Wednesday, August 29, 2012

Buying A House - Design and Style Tips

Welcome again to our Buying a House Series.

House Designs and Styles

We are going to start this entry with a basic overview of the designs and styles of houses. The different types are as follows:

Ranch - One level
Split Level
Split Foyer
1.5 Story
2 Story
Patio Home
Town House

To understand the difference between the types of houses we should look at things someone would normally consider when they buy a house. If someone does not want to walk up and down stairs it would be a natural assumption a ranch or patio style house would best suit their needs. Someone that does not want to cut grass would be more interested in a condominium or town house. The people with children or an expanding family would probably lean toward a split level, split foyer, 1.5 story, or 2 story. Especially if they need their own space.

Does the House Conform

When we ask if the house conform we are asking a basic question. Does your house look like the Jones' down the street? We all want to be different in some ways but being different in Real Estate is not always a good idea. This can drastically affect the value of the house you're buying. If the house is a lot bigger or smaller than the other houses in the neighborhood, it does not conform. When buying a house you never want to buy the biggest house because the value will never be maximized to it's full potential. If you are going to buy a house that does not conform, buy the smaller house. Think of it with this example, if Donald Trump lived in your neighborhood would his house help or hurt your value? The answer is Donald Trump's house would help the value of your house because he is always going to have the very best house. Your house on the other hand would hurt Donald Trump's value because your house would bring his value down. This is why you see similar designs and styles in a neighborhood. The reason for buying a house smaller than any others in the neighborhood is because the only way the value can go is up. The most inexpensive addition anyone can make to a house is adding square footage. No one ever tears down part of their house to make it conform to their neighbors.

Things You Notice But Do Not Realize

Have you ever noticed there are always more condominiums, town houses, and patio homes for sale in a neighborhood than there are in a traditional neighborhood? There are many reasons for this activity but we will cover the most important. When buying a house you should examine competition. Competition is what is for sale in the neighborhood, how many and for how much, compared to the house you're interested in buying. For these types of homes, they are usually a first or last time home buyer. This means the young married couple or the elderly that down-sized. In these neighborhoods, there is always what I refer to as a fire sale. Someone is expecting a baby and needs more room so they need to sell fast. When a fire sale takes place there is always a drop in the asking price to try to sell it before any of their neighbors. This is a good strategy for them since all of the homes are identical. This is not good for you though. This is also called the principle of substitution. Why pay more for the exact same thing when you can get it on sale down the street? The value in these neighborhoods struggle to appreciate and go up in value because there is so much competition compared to a traditional neighborhood.

How and Why to Bargain Shop When Buying a House

It is unfortunate to have as many deals on the market as there are today. It does not make you less of a person to look for a foreclosure or short sale when you're buying a house. A house is your greatest savings account. If you look at these types of houses they will most likely need repairs. This is perfect for you as a buyer. The market is slow and Lowe's is not selling as much. If Lowe's isn't selling as much then contractors are not working as much. This benefits anyone buying a house if they will use the discounts available to them in the market. The house down the street is selling for $150,000, but the foreclosure is selling for $65,000. The foreclosure looks horrible and not very appealing in it's current state. Take the blinders off and imagine it like the house down the street once the repairs are completed. Let's say the repairs cost $30,000, with the foreclosure. You saved $55,000, instantly by buying the foreclosure. If you buy the house down the street you are going to paint it at the least to match your taste. Now you're in debt because you paid full price and spent money after the fact. There are mortgage loans to buy and repair from the very beginning so take advantage of them. The most recognized is the FHA 203(k) loan. There is also Homepath sponsored by Fannie Mae. You can look at their website for available houses in your area. You can also visit the HUD Home Store.

When you're buying a house make sure you don't buy with short sighted thoughts. Buying a house is an investment you are making today but is one of the most important investments you are making for your future. If you buy a house right today, it will provide the equity for security in the worst Real Estate market. It's a long term saving account to draw from if it's ever needed.

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Monday, August 27, 2012

Buying A House - Location

Buying a House - Location Factors

Buying a house can be a time consuming, stressful, costly, and a confusing process. This series of entries will hopefully assist you with gaining the knowledge you need when buying a house. There will be many topics covered in this series but we are going to start with location.

We are starting with the location since it is the first thing you see when buying a house. Think of it in terms of your relationship; did you hear your significant other first or did you see them and have the initial attraction? What was your first thought when you saw the home for the first time? Your initial reaction should be what you base your opinion. If the home looks appealing at first glance you should go inside to see if it is appealing. Let's use your relationship again; you were attracted but then you had to get to know the person on the inside to determine if it was the right person for you. It is the same when buying a house. There are a couple of things to look for and we will cover those later in this post. When you are at the home for the first time you should use the feeling you have to determine if you want to pursue this home further. Just like with relationships, buying a house is not always about first impressions. We have all dated someone that we didn't get along with in the beginning. Some of those relationships turn out to be train wrecks and some last forever. If you have a mixed feeling then you should drive by the home again later by yourself. You gave someone along the way a second date right? The third date didn't always happen though. The point is to be sure you didn't miss something the first time.

Now lets talk about some of the things to look for with the location when buying a house. There are many external factors to consider when determining the right location for you.

Safety and Security When Buying a House

You always want to feel like it's a comfortable and secure area. When you drive to the home did you notice any street lights close to the home and were they common in the development? If street lights are not common it is usually a sign of an area that is not maintained by the local government or power company. It could be an indication of crime or mischievous activity in the area. You can also help to determine an area by the front yard. If the grass does not look like it is being maintained on a regular basis by your neighbors or overly cluttered with junk you may not even want to get out of the car to look at the home. Once you've determined the area is suitable for you then consider some other locational factors.

Hearing and Smelling When Buying a House

Now that you have made it to the home and decide to get out of the car to look further you should change to what you hear and smell. There could be a paper mill or waste facility hidden behind the trees. You may hear kids playing or loud music. There could be a school closeby or kids playing in a yard. This is typically a good sign to indicate you are buying a house in a good area. If you hear loud music, yelling, or loud vehicles; you may want to get back in your car unless you like loud noise and neighbors.

Linkages to Consider When Buying a House

One often overlooked locational factor when buying a house are linkages. Linkages are the places you visit regularly such as work, school, church, or shopping. These should be within a reasonable proximity of the home. You should drive to all of these places from the home a couple of times and at different times during the day. It may seem extreme before buying a house but you will drive to these places every day if you live there. It will help you determine if rush hour changes your daily commute or how long it will take to pick up your kids from school. You should also drive to the home from one route and leave going a different route. This will help you familiarize yourself with all of your surrounding. It is common practice in Real Estate for an agent to drive you to the home entering and leaving using the same route. The reasons for this may be a less desirable entry from one route they do not want you to see or it may be the only route they know. Since you are buying a home, not the agent, request to be taken to the home by one route and leave by a different route.

Weekend Factors to Consider When Buying a House

There is one last locational factor that is rarely thought of by someone buying a house. It is rare that someone buying a house will drive by themselves to the home over the weekend during the day and at night to determine if the neighborhood changes during the weekend. All of your neighbors could be diligent workers during the week but host parties or have a lot of noise on your street during the weekend.

If you are satisfied with all of the locational factors there are a couple of small items recommended you do before giving the location a passing grade.

Know ALL of Your Surrounding When Buying a House

Now you should look at satellite images of the immediate area to determine if there is anything in close proximity that would be a negative for you. You can look at satellite images on Mapquest or Google Maps. You should also look at your most recent Census. This is a free service provided by the government. To get the most reliable data you can type in the address and retrieve information, whether it be a half mile or 5 mile in diameter surrounding the home.

It is important to know all you can when buying a house. It starts with the location so gain as much knowledge and ask as many questions as you can prior to buying a house.

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Thursday, August 23, 2012

Fresh Start in Farmington

After many life changes, Meg's ready to buy a home and settle in. This video is part of House Hunters show.

Tuesday, August 21, 2012

What To Look For In Your First Home

Despite the increasing amount of people happy to rent well into their 30s, buying a home remains an ambition for many young people. However, the state of the economy means that it is increasingly difficult to raise the funds for a deposit and secure a reasonable mortgage.

Therefore, it is imperative that first-time buyers find a home not only suitable for living in, but also one that represents a sound long-term financial investment with decent sale prospects. While the property market is weak and uncertain at the moment, there are a few ways to identify a good first home.

Finding the right house can be hugely overwhelming, but with a few self-imposed parameters the process becomes a lot easier. Work and school commitments will usually determine your location for you, and you should know how many rooms you will need. Use the internet to further narrow down your search - there's a wealth of property comparison sites and local estate agents online with full property listings.

Your budget will obviously play a huge part in the house you choose, so make sure you are only searching within your budget range. Don't be tempted to search just over your budget as too often young househunters fall in love with a property they can't really afford and end up reneging on mortgage payments. Stick with what you can comfortably afford. The general rule of thumb for mortgage payments is 35% of your monthly income.

When deciding on which properties you want to view, consider the proximity of the house to local amenities such as schools, public transport and shops. Schools are particularly important; even if you don't have children, properties close to schools are extremely desirable and will always be in demand. If you're prepared to pay a little extra at first, you could potentially make a big profit on the property in the future.

Once you've drawn up a shortlist of properties, arrange some viewings with estate agents. Try and view at least three properties. Make the most of these viewings by taking photos, noting any work that needs doing and any potential for improvements that will increase the value of the property. Make sure you'd be comfortable living there too!

You may find that some estate agents will try and push you into buying quite quickly, but never invest until you are absolutely certain you want to - a house is probably the biggest investment you'll make in your life.

When you've settled on a house, negotiate mortgages with various brokers. Never settle for the first rate you are offered as you should find by generating a little bit of healthy competition between competitors, you will be offered increasingly more attractive rates in an attempt to get you on board.

Making the right choice when buying your first home is vitally important, as the repercussions of a bad investment could have knock-on effects for the rest of your life. Unfortunately, there is no hard and fast solution to finding the perfect first home, but you should find by keeping some of the considerations outlined in this article in mind the process becomes a lot easier.

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Sunday, August 19, 2012

Getting an Affordable Mortgage Loan in Your Area

Freddie Mac recently released its latest Primary Mortgage Market Survey (PMMS), and the news was good for prospective homebuyers. According to the federally-backed mortgage giant, 30-year fixed rates floundered around 3.62 percent, while 15-year rates averaged just 2.89 percent. This time last year, 30-year rates were as high as 4.60 percent, while 15-year rates were up to 3.75 percent.
Frank Nothaft, chief economist for Freddie Mac, blamed contraction in the manufacturing industry and less consumer spending for the decreased rates; however, rates have been near record lows for months, thanks to a variety of reasons.
What it means for buyers
Low mortgage rates are good news for buyers who are looking for affordable home loans. Right now, buying conditions are especially favorable, thanks to low home values throughout much of the country. If you are in a good position to buy, you could secure a very nice home you might normally be unable to afford.
Rates not low everywhere
Although Freddie Mac reports that rates are low across most of the United States, this doesn't mean they will be low in all parts of the country. The PMMS is only an average based on select good faith estimates from a handful of lenders. If you live in a place enjoying good economic stability and strong home sales, your rates could be higher. This will also be true if you live in a city suffering through a foreclosure crisis, because lenders associate borrowers in these areas with greater risk.
Getting approved
Before the foreclosure crisis, banks were far more lenient when they sized up potential borrowers. Nowadays, things have changed drastically. To attain a loan, prospective borrowers must be able to prove they can afford the property. This typically means they will need to provide a downpayment equaling at least 20 percent of the loan amount. Currently, banks are also demanding that borrowers have very good credit and good job stability.
Things to consider
Unfortunately, the real estate market continues to struggle, thanks in part to tough lending standards. Many potential buyers are having trouble getting approved for a loan, while others simply cannot raise the money for a large down payment. If you've been declined by private lenders or you just don't feel you will be able to meet their strict demands, there are other options. First time buyers programs are available to people who have relatively poor credit and low to moderate incomes, so it pays to talk to an expert before you give up hope.

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Friday, August 17, 2012

Payment Procedures When Purchasing A Home

One of the largest dilemmas people face in their lives is whether to continue paying rent, or purchase their own house and pay for mortgage instead. In general, it is often superior to purchase a house due to the potential investment gains. An exception to this would be a family that is constantly on the move, where purchasing and reselling is often not a financially stable approach to home ownership.
Payment Procedure
The large majority of individuals do not pay 100% cash when purchasing a house, as it is quite a lot of money that the average individual does not have access to. The process involves a down payment in cash which is a chosen percentage of the sale price, whilst the bank provides a mortgage loan to pay for the remaining amount. This mortgage is then returned to the bank per month as a calculated amount (depending on how much down payment was made), and is paid off over a certain number of years. When 100% of the price, plus the interest is paid off, the house then belongs to the individual, and payments are not required thereafter indefinitely.
It used to be that zero dollar down payments were widely available with 100% mortgage, however after the recession in the last decade, this unsafe practice is now restricted for safety. The general rule of thumb is that, the more down payment that is made (implying financial stability), the easier it is to get the bank to sanction a mortgage loan. In addition, the lower the interest rate for the mortgage, the less money is paid back to the bank per month.
Monthly payments
Depending on the bank, the average monthly payment is 0.7% to 1.2% of the purchase price, which therefore determines the monthly payment. On average, this results in $1,500/month on a $200,000 home. However, this amount can be inaccurate as there are the following factors that determine the true monthly payment amount:
  • Interest rate: This usually depends on the bank, as well as the financial deals offered at the current season. In general, the lower the interest rate, the lower the monthly payment becomes.
  • Down payment: As the amount paid during the down payment is made, the monthly payments over a certain period of time (e.g. 15 years) becomes less, as a lion's share of the payment is already made during the initial purchase. On the other hand, low down payments imply higher monthly payment, which in addition, compounds with the interest rate.
  • Payment time: The longer the loan is extended over, the less the payments are. However, this implies paying more interest to the bank over the periods, which on a longer span, results on inefficiency.

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Wednesday, August 15, 2012

Buying a Family Home

When you outgrow your starter home and start looking longingly at local real estate listings it's time to consider buying a family home. Maybe your family has expanded with the addition of children and pets or maybe you've just got a lot of stuff, whatever your reasons, when it's time for an upgrade you can count on the advice of an experienced realtor to help you buy a family home.

Many people compromise when they buy their first house because of the difficulty of getting a foot on that first rung of the property ladder. First homes are frequently condos, townhomes or small single family dwellings. After a few years (and often just as you need it) you will find that the equity you've gained in your first home can springboard you into a larger family home that is a better fir for your growing family.

Upgrading buyers are often looking at single family homes; they offer more privacy (less worries about the screaming baby keeping the neighbours awake!) and space. You would probably enjoy a nice big yard for the kids to play in, your pets to run around in and maybe even a veggie garden to defray grocery costs. What about the neighborhood? Wouldn't it be nice to get into an area where you:

· Are close to amenities that you use frequently (parks, rec centres, shopping etc.);

· Have a quick commute to your job, and

· Are in the catchment area of excellent schools?

You can get there - using the equity from your first house.

You will undoubtedly face some challenges along the way, obviously you need to sell your house and realize enough funds to be able to afford that upgrade. Sometimes the greatest challenge lies in timing it all so that you don't end up temporarily homeless or the proud owner of two homes (and two mortgages!).

There are plenty of horror stories about people who have gotten themselves into a difficult situation by falling in love with and buying a family home before selling their starter home. Your realtor might advise against this course of action unless you can comfortably carry both mortgages, it can be very stressful and lead to your having to accept a lowball offer on your house to escape a crushing debt load. If you find your perfect family home before you sell your starter house go ahead and make an offer on it, just make it contingent upon the sale of your house, this common tactic is quite acceptable in all but the hottest real estate markets.

Buying a family home or upgrade home is quite different than buying a starter house, with a unique set of challenges, but with the help of an experienced realtor you will be able to successfully negotiate this new chapter of your real estate experience. With professional guidance you can sell your house for a fair price, in a reasonable time frame, and find and purchase your new family home.

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Sunday, August 12, 2012

Advantages of Getting A Loan Pre-Approval

Most home buying experts often suggest first-time home buyers to get pre-approved for a mortgage loan before they start looking for a home for sale. Actually, getting a loan pre-approval is vital if you want an easy and blissful home buying experience. Below are the reasons why first-time home buyers should get a loan pre-approval before they search for a house for sale:

1. Help Buyers Save Time By Finding the Right Homes

Getting a home loan pre-approval help first-time home buyers search for home that actually fits their loan amount range. First-time home buyers often make the mistake of shopping for homes first before they even get a loan pre-approval. This is the reason why they often end up choosing homes that are not within their budget. Getting a pre-approval before your home hunting journey can help home seekers screen homes according to their price range. This can help you save time and effort looking for homes that you cannot afford.

2. Find More Time To Evaluate The Right Homes

By screening out the real estate properties that do not meet your budget, you can give yourself ample time to examine the homes you are considering to buy. Having a shorter list of prospect homes can help you find more time to weigh up the pros and cons of each property. This can also help you contemplate on which home can provide your needs and which one really fits your lifestyle.

3. It Boosts Your Confidence And Shun Disappointments

Being pre-approved for a home loan before you find the perfect home for you, can give you assurance that you will get the home that you want. Now, no one can stop you from acquiring the home you have been lusting for. Getting pre-approve can lessen your anxiety and eliminate loan surprises at the eleventh-hour that could disqualify you from purchasing the property. Moreover, this will help you get a better sleep at night while the home buying process is ongoing knowing that the transaction will turn to a positive result.

4. It Enhances Your Bargaining & Negotiating Power

Sellers will be more comfortable to do business with you even if you give an offer less than the price listed, because they are certain that you will really purchase the home. Sellers can take their home off the market and put it in pending status confidently because they are sure that someone will purchase it.

5. Have A Faster Closing Period

Since there is a window period while your mortgage application is in progress, by getting pre-approved for a mortgage loan the lender can accelerate the whole procedure. Appraisals can be done instantaneously. It is even possible to cut the 30-day closing to two or three weeks, especially in cases when the seller wants to immediately liquidate their assets but cannot decide which offer to accept. If you already get pre-approval for a home loan, you have the biggest chance to close the deal if you can accomplish the seller's demand to quickly close.

Since delayed mortgage approval is the common hindrance to complete a purchase contract, it can be really advantageous for you to get a pre-approval letter as soon as you are all set to start shopping for homes.

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Friday, August 10, 2012

Why Buy Real Estate Now?

Thinking about buying a second home or an investment property? A recent article by Realtor Magazine shows big drop in inventories of for-sale homes across the nation has led to a buying frenzy in some sought-after neighborhoods, real estate professionals report. A gradual gain in home prices is also following suit, they say. If you've been putting off investing in a second home or investment property, now might be the time to take the plunge.

New construction has slowed dramatically over the last few years and there's an anticipated back log of distressed homes that have not yet hit the market. Some homeowners who have been holding on to homes that are worth less than what they paid for them have been waiting as long as they can in hope for a change in the market. But most are now coming to the realization that there won't be any drastic changes in the market anytime soon and will be finally be abandoning the hold they've had on their homes.

So should you wait for those homes or move forward with your investment plans? There's a trend showing homes under $250,000 are moving quickly so there's a rush to pick them up. The distressed homes aren't anticipated to hit the market in bulk so with the demand for those types of homes it likely won't affect the pricing further. In other words, even though there will be a number of distressed properties hitting the market, it won't reduce prices any further than what they already are.

My advice is to secure your investment properties now - I'm anticipating a busy season with lesser inventory driving home prices up. At the moment inventory is low and there are some unrealistic sellers on the market. But there are still good deals to be made, especially if you are in position to put together unique offers with quick escrow or cash offers. Ironically distressed homeowners walking away from their properties are contributing to a hot rental market is so if you're looking to invest in a property you should have a relatively easy time leasing your property. If you don't want the hassle of managing a rental you can hire a property manager to care for the home.

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Wednesday, August 8, 2012

How to Calculate Your House Payment

The basic calculation for a house payment is to multiply the annual interest rate times the loan times the number of months of the mortgage. For example, 5 percent -- interest rate -- times $250,000 -- mortgage amount-- times 360 -- 30 year mortgage -- equals $450,000. Divide that by 360 for the monthly payment of principle and interest of $1,250. This gives you a pretty close approximation. The bank will calculate the interest based on each month. In other words the 5 percent annual interest rate is.41 percent on a monthly basis. Divide the taxes for the year and the private mortgage insurance -- PMI by 12 and add to the monthly payment.

Amount of the Loan
The larger the loan the larger the payment will be. With all other variables held constant a $350,000 mortgage results in a monthly payment of $2,000. It increases to $2,500 for a $450,000 loan amount and decreases to $1,500 for $250,000 loan.

Length of the Loan
Thirty, 20 and 15 year mortgages are available. If you want to substantially decrease what you'll pay for the interest of the loan, a 15 year mortgage does that very nicely. For example a $250,000 mortgage for a 30 year loan results in total payments of $550,000 and monthly payments of $1,500. A 15 year loan results in total payments of $380,000 or savings of $170,000. The monthly payment for just principle and interest on the 15 year loan is $2,000.

Interest Rate
The interest rate has the greatest impact on the payment total after the amount of the mortgage. A difference of as little as one percent can result in hundreds of dollars per month. Variable, or adjustable rate, mortgages are based on the prime lending rate and as the name suggests, varies from time period to time period. In the early years of making mortgage payments, most of the payment goes to pay the interest. As the equity slowly builds and the total of the amount owed on the home decreases, the amount that is applied toward the principle of the loan accelerates. The $250,000 mortgage for 30 years at 6 percent interest results in a monthly payment of $1,800 at 4 percent the payment is $1,550.

Where You Live
Taxes are property taxes and are dependent on where you live as well as the assessed value of the house. Market value differs than the assessed tax value. Call the county assessor to get the tax rates for the neighborhood you're considering.

Insurance included in the mortgage payment includes private mortgage insurance if you've made less than a 20 percent down payment. It varies depending upon the size of the loan. Once the loan drops to less than 80 percent of the original mortgage amount the PMI drops off. If you don't have your own homeowner's insurance on the property the mortgage company will obtain a policy and include that premium in the mortgage payment. The premium cost depends on the value of the building. The land isn't included. Even if the house is destroyed the land still has value.

Payment Periods
Most mortgages are made once a month. However, if you pay half the mortgage payment every two weeks, it results in an extra payment being made in a year's time. There are 12 months in a year and 52 weeks. 52 divided by 2 equals 26 payments or 13 full payments.

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Sunday, August 5, 2012

This Month in Real Estate (US) August 2012

Want to know just how important the power of being pre-approved is? Find out in this edition of This Month in Real Estate!

Thursday, August 2, 2012

Strategizing About Buying Your First Home?

Before you embark on this exciting journey it is a good idea to answer some questions for yourself just to make sure you end up with what you want. The following is food for thought to help steer you in the right direction:

Seek out professional help

This point cannot be stressed enough. Before you do anything you need to assemble your team. The basics will require a loan officer, an escrow agent, a home inspector and a real estate agent. A reliable real estate agent will have contacts with each of the former.

What can you afford?

Schedule a meeting with your loan officer and get pre-qualified. This important step will help you find out exactly what dollar amount you qualify for, and give you an idea of what you can afford. Keep in mind that you might need money for a down-payment, as well as closing costs. Find out if you qualify for a loan program with low or no down-payment. Also talk to your realtor about the possibility of asking the seller to pay for your closing costs.

How long do you plan to live there?

Selling a house is, for the most part, not an overnight thing, and there are costs involved. Before you buy, it is a good idea to ask yourself the question above. Next, ask yourself how long will the home meet your needs? If you don't feel comfortable with a time frame of at least three to five years, I would reconsider.

Ongoing costs of home ownership

This part is overlooked by many people. Don't forget maintenance, improvements, taxes, insurance, and homeowner's accusations fees; these are all costs in addition to your monthly mortgage payment.

Think about the resale

Sooner or later you will be selling your home. Be sure to buy what is going to be desired by others when comes time to sell. The more buyers you cater to, the more chances of selling faster at a higher price.

Move Fast & Stay in touch with your excitement!

Ready, get set... GO! Market conditions are dynamic, good houses sell fast, loan programs change. Once you have all your ducks in order, get out there and put in offers. I also want to alert you to what I personally feel is the most critical part of this process... have fun! Buying your new home can be daunting and overwhelming; as a result it is very easy to get stressed out with everything you are faced with. Keep in mind that this is an exciting time.... don't lose your joy!

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