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Why Buy Real Estate?
Home Ownership is still the best deal! Owning a home isn’t for everyone.
But if you want to
have long term stability, to give your kids a place to grow and prosper,
become part of a community and build financial wealth, owning your
home instead of renting it from someone
else should be one of your top priorities in 2011!
Experts say homeownership still offers the greatest benefit to the
most people. If you have a down payment in hand-BUY! Even if you do not
have a down payment , home-ownership still could be within
your reach. In the last year mortgage programs have changed drastically
and most no down options have disappeared for now, however there are still low down payment options as
well as adjustable rates, interest only, etc. As long as you have a
steady salary, good credit, and few long-term debts, purchasing a home
is probably within your reach especially with the new FHA loan programs and the new Higher loan amounts. And by taking things one step at a time,
you'll
find that buying a home can be a very manageable process.
Homeownership brings countless benefits. When you make a mortgage payment,
you're building equity, which is an investment in your family's future.
Owning a home can qualify you for tax breaks that actually lower your monthly
out-of-pocket costs. The mortgage interest tax deduction and the equity-building
boost. Buyers can deduct the interest component of their monthly mortgage
payment, subject to an annual limit. Tax deductions may be as much as 80 % of the payments during the first few years, when most money goes toward
interest. Equity is worth something. Building equity, in turn lets people accrue
money for a larger house
down the road, as well as gain access to funds through home equity
loans and lines of credit.
Even with a modest annual increase in the property's value.
Homeownership provides the kind of freedom, stability, and security
that is attainable in few other ways. Wealth accumulation through homeownership
is the key to financial independence and self-sufficiency.
A home is worth more than money- there's also the heart.
Most people would still rather own thier own home!
The Escrow Process
The Escrow Process: Your escrow is created shortly after you execute the purchase agreement to sell or buy your home. It cannot be successfuly completed until all escrow instructions have been carried out and all parties have signed escrow documents. The length of escrow can range from a few days to several months, depending on the terms of the purchase agreement. On average, and escrow closes within 45 days.
Opening the Escrow: Either your real estate agent or the sellers agent may open escrow. As soon as you execute the sales agreement, either your agent or yourself will place the initial deposit into an escrow account. At the opening of escrow, you may be asked to provide identification information such as your birth date and social security number. This information remains confidential.
The Loan : Unless the purchase is all cash, the first step will be for you (the buyer) to select a lender and apply for a mortgage loan. Escrow will require contact information of your lender so they may coordinate and expedite the process of closing the escrow.
Now What? : You have made the first step to home ownership but there is still much work to be done! Buyers and Sellers obligations are detailed in your contract so be sure to read through your purchase agreement carefully. Seller will usually provide a termite report but as the buyer you will need to obtain any inspection you and your realtor may deem necessary for complete investigation of property condition. Most important to start with is Home Inspection. There are many reliable inspection companies to choose from. If there are items discovered during the process you may choose to request the home owner to repair or replace items that have been discovered during inspection. Repairs are negotiable-your realtor will guide you. . There are time frames (deadlines) clearly established within the contract to accomplish your purchase so it is very important to read your contract and keep in contact with your realtor to make sure you meet all your obligations and deadlines in a timely manner.
The Closing Process
Signing the Escrow Instructions: Your escrow officer will contact you to make an appointment to sign your loan documents. The escrow officer will tell you the amount of money you'll need (in addition to your loan funds and deposit) to complete your purchase. The amount will include "closing costs" such as appraisal fees, loan fees, escrow charges, advance payment on property taxes and homeowner's insurance, the title insurance premium, etc.
Your Appointment: Before coming to sign escrow papers, make sure you have done the following:
- Identify all your lenders requirements and make sure you have satisfied them. You loan officer can assist you and answer any questions about this process.
- Obtain hazard/fire insurance. Once your loan is approved call you escrow officer with the insurance agent's name and telephone number so that he/she can verify that the policy meets your lenders requirements. You must have your policy in place before the lender will send you r loan funds to escrow.
- Obtain and bring with you a cashier's check issued by a California institution, made payable to the title company indicated to you by the escrow officer. Today, many people choose to wire the money-Make sure you arrange your payment to arrive in time for your closing date.
- Bring either your valid drivers license or passport to your appointment to that the notary public can verify your identity.
You must decide how you wish to hold title to your new home. We suggest you consult an attorney, tax consultant or other qualified professional.
After your appointment:Once your loan documents are signed, the escrow officer will forward them to the lender for a final review. The review typically occurs within a few days, after which the lender advises the escrow officer that the lender is ready to fund the loan. If all conditions of the escrow have been satisfied, the escrow officer will then inform you of the date of close and will take care of all the technical and financial details.
Close of Escrow: Close of escrow signifies legal transfer of title and occurs when the seller's grant deed to you is filed with the county recorder . The lenders deed of trust records concurrently with the grant deed. Recording usually occurs within one working day after the loan funds are received in escrow. Several weeks after closing , the county recorder's office will mail you the original grant deed.
General categories of loans
Most loans fall into three major categories: fixed-rate, adjustable-rate, and hybrid loans that combine features of both.
- Fixed-rate mortgages
As the name implies, a fixed-rate mortgage carries the same interest rate for the life of the loan. Traditionally, fixed-rate mortgages have been the most popular choice among homeowners, because the fixed monthly payment is easy to plan and budget for, and can help protect against inflation. Fixed-rate mortgages are most common in 30-year and 15-year terms, but recently more lenders have begun offering 20-year and 40-year loans.
- Adjustable-rate mortgages (ARM)
Adjustable-rate mortgages differ from fixed-rate mortgages in that the interest rate and monthly payment can change over the life of the loan. This is because the interest rate for an ARM is tied to an index (such as Treasury Securities) that may rise or fall over time. In order to protect against dramatic increases in the rate, ARM loans usually have caps that limit the rate from rising above a certain amount between adjustments (i.e. no more than 2 percent a year), as well as a ceiling on how much the rate can go up during the life of the loan (i.e. no more than 6 percent). With these protections and low introductory rates, ARM loans have become the most widely accepted alternative to fixed-rate mortgages.
- Hybrid loans
Hybrid loans combine features of both fixed-rate and adjustable-rate mortgages. Typically, a hybrid loan may start with a fixed-rate for a certain length of time, and then later convert to an adjustable-rate mortgage. However, be sure to check with your lender and find out how much the rate may increase after the conversion, as some hybrid loans do not have interest rate caps for the first adjustment period.
Other hybrid loans may start with a fixed interest rate for several years, and then later change to another (usually higher) fixed interest rate for the remainder of the loan term. Lenders frequently charge a lower introductory interest rate for hybrid loans vs. a traditional fixed-rate mortgage, which makes hybrid loans attractive to homeowners who desire the stability of a fixed-rate, but only plan to stay in their properties for a short time.
- Land Loans
There usually is only one purpose in getting a land loan and that is to buy the land to eventually build a new home. The only banks that provide land loans are banks that provide construction loans and even some of these banks will not provide land loans. Land loan terms usually range from 2, 5 to 20 year loan periods, amortized over 20 and 30 years. Land loans are also available with interest only options. This can be very beneficial so the land payments are affordable while you are obtaining plans and permits to build your new home. Buying land is like buying a expensive car that you cannot drive. Its very important to realize that a land loan should be thought of as a temporary loan. The land loan will be paid off with the construction loan once you are ready to apply for the construction loan. If you are not planning on building soon then you will want a land loan with a long term balloon payment
Balloon payments
A balloon payment refers to a loan that has a large, final payment due at the end of the loan. For example, there are currently fixed-rate loans which allow homeowners to make payments based on a 30-year loan, even thought the entire balance of the loan may be due (the balloon payment) after 7 years. As with some hybrid loans, balloon loans may be attractive to homeowners who do not plan to stay in their house more than a short period of time.
Time as a factor in your loan choice
As has been discussed, the length of time you plan to own a property may have a strong influence on the type of loan you choose. For example, if you plan to stay in a home for 10 years or longer, a traditional fixed-rate mortgage may be your best bet. But if you plan on owning a home for a very short period (5 years or less), then the low introductory rate of an adjustable-rate mortgage may make the most financial sense. In general, ARMs have the lowest introductory interest rates, followed by hybrid loans, and then traditional fixed-rate mortgages.
FHA and VA loans
U.S. government loan programs such as those of the Federal Housing Authority (FHA) and Department of Veterans Affairs (VA) are designed to promote home ownership for people who might not otherwise be able to qualify for a conventional loan. Both FHA and VA loans have lower qualifying ratios than conventional loans, and often require smaller or no down payments.
Bear in mind, however, that FHA and VA loans are not issued by the government; rather, the loans are made by private lenders but insured by the U.S. government in case the borrower defaults. Remember too, that while any U.S. citizen may apply for a FHA loan, VA loans are only available to veterans or their spouses and certain government employees.
Conventional loans
A conventional loan is simply a loan offered by a traditional private lender. They may be fixed-rate, adjustable, hybrid or other types. While conventional loans may be harder to qualify for than government-backed loans, they often require less paperwork and typically do not have a maximum allowable amount.
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