10 Common Mistakes to Avoid When Buying A Home in Farmington Hills MI 

10 Common Mistakes to Avoid When Buying A Home in Farmington Hills MI 

10 Common Buying Mistakes to Avoid When Buying A Home in Farmington Hills MIAre you currently in the market to buy a home in Farmington Hills, MI? If this is your first rodeo as a homebuyer, or if it’s been several years since you last bought a home, knowledge is power. Buying a home comes with many big decisions, and it doesn’t hurt to be mindful of possible pitfalls so you can avoid as many mishaps as possible. Some are minor, some are costly and some even involve buyers purchasing homes that are completely wrong for them.

Here are 10 common home buying mistakes to avoid and and some expert advice to help you on your journey to homeownership:  

1).  House hunting before getting pre-approved  

House shopping can be exhilarating and it can also be taxing, so it’s no surprise that many people want to get going on it right away. However, shopping for a home before getting pre-approved for a mortgage is not a good idea.

Getting pre-approved ensures that you have the financial ability to purchase a home, helps you understand how much home you can afford, and shows sellers that you are serious when making a purchase offer. There’s no need to tour any Farmington Hills MI homes for sale if you don’t know which properties are within your budget.

Sellers are also more likely to consider your purchase offer if they know they are dealing with someone who already has a mortgage pre-approval.

2).  Obtaining a rate quote from only one lender

No two lenders are the same and each one may offer different interest rates, closing costs or other fixed fees. If you don’t shop around, you could miss out on a better deal. By getting quotes from a number of lenders, you’ll be able to choose the one that will save you the most money at the closing table or over the life of the loan.

Pick at least three to five lenders and request quotes on the same day to help you compare apples to apples. According to Freddie Mac, getting a quote from just one additional lender could save you an average of $1,500 over the life of a loan.

Get a quote from 5 different lenders and the average savings doubles. Visit lender websites to learn more about the products they offer and read customer reviews to make sure you’ll be in good hands once the loan closes. Find a lender who is a good fit in costs and in service.  

3). Not checking credit reports and correcting errors

Mortgage lenders will scrutinize your credit reports when deciding whether to approve a loan and at what interest rate. If your credit report contains errors, you might get quoted an interest rate that’s higher than you deserve. That’s why it pays to make sure your credit report is accurate.

You can request a free credit report each year from each of the three main credit bureaus. Errors on your credit reports can cause your credit scores to be lower than they should be, which can affect your chances of getting a loan or credit card and how much interest you pay.

Federal law gives you free access to your credit reports from the three major credit bureaus: Equifax, Experian and TransUnion. Using the government-mandated AnnualCreditReport.com site is the quickest way, but you can also request them by phone or mail. Disputing any credit report errors and getting those negative items removed can be a quick route to a better score.

4).  Buying more home than you can afford

Don’t buy more house than you can reasonably afford. The maximum loan amount on your pre-approval letter doesn’t mean you should look at homes that are priced to match it. The lender may know your income and even your debt-to-income ratio, but that’s all they look at when it comes to monthly expenses.

The lender doesn’t know how much you pay for groceries, gas and insurance, healthcare, school tuition or loans, utilities, and other expenses you might have.  If maxing out the loan amount you qualify for means that you are stretching your monthly budget to the limit, you probably need to find a more affordable home.

Even if you can make your mortgage payments with all of your other monthly expenses, a higher monthly payment can affect other areas of your life. The more money you borrow, the less you’ll be able to put towards important savings such as your 401(k) or emergency fund.

5).  Depleting your savings

One of the biggest mistakes many first-time homebuyers make is spending all or most of their savings on the down payment and closing costs. Some people scrape all their money together to make the 20 percent down payment so they don’t have to pay for mortgage insurance.

This may translate to substantial savings on the monthly mortgage payment, but it’s not worth the risk of living on the edge. Instead, aim to have three to six months of living expenses in an emergency fund, even after you close. Depleting your emergency or retirement savings to make a large down payment is a risk best avoided.

6).  Being Unaware of the hidden costs of owning a home

Many first-time home buyers are unaware of the hidden costs of homeownership because they’ve never owned one. When moving from an apartment to a home, there can be some additional costs that you may not have experience paying as a renter.

These hidden costs include higher utility bills, new utilities like trash removal and recycling, property taxes, homeowners insurance, outdoor maintenance and equipment, maintenance and repair, tools for home improvement and maintenance, furniture to fill more space, etc.

Figure out how much each expense will be, add that amount to your savings goal, and have it saved up before you move in.

7).  Believing that you must have a 20% down payment

There’s still a long-standing myth that you need a 20% downpayment in order to buy a home, but that isn’t actually correct. When you make a bigger down payment on your home purchase, you’ll likely get a better mortgage rate and a lower monthly payment, since you’re not borrowing as much. But that doesn’t mean you should hold off purchasing your first home, or upgrading to a new one, until you have a 20% down payment.

You can get a conventional loan with as little as 3% down or a loan backed by the Federal Housing Administration (FHA) with just 3.5% down. There are also 0% down payment programs available if you’re in the military, or you’re a low- to moderate-income borrower buying a home in a rural community.

Plus, some first-time buyers may qualify for a down payment assistance program through their state or local housing agency.

8).  Not planning for closing costs

Your down payment isn’t the only upfront cost you’ll have as a homebuyer. With such a big emphasis on the purchase price and the down payment, many people fail to plan for closing costs, which can range from around 3% to 6% of your loan amount. To prepare for closing costs, it helps to know what’s included in this major expense.

Although some of these may not be included in your closing costs, common fees include the appraisal, home inspection, property taxes, title and attorney fees, lender fees, application fee, prepaid interest, loan origination fee, discount points, title search fee, mortgage insurance application fee, upfront mortgage insurance, and lender and owner title insurance.

Other costs and specific mortgage fees will depend on where the home you are buying is located and the type of loan you get.

9).  Changing jobs or having income gaps

In order to qualify for a mortgage, you need to show stable job history and consistent income. Your lender will scrutinize your income and employment history over the last two years to determine whether you have that stability.

If you’ve been in between jobs in the past two years, be prepared to explain why.  If you’re looking to take a new job before closing on your mortgage, be strategic because it may delay your loan approval. Communicate potential job changes to your lender and be prepared tp supply any additional documentation they may request.  

10).  Applying for credit or charging up credit before closing

One important home buying mistake you want to avoid is taking on more debt in the middle of the mortgage lending process. This misstep can quickly derail your loan approval. It’s recommended that borrowers not take on any new debt or apply for a credit card until after closing on their new home. The loan underwriting department at the bank may be checking your credit after you’re approved and before the bank funds your loan.

If you max out your credit card or take out an auto loan before your closing, that debt is factored into your mortgage application. More debt pushes up your debt-to-income (DTI) ratio, or the percentage of your gross monthly income used to repay debt. If your DTI ratio exceeds the maximum ratio for your loan program, your loan may not be approved.

Partner with Award-winning Farmington Hills MI REALTOR® – Tom Gilliam   

Tom Gilliam is proud to be a trusted REALTOR® in Farmington Hills MI for the past 20 years – offering his guidance and expertise to buyers and sellers. Tom is able to provide his clients with the kind of knowledge, skills, commitment, and expertise they need and deserve. He also understands that buying or selling a home is a significant financial and life decision and that you are looking for someone you can trust. Tom will protect your interests, advocate for you, negotiate on your behalf, and go the extra mile to ensure a smooth transaction and the best results possible!

If you or someone you know is interested in buying or selling Farmington Hills MI real estate, feel free to reach out to Tom Gilliam directly at (248) 790-5594 or you can get in touch here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578 

 

Home Appraisal Tips For Farmington Hills MI Homebuyers

Home Appraisal Tips For Farmington Hills MI Homebuyers

Home Appraisal Tips For Farmington Hills MI Homebuyers

You’ve been shopping for a home in Farmington Hills MI for weeks and you finally uncover the ideal home for your family in a great neighborhood. You put in a good offer and it gets accepted. If you are planning on taking out a mortgage, it now has to undergo a comprehensive appraisal of its worth. 

Although this may sound harsh, your dream-home-to-be isn’t a “home” to your lender. It’s a house and collateral, and if for some reason you are unable to make your mortgage payments, your lender can foreclose on your home and sell it to recoup all or some of its costs. 

Your mortgage lender will have to know the value of your home before handing over that large chunk of change. After you sign a home purchase agreement (the contract between you and the seller about the terms of the pending sale), and before your lender approves your loan, the home you are planning to buy must pass an appraisal by an unbiased third party – the appraiser.  

The home appraiser’s job 

An appraiser is a state-licensed or certified professional. Their job is to assess an opinion of value or how much a house is worth. The appraiser is a neutral party who doesn’t represent the buyer or the seller, a contractor chosen by your lender through an appraisal management company (AMC).

They work for lenders and help them decide if the home is a sound investment and worthy of the loan you’re asking for. Unlike a home inspector, who looks for defects that could cost the buyer money down the road, an appraiser looks at home components that contribute to the home’s value.

The appraiser will survey the house in person using specific criteria such as location, age, condition, square footage, additions/renovations, and recent sales of comparable homes. Home appraisals aren’t public records, but appraisers use public property records and other public documents to support their appraisals.

Some sellers have their Farmington Hills MI homes appraised before listing them on the market to help arrive at a fair asking price.

Who pays for the home appraisal?

Generally, it’s the buyer’s responsibility to pay for the home appraisal, a fee that’s typically included in your closing costs. While the cost of a home appraisal varies by the size and location of the home (among other factors), you can expect to pay around $300 to $400, according to recent estimates. Appraisers protect the bank and buyers from a potentially bad deal, so they’re worth every penny. 

The appraisal report

Once the appraisal is finished, the appraiser issues a written report with their opinion of the value of the home, and both the buyer and the lender will receive a copy of the report. If the home’s appraised value ends up higher than what you’re paying, generally the deal will move forward. 

However, if the appraisal is lower than your offer on the Farmington Hills MI home, your lender won’t give you a loan for more than the appraised value. If you and the seller agreed on $300,000, for example, but the appraisal value comes in at $290,000, there is a $10,000 shortfall. 

Options if faced with a low appraisal

If you are faced with a low appraisal, all is not lost. Negotiations aside, if the appraisal price seems much lower than the contract price, your agent can ask the appraiser to reevaluate their report. Appraisers can sometimes make mistakes in the basic data.

For instance, the number of bedrooms or baths. Or maybe, they need context for the comps, such as if a recent sale for a lower-than-typical price was between family members — or if a more-recent sale is available that changes the perspective.

If your offer included an appraisal contingency, you can renegotiate the price with the seller by persuading them to lower the sales price or split the difference between the home’s appraised value and the offer. If the seller is unwilling to negotiate, you can choose to walk away from the deal and keep your deposit.

Or you could decide to pay the additional $10,000 out of pocket so your home loan goes through. In either case, you have options. 

Talk with your Farmington Hills MI REALTOR® about their experience with the appraisal process, how they would recommend handling any shortfall — and how willing you should be to walk away from a deal that’s not right for you.

Partner with Top-rated Farmington Hills MI REALTOR® – Tom Gilliam

Whether you are interested in buying a home in Farmington Hills, MI, or it’s time to list your current property, experience matters most in a changing market. Top-rated Farmington Hills REALTOR® – Tom Gilliam offers over 20 years of local experience, in-depth market knowledge, and access to the most up-to-date listings for Farmington Hill MI homes for sale.

Known for his professionalism and care for every detail, Tom is an expert at uncovering the perfect home for his clients’ lifestyle needs in the right neighborhood or community.

2020 Best of Farmington Hills REALTOR - Tom GilliamIf you are ready to sell your home, Tom will create a comprehensive marketing plan that exposes your home to the public as well as to other real estate agents through the Multiple Listing Service (MLS), other cooperative marketing networks, open houses for agents, etc.

Your listing will appear on all the most popular real estate sites where buyers spend hours a day looking at homes such as Realtor.com, Zillow, Trulia, REMAX, Redfin, and dozens of others. 

Your property will also be featured on Tom’s own highly-trafficked website Homes2moveyou.com. You can be assured that your home will get sold quickly and for the highest market price.

Search Farmington Hill MI Homes for Sale

Tom works very hard for his clients and will be there to protect your interests, advocate for you, negotiate on your behalf, and do whatever it takes to ensure the best possible results. If you or someone you know is interested in buying or selling Farmington Hills MI real estate, please give top-rated Farmington Hills MI REALTOR® – Tom Gilliam a call today at (248) 790-5594 or you can reach him here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578 

 

Tips for Winning a Farmington Hills MI Real Estate Bidding War

Tips for Winning a Farmington Hills MI Real Estate Bidding War

Tips for Winning a Farmington Hills MI Real Estate Bidding War

After weeks, maybe even months, searching for a home in a low-inventory competitive market, you finally uncover the perfect home for your family. It’s in the right neighborhood, near top-rated schools, has the right number of bedrooms, and provides convenient access to everyday amenities. The house has everything you have been dreaming so you decide to make an offer. But, because of the current housing market, your Farmington Hills MI REALTOR® comes back with the news that several other buyers have also submitted offers on the home. Suddenly you find yourself in a situation with multiple buyers vying for the same property, otherwise known as a bidding war. 

With so few houses for sale today and historically low mortgage rates driving buyer activity, bidding wars are becoming the new norm. In a bidding war, each buyer will make a more attractive offer, often driving up the price beyond what it was listed for, in hopes of winning the home. Although bidding wars are more likely to occur during hot seller’s markets when there is less inventory for buyers to choose from, the quality of the property, the desirability of its location, and the strength of its school district can also increase the chances of a bidding war. If you do find yourself in a bidding war, there are some things you can do to make your offer more appealing to the seller than the other offers. 

Here are some things you can do to up your chances of winning in a multiple-offer situation:

Hire an experienced Farmington Hills MI real estate agent

If you are serious about winning a bidding war, it would be wise to enlist the services of a reputable, seasoned real estate agent. A qualified REALTOR® will have the experience and skills necessary to help you win in a multiple bid situation. They will also have extensive market knowledge, which is crucial in determining the fair market value of the home you’re interested in.

By enlisting the services of a Farmington Hills MI real estate agent, you can feel confident that you won’t offer more than the house is worth or more than you can realistically afford to pay for it. Your agent will give you much-needed advice and also ensure that all decisions made are in your best interest. Bidding wars can be challenging to navigate, especially if you’re a first-time homebuyer. It’s vital to do your research so you have a clear understanding of the process, the market, and the home you are interested in purchasing.

Waiving contingencies 

In a competitive market, buyers will often waive certain contingencies to make their offers more attractive to sellers. Contingencies in home buying contracts allow a way out for the buyer should there be unexpected issues with financing or defects with the property. By waiving certain contingencies—for example, your financial contingency (an agreement that the buyer will only buy the property if they get a large enough loan from the bank) or your inspection contingency (an agreement that the buyer will only buy the property if there aren’t any deal-breaker issues found during the home inspection) – you show just how serious you are about moving forward with the deal. 

Waiving contingencies can make an offer more appealing to the seller, but it can also be a risk for the buyer. If for example, you waive your inspection contingency and then find out during the inspection that the home has serious plumbing issues, you may have to sacrifice your earnest money to back out of the deal or pay for repairs once the title has been transferred. Although waiving one or more contingencies in a multiple offer situation could be the extra push needed to get the house you want, it ultimately comes down to how much risk you feel comfortable with.

There a number of different contingencies, but the three most common include the financing contingency, inspection contingency, and appraisal contingency: 

1). Financial contingency

One common strategy used to make an offer stand out from the competition is to waive your financing contingency. In a home sale and purchase agreement, financing contingency refers to a clause that states the offer is contingent upon the buyer securing financing for the property – a standard feature in most Offers and Purchase and Sales Agreements. If your mortgage is not approved for the amount of financing you need, the seller agrees to refund your deposit in full.  During a bidding war, waiving your financing contingency sends the message that you are confident you will get the loan no matter what.

With a clear picture of your finances and enough money in reserve, you can safely waive the financial contingency with minimal risk on your end. Of course, if you are paying for the home in cash, then financing is not an issue and you can exclude the financing contingency in your offer. Not only are you eliminating the need for a third party to get involved in the deal, but you’re also showing the seller that you mean business. There is a risk any time a lender has to get involved, so when you eliminate their presence, you eliminate the risk. 

2). Inspection contingency

In a standard real estate agreement, the buyer retains the right to back out of the contract if they find unacceptable issues with the property. This contingency allows the buyer to hire a home inspector to survey the home for damages before the deal closes. If major issues are discovered during the inspection, the buyer has the right to negotiate with the seller for repairs or back out of the deal. One safe way to waive your inspection contingency is to have a pre-inspection done on the property before ever making an offer.

If the report doesn’t reveal any serious issues, you can confidently waive the contingency with minimal risk. When a seller accepts an offer, their home is off the market. In a competitive market, the last thing the seller wants is to be waiting for an extended period of time for the inspection to happen. Make the contingency period no more than a week. If the home looks well maintained visually, it may be worth the risk to waive the inspection if you are confident you want the house no matter what. To minimize risk, the decision to waive inspection contingency should be made carefully and with the guidance of your real estate agent. 

3). Appraisal contingency

When an offer is accepted on a home, the lender will come out and appraise the property to determine its value. Mortgage lenders use appraisals to calculate the loan amount they will give buyers. If the appraisal falls short, the appraisal contingency lets the buyer cancel the contract rather than make up the difference in cost themselves.  If you waive this contingency, you are still responsible for purchasing the home if the loan does not work out – or you may be able to back out of the contract but lose your deposit. It is also possible the seller will decide to sue you if you break the contract.

That being said, more buyers these days are willing to waive appraisal contingencies to enhance their offer in a bidding war. Compared to a fully mortgage-contingent buyer, waiving the appraisal contingency is more attractive from the seller’s point of view because they have more certainty the deal is going to get done no matter where it appraises at. 

Waiving contingencies risk: Yes, there can be risk associated with waiving contingencies, but depending on the circumstances, a buyer might be in a position to do so.  When considering whether to waive contingencies, speak with your estate agent. They will be able to help you decide what’s best for you and help you determine if you are in a position to take on that risk. Your Farmington Hills MI REALTOR’s knowledge of normal practices and probable outcomes in the local market will make your offer more likely to succeed.

Up your offer

If you are set on winning a bidding war on a Farmington Hills MI property, your best bet is offering more money than the other buyers. Upping your offer doesn’t have to mean paying another ten thousand dollars or more. Sometimes, going up just a few thousand dollars can make all the difference between winning the bid on a property or losing out on it. One important thing to keep in mind when upping your offer is that just because you are ready to pay more for a house doesn’t mean the bank is. When it comes to your mortgage, you are still only going to be able to get a loan for up to what the house appraises for. So, if your higher offer gets accepted, that extra money might be coming out of your own pocket.

Pay in cash

This obviously isn’t going to apply to everyone, but if you have the cash to cover the purchase price, offer to pay it all upfront instead of getting financing. Not only are you eliminating the need for a third party to get involved in the deal, but you are also showing the seller that you mean business. Sellers typically prefer dealing with a buyer who can pay cash because they don’t have to worry about a potential buyer actually receiving the financing they need. There’s a risk any time a lender has to get involved and when you eliminate their presence, you eliminate the risk. According to a Redfin analysis of home sales over the past two years, buying a home without financing boosted a buyer’s chance of winning a bidding war by 97%.

Include an escalation clause

An escalation clause can be an excellent asset when trying to win a bidding war. An escalation clause is an addendum to your offer that states you’re willing to go up by X amount if another buyer matches your offer. More specifically, it dictates that you will raise your offer by a specific increment whenever another bid is made, with a cap. if winning a bidding war on a home is the end result you are looking for, there’s nothing wrong with putting it all on the table and letting a seller know how serious you are. Work with your agent to come up with an escalation clause that fits with both your strategy and your finances.

Be flexibility

The date of possession is often an important part of the offer in a multiple bid situation. Typically, the closing period lasts 30, 45, 60, or 90 days. Customizing the length of the closing to suit the needs of the seller can often help clench the deal over a higher offer. Sellers almost always want fast closings, usually 30 days. If the seller needs to coordinate selling with buying another home, or moving in a short amount of time, giving them the close date they want can often be the difference in getting the house or not.

If the seller needs a rent-back, you can offer to allow them to stay in the property after the close of escrow. Depending on the circumstances, you might charge them what your PITI (principal, interest, taxes, and, insurance) payment is or the local market rent rate. You can even consider giving it to them to enhance the terms of your offer, depending on the situation.

The takeaway

Bidding wars can be challenging to navigate, especially if you’re a first-time homebuyer. It’s vital to do your research so you have a clear understanding of the process, the market, and the home you are interested in purchasing. Finding experienced representation is the best way to ensure a smooth and successful transaction in a multiple offer situation.  If you are a first-time buyer or even a seasoned buyer, you should seriously consider working with a qualified Farmington Hills MI real estate agent you can trust, and carefully listen to their advice.

 

Partner with Top-rated Farmington Hills MI REALTOR® – Tom Gilliam

Whether you are interested in buying a home in Farmington Hills, MI, or its time to list your current property, experience matters most in a changing market. Top-rated Farmington Hills REALTOR® – Tom Gilliam offers over 20 years of local experience, in-depth market knowledge, and access to the most up-to-date listings for Farmington Hill MI homes for sale. Known for his professionalism and care for every detail, Tom is an expert at uncovering the perfect home for his clients’ lifestyle needs in the right neighborhood or community.

2020 Best of Farmington Hills REALTOR - Tom Gilliam

If you are ready to sell your home, Tom will create a comprehensive marketing plan that exposes your home to the public as well as to other real estate agents through the Multiple Listing Service (MLS), other cooperative marketing networks, open houses for agents, etc.

Your listing will appear on all the most popular real estate sites where buyers spend hours a day looking at homes such as Realtor.com, Zillow, Trulia, REMAX, Redfin, and dozens of others. Your property will also be featured on Tom’s own highly-trafficked website Homes2moveyou.com. You can be assured that your home will get sold quickly and for the highest market price.

Search Farmington Hill MI Homes for Sale

Tom works very hard for his clients. He will be there to protect your interests, advocate for you, negotiate on your behalf, and do whatever it takes to ensure a smooth and successful transaction. If you or someone you know is interested in buying or selling Farmington Hills MI real estate, please give top-rated Farmington Hills MI REALTOR® – Tom Gilliam a call today at (248) 790-5594 or you can reach him here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578

 

 

Farmington Hills MI First-time Homebuyers: The Down Payment

Farmington Hills MI First-time Homebuyers: The Down Payment

Farmington Hills MI First-time Homebuyers: The Down Payment

As a first-time homebuyer, socking away money for a down payment to purchase a home in Farmington Hills MI may seem like an overwhelming task. The down payment is the upfront cash you pay to qualify for a home loan, which is expressed as a percentage of the home price. 

Many potential homeowners think that 20% down is the only option when it comes to getting a mortgage, but, that is just a common misconception, as there are many options out there.  

Lenders often look at the down payment amount as your investment in the home. Not only will it affect how much you will need to borrow, but it can influence whether your lender will require you to pay for private mortgage insurance (PMI).

Mortgage insurance protects the lender in case the borrower defaults on the home loan, and typically, you will need PMI if you put down less than 20% of the home’s purchase price. 

Different loans require different down payment percentages

Down payment requirements can also vary by lender and your credit history. The minimum down payment for an FHA loan is just 3.5% with a credit score of 580 or higher, for example, but the minimum is 10% with a credit score of 500 to 579.

State and local down payment assistance

Exploring local and national first-time homebuyer assistance programs is an important step in the journey to homeownership. Down payment assistance is often combined with favorable mortgage interest rates or tax breaks.

Many state housing authorities combine closing cost and down payment assistance programs with mortgages that have favorable interest rates. Some states even offer tax credits you can use on your federal tax return.

These first-time homebuyer assistance programs can boost your chance of homeownership in particular geographic areas, or help borrowers in certain professions, such as educators, first responders, or active-duty military and veterans. 

It’s important to note that programs will usually set a maximum sale price and some have income limits, so not all home buyers will qualify. Still, it’s worth checking out programs in your state.

Down payment gifts from family members

It’s not uncommon for first-time homebuyers to get help from family members. Using a gift to supplement savings can help first-time homebuyers clear the down payment threshold.

According to a 2019 Generational Trends report from the National Association of Realtors, of all homebuyers ages 28 and younger, 28% used a gift from a relative or friend to make a down payment. And of all buyers ages 29 to 38, 21% used a gift.

Down payment gifts are acceptable to lenders, but applying a gift toward a down payment involves more than depositing a check. The donors will have to verify in writing that they made the gift and have the financial ability to make such a donation.

They will be required to provide bank statements as proof, along with a letter confirming that the donation is a gift and not a loan. 

If the gift funds are added to the buyer’s bank account after settlement, then documentation will still be required before it can be applied to the purchase. Typically, this will require a receipt of the cashier’s check as given to the closing agent.

Partner with top-rated Farmington Hills MI REALTOR® -Tom Gilliam

Whether you are interested in buying a home in Farmington Hills, MI, or its time to list your current property, experience matters most in a changing market.

Offering over 20 years of local experience, top-rated Farmington Hills REALTOR® – Tom Gilliam offers in-depth local market knowledge and access to the most up-to-date listings. Tom is known for his professionalism and is an expert at uncovering the perfect home for his clients’ lifestyle needs in the right Farmington Hills neighborhood or community. 

2020 Best of Farmington Hills REALTOR - Tom GilliamFor sellers, Tom will create a comprehensive marketing plan that exposes your home to the public as well as to other real estate agents through the Multiple Listing Service (MLS), other cooperative marketing networks, open houses for agents, and so on.

Your listing will appear on all the most popular real estate sites where buyers spend hours a day looking at homes such as Realtor.com, Zillow, Trulia, REMAX, Redfin, and dozens of others.

Your property will also be featured on Tom’s own highly-trafficked website Homes2moveyou.comYou can be assured that your home will get sold quickly and for the highest market price.  

Farmington Hill MI Homes for Sale

Tom works very hard for his clients. As your agent, he will protect your interests, negotiate on your behalf, advocate for you, and be your trusted guide and advisor throughout the home buying or selling process.

If you or someone you know is interested in Farmington Hills MI real estate, please give Tom Gilliam a call today at (248) 790-5594 or you can reach him here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578

 

 

Buying a Home in Farmington Hills MI: Home Inspection Tips

Buying a Home in Farmington Hills MI: Home Inspection Tips

 Buying a Home in Farmington Hills MI: Home Inspection Tips

Buying a home in Farmington Hills MI is a lengthy process, and will likely be one of the biggest financial decisions you make in your lifetime. Even if you find a great deal on the cost of a house, there are several other fees that will sneak in such as private mortgage insurance, closing costs, broker fees, etc. 

Hence, you might be tempted to forego the home inspection, especially since it’s one more cost added to the pot. Even if your prospective home looks immaculate, you should still get an inspection because it could potentially save you thousands of dollars and aggravation down the road. 

What You See May not be What You Get

When looking at Farmington Hills MI homes for sale, what you see may not be exactly what you get. Most sellers are going to have their home looking its best for prospective buyers. You may “see” attractive pots of colorful flowers on the front porch, freshly painted walls, attractive granite countertops, gleaming hardwood floors, and other touches that catch your eye. 

What you won’t see are things like cracks in the foundation, antiquated plumbing, dangerous wiring, appliances that don’t work, or other hidden issues that might only get revealed by hiring a professional home inspector.  

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A qualified Farmington Hills home inspector’s job is to assess the condition of the property, including its heating and cooling systems, plumbing, electrical work, water and sewage, and some fire and safety issues. The inspector will also look for evidence of insect, water, or fire damage or any other issue that may affect the value of the property. 

When The Home Inspection is Done

Typically, a home inspection is done after a sales contract or purchase agreement between the buyer and a seller has been signed. Therefore, it’s important that the contract include an inspection contingency or due diligence contingency, which allows the buyer time to find an inspector, schedule and attend the inspection, receive the inspector’s report, and decide how to proceed based on the information it includes. 

It’s a good idea to choose a home inspector early in the home buying process so you can schedule your inspection as soon as a seller accepts your offer. Good inspectors can be in high-demand, especially in the springtime when the majority of homes are sold. 

You should also budget for additional examinations in case the inspector finds problems or mentions issues that need further investigation, such as mold,  asbestos, or additions made without a permit. Whether the seller will give you more time to complete additional inspections is subject to negotiation. It’s up to the seller to agree or not.  

Preparing A Home Inspection Checklist  

You can prepare for the home inspection by making a list of the areas of the house you want to be checked before the inspector arrives. The following items should be included on your checklist:

  • Foundation
  • Roof
  • Attic space
  • Rain gutters and downspouts
  • Exterior stucco or paint
  • Electrical panel, light switches, and power outlets
  • Thermostats and heating, cooling, and ventilation (HVAC) system
  • Plumbing fixtures, faucets, and water heater
  • Appliances
  • Walls, ceilings, and floors
  • Doors and windows
  • Stairs, steps, and railings
  • Walkways and driveways
  • Porches and balconies
  • Basement
  • Garage

A professional Farmington Hills MI home inspection will likely take at least a few hours, and it’s a good idea to be present during the inspection if you can. That way you can find out as much as possible about the true condition of the home and ask the inspector about any findings that might concern you.

Additional Items To Consider

Keep in mind that since home inspectors are mainly concerned with the physical components of the property, there may be items about the home that are left out of the inspection, such as trees and landscaping, lawn sprinklers, sewer line, fireplace and chimney, swimming pool equipment, floors covered by carpeting, drainage, mice, rats, or other rodents, and wood pests such as termites or carpenter ants.

Inspectors typically won’t estimate repair costs, the remaining life of appliances, or other systems for you. If you are concerned about particular items, you may need to get your own repair and replacement bids from local contractors.   

Home Inspection Assessment

Depending on the inspection report, you may decide to proceed with the sale, schedule additional inspections, renegotiate the sale price with the seller (if there are serious issues), ask that certain repairs be made, or cancel the contract altogether. If you request major repairs, you may also ask for a re-inspection with the original inspector to verify that the original issue(s) has been resolved. 

Takeaway

Since the Farmington Hills home you buy will probably be one of the biggest, most valuable purchases you will ever make, a professional home inspection will help ensure that you’re making the right home purchase decision and a sound investment. 

Partner with Top-rated Farmington Hills MI REALTOR® -Tom Gilliam

2020 Best of Farmington Hills REALTOR - Tom GilliamWhether you are interested in buying a home in Farmington Hills, MI, or its time to list your current property, experience matters most in a changing market.

With over 20 years of local experience, Farmington Hills REALTOR® – Tom Gilliam offers in-depth local market knowledge and access to the most up-to-date listings.

Known for his professionalism and care for every detail, Tom is an expert at uncovering the perfect home for his clients’ lifestyle needs in the right Farmington Hills neighborhood or community.

Search Farmington Hill MI homes for sale

For sellers, Tom will create a comprehensive marketing plan that exposes your home to the public as well as to other real estate agents through the Multiple Listing Service (MLS), other cooperative marketing networks, open houses for agents, and so on.

Your listing will appear on all the most popular real estate sites where buyers spend hours a day looking at homes such as Realtor.com, Zillow, Trulia, REMAX, Redfin, and dozens of others. Your property will also be featured on Tom’s own highly-trafficked website Homes2moveyou.com. You can be assured that your home will get sold quickly and for the highest market price.  

Tom works very hard for his clients. He will protect your interests, advocate for you, and be your trusted guide and advisor throughout the home buying or selling process. If you or someone you know is interested in Farmington Hills MI real estate, please give Tom a call today at (248) 790-5594 or you can reach him here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578

Mortgage Pre-qualification, Pre-approval, and Approval Process

Mortgage Pre-qualification, Pre-approval, and Approval Process

Mortgage Pre-qualification, Pre-approval, and Approval Process  

If you are ready to make your dream of homeownership a reality, then you have probably already heard that you should consider getting prequalified or preapproved for a mortgage. It’s important to understand what each of those terms means. When you are working toward a major life goal like buying a home, you want every advantage and tool in your homebuying arsenal. 

In this article, we will discuss the mortgage prequalification, preapproval, and approval process and what to expect from all three:

Mortgage Pre-qualification 

When you pre-qualify for a home loan, you are getting an estimate of what you might be able to borrow. Many first-time homebuyers find that getting prequalified is helpful, especially when they are establishing their homebuying budget. Pre-qualification also provides the opportunity to learn about different mortgage options you may not know about and work with a lender to identify the right fit for your individual needs and goals. 

Keep in mind that you may qualify to borrow more money than you are comfortable spending on a home. But that doesn’t mean you have to spend more. It’s always a good idea to limit your home search to houses priced at an amount you can comfortably afford and obtain a mortgage amount that easily fits into your overall budget. 

Mortgage Pre-approval 

Pre-approval is as close as you can get to confirming your creditworthiness without having a purchase contract in place. Getting preapproved is a smart step to take when you are ready to put in an offer on a home. It shows sellers that you can secure a mortgage, which makes it more likely that you will complete your purchase of the home. Because you have had your finances and creditworthiness verified, sellers will be more likely to consider you a serious buyer.  

With a pre-approval, you will complete a mortgage application. The lender will verify the information you have provided and perform a credit check. If you are, in fact, preapproved for a home loan, you will receive a pre-approval letter, which is an offer (but not a commitment) to lend you a specific amount of money, which is good for 90 days. Lenders will look at every detail of your finances when granting pre-approval. Be prepared to answer lender questions as soon as they come up.

How Long It Takes To Get Pre-qualified or Pre-approved 

Pre-qualification and pre-approval can take different amounts of time. Pre-qualifying is a quick process and can actually be done online. You may even get results within an hour. Since you will need to supply more information for a mortgage pre-approval, it is likely to take more time. You should expect to receive a pre-approval letter within 10 business days after you have provided all of the information requested by your lender.  

Information Needed to Get Pre-qualified and Pre-approved

The information you will need to provide to get pre-qualified for a mortgage:   

  • Basic income information
  • Credit Check
  • Basic information about bank accounts
  • Downpayment amount and desired mortgage amount
  • No tax information required

 The information you will need to provide to get pre-approved for a mortgage:

  • Copies of pay stubs that show your most recent 30 days of income
  • Credit check
  • Bank account numbers/two most recent bank statements
  • Downpayment amount and desired mortgage amount
  • W-2 statements 
  • Signed, personal and business tax returns from the past two years

Pre-qualification Vs. Pre-approval Comparison

  PREQUAL  PREAPPROVAL
Benefits You can start house-hunting knowing how much you might be able to borrow You’ll be ready to make an offer with confidence—and gain a competitive advantage
Process Provide basic information to a lender and quickly get a prequalification amount After submitting documentation to a lender, you should receive a decision within 10 business days
Documentation Answer questions for this process, plus a credit check Provide proof of financial details, plus a credit check

 Factors Involved with Getting Approved for a Mortgage 

Even if you have been pre-approved for a mortgage, it isn’t an automatic final approval. Pre-approval is only the first step in the loan process and your underwriting can still be denied. Being pre-approved will make sure you have a good credit score, verify your income, and assure that you will be able to pay back the loan amount. 

Once you’ve been pre-approved, your file must then go to the underwriter who will take a much deeper look into your financial stability.  The underwriter will review your loan scenario and supporting documentation to determine whether you qualify for the loan, with the following basic criteria in mind:

  • Your ability to repay the loan – Is your income enough to cover the new mortgage payment and all your other monthly expenses? Lenders use your debt-to-income ratio (DTI) and most lenders want your debt-to-income ratio to be 36% or less.
  • Your likelihood to repay the loan. Your payment history and credit score are indicators to lenders of your likelihood to make payments in the future.
  • The home’s value – The underwriter will look at the value of the home you are purchasing to verify that it meets or exceeds the purchase price and whether the loan-to-value ratio (LTV) fits within the loan program guidelines. With a conventional loan, most lenders require a loan-to-value ratio of no more than 80-95% (The higher your home’s value and the less you owe on it, the lower your LTV).
  • The source and amount of funds for your down payment – You will typically be required to pay private mortgage insurance (PMI), which increases your monthly mortgage payment if you have a down payment of less than 20%. The underwriter will review your information to estimate whether you have enough money to cover closing costs. Lenders also typically require reserves to cover your mortgage payment in case of emergencies or unforeseen events.

As you move forward, your income, debt, credit history, down payment, savings, home value, and loan program guidelines will all play a role in whether your mortgage application is approved.

Partner with Top-rated Farmington Hills MI REALTOR® -Tom Gilliam

2020 Best of Farmington Hills REALTOR - Tom GilliamWhether you are interested in buying a home in Farmington Hills, MI, or its time to list your current property, experience matters most in a changing market. With over 20 years of local experience, Farmington Hills REALTOR® – Tom Gilliam offers in-depth local market knowledge and access to the most up-to-date listings.

Known for his professionalism and care for every detail, Tom is an expert at uncovering the perfect home for his clients’ lifestyle needs in the right Farmington Hills neighborhood or community.

Search Farmington Hill MI homes for sale

For sellers, Tom will create a comprehensive marketing plan that exposes your home to the public as well as to other real estate agents through the Multiple Listing Service (MLS), other cooperative marketing networks, open houses for agents, and so on.

Your listing will appear on all the most popular real estate sites where buyers spend hours a day looking at homes such as Realtor.com, Zillow, Trulia, REMAX, Redfin, and dozens of others. Your property will also be featured on Tom’s own highly-trafficked website Homes2moveyou.com. You can be assured that your home will get sold quickly and for the highest market price.  

Tom works very hard for his clients. He will protect your interests, advocate for you, and be your trusted guide and advisor throughout the home buying or selling process. If you or someone you know is interested in Farmington Hills MI real estate, please give Tom a call today at (248) 790-5594 or you can reach him here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578

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