Growing up I was rather adverse to credit cards. As numerous
millennial’s can attest to they saw how horrible credit cards were for
their parents. After my parents had to declare bankruptcy because of
credit cards I never really wanted them as an adult. So this is a
quandary how do you get someone to sign up for something that if used
irresponsibly can cause amazing destruction to your finances leading to
bankruptcy? Now you can go with the argument everyone needs a credit
card, which other than renting a car from a car rental agency I have
never seen a place that would not take a debit card in place of a credit
card. So there is one time in an adult’s life that arguably having a
credit card might come in handy, however, credit card companies I assume
want the average American to have more than one credit card. So how do
you get someone to sign up for credit cards? The current idea is that
you create sign up bonuses, card rewards, and also give some sort of
point or cash back reward.
Cash-Back Reward-
I personally use fidelity rewards card which gives 2% cash back as my
default card. Ok I’m adverse to the idea of credit card debt, however,
the idea of getting back 2% whenever I buy anything is appealing. This
is a little bit more than you get with a money market which are
typically around 1% and lets say inflation for sake of argument is 3% so
the amount you get back is pretty decent.
Sign-Up Bonuses-
Most of these work in the idea of spend x in three months after
opening the card and get y amount of bonus points. So I guess the idea
than comes to mind is how useful is a point? Capital One for example
with the Venture Cards had a 40,000 bonus points when spending 3,000
dollars in the first three months. Looking up on their reward system
it’s 50,000 points for a roundtrip flight from Atlanta, GA to SeaTac,
WA. So if I’m planning to spend 3,000 dollars in three months (which is
relatively easy to do and even if you have issues reaching minimum spend
limits you can always spend money on gift cards) I can get enough
points to fly home for the Holidays. Now what about if I had to earn
points normally without the help of a sign in bonus? In the Venture
example most money spent is equivalent to 2 points. Now spending
$25,000 in a year to get a free plane trip is a lot less appealing than
spending $3,000. I think this might lead to you opening up credit cards
just for the sign-in bonuses, however, every time your credit is pulled
it’s a ding on your credit score. If your interested in how opening a
credit card affects your credit I suggest reading the following:
https://www.thebalance.com/how-opening-a-new-credit-card-affects-your-credit-score-960501
Card Rewards-
Other cards like the IHG card gives you a night free stay every year
at an Intercontinental Hotel Group Resort, which has some inherit worth,
most of these cards also come with an annual fee in this case $49 and
can be worthwhile if you plan at staying at a Holiday Inn at least once a
year. I was looking at one card for a Disney Vacation that gave
special privileges why you are at Disneyworld again with all these
things you need to look at the fine print.
Also it’s never worth it to have a credit card that is not paid
off. As long as you pay the full balance due on the credit card every
billing cycle you should never theoretically be charged. Also some
cards don’t really have substantive enough rewards, but might still be a
good idea as a way to close another card that costs money and transfer
off the points you have earned up on it. For example, the Venture One
card doesn’t give as much as a bonus as the Venture card, but has no
yearly fee so is it’s a good card to have if you want to earn the points
with the Venture Card and then close the card out and transfer the
points to the Venture One card.
Growing up adverse to credit cards I do think that it’s worth using a
credit card so that as you spend money you can acquire some sort of
sign-in bonus or other flat reward like 2% cash back than just putting
the money on a debit card. It does make doing my monthly finances more
of a pain. In that along with my bank information I have to go into
each of my credit cards and see how much I spent on them and what I
spent that money on which can make categorizing your expenditures a bit
more work, however, you do get something for the extra work you are
putting in and for the risk of having a credit card. Also opening a
credit card can affect your credit so take that into consideration if
your about to make a major credit purchase such as a new home loan.
Wednesday, October 18, 2017
Buying a House
With things going well at TVA and my position seeming pretty stable,
I’ve decided to look for a house. Having lived in four different places
in the last year, I’m looking forward to the stability of a house and a
place to call my own. Chattanooga is a tricky place to buy a home in
that every area of the Chattanooga metropolitan area has an issue with
it, at least if you work downtown. Interstate 24 is rather horrid for
commuting, it would be nice if there was another interstate that
bypassed I-24, however, with the Tennessee River and Lookout Mountain
and the Cumberland Plateau, Chattanooga is rather landlocked which is
why there hasn’t been some sort of bypass created. The areas with
decent schools in Hamilton County are farther away from downtown and
require commuting on I-24. Most of Hamilton County has absolutely
terrible public schools and the more well off all send their kids to
private schools. North Georgia has decent public schools, but then you
have to pay GA income tax. You can also live up on a mountain like
Signal or Lookout Mountain, but then you have to drive up and down a
mountain to go work just so that the schools are more decent. Downtown
is nice, but the closer areas to downtown are your more poor and high
crime areas. It’s really a crab shoot of issues when picking an area.
The costs of housing also varies greatly in the Chattanooga area, with homes ranging from under 100k to over 500k with sometimes very little justification for charging more money for the home. Instead of having areas of gentrification and more affluent neighborhoods and less well off parts of towns you will see a $50,000 dollar home next to a $200,000 dollar home in Chattanooga. The variance of costs and area’s does make it tricky when thinking of the long term ramifications of buying a place.
Although it might seem like a good idea to look ahead when you plan on buying I would caution against it, there is no reason to look at houses and find one that you like if you’re not planning to put an offer out on a home. A typical home closing period is 30 days. You can ask for a 60 day closing or even a 90 day closing, but typically most homes close in a short period of time. Of course, this is complicated by apartment leases with more established apartment complexes having it more common to ask for a 60 day notice unless you break the lease. So if you are looking for a home half a year before you plan on moving by the time you could even put a 90 day offer on the house there is a good chance that it will be off the market and you will have spent time warming up to this new possible home for naught.
Although of course this depends on the market. The market I’m looking at is more of a seller’s market. Homes if there in a good location and at a reasonable price will usually be bought up rather fast. For example, I was looking at a home last week at 1701 Roberts Pl, Chattanooga that was listed on the mls Thursday and was under contract by Monday. The mls is what realtors use for listing homes for sale online. It’s more official then home searching sites like Zillow, Realtor or Trulia. Though when looking at homes online I do like to use several different tools to search for a home as often each of them will have a little different information about the home than another website.
Also of great use when looking for homes online is Google maps. You can see the street view of the home you are looking for and see a satellite view of the property which helps give you a better idea of what the home and the neighborhood look like online.
Typically most home buying experience starts with choosing a realtor to look at homes with. In real estate money is made from the sale of a home, the buyer actually never pays anything to a real estate agent to look at homes the seller pays the 3% cost of the buyer’s agent upon sale of the home. So with buying any agent can buy you a home, though you typically don’t want this to be the same person who is selling the home due to conflicts of interest.
Also you can ask yourself do I need a realtor, again the seller typically pays the 3% cost of the buyers real estate agent which might not seem like a lot of money, but it is. Remember 3% of 100,000 is $3,000 dollars so again if you as the buyer don’t think your going to get 3% value out of whatever agent you go with then don’t. With this being my second home buying experience I have realized that a lot of the things the agent does you can do yourself, so if the agent isn’t actively finding and scheduling homes for you to look at, and making all the paper work of the home buying process I would just go without an agent. If whoever is selling the home says you need an agent to buy the home they are probably just trying to scam you for 3% of the homes profits. Signing papers, looking for homes, and visiting homes is something anyone can do.
When a home closes the seller if there using a sales agent pays 6% of the sale cost of the home in agents fees half for the selling agent and the other half for the buying agent. If they are selling FSBO (for sale by owner) then they pay 3% for agent fees if the buyer real estate agent introduces the buyer to the seller. So in a situation where you are buying a home for sale by the owner it saves you and the seller money if you don’t have a buyer agent.
A realtor should sit down with you and discuss what you are looking for in a home to start out with. They should figure out what requirements you have so when new homes come on the market that meet those requirements they can send them your way and schedule with you to tour the home if you are interested in the property. This is important because a lot of homes might not fit what you are looking for, like example you want a three car garage, or you need a property that isn’t part of an HOA, or you want a property that you can raise chickens or goats. Whatever the reason you will definitely find that not every home that is available is something that fits your needs. A home is an investment and you don’t want to invest in something that you don’t like. Also having a realtor who shows you new homes that you are interested in as they appear on the market is key in a seller’s market when the home might be off the market in a week.
The other thing you need to do early in your home search is start figuring out the money aspect. With a home being an expensive investment you will likely need to get a loan and be able to finance a loan for whatever property you are looking at. When it comes to home loans there are several different types of loans and not all loans cover the same products, for example, manufactured versus stick-built homes will be financed differently. Typically when looking at interest rates the lower term the loan is the lower the interest rate though you have to pay more a month to pay off the loan faster. With home loans they will typically need to be at least $50,000 I’m not sure what the upwards cap is. These are considered Fannie Mae or Freddie Mac home loans and you will want to check with at least three different financial institutions to see which ones will provide the best rates. Also if you don’t have 20% of the closing cost for the home ready for a down payment you will need to provide PMI or Private Mortgage Insurance which increases the cost of the home over the life of the loan. As a note you can sometimes get loans for less than $50,000 dollar through places like Federal Credit Unions, in Chattanooga TVFCU will provide loans starting at $25,000 dollars.
Once you have found a loan you think you will like you need to get prequalified for the loan this is where you fill out some financial information online and then the bank will either approve or not approve you for the loan. You will need the prequalification letter when placing an initial bid on a home for sale. When looking at homes you also need to make sure they will qualify for whatever loan you have. Usually if a home needs major renovations there is a good chance it will not qualify for the home loan like if there is mold, the hardwood floors underneath the carpet are rotting, etc, the loan itself can fall through. With homes like these typically they will be a cash only sale and sold AS-IS. As stated earlier you will also need to look at the loan to make sure it covers whatever property you are looking at like for example if it will fall under a VA loan, etc.
Once you find a home you like online, you will then need to schedule to see it in person. You can tell a lot about a home online such as schools, pictures, safety of the neighborhood, comparable prices, sales history, etc, but still you definitely need to look a home over before you buy it. The scary thing about this is typically you only see a home once and for less than an hour before you put in an initial offer to buy a home. When you place your initial offer the seller can do one of three things: refuse the offer, counter the offer, or accept the offer. Once the offer is accepted the home is officially under contract. At this time you will need to arrange a home inspection of the house, the bank will want to do an appraisal of the houses value, and you will want the seller’s to fix/take care of any loose ends on the property before the closing date. The closing date is when the seller is officially moved out and you get the keys to your new home.
This part can be a blare so I do really recommend with the initial home inspection/tour of the home if once you walk through the home you think you want to buy it to make sure you see everything your interested in before leaving. This includes trying to see if you can get up into the attic to walk around and seeing the condition of the crawl space. Does the house have a suck pump and if so does it work? Those kind of questions you should have an idea of before you buy it. Now of course when the home inspection comes up the home inspector should find things like that and let you know. However, a home inspector isn’t going to find everything and some of the things they find probably are not going to be able to get fixed like if there is water issues on a foundation that you might not see with the naked eye. Eventually if you own a home you will enjoy the thrills of home ownership including finding out something is broke and according to who/what you want done to fix an issue it can cost you tens of thousands of dollars to fix.
Personally I don’t trust banks, but the home appraisal should confirm that whatever you are paying for the home is a valid price for the home. Since a bank makes money off a loan I think they are more interested in writing new loans then always making sure that the home really is what they say its worth, however, if you default on the home loan and the bank has to foreclose on the house they do need to be able to sell it for about, however much is on the loan for the house. Theoretically this is one of the checks on the cost of a home, the other being the buyer not paying more than a house is worth, and the third being the seller asking a reasonable price for the home in the first place.
This does make it tricky though when coming up with your initial bid for a home. I have heard of people going as low as 70% of asking price for a home on the initial offer which I heard the seller take in that situation. Typically a home will sell for a few thousand more than it last sold for. In this regard of trying to figure out what a home is really worth it isn’t easy, if you ask four different people what they think a home is really worth you might get four different answers, though you want to try to find a happy medium. I have also heard of people just offering whatever the asking price of a home is if it’s a seller’s market. So for buying and selling a home figuring out what the price should be listed for and what it actually is worth is tricky.
I will usually bid low for an initial bid unless I really want a house and think the market is too hot for a low bid. This is because you can not ever go lower when bidding on a home. Once your offer is accepted that is how much you are paying for the home. Now you can work in things later like if the roof needs to be redone and you find it out in the home inspection to have the roof replaced as a condition of the purchase, but whatever the purchase price you agreed on is now set in stone.
When multiple buyer’s place an offer on a home you can come into what is a multiple buyer situation which is really good for the seller. Here the seller will tell the buyer’s there are multiple offers and they will all place there highest and best offer and then the seller can choose the best offer for the house. I have also seen though when there are multiple buyer’s the seller just counter one of the offer’s on a house so if you place a bid hoping that if all else fails it will come down to multiple offers it will not always come down to you getting to place a second offer on a home.
Buying and searching for a home is a lot of work, typically if your looking to buy a home you will spend a few hours every week looking online and in person at homes. You will then need to come up with what you want to offer on homes that you are interested in after verifying that whatever loan you have works for the home. Once the offer is accepted you will then need to do several things before the Closing Date when the title for home is signed over and you get the keys for your new house including a home inspection and home appraisal. Hopefully at the end of all this work though is your new home some place that you find to be your sanctuary and not your nightmare. If it is a nightmare hopefully it is one that is fading and once you work out all the surprise kinks, a place that you grow to love, and would rather live in than any other place on Earth.
Once the price and contract is agreed upon there will be a lot of paperwork and a lot of fees. Lots of these “closing fees” are pretty much static meaning they won’t really change depending on the cost of the home while other’s are not and will change like paying for property taxes or prepaid interest on the loan for the remainder of the month.
This get’s into the question, What is the real cost of a home loan? Now everyone understands that there is going to be interest charged on the loan, right now this is around 3-4% of the houses value. However, a home loan cost is more than just the loan interest. There is also PMI that you have to pay for if you don’t have at least 20% of the down payment in liquid assets to cover the cost of the home. There is also the Appraisal fee, Credit Report Fee, Flood Determination Fee, Tax Monitoring Fee, Verification of Employment fee, along with the Origination Fee for the loan. Now there might be more fees specifically centered on the Loan I know for the home I am looking at buying these are all on the Loan Estimate.
The Loan Estimate will be given to you when after the property is under contract and you are going through the process of getting all the loan papers filled out and information for the home. This document provides an idea of the finances of the loan answering questions like how much is the loan amount, what is the interest rate of the loan, what is the expected monthly payment, is there a prepayment penalty (this is where you are charged more if you pay off your home early) and expected cost of fees.
Also all home loans that I am aware of require home owner’s insurance. Now one could argue that home owner’s insurance is in general a good idea so it’s not an added fee, but since your required to have it I consider it another fee tacked onto a home loan. Home Owner’s insurance like all insurance in the US can be shopped for though like most insurance you will find the cost is pretty much the same expect to pay around a 100-200 a month for this. Before the loan is approved for the purchase of the home you will have to provide the loan company with information proving that you have home owner’s insurance set up and ready to go on the closing date of the home.
It’s not just the loan company though that is making money off the sell of the home, the Title Company is getting a share of the profits with more fees like Title- Closing Protection Letter, Title – Document Preparation, Title – Lender’s Title Policy, Title – Settlement and Attorney Fee. There are even optional fees like Title Owner’s Title Policy. Now as you can tell there are a lot of fees, which is why the term closing fees although it seems simple, is not, expect anyone who can possibly make a dollar off the sell and purchase of the property to try to do so. Some of the other taxes and government fees include transfer taxes, and recording fees and other taxes (as if they had ran out of clever this is a bs reason to charge you more name).
With a loan as well typically some of the costs of the home go into what is called an Escrow account. You don’t have to have an Escrow account for your loan, but the charge to do so is significant (when I asked for the loan I’m getting it was 25% of the cost of the loan to not have it setup). Usually the costs for the properties property tax and home owner’s insurance will go into the Escrow account and be paid out through it.
As long as you own the property you will have to pay property taxes on it and these will typically vary significantly due to factors like location and perceived value of the home. This is the only ongoing home cost that you really have no say in other than exercising your right to vote in local elections.
The one fee not mentioned here is a home inspection this is optional and not part of the home loan process. Most people would recommend one and I do as well based off the fact that you really do want to know as much as possible before you close on a home. Usually before the closing date if you walk out on the contract and choose to not buy the home the only thing you will be out is the Earnest Money (this is typically something like $500 – $1000). The Earnest Money you will need to give to the title company usually within a week of agreeing upon the selling price of the property. So if you find a home that you really like and want to move into it and then put forward the Earnest Money and hire the home inspection as you begin to get all the loan papers filled out and find out that through the home inspection the house is a lemon then you can walk out and not have to worry that what you are about to get is a Russian Nesting Doll of money pits.
Along with the fees there is a lot of paperwork to be filled out when buying a home and when getting a loan there are a ton of documents the loan company requests from you. The whole process though can be done in 30 days easily it’s just a lot of stuff to do in that time frame, you might even be able to close sooner like in 20 days, I myself have done 60 day closings with the two properties I bought.
An important thing to do is to get the measurements of the home as far as the interior of the home so you can create a floor plan for the home. There are a lot of different apps and websites that cater to this need. I would recommend floorplanner.com as I used that when creating the floor plan for the home I am buying. This is very useful because you can then measure your furniture and start to have an idea of how to arrange everything in your new home.
As you have read there is a lot to the home buying process. I wish you luck in your home search and I hope that some of the information that I have shared from my home buying experiences helps you out. In closing I have provided a rough timeline for the home buying process.
Timeline of buying a home:
The costs of housing also varies greatly in the Chattanooga area, with homes ranging from under 100k to over 500k with sometimes very little justification for charging more money for the home. Instead of having areas of gentrification and more affluent neighborhoods and less well off parts of towns you will see a $50,000 dollar home next to a $200,000 dollar home in Chattanooga. The variance of costs and area’s does make it tricky when thinking of the long term ramifications of buying a place.
Although it might seem like a good idea to look ahead when you plan on buying I would caution against it, there is no reason to look at houses and find one that you like if you’re not planning to put an offer out on a home. A typical home closing period is 30 days. You can ask for a 60 day closing or even a 90 day closing, but typically most homes close in a short period of time. Of course, this is complicated by apartment leases with more established apartment complexes having it more common to ask for a 60 day notice unless you break the lease. So if you are looking for a home half a year before you plan on moving by the time you could even put a 90 day offer on the house there is a good chance that it will be off the market and you will have spent time warming up to this new possible home for naught.
Although of course this depends on the market. The market I’m looking at is more of a seller’s market. Homes if there in a good location and at a reasonable price will usually be bought up rather fast. For example, I was looking at a home last week at 1701 Roberts Pl, Chattanooga that was listed on the mls Thursday and was under contract by Monday. The mls is what realtors use for listing homes for sale online. It’s more official then home searching sites like Zillow, Realtor or Trulia. Though when looking at homes online I do like to use several different tools to search for a home as often each of them will have a little different information about the home than another website.
Also of great use when looking for homes online is Google maps. You can see the street view of the home you are looking for and see a satellite view of the property which helps give you a better idea of what the home and the neighborhood look like online.
Typically most home buying experience starts with choosing a realtor to look at homes with. In real estate money is made from the sale of a home, the buyer actually never pays anything to a real estate agent to look at homes the seller pays the 3% cost of the buyer’s agent upon sale of the home. So with buying any agent can buy you a home, though you typically don’t want this to be the same person who is selling the home due to conflicts of interest.
Also you can ask yourself do I need a realtor, again the seller typically pays the 3% cost of the buyers real estate agent which might not seem like a lot of money, but it is. Remember 3% of 100,000 is $3,000 dollars so again if you as the buyer don’t think your going to get 3% value out of whatever agent you go with then don’t. With this being my second home buying experience I have realized that a lot of the things the agent does you can do yourself, so if the agent isn’t actively finding and scheduling homes for you to look at, and making all the paper work of the home buying process I would just go without an agent. If whoever is selling the home says you need an agent to buy the home they are probably just trying to scam you for 3% of the homes profits. Signing papers, looking for homes, and visiting homes is something anyone can do.
When a home closes the seller if there using a sales agent pays 6% of the sale cost of the home in agents fees half for the selling agent and the other half for the buying agent. If they are selling FSBO (for sale by owner) then they pay 3% for agent fees if the buyer real estate agent introduces the buyer to the seller. So in a situation where you are buying a home for sale by the owner it saves you and the seller money if you don’t have a buyer agent.
A realtor should sit down with you and discuss what you are looking for in a home to start out with. They should figure out what requirements you have so when new homes come on the market that meet those requirements they can send them your way and schedule with you to tour the home if you are interested in the property. This is important because a lot of homes might not fit what you are looking for, like example you want a three car garage, or you need a property that isn’t part of an HOA, or you want a property that you can raise chickens or goats. Whatever the reason you will definitely find that not every home that is available is something that fits your needs. A home is an investment and you don’t want to invest in something that you don’t like. Also having a realtor who shows you new homes that you are interested in as they appear on the market is key in a seller’s market when the home might be off the market in a week.
The other thing you need to do early in your home search is start figuring out the money aspect. With a home being an expensive investment you will likely need to get a loan and be able to finance a loan for whatever property you are looking at. When it comes to home loans there are several different types of loans and not all loans cover the same products, for example, manufactured versus stick-built homes will be financed differently. Typically when looking at interest rates the lower term the loan is the lower the interest rate though you have to pay more a month to pay off the loan faster. With home loans they will typically need to be at least $50,000 I’m not sure what the upwards cap is. These are considered Fannie Mae or Freddie Mac home loans and you will want to check with at least three different financial institutions to see which ones will provide the best rates. Also if you don’t have 20% of the closing cost for the home ready for a down payment you will need to provide PMI or Private Mortgage Insurance which increases the cost of the home over the life of the loan. As a note you can sometimes get loans for less than $50,000 dollar through places like Federal Credit Unions, in Chattanooga TVFCU will provide loans starting at $25,000 dollars.
Once you have found a loan you think you will like you need to get prequalified for the loan this is where you fill out some financial information online and then the bank will either approve or not approve you for the loan. You will need the prequalification letter when placing an initial bid on a home for sale. When looking at homes you also need to make sure they will qualify for whatever loan you have. Usually if a home needs major renovations there is a good chance it will not qualify for the home loan like if there is mold, the hardwood floors underneath the carpet are rotting, etc, the loan itself can fall through. With homes like these typically they will be a cash only sale and sold AS-IS. As stated earlier you will also need to look at the loan to make sure it covers whatever property you are looking at like for example if it will fall under a VA loan, etc.
Once you find a home you like online, you will then need to schedule to see it in person. You can tell a lot about a home online such as schools, pictures, safety of the neighborhood, comparable prices, sales history, etc, but still you definitely need to look a home over before you buy it. The scary thing about this is typically you only see a home once and for less than an hour before you put in an initial offer to buy a home. When you place your initial offer the seller can do one of three things: refuse the offer, counter the offer, or accept the offer. Once the offer is accepted the home is officially under contract. At this time you will need to arrange a home inspection of the house, the bank will want to do an appraisal of the houses value, and you will want the seller’s to fix/take care of any loose ends on the property before the closing date. The closing date is when the seller is officially moved out and you get the keys to your new home.
This part can be a blare so I do really recommend with the initial home inspection/tour of the home if once you walk through the home you think you want to buy it to make sure you see everything your interested in before leaving. This includes trying to see if you can get up into the attic to walk around and seeing the condition of the crawl space. Does the house have a suck pump and if so does it work? Those kind of questions you should have an idea of before you buy it. Now of course when the home inspection comes up the home inspector should find things like that and let you know. However, a home inspector isn’t going to find everything and some of the things they find probably are not going to be able to get fixed like if there is water issues on a foundation that you might not see with the naked eye. Eventually if you own a home you will enjoy the thrills of home ownership including finding out something is broke and according to who/what you want done to fix an issue it can cost you tens of thousands of dollars to fix.
Personally I don’t trust banks, but the home appraisal should confirm that whatever you are paying for the home is a valid price for the home. Since a bank makes money off a loan I think they are more interested in writing new loans then always making sure that the home really is what they say its worth, however, if you default on the home loan and the bank has to foreclose on the house they do need to be able to sell it for about, however much is on the loan for the house. Theoretically this is one of the checks on the cost of a home, the other being the buyer not paying more than a house is worth, and the third being the seller asking a reasonable price for the home in the first place.
This does make it tricky though when coming up with your initial bid for a home. I have heard of people going as low as 70% of asking price for a home on the initial offer which I heard the seller take in that situation. Typically a home will sell for a few thousand more than it last sold for. In this regard of trying to figure out what a home is really worth it isn’t easy, if you ask four different people what they think a home is really worth you might get four different answers, though you want to try to find a happy medium. I have also heard of people just offering whatever the asking price of a home is if it’s a seller’s market. So for buying and selling a home figuring out what the price should be listed for and what it actually is worth is tricky.
I will usually bid low for an initial bid unless I really want a house and think the market is too hot for a low bid. This is because you can not ever go lower when bidding on a home. Once your offer is accepted that is how much you are paying for the home. Now you can work in things later like if the roof needs to be redone and you find it out in the home inspection to have the roof replaced as a condition of the purchase, but whatever the purchase price you agreed on is now set in stone.
When multiple buyer’s place an offer on a home you can come into what is a multiple buyer situation which is really good for the seller. Here the seller will tell the buyer’s there are multiple offers and they will all place there highest and best offer and then the seller can choose the best offer for the house. I have also seen though when there are multiple buyer’s the seller just counter one of the offer’s on a house so if you place a bid hoping that if all else fails it will come down to multiple offers it will not always come down to you getting to place a second offer on a home.
Buying and searching for a home is a lot of work, typically if your looking to buy a home you will spend a few hours every week looking online and in person at homes. You will then need to come up with what you want to offer on homes that you are interested in after verifying that whatever loan you have works for the home. Once the offer is accepted you will then need to do several things before the Closing Date when the title for home is signed over and you get the keys for your new house including a home inspection and home appraisal. Hopefully at the end of all this work though is your new home some place that you find to be your sanctuary and not your nightmare. If it is a nightmare hopefully it is one that is fading and once you work out all the surprise kinks, a place that you grow to love, and would rather live in than any other place on Earth.
Once the price and contract is agreed upon there will be a lot of paperwork and a lot of fees. Lots of these “closing fees” are pretty much static meaning they won’t really change depending on the cost of the home while other’s are not and will change like paying for property taxes or prepaid interest on the loan for the remainder of the month.
This get’s into the question, What is the real cost of a home loan? Now everyone understands that there is going to be interest charged on the loan, right now this is around 3-4% of the houses value. However, a home loan cost is more than just the loan interest. There is also PMI that you have to pay for if you don’t have at least 20% of the down payment in liquid assets to cover the cost of the home. There is also the Appraisal fee, Credit Report Fee, Flood Determination Fee, Tax Monitoring Fee, Verification of Employment fee, along with the Origination Fee for the loan. Now there might be more fees specifically centered on the Loan I know for the home I am looking at buying these are all on the Loan Estimate.
The Loan Estimate will be given to you when after the property is under contract and you are going through the process of getting all the loan papers filled out and information for the home. This document provides an idea of the finances of the loan answering questions like how much is the loan amount, what is the interest rate of the loan, what is the expected monthly payment, is there a prepayment penalty (this is where you are charged more if you pay off your home early) and expected cost of fees.
Also all home loans that I am aware of require home owner’s insurance. Now one could argue that home owner’s insurance is in general a good idea so it’s not an added fee, but since your required to have it I consider it another fee tacked onto a home loan. Home Owner’s insurance like all insurance in the US can be shopped for though like most insurance you will find the cost is pretty much the same expect to pay around a 100-200 a month for this. Before the loan is approved for the purchase of the home you will have to provide the loan company with information proving that you have home owner’s insurance set up and ready to go on the closing date of the home.
It’s not just the loan company though that is making money off the sell of the home, the Title Company is getting a share of the profits with more fees like Title- Closing Protection Letter, Title – Document Preparation, Title – Lender’s Title Policy, Title – Settlement and Attorney Fee. There are even optional fees like Title Owner’s Title Policy. Now as you can tell there are a lot of fees, which is why the term closing fees although it seems simple, is not, expect anyone who can possibly make a dollar off the sell and purchase of the property to try to do so. Some of the other taxes and government fees include transfer taxes, and recording fees and other taxes (as if they had ran out of clever this is a bs reason to charge you more name).
With a loan as well typically some of the costs of the home go into what is called an Escrow account. You don’t have to have an Escrow account for your loan, but the charge to do so is significant (when I asked for the loan I’m getting it was 25% of the cost of the loan to not have it setup). Usually the costs for the properties property tax and home owner’s insurance will go into the Escrow account and be paid out through it.
As long as you own the property you will have to pay property taxes on it and these will typically vary significantly due to factors like location and perceived value of the home. This is the only ongoing home cost that you really have no say in other than exercising your right to vote in local elections.
The one fee not mentioned here is a home inspection this is optional and not part of the home loan process. Most people would recommend one and I do as well based off the fact that you really do want to know as much as possible before you close on a home. Usually before the closing date if you walk out on the contract and choose to not buy the home the only thing you will be out is the Earnest Money (this is typically something like $500 – $1000). The Earnest Money you will need to give to the title company usually within a week of agreeing upon the selling price of the property. So if you find a home that you really like and want to move into it and then put forward the Earnest Money and hire the home inspection as you begin to get all the loan papers filled out and find out that through the home inspection the house is a lemon then you can walk out and not have to worry that what you are about to get is a Russian Nesting Doll of money pits.
Along with the fees there is a lot of paperwork to be filled out when buying a home and when getting a loan there are a ton of documents the loan company requests from you. The whole process though can be done in 30 days easily it’s just a lot of stuff to do in that time frame, you might even be able to close sooner like in 20 days, I myself have done 60 day closings with the two properties I bought.
An important thing to do is to get the measurements of the home as far as the interior of the home so you can create a floor plan for the home. There are a lot of different apps and websites that cater to this need. I would recommend floorplanner.com as I used that when creating the floor plan for the home I am buying. This is very useful because you can then measure your furniture and start to have an idea of how to arrange everything in your new home.
As you have read there is a lot to the home buying process. I wish you luck in your home search and I hope that some of the information that I have shared from my home buying experiences helps you out. In closing I have provided a rough timeline for the home buying process.
Timeline of buying a home:
- You and your family decide to look for a home for whatever reasons
- You choose rather to use a realtor or not
- You look at homes online through the MLS and other tools such as Zillow and even flip through some reality magazines.
- You find homes that you like and schedule to look at them.
- Arrange a loan if needed through a bank or credit union after searching for the best loan for the properties you are interested in.
- After looking at homes you like you put out a bid on a home. It is never considered wise to have more then one home bid out at a time.
- You should hear back from the seller or not, an offer has a statement that it is only good for a certain period of time.
- You either agree, or disagree upon the price and then haggle over it or go back to step 3 with another home.
- Once the price for the home is agreed upon by seller and buyer its under contract and will close on the date given in the contract.
- You will need to provide Earnest Money to the title company
- If you want order and have a Home Inspection done.
- At the inspection or sometime apart from it arrange to be able to have access to the property. Take measurements of every room/use whatever tool or app you want to create floor plans of the house. These floor plans are very useful for figuring out where you will put your furniture and allow you to start preparing for the day of the move by having an idea of what you want to do for the home’s layout.
- Provide a list to the seller from the Home Inspection of what all you want them to do to fix up the property to take care of issues found in the home inspection.
- Start filling out papers for the Loan if you are getting one.
- Provide the Loan Company with a ton of information such as: Full tax returns, W-2s for the last 2 years, 401k statement, 1 month recent paystubs, purchase contract, prove of homeowners insurance, copy of earnest money check, 2 month prior bank statements, and whatever else they want.
- Home Appraisal will be done by the Loan company and provided to you.
- Once the Loan paperwork is done and everything is in place the loan will very likely be approved.
- Have whatever other inspections you want done like a flood inspection for the home.
- Wait the loan company doesn’t need anything.
- The day before the closing you will need to do a final walkthrough of the home and make sure that you have whatever cash needed for the closing ready, typically the money will need to be wire transferred and you need to get with your bank to get this ready. The final walkthrough is where you verify all requested home improvements have been made.
- Day of the closing prepare to read a bunch of paperwork and sign a lot of documents at the title company’s office.
- Once all the paperwork is signed and you have transferred over the money the home is your’s you will receive the keys to the property.
- Do any pre move in cleaning or preparation you have planned for the new home. Now is the best time to clean the hardwoods.
- Move your stuff into your new home.
- Clean up your old place and prepare it to be ready for new people if you are no longer going to own it.
- Hopefully live happily ever after until you have to repeat step 1.
My Dad’s Financial Legacy
My Dad’s Financial Legacy
For my inaugural post I wanted to share on the most important lesson that my Dad taught me about finances. Before I begin I want to state that I love my dad deeply and try to honor him, perhaps it’s what makes his financial shortcomings to me so heartbreaking. One of the ways that we as humans learn is through failures and were some parents teach their children financial responsibility through their actions I learned what not to do by my father’s. Indeed it’s my father’s continual lack of fiscal responsibility that has affected my thoughts on money the most and plays a part of my worldview.
My dad for as long as I can remember has always had stuffitis that always present need for more and better. Every couple of years without fail he wants to buy a new car, not that he always has the old one paid off or there is anything wrong with it, he simply wants newer and better. His stuffitis translates to all areas of his life needing new furniture, new vehicles, new everything as if somehow consumerism and buying something new will validate or give meaning to something, anything. Just recently my father was able to secure money from a court settlement case for an on the job injury, a large sum of money that any prudent person at his age would use to pay off any remaining debt and invest and use wisely for his retirement. Instead with his stuffitis he went and bought a new car, new furniture, and is remodeling his house that he hasn’t finished paying off.
My father it pains me to say it is a fool. A couple years ago for Christmas I gave my father, Dave Ramsey’s Financial Peace shortly after returning home when I noticed that it took about the time for me to write him a check for him to go and spend it. One of the wasteful practices my father does is buy tons of food. A large percentage of food in developed nations is just thrown away because we buy so much food, but we don’t use it. In my dad’s case he has a stocked pantry, and has bought an extra freezer to just store more. Now this extra storing I don’t mind in some cases like if you hunt, an extra storage could make sense. What makes no sense is to buy food to just store it and never eat it. Although he tells me he read, “Financial Peace” I find it hard to believe when he doesn’t apply the concepts.
When we read something it can be for various reasons, but with nonfiction I believe we should always ask, “How do these concepts affect me?” It makes very little sense to read a pearl of wisdom and than to not try to apply it to our lives. If one just reads a religious text for example, but does not follow it’s edicts than one can see how others can doubt the usefulness of the religious text.
With my dad’s stuffitis though perhaps I should have known better than to think that me giving him a book or mentioning to him how I think he is careless with money would change the ways he handles it. At this point in my life I know that eventually he will squander away what money he has and that my brother and I will have to take care of him in old age with him leaving behind nothing, but a valuable lesson in what not to do. Our stuffitis should never be what we are known for. I hope when one thinks of me that they think of the good that I left behind, not the things which I can’t take with me. In Andrew Carnegie’s Gospel of Wealth he discusses the importance of dispersing one’s wealth while they are alive. When one is dead it’s too late to go back and change things and no matter how much one accumulates you can never take it with you in the end.
Sadly the adage, “You can’t teach an old dog new tricks” seems to apply to well with my father. My dad has been bankrupt several times. My mom and dad accrued massive amounts of credit card debt before they went through a divorce and bankruptcy. My advise for those that have loved one with stuffitis is to not enable them. They will spend money, it will not make sense, be sane or help them in any way. Limit the credit you give them and don’t give them more money than what they need for essentials. For those that are young seek wisdom in your finances and live a life of financial responsibility. Your future wealth depends on it. I might never be a wealthy man, but by being fiscally responsible I will hopefully never be in need. For those that you know that don’t know about fiscal responsibility, but are willing to be responsible spend the time and help lead them down the road.
For my inaugural post I wanted to share on the most important lesson that my Dad taught me about finances. Before I begin I want to state that I love my dad deeply and try to honor him, perhaps it’s what makes his financial shortcomings to me so heartbreaking. One of the ways that we as humans learn is through failures and were some parents teach their children financial responsibility through their actions I learned what not to do by my father’s. Indeed it’s my father’s continual lack of fiscal responsibility that has affected my thoughts on money the most and plays a part of my worldview.
My dad for as long as I can remember has always had stuffitis that always present need for more and better. Every couple of years without fail he wants to buy a new car, not that he always has the old one paid off or there is anything wrong with it, he simply wants newer and better. His stuffitis translates to all areas of his life needing new furniture, new vehicles, new everything as if somehow consumerism and buying something new will validate or give meaning to something, anything. Just recently my father was able to secure money from a court settlement case for an on the job injury, a large sum of money that any prudent person at his age would use to pay off any remaining debt and invest and use wisely for his retirement. Instead with his stuffitis he went and bought a new car, new furniture, and is remodeling his house that he hasn’t finished paying off.
My father it pains me to say it is a fool. A couple years ago for Christmas I gave my father, Dave Ramsey’s Financial Peace shortly after returning home when I noticed that it took about the time for me to write him a check for him to go and spend it. One of the wasteful practices my father does is buy tons of food. A large percentage of food in developed nations is just thrown away because we buy so much food, but we don’t use it. In my dad’s case he has a stocked pantry, and has bought an extra freezer to just store more. Now this extra storing I don’t mind in some cases like if you hunt, an extra storage could make sense. What makes no sense is to buy food to just store it and never eat it. Although he tells me he read, “Financial Peace” I find it hard to believe when he doesn’t apply the concepts.
When we read something it can be for various reasons, but with nonfiction I believe we should always ask, “How do these concepts affect me?” It makes very little sense to read a pearl of wisdom and than to not try to apply it to our lives. If one just reads a religious text for example, but does not follow it’s edicts than one can see how others can doubt the usefulness of the religious text.
With my dad’s stuffitis though perhaps I should have known better than to think that me giving him a book or mentioning to him how I think he is careless with money would change the ways he handles it. At this point in my life I know that eventually he will squander away what money he has and that my brother and I will have to take care of him in old age with him leaving behind nothing, but a valuable lesson in what not to do. Our stuffitis should never be what we are known for. I hope when one thinks of me that they think of the good that I left behind, not the things which I can’t take with me. In Andrew Carnegie’s Gospel of Wealth he discusses the importance of dispersing one’s wealth while they are alive. When one is dead it’s too late to go back and change things and no matter how much one accumulates you can never take it with you in the end.
Sadly the adage, “You can’t teach an old dog new tricks” seems to apply to well with my father. My dad has been bankrupt several times. My mom and dad accrued massive amounts of credit card debt before they went through a divorce and bankruptcy. My advise for those that have loved one with stuffitis is to not enable them. They will spend money, it will not make sense, be sane or help them in any way. Limit the credit you give them and don’t give them more money than what they need for essentials. For those that are young seek wisdom in your finances and live a life of financial responsibility. Your future wealth depends on it. I might never be a wealthy man, but by being fiscally responsible I will hopefully never be in need. For those that you know that don’t know about fiscal responsibility, but are willing to be responsible spend the time and help lead them down the road.
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