Common Misrepresentations by Home Sellers

Common Misrepresentations by Home Sellers

Unfortunately, you cannot always truest sellers of a home. Here are some common things that sellers misrepresent when they are trying to get a buyer to purchase their home.

When you get ready to buy a home, it is up to you to do the homework and research to ensure that you are getting a quality property that is worth your money. You cannot depend or rely on the seller’s word because they often misrepresent the home in various ways and once you sign that bottom line, you are stuck with the building regardless of what the seller told you about it. Here are some common misrepresentations and outright falsehoods that you should watch out for as a home buyer.

The House Does Not Have Pests
The seller might say that the house does not have pests, but you cannot know for sure until you have a home inspection. Most inspections do not include looking for pests and other critters inside the walls so you may have to ask for the inspector to include this as part of the service. It will probably cost a little more, but it may be worth it if there are pests and bugs living inside your walls. Termites, mold, mice and other problems could be living in the home and the seller may not even know about it.

Maintenance Costs and Taxes are Inexpensive
A seller will say many things to entice a buyer into buying their home. As a result, they may try to downplay the cost of the utilities, taxes and maintenance costs of the home. One way to get around this is to ask the seller to see their last few bills so you can at least get an idea of how much extra you will be paying each month. Does it cost hundreds of dollars a month to heat the home? Are the property taxes reasonable or outrageous? These are just a few of the extra costs to consider when buying a new home.

Developers are Adding Golf Course and More
When considering buying a home in a new development, the seller might tell you about the builder’s plans to build a community pool, a golf course and many other features that are attractive to today’s home buyer. However, you should always ask neighbors and possibly even the builders if those plans are still on track. As a result of the economic downturn, many builders have run out of money and have abandoned their original plans to build many of these features in their developments. Many states have disclosure laws that state sellers must inform buyers of these abandoned plans, but that does not mean it always happens.

Remember, when you are buying a home, it is up to you to find out the information about it. The seller wants to make the home look like a better deal so they are going to dress it up and make it sound great. But you are the one that will be paying on a mortgage for the next 30 years so take it upon yourself to educate yourself so you can make the best financial decision possible.

Answers from a Mortgage Expert

Answers from a Mortgage Expert

Have you had questions about the mortgage industry in general? Here are some highlights from a recent interview with a mortgage expert.

We have all had questions about mortgages at one point or another and getting the answers we need is not always easy. But Tom Champion, who has been a mortgage loan originator and now works as a regional manager for Mortgage Loan Inspection, took some time in an interview with the Baltimore Sun to answer some pressing questions. Here are some highlights of that interview with a paraphrasing of the questions asked and the answers given.

What is the problem with a family making about $63,000 a year financing a home that costs $226,500? Is this a realistic mortgage payment for such a family?
According to Tom Champion, there is a problem with simply being able to afford a mortgage payment. In this case, the family would be approved for the loan according to FHA guidelines. However, after reviewing their budget, they would only have about $100 left over at the end of the month and they would not be able to contribute to any savings plans, college funds or retirement accounts. If someone gets sick or misses a paycheck, the family could be on the road to financial disaster.

Mortgage loan lenders are not going to be concerned about how much you have left over after making the mortgage payment. They will tell you that you can afford the payment but they will not often tell you that you can barely afford it. When taking out a mortgage loan, always separate yourself from the emotion of the purchase and make a realistic decision based on your budget. Tom calls people who simply “afford” their mortgage payment “house poor.”

How can a person or family determine how much mortgage they can comfortably and realistically afford?
Before applying for a mortgage loan, a family should always come up with a written budget. This budget should have a list of your expenses and your income. Include all of your expenses throughout the year, including your property taxes, insurance payments and more. Once you have this, adjust the data to include the new house payment, the new property taxes, the new insurance and any other expenses for the new home. You should even consider how much farther (or closer) you will be to your job and the different gas expenses.

Once you have all of this, you have a bottom line for what you can afford and still have money left over for living expenses, savings and other necessities. You can also see if any lifestyle changes are needed in order to afford the mortgage payments comfortably.

Champion urges home buyers to take their mortgage loan seriously. You are committing to a 30-year debt in most cases so it’s not something you can take lightly. For most people, buying a home will be the largest investment they will ever make. Allow your logic and rational side to make the decision rather than your emotional side to ensure a well-informed decision.

Mortgage Terms You Should Know

Mortgage Terms You Should Know

Have you ever heard someone in the mortgage industry use a bunch of terms that you didn't know? We're here to help. Here are some common terms used in the industry to help educate you.

When shopping for a mortgage, you may get overwhelmed by the process if you don’t know what to expect. One thing that can discourage you is when lenders and others that you talk to throw around terms that you don’t know. Here are some terms you will run into when getting a mortgage so you know what others are talking about.

Amortization Schedule
This term refers to the schedule of repayment for the mortgage loan. The table breaks down the interest, balance, tax and insurance payment as well as any other fees or charges that the mortgage borrower is responsible for.

Equity
When referring to a home, the equity is the amount you have invested in the property. In short, it is the difference between the home’s value and the balance you owe on the home. For example, if the home is worth $120,000 and you owe $100,000, you have $20,000 of equity built up in it.

Escrow
Escrow is basically a third-party which keeps any money or objects of value until the home purchase goes through. Escrow accounts are generally used for the borrower to deposit money for taxes and hazard insurance before the deal is final. After closing, the mortgage lender then uses that money to pay those fees when they come due.

Fannie Mae and Freddie Mac
These are the two government agencies that purchase mortgage loans from the lenders.

Fixed-Rate Mortgage
A fixed-rate mortgage is on in which the interest rate and monthly payments are the same throughout the term of the loan. The interest rates never change and, as a result, the monthly payments remain the same as well.

Adjustable-Rate Mortgage
With an adjustable-rate mortgage, your monthly payments will fluctuate depending on the current interest rates.

Grace Period
A grace period refers to the number of days following the payment due date which you can pay your bill without getting charged late fees. Grace periods are only for mortgage loans in which the interest gets calculated each month.

Mortgage Rates
This refers to the current interest rates that banks are charging. Currently, they are hovering around five percent. However, mortgage rates are increasing which means paying more overall during the term of the loan.

Homeowners Insurance
A homeowners insurance policy is vital for protecting your most expensive investment. In some cases, you will be required to have a homeowners insurance policy because the lender requires it to protect their investment as well.

Housing Bubble
This refers to a significant increase in home prices doe to the expectation that the prices will continue to go up.

These are just a few of the more common terms you will encounter when searching for a mortgage loan. Hopefully, knowing these terms will make the shopping around process a little bit easier and understandable for you.