Should You Buy a Historic House?

There is nothing quite like the quaintness and uniqueness of a historic home. Many homebuyers and investors fall in love with historic houses because they are richly attractive pieces of historical beauty. They are also known for their established neighborhoods. But are historic homes worth the purchase?

If you have been considering buying a historic home, there are some things you should consider. This article from Total Mortgage  discusses factors that you need to think about before making an offer. Some of these factors include higher property taxes, possible repairs, and the cost of keeping the historic home looking authentic.

According to the article, you may pay more for a historic home in the long run, but your home value will be higher. Plus, you can enjoy the beauty and charm of your historic home!

Should You Buy a Cul-de-Sac House?

The cul-de-sac home has been a symbol of traditional suburban life for decades. While cul-de-sacs have been built for centuries in the form of dead-end streets, they are commonly built nowadays for other reasons—one of which is to alleviate vehicle traffic.

Basically, a cul-de-sac is a street that has only one inlet/outlet. They became popular in America cities after World War II, and they are a classic symbol of suburban life. However, lately cul-de-sacs have been viewed in a negative light by some urban planners. But the popularity and charm of the cul-de-sac will always be present with homebuyers, and for good reasons.

If you’re thinking about buying a cul-de-sac home, here are some pros and cons that you should consider:

Pros

Privacy- Cul-de-sac homes offer more privacy than others because most of the traffic will come from the people that live in the cul-de-sac itself.

Good for families- Less traffic means a safer play area for children. Plus, many families who live in the same cul-de-sac often become tightly knit.

Good resell opportunities- Buyers will pay 20% more for cu-de-sac homes. (Hopefully you won’t have to when you initially buy!) But this is good news if and when you decide to resell.

Cons

More driving- It’s rather difficult to get anywhere without driving when you live in a cul-de-sac because you have to funnel the roads to get to the main road. Traffic can be a challenge once you get to the main trunk.

Less privacy- While you have more privacy from other traffic and pedestrians, you are basically living in close proximity to at least five other homes when you buy a home in a cul-de-sac. All of your neighbors will know a great deal about you.

Vehicles turning around- Many cars will drive to the cul-de-sac to turn around, and this extra traffic can pose safety issues for children who are playing.

 

Costs Involved With Homebuying

So you’ve decide to buy a home. Congratulations! Before you go shopping for the home of your dreams, you should know that homebuying involves more than simply picking out a home and paying for it. There are many costs and expenses you need to know about before you sign on the dotted line. It is wise to be prepared and know the costs ahead of time so that you can budget accordingly.

Here is a list of expenses that every new homeowner should expect and budget for:

Homeowner’s insurance- While many home buyers don’t think about it initially, insurance is necessary to protect your property in case of fire and inevitable disasters. The cost varies from company to company, and it also depends on type of policy that you need.

Moving expenses- As you probably may already know, moving can be very expensive. From packing supplies to a moving van, the expenses can run well into the hundreds of dollars. The cost will be higher if you need to hire a moving company, and it also depends on how far you are moving.

Upgrades- Your new home may not come with the appliances and features that you desire. The base price may not include the finishes and flooring that the model home. Countertops, cabinets, marble flooring, crown molding and other fixtures may not be included with the house that you fell in love with.

Necessities- You may need to have things like window coverings, fences, gates and doors installed that weren’t included on the property. Even smaller expenses like mailboxes and having the locks changed can add up for a new homeowner.

Landscaping and gardening- While perfectly cut green grass and flowers are beautiful, they can be a big expense that adds up. If you can handle the workload, you will save money, but you still need the appropriate equipment. It should go without saying that the bigger your yard and lawn are, the more money it will cost in the upkeep and maintenance. Fertilizer alone is quite expensive, not including the tools. You can hire someone to do the job on a regular basis, but naturally it is much cheaper to do it yourself.

Cable, phone and internet services- Many people don’t account for the transfer of these services, and there are additional costs for companies to set up your services in your new home.

Décor and furniture- Of course you will want to decorate your new home as soon as you move in to give a personalized look and feel. You’ll need items such as blinds, draperies and rugs to create a lived-in environment. Chances are good that you are moving to a bigger home, so you will probably need to fill it with more furniture.

What You Should Consider While Shopping for an Adjustable Mortgage

The interest rate on an adjustable mortgage (ARM) can change at every adjustment. Actually, this is the main difference between a fixed rate mortgage and an adjustable mortgage. ARMs are also called flexible rate mortgages.

All adjustable mortgages have an initial period during which the rate of interest is lower than fixed rates. In fact, these low initial rates are the biggest USP of ARMs. They make mortgage payments affordable, at least during the initial period. But things can change for the worse when the rates adjust after the initial period.

Advantages of adjustable mortgages

·         Interest rates are low during the initial period. In fact, the rates on an ARM can be lower than fixed rates by 2 – 3%. This will translate into significant savings for the borrower.

·         Getting an ARM is easier than getting a fixed-rate mortgage.

·         Payments can drop if index rates fall.

·         Processing times are quicker and lenders are more willing to offer ARMs.

·         Most ARMs do not have a prepayment penalty.

Drawbacks

Monthly mortgage payments can increase when interest rates rise. On the other hand, when you have a fixed-rate mortgage, you are immune to rate changes.

There is the risk of negative amortization. Adjustable mortgages have rate and payment caps. That means your monthly payment can't go beyond a certain amount. As a result, sometimes your payment may not cover the whole of the interest costs. In this case, the difference will be added to the principal amount. If this happens even after making several mortgage payments, you will still owe more money than you did when took the loan.

Who should consider getting an ARM?

People who are purchasing a starter home should consider getting an ARM because they are more likely to sell that home and move into a bigger home during the initial period itself.

People who are likely to get a transfer in the next two - three years also make good candidates for ARM.

Who should not consider getting an ARM?

Homeowners who plan to live in the same house for the rest of their life should consider getting a fixed rate mortgage, not an adjustable mortgage.

People who don't expect their income to increase in the immediate future, too, should not get an ARM.

While shopping for an ARM, you should ask the following questions to the lender.

·         What is the initial interest rate?

·         What is the annual percentage rate?

·         What index does the lender use to adjust the loan? The borrower should also ask how this index performed over the last few years.

·         What is the lender's margin? (The lender will add margin to the index rate to calculate the ARM interest rate. The margin will be the same throughout the life of your loan.)

·         How long does the initial period last?

·         Will the rate go up at the first adjustment even if the benchmark index hasn't moved?

·         Is there a rate cap?

·         How often will the rate change?

·         Does the mortgage require private insurance? If so, how much will it cost?

·         Is there a prepayment penalty?

·         Does the loan carry the risk of negative amortization?

Getting an ARM is not a wise idea if you intend to get an educational or an auto loan in the future.

Expenses Involved in Buying a Home

If you feel that your rented home no longer meets your family's requirements, you will probably want to move into a little space of your own. But before you start looking for homes, you need to make an honest assessment of your existing financial situation. Have you got the financial capacity to afford a home?

Interest rates are at their historical lows now, so if you have got a stable income you will not have much difficulty making monthly mortgage payments. Let’s do the math.

These days, interest rates hover around 3 percent. At that rate, if you have a 30-year mortgage of $250,000, you will have to make a monthly mortgage payment of around $1000. You will probably be paying a rent of approximately the same amount each month. In this case, you can purchase a home without having to upset your monthly budget. Better still, your home is a great investment because its value will appreciate over time.

Remember that you will need to make a down payment. The lender will contribute up to 95% of the sales value of the home. You need to come up with at least 5%. You will need to consider some other expenses as well.

Energy

When you move into your own home, you will have to take care of your energy expenses. Make sure that you will have no difficulty setting aside a certain amount each month to pay your utility bills.

Notary

There is a legal fee associated with the acquisition of a property. The notary fees depend upon several factors and hence a little research is required to find out how much you will have to pay. In any case, expect to pay around $1,200.

School and municipal taxes

You will have to pay the municipal tax and school tax to the municipality every year. Some lenders set aside a certain percentage of your monthly mortgage payment to save the money required to pay these taxes on the due date. This arrangement will save you the trouble of having to come up with a bulk amount, but you should be prepared to pay a slightly higher EMI.

Renovations

Your home might require some renovations. If you are really handy, you could perhaps do these projects on your own and save some money. However, if the home requires major repairs, you will have to hire a contractor. Ask the contractor to give you a quote and plan your budget accordingly.

Mortgage insurance

If you contribute less than 20 percent of the value of the property, you will have to buy mortgage insurance. The mortgage insurance premium you pay varies between 0.5 percent and 2.90 percent of the principal amount.

Life insurance

Your lender may be ready to insure your mortgage, but that is not the best solution. Buying life insurance is a better idea because the premium payable depends on your age, health, and habits e.

Inspection

Before buying the property, you should consider getting it inspected by a professional. This is necessary to ensure that the home is in great shape. A home inspector may charge around $400.

Should You Offer Homebuyer Incentives?

You want to sell your house on an urgent basis. You’re thinking of giving some incentives to prospective buyers so that they’re better inclined towards your home. You want to add a sweetener to the process in the form of a decorating allowance, a big-screen TV, or a home warranty.

This appears to be a smart marketing tactic per se. But sometimes homebuyer incentives can prove to be money wasted. You need to ensure you’re sending out the right signals to buyers with your homebuyer incentive in place.

Here are some dos and don’ts you need to follow if you don’t want a wasted effort:

Do’s:

Use incentives that will make your home stand out amongst others. If all the properties up for sale in the neighborhood have a similar patio, by equipping yours with a brand new luxury patio set with a shiny stainless steel BBQ, you stand a good chance of your home being picked over others.

Compensate for drawbacks by offering a homebuyer incentive. If you have ancient floral wallpaper in your living room, you could offer a decorating allowance which will cover your buyer’s cost of replacing it. If your furnace looks as if it’s on its last legs, offering a home warranty can allay your buyer’s concerns that they’ll have to spend thousands of dollars for replacing it in the near future.

Don’ts:

Don’t presume that it’s legal to offer homebuyer incentives. Some states may put a ban on homebuyer incentives. Sometimes laws can be maddeningly confusing regarding whether this practice is illegal or not. Confirm the way to go with both your attorney and real estate agent before you actually declare details of the homebuyer incentive you’re offering.

Don’t underestimate the smartness of buyers. There’s a strong probability that buyers will probe deeper to find out the motivation behind the homebuyer incentive you’re offering. Offering an incentive might make you appear desperate. Suspicious buyers might begin to wonder about the hidden flaws existing in your house that compelled you to throw in a freebie for making a sale. Your apparent anxiety could also result in buyers making a considerably lower offer.

Don’t mask an exorbitant price using a homebuyer incentive. If you offer a very high priced homebuyer incentive, something like a luxury car or a high-end TV; buyers might regard this as a gimmick for avoiding a reduction in the sale price. Almost all experienced real estate agents recommend listing homes at more competitive prices rather than offering homebuyer incentives.

The price of a property is what buyers look at first and foremost. If a house is priced even slightly below its real value, it attracts both buyers and buyers’ agents. The home will be considered a good pick and will be bought quickly.

The bottom line

If you’re sure that offering a homebuyer incentive is beneficial, make sure you choose one that’s a value addition or that neutralizes an existing flaw in your home.