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Understanding the Costs Involved in Buying a Home

Understanding the Costs Involved in Buying a Home

Although the thought of paying a mortgage is more enticing than paying rent, it's important to understand all the costs involved in buying and owning a home as you determine whether you can afford to join the ranks of homeowners.

Potential buyers sometimes forget to factor in the down payment, homeowners insurance and the possibility of depreciation, as well as the costs associated with closing the transaction, moving, purchasing major appliances, and home, landscape and pool maintenance, not to mention furnishings and design accessories once you move in.
 
The days of calling up the landlord to fix your problems come to an abrupt halt when you're a homeowner. You'll be responsible for everything from malfunctioning appliances to leaky faucets to broken heating and air conditioning units and everything in between. And if you buy an older home, you'll probably eventually encounter costly repairs, such as replacing the roof or windows.
 
To determine whether you can afford to buy a home, you should do the following:
 
Determine the property value of homes that interest you. The property value (what the home is worth) is determined by comparing the prices of homes recently sold of similar size in the same neighborhood. Your real estate agent will be able to provide this information to you.

Review different mortgage loan types and compare their required down payment amounts to the money you have available. Down payments, based on a percentage of the value of the property and determined by the type of mortgage you select, typically range from three to 20 percent of the property value. Don't forget to factor in private mortgage insurance, a policy that allows mortgage lenders to recover part of their financial losses if a borrower fails to full re-pay a loan. Mortgage insurance makes it possible to buy a home with as little as 3 percent down. Usually, the lower the down payment, the higher the PMI, which typically will cost somewhere between $40 and $125 a month.

Get an estimate of your closing costs, including points (the dollar amount paid to a lender for obtaining a lower interest rate on a loan—one point is one percent of the loan amount), taxes, recording, inspections, prepaid loan interest, title insurance (a policy that insures a home buyer against errors in the title search; cost of the policy is usually a function of the value of the property, and is often borne by the purchaser and/or seller) and financing costs from your mortgage lender or a real estate professional. These will generally add up to between 2 and 7 percent of the property value. You'll receive an estimate of these costs from your lender after you apply for a mortgage.

Add the down payment requirements and the closing costs together to determine the amount of money you'll need right off the bat. But you're not done yet.
 
Think about the actual move. Will you hire a moving company or rent a truck? Either way will cost you. The more stuff you have, the more it will cost.
 
Property taxes. Many lenders will require an impound account in which monthly payments for property tax (and often insurance) are paid together with the monthly mortgage payment. You can figure your average annual tax rate will be about 1.5 percent of the purchase price of your home.
 
Next, budget for maintenance and repairs. HouseMaster, a home inspection company with 300 franchises nationwide, said that based on a study that evaluated 2,000 inspection reports, the typical costs of major repairs are:
  • Roofing: $1,500 to $5,000
  • Electrical systems: $20 to $1,500
  • Plumbing systems: $300 to $5,000
  • Central cooling: $800 to $2,500
  • Central heating: $1,500 to $3,000
  • Insulation: $800 to $1,500
  • Structural systems: $3,000 to $1,500
  • Water seepage: $600 to $5,000

Once you crunch the numbers and find you come up a bit short, investigate ways to reduce or creatively fund your down payment—it can come from a variety of sources. Check with your realtor or lender to find out what's available.
You'll also need to factor in the cost of homeowners insurance. In addition to the type of construction, age of the home, your credit history and past insurance history, new issues like litigating costly toxic mold cases are raising homeowners insurance rates.

In fact, the National Association of Insurance Commissioners reports that homeowners will spent an average of $822 on homeowners insurance in 2007, the last year data was available.

In your final analysis of whether you can afford to buy a home, you'll want to weigh the costs with the financial benefits—a consistent mortgage payment (unlike rent, which can increase), the tax benefits (you can deduct, in most cases, mortgage interest, closing costs, and property taxes), and the all-important appreciation factor—the rate of increase in a home's value.

And of course, you'll want to weigh perhaps the biggest benefit of all—having a place to call your own.

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Setting Up Mortgage Contingencies

Setting Up Mortgage Contingencies

When you’re buying a house, there are a lot of unknowns—and once you’ve bought a home, you’re committed, usually for years. Contingencies clauses in your home purchase contract might help take away some of the uncertainty of buying a home by detailing conditions that must be met before closing will take place.

How mortgage contingencies protect buyers

One very common contingency is a mortgage contingency. A mortgage contingency gives buyers added security during the home-buying process; it states that a buyer will try to get a particular kind of mortgage (traditional, Veterans Affairs or Federal Housing Administration) at or below a certain interest rate for a set amount of the purchase price (generally 80 percent) by a specific date before closing.

If the buyer is unable to secure a loan at the stated terms, he can back out of the contract, and the earnest money deposit returns to him.

How mortgage contingencies protect sellers

However, mortgage contingencies provide protection for sellers as well. If a buyer who can’t secure a loan neglects to tell the seller by a predetermined date, the buyer is still obligated to purchase the home, even without financing. And if the buyer can’t or won’t secure a loan, many contingencies permit the seller to find a mortgage for the buyer.

Sellers can word mortgage contingencies to protect themselves in other ways: The deadline for the contingency can be set at least a few weeks before closing to prevent the buyer from backing out at the last minute, for example. The earnest money could also be negotiated at a percentage that is high enough to pose a significant loss to the buyer if he or she doesn’t properly follow through with securing financing.

Other contingencies

  • Appraisal contingencies go hand-in-hand with the mortgage contingency. There are two ways appraisal contingencies work. One version states that if a buyer can’t get an appraisal that is at least as high as the seller’s asking price, the buyer may back out of the deal. The other states that if the buyer can’t get an appropriate appraisal, the buyer can ask the seller for a lower purchase price. Then, if the seller refuses, the seller may back out.
  • Inspection contingencies give the buyer a certain period of time (usually three to 14 days) to perform whatever inspections are needed to confirm his or her interest in the home. If these inspections reveal any problems, the buyer can back out of the deal.

There are many other possible contingencies, such as insurance contingencies or mold inspection contingencies. The common types of contingencies vary from state to state.

Pay attention to the fine print

The wording of a contingency is key—they’re not just filler in your contract! If you’re not paying attention, you could lose money, miss deadlines and, worst of all, you could be liable for buying a property even if you can’t procure a loan.

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What Does a Recruiter Do?

What Does a Recruiter Do?

Sometimes our hiring managers and business leaders are not fully aware of all of the work that goes into growing our organizations. Often, we are looked at as an unnecessary expense on overhead of an organization.

Recruiters Are Expert Researchers.

As recruiters, we need to know where to find people and the market intelligence around the industries we recruit for. There are many tools we use to find people to join our organizations. A good recruiter is constantly updating their skills because recruitment changes rapidly. Recruitment is very data driven. We use a variety of tools to source our candidates. Boolean search is data search method used by recruiters. It can be a very simple or very complex. I compare it to writing to writing code because if you are one key off, the meaning of search string changes. Another tool that we use is networking and it is extremely valuable no matter what you do for a living. The ability to link people and ideas is extremely important. A great recruiter knows the value of a good connection. Analytics is one of the most valuable tools that I use as a recruiter. I use analytics to determine market salaries, how many people are in the market with niche skills and where do I locate these people.

Recruiters Are Organizational Matchmakers.

When working on filling positions for our organizations, we make connections with candidates and hiring managers. The position & company has been a good fit for the candidate. The candidate has to been a good match for company & role. Making bad matches is to no one’s advantage, even if you work for a staffing firm. There are several reasons why bad matches hurt both the recruiter and the company. The first reason is the reputation of the recruiter can be harmed by making a bad match. The second reason is it is double work on the recruiter because they will have to refill the position if the candidate doesn’t work out. Third, it costs the company unnecessary extra money.

Recruiters Are Trainers.

As recruiters, we find ourselves training our hiring managers and candidates on the company’s hiring process. We protect the company from legal issues by insuring compliance in our hiring practices. We train our hiring managers on fair practices, how to interview our candidates, and selection process. When our hiring managers have questions on the process, they turn to us for answers. We also in turn guide them on the process and try to insure that they are compliant. For our candidates, we do the same. We guide them through applying to different positions and let them know what steps to expect. We personalize the process for both our candidates and hiring managers.

Recruiters Are the Face of the Organization.

Recruiters are usually the first people candidates come into contact with. We are the reflection of the company. We organize and attend job fairs, networking events, and campus events. We know the company inside out and understand the leadership structure of the organization. We are sales people, organizers, negotiators, matchmakers, trainers, researchers, and public relations specialists. Our ability to convince the right people to join our organizations is what makes a great recruiter. A lot of people have this idea that all recruiters do is search the job boards and cold call candidates. The way I’ve heard it described as if there was no skill to recruiting, that all we do is collect resumes and hand them to our hiring managers. If this were truly the case, we wouldn’t make good matches. There is even the thought that all we do is collect resumes from our applicant tracking systems. That is also not the case, while the applicant tracking system is a great tool, we still have to open our minds to passive candidates and convince them to join us.

Conclusion

Recruiters are extremely important to an organization because we are the life supply of people to the organization. Without people, an organization doesn’t have the manpower to grow or even complete their current projects.People create revenue for the company which translates into profits. Personally, I love my job and find it to be very fulfilling. I love that I get to meet new people every day and that I am able to help my organization grow. I believe in what I do and when you believe in what you do, you have the ability to be successful.

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