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How To Save Money, When Buying Real Estate

Every wants to save money, when they are looking to purchase a home, or investment property. This article, brings industry related information, that consumers can use, to save large amounts of money.

Author: Gary Owens

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Saving money when you are purchasing a home is not difficult, if you take time to plan and understand what resources are available, for your use. With the emergence of the Internet, consumers have an advantage, over those whom purchased their homes in the earlier years. Real Estate Agencies, Brokers and Loan resources, and even listings for auction houses and for-sale by owner sites, are readily available for your convenience. With some planning and shopping, a home buyer can save dramatically when the time comes to putting their names on the dotted line, in the closing process.

Within your planning, one must look at their credit score and evaluate whether or not they will require the use of a Mortgage Broker, or are able to go into their neighborhood bank to seek a loan. Although loans are very competitive, those which are originated by the local banks are typically less costly than those obtained by the Mortgage Brokerage houses. However, if one should be turned down by the bank, the use of a Mortgage Brokerage typically costs more.

Real Estate Agencies and Agents:

Real Estate professionals are typically pretty good in locating property, which will suit your needs. However, getting the wrong agent can cost you, in the real estate transaction. Agents typically will push properties which are listed through their agency. Becoming involved in an agent who is not willing to negotiate their fee percentages, or willing to place an offer which may seem too restrictive to a seller, should be left behind.

Homeowners whom are selling are obligated to fix deficiencies and pay for inspections, related to the sale of their home. However, these updates and inspections are a subject to negotiations, in the sale and purchase of any property. An Agent, whom is not willing to push this negotiation angle, is likely to be representing the seller and does not really have your interests at heart.

Saving Money with Mortgage Brokerages:
Mortgage Brokers or Mortgage Broker Agents get paid through commissions based on loan amounts and the interest rates, they attach to a loan or “mark up”. An example of this point is demonstrated in the following scenario:

Buyer cannot obtain approval for a loan, through his/her bank, even with a credit score of 760, on a Tri-bureau credit report. (Three credit bureaus average reporting scores). It could be due to their income/debt ratio’s being out of proportion. Let’s assume, as in most cases, that the issue could be taken care of through taking more money out on the loan and pushing up the interest rate a little. Instead of borrowing say, 79 percent of the purchase price, the loan grows to say 90 percent of the purchase price.

Well, that gives the broker more commissions, but is unavoidable, to get the financing done. Now, 79 percent of the purchase price, with a score like 760, would typically bring in lenders asking only say 6.75 percent interest rate. But, since the loan to value ratio is higher than 80 percent, the lender will ask for say 7.25 percent.

The Brokerage will call the borrower and state that he can get the deal done, but it will come with an interest rate of say; 7.50 percent interest. He/she will proclaim that it is due to the need to pay off other debt, which is unsecured, thereby bringing your ratios in line with lending requirements.

Here is what occurs with that extra .25 percent, the broker added to your loan. First the brokerage gets a commission for selling the loan product to the borrower. Yes, he sold it to you! He will likely get near the range of $2500.00 per $100,000.00 of the loan, or more. But the cost back to the borrower is much more, over the life of the loan.

Negotiation between the Real Estate Brokerage/Agent and the Mortgage Brokerage/Broker can save a buyer hundreds or thousands of dollars, during the negotiations of the buying experience. Both the agencies have to disclose the fees they receive, in any Real Estate Transaction. Reading through the paperwork, or having an attorney explain the provisions of a Buyer’s contract and proposed settlement worksheets. A buyer can request reduction in compensation, for both a mortgage broker agreement as well as with the realtor’s agency agreement.

The Seller can pay a portion of closing costs. This can also assist the buyer with up to 6 percent, of all closing costs, in addition to repairs and inspections required to bring the property to code, in a typical real estate transaction. This allowance can go a long way in improvements and also in off-setting costs of both the realtor and mortgage brokers’ fees, if the purchase is structured properly. This is a method used by most investors to purchase properties, with little or no money, out of pocket.

By obtaining an agreement for the seller to carry some of the closing costs, and absorbing taxes for the remainder of the year, and paying the purchaser to do the repairs up front the buyer can sign off on certain repairs, and obtain a check at closing. This can also be added to savings accrued by negotiations with the realtor and mortgage broker, prior to closing the loan and title documents. In all, this can save the buyer thousands of dollars.

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Baseball,football,soccer,camping,fishing and investing in real estate, See a related article: Tips for getting a mortgage in 2009 at: http://www.helium.com/knowledge/254861-tips-for-getting-a-mortgage-in-2009

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