Meridian, Idaho Homes: Renting vs. Buying

Should you rent or buy?

It’s a frequent question from people who are looking at Meridian, Idaho homes.

The answer often involves more than just money.

Buying is a longer-term commitment that includes both financial commitments and more responsibilities than renting.

If there’s a possibility that you’ll be moving within a couple of years, you’re almost certainly better off renting than buying.

Renting provides more flexibility, doesn’t require a down payment or buyer closing costs, and your landlord takes care of the property.

But, the landlord also dictates how you must live in his home.

If you’re reasonably sure you will not be moving within a couple of years, you should consider buying a home.

Buying a home allows you to build equity as you pay down your mortgage instead of paying off your landlord’s mortgage.

And, you’ll have the freedom to live as you wish without a landlord or property manager dictating what you must do with his home while you are paying for it.

There are also many financial considerations.

Here’s a comparison of renting vs. buying, using a $200,000 home as an example:

Renting

  • $1,250 – $1,300/month rent
  • One-year lease (likely)
  • Security deposit (varies)
  • First and last month’s rent (varies)
  • Pet deposit (varies)

Buying

  • $200,000 purchase price
  • $20,000 down payment
  • $180,000 loan – 30 year, fixed-rate, 4.25% interest rate
  • $1,050 estimate payment (principal, interest, taxes, and insurance)

Things To Consider

  • Depending upon the buyer’s eligibility, there are loan programs available with as little as zero down payment, or low down payments.
  • Some sellers will pay buyer’s closing costs; thereby reducing the amount of money needed to purchase.
  • Homeowners are also often able to deduct certain costs of home ownership on their tax returns.

Would you like some help analyzing buying vs. renting for our own specific situation?

I would be happy to meet with you and help you figure out what’s best for you with no obligation or sales talk.

Give me a call at (208)938-5533 to schedule your own private consultation.

 

Home Loans: What Not To Do

Buyers who are in the midst of getting home loans often don’t understand how precarious their position is while they’re in escrow.

One of my recent transactions illustrates how critically-important it is for buyers to be aware of what they can and cannot do when they’re buying a home.

My young buyers were anxious to achieve the American Dream and own their first home.

We found the right home, got their offer accepted, and thought we were on our way to a smooth closing.

As the closing date approached, the lender did their last-minute credit check, along with re-verifying employment status, and confirming adequate funds to close.

That’s when I got the call from the lender, asking me if I knew my buyers had bought and financed a new vehicle a few days earlier.

So, I called my buyers and learned all about their beautiful new $70,000 Yukon Denali XL with the Mocha Steel Metallic paint, 6.2 liter V-8 with 403 horsepower, nav system, 8,000 lb. towing package, third-row seats, rear DVD system, and special financing with no payments until it’s worn out.

They bought a beautiful new rig, but the lender didn’t share their excitement.

We were unable to close because the new Yukon payment resulted in the buyer exceeding the debt:income ratio required for their new mortgage.

If you’re buying a home, it’s critically important that you do not take on any additional debt during escrow after loan approval.

Lenders are required to complete last-minute confirmations of every last detail of your financial stats before they fund your loan.

Now you know!

 

Boise Home Buyer Closing Costs

I get a lot of questions from Boise home buyers about their closing costs.

Those questions are valid, but nearly impossible to answer precisely.

Here are a few things that can be included in a buyer’s closing costs.

Loan Costs

Lenders usually charge all sorts of fees, including an origination fee that’s often 1% of the loan amount, plus assorted other fees.

Your lender is required by federal law to provide you with a Truth In Lending Disclosure detailing all of your financing costs.

Impound Account

Impound accounts are also sometimes called escrow accounts.

An impound account is an account established with your lender to accumulate adequate funds to pay your property taxes and homeowner’s insurance when they come due.

Buyers must provide a portion of those funds to establish their impound account as part of their closing costs.

Appraisal Cost

When a buyer is financing their home purchase the lender, the lender will require an appraisal.

The appraisal is ordered by the lender from a blind pool of appraisers (through an Appraisal Management Company) to prevent any outside influence on the appraisal.

The purpose of the appraisal is to justify the value for the loan amount; not to determine market value.

In the Boise real estate market, the seller often pays for the appraisal.

The cost for a single-family appraisal is usually around $400 to $450, but can be more for non-owner occupied properties.

Escrow Fee

Title companies charge a flat fee for processing the escrow of a home purchase.

This fee is regulated by the Idaho Insurance Commissioner, so it’s generally comparable from company to company.

A typical escrow fee is usually around $700 and is split 50/50 by buyer and seller.

Homeowner’s Insurance

Buyers pay for the first year’s homeowner insurance premium at closing.

The cost can be obtained from the buyer’s insurance agent and varies according to coverages.

Title Insurance

There are several types of title insurance, but there are two that are most common.

One is the Owner’s Title Policy that insures the buyer for clear title.

The other one is the Lender’s Title Policy that insures the lender for clear title.

The Seller usually pays for the Owner’s Title Policy and the Buyer usually pays for the Lender’s Title Policy.

My Handy Rule of Thumb

As a general rule of thumb, a buyer’s closing costs are often around 3% of the purchase price of the property.

Takeaway

The biggest variable is financing, so be sure to discuss your financing costs with your lender and make sure you understand them.

 

Boise Real Estate: 10 Common Buyer Mistakes

Buying a home looks easier than it is in many instances.

Here are 10 common buyer mistakes I see in the Boise real estate market.

1)  Working with more than one agent

Playing the field and using several agents at the same time might seem like a good idea, but you should realize that all agents have the same MLS listing inventory to show you.

Using several agents at the same time is usually a waste of your time.

2)  Not signing a Buyer Representation Agreement

In Idaho, you are not considered a client until you enter into a written Buyer Representation Agreement with your agent.

That means you are merely a “customer” and not entitled to client level representation.

Most competent, successful agents will require that you enter into a Buyer Representation Agreement before devoting serious effort to finding the right property for you.

3)  Not understanding agency relationships

Many buyers do not understand the consequences of buying a home from a listing agent.

The listing agent’s first loyalty is to their seller.

When you buy a property from the listing agent, the best you can hope for is limited dual agency representation where the agent represents both the seller and the buyer with no advocacy for either party.

You should be sure that you clearly understand who your agent represents.

A buyer’s agent will represent you and only you, unless you authorize the agent to become a limited dual agent while purchasing a property listed by their broker.

4)  Using an inexperienced agent

There are approximately 3,000 agents in our Intermountain MLS, many of whom are new to real estate.

I realize that new agents have to start somewhere, but is it really a good idea to entrust the purchase of your most valuable asset to an agent who is new and may have handled only a few transactions?

5)  Using an agent who is a friend or a relative

Using an agent who is a friend or a relative opens you up to many potentially difficult situations, including possible discomfort over disclosing personal financial information and other sensitive aspects of the transaction.

It’s usually not a good idea to mix family or friendship with business.

6)  Not getting your financing pre-approved

Proof of your ability to obtain financing is often a critical issue when a seller considers whether to accept your offer vs. another offer.

It’s always best to get totally approved for your financing before shopping for a home to avoid looking at homes you may not be able to afford, and also to be able to demonstrate to the seller that you can obtain the necessary financing.

7)  Making lowball offers

Making an offer that is substantially below fair market value is a sure fire way to ensure that you won’t get the home you want.

Many sellers will be insulted by such an offer and may not counteroffer; thereby ensuring that you will not get the home.

It’s usually best to have your agent research the true market value of the property and make a tempting offer.

8)  Making contingent offers

Most sellers will not accept an offer that is contingent upon selling your present home.

Despite the difficulty, it is usually best to sell your present home before making an offer to purchase your next home.

You may want to consider arranging bridge financing so you can make a firm offer, or at least have your present home sold and in escrow to make your offer more attractive to the seller.

9)  Not getting a home inspection

You might think that you know if the home you want to buy is in good condition, but a thorough home inspection is always a good idea.

A competent home inspector will check out all of the major systems of the home and tell you which items may need attention.

I have seen many unanticipated results during home inspections, including one where the inspector was cornered by an angry, aggressive racoon that had taken up residence in the crawlspace of a brand-new home!

Spend the money and get a good inspection ~ it’s a bargain!

10)  Not determining the seller’s motivation

It’s always a good idea to try and determine why a seller is selling.

This may be difficult, but if you can learn the seller’s motivation, you may be able to structure your offer to be more acceptable than competing offers.