Home Buyer Guide

There are many different aspects that go into purchasing a new home. The following are some tips and information on some particularly important points of interest for home buying.

Interest Rates
The rate at which interest is paid by the borrower for the use of money that they borrow from the lender is known as an interest rate. They are normally expressed as a percentage rate over a one year period. When they change, it is usually due to a combination of many factors. Those who study interest rates equate forecasting future interest rates to forecasting weather; it is often unpredictable and changes on a dime. Interest rates reflect cultural and economical activity, making a long-term forecast virtually impossible.

There are three major factors that help dictate interest rate changes. Often considered most important is the supply of funds available from lenders and the demand from borrowers. If there is a higher borrowing demand than there are funds available, lenders can raise their rates or borrow money from other people by issuing bonds to institutions in the wholesale market. The trouble is that this source of funds is more expensive, forcing interest rates to go up. Alternatively, if the banks and trust companies have ample money to lend but the housing market is slow, any borrower financing a house will get certain rate discounts and the lenders will be competitive, keeping rates low.

Another major factor is governmental monetary policy. Governments often alter money supply to attempt to manage the economy. If a government prints more money, interest rates go down due to the extra money available to lenders and borrowers alike. Alternatively, if the supply of money is lowered, interest rates rise.

The final major factor in interest rate change is inflation. Investors prefer to preserve the “purchasing power” of their money. If inflation and risks are high, investors need a higher interest rate to consider lending their money for more than the shortest term.

Property Taxes Link to Lakes Region Tax Rate Summary
Property taxes are local taxes that are charged against the value of your property annually. These taxes help to pay for public services such as local public education, police and fire protection, local governments, and most other local infrastructure. They are generally are fully deductible against current income taxes.

There are several ways to determine the value of a home. An appraisal is a professional estimate of the property’s market value; this assessment is based on recent sales of comparable realty, location, construction quality, and square footage. On average, this costs around $400 for a $250,000 house. A comparative market analysis (CMA) is an informal estimate of market value performed by a Realtor. Most agents offer free analyses in hopes of gaining your business. You can also get a comparable sales report for a fee from a private company that specializes in real estate data analysis.

Home Inspections
A home inspection is an important step in the buying process that should never be overlooked. Buying a home without an inspection is risky; why take a risk on one of the biggest investments in your life? Some homes that look picture perfect can have hidden flaws that could cost you thousands to remedy one day. 

A paid professional inspection is the best bet to ensure that the risk of defect is taken out of your buying equation. Home inspectors are often directly involved in housing construction, such as a contractor or an architect. They will be sure to check the plumbing, electrical wiring, roof, and other problem areas that are hard to examine yourself. Make sure to check out an inspector’s references as this is a key component in home buying.

The home inspector typically inspects everything (including water and radon tests) except the property septic system. The septic inspection is done separately by local septic companies with this unique expertise and pump truck. The combination provides the buyer with valuable information and a written report that is used when communicating any concerns to the seller (part of the Purchase and Sale Agreement).