ResidentialRates

Home Protection Plan

July 3rd, 2005

Are they a good deal?: Tips on finding a home protection plan

By Dian Hymer

When something malfunctions in your home, wouldn’t it be wonderful if you could pick up the phone, request a service call, pay a nominal service charge and have the problem fixed. In theory, this is how a home protection plan works.

A home protection plan–also called a home warranty-is an insurance policy that insures homeowners against defects in the major systems of their home. Precisely what is covered will vary from one company to the next. Most policies cover the heating, plumbing and electrical systems as well as built-in appliances like the stove, dishwasher and garbage disposal. Some companies will cover movable appliances like the refrigerator, washer and dryer for an extra charge. And some policies even include roof coverage-if you pay an additional fee.Policy terms are usually for one year and they are renewable. The annual cost of a policy varies but you might expect to pay about $250 for a moderate-size home. Protection plans are available for both single-family residences and condominiums. The plans are offered in most states.

Home protection plans are popular in the home sale industry because they provide a relatively inexpensive way to take care of home defects that develop soon after the home sale closes. For example, let’s say the water heater quits working the day after closing. Depending on the terms of the purchase agreement, the seller may be responsible for replacing the water heater. A new hot water heater can cost several hundred dollars. However, if there is a home protection plan in place at closing, the hot water heater will probably be replaced for the nominal cost of a service charge. Home warranty service charges vary but they are often in the range of $30-35 per call.

Some sellers offer to pay for a home protection plan to cover the home for the buyer for one year. If problems arise during that year, the buyers simply call the warranty company and pay the service charge. The warranty company pays for the repair or replacement.

First-Time Tip: Be sure to read the policy carefully because there are exclusions from coverage. For example, pre-existing conditions are not usually covered. So if the furnace hasn’t worked properly for years, it probably won’t be covered by the buyer’s home protection plan. Also, there are limitations on coverage. For instance, some policies offer roof coverage, but only up to $1,000 of work.

Seller coverage is also available to cover the home during the listing and sale period. Seller coverage works the same as buyer coverage except that there are usually more limitations on the coverage. For example, the furnace is usually covered under both buyer and seller coverage. But, the amount of coverage offered under seller coverage is often less than the amount that’s available to the buyer if the furnace breaks down after closing.

One seller who had signed up for seller coverage was able to have some of the defects that were discovered during the buyer’s inspections fixed by the home protection plan company for the cost of a service charge. This was a great deal for the seller because it saved him money and he didn’t have to pay the policy premium until closing. Seller coverage is usually charged by the day. The cost varies, but it can run about 75 to 85 cents a day.

The Closing: If the seller of a home you’re buying does not offer to pay for a home protection plan, you can pay for one. Be sure to order it before the closing date.Dian Hymer is author of “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.

San Ramon Real Estate

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Three Simple Steps to Successfully Selecting an Agent

July 3rd, 2005

Three Simple Steps to Successfully Selecting an Agent

Buying or selling a home takes a great deal of preparation, decision-making, patience, scheduling flexibility, and in many markets, acting quickly - all the ingredients for a potentially stressful experience. A great relationship with your real estate agent helps keep this experience productive and stress under control. HomeGain has uncovered that the key to successful relationship with your agent comes from taking 3 simple steps:

1. Know what is important to YOU - Take a few minutes to consider what is important to you as you embark on buying or selling your home. First, understand what is your overall objective in this process. Is speed most important? Or is the right price critical? Second, understand how you want this process to unfold. Is this a process you want to control completely, or do you want someone else making the decisions? Is constant communication important to you or do you require minimal disruption in your busy life? Knowing what is important to you will help you make a confident decision on which agent to select. Do you want a top producer, a hard sales person or a methodical project manager?

2. Select agents that meet your needs and talk to them on the phone. Using HomeGain for this process is the most effective and expedient way to find an agent. We ask the questions for you and within hours, you’ll have complete performance information on several agents in your area that you can compare and contrast, giving you a unique insight into many agents on a short period of time. Then, select a few agents that meet your needs and call or email them. Get to know their personality by asking them about their approach in handling new clients. Listen to their communication style and ask about their negotiating skills.

3. Select one or all of them to meet personally. Many HomeGain Members review the “factual” information of the agent proposals, and then after talking on the phone, they can narrow down their selection to just one agent that they meet personally to ensure the “chemistry” is right.

The end result is that you have done your homework in the most expedient yet thorough way on a decision that should ensure you a stress-free relationship and positive outcome.

San Ramon Real Estate

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What Are Closing Costs - San Ramon Real Estate

July 3rd, 2005

What Are Closing Costs and Who Pays for Them?

By Dian Hymer

The various fees associated with buying or selling a home are called closing costs. Buyers and sellers both pay closing costs but who pays what costs varies from area to area. For example, in Los Angeles, sellers usually pay for title insurance. In San Francisco, it’s customarily paid for by the buyer.

Buyers typically pay the following closing costs: fees charged for obtaining a mortgage; inspection fees; homeowner’s insurance (must be prepaid for one year at closing); transfer taxes if there are any (although the seller may pay these or they may be shared 50-50 between buyer and seller); title insurance and escrow fees (depending on the location); and attorney’s fees (where attorneys are involved in the transaction). Your real estate agent or mortgage broker can tell you which fees are customarily paid for by the buyer in your area and how much they’ll cost.

Sellers’ closing costs typically include: loan payoff fees; the real estate commission (in some cases, a portion of this may be paid by the buyer); title insurance (depending on the location); termite repairs (this is negotiable in some areas); all or part of transfer taxes and escrow fees, if there are any; attorney’s fees where applicable; and other fees set by local custom or negotiated during the transaction. Sellers can get an accounting of the closing costs they’re likely to pay from their listing agent.

First-Time Tip: The most expensive closing cost a buyer pays is often the loan origination fee. Lenders charge points to originate a loan. One point is equal to one percent of the loan amount. A $240,000 loan with a 1 point fee will add $2,400 to your closing cost bill. This charge can be eliminated if you take a no-point loan. You’ll pay a higher interest rate on a no-point loan, but you’ll conserve cash. If you don’t plan to stay in the home for more than a few years, it may be cheaper in the long run to take a no-point loan and pay the higher interest rate.

Most lenders allow parents to give money to their children to use for a home purchase as long as the parents are willing to stipulate that the money doesn’t have to be repaid. However, lenders usually require that the borrowers have some of their own money invested in the property. For example, a lender would probably approve a loan for buyers with good credit if they had enough of their own money for a 5 or 10 percent cash down payment and gift money from their parents for the closing costs. Also, there are loan programs for low-cash down buyers that allow the buyer to finance some of the closing costs.

Another way to generate cash to pay for closing costs is to ask the seller for a cash credit at closing. Lenders have restrictions on how much a seller can credit to a buyer (often no more than 3 to 6 percent of the selling price). And some lenders will only allow credits for nonrecurring closing costs, that is, closing costs like title insurance that are paid on a one-time-only basis. Keep in mind that when you ask the sellers for a credit, you are, in effect, asking them to lower the price of their property. If the sellers give you a $5,000 credit, their proceeds will be reduced by $5,000.

The Closing: Buyers who are competing with other buyers may want to increase their offer price by $5,000 to offset their request for a $5,000 credit.

Dian Hymer is author of “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books, Revised 1998.

Distributed by Inman News Features

San Ramon Real Estate

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Purchase Contract Basics - San Ramon Real Estate

July 3rd, 2005

The document that spells out the terms and conditions of your home (or condominium) purchase is variously referred to as a purchase contract, deposit receipt, earnest money contract or sales contract. It’s a legally binding document that should reflect your intentions and capabilities accurately.

Purchase contracts will vary depending on the type and location of the property and on whether the contract is a reprinted form used by a real estate broker or a document drawn by an attorney. But there are basic elements that should be included in any residential property sales agreement.

To be enforceable, a property sales contract must be written; oral agreements to sell real estate are not binding. The contract must identify the buyers, the sellers and the property. And it must establish a purchase price and the terms of the sale if the sale is not all cash.

The contract specifies the amount of the buyers’ earnest money (good faith) deposit. The agreement usually provides for this money to be held by a third party, typically an escrow officer or an attorney. The deposit is applied to the purchase price at closing, or it’s refundable to the buyers if certain terms of the contract (called contingencies) aren’t satisfied. The deposit amount is negotiable, but local custom often prevails.

Most real estate purchase contracts will include at least two contingencies. A financing contingency makes the purchase conditional on the buyers’ ability to obtain a loan commitment from a lender. An inspection contingency allows the buyers to have professionals inspect the property to their satisfaction. If the sellers are unwilling or unable to correct defects, the contract is voidable and the buyers’ deposit is refundable.

A deposit could be forfeited by the buyers under certain circumstances, such as the buyers backing out for a reason not provided for in the contract.

The purchase contract should describe the sellers responsibilities which will include such things as passing clear title to the property; maintaining the property in its present condition until closing; delivering the property “broom clean” and free of personal possessions and debris; and making any agreed upon repairs to the property.

The sales contract should also specify who’s responsible for paying which closing costs. Closing costs include such things as a brokerage commission, loan origination fees, title insurance and transfer taxes. Who pays these charges is usually dictated by local custom but they can be negotiated.

The purchase contract should clarify any items of personal property that will be included in the sale and any attached fixtures that will be excluded. The dates that title will transfer to the buyer and when possession will be delivered to the buyer should also be specified in the contract.

First-Time Tip: A final walk-through provision gives the buyers the right to inspect the property prior to closing. This allows the buyers an opportunity to confirm that the property is in the same general condition as it was when they agreed to purchase it. A walk-through can also be used for the purpose of assuring that the sellers have completed repairs they agreed to do, or that a home that was still under construction when the buyers purchased it is finished.

The Closing: A real estate purchase contract is a complicated legal document. You should read and understand it before signing it, although many buyers never do. If you have any questions, ask your real estate agent or a knowledgeable attorney for an explanation. There are no stupid questions when it comes to buying real property.

Dian Hymer is author of “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books, Revised 1998.

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If You Move Yourself - San Ramon Real Estate

July 3rd, 2005

Resources Tools Library Glossary Home Sale Maximizer

HomeGain Library

If You Move Yourself…

By Edith Lank

You’ll want to take some items in your own car when you move, and that’s true whether you’re hiring a mover or doing the job on your own. You’ll hand-carry jewelry, medications, house plants, pets and a suitcase for each family member. Keep handy a box containing hammer, screwdriver, cleaning supplies and rags, extension cords, paper plates and cups, plastic utensils, saucepan, coffee maker and supplies, snacks, toothbrushes, soap and towels.

If you’re renting a truck, they’ve met your kind before at truck rental agencies, and they’re prepared with all sorts of assistance. They have information to help estimate what size truck or trailer you’ll need. They can rent you a handtruck or dolly, furniture pads and straps, and sell you cartons specifically made for packing various types of items.

If you don’t want to buy or rent boxes, one good source for small sturdy cartons is your local liquor store.

Your truck rental can be one-way or round-trip. Be sure to ask about drop-off locations. If there isn’t one in your new town, there may be one nearby, which could be just as good. You’d need someone with a car to follow you and bring you back no matter where you returned the truck.

In contrast to moving companies, which seldom accept credit cards, car rental companies will take your card. Remember that in addition to daily charges, you’ll have costs for gasoline and tolls.

Be sure to check with your insurance company to see whether you need any additional insurance to supplement the rental agency’s own policy.

And when it comes to loading the truck, remember –. there’s no substitute for good friends, a few six-packs of soda and beer, and a pizza delivery.

” USAToday has called Edith Lank “The Dear Abby of Real Estate” and the San Diego Union says she’s “The Doctor Ruth of Real Estate.” Her seven books on real estate include The Homebuyers Kit and The Homesellers Kit, as well as the most widely-used real estate textbook in New York state. She teaches on the college level, and is heard weekly on public radio. ”

Distributed by Inman News Features

San Ramon Real Estate

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San Ramon Real Estate

July 3rd, 2005

What Are the Hidden Costs of Home Ownership?

By Dian Hymer

Most home buyers think first of the monthly mortgage payment when they consider how much they can afford to pay for a home. They frequently forget about the cost of home maintenance. Some homes cost more to maintain than others. But all homes need to be attended to on a regular basis to keep them from falling into a state of disrepair.

Older homes usually need more maintenance than newer homes. Plumbing and electrical systems wear out over time. So do components like the roof and the foundation.

For example, let’s say you’re buying an older home from the 1920’s that has a tile roof. The terra cotta tile may have an indeterminate life span, as long as the tiles aren’t damaged. But the felt that lies underneath the tile can become brittle after awhile and crack. This felt paper is the waterproofing membrane that keeps rainwater from penetrating into your home. When the waterproofing membrane fails, the tiles need to be removed from the roof and the membrane replaced in order for the roof to be watertight. This can be expensive, especially for large roofs.

Updating often includes plumbing, heating, electrical, drainage, foundation, kitchens and bathrooms. Unless you’re buying an older home that has been renovated by previous owners, you should anticipate making such upgrades in the future.

First-Time Tip: Have any home you buy thoroughly inspected by an experienced and reputable home inspector. Let the inspector know that, in addition to learning the current condition of the property, you need to know when you should anticipate replacing or repairing major systems and components.

Find out how much it will cost to maintain the property before it becomes your responsibility. In some cases, this will require that you get bids from certain contractors (plumber, roofer, electrician or drainage expert) who may need to look at the property before giving estimates. Find out if the seller has had contractors work on the property. They may be able to provide you with information about future maintenance costs.

Ask the previous owners what routine maintenance chores they took care of during their term of ownership. Did the roof gutters need cleaning? How often? Are there drains that need clearing? Do any skylights leak? What is the cost to take care of these items? If the sellers know craftsmen they can recommend to take care of these chores, get their names and numbers and consider using them in the future.

Find out what the monthly utility bills run. This will vary from one month to the next. Ask the sellers for an average for the summer and winter months. Also find out if there are any local homeowner assessments. If there are, what do they cost?

Set a budget for yourself before you commit to going through with the purchase. Include the costs for incidentals like tree-trimming, painting, heating and maintaining a pool or spa. Don’t forget to ask the seller when the house was last painted. Find out how often does the exterior need repainting. This will usually range from 5 to 10 years depending on the quality of the last paint job and the harshness of the climate.

Don’t assume that because a home is new, it won’t need any maintenance for awhile. New homes can be defective. Also, there may be vent pipes or skylights that need routine sealing to keep them from leaking.

The Closing: If your new home comes without landscaping and window coverings, you’ll need to budget these into your hidden costs of home ownership.

Dian Hymer is author of “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.

© 1998 Dian Hymer
Distributed by Inman News Features

San Ramon Real Estate

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San Ramon Real Estate - What Questions Should I Ask?

July 3rd, 2005

As a buyer, what questions should I ask?

When you’re in the market for a home, it seems as if there are millions of questions to ask — and no doubt plenty more. As buyers we become so wrapped up in the physical aspects of the house — the rooms, amenities, and structure — that we give less attention to quiet issues which may strongly impact our ability to enjoy a home.

What kinds of factors will affect your quality of life? The obvious ones are the first to come to mind: the distance to work, the special programs available through the local school system, and neighborhood shopping and recreation.

Those factors, while important, may not touch the issues specific to your situation. Consider the thousands of families who have an aging parent residing with them. The average age of our population has grown older, meaning we are living longer lives, spending longer periods as widows and widowers, and increasingly choosing to take up residence with our children. In such situations, the distance from our homes to the nearest hospital is vitally important.

Public transportation is also something we tend to overlook in a nation of drivers. As more of us get older, many elect not to drive, thus nearby public transportation becomes important –especially if buses stop frequently.

Public safety is a major issue, and proximity to police stations, emergency medical services and fire houses is important. Community groups– including homeowner associations, PTAs, and a neighborhood crime-watch– are also important.

No one wants to hassle with parking issues, so what is the parking situation? What if you have guests. Take note of any parking restrictions, which could result in a visitor’s car — or your car — being towed from in front of your house.

What about trash pick-ups? Okay, this isn’t a glorious subject, but consider the alternative. In rural areas there are often communal dumpster zones to which residents haul trash. If the community will pick-up from you, great. If they recycle, better. Check for pick-up dates, if Mondays ask how holidays are handled.

Is the area impacted by local conservation efforts? For example, what about water supplies in the summer? Electric power?

If you’re moving to a new community you might look forward to such recreational facilities as clubhouses, playgrounds, exercise rooms and other offerings. Before you sign on the dotted line, check out the “fine print” details. Is use free or an additional cost? Are there plans to build a playground or other amenity next to the property you want to purchase? Do you regard a playground as a convenience or noisy problem?

What about that nice stand of trees behind the lot where you want to build–is that land being preserved or will a zoning change allow it to become a gas station next year?

Another issue concerns property taxes: You know what the owners pay today, but is that what you will pay tomorrow? Property tax rules may allow special benefits for older citizens, veterans, or long-time residents–benefits which may not apply to you.

Here’s one more: That nice condo or homeowner association you’re thinking about. You know about their assessments now, but are they planning a “special” assessment soon? If yes, you could be out big money (or you could make an offer which is discounted to reflect the cost of the special assessment).

Are there more questions to ask? You bet. But the ones above are a good place to start.

San Ramon Real Estate

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How Much Home Can I Afford - San Ramon Real Estate

July 3rd, 2005

How Much Home Can I Afford?

Your buying power depends on how much you have available for the down payment and how much a financial institution will agree to lend you.

There is a rule of thumb that says that if you have the capacity to repay the mortgage, you can afford a single-family house that costs up to two and one-half times your annual gross income. (Annual gross income is the amount you make before taxes are deducted.)

Like other rules of thumb, this one is handy and can give you a general idea of how large a mortgage you can afford.

But, because it is so simple, it doesn’t take into account all the information that will help you feel comfortable with your mortgage payments.

If you are buying a house with someone else (spouse, parent, adult child, partner/companion, brother or sister or other relative), you should consider your co-purchaser’s earnings and existing debts as well. Remember, if you apply for a loan with somebody else, you and your co-borrower are both legally responsible for repayment of the mortgage.

Your buying power depends on how much you have available for the down payment and how much a financial institution will agree to lend you.

Your down payment
If you are a first-time home buyer, the price you can afford to pay for a house may well be limited by your ability to come up with the required down payment and closing costs. If you haven’t accumulated much savings, you may want to set aside funds for a down payment on a regular basis from your paycheck. Monies in your checking and savings accounts, mutual funds, stocks and bonds, the cash value of your life insurance policy, and gifts from parents or other relatives may all be suitable sources for a down payment.

The biggest hurdle for most home buyers is saving enough money for the down payment. This can be particularly hard for first-time buyers. Many times it takes years of careful budgeting of their spending for first-time buyers to save enough for the required down payment.

Depending on the lender and loan type, you may be able to get a mortgage with as little as 3 percent or 5 percent down. However, putting less than 20 percent down often means you will be required to purchase private mortgage insurance. Private mortgage insurance (PMI) helps protect the lending institution in case you fail to make payments on your mortgage.

Typically, these costs will be added to your monthly mortgage payments and to your closing costs. In helping you decide how much money you feel comfortable paying as a down payment, you should think about the many other expenses that go along with buying a home. There will be moving expenses and maybe home decorating costs. You may be about to face other expenses such as buying a new car.

You should try to avoid moving into the home of your dreams with a savings account on empty. In many cases, your lender will want you to have two months of mortgage payments saved up as a cash reserve when you apply for your mortgage.

Your closing costs
In addition to the down payment, you will also need to consider closing costs. The closing is the final step during which ownership of the house is transferred to you. The purpose of the closing is to make sure the property is ready and able to be transferred from the seller to you.

Closing costs generally range from 3 percent to 6 percent of the amount of the mortgage. So, if you were to buy a $100,000 house with a 5 percent ($5,000) down payment, you could expect to pay between $2,850 and $5,700 on your $95,000 mortgage. Sometimes, you can negotiate with the seller of a property to pay some of your closing costs, which will reduce the amount of money you will need to bring to closing.

How much a financial institution will lend you
Apart from having available funds for a down payment and closing costs, the other major factor limiting how expensive a house you can buy will be how much you can borrow.

When you apply for a mortgage, the lender will consider both your earnings and your existing debts in determining the size of your loan. Lenders generally use the following two qualifying guidelines to determine what size mortgage you are eligible for:

The amount of money you owe for mortgage payments, property taxes, insurance, and condominium or co-op fee, if applicable, should total no more than 28 percent of your monthly gross (before-tax) income. This is called the housing expense ratio.

The amount of money you owe for the above items plus other long-term debts should total no more than 36 percent of your monthly gross income. This is called the total debt-to-income ratio.

Basically, lenders are saying that a household should spend no more than about one-fourth of its income (28 percent) on housing and no more than about one-third of its income (36 percent) on total indebtedness (housing plus other debts). Lenders feel that if they follow these guidelines, homeowners will be able to pay off their mortgages fairly comfortably.

These lender ratios are flexible guidelines. If you have a consistent record of paying rent that is very close in amount to your proposed monthly mortgage payments or if you make a large down payment, you may be able to use somewhat higher ratios. Some lenders offer special loans for low- and moderate-income home buyers that allow them to use as much as 33 percent of their gross monthly income for housing expenses and 38 percent for total debt.

When you go to apply for a mortgage, the lender will use all the relevant data — your income, your existing debts, the purchase price of the house, your down payment, the interest rate on the loan, and the cost of property taxes and insurance — and calculate whether you qualify to borrow the amount of money you need to buy the house.

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San Ramon Real Estate - How To Determine if you are ready to buy a house in San Ramon

July 3rd, 2005

How do I determine if I’m ready to buy a home in San Ramon?

The following four questions are among the most important when determining if you should consider a home purchase.

1. Do you have a steady job history?

If you have been working consistently for at least the last two years, a lender will consider this to be steady employment. This does not mean that to be approved for a mortgage loan, you need to have held the same job for the last two years. In fact, job moves are looked on favorably if the result has been equal or more pay. However, if you have been working continuously for less than two years, this doesn’t necessarily mean you won’t be approved for a mortgage loan. The important thing is to be able to reasonably explain any gaps in employment. For example, if you were just discharged from the military, recently finished school, work seasonally with work gaps between seasons, were temporarily laid off, or had an illness that prevented you from working, you may still be able to qualify for a mortgage loan.
If you answer yes:

This means you have been working continuously for the last two years, or if you have not, you are able to provide a mortgage lender with reasonable explanations for any gaps in employment. If you can demonstrate a steady level of income and job history, the lender will have evidence of your capacity to pay back a mortgage loan.
If you answer no:

Saying “no” to a stable work history means you have not been consistently employed over the past two years and have not kept up a regular and even income level. You may have been fired for cause. You might have big gaps in your job record. Or there may have been dips in your income level that you cannot satisfactorily explain. If this is the case, you may have to delay borrowing money for a home until you can show that you have a steady income and stable work history.

2. Do you have an established and favorable credit profile?

Before lending you money, lenders want to see a track record of debts owed and duly repaid. Your lender will order a credit report to verify your debts, the amount of your monthly payments, and how many months or years you have left to pay off your debts. Credit bureaus keep records of consumer debt and how regularly these debts are repaid. Credit bureaus compile these reports by obtaining information from a wide range of sources–credit card companies, banks that have given you car loans, department stores and gasoline companies that provide credit cards. If you have never had any credit cards and have never borrowed money from a financial institution, you can still establish a credit history by documenting your monthly rent payments to current or previous landlords and your monthly payments to utility companies for electricity, gas, water, and telephone services. A mortgage lender can probably help you put this information together. You can find out what information is in your credit file by contacting a credit bureau. They usually are listed in the yellow pages of your phone book under “Credit Reporting Agencies” and will provide you with a copy of your report for free or for a nominal fee. The major companies are Experian (formerly TRW., Inc.), CBI Equifax, Inc., and Trans Union . Contact any of them for your credit report. See if any information is missing or inaccurate, so you can take steps to have the report corrected if necessary.
If you answer yes:

Saying “yes” to a good credit record means you have a history of paying your rent and other bills on time and will be able to prove that through a credit report or through compiling a nontraditional credit history. Although lender credit standards may vary, being late on a payment or having gone over your credit limit once or twice doesn’t necessarily mean you don’t have good credit–particularly if you can reasonably explain why. But if you show a repeated pattern of not paying accounts as agreed, it will affect your credit history. A good credit history tells the lender that you pay your obligations on time and use credit wisely– important information for a lender to know when you want to take out a mortgage loan.

If you answer no:

An unfavorable credit profile may mean you do not pay your bills on time or you currently have more credit obligations than you have been able to handle. Information that may be considered negative includes late payments, repossessions, accounts turned over to a collection agency, judgments, liens, and bankruptcies. Negative information in your credit file may lead creditors, such as mortgage lenders, to deny you credit. If your credit report shows that you do not have a good credit history, and the report is accurate, now may not be the best time to apply for a mortgage loan. Instead, you should try to improve your credit profile. Bring your payments up to date; pay off some of your debts; and work on paying your bills on time. Over time, you can build a profile that shows you are a good candidate for a loan, even if you have had serious credit problems in the past. For example, a foreclosure on an earlier mortgage does not mean you can never get a mortgage for another home. But most lenders prefer that three years go by before they will consider you for a new mortgage, and will want to know why there was a foreclosure. Similarly, if you have declared bankruptcy, most lenders won’t let you assume a mortgage debt until at least two years after discharge of the bankruptcy.

3. Have you saved the money for a down payment and closing costs?

Nearly all home buyers require a mortgage loan from a financial institution. However, few loans are for the full purchase price of a house. Instead, a lender will insist you contribute some portion of your own funds (the down payment) as part of the deal. Today, buyers can pay as little as 5 percent down. (In fact, some programs such as the Fannie 97® mortgage, require as little as 3 percent down). There are also a number of government-sponsored loan programs, including Federal Housing Administration (FHA), Veterans Administration (VA), and Rural Housing Service (RHS) loans, that require little or no down payment for qualified borrowers. Typically, however, most lenders require some form of down payment. For a $100,000 home, a 5 percent down payment requirement would be $5,000. You also will need to pay a number of additional costs, called closing costs, that cover the legal transference of a property to your name and other costs associated with your taking out a mortgage. Closing costs generally range from 3 percent to 6 percent of the sales price of the home. So, if you were to buy a $100,000 house with a 5 percent ($5,000) down payment, you could expect to pay between $3,000 and $6,000 in closing costs. Think about how much houses cost in your area and the type of mortgage down payment your loan will require. Then calculate the funds you have available to you for a down payment and closing costs.

If you answer yes:

Congratulations! Saving sufficient funds for closing costs and a down payment is usually one of the hardest parts of being ready to buy a home. If you believe you have sufficient funds, you are in a good position to shop for a mortgage and get pre-qualified by a lender, so that you know how much you can borrow based on your income and existing debt. When you do apply for a loan, your lender will verify that you have the funds you say you do, so be sure to be truthful about the amount you really do have available.

If you answer no:

If you do not now have at least a part of the money saved, you may be able to enlist the aid of a relative or a government or nonprofit agency that might give or loan you the money. Local housing agencies often offer loan terms that include no down payments. (Check with your state or local housing authority. The phone numbers usually can be found in the government “blue pages” of the phone book.) However, if this type of down payment and closing cost assistance is not available and you have not already saved the money for at least part of those expenses, this probably isn’t the right time for you to buy a house. Instead, you should begin to budget some money from every pay check that you can put into a savings account. The more consistently you save money, the better your chances to apply for a mortgage in the future.

4. Can you afford monthly mortgage payments for the house you want?

Generally, the amount of your monthly mortgage payment is limited to 28 percent of your gross monthly income. The amount of your total monthly debt is limited to 36 percent of your gross monthly income. Staying within these lender guidelines will give you a certain range of monthly mortgage payments you can afford. The amount of these payments will depend on current interest rates.

If you answer yes:

If you calculate that your income and your current debts are sufficient to allow you to afford monthly mortgage payments for a home at a certain sales price and at a certain interest rate, then your next step may be to get to know what types of homes are available to you in the price range you can afford. You may wish to visit open houses advertised in the real estate section of your local newspaper, or contact a REALTOR® who can show you homes in your price range. You may also want to get pre-qualified by a mortgage lender, who can help verify that the calculations of your buying power are in the ball park of the amount of the money the lender will provide you for a mortgage.

If you answer no:

If after investigating various types of mortgages, you are not happy with the mortgage amount you will qualify for, you may need to lower your sights and simply recognize that you’ll have to buy a less expensive “starter home” or continue to rent. You may decide to wait to apply for a mortgage until your income increases. For example, is it possible for you to put in extra hours on the job to build up your income? Or do you or your co-borrower, if there is one, expect a raise in the near future? If so, you may wait a bit to buy a house so that you can qualify for a higher mortgage amount. In addition, if your existing debt is too high in relation to your income, you may be able to qualify for a larger mortgage by paying off some of this debt.

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California Real Estate - San Ramon Real Estate

July 3rd, 2005

Despite dire speculations of escalating interest rates and an about-to-burst housing bubble, home sales in the state will escalate and prices will hit yet another record, the California Association of Realtors predicted Wednesday in its mid-year forecast.

The association predicts California’s median price of existing single-family homes will hit $523,150 this year, 16 percent more than 2004’s record of $450,990. That compares to a 21 percent growth rate increase in 2004.

“We don’t have the rapid price appreciation we had a year ago. But it’s still strong,” said Robert Kleinhenz, the association’s deputy chief economist.

The main driver behind the price increases: not enough housing stock to meet demand, combined with low interest rates, he said.

The CAR’s annual housing market forecast also projected that sales of existing single-family homes will reach 633,490 units in 2005, a 1.4 percent increase from a year ago.

But at UCLA, where Anderson Forecast analysts have been labeling the housing market as a bubble, economist Christopher Thornberg said that while CAR’s picture of rising prices for the rest of 2005 might come true, the real estate industry isn’t acknowledging the likelihood of a burst.

“The housing market is in a bubble. At some point in time, we’re going to pay for it. It may go for a year, it may go for more,” he said.

For the Sacramento region, the statewide trade association said median home prices for all of 2005 will see a slight cooling, in the low 20 percent range, following 2004 when the median shot up by 27 percent.

The association also revised its prediction from October that overall sales of existing homes would decline 2.5 percent in 2005. Kleinhenz said his group changed its prediction to a 1.4 percent increase in sales after long-term interest rates defied expectations by staying low.

One potentially troubling finding is CAR’s affordability index, which estimates that 16 percent of California households could afford the median price in 2005, down from 20 percent last year.

To calculate that percentage, the association assumes all buyers make a 20 percent down payment and dedicate 30 percent of their income toward housing.

But with the growth of adjustable rate mortgages and other creative financing, Kleinhenz acknowledged that CAR’s affordability formula may not reflect the current market. If the association assumed, for example, that all buyers were putting 40 percent of their income toward monthly payments, the affordability index would rise by 10 or 11 percentage points, he said.

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