Frequently Asked Questions

Q. We are considering a new home development in St. Charles County. The builder is nice and the homes are pretty. As we were leaving, we saw a sign in the development saying the builder won’t fix problems and is going bankrupt. How would we find out if this is true?

A. When buying a new home, special concerns need to be addressed:

Quality of Product- Get your answers by asking more than one present homeowner about how they feel about their home. Look for flaws in the display models. If you see any, remember this: the display model is the builder’s showcase.

Follow up by builder after closing- A new home has not been tested. The issue is not if problems normally occur, It’s how responsive the builder is to the problems which will occur. Again, talk to past clients of the builder. There is normally a 30 or 60 day follow up by the builder’s representative to solve issues.

Call the BBB- Call the Better Business Bureau to see how many complaints have been filed and their resolutions. Remember: you can’t please everybody, so don’t be frightened if a few complaints have been filed.

Company Solvency - Unfortunately, builders do go under-just like any other kind of business. Liberman Brothers and Mason Homes are two large building companies that ended up in bankruptcy. To avoid undo concern, have your realtor contact a reputable title company and find out if they are hesitant to issue title insurance for that builder. If they are- be very careful! If a builder goes under and the subcontractor bills for that home are attached as liens against the property, they are now your bills. Title insurance is the coverage that protects you against this problem. If the title company of your choice is reluctant (again, not the builder’s choice) you need to find a new development.

Q. Why is a truth in lending statement interest rate higher than what I was quoted by the loan officer? I’m supposed to sign this form and send it back but I don’t want to if I’m going to be charged a higher rate.

A. Ah the good old Truth in Lending statement. One of the most misunderstood forms in real estate. Its purpose is good. The results are horrendous. The form is designed to show you the true interest rate if all of the financial charges a lender bills you are added to the amount and amortized over 30 years. Don’t worry about it. Its not how your monthly house payment is calculated. Call your lender. Verify what the interest rate of your loan is. If it’s what you agreed to at the time of loan application, then send it in. For all the confusion this form causes, I wish they would revise it or discontinue using it.

Q. What is the average difference between what a seller is asking for a home and the final sale price?

A. As you might imagine, the difference between the asking price and the final sales price can vary greatly. Especially with higher-priced homes. Generally speaking, homes of $50,000 or less have a margin of approximately 2%-5%.

Q. If a seller damages my home when they are moving out and refuses to pay for the repairs, what are my options?

A. Three words- Smalls Claims Court. It only costs about $40 to file. $30 will get the person served the papers forcing them to show up in court. Normally, the person with the most organized information wins. Take pictures and note of conversations. Record dates and times. You’ll win!

Q. I’m arguing with my lender about pre paying on my mortgage. I feel that my house payment should show the pre payments by becoming lower. My lender says no. Who’s right?

A. Your lender is correct. When you sign up for your loan you agreed to pay x amount of dollars every month. Even if you pre-pay, you’re still obligated to meet the monthly payment. Pre-payment by reducing the amount of principal you owe reduces the amount of interest you owe over the life of the loan. You will own more of your home sooner. If you refinance after a bunch of pre-paying, then and only then will your payment be reduced, because the outstanding balance you owe is less.

The bonds have been issued for the new MHDC. This is for Missouri buyers only. A first-time home buyers program closing can begin as soon as May 11, 1998. This program allows you to get into a home for as little as $800 out-of-pocket. Call 878-2300 and we’ll get you in touch with a lender who participates in the funds so you can get pre-qualified.

Q. We’re getting ready to sell the house where we raised 4 children. As they were growing up, we needed more room and added 2 bedrooms and a bath to the basement. Our city inspector just finished the inspection and said the bathroom is not vented properly. The estimate of the repairs is over $3,000. Do we have to do this?

A. This is a common problem for almost all bathrooms in the lower level of a home. I think it’s a conspiracy by the city inspectors, plumbers, and building inspectors. It never fails to amaze me that you and thousands of other families are told this after successfully raising your family without problems with a “dangerous plumbing situation in hand” in the basement. Luckily, I have an answer to your problem. When you put your home on the market, have your agent put a sign in the lower level bathroom stating that it’s not vented properly according to city code. State that you have used this bathroom for many years without a problem. If they wish, you will remove the toilet and cap off the pipe. You will not pay for it to be vented. The toilet may be reinstalled after closing.

Q. Another real estate columnist says a “prequalified” mortgage means about the same to me as being pre-qualified as a lottery winner or the most handsome man on Earth. It’s meaningless. “Pre-approved” means I have numbers I can literally take to the bank. You seem to treat each phrase equally. Please explain.

A. I treat the terms equally, because in my opinion they are the same. Let me explain. “Pre-qualification” means you provide a lender information about your income, monthly bills and allow them to run an in-file credit report to see the pay history on your open accounts. Based on this information the lender then calculates and qualifies you for a mortgage. The only difference between this and “Pre-approval” is that a lender actually runs a mortgage credit report (which costs you approximately $50) and verifies that your income is in fact what you say it is. Then they issue you a letter of pre-approval based upon that information. In my opinion, the only difference is whether you tell the truth or not. Does one carry more weight than the other? Not really. You see, if you change any of the criteria the lender looked at (job change, increase in charge accounts, missing car payments) etc., then the lender who Pre-qualified you is no longer obligated to honor the preapproval. In other words, there are all kind of ways for the lender to get out of it. When I look at someone’s in-file credit report and it’s marginal in terms of whether or not they will be approved for a loan, I tell them to pay up the $50 to see if there is any dirty laundry on the full mortgage report that didn’t show up in the file. The full mortgage report is the combined credit report from all 3 major credit agencies.

Q. I’m currently renting a townhouse. My lease will expire at the end of June 98. I am seriously considering buying a house. There’s just one catch, I have “THE WORST CREDIT.” I’m in the process of getting a payroll deduction wage earners plan. I’ve also filed bankruptcy in 94. Is there any hope?

A. It’s a tough situation. Normally after a bankruptcy is discharged, it takes 2 full years of perfect credit to be eligible for a home loan. After reentering bankruptcy so soon (even though it’s the wage earners pay back plan), you won’t be eligible until that bankruptcy is discharged. Make sure you have all of your payments in on time! Your best chance for a loan is owner financing. Have your realtor look for an owner financed home.

Q. What if a seller’s disclosure says “as is”? What does that mean to me?

A. Buying “as is” usually means that the seller is letting you know in advance that they don’t plan on doing any work to the property. If a municipal, gas, septic, or termite inspection is required, then you’ll be obligated to have inspection performed and do any repairs necessary. Be Careful- make sure your contract stipulates that you can have any or all inspections you wish (especially a whole house inspection) and that the contract is indignant upon you being satisfied with the “as is” condition. Negotiate the contract with any repairs necessary in mind.

Q. Can I access the multiple listing service (MLS) by myself or do I need a realtor?

A. The MLS system is owned and operated by the local association of realtors. It’s one of the great benefits of belonging to the association. Access is by membership only and it’s expensive. The database provides information on all properties currently listed by members, recently sold properties, expired properties (properties listed for sale that did not sell during the listing period), properties currently under contract, and tax records on all properties in the city and county. The information is invaluable in determining the value of a property. The internet does have some information, but not all. Check realtor.com

Q. What are the final figures? When do you get them?

A. The final figures are the charges associated with a real estate transaction. They should be close to what was quoted on your good faith estimate. They are normally drawn up within 48 hours of closing. Take time and go over them with your realtor prior to or at the closing table. If you have any questions, ask!

Q. Is my car considered a long term debt when I’m trying to get myself qualified for a loan?

A. Your car is considered a debt if you have more than ten payments left at the time of closing. If a car is leased, it is considered a debt even if it has less than ten payments on it.

Q. If I pay off my credit cards every month are they considered a long term debt?

A. NO

Q. Can I use my stock options as qualifying income?

A. Only if they are declared on your tax return as income. Otherwise they would not be considered additional assets.

Q. My husband and I are looking into purchasing a home. We are not using a realtor. Should we? If we don’t, what should we do as far as a contract? How about using a lawyer?

A. Congratulations on deciding to buy a home. It’s one of the best and largest investments you’ll ever make in your life. I always recommend using a realtor. If you purchase from a private seller, negotiate a reduced commission and have a realtor put the package together for you so you are informed about all the particulars of buying a home. You can pick up a blank Real Estate contract from a book in the library or any business form store. If you choose to do it without a realtor, make sure you hire an attorney to look it over. Do not use the seller’s attorney- hire your own.

Q. I’m planning on selling my home in the near future and am trying to clean it up. Here are a few questions I need answers to:

  1. If I paint the basement floor will people think I’m trying to cover something up?
  2. I have a 15 year old furnace and air conditioner- do I need to replace them?
  3. What about cracks in my foundation?
  4. What about the cracks I have in my patio?

A. I can’t express emphatically enough the value of cosmetically cleaning the place up when you’re selling your home. The effect on a potential purchaser in terms of paying for your home is great.

The basement and crack in the foundation:

Most women cannot stand basements for a few simple reasons. They are dark, dreary, dirty, and there are “things” down there that they don’t like. By painting the walls and floor and increasing the wattage of your bulbs, you’ve taken a ____ to the home and turned it into a “re____” place. If they think that you’re covering something up, remind them the building inspector will address any problems they may have. If anything needs to be disclosed, make sure you do!

 

The plumbing stack:

Knock off any barnacles and sand the stacks. If necessary, put a rubber clamp around the portion of the stack that leaks and paint that area black.

Furnace and air conditioner:

An older furnace and air conditioner could create some expenses for you. The common cause for concern with the furnace is a cracked heat exchanger. The solution costs between $500 and $800. Air conditioners may need additional Freon, which costs $100 to $200. One way to avoid problems is to offer the purchaser a home protection warranty. For approximately $400, all of the main systems of house are covered for the first year. If problems arise, the deductible for the purchaser is normally $50 to $100.

Cracks in the Patio:

Fill any cracks in the patio with sealer or patch them.

Q. I’m planning to buy a four family flat but I don’t make a whole lot of money. I think this is a good way to go. What do you think? Also, how much rent can I use from the other units as income and what type of loan should I go for?

A. I think a multi-family unit, whether it be a 2 family flat, duplex, or 4 family flat, is an excellent way to get into a home. The good news is you live for free and your tenant picks up the bill. The better news is that being the owner and living at the property drastically reduces tenant problems and abuse to the building. The downside is that you’re a landlord! The key to your success lies in screening your tenants for past good pay history. When you purchase a multi-unit, the lender usually credits you with 75% of the rent received from the other units if and only if they are under 1 year leases. The easiest and cheapest type of financing is an FHA Loan up to $100,000. Above that do a conventional loan. Your limit as an owner-occupant is a 4 family unit. Larger units are considered investment property. Now, let’s look at some numbers:

4 family flat

$250 rent per x (3) units

Sale price $70,000

Total cost to get in = $3500

Deposit from Tenants 3×250 = $750

Total cost = $2750

House payment= 550

Rents (3×250) = 750

Extra each month to prepay on note = 200

If $200 is used each month prepaying on note, the loan will be paid off in 12 years.

You cannot use first-time buyer funds on this type of property, but as you can see, they’re still a great deal. Even better for higher rent units.

Q. What are normal closing fees? Is there any way to save on them? How would I know if a lender was adding some “extras”?

A. The biggest concern you have is making sure that if a lender quotes you a low interest rate, that they’re not making up for it somewhere else. The way to insure you’re not being taken advantage of is to ask each lender to provide you with a good faith estimate of the loan program they are suggesting to you. These estimates list each charge the lender is requiring you to pay for them to grant the loan. These costs can vary by hundreds and even thousands of dollars.

Some standard required items are:

  1. Appraisal
  2. Credit report
  3. Pre-paid interest
  4. Hazard insurance
  5. Escrows for taxes and insurance
  6. Closing fees
  7. Title search and insurance
  8. Flood letter
  9. Survey
  10. Recording and notary fees

Extra costs are:

  1. Loan discount fees
  2. Origination fees
  3. Mortgage insurance
  4. Processing fee
  5. Underwriting fee
  6. Commitment fee
  7. Document preparation fee

Q. Why are realtors so reluctant to recommend good lenders and inspectors to clients? What are they afraid of? It seems to me that they would be glad to do this.

A. Most realtors are afraid of the liability of recommending anyone to a client. Too many people have sued when things didn’t work out. Instead ask if they have a list of reputable lenders, inspectors, etc. that you can use to choose your subcontractors from.

Q. I Receive child support, I’m trying to get a home loan, and I need some help. My income from my job is not enough to qualify for the house payment I want. I receive child support of $600 a month, but since one of my children is 16, the lender says he can’t count it. I have 3 children and their ages are 16, 14, and 10.

A. When it comes to child support, pensions, disability or supplemental income, as long as you’ll be receiving these things for at least 2 or more years they can’t be considered as income. Different lenders have different levels of flexibility in their guidelines and it sounds as through yours is much too conservative. Shop for a new lender today.

Q. My husband and I want to purchase a home. We’ve been married for two years and have been able to meet our bills, but his credit is still poor due to some bills left from his previous marriage. All our credit cards are in my name due to the same problem. How long do we have to be penalized for his past problems?

A. There’s a number of ways to deal with this problem. A lender is going to look at your most recent 12-18 month credit history. For older problems involving credit such as charge off, judgment, and collection accounts, they want to see them either paid off or in a repayment plan that shows at least 6 months’ worth of payments have been made on the debt. If they were joint accounts and the divorce decree says they are the responsibility of his ex-wife, a copy of the divorce decree will suffice. Another idea if all of these fail is to have him sign a waiver of marital rights, then buy the property based on your good credit and salary. Bottom line, when there’s a will, there’s a way. Have your realtor start contacting lenders for you today.

Q. I’m thinking of buying a home from a friend. Would it be better to use a real estate agent or a lawyer to put the deal together?

A. It’s almost always better to use a realtor to put a real estate transaction together, especially if it’s a resident piece of property. A lawyer is great at looking over a contract to make sure all the I’s are dotted and T’s are crossed and who’s liable for what if the transaction gets bogged down. A realtor, on the other hand, not only has access to the appropriate contracts and addendums needed, but is well-versed in the responsibilities of all the parties involved in the transaction. That experience is involved when it comes to monitoring the details of a transaction necessary to get it to closing; details that, for the most part, a lawyer is no more familiar with than the average consumer. Eight out of ten for-sale-by-owners find a buyer. 80% of those ultimately do not get to the closing table. That is because no one knew what to do when the normal problems that occur in every real estate transaction popped up. Many of these contracts were looked over by an attorney. Pick your poison, an attorney or realtor. NOTE: Buying a home from a friend is one of the easiest ways to destroy a friendship. The biggest cause for this is the unknown problems with the condition of the home. Make sure your agreement includes a clause that allows you to have the home inspected by a home inspector, so that any problems can be addressed between yourself and your friend.

Q. I have just finished college, I have successfully been hired in my field, and I’m interested in buying a home. My problem is that I have never owned a credit card, so I don’t think I have any established credit. I’ve been told by many people that this will be held against me. Any truth to these rumors? If so, what do I do and when would I be eligible for a home loan?

A. Not having a credit card at this point in your life is not necessary for purchasing a home. When a lender checks your credit report and recognizes this set of circumstances, they will look at your secondary tier of credit: rent, utilities, etc. As long as you can show you’ve paid your bills on a regular basis, you will be fine. If you never paid the rent, utilities, car payment, student loans, or a credit card debt, then you will need to establish some form of credit. Open a line of credit and make at least 6 payments to the debt on time, and you will be eligible for a home loan.

Q. How does my VA entitlement work? I was in the service in the 70′s and have never used it. Is it still good? If I die, can my wife use it? Can I buy a home for nothing? Please tell me because my wife is really giving me grief over this. She wants a house. I don’t think we can afford it.

A. Your VA entitlement is good for life! Your buying power is limited to $180,000. There is no down payment and no limit on where you can use it to buy a piece of property. A VA loan allows the seller to pay almost all of your closing cost and prepaid items. You can basically buy a $100,000 dollar home for as little as $1,000 out-of-pocket money. However the entitlement is not transferable. Go get approved for your VA loan, use a realtor who is familiar with VA contracts, and enjoy your wife and your life.

Q. I would like to take advantage of the first time home buyers program, but I inherited a house from my parents. Does this exclude me from these programs?

A. The big issue is whether or not you live in the home you inherited. If the answer to that is yes, you are not considered a first time buyer. If the answer is no and you can verify that, you are a first-time buyer.

Q. When is the best time to close on a home?

A. The best time to close on a home is any day but the last four days of the month. At least 75% of all real estate transactions close during those four days, leading to delays, a lot of frenzied activity, and last minute problems. The rest of the month, you’ll be the only people in the building.

Q. I don’t have a lot of savings, but I do have a large income. What type of loan should I pursue?

A. The most inexpensive way to purchase a home is through owner financing or the FHA loan. With an owner, you can create any type of financing you wish. With FHA loans, there are no salary limits and the total cost of cash necessary is less than 6 ½% of the sale price. There are sale price limits to these programs. Check with a realtor to find out what they are in the area you wish to buy.

 

Q. Why is a truth in lending statement interest rate higher than what I was quoted by the loan officer? I’m supposed to sign this form and send it back, but I don’t want to if I’m going to be charged a higher rate.

A. Ah, the good old Truth in Lending statement. One of the most misunderstood forms in real estate. It’s purpose is good. The results are often horrendous. The form is designed to show you the true interest rate if all of the lender charges you are added to the amount you borrowed and amortized over 30 years. Don’t worry about it. It’s not used to calculate your monthly house payment. Call your lender. And verify the interest rate of your loan. If it’s what you agreed to at the time of loan application, then send it in.

Q. I’m arguing with my lender about pre paying on my mortgage. I feel that my house payment should be lower to reflect the pre payments. My lender says no. Who’s right?

A. Your lender is correct. When you sign up for your loan, you agreed to pay x amount of dollars every month. Even if you pre pay, you’re still obligated to meet the monthly payment. Pre-payment works by reducing the amount of principal you owe, reducing the amount of interest you owe over the life of the loan. So you will own more of your home sooner. If you refinance after a bunch of pre paying, then and only then will your payment be reduced, because the outstanding balance you owe is less.

Q. I read on the other sites that a prequalified mortgage means about the same to me as being pre-qualified as a lottery winner or the most handsome man on Earth. It’s meaningless. Pre-approved means I have numbers I can literally take to the bank. Are these terms the same thing?

A. I treat the terms equally, because in my opinion, they are the same. Let me explain. Pre-qualification means you provide a lender information about your income, monthly bills and allow them to run a credit report to see the pay history on your open accounts. Based on this information, the lender then calculates and qualifies you for a mortgage. The only difference between this and prequalification is that a lender actually runs a mortgage credit report (which costs you approximately $50) and verifies that your income is in fact what you say it is. Then they issue you a letter of pre-approval based upon that information. In my opinion, the only difference is whether you tell the truth or not. Does one carry more weight than the other? Not really. You see, if you change any of the criteria the lender looked at (job change, increase in charge accounts, missing car payments) etc., then the lender who preapproved you is no longer obligated to honor the preapproval. In other words, there is all kind of ways for the lender to get out of it. When a potential buyers credit report and it’s marginal in terms of whether they will be approved for a loan, I tell them to pay $50 to see if there is any dirty laundry on the full mortgage report that didn’t show up in the file. The full mortgage report is the combined credit report from all 3 major credit agencies.

Q. What are the final figures? When do you get them?

A. The final figures are the charges associated with a real estate transaction. They should be close to what was quoted to you on your good faith estimate. They are normally drawn up within 48 hours of the closing taking place. Take time and go over them with your realtor prior to or at the closing table. Any questions, ask!

Q. Is my car considered a long term debt when I’m trying to get myself qualified for a loan?

A. Your car is considered a debt if you have more than ten payments left on it at the time of closing. If a car is leased, then it is considered a debt even if it has less than 10 payments on it.

Q. If I pay off my credit cards every month are they considered a long term debt?

A. NO

Q. Can I use my stock options as qualifying income?

A. Only if they are declared on your tax return as income. Otherwise they would not be considered additional assets.

Q. My husband and I want to purchase a home. We’ve been married for two years and have been able to meet our bills, but his credit is still poor due to some bills left from his previous marriage. All of our credit cards are in my name due to the same problem. How long do we have to be penalized for his past problems?

A. There’s a number of ways to deal with this problem. A lender is going to look at your most recent 12-18 month credit history. For older problems involving credit such as charge off, judgment, and collection accounts, they want to see them either paid off or in a repayment plan that shows at least 6 months worth of payments that have been made toward the debt. If they were joint accounts and the divorce decree says they are the responsibility of his ex-wife, a copy of the divorce decree will suffice. Another idea, if all else fails, is to have him sign a waiver of marital rights, then buy the property based on your good credit and salary. Bottom line, when there’s a will, there’s a way. Have your realtor start contacting lenders for you today.

Q. I’m receiving child support and trying to get a home loan. My income from my job is not enough to qualify for the house payment I want. I receive $600/month in child support, but since one of my children is 16, the lender says he can’t count it. I have 3 children, aged 16, 14, and 10.

A. When it comes to child support, pensions, disability or supplemental income, as long as you’ll be receiving these things for at least 2 or more years they can’t be considered as income. Different lenders have different levels of flexibility in their guidelines and it sounds as though your current lender is much too conservative. Shop for a new lender today.

Q. I have just finished college, I have successfully been hired in my field, and I’m interested in buying a home. My problem is that I have never owned a credit card, so I don’t think I have any established credit. I’ve been told by many people that this will be held against me. Any truth to these rumors? If so, what do I do and when would I be eligible for a home loan?

A. Not having a credit card at this point in your life is not necessary for purchasing a home. When a lender checks your credit report and recognizes this set of circumstances, they will look at your secondary tier of credit: rent, utilities, etc. As long as you can show you’ve paid your bills on a regular basis, you will be fine. If you never paid the rent, utilities, car payment, student loans, or a credit card debt, then you will need to establish some form of credit, make at least 6 payments to the debt on time, and you will be eligible for a home loan.

Q. How does my VA entitlement work? I was in the service in the 70′s and have never used it. Is it still good? If I die, can my wife use it? Can I buy a home for nothing?

A. Your VA entitlement is good for life, but is non-transferable and your buying power is limited to $180,000. There is no down payment and no limit on where you can use it to buy a piece of property. A VA loan allows the seller to pay almost all of your closing cost and prepaid items. You can basically buy a $100,000 home for as little as $1,000 out-of-pocket money. Regardless, use a realtor who is familiar with VA contracts.

Q. I would like to take advantage of the first time home buyers program, but I inherited a house from my parents. Does this exclude me from these programs?

A. In this case, the big issue is whether or not you live in the home you inherited. If the answer to that is yes, you do live in the home you inherited, you are not considered a first time buyer. If the answer is no and you can verify that, you are one.

Q. When is the best time to close on a home?

A. The best time to close on a home is any day, but not within the last four days of the month. At least 75% of all real estate transactions close during those four days, leading to delays, a lot of frenzied activity, and last minute problems. The rest of the month, you’ll be the only people in the building.

Q. I don’t have a lot of savings, but I do have a large income. What type of loan should I pursue?

A. The most inexpensive way to purchase a home is through owner financing or the FHA loan. With an owner, you can create any type of financing you wish. With FHA loans, there are no salary limits and the total cost of cash necessary is less than 6.5% of the sale price. There are sale price limits to these programs. Check with a realtor to find out what they are in the area you wish to buy.

Q. Are charitable contributions considered a debt?

A. No.

Q. Should I shop around for the right lender?

A. Shopping for a lender should be a combined effort between you and your realtor. To handles it effectively, call 3 or 4 lenders asking them to quote their current 15 or 30 year or adjustable rate (1-3-5-7 year) mortgage with no points attached to the loan. Then ask them to fax you a good faith estimate. This will allow you to compare apples to apples. By getting the good faith estimate, you’ll be able to identify if a lender is charging you anything extra. These extra charges are called “junk fees” and are the way a lender recovers costs when they quote you a distinctly lower rate than other lenders.

Q. What are the prepaid items that you get quoted when asking about fees associated with buying a home?

A. The prepaid items are equal to approximately 1% of the sale price and interest, including: prepaid interest (interest paid form the date of closing till the end of that month, escrows of your real estate taxes, homeowner’s insurance and mortgage insurance, and the upfront one year homeowner’s policy that you purchase prior to closing)

Q. How much money do I need upfront when I’m in the process of trying to buy a home?

A. You need earnest money, ranging from $500 to $2500, (depending on the sale price of the property) loan application fees (usually $350]) and inspection fees (between $350 to $550). The rest of your funds necessary for closing need to be in the bank for 10 days.

Q. If I am a veteran, how much does it cost to purchase a home?

A. The cost will change for a veteran based on the sale price, but no down payment is required. The closing costs can be paid for by the seller if that is negotiated into the sales contract. If done correctly, a veteran can get into a home for less than 1% of the sales price.

Q. I have just finished college, I have successfully been hired in my field, and I’m interested in buying a home. My problem is that I have never owned a credit card, so I don’t think I have any established credit. I’ve been told by many people that this will be held against me. Any truth to these rumors? If so, what do I do and when would I be eligible for a home loan?

A. Not having a credit card at this point in your life is not necessary for purchasing a home. When a lender checks your credit report and recognizes this set of circumstances, they will look at your secondary tier of credit: rent, utilities, etc. As long as you can show you’ve paid your bills on a regular basis, you will be fine. If you never paid the rent, utilities, car payment, student loans, or a credit card debt, then you will need to establish some form of credit, make at least 6 payments to the debt on time, and you will be eligible for a home loan.

Q. I don’t have a lot of savings, but I do have a large income. What type of loan should I pursue?

A. The most inexpensive way to purchase a home is through owner financing or the FHA loan. With an owner, you can create any type of financing you wish. With FHA loans, there are no salary limits and the total cost of cash necessary is less than 6.5% of the sale price. There are sale price limits to these programs. Check with a realtor to find out what they are in the area you wish to buy.

Q. Can I access the multiple listing service (MLS) by myself or do I need a realtor?

A. The MLS system is owned and operated by the local association of realtors. It’s one of the great benefits of belonging to the association. Access is by membership only and it’s expensive. The database provides information on all properties currently listed by members, recently sold properties, expired properties (properties listed for sale that did not sell during the listing period), properties currently under contract, and tax records on all properties in the city and county. The information is invaluable in determining the value of a property. The internet does have some information, but not all.

Q. My husband and I are looking into purchasing a home. We are not using a realtor. Should we? If we don’t, what should we do as far as a contract? How about using a lawyer?

A. Congratulations on deciding to buy a home. It’s one of the best and largest investments you’ll ever make in your life. I always recommend using a realtor. If you purchase from a private seller, negotiate a reduced commission and have a realtor put the package together for you so you are informed about all the particulars of buying a home. You can pick up a blank Real Estate contract from a book in the library or any business form store. If you choose to do it without a realtor make sure you hire an attorney to look it over. Do not use the seller’s attorney- hire your own.

Q. Why are realtors so reluctant to recommend good lenders and inspectors to clients? What are they afraid of? It seems to me that they would be glad to do this.

A. Most realtors are afraid of the liability of recommending anyone to a client. Too many people have sued when things didn’t work out. Instead, ask if they have a list of reputable lenders, inspectors, etc. that you can use to choose your subcontractors from.

Q. I’m thinking of buying a home from a friend. Would it be better to use a real estate agent or a lawyer to put the deal together? Thanks for your help.

A. It’s almost always better to use a realtor to put a real estate transaction together, especially if it’s a resident piece of property. A lawyer is great at looking over a contract to make sure all the i’s are dotted and T’s are crossed and who’s liable for what if the transaction gets bogged down. A realtor, on the other hand, not only has access to the appropriate contracts and addendums needed, but is well versed in the responsibilities of all the parties involved in the transaction. That experience is involved when it comes to monitoring the details of a transaction necessary to get it to closing; details that, for the most part, a lawyer is no more familiar with than the average consumer. Eight out of ten for-sale-by-owners find a buyer. 80% of those ultimately do not get to the closing table. That is because no one knew what to do when the normal problems that occur in every real estate transaction popped up. Many of these contracts were looked over by an attorney. Pick your poison, an attorney or realtor. Note: Buying a home from a friend is one of the easiest ways to destroy a friendship. The biggest cause for this is the unknown problems with the condition of the home. Make sure your agreement includes a clause that allows you to have the home inspected by a home inspector, so that any problems can be addressed between yourself and your friend.

Q. What is the average difference between what a seller is asking for a home and the final sale price?

A. As you might imagine, the difference between asking and the final sales price can vary greatly. Especially in the higher priced homes. Generally speaking, homes on the market for $50,000 or less have a margin of approximately 2%-5%. Foreclosures can range from 10% to as much as 30%. Short sale ranges depend upon the loan balance owed and recent sales in the neighborhood. Homes above the $50,000 range from 0-10%. You make an offer and see what the seller does.

Q. If a seller damages my home when they are moving out and refuses to pay for the repairs what are my options?

A. Three words…Smalls Claims Court. It only costs about $60 to file. Just $30 will get the person served the papers forcing them to show up in court. Normally the person with the most organized information wins. Take pictures and make note of conversations. Record dates and times. You’ll win!

Q. We’re getting ready to sell the house we raised 4 children in. As they were growing up, we needed more room and put 2 bedrooms and a bath in the basement. Our city inspector just came out for the inspection and said the bathroom is not vented properly. The estimate to take care of the repairs is over $3,000. Do we have to take care of the repairs?

A. This is a common problem for almost all bathrooms in the lower level of a home. I think it’s a conspiracy by the city inspectors, plumbers, and building inspectors. It never fails to amaze me that you and thousands of other families are told this after successfully raising your family without problems with a “dangerous plumbing situation in hand” in the basement. Luckily, I have an answer to your problem. When you put your home on the market, have your agent put a sign in the lower level bathroom that it’s not vented properly according to city code. State that you have used this bathroom for many years without a problem. If they wish you will remove the toilet and cap off the pipe. You will not pay for it to be vented. The toilet may be reinstalled after closing.

Q. What if a seller’s disclosure says as is? What does that mean to me?

A. Buying as is usually means that the seller is letting you know in advance that they don’t plan on doing any work to the property. If a municipal, gas, septic, or termite inspection is required, then you’ll be obligated to have them performed and do any repairs necessary. Be careful…Make sure your contract stipulates that you can have any or all inspections you wish (especially a whole house inspection) and that the contract is contingent upon you being satisfied with the as is condition. Negotiate the contract with any repairs necessary in mind.

Q. Can I access the multiple listing service (MLS) by myself or do I need a realtor?

A. The MLS system is owned and operated by the local association of realtors. It’s one of the great benefits of belonging to the association. Access is by membership only and it’s expensive. The database provides information on all properties currently listed by members, recently sold properties, expired properties (properties listed for sale that did not sell during the listing period), properties currently under contract, and tax records on all properties in the city and county. The information is invaluable in determining the value of a property. The internet does have some information, but not all.

Q. What are the final figures? When do you get them?

A. The final figures are the charges associated with a real estate transaction. They should be close to what was quoted to you on your good faith estimate. They are normally drawn up within 48 hours of the closing date. Take time and go over them with your realtor prior to or at the closing table. Any questions, ask!

Q. My husband and I are looking into purchasing a home. We are not using a realtor. Should we? If we don’t, what should we do as far as a contract? How about using a lawyer?

A. Congratulations on deciding to buy a home. It’s one of the best investments you’ll ever make and usually the largest you’ll ever make in your life. I always recommend using a realtor. If you purchase from a private seller, negotiate a reduced commission and have a realtor put the package together for you so that you are informed about all the particulars of buying a home which are many. You can pick up a blank Real Estate contract from a book in the library or any business form store. If you choose to do it without a realtor make sure you hire an attorney to look it over. And do not use the seller’s attorney. Hire your own.

Q. My husband and I want to purchase a home. We’ve been married for two years and have been able to meet our bills, but his credit is still poor due to some bills left from his previous marriage. All of our credit cards are in my name due to the same problem. How long do we have to be penalized for his past problems?

A. There are a number of ways to deal with this problem. A lender is going to look at your most recent 12-18 month credit history. For older problems involving credit such as charge off, judgment, and collection accounts, they want to see them either paid off or in a repayment plan that shows at least 6 months worth of payments that have been made on the debt. If they were joint accounts and the divorce decree says they are the responsibility of his ex-wife, a copy of the divorce decree will suffice. Another idea if all of these fail is to have him sign a waiver of marital rights, then buy the property based on your good credit and salary. Bottom line, when there’s a will, there’s a way. Have your realtor start contacting lenders for you today.

Q. I’m thinking of buying a home from a friend. Would it be better to use a real estate agent or a lawyer to put the deal together?

A. It’s almost always better to use a realtor to put a real estate transaction together, especially if it’s a piece of residential property. A lawyer is great at looking over a contract to make sure all the i’s are dotted and T’s are crossed and who’s liable for what if the transaction gets bogged down or doesn’t come to fruition. A realtor, on the other hand, not only has access to the appropriate contracts and addendums needed, but is well versed in the various responsibilities of the parties involved in the transaction. That experience is helpful when it comes to monitoring the details of a transaction necessary to get it to closing; details that, for the most part, a lawyer is no more familiar with than the average consumer. Eight out of ten for-sale-by-owner properties find a buyer. Eighty percent of those ultimately do not get to the closing table, primarily because no one knew what to do when the normal problems that occur in every real estate transaction popped up. Many of these contracts were looked over by an attorney. Pick your poison, an attorney or realtor. By the way…Buying a home from a friend is one of the easiest ways to destroy a friendship, often due to unknown problems related to the condition of the home. Make sure your agreement includes a clause that allows you to have the home inspected by a home inspector, so that any problems can be addressed between yourself and your friend.

Q. I have just finished college, I have successfully been hired in my field, and I’m interested in buying a home. My problem is that I have never owned a credit card, so I don’t think I have any established credit. I’ve been told by many people that this will be held against me. Any truth to these rumors? If so, what do I do and when would I be eligible for a home loan?

A. Not having a credit card at this point in your life is not necessary for purchasing a home. When a lender checks your credit report and recognizes this set of circumstances, they will look at your secondary tier of credit: rent, utilities, etc. As long as you can show you’ve paid your bills on a regular basis, you will be fine. If you never paid the rent, utilities, car payment, student loans, or a credit card debt, then you will need to establish some form of credit, make at least 6 payments to the debt on time, and you will be eligible for a home loan.

Q. How does my VA entitlement work? I was in the service in the 70′s and have never used it. Is it still good? If I die, can my wife use it? Can I buy a home for nothing?

A. Your VA entitlement is good for life, but is non-transferable and your buying power is limited to $180,000. There is no down payment and no limit on where you can use it to buy a piece of property. A VA loan allows the seller to pay almost all of your closing cost and prepaid items. You can basically buy a $100,000 home for as little as $1,000 out-of-pocket money. Regardless, use a realtor who is familiar with VA contracts.

Q. I would like to take advantage of the first time home buyers program, but I inherited a house from my parents. Does this exclude me from these programs?

A. In this case, the big issue is whether or not you live in the home you inherited. If the answer to that is yes, you do live in the home you inherited, you are not considered a first time buyer. If the answer is no and you can verify that, you are one.

Q. When is the best time to close on a home?

A. The best time to close on a home is any day, but not within the last four days of the month. At least 75% of all real estate transactions close during those four days, leading to delays, a lot of frenzied activity, and last minute problems. The rest of the month, you’ll be the only people in the building.

Q. I don’t have a lot of savings, but I do have a large income. What type of loan should I pursue?

A. The most inexpensive way to purchase a home is through owner financing or the FHA loan. With an owner, you can create any type of financing you wish. With FHA loans, there are no salary limits and the total cost of cash necessary is less than 6.5% of the sale price. There are sale price limits to these programs. Check with a realtor to find out what they are in the area you wish to buy.

Q. I’m interested in a home that is involved with a corporate relocation company. When I decided to write a contract, I was presented with an inch thick packet of forms. The relocation company said these had to be included with our contract. Is this normal? I thought I should have a lawyer look at them, so I decided not to put in an offer. What’s up with this?

A. Buying a home through a corporate relocation company can be financially rewarding, but mechanically frustrating: Financially rewarding due to the fact that the emotions of the owner aren’t involved in the sale. It’s a strictly bottom line figure. The person handling the sale for the relocation company has a range of pricing, within which they can accept any offer. If the offer is below that range, it goes before a committee. Any losses are absorbed by the company that hired the relocation company-i.e.; their pockets are deeper than the seller’s. Mechanically frustrating is the issue that caused you to walk away. The vast array of forms you needed to sign range from termite inspections, building inspections, municipal inspections, seller’s disclosure, disclaimers about the fact that the relocation company doesn’t own the house, therefore, doesn’t know much about the house, acknowledgment of sister companies they worked with, etc. None of the forms are anything to worry about. It’s all about what the lawyers think the relocation company needs to indemnify them. You may use their inspectors or hire your own. You may use their lenders or hire your own. You get the picture… Another frustrating issue is the fact that they only negotiate these contracts during certain business hours.

Q. Do taxes vary from county to county?

A. Taxes do vary from county to county, but the significant variable is whether you live in the highly populated metro areas or in rural areas. Rural areas almost inversely have substantially lower taxes, but they also provide fewer services. Metro areas have higher taxes. It used to be that parts of the metro areas had considerable variance in their taxes, but today they are much closer to each other (they may vary $5 to $10 per month).

Q. What is the average difference between what a seller is asking for a home and the final sale price?

A. As you might imagine, the difference between asking and the final sales price can vary greatly. Especially in the higher priced homes. Generally speaking, homes on the market for $50,000 or less have a margin of approximately 2%-5%. Foreclosures can range from 10% to as much as 30%. Short sale ranges depend upon the loan balance owed and recent sales in the neighborhood. Homes above the $50,000 range from 0-10%. You make an offer and see what the seller does.

Q. We’re getting ready to sell the house we raised 4 children in. As they were growing up, we needed more room and put 2 bedrooms and a bath in the basement. Our city inspector just came out for the inspection and said the bathroom is not vented properly. The estimate to take care of the repairs is over $3,000. Do we have to take care of the repairs?

A. This is a common problem for almost all bathrooms in the lower level of a home. I think it’s a conspiracy by the city inspectors, plumbers, and building inspectors. It never fails to amaze me that you and thousands of other families are told this after successfully raising your family without problems with a “dangerous plumbing situation in hand” in the basement. Luckily, I have an answer to your problem. When you put your home on the market, have your agent put a sign in the lower level bathroom that it’s not vented properly according to city code. State that you have used this bathroom for many years without a problem. If they wish you will remove the toilet and cap off the pipe. You will not pay for it to be vented. The toilet may be reinstalled after closing.

Q. I’m planning on selling my home in the near future and am trying to clean it up. If I paint the basement floor will people think I’m trying to cover something up? My furnace and air conditioner are 15 years old…Do I need to replace them? What should I do about cracks in my foundation or in the patio?

A. I can’t express emphatically enough the value of cosmetically cleaning the place up when you’re selling your home. The effect on a potential purchaser in terms of paying for your home is great.

The basement and crack in the foundation…

Most women cannot stand basements for a few simple reasons: They are dark, dreary, dirty, and there are just “things” down there that they don’t like. By painting the walls and floor and increasing the wattage of your bulbs, you’ve taken steps to improve the home and turned it into a more pleasant place. If they think that you’re covering something up, then remind them the building inspector will address any problems they may have. If anything needs to be disclosed, make sure you do!

The plumbing stack

Knock off any barnacles on and sand the stacks. If necessary, put a rubber clamp around the portion of the stack that leaks and paint that area black.

Furnace and air conditioner

An older furnace and air conditioner could create some expenses for you. The common cause for concern with the furnace is a cracked heat exchanger. The solution costs between $500 and $800. Air conditioners may need additional Freon at a cost of $100 to $200. One way to avoid problems is to offer the purchaser a home protection warranty. For approximately $400, all of the main systems of house are covered for the first year. If problems arise, the deductible for the purchaser is normally $50 to $100.

Cracks in the Patio

Fill any cracks in the patio with sealer or patch them.

Q. When is the best time to close on a home?

A. The best time to close on a home is any day, but not within the last four days of the month. At least 75% of all real estate transactions close during those four days, leading to delays, a lot of frenzied activity, and last minute problems. The rest of the month, you’ll be the only people in the building.

Q. What are the final figures? When do you get them?

A. The final figures are the charges associated with a real estate transaction. They should be close to what was quoted to you on your good faith estimate. They are normally drawn up within 48 hours of the closing date. Take time and go over them with your realtor prior to or at the closing table. Any questions, ask!

Q. When is the best time to close on a home?

A. The best time to close on a home is any day, but not within the last four days of the month. At least 75% of all real estate transactions close during those four days, leading to delays, a lot of frenzied activity, and last minute problems. The rest of the month, you’ll be the only people in the building.


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