Frequently Asked Sales Questions
1. Is it better for me to buy, or keep on renting?
Rent goes on forever, a mortgage gets paid off. If you plan to keep working so you can pay rent forever, then you should keep renting. If you realize that your financial future and how you will live in retirement are at stake, then get going and buy something to live in. You'll reap the rewards of all your hard work someday.
As Bill Holland, a financial advisor, heard on area radio is fond of saying "Own the home you live in. It's the first and best investment you should make".
2. How much CASH do I need to buy a home?
Today you'll need less cash than you think to buy a home. Many programs are available with as little as "zero" down payment. You'll need to show that you have some cash reserves after the close of escrow, but there are many creative ways to finance your home purchase see Financing Real Estate for more information.
3. What price houses should we be looking at?
Follow the advice found in Buying a Home. Get yourselves "prequalified" or better than that get your loan "preapproved". Prequalified means you've completed a preliminary discussion with a lender and discovered how much of a mortgage you can qualify for. Preapproved means that you've completed a loan application and your financial information has be verified. The only contingency to your loan is the property appraising.
4. What are the monthly payments?
A rough rule of thumb is that a thousand dollars borrowed for a home costs $8.90 a month. This includes property tax and insurance. Borrowing $100,000 costs $890 a month but this number is misleading. If you add in the tax advantages of owning (being able to deduct interest and property taxes paid) the $890 a month "feels" more like $800.
5. Are there special programs for "First Time Home Buyers"?
Yes. Various federal, state, local, and even private programs are available for first time buyers (generally, first time buyers are defined as people who have not owned a home for the last three years). Check with your lender, real estate salesperson, and local affordable housing agencies for programs in your area.
6. Can we "Rent to Own"?
Renting to own involves paying an "above the market" rental rate for a property and having the owner "bank" the difference. This is a forced savings plan for the tenants/buyers. This money is then used for part of the down payment and closing costs if and when the property is purchased.
I have several concerns with this type of scheme. Why should the tenants/buyers limit themselves to only one property. If they are able rent at a market rate and bank the difference themselves they can purchase whatever home suits them at the time instead of limiting their choices. Also, who makes sure that the "banked" funds are available for closing the purchase. A price reduction for that amount is not the same as cash. A purchase option built into a lease better serves the tenants/buyers.
The landlord/seller faces some questions about "renting to own". Why should they be limited in what they can sell the property for? If they contract with the tenants/buyers for a certain price and the market moves up dramatically they might not be as willing to sell.
7. How do I know what a house is worth?
Part of the purchase process is having the house appraised. Your lender will require that the property be appraised prior to lending you the money to buy it. This isn't to protect you, it's to protect the lender in case you don't pay them. At any rate, you are protected from paying to much. Most home sale transactions are also a matter of public record due to property tax implications, so it's possible to analyze the market and determine value. Your real estate salesperson should show you this.
8. I have heard about repo's and foreclosure sales. Should I try to get a "deal" on one?
In a word, stay away from these "deals". This is the famous "pot of gold" for the seminar and infomercial crowd, playing on peoples' greed. While some very experienced people have managed to profit in this area, it's not for beginners. You MUST do your homework with these types of transactions and be patient. It is not easy money. If it was, I'd be in it.
9. Is Imperial Beach a good area to buy in?
Imperial Beach and the surrounding areas are excellent places to live and that makes it a great area to buy in. Our ocean and climate aren't going anywhere and the long term outlook is favorable for the entire South Bay.
10. What documentation is required by lenders?
You'll need to provide the lender with at least the following items, last two years tax returns, current pay stubs, last three months bank statements, names and addresses of employers and landlords for the past two years, copies of latest statements for all monthly debt ( credit cards, car payments, other loans, etc...). You'll also need to provide additional information specific to your situation so be prepared the process can be a little overwhelming.
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