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| Hawaii Real Estate Online, LLC 1888 Kalakaua Ave., Suite C312 Honolulu, HI 96815 |
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Copyright © 2006-09 Kate Braden. All Rights Reserved. |
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Why a Prequalification is Important The Hawaii market is currently a balanced market with more opportunities for Buyers than in the recent past. Sellers are aware that properties will not go for more than market value ( last sold for like property plus a 5-7% appraisal per annum). Well priced properties still go quickly, so the savvy buyer needs to be prepared to make an offer quickly. Some neighborhoods are more price competitive than others, but in all of Oahu's neighborhoods a seller will not consider an offer without at least a pre-qualification, preferably by a local lender. It is the first step in buying a home in Hawaii and quite simple. The process declares that a lender has assessed your situation and upon confirmation of your information, you are able to borrow this amount. A smooth transaction depends on working closely with the lender and title company to correct any issue so that the title to the property can be transferred cleanly to the new owner and the funds will be available to close the transaction in the time specified in the contract. Contact the lenders above to assess which one will meet your needs in securing a pre-approval and the mortgage that will work best for you.
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10 Steps to Prepare for Homeownership Decide how much home you can afford. Generally, you can afford a home equal in value to between two and three times your gross income. Develop a wish list of what you’d like your home to have. Then prioritize the features on your list. Select three or four neighborhoods you’d like to live in. Consider items such as schools, recreational facilities, area expansion plans, and safety. (Click Here) Determine if you have enough saved to cover your downpayment and closing costs. Closing costs, including taxes, attorney’s fee, and transfer fees average between 2 percent and 7 percent of the home price. Get your credit in order. Obtain a copy of your credit report. Determine how large a mortgage you can qualify for. Also explore different loans options and decide what’s best for you. (Click Here) Organize all the documentation a lender will need to preapprove you for a loan. Do research to determine if you qualify for any special mortgage or downpayment-assistance programs. Calculate the costs of homeownership, including property taxes, insurance, maintenance, and association fees, if applicable. Find an experienced REALTOR
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10 Things a Lender Needs From You W-2 forms or business tax return forms if you’re self-employed for the last two or three years for every person signing the loan. Copies of one or more months of pay stubs from every person signing the loan. Copies of two to four months of bank or credit union statements for both checking and savings accounts. Copies of personal tax forms for the last two to three years. Copies of brokerage account statements for two to four months, as well as a list of any other major assets of value, e.g., a boat, RV, or stocks or bonds not held in a brokerage account. Copies of your most recent 401(k) or other retirement account statement. Documentation to verify additional income, such as child support, pension, etc. Account numbers of all your credit cards and the amounts of any outstanding balances. Lender, loan number, and amount owed on other installment loans—student loans, car loans, etc. Addresses where you lived for the last five to seven years, with names of landlords, if appropriate.
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10 Questions to Ask Your Lender Be sure you find a loan that fits your needs with these comprehensive questions. What are the most popular mortgage loans you offer? Which type of mortgage plan do you think would be best for us? Why? Are your rates, terms, fees, and closing costs negotiable? Will I have to buy private mortgage insurance? If so how much will it cost and how long will it be required? NOTE: Private mortgage insurance usually is required if you make less than a 20 percent downpayment, but most lenders will let you discontinue the policy when you’ve acquired a certain amount of equity by paying down the loan. Who will service the loan? Your bank or another company? What escrow requirements do you have? How long is your loan lock-in period (the time that the quoted interest rate will be honored)? Will I be able to obtain a lower rate if they drop during this period? How long will the loan approval process take? How long will it take to close the loan? Are there any charges or penalties for prepaying the loan? Used with permission from Real Estate Checklists & Systems ( http://www.realestatechecklists.com).
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Common Closing Costs for Buyers The lender must disclose a good faith estimate of all settlement costs. A check to cover your closing costs will probably have to be a cashier’s check. The title company or other entity conducting the closing will tell you the required amount for: Downpayment Loan origination fees Points, or loan discount fees, you pay to receive a lower interest rate Appraisal fee Credit report Private mortgage insurance premium Insurance escrow for homeowners insurance, if being paid as part of the mortgage Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and insurance in escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you. Deed recording fees Title insurance policy premiums Survey (Usually paid by Seller but sometimes cost is shared) Inspection fees—building inspection, termites, etc. Notary fees Prorations for your share of costs, such as utility bills and property taxes A Note About Prorations: Because such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for services used by the sellers before they moved. Proration is a way for the sellers to pay you back or for you to pay them for bills they may have paid in advance. For example, the gas company usually sends a bill each month for the gas used during the previous month. But assume you buy the home on the 6th of the month. You would owe the gas company for only the days from the 6th to the end for the month. The seller would owe for the first five days. The bill would be prorated for the number of days in the month, and then each person would be responsible for the days of his or her ownership.
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What Is Appraised Value? It’s an objective opinion of value, but it’s not an exact science so appraisals may differ. For buying and selling purposes, appraisals are usually
based on market value—what the property could probably be sold for. Other
types of value include insurance value, replacement value, and assessed
value for property tax purposes. Appraised value is not a constant number. Changes in market conditions can dramatically alter appraised value. Currently in Hawaii, market value is the sale price (not the asking price) of the last similar property plus appreciation to date (currently about 5-7% per annum). Appraised value doesn’t consider special considerations, like the need to sell rapidly. Lenders usually use either the appraised value or the sale price, whichever is less, to determine the amount of the mortgage they will offer.
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5 Things to Understand About Homeowners Insurance Look for exclusions to coverage. For example, most insurance policies do not cover flood or earthquake damage as a standard item. These coverages must be bought separately. Look for dollar limitations on claims. Even if you are covered for a risk, there may a limit on how much the insurer will pay. For example, many policies limit the amount paid for stolen jewelry unless items are insured separately. Understand replacement cost. If your home is destroyed you’ll receive money to replace it only to the maximum of your coverage, so be sure your insurance is sufficient. This means that if your home is insured for $150,000 and it costs $180,000 to replace it, you’ll only receive $150,000. Understand actual cash value. If you choose not to replace your home when it’s destroyed, you’ll receive replacement cost, less depreciation. This is called actual cash value. Understand liability. Generally your homeowners insurance covers you for accidents that happen to other people on your property, including medical care, court costs, and awards by the court. However, there is usually an upper limit to the amount of coverage provided. Be sure that it’s sufficient if you have significant assets.
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5 Things to Understand About Title Insurance It protects your ownership right to your home both from fraudulent claims against your ownership and from mistakes made in earlier sales, such as mistake in the spelling of a person’s name or an inaccurate description of the property. It’s a one-time cost usually based on the price of the property.
There are both lender title policies, which protect the lender, and owner title policies, which protect you. The lender will probably require a lender policy. Discounts on premiums are sometimes available if the home has been bought within only a few years since not as much work is required to check the title. Ask the title company if this discount is available.
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What Your Home Inspection Should Cover Siding: Look for dents or buckling Foundations: Look for cracks or water seepage Exterior Masonery: Look for cracked surfaces or mortar or mortar pulling away from blocks, bricks or stones Insulation: Look for condition, adequate rating for climate Doors and Windows: Look for loose or tight fits, condition of locks, condition of weatherstripping, condition of louver handles and frames Roof: Look for age, conditions of flashing, pooling water, buckled shingles, or loose gutters and downspouts Ceilings, walls, and moldings: Look for loose pieces, drywall that is pulling away Lanai/Deck: Loose railings or step, rot Electrical: Look for condition of fuse box/circuit breakers, number and types of outlets in each room Plumbing: Look for poor water pressure, banging pipes, rust spots or corrosion that indicate leaks, sufficient insulation Water Heater: Look for age, size adequate for house, speed of recovery, energy rating Air Conditioning: Look for age, energy rating; Air conditioners have special ratingsand some current units are not repairable but must be replaced with newer units. However, other factors such as payback period and other operating costs, such as electricity to operate motors need to be considered. Garage/Parking: Look for exterior in good repair; condition of floor—cracks, stains, etc.; condition of door mechanism Basement/crawl space: Look for water leakage, musty smell Attic/crawl space: Look for adequate ventilation, water leaks from roof Septic Tanks (if applicable): Adequate absorption field capacity for the percolation rate in your area and the size of your family. Most cesspools and septic tanks have by federal and state law been required to be removed and connected to the sewer systems. Any changes to the property would require those grandfathered units to be removed and new sewer connections. Driveways/Sidewalks: Look for cracks, heaving pavement, crumbling near edges, stains
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5 Property Tax Questions You Need to Ask 1. What is the assessed value of the property? Note that assessed value is generally less than market value. Ask to see a recent copy of the seller’s tax bill to help you determine this information. 2. How often are properties reassessed and when was the last reassessment done? Generally taxes jump most significantly when a property is reassessed. 3. Will the sale of the property trigger a tax increase? Often the assessed value of the property may increase based on the amount you pay for the property. And in some areas, such as California, taxes may be frozen until resale. 4. Is the amount of taxes paid comparable to other properties in the area? If not, it might be possible to appeal the tax assessment and lower the rate? 5. Does the current tax bill reflect any special exemptions that you might not qualify for? For example, many tax districts offer reductions to those 65 or over.
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10 Things to Take the Trauma Out of Homebuying Find a real estate professional who’s simpatico. Homebuying is not only a big financial commitment, but also an emotional one. It’s critical that the practitioner you choose is both skilled and a good fit with your personality. Remember, there’s no "right" time to buy, any more than there’s a right time to sell. If you find a home now, don’t try to second-guess the interest rates or the housing market by waiting. Changes don’t usually occur fast enough to make that much difference in price, and a good home won’t stay on the market long. Don’t ask for too many opinions. It’s natural to want reassurance for such a big decision, but too many ideas will make it much harder to make a decision. Accept that no house is ever perfect. Focus in on the things that are most important to you and let the minor ones go. Don’t try to be a killer negotiator. Negotiation is definitely a part of the real estate process, but trying to "win" by getting an extra-low price may lose you the home you love. Don't tie your Realtor®'s hands, they know the market and have researched the property; their job is to negotiate for you. Remember your home doesn’t exist in a vacuum. Don’t get so caught up in the physical aspects of the house itself—room size, kitchen—that you forget such issues as amenities, noise level, etc., that have a big impact on what it’s like to live in your new home. Don’t wait until you’ve found a home and made an offer to get approved for a mortgage, investigate insurance availability, and consider a schedule for moving. Presenting an offer contingent on a lot of unresolved issues will make your bid much less attractive to sellers. Factor in maintenance and repair costs in your post-homebuying budget. Even if you buy a new home, there will be some costs. Don’t leave yourself short and let your home deteriorate. Accept that a little buyer’s remorse is inevitable and will probably pass. Buying a home, especially for the first time, is a big commitment, but it also yields big benefits. Choose a home first because you love it; then think about appreciation. While U.S. homes have appreciated an average of 5.4 percent annually from 1998 to 2002, a home’s most important role is as a comfortable, safe place to live.
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