I Think I Want To Buy A House – Part Four

Over the past few weeks as we’ve been looking at the “sorting” process of home buying, we’ve looked at the importance of location and how it relates to where we work and where we play. We’ve also looked at the steps involved in getting the necessary financing – how much we can afford and the differences between mortgage brokers and direct lenders. This week we’ll finish the “sort” process by looking at the last two major considerations in determining what type of home we buy – size and condition.

Many times size is an easy consideration to determine. If we have three kids and our mother-in-law is going to live with us, two bedrooms won’t make it. On the other hand, two bedrooms might be perfect for a single person or a couple starting out or emptying their nest. The number of baths might be a consideration; even how much land. We may want to think about how big the rooms need to be, although it’s never a good idea to go looking for a home to fit our furniture unless those pieces are heirlooms.

Condition can be an important aspect in our search. How comfortable am I doing upgrades and modifications right after we buy? Will I have the money? The time? The know how? While there is an old saying that, Poverty is the best teacher”, there is another one that says, “If you don;t know what you’re doing, you do it twice”.

Following is a chart that will give us an idea of the cost of some of the major repair or renovations:

Many of us underestimate what’s involved in terms of money, time, and stress when taking on projects around the house.  This is doubly so when we’re doing it for the first time, so think carefully before tackling the job.  Speak to your Realtor and contractors you might know about what’s involved.  Know what you’re getting into.

Next week we begin the search process.  What should I look for and more.

Rick Coughlin is a residential real estate broker who has been helping people buy and sell homes in Weymouth, Quincy, Braintree, and throughout the South Shore since 1984.  He’s been involved in the Associations of Realtors at the local, state, and national levels in a number of different leadership levels.  He has been a guest contributor on WCVB-TV’s “Chronicle”; Tom Williams’ “Sound Advice” and is often sought for his real estate expertise and knowledge of the South Shore real estate market.   Contact him at Rick@CoughlinHomes.com or by phone, 781.335.2357

A calm sea never made a skillful mariner. As we make our way through these tough times, consider that we’re being refined for better things

A calm sea never made a skillful mariner. As we make our way through these tough times, consider that we’re being refined for better things

I Think I Want To Buy A Home – Part Three

Over the last three weeks we’ve been looking at the home buying process and how we go about getting ourselves into the home that is just the right one.  We’ve looked at price, financing, and how much we can afford.  Now let’s turn our attention to what many consider the most important aspect of real estate – location.

When thinking about where we want to live, there are some questions we want to ask ourselves: Where do I work?  Where do I play?  Who do I want to be closest to? (Who do I want to be furthest from?!)  What’s important to me in the community?  Is it the schools? Proximity to transportation?  Arts and attractions?  There are a number of variables that go into what I view as being the perfect community – and what I think is important may not be what you think.  Regardless, a good place to start is to list what’s important to you.  Talk to friends, family, and co-workers.  Get their views on the towns or neighborhoods you’re thinking about.  Check them out online – the towns, not your friends!  (for communities on the South Shore, CoughlinHomes.com provides links to each).  For many, schools are the most important criteria when determining where they want to look.  But even the quality of schools may be subjective.  I remember hearing of a school district in Ohio years ago that had the highest percentage of kids going on to and graduating from four-year colleges.  Yet that same school district had the highest percentage of suicides of any other in the state.  What’s important to you?  Is it a school system where your child is pushed to be the best he or she can be?  Is one where your child is warmly nurtured?  Are sports important to you?  Special needs?  Ask questions and don’t be afraid to visit some of the schools in the communities you’re interested in.

When you narrow in on a particular town, it’s then time to focus on the neighborhoods. Drive around to get a feel for what is where and how far away you actually are from the people and places you love.  Check them out at different times of the day.  Are the homes well-maintained?  What is traffic like?  Are there people walking around?  Are there kids in the neighborhood?  Does this place feel like it could be home to you?

A little time thinking about what makes my community my home will pay dividends when it comes time to actually set down roots.  It will also go a long way toward alleviating some of the stress that’s involved in buying that home.

Next week we’ll look at “Condition” & “Size” as we continue our series of buying a home.  In the meantime, is there something you’d like to see addressed here?  Do you have any questions or comments?  Let me know.  Leave me a comment here or shoot me an email at Rick@CoughlinHomes.com

I Think I Want to Buy A Home – Part Two

Last week we began looking at the home buying process and started thinking about how much we can afford to spend per month for our housing.  This week we see how much that monthly payment translates into a loan amount.  Remember that your mortgage payment actually has several components to it: principal, interest, taxes, and property insurance (PITI).  If we back out taxes and insurance, the remainder will be principal and interest.  (A mortgage calculator will do that work for us) Now that we know what we believe we can afford and feel comfortable with, it’s time to speak to a lender.

When it comes to home financing, there are several options available to us.  Local banks, direct mortgage lenders, and mortgage brokers.  Each have strong benefits and each have their limitations.  While local banks may have a limited product line, many service their loans themselves.  The benefit to us is that if we have an issue or concern we can go to the people to whom we originally spoke, even if that loan has been subsequently sold.  Direct mortgage lenders don’t typically service their loans themselves.  Once the loan is closed, we deal directly with the bank or investor to whom it was sold.  The advantage to larger direct lenders is that they tend to have a broader product lines , i.e., VA and/or FHA loans, a number of variable rate mortgage loans, etc.  Direct lenders also have the ability to underwrite the loans themselves, which gives them direct decision making capabilities.  Mortgage brokers typically will meet with us, determine our needs, and then shop around to find the loan product that best meets our needs.  In-house restraints that might limit the number of loan programs available to us may not be an issue with mortgage brokers.  The disadvantage is that mortgage brokers cannot issue commitment letters.  Those have to be issued by the actual lender.  All mortgage brokers and mortgage companies have to be licensed in each of the states in which they do business.  As with any major decision we make it’s important to get references.  Speak to your Realtor, talk to family and friends, see who you feel comfortable working with.

Once we’ve settled on our lender we want to make sure that the lender will write the loan for the amount we believe we can afford.  That process is called “pre-approval“.  Usually we need to provide our lender with our last two years tax returns (including W-2′s),  last two pay stubs, and our last two bank statements.  The lender will also pull our credit report.  When this is completed, he or she will issue us a pre-approval letter, which essentially says, that if nothing changes in our financial lives and the property we want to buy meets the lender’s guidelines, they will issue the loan.  If you have not met with your lender or gotten him or her documentation, then you do not have a pre-approval.   And most home sellers want to know that you have been pre-approved by a mortgage lender before negotiating with you.

Next week we’ll look at the the three most important things in real estate:  Location, Location, Location.  In the meantime, let me know what you think.  Do you have any stories to share?  Do you have any questions, comments, or thoughts you’d like to see addressed in this series?  Leave a comment here or shoot me an email at Rick@CoughlinHomes.com

Redistributing Wealth to the RICH?

From time to time I have a guest columnist share his or her views on what’s going on in the real estate industry. Today Steve Harney has a great column on a major US Policy shift and it’s ramifications to future generations. Let me know what you think. – RealtorRick

Many people are placing the concept of homeownership under attack. There is more and more debate whether we should limit government assistance to homeowners. The administration just came out with their Reforming America’s Housing Finance Market: A Report to Congress. The report acknowledges the advantages of homeownership:

“…which has helped millions of middle class families build wealth and achieve the American Dream.”

The paper also talks about curtailing a century of government assistance for American homeownership (ex. the elimination of Fannie Mae and Freddie Mac):

“But our plan also dramatically transforms the role of government in the housing market. In the past, the government’s financial and tax policies encouraged housing purchases and real estate investment over other sectors of our economy, and ultimately left taxpayers responsible for much of the risk incurred by a poorly supervised housing finance market.

Going forward, the government’s primary role should be limited to robust oversight and consumer protection, targeted assistance for low- and moderate-income homeowners and renters.”

At the same time it speaks of increasing its support for rental housing:

“The Administration believes that we must continue to take the necessary steps to ensure that Americans have access to an adequate range of affordable housing options. This does not mean all Americans should become homeowners … we should ensure that there are a range of affordable options for the 100 million Americans who rent, whether they do so by choice or necessity.”

In a press release announcing the administration’s points, Housing and Urban Development Secretary Shaun Donovan is quoted:

“We must continue to take the necessary steps to ensure that Americans have access to quality housing they can afford. This involves rebalancing our housing priorities to support a range of affordable options, from promoting much-needed financing for quality, affordable rental homes to ensuring the availability of safe, and sustainable mortgage products for current and future homeowners.”

This is not just a matter of semantics. In his prepared testimony before the House Committee on Financial Services, Treasury Secretary Timothy Geithner said:

“Our goal is not for every American to become a homeowner.”

The administration is taking a strong stance against government’s role in supporting homeownership. This would be a major change in policy. Assistance for homeownership has been important to America for a century. Many young people were able to attend college because their parents were willing and able to refinance their home to pay the tuition. Many American business owners got their start-up capital by taking an equity loan on their house. Renters won’t be able to ask their landlords to help pay their child’s college tuition. Renters can’t expect landlords to finance the development of the new product they discovered.

If we start to create a land with greater numbers of renters, those able to still purchase property will get wealthier collecting the rents from those who can no longer attain the American Dream. The administration calls for more support for these developers:

“The Administration will explore ways to provide greater support for rental housing. One option would be to do so by expanding FHA’s capacity to support lending to the multifamily market.”

This will lead to the redistribution of wealth in this country with the owners of the rental units building family wealth with profits generated by this real estate.

Diana Olick in an article for CNBC Realty Check quotes Democrat Melvin Watt of North Carolina:

“…there’s not going to be any home ownership at the low income level…Rich people will have home ownership and rich people will make money on apartment rentals, but we’ll be a renter nation for low-income people.”

We have to make sure this is the America we want.

I Think I Want to Buy a Home – What Do I Do?

It’s been said that the best time to buy a home was either ten years ago or right now.  Interest rates are now lower than they have been in generations – around 3.875% for a thirty-year fixed rate!  Prices continue to be depressed as our economy remains in the doldrums.  This truly is the best time in years to buy a home.  And yet, it’s such a big step that many of us keep putting it off until ….

Truly, buying a home – especially our first one – is one of the most stressful things we will ever do.  It ranks right up there with changing jobs and gaining or losing a loved one, according to researchers.  But there are steps that we can take that will alleviate if not eliminate most of that stress.  Our stress levels tend to spike when we find ourselves in unfamiliar territory and /or are blindsided by something. Unfamiliar territory and being blindsided are now the norm in the real estate industry. (Do we still wonder why everyone seems so stressed out?!) For the next several weeks we’ll took at steps we can take that can make the buying experience, if not enjoyable, at least tolerable.

The first step is to determine what we’re looking for in a home. Where do I want to live? How much can I afford? How big does the house need to be? These questions and lots more are part of the “Sort” process.  The old saying is that the three most important things in real estate are:  “Location, Location, and Location”.  While that is partially true, the reality is that we have to pay for our home, so price typically trumps everything else.  How much can I afford to pay on a monthly basis?   Some of the questions to ask are:  How much am I currently paying for rent?  Is that comfortable or is it a stretch?  Are my utilities included in my rent?  Is there anything I’m willing to give up that will make it easier for me to afford a home?  As a rule of thumb, our mortgage payment (principal, interest, taxes, and property insurance – PITI) should be around one week’s gross income or about 33% of my monthly gross.  When long term debt (car loans, student loans, anything with more than ten months left to pay) are added in, that total should not exceed more than 38% – 40% of my gross income.  In today’s world it’s a good idea to speak with a mortgage lender to get “pre-approved”.

Next week we’ll look more at mortgage lenders – brokers and direct lenders and the pre-approval process.  Let me know questions you’d like to see answered in this series.  Leave a comment or shoot me an email!

New Thoughts On Music, Books, and Old Friends

Have you ever stumbled upon something you really enjoyed years ago and wondered if your fond memories were real or only nostalgia? (Think “Green Acres”)

While going through some old boxes recently I came across a cassette tape from an old friend, David Crossman. David was attending North River Community Church at the time and helping with some of their worship music. My wife and I were at South Shore Baptist and David’s tape, “Footprints On My Wings” had a profound effect on me. The question now was, “Was the music as good and as powerful now as it had been way back when?” Indeed it is! The songs are as relevant now as then, both the music and lyrics are well written and completely enjoyable to anyone listening for the first time or those of us who have been David’s fans from years ago. And now the music is available online!

I’ve been recently able to reconnect with David. He’s living in Nashville now and not only is he still writing music, he’s writing novels as well. From mysteries, to fantasy to historic fiction, David’s books are thoroughly available. They’re also available online.

So if you’re looking to relax and read a good book while listening to some great music, check out David Crossman’s website and tell him that RealtorRick Coughlin say’s “Hi!”

Oh, yeah. Let don’t forget to let me know what you think!