Maryland Real Estate Consultant

Part 1

Should You Own Your Home? The American Dream Of Home-ownership Isn't Right For Everybody... Or Is It?

Weighing the pluses and minuses of home-ownership...Buying a home can be one of life's most exciting and yet most challenging experiences.

With the numerous loan programs available to consumers today, it is easier than ever to get into a house. However, the question remains, "Should you own your own home or rent?"

There are many benefits to owning a home, but there are also just as many tradeoffs. To help you decide if owning a home is right for you, we've listed the pros and cons of buying versus renting.

Equity

One of the most common complaints among renters is the discouraging feeling that you are simply throwing your money down the drain. This is typically true for the homeowner who lives in a specific house for a long time.

However, building equity isn't an automatic universal truth. In some cases the property values are too high to start with, so the resell just won't net you a profit. In other cases, the property values don't increase at all. In truly depends on your area, Columbia and Howard County has had steady appreciation year after year.

Buying: You build your equity with every payment made. For the first half of the mortgage, most of each payment is interest.

However, every month some part does go towards your principle. Your equity will fluctuate as the market value of your home changes. Over time though, history has shown us that building equity in a home is a smart investment.

Renting: You pay for a place to live, period. While you have a lease for a certain time period, you are not investing in the home. The plus side is you have no responsibility for ongoing repairs, but you are also not building equity. However, you are investing for the landlord. You are essentially making the landlord's payment and building her equity.

Monthly Payments: In many cases, depending on the home that you plan to purchase, your monthly payments will likely be comparable to your current rent or quite possibly much higher.

Many first time buyers purchase a "starter home." This may be a smaller or an older home that can be purchased at an affordable cost.

As mentioned above, you can begin to build equity in this home and you can then upgrade to a more expensive home in a few years.

Buying Costs: These can fluctuate somewhat on a yearly basis over the first few years due to escrow adjustments. After this initial adjustment period, however, your payment could be fixed for the remainder of the loan, assuming you opt for a fixed interest rate.

Renting: Costs are fixed at least for the term of the lease (generally 1 year) but usually increase after the lease expires.

Up-front Costs: Up-front costs are possibly the most misunderstood aspect to the home purchase and the one that keeps most renters from even researching a purchase. The perception that you must have a huge down payment to purchase a home is no longer accurate in most cases today.

Buying: Typically requires a larger investment than renting initially. However, there are many programs that require very little for down payment.

Renting: Usually does not require as much up front as buying, but still requires fees such as deposit, pet deposit, 1st month's rent and possibly more.

Tax advantages: One of the most advantageous aspects to home-ownership.

Buying: There are significant tax advantages to home-ownership.

Interest that you pay on your mortgage and property taxes are all deductible.These deductions can make a huge impact on your federal and state tax returns.

Renting: Renting offers no tax advantages. Only your landlord will reap tax benefits that are available.

Part two will be posted soon.

                                                                Local Talent

This is a wonderful Band, being a guitarist myself I am always checking out the music scene.

Performing at Blues Alley in Washington D.C. Wednesday, June 20^th-Linwood Battle & Woody's Lounge-R&B Vocals

Lindwood Battle, Jr. has been performing in the DC, Maryland and Virginia area's with his core band "Woody's Lounge" whose motto is "not where you are, but where the music takes you" when you the fan are at "one" with this band and their performance, you're there; at "Woody's Lounge". This band delivers a high energy performance reminiscent of great jazz bands like Spyro Gyra, the Yellowjackets and the Crusaders. The band consists of a very dynamic rhythm section featuring a sensational young drummer, Phillip Edwards, a graduate from Towson State University, the bassist, Kevin Jackson and rock/funk styled guitar Kevin Powe.

I love this place!

Blues Alley
1073 Wisconsin Ave. NW
Washington, DC 20007
Daily 6:00pm-12:30am
Tel: (202) 337-4141

                                          Canton Community Located in Baltimore Maryland

For those who would like to know a little more about the Canton area of Baltimore Maryland check out the link below. Many of these homes still have Formstone exterior. Many of the homes have been repointed with brick. When you have the chance come on down and visit. Canton is part of Highlandtown and a wonderful area for the family and kids. I love Canton!

Canton

                                 Columbia Maryland Voted Top Ten Place to Live in America

Best Place to Live

If you are at all interested in Moving to Howard county or Columbia Maryland, go to the link above. I love this city and have lived here since 1989. Columbia is smack in between Washington and Baltimore Maryland. We are (Columbia Maryland) actually celebrating our 40th year anniversary.

                                                       Real estate and Mortgage Terms

Earnest Money

Money given by a buyer to a seller as a deposit to commit the buyer to the future transaction. Earnest money is subtracted from closing costs. We also called this good faith money and some areas people may just put down a dollar. A good rule of thumb may be one half to one percent of the purchase price. The monies go toward the purchase of the home

Closing

Also referred to as settlement.  The meeting at the conclusion of a real estate sale in which the property and funds are exchanged between the two parties involved. I always let buyers and sellers know, especially first timer, that the closing cost also includes cost that the State and County imposes.

Equity

The value an owner has in real estate over and above the obligation against the property.  Equity is fair market value minus the current indebtedness.

Annual Percentage Rate (APR)

An interest rate that reflects the cost of a mortgage as a yearly rate.  This rate takes into account any points and fees and is based on the loan going to it's full-term.

Escrow

Funds given to a third party which will be held to cover payments such as tax or insurance payments and earnest money deposits. 

Fixed Rate Mortgage

A mortgage in which the interest rate remains constant throughout the life of the loan.

Loan-to-Value Ratio

The ratio between the amount of the mortgage loan and the appraised value of the property.

Market Value

The price that a property could possibly bring in the marketplace. The buyer ultimately decides on the value of a property.

Origination Fee

A fee charged by a lender for processing a loan application; usually computed as a percentage of the loan.

PITI

Refers to Principal, Interest, Taxes, and Insurance. 

Underwriting

The decision-making process of granting a loan to a potential homebuyer.

Mortgage Insurance

insurance that protects lenders against loss if a borrower defaults.  This is required when the loan-to-value ratio is greater than 80 percent.

Earnest Money

Money given by a buyer to a seller as a deposit to commit the buyer to the future transaction. Earnest money is subtracted from closing costs. We also call this good faith money and some areas people may just put down a dollar. A good rule of thumb may be one half to one percent of the purchase price. The monies go toward the purchase of the home

Closing

Also referred to as settlement.  The meeting at the conclusion of a real estate sale in which the property and funds are exchanged between the two parties involved. I always let buyers and sellers know, especially first timer, that the closing cost also includes cost that the State and County imposes.

Equity

The value an owner has in real estate over and above the obligation against the property.  Equity is fair market value minus the current indebtedness.

Annual Percentage Rate (APR)

An interest rate that reflects the cost of a mortgage as a yearly rate.  This rate takes into account any points and fees and is based on the loan going to it's full-term.

Escrow

Funds given to a third party which will be held to cover payments such as tax or insurance payments and earnest money deposits. 

Fixed Rate Mortgage

A mortgage in which the interest rate remains constant throughout the life of the loan.

Loan-to-Value Ratio

The ratio between the amount of the mortgage loan and the appraised value of the property.

Market Value

The price that a property could possibly bring in the marketplace.

Origination Fee

A fee charged by a lender for processing a loan application; usually computed as a percentage of the loan.

PITI

Refers to Principal, Interest, Taxes, and Insurance.  This is all added together to understand the clients debt to ratio, which was included in terms from a previous post.

Underwriting

The decision-making process of granting a loan to a potential homebuyer.

Mortgage Insurance

Insurance that protects lenders against loss if a borrower defaults.  This is required when the loan-to-value ratio is greater than 80 percent.

Of course there are more term and I will continue to add to the list. Until next time.

                                                          Real Estate Language

Here are some terms that a Buyer and Seller may find useful. This is aimed mostly toward first time buyers. I know when I purchased my first home, I was terrified.Understanding terms can help ease your anxieties. Soak in all you can so that you may become comfortable with your real estate purchase.

Loan-to-Value Ratio

The ratio between the amount of the mortgage loan and the appraised value of the property.

Assumption

An agreement between buyer and seller in which the buyer assumes responsibility for the seller's existing mortgage. This does not happen as much as it use to, at least here in Maryland.  This agreement usually saves the buyer money because closing costs and the current interest rate, possibly higher, do not apply.

Variable Rate Mortgage

Also referred to as Adjustable Rate Mortgage. A mortgage in which the interest rate is adjusted periodically based on a pre-selected index. There are many many programs.

Debt-to-Income Ratio

The ratio, expressed as a percentage, which results from dividing a borrower's monthly payment obligation on long-term debts by the borrower's gross monthly income.

Adjustable Rate Mortgage (ARM)

Also referred to as a Variable Rate Mortgage.  A mortgage in which the interest rate is adjusted periodically based on a pre-selected index.

Caps

A limit in the amount the interest rate or monthly payments for an adjustable rate mortgage that may change.

Buy-down

A method of lowering the buyer's monthly payment for a short period of time.  The lender or home-builder subsidizes the mortgage by lowering the interest rate for the first few years of a loan. Buy downs were most popular when rates were higher.

Discount Points

Prepaid interest assessed at closing by the lender.  A point is equal to 1 percent of the loan amount.

Down Payment

Cash paid by the buyer at closing that makes up the difference between purchase price and the mortgage amount.

 As more terms pop up in my head I will add them to the list as well. I may also post some info on 100% loans within the next week.

Take care

We have recently started running Home Buyer Seminars and I am often asked, what do I need to do to purchase a home? Here is a brief guideline that you may follow to buy a home.

How the Buying Process Works

•·        Contact lender to get a Pre-Approved loan-please note the difference between getting pre-qualified VS getting pre-approved. A pre-qualification is merely a lender telling you how much your note would be based on how much you make VS how much you owe monthly. It is very import to having a smooth transaction to have a completely approved loan except for a purchase agreement, and an appraisal.

•·        Find a Realtor

•·        Decide your home criteria-The purchase price, area, size etc

•·        Schedule an appointment with your Realtor-Set a convenient time to look for a home with your Realtor.

•·        Negotiate purchase agreement-Price, who pays closing cost, inspection report time limit, closing date, closing attorney, occupancy time, contingencies. This is another function that your Realtor will help you with

•·        Schedule inspection of property by professional of your choice, this should be done as soon as there is a contract. Beware that some inspectors will give you a very detailed report. Don't be scared by this, it is the inspectors job to point out every possible thing that is not new or in the same condition it was when it was new. There are no perfect homes, not even a new home.

•·        Give written report to seller-requesting desired repairs to be made by seller.

•·        Seller agrees or disagrees - You must come to terms before you move to the next step.

•·        Realtor orders Appraisal-Your Realtor should have a team of competent vendors and will gladly recommend a professional appraiser. The appraisal should be ordered within one day of the satisfactory inspection report.

•·        Realtor contacts closing attorney-and purchase agreement is faxed, and time of closing is schedule as per buyer and sellers request.

•·        Walk through inspection is scheduled-this is usually scheduled the day before closing, particularly if there are seller repairs to be made.

Closing is scheduled-This is the grand finale, you get the keys to your new home. Be sure to get your homeowners insurance in advance, you will also need your driver license at the closing. You will need a cashiers check for your down payment. Your lender will be able to give you a close estimate as to how much you will need. The estimate doesn't have to be down to the penny because you will be able to write a check for the difference up to $2500.

This is a basic guideline. I hope this has been helpful. Next time I will talk about some of the duties that your realtor may perform on your behalf.

Happy House Hunting.