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Fixed Rate Mortgages

by The Pilgrim Team

When looking for financing on your new home purchase, you will be given many different options.  One of the most common is the fixed rate Home Loans, typically with a 15 year or 30 year term.  These traditional mortgages are amortizing, which means that you pay off the entire loan amount by the end of the term of the loan. This type of loan is very common but there are both advantages and drawbacks to these mortgages.  Depending on your financial situation, and the prospects of changes in your financial future, a fixed rate Home Financing may or may not be the best product for you.

Below are some of the pro's and con's of fixed rate Home Loans:

PROS

  • Interest rate on your Home Financing cannot be increased for the life of your loan
  • Monthly payment will remain the same for the life of the loan
  • Loan will be completely paid off by the end of the term

CONS

  • Fixed monthly payment amount may be difficult to make at the start of the loan
  • Large percentage of payment goes to interest payment in first years of the loan
  • Usually has a higher interest rate than a variable rate loan initiated at the same time
  • Interest rate cannot be reduced as in some variable rate programs
  • Maybe harder to qualify for, as higher income may be required

Depending on your financial situation, a fixed rate Home Financing may be the best solution for you.  If you can afford the monthly payment required to obtain the loan, then the fact that your interest rate and monthly payments will stay the same for the life of the loan while give you peace of mind and make monthly budgeting easier.

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Real Estate Attorneys

by The Pilgrim Team

If the purchase of a new home is in your future, you will have many decisions to make. Many home buyers may consider using the services of a real estate attorney for assistance with complicated documents and legal advise during the sale. Using a real estate attorney is a good idea, because the process of buying a house is complex, and most people find it's easiest to get through with a professional by their side.

Laws vary from state to state and some states require an attorney to create the purchase agreement and do the title search. There may be legal issues arise that your real estate agent can't answer, then you'll need an attorney's help. An attorney is also beneficial if there is any confusion or if you have questions about the documents then it is important to have an attorney look the documents over. Below are some other reasons you might want to consider using a real estate lawyer.

  • They can help protect your interests by examining all the legal documents before you sign them and can ensure that you’re not signing something that isn’t in your best interest. Always make sure you consult with a real estate attorney before you sign any legally binding documents to avoid signing a contract that can be damaging..
  • A real estate attorney is also better equipped to negotiate with the seller’s attorney; something that most buyers can’t do successfully because they’re too emotionally involved in the purchase.
  • If funds are being held in escrow as part of the sale, a real estate attorney has the authority to administer escrow. They can disburse funds as appropriate according to the terms of the escrow.

The cost of an attorney can vary, but typically the legal fees are higher when you buy than sell because the role of the buyer’s lawyer is more extensive. Most fees range from $500 to $1,500 for an average home whether you’re the buyer or the seller. You may find an attorney that will charge a flat fee for specific services and others bill by the hour. Usually, a lawyer can easily estimate costs related to a real estate transaction.

 

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Successful Negotiation Tips

by The Pilgrim Team

Having a successful negotiation and sale is what ever homebuyer and homeseller wants to achieve during the real estate transaction.. The negotiation process can be both complex and confusing for both sides. Bot the seller and the buyer want to have a fair transaction and achieve the best deal. Even if you have been thru the negotiation process before, below are some tips to help you get the most from the  transaction and walk away with what you want.

1. Time the market right. At this time, we are in a "buyers" market, where most sellers are very motivated to sell, this can give a buyer the upper hand. On the other side,  a "sellers" market, or a market where housing supply and demand are roughly equal might give the seller an advantage. If possible, you want to be in the market at a time when it favors your position as a buyer or seller.

2. Pay attention to the details. Buyers and seller pay a lot of attention to the transaction price. It is a good idea to consider other perks or benefits that can add to the overall worth. For example, if you negotiate that the roof be replaced or perhaps having the seller pay some of the closing costs this can sweeten the deal. Don't be stuck with the idea that the purchase prince is the only financial gain to the transaction.

3. Don't forget about financing. Keep in mind that there are several factors that can impact the final sale:

• Has the buyer been pre-qualified or pre-approved by a lender?  Having buyers that are "pre-qualified" or "pre-approved" are more likely to pose less risk than a buyer who has never met with a lender. This also shows the seller that they are serious about the offer and will give the seller more confidence. that they are a qualified buyer.

•If there is a low interest rate, then there will be a larger selection of potential buyers. More buyers equal more potential demand, which is good news for sellers. On the downside, high interest rates will cause buyers to be more selective or cause them to withdrawal from the market all together.

•The traditional 20% downpayment is not standard anymore. If the buyer has good credit, loans with 5 percent down or less are now widely available. Many loans where 100 percent financing are still available, although not as much as a few years back.

Negotiation is an important tool of the real estate transaction. To be a successful home seller or buyer you should have a basic understanding of negotiation methods, knowing the motivation of the other party and adapting to their style.

 

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Piggyback Loans

by The Pilgrim Team

A piggyback loan may have a strange name but it is a home financing option in which a property is purchased using more than one Home Financing from two or more lenders. This type of financing is also called an 80/20 loan. There are many variations of this loan such as an 80-10-10 loan, which can typically be defined as a 10 percent second mortgage coupled with a traditional 80 percent first lien and a 10 percent down payment. There can also be different variations to make up the difference between a conventional loan and almost any amount of down payment, such as an 80-5-15 loan. 

These types of loans have advantages and disadvantages. The good news is that this type of a loan allows the home buyer to acquire or refinance a home with less than a 20 percent down payment or equity. In addition, another benefit is that the homebuyer does not need to carry private Home Financing insurance (PMI). 

One downside of these types of loans is they typically have higher interest rates than standard loans, mainly because lenders are assuming a higher risk. Also many piggyback loans attach a large balloon payment at the end of a loan. For homeowners who don't plan appropriately, this large payment can be a large financial strain. Homebuyers who assume these types of Home Loans should be aware that if they ever need an additional Home Financing or home equity loan in the future it will be difficult to obtain.

Homebuyers can also use piggyback loans as a source of funding for making a bigger downpayment on the new home. Homeowners who don't have the funds to make the 20 percent downpayment can use this loan to their advantage because private Home Financing insurance can be expensive and is not tax deductible. 

When considering these types of loans it is important to do the math on  how much money you have available for down payment. It is important to meet with your lender so that you clearly understand your budget before looking for a new home. Be sure to keep in mind that you'll likely need to cover expenses like earnest money, Home Financing insurance and closing costs for the transaction.

The Importance of Title Insurance

by The Pilgrim Team

Once you purchase a home and obtain a Home Financing, you will be required to obtain homeowners insurance. However, many potential homebuyers may not be familiar with another type of insurance, title insurance. So what is title insurance and why do you need it? Once you buy a home you are given a title, it then the owner's right to possess and use the property. It may be the homeowner who is selling the home or bank with a Home Financing on the property that has the title. It is also a possibility that a third party such as a homeowners association if the dues have not been paid or even the government may also have liens against the property for unpaid taxes.

Problems with the title can limit your use and enjoyment of the property, as well as bring financial loss. It is vital to not only obtain title insurance but to also have a  title search done to protect your interest. By doing a search, it will reveal if someone other than the owner of the property owns the title. This search can be done by examining public records to look up the history of property ownership. While you can easily do your own title search, if you are obtaining a loan to purchase the property, the lender will require that a qualified third party do the title search. The title search shows not only limitations on the use of the property and rights others may have in the property, but also liens or monetary obligations that are outstanding against the property. 

Title insurance is different than the standard insurance where you are covered in case of a future event. For example, if you get car insurance you are insured in case you have an accident, you buy health insurance in case you get sick.  Title insurance is different as it covers events relating to the title that have already happened. It does not cover anything that happens to the title after the date of issuance. For example if you have liens filed against the property for taxes that you have not paid, your title insurance policy is not going to help you. But, if the lien is for taxes not paid by someone who owned the house before you, then you may have coverage under your title policy.

A title company will do a title search on the property before issuing the policy to see if there are any problems with the title. This search is done in an effort to minimize the risks of offering insurance.  Problems such as deeds, wills, outstanding Home Loans, judgements, and tax liens can be located from the search and can typically be cleared up before the closing on the property. When these problems are not cleared they will often be listed as exceptions to the policy's coverage. You would then need to decide whether the property is still something you want to purchase given the known problems with the title.

 

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The Pilgrim Team
Professional Realty Associates
2002 S Queen St, Suite 3
York PA 17403
Office: 717-757-5955
717-755-2683
Fax: 717-757-2887