Frequently Asked Questions - Buyers
Many buyers do not fully understand the home buying process and what role a real estate agent plays.
The following are some of the most frequently asked questions that buyers ask or don’t fully understand. If you need more information Call my Loan Guy, Glenn Hauschild at 630-602-8000
What does it cost as a buyer to use an agent?
The compensation that a sales agent receives typically comes from the seller’s proceeds. In other words, there is no cost for a buyer to use an agent in a traditional agent/buyer relationship. In a buyer agency agreement, there may be some cost to the buyer, but even these agreements are usually worded so that the agent is compensated from the seller.
Can my agent give me information regarding properties from other companies?
Yes, if that other company is a member of Multiple Listing Service (MLS) – which most real estate companies are. For Sale By Owner (FSBO) properties are not listed in MLS so an agent likely would not be able to provide information regarding them. However, with a buyer agency agreement, your agent may be able to help you purchase a FSBO.
What if I find a property on my own?
You should contact your agent and not the property owner or the agent listing the property. Having the address or the MLS number is very helpful and will assist your agent in gathering information regarding the property.
What type of information will my agent need from me?
An agent will need any type of information regarding the property you are looking for that is important to you. For example, number of bedrooms, garage size, price, location and number of bathrooms are common criteria. Other considerations include the school district, type of home (ranch, tri-level, etc) and room sizes. Keep in mind that a search that is too specific may narrow your list of properties too much while one that is too broad may give you more properties to look at than you have time to go through!
An agent may also ask you for other information such as hobbies or activities you enjoy, children’s names, birthdays, etc. This type of information fosters more of a “friend” relationship than a “business” one and makes the home buying process much less stressful.
Can I go to open houses without my agent?
You can go to open houses without your agent. However, you need to make sure that you indicate you are working with an agent already. If you don’t, your agent might not be able to help you write an offer on that property in the future.
How can I find out about new properties?
Your agent should be able to accommodate your particular situation whether it be via e-mail, phone calls, etc. Clients with e-mail capability can receive automatic updates from the MLS system as soon as new listings are entered.
What if I am unhappy and want to switch agents?
First let the agent know that you are unhappy and the reasons why. See if you can work out the issues with them. If not, tell the agent you no longer want to work with them and find another agent.
Summary
When purchasing real estate, a sales agent can be an invaluable resource if you remember your responsibilities:
1. Work with just one agent
2. Make sure you tell your agent everything
3. Always tell other agents you are already working with an agent
4. Consider your agent a friend
If you have any questions regarding purchasing a home or would like us to be your agent, please give us a call. We want your home buying experience to be as easy and enjoyable as possible and will do everything we can to ensure you find the home that is right for you.
Understanding Different Types of Loans
Today's homebuyer has more financing options than have ever been available before. From traditional mortgages to adjustable-rate and hybrid loans, there are financing packages designed to meet the needs of virtually anyone.
While the different choices may seem overwhelming at first, the overall goal is really quite simple: you want to find a loan that fits both your current financial situation and your future plans. Though this article discusses some of the more common loan types, you should spend time talking with different lenders before deciding on the right loan for your situation.
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.
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 though 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. FHA loans are insured to the actual lender and VA loans are guaranteed 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.
Special Edition Tax Tip 2010-02
Claiming the First-Time Homebuyer Tax Credit on your 2009 tax return might mean a larger refund but it can seem complex. Are you confused about the documentation requirements? The IRS recognizes that the settlement documents can vary from location to location, so here are five tips to clarify the documentation requirements.
Settlement Statement: Purchasers of conventional homes must attach a copy of Form HUD-1 or other properly executed Settlement Statement.
Properly Executed Settle Statement: Generally, a properly executed settlement statement shows all parties' names and signatures, property address, sales price and date of purchase. However, settlement documents, including the Form HUD-1, can vary from one location to another and may not include the signatures of both the buyer and seller. In areas where signatures are not required on the settlement document, the IRS encourages buyers to sign the settlement statement when they file their tax return -- even in cases where the settlement form does not include a signature line.
Retail Sales Contract: Purchasers of mobile homes who are unable to get a settlement statement must attach a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.
Certificate of Occupancy: For a newly constructed home, where a settlement statement is not available, attach a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
Long-Time Residents: If you are a long-time resident claiming the credit, the IRS recommends that you also attach documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.
For more information about the First-Time Homebuyer Tax Credit and the documentation requirements, visit IRS.gov/recovery.
http://www.irs.gov/newsroom/article/0,,id=219518,00.html
Tom & Ida Donahue 630-297-8389
E-Mail Tom@donahue2.com
Mother and Son Team
522 S. Washington Suite 113
Naperville, Illinois 60563
