Things You Probably Don’t Know About Real Estate – Part 2

     This is the second in a three-part series to clear up common misconceptions about real estate.

You do NOT need excellent credit to buy a home

     Sure, good credit helps, but your credit score is only one of many factors that determines whether you qualify for a home loan. Lenders consider your whole financial picture to assess the risk of you defaulting on the loan. If you have steady income with very little debt and can come up with a large down payment, your not-so-great credit score may not matter so much. You may have to pay a higher interest rate on your loan, but you won’t be shut out of the market.

You CAN buy a home, even with outstanding student loans

     Student loans factor into how much money you can borrow, but they don't disqualify you outright. As mentioned above, qualifying for a home loan and how much you can afford depends on many factors.

You CAN buy a home if you're self-employed

     Lenders look at credit, debt, current finances, and predictable income. If you have a solid track record of profitability, you can qualify for a home loan.

Fall and winter can be GREAT times to buy

     It’s true that many sellers prefer to put their houses on the market in spring, when the weather is nice and families with children are interested in moving. However, as a buyer you can benefit from house shopping during fall and winter. Evaluating a potential home when it’s cold and wet outside allows you to answer questions such as: Is there enough insulation? Are the doors and windows weathertight? Is there evidence of leaks? Also, you have less competition because not everyone is interested in braving the cold to go house hunting or moving between Thanksgiving and Christmas.

Buying a fixer-upper doesn’t always save money

     Beware the lure of a do-it-yourself project. DIY home repair videos can make complex projects look easy. Saving money with a fixer-upper typically requires considerable skill and experience, a garage full of specialized tools and other building materials, and enough time to do the job right.

     Do you know carpentry, electrical, plumbing? Have you ever worked on heating and air conditioning systems or replaced a water heater? Even if you say yes to all this, remember time is money. If you’re a self-employed contractor, you have to ask yourself whether you want to work on your home where no one pays you for your time. Or does it make more sense to buy a home in good working order, freeing you up to do paid work?

A home sitting on the market does NOT mean something is wrong

      Sometimes a house sits on the market because the initial asking price was too high or because it has low curb appeal. People often overlook these hidden gems. Another reason a property may take more time to sell is because it has unique attributes that don’t work for everyone but may work for you.

A good lender can make a BIG difference

     Some people think all lenders are pretty much the same—not true! Many specialize in certain types of loan products and levels of skill and expertise vary. It’s worth shopping around. Ask your REALTOR for recommendations.

      As I’ve said before, I prefer to work with local lenders because they take care of you. They know their business depends on their reputation, and it keeps them on top of their game. Online lenders have no connection to our community.

Equity grows, even when you’re just paying interest on the loan

     Home equity is the portion of your home you effectively own: its current market value less the balance of your loan (and any other loans secured by the property). You can increase equity in your home by paying down the principal on the loan through monthly payments or a lump-sum payment (reducing what you owe and increasing your ownership stake). As market conditions change and home prices go up, your home appreciates (becomes more valuable). This also increases your equity, even if the balance on your home loan stays the same.

     Well-chosen permanent improvements can also raise the appraised value, but as I wrote in a recent article, returns differ by project, buyer preferences, and market conditions.

     If you have questions about property management or real estate, please contact me at [email protected] or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.

     Dick Selzer is a real estate broker who has been in the business for more than 50 years. The opinions expressed here are his and do not necessarily represent his affiliated organizations.