22 Real Estate Terms You Should Know

1.     Real Estate Agent

A real estate agent is a licensed professional who helps the buyer or seller in the house-purchasing process. Most agents work for a real estate brokerage. As a buyer, you want to hire a good real estate agent when you are buying a house. A Realtor is even better, they are held to higher standards than a real estate agent who is not also a Realtor.

2.     Prequalified and Preapproval

Getting prequalified is the first step in the mortgage process. You give your lender your overall financial picture, the lender evaluates your information, and then the lender gives you an idea of the mortgage amount that you will qualify for. Note, a prequalification is not a done deal – you may not, in fact, qualify for the loan for which you are preapproved.

Preapproval is the second step in the mortgage process. You complete a mortgage application and provide detailed information to the lender (although you will likely not have a house picked out, so the property information can be left blank). The lender will approve you for a specific amount and you will get a better idea of your interest rate. This puts you at an advantage with a seller because the seller will know you’re one step closer to getting a mortgage.

If you get preapproved before you pick out a home, then you can move quicker on purchasing a house (you won’t have to make your offer contingent on obtaining financing, which is especially valuable in a competitive market).

3.     Proof on Employment and Income

You must provide proof of employment and proof of income to qualify for your mortgage. This shows the lender that you are creditworthy. It’s usually not great to quit your job during the home-buying process for this reason. Some lenders may ask for employment verification later in the home-buying process, so your approval could change if you take a lesser paying job during the home-buying process.

4.     Types of Loans: Conventional, FHA, and VA

 A conventional loan is a loan that is not backed by the government (meaning that the government doesn’t make any guarantee that you will pay the mortgage), and therefore, carries private mortgage insurance if you put less than 20% down. Conventional loans adhere to guidelines set by Fannie Mae and Freddie Mac and are available to everyone, but are more difficult to qualify for than VA or FHA loans (you need better credit and a steady income, for example).

An FHA loan is a loan insured by the Federal Housing Administration (this means that if you default, the FHA will repay the note to the bank). Because the loan is insured, the lender typically offers a low down payment required (3.5%, for example) and low closing costs. Anyone can apply for an FHA loan and an FHA loan is easier to qualify for than a conventional loan. Instead of PMI on your FHA loan, you will have MIP (mortgage insurance premium), which stays with the life of the loan. That means that unlike a conventional loan where you can remove the PMI, on an FHA loan, you cannot remove the insurance without refinancing the entire loan (which you must qualify for in order to do).

A VA loan is guaranteed by the Veterans Administration and is available only to certain borrowers through VA-approved lenders. Usually, you need to be in the military or a veteran, and you must also meet certain requirements the VA sets to qualify. VA loans do not carry PMI and there is no down payment requirement.

5.     Adjustable rate vs. Fixed rate

An adjustable rate mortgage (ARM) offers homebuyers with a low interest rate on their loan for an initial period, after which time, the interest rate increases or fluctuates for the remainder of the loan. This loan transfers the risk of rising interest rates to the buyer.

A fixed rate mortgage means that the interest rate on the mortgage is fixed at a specific rate for the entire life of the loan. For example, if you have a 15-year fixed mortgage at 4%, this means that your loan is for 15 years and your interest rate will be 4% for the full 15 years, regardless of the market.

6.     PMI (and MIP)

PMI stands for private mortgage insurance. As part of qualifying for a conventional loan, you must get PMI if you put down less than 20%. Once your equity in your home reaches 20%, you can get the PMI removed (lowering your monthly mortgage payment). However, with an FHA loan, the insurance stays on the loan for the life of the loan, regardless of the equity in the loan. The private insurance on an FHA loan is called mortgage insurance premium (MIP). There is no way to avoid MIP on an FHA loan.

7.     15 year and 30 year

Lenders issue mortgages on 30 year or 15 year terms. You will be hard pressed to find a lender issuing a mortgage for a term other than 15 years or 30 years. The advantage of a 15-year mortgage is that you pay significantly less money in interest over the life of the loan than you would under a 30-year mortgage.

8.     Cosigner

Like any other loan, a cosigner on a mortgage means that the person is binding himself to be legally obligated to make the debt payments should you default. So, if you have your mom cosign on your mortgage and you default, she’s on the hook legally and must make payments. Similarly, if she wants to get off your mortgage, she can’t do so without you refinancing. If a cosigner is required, the lender is effectively saying that your financial history isn’t good enough and they want someone else to be on the hook, too.

9.     Amortization Schedule

An amortization schedule is a complete table showing your payments, principal, and interest over the course of the loan.

10.  Prepayment Penalty

A prepayment penalty is a clause that will be in your loan documents (if it exists at all). A prepayment clause says that you will pay a penalty for repaying your debt early.

11.  Offers and Counter Offers

When you buy a house, you will make an “offer”, which is an offer to buy the house. The seller may accept your offer or reply with a counter offer, which will state different conditions than what you offered.

12.  Inspection

A home inspection is an examination of a home done by a Professional Home Inspector to determine the condition of the home at the time of inspection. You will need to pay for a home inspection if you’re buying a house.

13.  Appraisal

A home appraisal is an examination of the value of the property done by a real estate appraiser. An appraiser determines the monetary value of the property. You will need to pay for a home appraisal to provide your lender with the value of the property for which you are trying to purchase in order to get financing.

14.  Transfer Documents

 “Transfer documents” refers to the documents relating to the transfer of ownership from the seller to the buyer. Documents include: 1) deed, 2) bill of sale, 3) affidavit of title (or seller’s affidavit), 4) transfer tax declaration, and 5) buyer / seller settlement statement. It’s important that you do your due diligence and read through the transfer documents to make sure everything says what it should say.

15.  Home Loan Documents

“Home loan documents” refers to the documents relating to the mortgage issued by the lender to you, the buyer. These documents include: 1) note, 2) mortgage, 3) loan application, and 3) Truth-In-Lending Disclosure (TILA). There may be other documents included. It’s always a good idea to read the documents yourself, or have an attorney read through on your behalf.

16.  Real Estate Title Documents

The title company and escrow company will also send you documents to review. The title company will send you the title insurance commitment showing that the party who has title is in fact the seller, in addition to any liens on the title. You should review this document and so should your attorney if you have one. The escrow company will also review it to make sure it says what it should say.

17.  Title Insurance

Title insurance protects you and the lender from the possibility that the seller didn’t have free and clear title when the seller sold you the property. Getting title insurance is a standard step in the home-buying process. In our area, your Realtor will typically help you get title insurance after the purchase agreement is signed.

18.  Home Warranty

A home warranty includes basic coverage over certain things that may go wrong, such as plumbing, electrical, heating, and major appliances. The warranty is for a certain amount of time and you must pay for it up front if you want it. Often, it can be written into a contract to have the seller cover the cost of the warranty.

19.  Closing Costs

Closing costs are fees paid at the closing of the transaction. Closing costs can be paid by the buyer or seller and they can be part of the negotiation process. Closing costs can be thousands of dollars, so don’t forget about them!

20.  Escrow and Monthly Payment

When you get a mortgage, your lender will likely require you to set up an escrow account. A monthly escrow amount is added to your mortgage payment. The escrow payments go toward real property taxes and insurance that you would otherwise have to pay once or twice a year. Instead, you generally will pay a monthly payment and the money sits in escrow to be paid by your lender when it’s due. This escrow payment is above the principal and interest portion of the mortgage payment and is required. 

21.  Homeowners Insurance

Most lenders require you to have homeowners insurance in place in order to obtain a mortgage; however, it is not required by law. 

22.  Property Tax

Property tax is the amount of money that you are required to pay based on the property’s assessed value. Property tax can be very costly, depending on where you live. This is something you’ll want to consider when calculating how much you plan on spending on your overall home-ownership expenses. Property tax payments are usually due annually, but often, they are divided into and included in your monthly escrow payment.

For further clarification, to see if you're ready to buy or to find out how much your home may be worth, call The Woelkers Group. 

You can reach out to us directly at 734-386-6550.

January is National Radon Action Month

Radon is a cancer-causing radioactive gas. You cannot see, smell or taste radon but it may be a problem in your home. When you breathe air containing radon, you increase your risk of getting lung cancer. In fact, the Surgeon General has warned that radon is the second leading cause of lung cancer in the United States today. If you smoke and your home has high radon levels, your risk of lung cancer is especially high. Radon induced lung cancer costs the United States over $2 billion dollars per year in both direct and indirect health care costs.

Testing is the only way to know your home’s radon levels. There are no immediate symptoms that will alert you to the presence of radon. It typically takes years of exposure before any problems surface and then it is too late.

The U.S. Environmental Protection Agency, Surgeon General, American Lung Association, American Medical Association and National Safety Council all recommend testing your home for radon.

If you find that your home has high radon levels, there are ways to reduce the concentrations. Even very high levels can be reduced to acceptable levels. Most radon problems can be fixed by a do-it-yourselfer for for less than $500. Many property owners discover radon gas and then do nothing, usually because they fear the remediation costs would be too far out of their common maintenance costs or lack of knowledge. Many radon remediation companies will help you interpret the radon test results, some even coming into your home for a free evaluation. Anyone coming into your home should guarantee levels under 4.0 pci/l after remediation. Generally, to have a professional remediate, you can anticipate anywhere from $300 to $1500, with the guarantee that the home will test under 4.0 pci/l.

2017 Housing Outlook for the Younger Generations

Forget the starter home, millennials want the move-up property

More millennials — roughly, those born between the early 1980's and the late 1990's — are expected to buy a first home in 2017, according to the Washington, D.C.–based National Association of Realtors.

Many of those buyers have saved enough to go with something more than a condo unit or a starter home, said Jessica Lautz, managing director for research at NAR. And with the markets doing so well, and interest rates as low as they are, millennials who have paid down their student debt and built up their cash may be in a position to buy more house than real-estate agents might think, she said.

Indeed, the NAR noted that in 2016, 17% of buyers under 35 were able to save enough for a down payment for a home within a year, compared with 14% of all age groups. And though it was lower than all other age groups, 37% of buyers under 35 said they were able to save enough for a down payment within six months, compared with 46% of all other buyers, the NAR said.

To be sure, student debt still is seen as one of the top factors that will influence, in the coming year, whether the millennial generation will buy a home. The NAR noted that 44% of Generation Y buyers had a student-loan debt balance of at least $25,000. And perhaps also worrisome, the baby boom generation is also deep in debt, with the highest median debt balance of $29,100. And it isn’t just their own debt, according to the NAR. “This may be due to not only their personal educational loans but accumulating debt from their children’s education loans,” Lautz said.

Start thinking about Generation Z

The millennial generation might grab all the headlines, but it won’t be long before Gen Z reaches the market. They’re teenagers now, but Generation Z is almost on the cusp of being able to buy homes, with the first Gen Z–ers reaching their 18th birthdays in 2017. Gen Z, according to the National Association of Realtors, is a lot different from the predecessor generation that came of age in the midst of recession, war, terrorism and a stock-market collapse, and was burned by the housing downturn and crushing student-loan burdens.

Gen Z will come of age with low interest rates, better job prospects and higher wages to help cushion the high costs of college education, said NAR research director Lautz.

“It might sound a little traditional, especially when compared to what we’ve seen with millennials, but this is a generation that values homeownership,” said Sherry Chris, chief executive of Parsippany–Troy Hills, N.J.–based Better Homes and Gardens Real Estate.

In fact, 97% of the Gen Z age group wants to own a home, she said. “I want a big house,” said Cayman, a 17-year-old interviewed by NAR. “I want a room for each of my kids, a master bedroom, a few guest rooms, a movie room. I want a lot of space.”

Taken from: http://www.marketwatch.com/story/5-real-estate-trends-to-watch-in-2017-2016-11-15

5 Habits to Start Now If You Hope to Buy a Home in 2017

Have you vowed to buy a home in 2017? It’s time to get moving!

Even if you’re months away from hiring an agent and touring homes, there are things you need to do now to make that dream happen. After all, this is a huge purchase and it requires some preparation. Getting the building blocks in place will ensure a seamless transition from renting to buying, both financially and mentally.

To make sure you hit the ground running once you start checking out houses in earnest, here are some good habits to start now that will pave the way to the home of your dreams.

Habit No. 1: Automate your down payment savings

“The down payment takes more money than 99% of people plan for,” warns Joshua Jarvis of Jarvis Team Realty with Keller Williams Realty Atlanta Partners in Duluth, GA.If you’re trying to squirrel away the recommended 20% down payment, that works out to about $40,000 for a $200,000 home. That’s a huge chunk of cash, so unless you’ve been the recipient of an inheritance or have recently won the lottery, you can never save too early or too much.

Yet one practically painless way to get started is to automate your checking account to regularly set aside a small amount of your paycheck into a separate savings account dubbed your “house fund.” There are also many savings apps out there as well. A great one is Digit savings. It automates savings based on your spending habits, and you barely even see the difference in your account!

“Amassing enough for a down payment takes discipline and perseverance, but setting up automatic savings can make it easier,” points out Realtor® Marcia Goodman with Re/Max Gateway in Gainesville, VA. “If you never see the cash, you won’t spend it.”

And you don’t have to put down the full 20%, either—there are other options. But it’s best to save as much as you can to cover your down payment, closing costs, or any incidentals upon moving.

Habit No. 2: Build your credit history and keep it clean

To get a mortgage, lenders will want to see evidence that you’ve paid off past debts. As such, keeping on top of your credit cards ad car and college loans is a crucial mortgage must-do.

But don’t steer clear of credit altogether. If you’ve never had a credit card or a bank loan, you won’t have a credit history. Once you have credit established, keep it pristine. Pay all your bills on time—this cannot be overemphasized.

“I had a client who made $250,000 a year and was denied a mortgage because his credit card payments were always late,” says Alexandra Axsen, managing broker of Lake Okanagan Realty Ltd. in Kelowna, BC.

Dean Sioukas, founder of Magilla Loans in Sacramento, CA, also advises not using more than 30% of your available credit, as recommended by the credit bureaus.

Habit No. 3: Practice living on a budget

Think owning a home is pricier than renting? Not necessarily—it depends on your area, so make sure to compare the costs of renting vs. buying near you. But if you expect your mortgage to take a bigger bite than your rent, create a budget that factors in your new reality so you can get used to living on less disposable income, suggests Kevin Lawton of Coldwell Banker Schiavone & Associates in Yardville, NJ.

Downsizing your budget early also means you’ll be able to save more for your down payment, pay down debt, or save for furniture for your new home.

Habit No. 4: Get your handy on

One of the big perks of renting is that any problems around the home—leaky faucets, broken boiler—are your landlord’s responsibility to repair. But once you own, you should probably know how to roll up your sleeves and fix it yourself if you don’t want to shell out for a handyman every time something goes wrong.

“Consumers thinking about buying a home should learn the basics of property maintenance and general ‘handy habits,’ since maintenance is an ongoing effort for homeowners,” says Evan Harris, co-founder of SD Equity Partners in San Diego.

“Knowing how to fix basic home issues such as electrical shorts, repair drywall, and tackle basic plumbing problems will save thousands of dollars in the future,” he says, noting that it’s smart to learn how to fix these issues before you’re scrambling around a dark kitchen where you blew a fuse.

Habit No. 5: Prepare to pounce

The more pieces you can put in place, the better, says Lawton, who advises buyers to spend time getting to know the real estate market before they’re ready to buy.

“It’s a good habit to start browsing homes online to get a sense of what is available in your price range and the neighborhoods and amenities you’ll realistically be able to afford,” he says. “This can help avoid disappointment when it comes time to really look.”

Now that you know the good habits to start now to buy a home this year, come back tomorrow to learn the bad home-buying habits to ditch before it’s too late!

Happy Holidays from The Woelkers Group

Happy Holidays!

It seems the decorations and sales for the holidays start earlier and earlier every year. The retail world encourages you to shop early to save more.  Saving money on gifts is nice, but the heart of the holidays is found in the gathering of your family and friends.  Whether around the Thanksgiving table, the Chanukah Menorah, the Christmas tree, the Kwanzaa candles or the New Year clock, there is no place like home for the holidays. As you prepare for those gatherings, you may take a look around your home.  Has your family grown, so that you are not sure how everyone will fit? Susie just got engaged, so your number will increase again next year (and maybe even more 2 years from now). Your Dad seems to require more assistance this year. Is it time to start thinking about him becoming a permanent part of your home? Or is it the opposite? Has your family gathering shifted to one of your adult children's homes, so you do not need as much space? Or maybe like the Kranks you have decided to skip Christmas and take a cruise. Family and friends change and evolve year after year, so it only follows suit that holiday gatherings do too. Does your current home still fulfill the needs of your family? Do you need to upsize or downsize? Would you like to know what your home is worth on today's market? Are you curious about what other homes are out there? The Woelkers Group has over 30 years combined experience helping families find their way home. Call 734-765-1081 today to get help answering any of these questions.

However your family chooses to celebrate this season, The Woelkers Group wishes you the Happiest of Holidays!