Mike Answers Philadelphia Home Buyers' FAQs

Purchasing your new home in Philadelphia can be an exciting, but sometimes overwhelming experience. A good first step is to educate yourself on the home buying process and analyze your own expectations and financial situation.  Gaining knowledge about the process will help you to be a more informed buyer and give you confidence in your home buying decision.  Here are some frequently asked questions whose answers can benefit both first-time and seasoned home buyers.

Q - Why should I buy instead of rent?

A - Currently, it is more affordable in 72% of major cities to own than it is to rent a property.  A mortgage consultant can help you compare the financial aspects of your current rental situation to that of owning a home, at no cost or obligation to you.  It's a good idea to consider that instead of all of those years spent paying a high monthly rent, your hard-earned finances can be put toward equity in your very own property.  Owning a home offers plenty of benefits that renting does not:  the ability to renovate and tailor your home's aethetics to your specific taste, the feeling of long term stability and tax benefits.  As a homeowner, you are eligible to receive various tax benefits, such as the ability to write off the interest you pay on your mortgage each year.  It would not be a wise decision to purchase a property, however, if you're only planning to remain in your current location for 1 to 3 years.

Q - How much house can I afford?

A - Traditional guidelines, often used by many mortgage companies, dictate that your housing costs or mortgage payment should not exceed 28% of your income.  Your combined debt, including housing costs, student loans, car payments and credit cards, should not exceed 35-38% of your income. 

Q - How do I know if I'm ready to buy?

A - If you're planning on staying in the area for 4 or more years, you should consider purchasing a home.  Also, it is very important that you have good credit, stable and verifiable income and your own funds to use toward the down payment.  Currently, there are ways to purchase a home with a down payment as low as 3% of the sale price.  Sellers can even pay up to 6% of your closing costs.  There are many great programs offered and speaking with a mortgage consultant will help you to determine if you're qualified.  If you're not qualified at the moment, a mortgage consultant can put you on a road map to helping you qualify.

Q - What is a REALTOR?

A - A REALTOR is a real estate salesperson licensed within a specific state.  A REALTOR is also a member of the National Association of Realtors, an organization that subscribes to a strict code of ethics, standards and practices.  You hire a REALTOR to represent you in a real estate transaction and it is his or her obligation to protect and promote your interests.  In selecting a REALTOR, you want to make sure you choose someone who is knowledgable of and experienced in the location where you want to live.  Friends or family members can be great resources in recommending REALTORS they've worked with in the past!  Your REALTOR will navigate you through the process and can show you any home on the market, no matter the listing brokerage.  A REALTOR is a great resource to have on your side and can also connect you with a mortgage consultant to help you with the financial aspect.

Q - What is a home inspection?

A - When you you've found the home that's right for you, the REALTOR will prepare an agreement of sale that will be presented to both the listing real estate broker and the seller of the property.  In this agreement, the REALTOR will make your purchase of the home subject to several things, including a home inspection, as well as termite, radon and lead based paint inspections.  If you and the seller agree on all of the contract's terms, you typically will have 15 days to hire a home inspector to inspect the property.  It will cost approximately $500 to $600 for the home inspection and additional costs for termite and radon inspections.  If you're not satisfied with the findings of the inspections you may terminate the contract.  Or, you can negotiate with the seller for a reduced sale price or agree have the seller fix the items and provide proof of doing so.  Never purchase a home without doing a home inspection from a licensed inspector, not your Uncle Louie, not your best friend, but a state licensed home inspector! 

Q - How do I know it's the right time to buy will all the negative press?

A - Real estate runs in cycles.  There is likely to be 5 to 10 year upward cycle and then another 5 to 10 year cycle downward.  There are many instances where properties will double in value in a few years and then decrease 10-30% over a few years.  Purchase a home as a long term place to live, where you want and when it works best for you.  The overall value of your home will increase over time, especially if you plan on remaining in your home for 7 to 10 years. Currently, conditions area ideal for buying real estate; interest rates are the lowest they've been in 40 years, prices are low and the housing affordability index is the best it has been in 10 years.  Many buyers wait to jump in and purchase when the market starts to go up, but the best time to purchase, in terms of value, is when others aren't purchasing.  You're likely to find yourself a better deal during this time when there is little competition from overwhelming numbers of buyers, developers and investors.   When the next cycle occurs and the market goes up, you can sell or remain there, increasing your equity. 

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