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Home Buying Guide

Expert Advice...

Becoming an informed home buyer can save you a great deal of time, aggravation, stress, and possibly even prevent you from losing out on your "dream home." Below are several articles which explain in detail, many aspects of your upcoming home purchase. These articles are definitely essential reading for anyone who is thinking about or planning to buy a home!

. The Buying Decision
. Do's and Don'ts of Home Buying
. Is Your Next Home Getting Out Of Reach?
. Loyalty Pays Off
. Determining What You Can Afford
. The Pre-Approved Buyer
. Questions To Ask Your Mortgage Lender
. Should You Pre-Pay Your Mortgage?
. Always A Compromise
. When Have You Seen Enough Homes?
. The Earnest Money Deposit
. Making House Hunting Easier
. How Much Should You Offer
. I Really Love This House. What Else Do You Have?
The Buying Decision
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

Who should make the decision on the home you buy? The decision to buy a home is an important step. In fact, it is often the biggest financial transaction of our lives. Because of its importance, some of us look to other people for advice when we begin our house hunting.

If you are receiving money from parents, other relatives, or friends, you often feel obliged to bring them along to see how they feel about a particular home you may be considering. There are also some situations in which you really don't have a choice. The person giving you the money prefers that they have a voice in the final decision.

Whatever the reason may be, I think it is a good idea to seek advice from others if this helps you become more comfortable with your final buying decision. Many things must be considered. Is the price fair? Will this purchase be a wise investment? Where do I get the financing?

There is a difference, however, between asking for advice and actually letting others make the decision for you. Get all the advice you need, but it will be best in the long run if you make the final decision on your own. After all, it is you who will be living in the house. Many times, friends and relatives mean well by giving advice. Some of them have had a great deal of experience in buying and selling real estate and feel that they can make a better decision than you. I have seen this happen on many occasions over the years and it usually doesn't work out too well. It is not good to have one person make the decision while someone else must live with the consequences.

One of the greatest areas of conflict involves the subject of personal taste. Only you know if you like a home and would want to live in it. A well-meaning advisor may not share your personal tastes and prefer that you buy something else. They don't want you to buy a certain home because they wouldn't want to live in it themselves.

ADVICE: The decision to buy or not to buy is important and very personal. Listen to advice but be willing to make the decision that is best for you. You may have to live with it for a long time.

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Do's and Don'ts of Home Buying
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

I am often asked for some simple rules to remember when buying real estate. Here is a list of my do's and don'ts to keep in mind.

DO take time to analyze the important features you really want in a home and hold on until you find them. If you need eating space in the kitchen, be sure you get it in the next home.

DON'T purchase a home that is considerably more expensive than other homes in the neighborhood. The surrounding homes will drag your value down rather than lift it up.

DO investigate the quality of the local school system. Whether you have school age children or not, school systems do have a dramatic effect on the value of residential real estate.

DON'T be too quick to purchase a home on a busy street or one that adjoins any non-residential structures. The reason that you may be able to purchase one of these at a good price is the same reason that a subsequent buyer will expect a price concession from you.

DO study the floor plan to be sure that it has the number of bedrooms and bathrooms that are normally desired in this price range. Will the traffic pattern be livable on a daily basis?

DON'T buy a home because of the decor alone. Does it also have the features that you need? I have seen buyers emotionally flip over decor and furnishings and overlook the lack of some important essentials.

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Is Your Next Home Getting Out Of Reach?
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

If you are presently a homeowner and planning to buy a nicer home in the future, you may be falling behind in your quest to buy that next home. Or, you may be gaining on it without realizing that the time to buy is fast approaching. It all depends upon the constantly changing status of the value of your present home and of the home you want to purchase.

As you know, market knowledge is extremely important when buying stocks, bonds, or other commodities. It is also a necessity when making real estate buying and selling decisions.

PRESENT HOME: What is happening to the market value of your existing home? Will it increase or decrease in value? How much of a change will occur in its value this year? If you bought one of the first homes in a new subdivision, as an example, your home's value may not move up substantially until the builder has finished selling all the other homes in your subdivision. Typically, it is difficult for an existing homeowner to compete for buyers against the builder who can offer custom features and decorating to each customer. Perhaps your home has risen in value steadily over the past few years, but the rate of appreciation may be slowing down. Its value may have been growing at the rate of 7% or 8% a year and has slowed to 3% each of the last two years.

NEXT: The home you want to acquire also has its own market dynamics that effect its present and future value. You must be able to determine if the gap is widening, narrowing, or remaining stable between the sale price of your present home and the expected purchase price of the next one. You might have been pleased that your home has increased in value 10% each of the last three years, but discover that the next home has moved up 15% in price during that same period of time.

ADVICE: If you are seriously considering upgrading your housing in the next few years, you must keep abreast of the trends in your local real estate market. Ask your Realtor® to give you a current market appraisal of your present home and the price and availability of the home you want to buy.

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Loyalty Pays Off
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

If you are planning on purchasing a home, you will be faced with many decisions. Should you try to sell your existing home before buying the next one? What area would best suit your needs? What price range can you afford? Which home would be the best choice from an investment perspective? When do you know that you have seen enough homes in order to make an informed selection?

Before addressing these questions, however, you have another decision that should be made before those listed above. Which Realtor shall I choose to help me get the help and answers I need? Real estate transactions are becoming more complicated. Because of this, it is in your best interest to work with a professional when making a buying decision of this magnitude.

Some buyers like to leave their name with three or four salespeople. Although it may seem to be to the buyer's advantage to have a number of people to work with, it is usually a very ineffective approach. The basic assumption is that a committee of agents can produce more results than working exclusively with one Realtor. Like most committee assignments, results are often discouraging.

You need the total commitment of one person who knows and understands your particular situation. My advice is to find a Realtor whom you feel will get the results you need. Tell this person that you will work with him or her exclusively as long as you see the effort required to get the job done. In this way, you will have a dedicated agent who will take on the personal responsibility of handling all the details of your home purchase.

You see, Realtors are paid on a straight commission basis. They don't receive a salary. They are not on an expense account. They are paid only after they sell something. This is why working with more than one agent is not a good idea. None of the Realtors know if it will be financially worthwhile to spend much of their time with you because they know that you may buy through another agent. So, you don't get the total dedication you need by playing the field. If a Realtor knows that you will be loyal to him or her, you have provided all the motivation that is necessary. Your Realtor can enthusiastically go to work knowing that all the effort will be rewarded.

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Determining What You Can Afford
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

Many articles are being written these days about the fact that home prices are moving out of the reach of potential home buyers. This dilemma is referred to as an affordability problem. Do you know what you can afford on today's market? The price you can pay is a combination of three factors: a down payment, a mortgage loan, and closing costs. You probably know how much cash you can assemble for the down payment and closing costs, but you must also determine the amount of mortgage financing you can obtain.

Don't assume that you can't afford the home of your choice. Talk to the experts. The first expert to consult is your local Realtor®. He or she can give you an idea of the price you will have to pay for the type of home you want. After identifying the price, talk to a mortgage lender about your current financial situation and your ability to borrow the amount you'll need.

Here are some of the basic items a mortgage lender may require at the time you make a formal application for a mortgage loan:
  1. A copy of your contract of sale or building agreement complete with legal description.
  2. W-2 forms for the past two years and original pay stubs for the last thirty days showing year-to-date income or a letter from your employer confirming your earnings for the previous two years and this year to date.
  3. If self employed, business and personal Federal Tax Returns for the past two years plus a current balance sheet.
  4. A 90-day history of savings, checking, and for brokerage accounts.
  5. A complete list of outstanding debts and account numbers.
  6. Verification of twelve months of rental, mortgage, or land contract payments.
ADVICE: Investigate your ability to buy real estate. Ask the experts.

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The Pre-Approved Buyer
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

Many lenders today offer a service that is referred to as a preapproval. Unlike the typical mortgage loan approval, this service is provided to a buyer before he or she agrees to purchase a certain property. An abbreviated application is taken, and the lender provides a document stating the amount of money that the buyer will be able to borrow when making a home purchase. The pre-approval also states that it is conditional pending the appraisal of the actual property being purchased and written proof of the buyer's employment and income. Here are the benefits to both the buyer and seller.

BUYER'S BENEFITS: With a pre-approval, the buyer knows what price range he or she can and cannot afford. This knowledge in advance prevents a person from falling in love with a home that is not within his or her financial grasp. After looking at more expensive houses, it can be a real disappointment to begin looking at lesser properties that are affordable. The pre-approval allows the buyer to begin in and stay in the correct price range when shopping.

SELLER'S BENEFITS: Whenever an offer is made, it is usually dependent upon the buyer obtaining the necessary loan amount from a lender in order to complete the purchase. It may take a few weeks or a month to find out if the buyer has been approved. During this time, the house is off the market and not available to other would-be buyers. If the buyer is unable to qualify for adequate financing, the seller loses the time that the house was off the market and must begin again to attract another buyer. If the buyer has been pre-approved, however, the seller knows that this is a buyer who is indeed capable of completing the purchase.

ADVICE: Ask your Realtor® to help you obtain a pre-approval.

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Questions To Ask Your Mortgage Lender
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

When talking to a mortgage lender/banker prior to making an mortgage application, you may find it helpful to ask the following questions in order to make an informed decision.
  1. Will this loan be sold on the secondary market or will it be placed in your portfolio?
  2. If private mortgage insurance (PMI) is required, at what point can it be eliminated?
  3. What is the procedure for eliminating private mortgage insurance?
  4. What is the up-front charge for private mortgage insurance and what is the renewal fee?
  5. When does the mortgage servicing department pay the property taxes to insure the income tax deduction for that year?
  6. How many months worth of property taxes and insurance are required for the reserve account?
  7. If obtaining an adjustable rate mortgage, describe how and when the loan can be converted to a fixed rate mortgage and what charges will be involved. Will another appraisal be required?
  8. If obtaining an adjustable rate mortgage, what is the margin, index, and anniversary for adjusting the payments?
  9. When is the house payment due and when is the late fee incurred? What is the late fee?

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Should You Pre-Pay Your Mortgage?
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

Should you pre-pay your mortgage? There are two sides to this question just as there are to most questions. So, in order to get the right advice for your situation, a few other considerations have to be made first.

There is one school of thought that interest and property taxes on a person's home is one of the few income tax deductions still available and a taxpayer needs as many deductions as possible.

A deduction does not reduce taxes dollar for dollar but simply by the marginal tax rate of the taxpayer. For instance, if you had a $10,000 deduction and were in the 28% tax bracket, it would save you $2,800 in taxes. The net effect is that you still spent $7,200. The question is: did you get $7,200 worth of economic benefit?

As an example, let's say you have a mortgage at 9% interest. You have an extra $100 per month available and want to put it where it will do the most good.

If you put it in a savings account, it may only earn 5%. If you make an additional $100 principal payment on your 9% mortgage, you will have a 4% net gain without any tax considerations. Regardless of what tax bracket you are in, you will save money in this example.

The answer to the original question is determined by asking if you can earn more in an alternative investment than the rate being charged on your mortgage. If not, then in most cases, you will be better off pre-paying your mortgage.

There is one other consideration that should be made. If you will need the money in the near future, the equity in the home may not allow the liquidity needed. Some states make it very easy to have a home equity loan but economic conditions can always change which may make it difficult to get at the equity.

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Always A Compromise
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

I hope you are not still looking for the perfect home. It is not unusual for people to completely design their new home from scratch, only to be disappointed with the end result. In the final analysis, a home purchase is always a compromise. You like the house, but not the lot. You like the location, but not the house. You like the floor plan, but not the decor. It's always something. Knowing that your next home purchase will be a compromise, the issue comes down to deciding what you must have and what you can give up. Here are some suggested items you should NOT give up:

Location: Remember, a home purchase must satisfy your needs and tastes but also be a worthwhile investment. A good location can always make up for shortcomings in the property itself.

Bedrooms: The first question asked by potential home buyers is, "How many bedrooms does it have?" The number of bedrooms must accommodate your needs and appeal to a significant percentage of buyers who will consider buying your home in the future.

Bathrooms: The second most frequently asked question is, "How many bathrooms?" Don't include the bathrooms that may be located in the basement, if any. They do not carry the value that bathrooms have that are located elsewhere in the house. A bath off the master bedroom is usually a much sought-aft feature by most home buyers.

ADVICE: When you begin the search for your next home, decide in advance which features you will and will not compromise.

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When Have You Seen Enough Homes?
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

As we all know, a home purchase for most people is the single largest financial investment of their lives. As the price of homes continues to edge upward, buying a home takes on even greater significance.

One of the dilemmas facing a prospective buyer involves the number of homes that should be seen before making a final buying decision. Some people are not content until they have seen every home on the market in their price range.

How do you know when you have seen enough homes in order to make an offer on a certain home with the confidence that it is the right one for you? Basically, you want to accomplish two things:

It is difficult to make an informed buying decision until you have had the opportunity to view various homes and compare their prices. Home showings also help educate you as to the buying power you possess for the area you want. It is sometimes sobering to learn that you cannot buy as much home as you originally thought. After seeing a number of homes, it is not unusual for buyers to adjust their expectations of the home size and features they can afford. You may have to settle for a lesser home than you thought in order to get the location that is most desirable to you.

You will know when you have found the home that is right for you. This often happens when you drive up in front of the house or when you are just inside the front door. The right home not only has most of the features you want but it also appeals to you emotionally. No one else can tell you that a certain home is right for you. You usually have to sense it for yourself.

ADVICE: If you have a good grasp of local home values and have found a home that feels like the right home for you, don't look further. You really don't need to see every home on the market. As a matter of fact, too many home showings could even confuse you. It is also not unusual to find the right home after only two or three showings. There is no magic formula. Every buyer and each situation is different. Just rely on your own common sense.

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The Earnest Money Deposit
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

Certain misunderstandings exist regarding the purpose and proper handling of an earnest money deposit given by the buyer in a real estate transaction. In fact, disputes over forfeiture of a deposit are quite common. So, to avoid problems in a future real estate purchase, let's look at the role that the deposit plays in buying real estate.

DEFINITION: The earnest money deposit is a sum of money paid by the buyer at the time of submitting an offer to purchase real estate.

PURPOSE: The purpose of the deposit is to show "good faith" by the buyer that he or she intends to follow through with the terms of the sales agreement. If the buyer does not live up to the agreement, the deposit shall be forfeited to the seller as payment for any damages suffered by the seller as a result of the sale not being completed as planned.

AMOUNT: The amount of the deposit varies in different areas depending upon local custom or the specific needs of a particular transaction. The size of the deposit will have an effect on the desirability of the offer. Many buyers have won properties away from competing offers only because they gave a larger deposit than others being considered by the seller. If you really want a piece of property, make your deposit large enough to help your offer win acceptance.

ADVICE: Always buy through a Realtor so you may have the assistance of a professional when making an offer on your next home.

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Making House Hunting Easier
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

People approach the task of finding the next house in different ways. Some grab the classified ads and begin calling real estate offices. Others jump in the car and drive neighborhoods looking at "for sale" signs. If you are in the market for a home, here are some ideas that might be helpful:

Because we are all different people, you should select a real estate agent who has the right credentials and suits your personality. Don't work with more than one agent when house hunting. You may feel that two or more agents could help you find more homes more quickly. It usually doesn't work that way. Because Realtors® are paid on a commission basis, an agent who knows that he or she has your exclusive loyalty will be more motivated to stick with the job until you are satisfied.

One of the most painful experiences for a potential home buyer is to look at homes that are out of the buyer's price range. You may fall in love with a certain home only to discover that you are not financially able to complete the purchase. When you do begin inspecting homes you can afford, they never seem as nice as the more expensive models. Ask your agent to look at your finances and help you decide upon a price range that suits your budget before beginning your house hunting. This all-important first step will allow you to get your home search off on the right foot.

Many buyers visit too many homes before their final selection is made. This is caused by a communication gap between the buyer and the agent. It is difficult for an agent to get an appreciation of your tastes and the type of home you want when you only rely on verbal communication. The best way to help your agent understand your needs is to invite him or her to see your existing home. Point out the features you like in your present home that you want duplicated in the next house. Show your agent the features you dislike about this home so they can be avoided in the next one. Let him or her see the size and style of your furniture so that room sizes can be considered when selecting homes for future showings.

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How Much Should You Offer
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

When you find the house you want, it is time to act. How do you know how much to offer the seller? Although everyone likes to get a bargain, every transaction is unique and there are certain factors to consider in each potential purchase. Here are some things to consider:

What price has this type of property sold for in the recent past? Can you see a trend in the local area that would justify an offer in a certain amount? Remember that the seller will be going to the same sales data in order to evaluate your offer. If your offering amount can be backed up by solid market data, you will have a better chance of having your offer accepted.

Some properties have no one else interested at the time you make your offer. This situation is to your advantage because the seller doesn't know when or if another offer will come along. If the house you want is in great demand, however, you could be involved in a bidding war regardless of what the market value may be. Your best strategy may be to offer more than the seller is asking. This will often get the house when competing against someone else who thinks a full-price offer is sufficient to win the house from you. Offering a high earnest-money deposit also helps strengthen your position. Another good strategy is to obtain a pre-approval from a mortgage lender prior to making the offer so the seller is assured in advance that you will be able to qualify for the loan amount you will need to complete the purchase.

ADVICE: The purchase of real estate is a major financial decision for all of us. Use the services of a Realtor when you are buying real estate. Realtors know the present market and the past sales history of similar homes. They can give you the facts.

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I Really Love This House. What Else Do You Have?
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

As strange as the title of this column may appear, it is a familiar refrain these days. Buyers are shown a house that is just perfect for them, and after seeing it, they ask their Realtor® to show them more homes. This is a recent phenomenon. In the past, when the buyers found the right house for them, they sat down and made an offer. From my interviews with Realtors, I have concluded that people are acting this way for one of two reasons:

Some buyers may feel that they should continue looking at other properties because there may be a better deal around and they don't want to miss it. Although this is a possibility, this philosophy could be taken to an extreme. Theoretically, the best decision is not to buy at all. This would allow you to always be available to look at more homes. While continuing your search, it is possible that someone else could purchase the home that was right for you.

The decision to buy a certain home is a big one. Sometimes, wanting to see more homes is a way to avoid making a decision. It is possible to feel confident when buying. Here are some of the steps that can improve confidence: Be sure that this property has the basic features that you need. Ask your Realtor to provide examples of similar homes that have recently sold and their selling prices. Make an offer on the property conditional on a satisfactory home inspection by a qualified home inspector. After taking the logical steps listed above, buy with your heart.

If you are going to invest your hard-earned money on this house, it should be a place that you want to come home to.

ADVICE: When you find the right property, you will feel it. Listen to your instincts. You know yourself and your tastes better than anyone else.

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The Most Expensive Home In the Neighborhood
By Thomas Irvin
A nationally syndicated real estate columnist
Reprinted w/ permission from author

Homeownership provides you with a great sense of pride and satisfaction. Your home is a statement about yourself. It is also only human nature to compare your home with those of your friends and neighbors.

If your home is the most expensive home on the block, it may make you feel good, but you could have a problem when the time comes to sell. Surrounding homes of lesser value will have a tendency to lower the price you will get for your home. Most buyers decide upon an offering price that is based on the selling price of other homes in the immediate area. Because neighboring homes have been bringing prices below what you want for your home, a prudent buyer will be hesitant to invest in a price range above surrounding properties.

Some people buy the best home in an area because they are able to buy it at a lesser price than if it was located in an area of equally expensive homes. It seems to make sense when you are the buyer, but you will not realize the same inflation in value available to similar homes in better locations.

Many homeowners have the best house in the area because they have made costly improvements to their home ever a period of time. These improvements might have been necessary to provide for the needs of a growing family. They may now, however, have to be considered over-improvements because they have priced your home out of the market.

If you are considering making improvements to your home, be sure to add up all the dollars you will have invested in your property by the time improvements are completed. After this analysis, will you be able to sell your home at a price that is typical for your area, or will you be the victim of an over-improvement?

Whether buying your next home or improving your existing home, don't allow yourself to have a larger financial investment than any of your neighbors. It could be a very costly mistake.

ADVICE: Don't make a buying decision of this magnitude without the assistance of a knowledgeable Realtor® who can provide you with the information you need.

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  Steve Hatfield
REALTOR® ABR, CRS, e-PRO Certified
CENTURY 21 Curran & Christie
25636 Ford Road
Dearborn Heights, MI 48127
Office: (313) 274-7200
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Licensed Realtor® Since 1987 (#6501221773)
realtor Accredited Buyer Representative Certified Residential Specialist e-PRO

Steve Hatfield, Realtor® provides professional real estate / home buying services to buyers and sellers in Dearborn Michigan, Dearborn Heights Michigan, the Wayne County MI (Southeast Michigan) communities of Livonia, Canton, Redford, Westland, Garden City, Plymouth, Northville and the Oakland County cities of Farmington / Farmington Hills and Novi Michigan.

Equal Housing OpportunityIn accordance with the law, the properties, real estate services and homes for sale featured on this web site are offered without respect to race, religion, color, creed, national origin, sex, physical limitations / disabilities or familiar status.

REALTOR® is a registered collective membership trademark that identifies a real estate agent / professional who is a member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict code of ethics.

Century 21 Real Estate Corporation © and sm trademark and servicemark of Century 21 Real Estate Corporation. Equal Housing Opportunity. Each office Independently Owned and Operated.

Copyright © 1996 - Steve Hatfield
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