Buyer Services

Finding the right home is probably one of the most important decisions you will make in your life. We at Kierman Realtors have a reputation built on assisting you in finding the right home to buy, in the right neighborhood, and guide you through the process. Our firm is staffed by local residents who grew up here and who can offer you a keen insight into the community you’ll not find elsewhere! As the leading real estate agency in the area, Kierman Realtors is able to offer buyers the largest selection of homes, condos and multi-family homes in the area! We have the resources and expertise to help you find the right home for you in the least amount of time, with your personal needs and wants always in mind.

A Kierman Realtors agent can assist you in evaluating your housing and community needs, and can offer valuable insights into the process of choosing your new home. Kierman Realtors’s real estate professionals can also help you to determine how much down payment you will need, where to go for financing, and other issues important to buyers. For first time home buyers, a Kierman Realtors agent can explain how owning a home not only provides long-term equity, but also offers tax advantages that can make owning more affordable than renting.

As members of the National Association of REALTORS, we abide by a strict Code of Ethics and offer our customers honesty, fairness and ethical treatment. Our skilled staff can guide through the buying process including selection, inspection, financing, closing and moving! Clicking any of the associated services will reveal a host of helpful tips, forms, and advice on all aspects of buying a home, including selecting a neighborhood, choosing the right home for you, and determining what you can afford.

The full range of Buyer Services that Kierman Realtors offers is listed on the menu to the left. When you click on any one of these main categories you will be presented with a variety of associated services. Be sure to check out not only our Property Listings, but also School & Community Info, and our Links to local mortgage companies and banks.

We strive to surpass the competition by exceeding your expectations. Your satisfaction is our most valued asset.

What Can You Afford?

Mortgage Calculator

At Kierman Realtors, we understand how important it is to choose a home that is within your financial ability. That is why our agents receive special training in personal finance evaluation and mortgage acquisition. By understanding these very important aspects of home purchasing, a Kierman Realtors agent can help you to determine how much of a mortgage payment you can really afford, how much you’ll need for a down payment, and exactly what the closing costs will be at the sale. Our agents also know a great deal about the mortgage industry and can help you to find the most competitive financing package available.

For first time home buyers, a Kierman Realtors agent can explain how the tax advantages associated with home ownership can make owning more affordable than renting, and can also help to clear-up any discrepancies that may exist on your credit report before you apply for a mortgage. We recommend that you take advantage of the knowledge and experience a Kierman Realtors agent can offer you while determining your costs.

Your financial obligations are as important as your income when determining how much money you can borrow. Lending institutions will vary on their guidelines, but outstanding debt will always affect the mortgage amount allowed to you. The amount of credit cards you hold may also affect the institution’s decision if your status is questionable. Financial institutions view all loans as risks. A flawless loan repayment history may be an important consideration, but your current ability to meet all of your debt obligations is equally important. Therefore, the risk that your mortgage represents is based upon a predetermined ratio that the lending institution relies upon, known as a “debt-to-income ratio.” This is factored by analyzing your existing household debt in comparison to your household income.

You can get an idea of how much money you have left to pay off a mortgage by using our Calculate Your Debt-to-Income Ratio form. Once you find out how much money you have available each month for a mortgage payment, you must then determine the amount of the mortgage you are seeking, the amount of the down payment, and the life of the mortgage.

Finally, it is recommended that you get a credit check done before you approach the financial institution for a mortgage. The financial institution will use this material in determining your loan status. Kierman Realtors can help you secure a credit report on yourself. This will help the agent give you a good idea of what to expect. It will also help you find out if there are any discrepancies. These need to be cleared up before your meeting with the institution. Your Kierman Realtors representative will be glad to be of assistance.

Determining Your Down Payment

The amount of money that you have available for a mortgage payment is only the first part of the home buying equation. Lending institutions normally will not finance the full purchase price of a property; instead they require you to pay an initial amount of money toward the total value of the property. This initial amount of money is known as a down payment, and is a very important factor in purchasing a home. There are three different types of down payment plans: standard down payment, reduced down payment, and non-traditional “no money down” options.

Standard Down Payment The standard down payment for most lenders is twenty percent of the purchase price. In the past, this down payment was the minimum required by a financial institution. Even today it is the amount preferred by most lenders.

Reduced Down Payment Options If you do not have twenty percent of the purchase price, you should not give up. It is now possible to get a reduced down payment from a lender if you are financially stable and have a good credit history. For many people, this down payment is equal to the maximum amount that they can put down on a house. It is wise to shop around for a financial institution that can provide you with the down payment that you need. If you are eligible to obtain a reduced down payment, you will be required to carry Private Mortgage Insurance (PMI). This carries a premium that you must pay to protect the bank or mortgage company in the event of a default on the loan. Some great places to check into for low and no down payment options are as follows:

Federal Housing Authority Another common way to reduce your down payment is to obtain a loan through the Federal Housing Authority (FHA). This agency was designed specifically to provide mortgage alternatives with low down payments. FHA loans have the potential to go as low as a three percent down payment. In many cases, the down payment from a FHA loan is lower than five percent. These types of loans are typically not available for expensive homes and are not available in some locations. Your Kierman Realtors representative can help you determine if this type of loan would be available to you.

Veterans Administration The Veterans Administration (VA) offers veterans the opportunity to purchase a home with a reduced down payment. In some instances, this can even mean no money down. VA loans are capable of covering the full amount of the purchase. Restrictions apply to VA loans. In order to qualify for a VA loan, you must:

• Be a veteran
• Have six years in the Reserve or National Guard
• Have two years active service after September 7, 1980
• Have a discharge (not Dishonorable) and either
  1. ninety days service during a war, or
  2. 180 days of service between September 16, 1940 and September 7, 1980.

Federal National Mortgage Association Referred to by real estate professionals as “Fannie Mae,” this is a private company that purchases existing loans from primary lenders. This organization is very successful in getting mortgages for families with low to moderate incomes.

Federal Home Loan Mortgage Corporation Referred to by real estate professionals as “Freddie Mac,” this is a similar private company that purchases existing loans from primary lenders. This organization is also very successful in getting mortgages for families with low to moderate incomes.

Farmers Home Administration Referred to by real estate professionals as “FmHA,” you don’t have to be a farmer to qualify for this loan. This is available to individuals with low to moderate income looking to purchase a home in towns with a population of under 10,000. The FmHA acts as an insurer, not a lender. You do not need a down payment on FmHA loans.

“No Money Down” Options If you have ever watched cable-TV after midnight, there is little doubt that you’ve seen one of those “no money down” real estate infomercials and wondered if their claims were true. In this section, Kierman Realtors will save you the $49.95 and give you the real scoop on “no money down” financing. Lesson #1: purchasing real estate with no money down rarely ever happens, but is not impossible. If your late-night tutor suggests that you run around searching for property being sold at 20% below its appraisal value, you may consider two things:

1. Over 99% of sellers have a pretty good idea what their property is worth.
2. Santa Clause and the Easter Bunny are fictional characters.

Even in government auctions or foreclosure sales, the starting price may start low, sometimes over 20% below the appraised value, but the competitive bidding between interested parties will often bring the actual purchase price up to its normal level, and sometimes more. And while there are some great deals to be had at these events, you need to submit a substantial deposit check to participate in these auctions, and that is not “no money down.” In the real world, and only if you have great credit, there are a few ways to buy property with no money down.

VA or FmHA Qualification If you qualify for a VA or FmHA loan, as detailed above, you may be able to acquire a “no money down” mortgage. Your Kierman Realtors agent can help you to determine if you qualify for such a loan, and can help you to receive it if you do.

Secondary Financing If the seller is desperate to sell the property, you may be able to convince them to accept the financed amount as the initial payment for the property, and to hold a second mortgage for the balance. In this scenario, the seller is, in a way, lending you the down payment. The lending institution is happy with the security of only financing 80% of the appraised value, and the seller is happy with 80% of the sale price up front (which is more than nothing). You would then pay two mortgage payments each month – one to the lending institution, and another to the former owner of the property. These deals are sometimes available in a slow market, and virtually impossible in a hot market.

Mortgage Assumption If the seller is in financial trouble, you may be able to take over the monthly mortgage payments that the seller would otherwise be making to the lending institution, and pay the seller the difference between what the seller owes and the sale price. If the lending institution is having problems collecting their monthly payments, they will be quite happy to help you to assume the mortgage. As a result, qualifying for a mortgage assumption is often easier, and closing costs are often lower, than a regular mortgage.

Lease-Purchase Agreement This arrangement is kind of like a real estate lay-away plan, where you rent the home and a portion of your rental payment is credited toward the purchase of the home. The property leasing agreement includes how much of the monthly rent payments will go toward the purchase price of the home, and what date you will ultimately purchase the home. Your initial investment can be as little as one month’s rent and security deposit. If the property needs repairs or improvements, you can agree to do the work and have the increased value of the home credited to your down payment. In this way, you can accumulate the 20% equity needed to get a mortgage and the seller gets their existing mortgage payments maintained until the property is purchased.

Lease-Option Agreement Similar to the Lease-Purchase Agreement except you have the option to purchase the property. You rent the property and a portion of your rental payment is credited toward your down payment. If you decide not to purchase the house, you receive a credit for the amount that would have gone toward your down payment.

Equity Sharing You and an investor (often parents) combine resources and purchase a home. The investor puts up the money for the down payment and closing costs. The monthly mortgage payments, taxes and insurance costs are then split between you and the investor. You occupy the home and make two kinds of monthly payments: one payment is half of the monthly mortgage, taxes and insurance. The second payment is for an equal amount, but is paid as rent to the investor. You and the investor both get the tax benefits. After several years, you can refinance the home and buy out the investor or sell the home and split the profit.

Your Kierman Realtors agent can help you to negotiate alternative financing arrangements with those who are willing to participate. At Kierman Realtors, your satisfaction is our most valued asset.

Calculating Your Total Housing Expense

To determine your total housing expense, you must first determine what your monthly Principal, Interest, Tax, and Insurance costs will be. You must also choose the type of loan you will be receiving from the lending institution. Lastly, you must remember that you must factor your closing costs and down payment into your calculations.

Determine Your PITI Your mortgage payment is made up of four different items: principal, interest, taxes, and insurance or PITI. We will discuss each of these in the reverse order so that you have an understanding of them.

Insurance Every lender requires that you carry Homeowners insurance. This covers the replacement value of your dwelling in case of fire, vandalism, natural disaster, or a host of other potential mishaps. It is common practice for the primary lender to be named on the policy. The pricing of Homeowners insurance varies, but usually costs approximately $350 per year, per $100,000 of property value (your Kierman Realtors agent can help you to determine an exact amount). Because the primary lender is at risk for the value of the house, and will commonly not want to take the risk of your homeowners insurance being cancelled, most lending institutions will have you make the insurance payments directly to them and they, in turn, will pay your insurance company.

Taxes As with insurance, taxes vary from community to community. You will have to research the tax history of the town that you are looking into and apply the tax to the approximate value of the house. Tax rates are expressed in mills. A mill is one-tenth of a cent. It is the rate that you pay for every thousand dollars worth of property. For example, if your town’s mill rate was 25 and you owned a $100,000 house, you would pay $2,500 in property taxes. This is calculated by multiplying 100 (the number of thousand dollars of your house) by the mill rate. A local Kierman Realtors representative can help you determine what the tax amount will be.

Interest A lending institution provides you a loan with interest. Interest is the extra amount of money that you pay to the lending institution as a fee for the privilege of using their money. Interest rates fluctuate up and down constantly. There are primarily two types of mortgage plans offered by lenders today: fixed rate and variable rate. A fixed rate plan locks you in at an interest rate and that rate never changes. An adjustable rate mortgage (ARM) has an interest rate that fluctuates with the marketplace. Interest plays a large factor in the overall amount that you will ultimately pay. Always remember that the same loan from different banks with the same interest rate does not always mean that you will pay the same amount of money. This is because the fees that lenders charge can vary tremendously. So, it is important to shop not only interest rates, but also annual percentage rates (APRs). The APR takes the lenders fees into consideration and will be discussed in further detail below.

Principal Principal is the actual amount that you currently owe the lending institution at any given time, and also refers to the amount of each monthly payment that is applied directly to paying off the loan. In either case, Principal is affected greatly by the term of the mortgage. This is the amount of time needed to pay off the loan. The breakdown of principal and interest amounts change throughout the life of the loan. Interest normally makes up the greater portion of the monthly payment when a loan first starts, and principal makes up the greater portion of the monthly payment toward the end of the loan. The next section shows just how the length of the mortgage affects the monthly payment and the bottom line as well.

Pick A Mortgage Loans made on property are commonly called mortgages. When picking a mortgage, the key items to keep your eye on are: the term of the mortgage (how many years you will take to repay the principal), and the interest rate (the percentage you will pay on the principal while you’re repaying the loan).

Most loans are amortized over a thirty year period. This means that the loan has to be paid off in thirty years. For those who prefer to have a shorter loan, there are fifteen year mortgages and twenty year mortgages available as well. These loans carry a heftier monthly payment than the thirty year mortgage but a lower monthly interest rate. However, if you can afford the extra cost, you can build equity faster with a shorter mortgage term. You can see the effect that the length of the mortgage has on the bottom line by looking at the following example:

As you can see, the length of the loan plays a great factor in exactly how much money you have to pay out. If you can afford a higher monthly payment, you pay substantially less money by the end of the loan. In addition to the term of the loan, mortgages differ by type. There are fixed rate mortgages and adjustable rate mortgages (ARMs).

Fixed Rate Mortgage A fixed rate mortgage locks you in at the interest rate that is available at the time of the loan. Many people prefer a fixed rate because they know how much their mortgage payment will be throughout the life of the mortgage. However, a fixed rate may not be a good option if you are buying at a time of high interest rates. You will never be able to take advantage in the reduction of interest rates. On the flip side, the rates will fluctuate throughout the life of the mortgage and – unless you can see the future – you will never know which plan offers better rates through the life of the mortgage.

Adjustable Rate Mortgage An adjustable rate mortgage fluctuates with changes in interest rates. An adjustable rate allows your interest rate to change with the market. An adjustable rate mortgage normally has a much lower initial interest rate than the fixed rate. That rate difference can be as much as four percent. By using an ARM, you can also qualify for a higher mortgage due to the difference in interest rates. However, ARMs have their drawbacks. The most obvious is the strain that it puts on your financial planning situation. It is impossible to foresee how the interest rates will rise and fall for such a long period of time.

Graduated Mortgage Payments This mortgage has an initial interest rate that is lower than that of a fixed rate mortgage. However, the interest rate increases throughout the life of the mortgage. These increases are defined at the time of the inception and financial planning can be done around these increases.

Other Costs In determining your total housing expense, make sure to factor the down payment and the closing costs into the equation to determine your total housing expense:

The Down Payment In addition to the mortgage, you must also put money aside for a down payment. The larger the down payment, the less the monthly payment is on the mortgage and the less you will pay in interest costs over the life of the mortgage. This amount can range from 20 percent down to nothing.

The Closing Costs These costs can range anywhere from $2,000 to over $10,000. The fees include but are not limited to:

Your Kierman Realtors agent can help determine what your closing costs will probably be, and work with the seller and your loan officer to pin the exact number down when you have chosen a home.

Comparing Renting to OwningIs buying a house the right thing to do at this stage in your life? Many people have the perception that home ownership is much more expensive than renting. What you may not realize is that for the price of renting, you can probably own your own home. It may not be the Castle of Versailles, but it will be a home you can call your own. A home that can build equity and a secure future. In most cases, your home will be your single biggest asset with tax advantages that you couldn’t take advantage of while renting.

For instance, if you own a house, the government allows you to deduct mortgage interest and real estate taxes from your gross income amount through a “Schedule A” tax form. This means you will pay less tax to Uncle Sam if you own a home. Recent tax laws also state that first-time home buyers can use money from an IRA (Individual Retirement Account) for the down payment on their new home. Let’s look at an example that will compare the tax benefits you would receive from owning a house rather then renting.

EXAMPLE: A married couple has a combined gross income of $70,000 per year. They have some money in a savings account and an IRA totaling $25,000. The couple cannot decide whether they want to purchase a home or stay in their current apartment. Their current rent is pretty cheap at $700 a month. They know that owning a house costs more than that. But does it?

The couple is looking at a house that is priced at $125,000. Because of the new tax laws that allow you to utilize money from IRAs, the couple has enough to cover a twenty percent down payment (smaller down payments are also available – for more information visit the our Web Page titled Establish your Down Payment).

After the down payment, the mortgage comes out to $100,000. On a mortgage of $100,000, the couple’s monthly mortgage payment is $900 (principal + interest). Because the interest is always higher at the start of a mortgage, the split of the $900 comes to $800 in interest and $100 in principal. Using the “Schedule A” tax form, the $800 a month will be tax deductible. The property taxes equal $2,500 a year, and you can deduct those costs from your taxes as well.

Here’s where the accounting comes in. The renting scenario uses your basic tax form where the buying scenario using a “Schedule A” Form. Let’s play the example out factoring in the tax advantages.

If you divide the $2,688 of tax savings into twelve months, you determine a tax savings of approximately $224 per month. Subtract the $224 from the $900 mortgage payment and you get an adjusted total of $676.

While the $700 per month apartment originally appeared to cost less than the $900 per month house, factoring in $2,688 of tax savings shows that building equity by owning your own home can actually cost less per month than renting a property you will never own.

For more details on the financial advantages of home ownership, contact one of Kierman Realtors’s agents. At Kierman Realtors, your satisfaction is our most valued asset.

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