Home Buying

Frequently Asked Questions

Q: What is the first step to buying a home?
A: Make sure you are ready - psychologically and financially. Ask yourself the following questions: Do I have steady income? Is my debt lower than my total income? Do I have enough money to pay for the down payment and closing costs? What’s my credit like? A house needs constant care and attention. Also ask yourself if your budget will allow for unexpected repairs and upkeep. Once you can honestly answer "yes" to these questions, you are several steps ahead of the game and that much closer to becoming a homeowner.

Q: What are the advantages of owning a home?
A: There are many. Among the most appealing: you own it, which gives you, instead of a landlord, control of your living space. Other benefits stem from potential tax savings and the buildup of equity as your property likely appreciates in price over time. Equity can be used to help put children through college, purchase a cottage, or make home improvements. The mortgage interest paid on a home loan is tax deductible, as is the local property tax. If you get a fixed-rate home mortgage loan, you also can invest more wisely knowing your monthly mortgage payment, unlike rent, will not change substantially.

Q: How much can I afford?
A: The general rule of thumb is that you can buy a home that costs about two-and-one-half times your annual salary. Your CENTURY 21 Town & Country sales associate can help determine how much you can afford and estimate the maximum monthly payment based on the loan amount, taxes, insurance and other expenses. To find out now how your income, debts, and expenses can affect what you can afford, use our mortgage calculators to estimate how much you may be able to borrow to purchase a home.

Q: What Are Some Home Buying Negotiation Tips?
A: One of the most frequently asked questions about buying a home is related to negotiating a fair price. Buyers -- especially first-time home buyers -- want home-buying tips, particularly about negotiating.

While some people feel uncomfortable bargaining even at a garage sale or farmer's market, in real estate, negotiating is a necessary part of the home buying process. Here are a few proven home buying tips for becoming a successful negotiator:

Tip: Learn what homes of like kind and quality have recently sold for within the area where the property is located.

Tip: The “Listing “ or “Asking” price is what the seller would ideally like to sell their home for. Keep in mind that homes are generally priced with the assistance of a real estate professional providing a home marketing plan to help the seller in making a good pricing decision. However seller motivation can be a factor.

Tip: Every buyer would like to pay as little as possible. Low or unreasonable offer could be accepted. However most of the time this type of offer could be viewed as offensive and may generate an unfavorable response.

Tip:  Be flexible and patient, don’t let your emotions get in the way of negotiating the agreement. Offers and counter offers can go back and forth before a final agreement is reached.

Tip: A strong financial position will be looked at more favorably by a seller. Having a pre-approval from a qualified lender and a sizable deposit may help the seller to consider your offer, especially when there are other competing offers.

Q: What contingencies should appear in the offer?
A: When you look to purchase a home, try to anticipate potential problems. But protect against them so that if something does go wrong, you can cancel the contract without penalty. This is what contingencies allow you to do. They should be included in any offer you present to buy a home.

Most offers include two standard contingencies: a financing contingency, which makes the sale dependent on your ability to obtain a loan commitment from a lender, and an inspection contingency, which allows you to have a professional inspect the property. Without contingencies, a buyer could forfeit his deposit under certain circumstances if he backs out of a deal. The purchase contract also should include the seller's responsibilities, such as passing clear title, maintaining the property in its present condition until closing, and making any agreed-upon repairs.

Q: Is it possible to buy a home below market price?
A: Certainly, but do not hold your breath. It takes a lot of determination and time to find a real bargain. But if you are adamant, here are some likely targets to pursue:

  • foreclosed property
  • a fixer-upper
  • hard-to-sell new homes in a housing development
  • Tenant-in-common partnerships

With the latter, you may be able to buy a partial interest in this form of title to property owned by two or more individuals because the partners often sell at a discount. However, bargains are easier to come by in a soft real estate market, when the economy is in a recession, and when homeowners, and builders and sponsors of condominium conversions, are desperate to move unsold units.

Q: Is it best to save for the ultimate dream home or begin with a less expensive starter home?
A: It can take a long time to save for that perfect dream home. Meanwhile, the market has been flooded with some of the most favorable mortgage interest rates in years. Low rates make housing more affordable, which is why so many buyers have jumped on the home buying bandwagon. Home-price appreciation has also been strong, making very solid gains in communities across the country. In fact, home prices are expected to increase 2.5 percent to 3 percent annually over the next five years. If you purchase a starter home today, you can potentially begin to build value that can lead to the purchase of a larger, or more desirable, trade-up home in the future.

Q: How do you decide whether to add on to an existing home or purchase a new one?
A: There are a few things to consider, including cost, individual needs, and what will add value down the road. Also important: your emotional attachment to the existing home. An addition is much cheaper than building a new home and can offer a "new" home without the heartache of moving. Other considerations:

  • Can you finance the home improvement with your own cash or will you need a loan?
  • How much equity is in the property? A fair amount will make it that much easier to get a loan for home improvements.
  • Is it feasible to expand the current space for an addition?
  • What is permissible under local zoning and building laws? Despite your deep yearning for a new sunroom or garage, you will need to know if your town or city will allow such improvements.
  • Are there affordable properties for sale that would satisfy your changing housing needs? Explore your options.