Should I buy or continue to rent?
That depends on your situation. Buying a home is a very solid investment, but you will want to maintain ownership for at least 3-5 years to get your return. So if you think you may be moving in a couple years and would have to sell the home, renting is a better option. But if you do expect to be in the area for at least 3 years, buying a home may be cheaper then you think, and very cost effective. The federal government has set up generous tax laws to make homes more affordable for potential homeowners. For instance, if you have a retirement account, you may draw from that tax free (regardless of age) to use as funds for a first-time home purchase. And on a $300,000 home, you may need as little as $9,000 to complete the purchase (down payment and closing costs). Further, the interest you pay on your monthly mortgage (if you get a loan to finance the purchase), as well as your property taxes, are tax deductible.
What’s the first step of the home buying process?
If you need a home loan for the purchase, your first step should be to get pre-approved for a mortgage. A pre-approval will let you know how big a loan you can receive for the purchase, and thus what price home you can afford. With low-money-down programs, and such help as the “Lender Rebate” offered by Keystone Funding, many new homebuyers are often surprised at how much home they can afford. To get pre-approved for a mortgage, CLICK HERE.
What are all the costs involved in a home purchase?
When you buy a home, there will be mortgage-related and non-mortgage-related expenses (ie depending on whether you are getting financing to purchase the home). Most states, Pennsylvania included, impose a Transfer Tax when property changes hands. And occasionally, the local jurisdiction imposes a Transfer Tax. Typically the total Transfer Tax (in Pennsylvania) is 2.0%, and is customarily split between buyer and seller. There will also be a recording fee, in the $200 ballpark, paid to the County Clerk in the local jurisdiction for recording the new Deed. Additionally, if you get a home inspection, plan for a home inspection fee, and if you desire Owner’s Title Insurance, plan for that fee as well. If you are financing the home purchase, there will be additional costs associated with the mortgage, such as Appraisal, Lender’s Title Insurance, Lender Underwriting Fee, etc. However, if you are financing the home purchase, your mortgage lender may be able to arrange a “Lender Rebate” to cover some or all of your closing costs (except down payment). Keystone Funding offers such rebates, which are a great way to increase your purchasing power.
Do I really need a Real Estate Agent when buying a home?
Technically, no. You do not NEED a Real Estate Agent to buy a home…..much like you don’t NEED an Attorney to defend yourself in court. But like an Attorney, it is advised you have one. As a Buyer, you do not pay the Real Estate Agent. Your Agent receives his/her commission from the Seller’s Agent (typically Seller’s Agent pays 50% of his/her commission to Buyer’s Agent for helping to sell the property). Your Real Estate Agent has a fiduciary duty to represent your best interests in the transaction, and is well versed in the legal language of the purchase contract. Your Agent will also help you negotiate price, fight for any home improvements from seller, provide guidance on home inspection results, and give pros/cons of properties you are looking at.
As a Homebuyer, do I pay the Real Estate Agent?
No. The Seller’s Real Estate Agent will pay your Agent for being the “procuring cause” of the purchase. Typically the Seller’s Agent will split his/her commission (paid by Seller) with your Agent. The only exception is if the property is a “For Sale by Owner” (FSBO), and the seller has not agreed to pay any Buyer Agent commission.
What’s the difference between a “Listing Agent” and a “Selling Agent”?
The terms can be confusing, but a “Listing Agent” is the Real Estate Agent presenting the property for sale….”listing” the home on the Multiple Listing Service, and directly contracted by the Seller. If you attend an Open House and meet a Real Estate Agent hosting the event, or contact an Agent from an advertisement about a property for sale, that Agent is the “Listing Agent”. Conversely, the “Selling Agent” (aka Buyer’s Agent) is the Real Estate Agent who works for the Buyer. The Selling Agent represents the needs and best interests of the buyer, and has a fiduciary duty to the buyer (like the Listing Agent has a fiduciary duty to the seller). These roles are transaction dependent, ie an Agent may be on the “buy side” for one client/transaction, and on the “sell side” for another client/transaction.
What should I be looking for when I visit a home for sale?
This of course depends on your personal situation, but some typical questions to ask yourself are:
1. How will my family be growing over the next 5 years…is there enough room now and in the future?
2. Are the windows double-paned, and are in the ceilings high? This can increase heating and cooling costs (your Agent can get specific heating/cooling costs from Listing Agent)
3. What type of maintenance is required of the yard and landscape?
4. Do the rooms have “odd angles” that may make it difficult to accommodate my furniture?
5. Is there Central Air Condition? Are there thermostats on each floor?
6. Is there enough storage space?
7. How is the street noise (ie passing cars)?
8. Will I be able to handle winter maintenance requirements (ie snow and ice removal form driveway)
9. If there is a Homeowners Association (HOA), are there restrictions on what I can or cannot do?
As you walk through the home, your Real Estate Agent will point out the pros and cons of various features, and may see things you don’t. This is one reason why having an Agent with you when visiting the inside of a property is tremendously valuable.
How many homes should I look at before putting in a purchase offer?
This is a common question, and answers vary widely. Our opinion is that there is no minimum, and if you know exactly what you want, there is nothing wrong with making an offer on the first house you see, especially in a competitive market. On the other side though, there could be a maximum. There is nothing wrong with looking at 10, 20, 30 homes….but you want to ensure each visit has a purpose and objective. Going to look inside every home that comes on the market can be overwhelming, and will impair your ability to make a decision. Having a strategy and approach towards your home purchase will make the process tremendously easier, and your Real Estate Agent can help with this. What works well as you form your requirements is to drive by your homes of interest….check out the neighborhood, local attractions, yard space, etc. This is quick and easy to do on your own, and provides tremendous information.
Should I get a home inspection?
ABSOLUTELY!! Think of the home inspector as your “prosecuting attorney” in a court trial. The home inspector looks for all possible things that may be wrong with the property, and provides to you (and only you) a full report, including estimated cost to fix. Assuming you’ve included this contingency in your offer, if anything is discovered in the home inspection that makes you feel uncomfortable, you can withdraw from the transaction with no penalty, and receive a full refund of any earnest money.
What Advice Can You Offer for First-Time Homebuyers?
As a First-Time Homebuyer, the best thing you can do is trust the Professionals- your Real Estate Agent, your Mortgage Loan Originator, your Home Inspector, etc. While getting insight from friends, family, and co-workers is important, those who do not work in the industry do not have all the information….particularly on the uniqueness of your scenario. Everyone likes to give opinions, especially on Real Estate, but buying and selling a couple of homes does not make someone a well-rounded source of information. The people who know best are the people that work in the industry, and have been involved in hundreds, sometimes thousands, of property transactions.