulations!
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Deciding to buy
Before you take the first step in buying a home, it’s important to first make sure that the timing is right and you’re ready for the big move. Here are some of the things you need to consider:
- Are your finances in order?
- Are you prepared for other homeownership costs?
Homeownership costs go beyond your monthly mortgage payments. You also need to consider maintenance costs, utilities, property taxes, and other regular expenses.
- Are you ready to settle down in one place?
In general, homeownership is profitable only after five years or so. If you intend to move and sell the property before this, you could end up losing money as you most likely would not have built enough equity on the home.
Check your credit score, keeping in mind that lenders will use this as a basis to determine the mortgage terms and conditions you’re eligible for. A credit score of at least 620 is ideal. You can still obtain a loan with a lower credit score, but most likely, you’ll get less favorable credit terms, such as higher interest rates, a lower mortgage amount, and a higher down payment.
To raise your credit score, get a copy of your credit report, look for items that may be pulling your score down, and work on improving these.
Preparing to buy
- Look for the right mortgage
- Get pre-approved for a mortgage
Most sellers will only show their properties to buyers with mortgage pre-approval. In addition, getting pre-approved will give you a good idea of how much home you can really afford, which you can use in setting a budget when you go home shopping.
Talk to a mortgage broker or to several lenders to learn about various mortgage products and find the right one for you.
Finding a buyer’s agent
A professional real estate agent is your ally and partner throughout the homebuying process. They will help you understand the market and find the perfect home, negotiate strongly on your behalf, assist with the paperwork involved, and so much more.
To find the right agent, consider these tips:
- Get referrals from people you know
- Search the internet for Realtors who are knowledgeable about the area you’re interested in and the type of home you’re looking for
- Interview potential agents to find out who you’re most comfortable working with
If you’re interested in buying a house in CT and houses for sale in Fairfield County or Litchfield County, we at Fazzone & Harrison Realty LLC will be more than happy to help. With over 45 years of collective experience, we’re confident we can provide you with the best representation. Call us today at 860.354.0479 or drop us a note here.
Looking for homes that fit your lifestyle
Let your Realtor know about your preferred home features so they can help you find the right property in your price point. The things to consider include:
- The property type
Different property types, such as single-family homes, condos, and townhouses, have their own pros and cons. Ask yourself which one is best suited for the lifestyle you want.
- The size
How many bedrooms and bathrooms do you need? Do you need a garage for multiple cars? How much storage do you need? Consider your needs and factor these in determining the right home size for you.
- The amenities and other features
List down the extras that will make living in the home more enjoyable for you and the family, such as a swimming pool, an outdoor kitchen, a private gym, and so on.
Consider the lifestyle you want to have and look into neighborhoods and locations that will give you the best access to your places of interest, such as your office, schools, shopping centers, and others.
Escrow and appraisals
Once you’ve found the right home and have signed a purchase agreement with the seller, the process goes to escrow, where any cash payments, including your earnest money deposit, are held. During the escrow period, the following procedures need to be completed:
- Finalize the financing of the home with your mortgage provider
- Your lender will conduct an independent appraisal of the property. If their appraised value is less than the sale price you agreed upon with the seller, your options are to renegotiate the price, pay for the difference from your pocket, or get out of the sale.
- Have a professional home inspection done to protect you from major damages or repairs
- Work on removing any other contingencies agreed with the seller
Closing the deal
Closing takes place in a neutral location, usually at the office of the escrow officer or the title agent. You may choose to be personally present for the closing, or sign the documents ahead of time and have your agent represent you at the meeting.
During closing, in addition to signing the necessary paperwork, you and the seller also need to pay the fees and costs involved in the sale, including commission fees, mortgage fees, and the down payment on the property.
Once everything is in order and the lender releases the funds to the seller, the title and keys to the property are handed over to you.
Make the move to your new home as stress-free as possible by doing the following in advance:
- Inform your utility providers about the transfer and make sure all essential services are working once you move to the property
- Sort and pack your belongings well ahead of time, and arrange for storage rental if needed
- Identify and contact the right moving company as early as possible
With people fleeing the city to open, spacious environments where there is a literal and metaphorical room to move and breathe proves the enduring desirability of lakefront homes. Now more than ever, lake homes embody both refuge and freedom – and deliver on their myriad promises. Owning a lakefront home means reaping the health and psychological benefits of being in the midst of clean and green surroundings. It can also awaken creative urges. Financially, a lake home will appreciably increase in value over time and can be a source of passive income. If you’re on the fence about buying a lakefront home, read this article to find out why you may want to take the plunge.
In many respects, 2020 was an unprecedented year for Connecticut real estate, with COVID-19 forcing sellers to find creative ways of promoting and selling properties, and getting buyers to reevaluate their priorities and preferences when it comes to housing. What should have been a disastrous year turned out to be a robust one for the Connecticut real estate market, particularly for the rural areas as an influx of buyers left densely populated metro areas.
2021 is expected to be just as strong a year for Connecticut real estate, if not stronger. Spring, which is typically peak season for home sales, will see more real estate activity than recent years as financial certainty and vaccine distribution restore buyer confidence.
Looking at listings is one of the most exciting parts of buying a home. But when you’ve finally found the perfect property, it’s time to make your offer. However, there’s no guarantee that a seller will choose your offer, especially as properties often attract several bidders. And if you fail to make a winning bid, your dream home could slip from your grasp. What exactly goes into making an attractive and effective home offer? In this article, Fazzone & Harrison Realty LLC discusses the strategies it uses to help clients clinch their dream homes. If you’re keen on buying houses for sale in Litchfield, CT, be sure to take heed of these tips!
Reflecting on buying a second home at this time?
Perhaps at first glance, doing so may not be an idea to even ponder on, considering the state of present affairs where people are gripping their funds more closely to their chests because…COVID. However, upon carefully considering several key factors, making that purchase may turn out to be one of the best decisions you can ever make.
Two of the factors mentioned here are commonly found in criteria to gauge one’s level of readiness to enter the housing market for the first time – purpose and finances. Even when taking on a second home, these two will remain relevant to you as a not-so-newbie homebuyer.
However, there are other factors that you will come across in this new real estate endeavor that you may not have encountered before. All of these will come into play in your decision whether to proceed with this transaction or to keep to the sidelines for now.
Learn more as you read this article.