1. Is a home really a good investment? What if I buy and the economy collapses?
Unlike the volatility of the stock market, real estate is typically much slower to react to a current economic situation, and does not react as radically overall. Also, housing is primarily purchased for shelter. Many people hold their homes during a bad economic period, and then sell when the market improves. Unlike other investments, there is not typically "panic selling" of family residences. Lastly, real estate in the CANADA has traditionally trended upward. Real estate held over time generally produces equity.
2. I’m confused about what to buy. There seem to be so many different houses around these days.
Whether you are interested in a house or condo, it is a buyer’s market! Having choices is a good thing, however trying to wade through all the inventory on your own can be daunting. Remember that when you are a buyer, you can hire a Realtor to work for you for free! Years down the road when it is your turn to sell your house, you’ll pay both the selling broker as well as the buyer’s broker. That’s why it’s free for you as the buyer! You never have to sign a buyer’s agency agreement with an agent, however it is to your greatest advantage to have a professional working for you with your best interests as their contractual duty!
3. I’m afraid I won’t qualify for a mortgage, so I’m afraid to apply for one.
Getting a home loan is still possible. However, it takes the right lender to get the job done well! DO NOT pay up-front for an initial pre-qualification consultation with a lender. You simply don’t have to these days. Once again, find a Realtor you feel has a good handle on the business of buying and selling houses (find my number and email address at end of this report). I can suggest good lenders to talk to about your specific situation. If one lender can’t get you qualified, perhaps another can. And lastly, if a lender can’t get you qualified today, they can tell you what you need to do to correct the situation. That way you will have a "to do" list and when you’ve completed it, you will be prepared to qualify for a mortgage. Or maybe we should talk about rent-to-own options.
4. Financing has me totally confused. I don’t know where to begin figuring out how mortgages work.
Mortgages can be confusing, but ... again, having the right Realtor who directs you towards reputable lenders, and having a very knowledgeable loan officer can really make or break your whole purchasing project! I recommend lenders that have YEARS of experience in their field, and also have a vast array of lending programs. A really good loan officer can listen to your specific situation and your unique goals, and match you up with a loan program that is optimal for you. Unskilled loan officers can end up putting you into all sorts of strange lender programs that make them a lot of money, but cost you much more than you needed to spend. This is a serious issue in the entire house-hunting project, and I strongly suggest you call me personally to discuss some options. Vishal: 905.330.8675.
5. What if I start house-hunting and then learn I’m a few thousand dollars short of a down payment? Are all down payment requirements alike?
Once again, there are still many mortgage programs out there. All of them are different. Many low down-payment mortgage programs request the seller pay your closing and pre-paid costs. Some even have the seller "gift" your down payment back to you at close. Lenders are now required to provide a "good faith estimate" which will show all the costs for your specific loan. A good lender will make sure that you fully understand it. You should fully understand your expenses before you make an offer on a house. There are also additional expenses which you will incur from the day you write an offer to the time you close. Expenses such as the deposit check, your home inspections, your appraisal, and your homeowners’ insurance are items to discuss in addition to your good faith estimate. A good Realtor will explain all of these anticipated expenses early on in the process. Some of these up-front expenses can be deferred or even reimbursed at close.
6. What if I put down a deposit on a house and then change my mind after signing a contract?
Don’t sign an offer until you feel certain that you want the house, for exactly what you have written in the offer! Remember that if the seller signs the last page under, "Accepted as Written" it means that you’ve got a deal! That should be a very happy moment, not a time to think about looking at other houses! If there are some major concerns you have about the property at the time you write an offer, you can have your agent put language into the contract that specifies certain contingencies which must be met in order to complete the deal. Home inspections are also an excellent resource for more in-depth information about a home, and even though you will still have to pay your inspector for his work, if something major comes up and the seller’s won’t work with you to overcome it, you can halt the deal at that time! Inspections must be requested at the time you write an offer, so if you and your agent don’t put them in there, don’t expect the seller to do anything in addition to that which is specified in the offer you have written.
7. I’ve been living in an apartment and don’t know anything about home maintenance and repair.
There’s a funny thing that happens when you move into your first home that you have personally purchased … you discover that puttering around the house, casually tending to this-or-that, can actually be enjoyable! It’s amazing how empowering a little thing like fixing a leaky faucet, or installing a new hinge on the cabinet door can be! I say that from first hand experience, acquired while we lived in our first own home! It’s also amazing to discover how handy your friends happen to be, when offered some pizza and a "cold one" at the house some afternoon! Your lifestyle changes a bit when you buy a house. You may discover that you no longer look for things to do away from home every chance you get. A lazy Saturday on the porch swing (after you have mowed the lawn, planted your favorite color flowers near the walk, and picked some fresh veggies from your garden) suddenly becomes the ideal weekend event! Instead of leaving the apartment complex to go to your friend’s house for a party, people start coming over to visit your house! Home ownership is good.
8. What if I buy a home and then find out it’s too expensive for me?
That should not happen. Unlike a landlord who may not care how much of your income is spent to pay the rent, a mortgage lender will consider what percentage of your income goes towards your monthly payments. However, the lender will not put you on a budget, so even though you may qualify for a certain amount, you should take the time to determine exactly how much of your income you can afford for house payments. I don’t mean to be redundant, but once again, chose a good Realtor who will suggest a reputable and knowledgeable lender!! Avoid lenders who tell you not to worry about it as long as you’re qualified for a certain amount. Remember that lenders make their living by finding people who want a loan. A hungry lender can be a scary thing. As for expenses, also remember that currently, interest paid on a home loan can often be deductible on taxes. Also, you are building equity with time and principle payments. All these things should be considered when determining what you can afford.
9. What if I buy and then don’t like the house, or get transferred out of town and must sell?
Remember that the average Canadian moves every 5 to 7 years. If you move in and do not like your home, sell it and buy something else. While you should be serious when selecting a home to purchase, remember that your first home purchase will seldom be your last, but rather only one stop in a lifetime of home purchases. Traditionally, if you keep a house about two years, you should be able to sell it and break even (typically, a rule of thumb average). As a corporate brat, (my Dad frequently transferred cities, or the head hunters got him for a new company) just like ‘ol Dad, I can tell you that unless you are in a position that specifies that you must be highly mobile and will need to move every year, it is still usually better to buy than to rent, or rent-to-own with an option to buy. Lastly, many Corporations that require you to move, will offer you a nice relocation package that can take care of much of your expenses relating to the sale of your house, or rent expenses! Expenses such as Realtor commissions, closing costs, and "buy out"s if your house doesn’t sell within a given time period, are typical. Sometimes you can even make an additional profit if you can sell your house with your Realtor within a given period of time. If you and your chosen Realtor get your house sold under this particular type of relocation deal, they may offer you an extra percentage, or "reward" amount! MANY young (and even not-so-young) executives I have known feel a bit intimidated about pressing for the Realtor of their own choice to sell their home in a relocation package situation. Just remember this … the "reward" is yours if you select the best Realtor to get the job done. And, BY LAW, no one can FORCE you to use a Realtor that is not of your choice! YOUR new boss doesn’t care whom you use as your Realtor! THE RELO COMPANY is only a contracted resource. Though someone tells you that you MUST interview two agents and have two appraisals (or whatever), just accept the direction and say "Okay", ... and by the way, I also want to interview … (Vishal) to sell my house, (or help me find a new house or rental)". Believe me, your new company wants to make you happy! If you are relocating due to a transfer or new corporate position, you should talk to an agent experienced in Relocation deals! Once again, I’m your ERC (Employee Relocation Council) designated relo agent!
10. What if I get married after I buy a house?
Your income, your career, your tax breaks, and your best potential lifestyle are what matters most when you select a house. Yes, in Michigan, if you buy a house as a single man and then sell it as a married man, your wife must also sign of her own free will. If you are a woman, don't worry about it ... he doesn't have to sign. Other than the free will signature, the rest and the results are best decided by courts and such. I won’t provide any advice on that part of it, because I am a Realtor, not an attorney. If you are concerned about what might happen if you purchase a house and then get married, and then become divorced, you should really find a good lawyer. As for me personally, I won’t give you advice on that, but I’ll tell you that when I was divorced, the first thing I did was go out and buy my own little house! I was single, but it was mine! I enjoyed all the details of home ownership that I have written about here, and many details I have not discussed. In the end, I remarried less than two years after purchasing the house. I rented it out for another couple of years. And then I sold the house and tucked a few dollars into my pocket when they gave me the check at closing.
So, I hope this helps a little with home-buyer’s confusion! I remember how that feels, and I wish I had a report like this available to me back when my wife and I were shopping for our first home! I was so nervous, that I was afraid to even talk to Realtor’s on the phone when I called for the price of a house I had seen in the paper!
In the end, that’s exactly why I became a Realtor. Wish I had me as an agent back then!
And I wish that for you too.
Excerpts from pg. 147 through 158 by Carolyn Janik and Ruth Reignis in Everyone’s Guide to Buying, Selling, Renting, and Investing. All America’s Real Estate Book
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