Buying a home Archives - Preferred Properties of Texas Home & Ranch Properties Stephenville

How Does Rent-To-Own Work?

May 30, 2023 by chorton Leave a Comment

Rent-to-own is an option if you are looking to purchase a house. Rent-to-own is not for everyone, and comes with its own set of pros & cons.

Here’s a list of all the things you need to know about renting-to-own before buying a home.

The Basics

Rent-to-own has many appealing features, but it also comes with risks.

When you enter into a contract of this type, you agree to rent a property for an agreed-upon period before you become the owner. The length of time you rent a property can range from a few months up to several years depending on your contract.

A company or an individual may own the property.

The contract stipulates that the seller is entitled to a certain percentage of each rent payment. This money goes towards the equity when the buyer buys the property.

Rent-to-own agreements can be classified into two different types. There are two types of lease-purchase agreements: a lease option contract and a lease purchase agreement. The lease option agreement gives you the option to purchase the home at the agreed-upon time. A lease-purchase agreement is different because you are legally required to buy the home.

The Process

Rent-to-own transactions can have a variety of unique elements.

* The agreement will first specify a price. The price may be based on either the current value or the estimated future value. The price could be set when the buyer and seller sign a contract, but sometimes it’s decided after a lease expires.

* As part of the contract, you will pay a certain amount of rent every month. Rent payments will be higher than comparable rents in the area because a portion of the payment is set aside for your future purchase. When you sign one of these agreements it is important to understand what you are agreeing to.

* You pay a one-time, non-refundable fee to the seller. Some sellers will then apply that towards your equity. It’s calculated as a percent of the purchase price.

* Your lease contract will specify a specific term.
If you plan to buy a home at the end the lease, you will need to obtain financing. A closing date will be set.

Rent-to-Own: The Benefits

Rent-to-own agreements have many benefits for buyers.

*You can build up your down payment gradually rather than having to pay a large amount upfront.

*When you’re ready for a purchase, you don’t need to worry about other buyers.

* You do not have to qualify for an mortgage immediately. Instead, you can work towards improving your credit score.

Rent-to-Own: The Cons

Rent-to-own agreements may initially seem like a great idea, but they have a number of downsides.

* You will pay more rent for a similar home, because you’re forced to put money aside as a downpayment. You could rent a less expensive home and put your money in a bank account that earns interest to help you save for your down payment.

* You will still be required to pay the non-refundable option money, even if you end up not completing your deal.

* You will likely have to pay for the maintenance and repairs of a house that you do not yet own.

* If the value drops, you may be stuck with an agreement that has a much higher purchase price.

*You may lose equity in your home due to circumstances beyond your control. If the home goes into foreclosure, for example, it is given to the bank.

You must weigh the pros, cons and your own financial situation to decide what is best for you.

Rent-to-own is not always the best option for buyers. It’s better to get your finances straightened out and take the traditional route.

Original Blog: https://realtytimes.com/archives/item/1041539-how-does-rent-to-own-work?rtmpage=

Just Listed! 355 Bird Song Court in Stephenville, Tx

May 30, 2023 by chorton Leave a Comment

This unique home is located just 5 minutes away from Stephenville. It sits on 2.3 Acres at the end of a small cul de sac. This open-plan home with four bedrooms and two bathrooms is surrounded by huge Live Oaks. The living room and kitchen have 10 foot high ceilings. You can enjoy the view of your back yard by the charming fireplace with oversized window. The flower beds are professionally designed and there is Tifgrand lawn. A 20×18 treehouse playground with sandbox is located in the backyard. The driveway has a half-court basketball court, a Goliath hoops and a chip-sealed driveway. The home has an extra electrical panel that can be used to connect a generator for powering the water heater, fridge, microwave, and water pump. Enjoy a stroll through the trees, and then cross the creek by way of a picturesque bridge. Call us today to see all that this property has offers!

Just Listed! Custom Home in Stephenville, Tx!

For any real estate questions or information please contact us today!

Loan-to-Value Ratio Break Down

May 9, 2023 by chorton Leave a Comment

You’re going to hear many terms when you buy a house, and some may be unfamiliar. The loan-to value ratio, or LTV, is one of them.

LTV is the comparison of the amount you want to borrow versus the appraised value of the home you are trying to purchase. This comparison is used by lenders to decide whether to approve a loan or not. LTV can also be used to determine whether you need mortgage insurance.

The higher your LTV, the greater risk you may pose to a lender.

The loan-to value ratio tells you how much you own in relation to the amount you owe for your mortgage. LTV is used most often for mortgages but can also be used for refinancing and car loans.

Lenders will not only look at the LTV. Lenders will also look at your credit score, how much you can afford to pay each month and the condition of what you are trying to purchase.

You’ll be in a much better position to obtain higher LTV loans if you have a good credit rating. You may be denied approval if you have a large LTV ratio. Or, you could have to pay a higher rate of interest. Mortgage insurance may be required, which reduces the risk of the lender.

How is the loan-to-value ratio calculated?

You can calculate the LTV ratio yourself. Divide the mortgage amount by the appraised value and then express it as a percentage.

If you bought a house with an appraised value of $100,000, and put down only $10,000. You would borrow $90,000. This leaves you with a LTV of 90%. If you made a downpayment of $20,000, your LTV would be 80%.

The more money you get from a lender, the higher your LTV and the greater the risk that they are taking.

Collateral and LTV

When the LTV calculation is used to determine a loan’s terms, it’s likely that the loan involves collateral. A loan is secured by a lien. This lien remains in place as you pay your mortgage. If you fail to make payments, your lender may take possession of the home and sell it. The goal of a lender is not to seize your property. Instead, collateral allows them to get some money back in the event you default on a loan.

The idea is that if a lender gives you only 80% of your property’s value, they will still be able to sell it at a discount and still make their money back.

Negative equity is when you get a loan for more than what you paid for the asset. A negative equity is a LTV ratio greater than 100%. It’s an underwater mortgage in that situation.

What should the LTV ratio be?

LTV is usually around 80%. You’ll need private mortgage insurance if you borrow over 80% of a house’s value. This will give your lender protection. Your lender will often let you cancel your insurance once you reach 80% LTV.

You may be able to get an FHA mortgage with only a 3% deposit, which would make your LTV at 97%. Mortgage insurance would be required, possibly for the entire term of your loan.

You can increase the LTV by getting a home equity line of credit. If the value of your house increases, then your LTV will decrease.

There is no definitive answer to the question of what LTV you should have in your mortgage loan. The closer it is to an acceptable percentage the better. However, there are many other factors which affect the decision.

For any real estate questions or information please contact us today!

Original Blog: https://realtytimes.com/archives/item/1043363-loan-to-value-ratio-explained?rtmpage=

Earnest Money – What is it and how much is enough?

April 25, 2023 by chorton Leave a Comment

It is crucial to make your home offer stand out in today’s market. You can let the seller know that you are serious about purchasing a house by obtaining a preapproval. You can also put down a deposit as a sign of your seriousness.

This article provides an overview of earnest money, including how you can use it in your favor when purchasing a home as well as how to protect yourself after depositing it.

What is Earnest Money in Real Estate?

To show that you are serious about buying a home, earnest money is paid before the closing. This is also called a good-faith deposit.

If a buyer enters into a agreement of purchase with a seller, the seller removes the property from the market and the transaction proceeds to the closing. The seller will have to start over if the deal fails.

The seller is protected if a buyer cancels. The amount is usually between 1 and 3% of the total sale price, which is kept in an escrow until the transaction is completed. It depends on the customs in your area. If everything goes well, the earnest cash is applied towards the down payment or the closing costs.

The buyer will get their earnest money refunded if the deal fails due to a failed inspection or other contingencies in the contract. Earnest money deposits can reduce the chances of a buyer walking away from multiple offers after the seller has taken the house off the market.

Why should you pay earnest money?

It’s not always necessary to pay earnest money, but you may need it if the real estate market is competitive. These good faith deposits are preferred by sellers who want to make sure that the deal will not fall through. Earnest money is a form of insurance that both parties can use.

Earnest money can also reduce the amount needed at closing, as it is applied directly to down payment and closing costs. You’re essentially putting some money down earlier in the process.

Verified Approval: How it Could Help

If a seller is evaluating multiple offers, they are more likely to favor a buyer who has approved funding. Having earnest money on top can also make your offer standout.

How much earnest money is enough?

How much earnest money to offer will depend on which real estate market you are interested in. If a real estate listing is languishing in a slow-moving market, you may not require as much earnest cash as if there are multiple buyers vying to buy the property. A higher deposit may be necessary if you are planning to buy in an area where bid wars and cash offer are frequent.

You should consult your agent to determine how much earnest cash you should offer. It’s best to not undercut other offers for the same home if you are competing with them. You could lose out to someone who makes a better offer. Your agent will be able to tell you whether a standard good faith deposit is sufficient if the market is slow or moderate.

Is Earnest Money Refundable?

Earnest money is protected by contingencies for both buyer and seller in certain situations.

If you submit an offer to buy a house and the seller accepts it, the sale will only be finalized if certain conditions are met. These are usually listed in the contract and include items such as the appraisal, mortgage approval and inspection.

Home Inspection Contingency

Home Inspection can be a major reason for potential buyers to back out of a deal. A home inspection contingency allows you to cancel the deal if your prospective home has been inspected by professionals and certain elements need repair. You can also negotiate with the seller for the repairs to be made, or to lower the price of the home so that you can make the repairs yourself.

Appraisal Contingency

Appraisal Contingency is also important. It protects the buyer in the event that the property is valued too high. The lender will hire a third party appraiser to assess the value of a home, and compare it with similar properties that are for sale. If the appraised value of the home is less than the purchase price, the buyer can opt to not proceed with the transaction and receive their earnest money. You can also use the appraisal as a tool to negotiate a price increase.

Financing Contingency

Mortgage contingency protects you if your mortgage application is denied. If this contingency is listed in the contract, you can walk away from the deal and receive your earnest deposit back.

Contingency For Selling An Existing Home

Some contracts include a contingency to sell your current home. This contingency allows you to back out of a deal if you cannot sell your current home before closing on a new home.

When To Waive A Contingency

Some buyers may feel pressured to waive contingencies in hot real estate markets. For example, they might do this if are absolutely sure they will qualify for a loan. It’s not a good thing to waive appraisal or inspection conditions. These contingencies exist to protect you.

How to protect your Earnest Deposit

You can protect your earnest cash by taking a few simple steps:

Step One. Use an Escrow Account

Fraud is not a rare occurrence in the real estate industry. You should not give earnest money to a seller or real estate broker. You should instead use a third-party, such as a title or Escrow , to hold your earnest funds.

You can pay with a certified check, a wire transfer or if you’re paying by personal check. You can request and keep a receipt and a copy. Your check must be payable to the third-party. These funds will be held on the escrow until it closes.

Step Two. Know Your Contingencies

You should be aware of all contingencies that protect the buyer and seller. Make sure that you understand the contingencies, and you are comfortable taking any action.

Step Three. Keep Your Responsibilities in Check

The purchase agreement usually includes a schedule of when each aspect must be completed, for example, when you have to get an inspection or the approval date for the mortgage.

The seller may withdraw the offer if you fail to meet the deadlines. The seller will not rescind a contract if they miss the deadline. However, if the delay is too great, this could prove to be a deal-breaker.

Step 4. The Fourth Step is to Put Everything In Writing

Many of us are going to make a large purchase. You should always protect your investment, so you must put all the details in writing. Included in this are any timeline changes and the buyer’s responsibilities. The purchase contract should clearly state who receives the earnest deposit if the agreement is cancelled.

In the event that the inspection is a failure and the buyer gets to keep their earnest money then state this in the contract. So, if the buyer changes his mind and wants to keep the earnest cash from the seller, you should also state that in the contract. The contract should explain everything in full detail.

Bottom line

Earnest money is a way to protect both the buyer and the seller in the event of a problem with the property. A Verified Approval, or earnest money can show a seller you are serious and make your offer standout from others.

Original Blog: https://www.rocketmortgage.com/learn/earnest-money

The Pros and Cons to Buying a Fixer-Upper

April 18, 2023 by chorton Leave a Comment

The purchase of a fixer upper is becoming a more common choice, as sales of this type of home have risen 13,4% from 2020 to 2021. Despite what you may see on HGTV or social media, buying a fixer upper and bringing it to a livable condition is not an easy task.

The risk involved in buying real estate is something that all buyers must consider. How much risk you are willing to take depends on your personal preferences, lifestyle and short- and longer-term financial goals. There’s more to consider than the price of a fixer upper when you decide to invest in it.

This article will give you a quick overview of the pros and cons to choosing a fixer upper. Keep these in mind as you decide whether or not to make an investment.

The Pros of Fixer-Uppers

With enough money, imagination and work, you can make any property your dream home. Fixer-uppers offer a lot of potential to those looking for long-term gain.

The following are some of the most important pros to buying a fixer upper property:

Lower prices– If you search in the right places, the price of a fixer upper could be much lower than a home that is ready to move into. This could result in you getting more space for your money, and a lower deposit.

Less Competition – Fixer-uppers aren’t for everyone so there won’t be as much competition in your search. As an added bonus, the seller may be more willing to negotiate on price because their pool of buyers is smaller.

More possibilities– A fixer-upper offers an incredible amount of customization. When you are down to the studs you have a lot of options.

The Cons of Fixer-Uppers

It’s important to weigh the above advantages against some harsh realities of investing in a fixer upper. There’s a good reason why so many buyers are willing to pay more for a turnkey house.

Cons to be aware of include:

Renovation costs are higher up front– You may pay more in renovation costs for the money you saved on purchase price or down payment. A mid-level kitchen renovation alone cost between $15,000 AND $29,000, and that’s only one room out of many.
Unanticipated Issues– A home purchase can be a surprise. This is particularly true for fixer-uppers. Costly problems could be lurking behind each wall and floorboard.
Expect a longer timeline– Your fixer-upper may take months or years to become a suitable and safe place to live. Be realistic with your timeline and, if you are in a rush to move, get a thorough inspection as soon as you can to find any problems that may hinder you. It takes a lot to buy a fixer upper, whether it’s with or without land. Working with an experienced agent and financial advisor to decide if this is a good investment, and consider the pros and the cons before you sign on the dotted lines. Are you thinking of Buying? Our agents at Preferred Properties of Texas are here to help!

Original Blog: https://www.landhub.com/land-news/pros-and-cons-of-buying-a-fixer-upper/?inf_contact_key=9c3f17f8ec456476d7ca9cad4e58e1ac680f8914173f9191b1c0223e68310bb1

Buying Your First Home? Know These 3 Things

April 4, 2023 by chorton Leave a Comment

It is a joy to work with first-time buyers. I love helping first-time home buyers find their first home and teaching them the process of buying a home. These are the three things you need to know before you begin looking.

1. Only work with one agent. It is best to work with one agent for your real estate search. Your agent will work with you to find the perfect property and negotiate all terms for your transaction. It is important that the agent gets to know you personally and your family so they can negotiate on your behalf. Remember that an agent who shows you a house is ethically the one who should handle the transaction. You are also dealing with the seller’s agents if you call an agent through a yard sign. Although most professionals can handle both sides of a transaction professionally it is more beneficial to work with someone you know well and who will look out for your best interests as the buyer. Your agent is not paid; the seller pays him or her upon closing. You are still hiring an agent to work for your business. Therefore, it is important to interview as many agents as possible and to choose the one you like best.

2. Pre-approval is required for financing. A lender must be pre-approved unless you plan to pay cash for your home. It helps you to set a realistic price range for house hunting. Frustration can result from looking at houses you cannot afford to buy. The mortgage lender will tell you how much you can borrow and also what your monthly payment will be. They will also give you information about closing costs and what you should do to protect your eligibility during the loan process. A current pre-approval is important to ensure you don’t lose your chance to buy another house. You will need to make an offer on the house you have found. The pre-approval letter must be included with your offer. I am happy to give you the names of local mortgage lenders who have been great to my clients.

3. There are some upfront costs. After you have found the perfect house and agreed on the terms and price, and signed the contract, it is time to pay your escrow deposit, also known as “good faith”, deposit. If you cancel the deal due to reasons not covered by the contract, this is money that you risk. It is usually between 1% to 5% of the sale price, but it can vary depending on the terms you and the seller have agreed to in the contract. During negotiations, your agent can help you with this. The escrow deposit is a part of the final sales price.

4. A certified home inspector should inspect the property. The cost of this inspection varies depending on how large, old, and what features the property has, but it is typically around a few hundred dollars. This amount will be due at the time service is rendered. Based on the results from the first inspection, you may choose to pay for additional inspections. If the inspector finds a problem with your HVAC system, you might need to pay a fee to have an HVAC contractor inspect it. To be able to move forward confidently with your purchase, you want as much information as possible during the inspection period.

5. A survey and appraisal of the property will be required. These costs are added to closing costs and should not be paid upfront. In the unlikely event of closing, however, you might be asked for a credit card number.

All of these steps will be covered during your home-buying journey. Are you ready to get started? Give Preferred Properties of Texas a call!