Barbados Real Estate Resources
Why Use CIP
Where to Start
17 Steps to a Successful First-Home Purchase
How Much Can You Afford?
Buying Your New Home
Making an offer
What is the single most important rule in looking for a home?
What should I ask a prospective agent?
Real Estate glossary
Why use Caribbean Island Properties?
When you choose CIP to sell your home or help you purchase a new one, you'll experience an exemplary level of
service.
First, CIP offers individual attention to each and every customer, we are local experts with international experience.
We know our island but we also know that you expect first class service should
you choose to use us.
Customer Satisfaction
We at CIP pride ourselves on the level of service we offer. We will be happy to
put you in contact with one of our satisfied customers as a reference.
Competitive Advantage
Being able to focus on your needs by giving you the time and attention needed
to help you find or sell your property is how we make a difference.
Advertising
We advertise each week in the local press, in the local Property News magazine, on
Cariblist, on our own website and on websites in the UK. We are always looking for new
opportunities to reach more buyers for our clients.
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What would you recommend as the best first step in home buying?
Before you start looking at homes for sale, be sure you do some "homework." Here are
some of the questions for which you'll need answers:
- Check out interest rates
What are current local mortgage interest rates for 15-year and 30-year
fixed rate mortgages, and for 1-, 3- and 5-year adjustable rate mortgages?
- Shop for the best loan
Which type of loan is best for you? Will you be in the house several years
and benefit most from a long-term fixed rate, or do you want a lower,
short-term rate because you plan to move soon or expect your income to
increase rapidly over the next few years?
- Determine how much house you can afford
How much of a mortgage can you qualify for? The loan amount plus your down
payment tells you how much house you can afford.
- Investigate neighborhood prices
What neighborhoods feature homes in your price range?
- Separate needs from wants
What are your priorities for your next home? How important are public transportation, community facilities, on-street parking, lot size, privacy? How many bedrooms and baths will you need? Will you need a space for a home office? How important are quality neighborhood schools?
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17 steps to a successful first-home purchase
If you've decided it's time to buy your first home, you may be a little
overwhelmed about all the things you need to do and decide on. Here's a handy
list of steps you should take on the way to your new home.
1. Select a professional real estate agent
2. Investigate mortgage programs
3. Contact a reputable lender
4. Get pre-approved for a loan
5. Develop a "needs and wants" list for your house
6. Research housing inventory with your agent.
7. Tour homes
8. Pare down your choices using your "needs and wants" list
9. Write a purchase offer for the home with your agent
10. Negotiate the contract with the sellers
11. Sign the bottom line!
12. Prepare for the move
13. Hire movers; or
14. Get lots of boxes and invite all your friends to help
15. Complete final walk-through of the home
16. Attend settlement
17. Move in and celebrate!
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How much can you afford?
1. Lenders often use the 28/36 method of qualifying buyers
The monthly payment cannot exceed 28% of your monthly income, and the total of all
debt payments is limited to 36% of income.
2. The lender percentages are usually maximums
Not everyone can afford the largest home they qualify for. You need to look
carefully at your expenses and lifestyle to see whether you can and are willing
to pay the maximum month after month. Families with high medical expenses, auto
repair bills or educational costs, for example, may decide to take out a
smaller mortgage rather than borrow the most they can.
3. Ask us or a lender what the monthly principal and interest payment would be for the loan maount you qualify for at the prevailing interest rate
Add
in the monthly amounts for property taxes, homeowners insurance and homeowner
association dues, if any. Estimate utility, credit-card and car payments. Add
all these items to the monthly mortgage to get your total fixed expenses. Also
figure in some routine maintenance costs. Subtract the total from your monthly
income to get an idea of how much discretionary spending money you will have
left at the end of the month in your new home.
4. Don't put all your money into the new home
Plan
to have several months' worth of income in a savings account for emergencies
after you pay closing costs. Also, allow for new-home start-up costs such as
new furniture and draperies, paint and wallpaper, new tools and equipment, etc.
5. Look into the crystal ball
If
you foresee a loss of income or a growth in family size, you may want to be
more conservative in the amount you spend on your first home. On the other
hand, if you expect your income to rise, enabling you to reach a comfort level
after stretching your budget for a year or two, you may want to borrow the
maximum.
6. Consider moving up to a bigger home in steps, rather than all at once
After considering all the figures, you may decide to move into your first home, now,
even if it is not your dream home. In a few years, your dream home may be
within a comfortable reach.
Buyers Planning Guide
The table below shows how much 28% is at various income levels
Annual Income
|
Gross Monthly Income
|
Affordable Monthly Payment
|
|
$20,000 |
$1,667
|
$467
|
$25,000
|
$2,083
|
$583
|
$30,000
|
$2,500
|
$700
|
$35,000
|
$2,917
|
$817
|
$40,000
|
$3,333
|
$933
|
$45,000
|
$3,750
|
$1,050
|
$50,000
|
$4,167
|
$1,167
|
$55,000
|
$4,583
|
$1,283
|
$60,000
|
$5,000
|
$1,400
|
$65,000
|
$5,417
|
$1,517
|
$70,000
|
$5,833
|
$1,633
|
$75,000
|
$6,250
|
$1,750
|
$80,000
|
$6,667
|
$1,867
|
$100,000 *
|
$8,333
|
$2,333
|
|
For incomes over $100,000, add together the two appropriate lines |
Buying Your New Home
How much can you afford? Documents Needed, Importance of Credit & Getting Approved
You've decided to start fresh and purchase a new home. This is a very exciting time for you and we look forward to guiding you smoothly through this process, helping you to efficiently find the home of your dreams.
As you will see, there are several steps you need to take before you move into your new home. The Caribbean Island Properties HomeBuyer Guide is designed to inform you of your rights as a homebuyer and to introduce you to the world of real estate.
When using a Caribbean Island Properties representative, you will feel confident your search for a new home will be very successful.
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How Much Can You Afford?
Before you can begin to search for a new home, you need to determine your budget and estimate how much you can afford. One of the most important factors in figuring out your financial budget is getting pre approved for a mortgage.
What is a Mortgage?
The first step towards financing a new home is getting pre-approved for a mortgage. A mortgage is an advance of money from your lender that will cover the finances of your new property. Over an extended period of time, you (the mortgagee) must pay the bank back each month a percentage of the money they lent you plus interest, until the total sum is paid in full. This is how most homes are financed.
Documents Needed
When you apply for a mortgage, you will need to furnish information regarding your income, expenses and obligations. To save time, have the following items available for each borrower:
- Two most recent pay slips
- Last two months' bank statements
- Long-term debt information (credit cards, child support, auto loans, installment debt, etc.)
Repairing Credit Problems and Establishing Good Credit
At one time or another, most people have put blemishes on their credit reports.
If your credit report is tarnished, here are a few suggestions you can do to
repair the damage.
Examine the credit report thoroughly and make sure it's accurate. If there are
mistakes on the report, contact the credit report agency and ask them to remove
the mistakes immediately.
Here are some other helpful tips:
Begin to pay your bills on time and in full
Only use two to four credit cards so that you can keep track of them and do not spend more than your budget
Keep a separate checking and savings account
Hold on to the same job for a few years, the longer you stay put, the better Now that
you've examined your credit report and are confident that you're in good shape,
you're ready to choose between getting pre-approved for a mortgage or pre-qualified
for a mortgage. Here's the difference:
Pre-approval uses basic information as well as credit reporting to
determine whether a lender will loan you money. If you are pre-approved for a
mortgage, the lender has given you a commitment to support your new purchase.
Pre-qualification is not a
mortgage approval but simply an estimate of what you can afford. When you
pre-qualify for a mortgage, the lender also collects basic information
regarding your income, monthly debts, credit history and assets, and then uses
this information to calculate an estimated mortgage amount. The lender has not
yet committed to supporting your financial needs and, therefore, you have not
received an actual guarantee of funds.
People who are pre-approved for a mortgage are more attractive candidates to
the seller and have a better chance of getting the property when they make an
offer. Of course, a lender will only lend you money if they're sure your credit
is strong and they're confident you have the ability to pay them back. A bank
checks your credit by studying your financial history, income, pay slips, and
long-term debt information (such as credit cards, auto loans, child support, etc.)
to determine if you are a good candidate for a loan. If your credit report is
good, then you have an excellent chance of obtaining a mortgage. If not, then
you must take the appropriate steps to improve your credit rating.
Getting Approved Deciding Of course, a lender will only lend you money
if they're sure your credit is strong and they're confident you have the
ability to pay them back. A bank checks your credit by studying your financial
history, income, pay slips, and long-term debt information (such as credit
cards, auto loans, child support, etc.) to determine if you are a good
candidate for a loan. If your credit report is good, then you have an excellent
chance of obtaining a mortgage. If not, then you must take the appropriate
steps to improve your credit rating.
About Caribbean Island Properties
With considerable personal and professional experience in buying and selling
homes and properties both here in Barbados and overseas we at CIP are
ready and able to answer your questions and to help guide you through the
process of borrowing money to buy your own home. Give us a call on 246 424
6633.
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You've found the home
you want, now how much should you offer to pay for it? This can be a tricky
puzzle, because there are no carved-in-stone guidelines. Some homes are
overpriced, while others are a "real steal" at the full asking price. Here are some tips:
- Ask your agent for comparables
To determine a fair purchase offer, ask your agent to prepare a written comparative market analysis showing the sales prices of similar neighborhood homes that sold recently and the asking prices of comparable homes currently on the market.
- Compare the details
To calculate your best offer, compare the features of the home that interests you with the features of similar homes that have sold recently in the same neighborhood.
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What is the single most important rule in looking for a home?
While many important details must be considered in choosing your first home - style, size, price, location - one thing is certain: if you will be moving again in a few years, be sure you buy with selling in mind. Chances are, the items that make your new home a comfortable fit for you will also attract buyers later on.
Some special considerations for the first-time homeowner who has resale in mind:
- Watch for growth potential
Look for an established neighborhood that will be enhanced by future growth but not inconvenienced by it.
- Look out for resale value
Seek a prime neighborhood where homes sell well in any market.
- Check out location
Consider availability of all aspects of transportation; even those you may not use.
- Research Area Schools
Check for quality public schools, whether or not you have school-age children.
- Go for the green
Look carefully at the lot for trees and greenery to buffer winter winds or summer heat.
- Make room for visitors
See if ample guest parking is available for you and your neighbors.
- Ponder privacy issues
Consider how much privacy the home and lot provide.
- Drive the commute before you buy
Check morning and afternoon drive time to work, schools, shopping, churches.
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What should I ask a prospective agent?
For novice home buyers, the first place to start is by looking for a professional to help you. An experienced real estate agent will "bind" together the entire process and help you find the right property. Best of all, your real estate agent will keep things on track from shopping to closing.
Here are some key questions to ask the agents you are interviewing:
- Do you represent the buyer or the seller?
- What are your fees and who pays them?
- How much time will you have to help me look for a new home? What tasks will you perform for me as my representative?
- How often will you communicate with me, and how can I reach you?
- Will you refer me to some buyers you have represented recently?
- Do you have access to the area multiple listing service, foreclosed listings and other sources of information about available homes?
- Will you show me all the available homes in my price range, even if they are listed by another company?
- Will you give me a comparative price analysis for any homes I am considering?
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Real Estate glossary
A - B - C - D - E - F - G - H - I - J - L - M - O - P - R - S - T - U
Amenity
A feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural (such as location, woods, water) or man-made (such as a swimming pool or garden).
Amortization
repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years)
Annual Percentage Rate (APR)
calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan.
Application
the first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.
Appraisal
a document that gives an estimate of a property's fair market value; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.
Appraiser
A qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.
ARM
Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly payment amount, however, is usually subject to a Cap.
Assessor
a government official who is responsible for determining the value of a property for the purpose of taxation.
Assumable mortgage
a mortgage that can be transferred from a seller to a buyer; once the loan is assumed by the buyer the seller is no longer responsible for repaying it; there may be a fee and/or a credit package involved in the transfer of an assumable mortgage.
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Balloon Mortgage
A mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, the balance is due or is refinanced by the borrower.
Bankruptcy
a federal law whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay.
Borrower
a person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.
Building code
Based on agreed upon safety standards within a specific area, a building code is a regulation that determines the design, construction, and materials used in building.
Budget
A detailed record of all income earned and spent during a specific period of time.
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Cap
A limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease.
Cash reserves
A cash amount sometimes required to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.
Certificate of title
A document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims.
Closing
Also known as settlement, this is the time at which the property is formally sold and transferred from the seller to the buyer; it is at this time that the borrower takes on the loan obligation, pays all closing costs, and receives title from the seller.
Closing Costs
Customary costs above and beyond the sale price of the property that must be paid to cover the transfer of ownership at closing; these costs generally vary by geographic location and are typically detailed to the borrower after submission of a loan application.
Commission
An amount, usually a percentage of the property sales price, that is collected by a real estate professional as a fee for negotiating the transaction.
Condominium
A form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex; the owner also shares financial responsibility for common areas.
Conventional loan
A private sector loan, one that is not guaranteed or insured by the U.S. government.
Cooperative (Co-op)
residents purchase stock in a cooperative corporation that owns a structure; each stockholder is then entitled to live in a specific unit of the structure and is responsible for paying a portion of the loan.
Credit History
History of an individual's debt payment; lenders use this information to gauge a potential borrower's ability to repay a loan.
Credit Report
A record that lists all past and present debts and the timeliness of their repayment; it documents an individual's credit history.
Credit bureau score
a number representing the possibility a borrower may default; it is based upon credit history and is used to determine ability to qualify for a mortgage loan.
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Debt-to-Income ratio
A comparison of gross income to housing and non-housing expenses. With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income.
Deed
The document that transfers ownership of a property.
Deed-in-lieu
to avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn't allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure.
Default
The inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms.
Delinquency
Failure of a borrower to make timely mortgage payments under a loan agreement.
Discount point
normally paid at closing and generally calculated to be equivalent to 1% of the total loan amount, discount points are paid to reduce the interest rate on a loan.
Down payment
The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan.
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Earnest money
Money put down by a potential buyer to show that he or she is serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal.
Equity
An owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage loan(s)from the fair market value of the property.
Escrow account
A trust account created by a third party to hold money. A mortgage escrow account is an account set-up to pay taxes and insurance. Monthly mortgage payments may include 1/12 of annual property taxes and insurance. When the bills comes due, lenders use the money in the escrow account to pay them.
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Fair market value
The hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.
Federal Housing Administration (FHA)
Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.
Fixed-rate mortgage
A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.
Flood insurance
Insurance that protects homeowners against losses from a flood; if a home is located in a flood plain, the lender will require flood insurance before approving a loan.
Foreclosure
A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.
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Good Faith Estimate
an estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.
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Home inspection
An examination of the structure and mechanical systems to determine a home's safety; makes the potential homebuyer aware of any repairs that may be needed.
Homeowner's insurance
an insurance policy that combines protection against damage to a dwelling and it's contents with protection against claims of negligence or inappropriate action that results in someone's injury or property damage.
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Index
A measurement used by lenders to determine changes to the interest rate charged on an adjustable rate mortgage.
Inflation
The number of dollars in circulation exceeds the amount of goods and services available for purchase; inflation results in a decrease in the dollar's value.
Interest
A fee charged for the use of money.
Interest rate
The amount of interest charged on a monthly loan payment; usually expressed as a percentage.
Insurance
Protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium.
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Judgment
A legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditor's claim by providing a collateral source.
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Lease purchase
Assists low to moderate income homebuyers in purchasing a home by allowing them to lease a home with an option to buy; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.
Lien
A legal claim against property that must be satisfied when the property is sold.
Loan
Money borrowed that is usually repaid with interest.
Loan fraud
purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties.
Loan-to-value (LTV) ratio
A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.
Lock-in
since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.
Loss mitigation
a process to avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan
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Margin
An amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage.
Mortgage
A lien on the property that secures the promise to repay a loan.
Mortgage banker
A company that originates loans and resells them to secondary mortgage lenders such as Fannie Mae or Freddie Mac
Mortgage broker
A firm that originates and processes loans for a number of lenders.
Mortgage insurance
A policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price.
Mortgage insurance premium (MIP)
A monthly payment usually part of the mortgage payment paid by a borrower for mortgage insurance.
Mortgage Modification
a loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payments.
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Offer
indication by a potential buyer of a willingness to purchase a home at a specific price; generally put forth in writing.
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Partial Claim
a loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUD to bring their mortgage payments up to date.
PITI
Principal, Interest, Taxes, and Insurance - the four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.
PMI
Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.
Pre-approve
lender commits to lend to a potential borrower; commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.
Pre-foreclosure sale
Allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.
Pre-qualify
A lender informally determines the maximum amount an individual is eligible to borrow.
Premium
An amount paid on a regular schedule by a policyholder that maintains insurance coverage.
Prepayment
Payment of the mortgage loan before the scheduled due date; may be subject to a prepayment penalty.
Principal
The amount borrowed from a lender; doesn't include interest or additional fees.
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Real estate agent
An individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker.
Realtor
A real estate agent or broker who is a member of the NATIONAL ASSOCIATION OF REALTORS®, and its local and state associations.
Refinancing
Paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (such as a lower interest rate).
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Settlement
Another name for closing
Subordinate
To place in a rank of lesser importance or to make one claim secondary to another.
Survey
A property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc.
Sweat equity
Using labor to build or improve a property as part of the down payment.
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Title insurance
Insurance that protects the lender against any claims that arise from arguments about ownership of the property; also available for homebuyers.
Title search
A check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.
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Underwriting
The process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and a judgment of the property value.
