About two-thirds of millennials, adults between the ages of 18-34, who plan to become Columbia SC home buyers are largely unaware of closing costs, creating a form of "sticker shock" for the largest generation in history.
The finding comes from a survey by ClosingCorp. Across all adult age categories, more than one-third of potential homeowners are "Not Very" or "Not At All" aware of closing costs.
First Time Columbia SC Home Buyers Waiting Longer
Why is this closing-cost ignorance important? Mostly because the housing market has seen diminishing sales among first-time Columbia SC home buyers, and millennials are waiting longer to buy their first homes than previous generations. These factors are affecting the market's recovery.
Moreover, closing costs can be substantial, as most experienced borrowers know all too well. Closing costs are paid when a real estate transaction closes, and the title to the property is
transferred to the buyer. Closing costs typically amount to 2 percent to 5 percent of the total purchase price of a home.
The fees are incurred by either the buyer or the seller, and typically cover everything from appraisal, inspection and attorney's fees to home warranties.
The study emphasizes the need to better educate millennials, and all consumers in general, on the real estate closing process. While interest rates are often the driving force in initiating a real estate transaction, the real estate agent, lender, title and other settlement fees also have a significant impact on the down payment and cash outflow from the borrower perspective.
The ClosingCorp survey of more than 1,000 adults also showed that most young people learn about closing costs from their real estate agent, or by doing their own research. Millennial homeowners are more likely to learn about closing costs from a real estate agent as opposed to a lender by a ratio of nearly two-to-one.
Find more articles as they relate to becoming Columbia SC home buyers under our Columbia SC Home Buying Tips section of articles to your right under Columbia SC Real Estate Categories. We also post tips on Facebook and Twitter. Follow us there for daily updates as well.
There are several major Columbia SC home buying mistakes that could cost you a minor fortune if you slip up and commit these errors. Even so, there's plenty you can do to affect how much money you spend on a purchase.
A lot rides on your choice of real estate agent. A disturbing finding in a survey by Consumer Reports showed that 86 percent of agents said they witnessed other agents engaging in poor business practices which could cost consumers money. About a third said they saw agents steer buyers toward homes that would give them higher commissions. Others said some brokers exaggerate when marketing themselves. And 27 percent even knew of brokers who tried to persuade clients to sell a home for less than it was worth.
Avoiding Columbia SC Home Buying Errors
Rushing Into a Deal
One of the more costly Columbia SC home buying mistakes is agreeing to too high a price on a home. A related mistake is overestimating one's knowledge of the real estate market. It's not until you've been in the Columbia SC home buying market for a while that you know what homes are really worth. If you make an offer on the first house you fall in love with, you risk spending too much based on emotion, not practical sense. So take your time, go see lots of homes, and get a good idea of the local price scale. A tip: If you do enter into negotiations on a house and they come to a standstill, don't be afraid to walk away.
Biting Off More Than You Can Chew
Another mistake Columbia SC home buying customers make that puts them in a more financially untenable situation is under-estimating the costs of home ownership. You can't just calculate the monthly mortgage. You also have to factor in your closing costs and all of the additional fees you'll owe. Many of the fees are negotiable, such as the home inspector's fee, the cost to do a title search, and your attorney's fee. And find out what the current homeowner pays for utilities, taxes, and other monthly costs, so you can be sure you can really afford that home. Also get estimates for repairs you want or need to make to the home before you move in.
Not Upgrading Your Credit Score
To get the most favorable rate on a loan, you have to have a strong credit profile, and that means a credit score of at least 740. Recently, if your score was 740 and you applied for a $300,000, 30-year fixed mortgage, you could qualify for a 3.75 percent interest rate, with monthly payments of around $1,389. If your score was below 680, the best rate you might expect would be around 4.25 percent, with a monthly payment of $1,476 for the same loan; over the life of the loan, you'd pay $31,130 more. Don't wait until the last minute to scrutinize your credit reports and make any necessary changes to improve your profile. If you find errors, be sure to dispute them. Get your credit score as high as possible before starting out on your Columbia SC home buying expedition.
Not Shopping Your Mortgage
Just as important as getting your credit score as high as possible is shopping for that mortgage. Sticking with your regular bank could be costly. Approach several lenders, including banks and credit unions. You can search for national deals online. We don't recommend that you hire a mortgage broker to do that because he may be more focused on selling you a mortgage than getting you the best deal. And get pre-approved for a loan before you shop; sellers take preapproved buyers more seriously.
Skipping a Home Inspection
One of the biggest Columbia SC home buying mistakes comes from people who do not get a home inspection and find out later there were big problems with the house. You want to be present during the inspection to learn about any costly repairs that might be needed and to get basic info on the home, such as where the electrical panel is and where you shut off the water. A home inspector can also point out repairs that will need to be done in the next few years based on the average life expectancy of things in your home.
We have more helpful tips on Columbia SC home buying in our section on Columbia SC Home Buying Tips to your right under Columbia SC Real Estate Categories.
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If you're thinking about buying Columbia SC real estate, perhaps for the first time, we know it can seem like chaos trying to figure out all the things you have to do and the order you need to do them in. We're here to help with a list of things you might not ordinarily think about before buying Columbia SC real estate, but things you definitely should consider.
Before Buying Columbia SC Real Estate
You've probably heard this 1,000 times. So make it 1,001. Get your credit score in order before starting the process of buying Columbia SC real estate.
The higher your credit score, the lower your interest rate will be, which makes your mortgage payment smaller in the long run. If your credit score isn't looking too good (below 660), see if you can improve your finances and boost the score before shopping interest rates.
As long as your credit score is above 580, you can always try for an FHA loan, which can save you some money. If you're looking to raise your credit score, it's all about making payments on time and keeping your debt payments current.
Take some time to get your financial house in order before you go hunting for Columbia SC real estate. Outside of your credit score, make sure you have some money saved. Yes a mortgage is a loan, but it still requires a good chunk of change up front.
Two of the largest items you'll pay for will be your closing costs and your down payment. Closing costs is a general term for many of the services and fees you'll have to pay when getting a mortgage: title fees, inspections, taxes and more are thrown into this. Your down payment is how much you pay upfront on the overall cost of your home – the remainder is your mortgage.
The larger the down payment, the smaller the loan you'll have to pay off. The recommended down payment size is 20% of the total cost of your home, but that's not a required amount. It's hard to give exact advice on savings for your down payment and closing costs, because the amount depends on what your home costs. Have a good amount of money saved, so you have the upper hand when approaching lenders.
Know How Much Columbia SC Real Estate You Can Afford
Know what you're financially capable of before you even start looking for any kind of Columbia SC real estate. Searching for a new home can be like ordering at a restaurant when you're starving – it's easy to overspend. Figure out realistically how much you can afford with your down payment and closing costs, and start searching for homes in areas that will accommodate your budget. There's no point in touring 8-bedroom mansions if you're in a 2 or 3-bedroom starter home bracket.
Buy Columbia SC Real Estate For the Long Haul
To prevent you from making impulse buying decisions when looking at any Columbia SC real estate, decide if the home you're going to buy is going to be one for the long haul, or a temporary move as a stepping stone on the way up to something bigger or better.
Think about all of the changes your life could have while you're living in your new home, and if this home will accommodate your needs long term.
Are you going to get married while living here? If so, are children in the plans? Does the surrounding community seem like it's getting better or worse? Is this a neighborhood you will want to live in at your current age? How about in 10, 15, or 20 years? It's a little weird to get that deep in thinking about your future, but it's a conversation you need to have with yourself, and your partner, if you have one.
We have more articles to help in the process of buying Columbia SC real estate at our Columbia SC Home Buying Tips link to your right under our Columbia SC Real Estate Categories.
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Many young "would-be" Columbia SC homebuyers are finding themselves in a position that young Columbia SC homebuyers haven't been in before.
Statistics tell us there aren't as many young Columbia SC homebuyers as there used to be. Thirty-six percent of American homeowners are 35 and younger, the lowest on record since 1982, when the census's Housing Vacancy Survey began tracking homeownership by age. Those age 65 and older have a much higher rate of homeownership – 80 percent – but that's expected. The longer you live, the more time you've had to save and buy a house.
Many young Columbia SC homebuyers are beginning to wonder if they've done something wrong, and will they ever have a place of their own.
Financial Hurdles for Columbia SC Homebuyers Today
There are numerous factors pushing against millennials' plans to become Columbia SC homebuyers, including the economic hangover from the recession, but student loans are a major obstacle. Even if a lender doesn't see your massive student loan debt as something that could prevent you from making a mortgage payment, plenty of potential homeowners do.
Student loans have kept many potential Columbia SC homebuyers on the sidelines in recent years, and that trend is poised to get even worse going forward.
Other "would-be-buyers" are burdened with the lack of any credit history at all. Lenders generally see you as a risk if you have no credit history.
The best advice most lenders have for young Columbia SC homebuyers is to establish some credit as soon as possible. Getting a credit card will help, providing you don't abuse it and turn no credit into bad credit. The average millennial is two to four times more likely to make a late payment than older generations. So be careful with credit cards.
Your geography may be an obstacle. If you graduated from college and moved to Columbia SC with a lot of student debt and no other credit, your chances for becoming one of the few Columbia SC homebuyers in your age bracket to own their own home is slim.
If you have good credit, a good job, some funds for a down payment, and are not strapped with a lot of student debt, getting a mortgage may still be a challenge if you're using the bigger lenders. Sometimes it's better to shop the smaller lenders and credit unions. Oftentimes they may be willing to keep your mortgage "in-house" rather than re-selling your loan to Fannie Mae or Freddie Mac.
Smaller lenders can work around some circumstances and situations with less red tape, and without having to worry about guidelines on the loan resale market.
Consider an FHA loan. These loans are insured by the Federal Housing Administration and are for first-time Columbia SC homebuyers, although the FHA defines that as anyone who hasn't owned a house in three years. Generally, you'll need a down payment of at least 3.5 percent and a credit score of at least 580, although some lenders won't even begin a discussion unless you're in the mid-600s.
Talk to as many lenders as possible, and see what specific programs they offer and what the best rate around is. Go in person to a branch office and speak directly with a loan officer. Your chances of becoming one of the newest Columbia SC homebuyers is much better going that route than trying to apply online, or through a larger lender.
We can help you find the best lender for your set of circumstances. Contact us and let us help you get on the right path to becoming a Columbia SC homebuyer.
A recent survey of buyers buying a Columbia SC home indicated that a whopping 80% said there was at least one thing they regretted about the home.
The number one complaint: The home just isn't big enough, mortgage information site HSH.com found. Others complained about a lack of closet space or that the place didn't have enough bathrooms. Bad neighbors were also a problem, as was a substandard school system.
A lot of those issues could have been avoided. Of course, some factors, like bad neighbors, can't be anticipated. And some conditions change over time. Nearby property may be developed into a shopping mall or freeway, for instance.
Tips When Buying a Columbia SC Home
To keep you from buying a Columbia SC home you'll regret, follow these tips:
- Don't give in on your core requirements. If you know that having three bathrooms is important for your happiness but the Columbia SC home you're looking at only has two, keep shopping.
- Don't let yourself fall in love with a Columbia SC home that doesn't match your needs. Regret may not set in right away, but when it does, the fix, like adding a bathroom, might cost you a fortune.
- Don't cave in to a partner or spouse. If you believe you will be unhappy in your new Columbia SC home, don't let your wife of husband talk you into buying it. It will only cause resentment.
- Know your give-in points. Everyone house hunts with a wish list, but there are some items that can be compromised. Tiny kitchens might be a deal breaker if you are an avid cook but maybe you can live without a den.
- Don't lose your edge. Once a shopper makes the decision to buy a Columbia SC home, they sometimes overlook major issues. If the home inspector finds dry rot in the joists or the appraisal comes in lower than the sale price, stand your ground: either pull out of the deal or get the seller to lower the price to reflect the cost of the repairs. Consider the advantages of having your own buyer's agent to help you in the home search process.
- Do your research. These days, there's a ton of information available on the web that can help you in your search for a new Columbia SC home. We can help you get the stats you need on the quality of school systems, walkability and access to restaurants, as well as crime, that will help you assess whether a neighborhood or area is right for you.
You'll find many more tips on buying a Columbia SC home in our Columbia SC Homebuyer Tips section of articles in the Columbia SC Real Estate Categories to your right.
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