Buying A Home

Do you want to get the best property you can for the least amount of money? Then make sure you are in the strongest negotiating position possible. Price is only one element in the negotiations, and not necessarily the most important one. Often other terms, such as the strength of the buyer or the length of escrow, are critical to a seller.In years past, I always recommended that buyers get “pre-qualified” by a lender. This means that you spend a few minutes on the phone with a lender who asks you a few questions. Based on the answers, the lender pronounces you “pre-qualified” and issues a certificate that you can show to a seller. Sellers are aware that such certificates are WORTHLESS, and here’s why! None of the information has been verified!Many times unknown problems can come to the surface! Some of the problems I’ve seen include recorded judgments, alimony payments due, glitches on the credit report due to any number of reasons both accurately and inaccurately, down payments that have not been in the clients’ bank account long enough, etc.So the way to make the strongest offer today is to get “pre-approved”. This happens AFTER all information has been checked and verified. You are actually APPROVED for the loan and the only loose end is the appraisal on the property. This process takes anywhere from a few days to a few weeks depending on your situation. It’s VERY POWERFUL and a weapon I recommend all my clients have in their negotiating arsenal.

If you have a house to sell, sell it before selecting a house to buy! Contingency sales aren’t nearly as strong as one that comes in with a ready, willing and able buyer. Consider this scenario: You’ve found the perfect house – now you have to go make an offer to the seller. You want the seller to reduce the price and wait until you sell your house. The seller figures that this is a risky deal, since he might pass up a buyer who DOESN’T have to sell a house while he’s waiting for you. So he says OK, he’ll do the contingency but it has to be a full price offer! You have now paid more for the house than you could have because of the contingency, and you have to sell your existing house in a hurry! Otherwise you lose the house! So to sell quickly you might take an offer that’s lower than if you had more time. The bottom line is that buying before selling might cost you THOUSANDS of dollars.If you’re concerned that there is not a house on the market for you, then go on a window-shopping trip. You can identify possible houses and locations without falling in love with a specific house. If you feel confident after that then put your house on the market.Another tactic is to make the sale ”subject to seller finding suitable housing”. Adding this phrase to the listing means that WHEN YOU DO FIND A BUYER, you will have some time to find the new place. If you don’t find anything to your liking, you don’t have to sell your present home.

Before house hunting, make a list of things you want in the new place. Then make a list of the things you don’t want. You can use this list as a guide to rate each property that you see. The one with the biggest score wins! This helps avoid confusion and keeps things in perspective when you’re comparing dozens of homes.When house hunting, keep in mind the difference between ”STYLE AND SUBSTANCE”. The SUBSTANCE are things that cannot be changed such as the location, view, size of lot, noise in the area, school district, and floor plan. The STYLE represents easily changed surface finishes like carpet, wallpaper, color, and window coverings. Buy the house with good SUBSTANCE, because the STYLE can always be changed to match your tastes. I always recommend that you imagine each house as if it were vacant.Consider each house on its underlying merits, not the seller’s decorating skills.

Your agent should show you everything available that meets your requirements. Don’t make a decision on a house until you feel that you’ve seen enough to pick the best one.A decade ago, homes were selling quickly, usually a few days after listing. In that kind of market, agents advised their clients to make an offer ON THE SPOT if they liked the house. That was good advice at the time. Today there isn’t always this urgency, unless a home is drastically underpriced, and you’ll know if it is.Don’t forget to check into the SCHOOL DISTRICTS of the area you’re considering. Information is available on every school; such as class sizes, % of students that go on to college, SAT scores, etc. You can get this information from this web site.

Please note – ads are sometimes created to make the phone ring! Many of the homes have some drawback that’s not mentioned in the ad, such as traffic noise, power lines, or litigation in the community. What’s not mentioned in the ad is usually more important than what is.For this reason, I want you to be very careful when reading ads. Remember that the person writing the ad is representing the seller and not you! The most important thing you can do is have someone on your side looking out for your best interests. Your own agent will critique the property with an eye towards how well it meets your needs and will point out any drawbacks you should know about. So whether you decide to work with me or not, pick an agent you feel comfortable with and enlist the services of that agent as a buyer’s broker. Then you become a client with all the rights, benefits, and privileges created by this agency relationship, and you’re no longer just a shopper. Did you know that many homes are sold WITHOUT A SIGN ever going up or an AD EVER BEING PUT IN THE PAPER? These “great deals” go to those people who are committed to working with one agent. When an agent hears of a great buy, whom do you think he’s going to call? His client, who he has a legal obligation to work hard for you, or someone who just called on the phone and said “keep your eyes open”? So to get the best buy on a property, I always recommend that you hire your own agent and stick with him or her.

If you’re new too investing or real estate and don’t know the first thing about interest rates, here’s a good tip: the higher the interest rate, the more expensive it’s going to be. High interest rates mean you will have to pay back more on the money you borrow. Another good rule of thumb is that affordability increases if you use an adjustable rate mortgage (it’s easier to qualify this way). Of course, there will be a wide range of prices that you can choose from, depending on what kind of financing you choose.

The Fed holds a considerable amount of power, but they can’t control everything. Mortgage interest rates are affected by many unpredictable political, economic and social events. So there is no guarantee what direction interest rates will go, despite the forecasts of the experts. Therefore, make your financial decision based on where things are today including your budget, your needs and your future plans.

If you do decide you want to lock in at a certain interest rate, you will need to complete a loan application and send it to your lender as soon as possible. This must be done so that your commitment doesn’t run out before your loan is approved. Follow up and be se sure that the lender is receiving all of the necessary documentation. Get a property appraisal, which usually costs about $300, through your loan agent as soon as possible.

Although rising interest rates can create more problems for home buyers, waiting and hoping for low rates is not necessarily a smart move. You may end up paying a higher price. Also, refinancing is always an option in the event that interest rates come down.

1. If you have to resell soon, don’t buy an unusual home.

2. Even if the quality of a school district doesn't matter to you now, remember it might someday to another buyer.

3. Expect lower maintenance costs with a brand-new home.

4. Never tell a seller’s broker how much you’ll raise your offer for a particular house.

5. When interest rates are low opt for a fixed mortgage.

6. Pay attention to floor plans. Changing layouts of rooms later can be costly.

7. You can deduct on that year’s tax return points paid by either party on the purchase of your own residence.

8. If the present owner has a title insurance policy less than 3 years old, you could have substantial savings by buying a reissue of that policy rather than a completely new one.

9. Pay attention to the original listing date of the homes you inspect; Sellers tend to be more flexible in the price the longer the home is on the market.

10. A house that’s sited to take advantage of the sun, the wind and the typography costs less to heat and cool and can save thousands of dollars over the years in utility bills.

11. Buying a house whose style is uniquely individual will probably minimize rather than maximize its resale value because the house will appeal to a somewhat more limited number of potential buyers.

12. If you think you may need more space in the near future, be sure the house and lot will allow for expansion.

13. Redoing a kitchen is likely to be expensive. So be sure of what you need and want before you buy.

14. Don’t buy a house with foundation problems. Although most foundation problems can be corrected, repair work is usually expensive.

15. Before you buy a house that may have a wet basement problem, get a good unbiased diagnosis from a professional with moisture control experience. The solution could be costly.

16. A roof that complements the style of a home and is carefully maintained adds to the home’s visual appeal and its resale value.

17. A light-colored roof reflects heat and is best in areas where air-conditioning is the greater energy user. In colder weather climates, a dark roof is preferable because it absorbs more heat. In temperate climates, a middle-range shade is best.

18. The three most popular wall choices are brick, wood siding, and stucco. About half of all home shoppers prefer brick for exterior walls; about one-third prefer wood siding, and about one-fifth prefer stucco.

19. Wood floors suggest warmth, quality and good taste and are an asset when it comes time to sell a house.

20. Most home shoppers prefer a combination of ceramic tile and vinyl wallpaper as a covering for bathroom walls, creating a positive effect on the house’s resale value. Ceramic tile is usually installed wherever water comes in contact with the wall.

21. Plant deciduous trees, shrubs and vines on south and west sides of the home to provide shade in the summer and sunshine in the winter. Remember trees enhance the beauty and value of a lot and house.

Buying a residence can be a hair raising experience. You will experience a roller coaster of emotions while finding the right place, securing the loan and finally moving in. For most of us, the first time home purchase is the largest investment we’ve ever considered. The emotions of purchasing something so expensive and personal can often cloud our business judgment. Most home purchasers do little or no research before they invest their nest egg. Doesn’t it make sense to become as completely informed as possible before you buy your first home? This special report is designed to help you avoid 10 common and crucial mistakes. The right real estate professional can help you make good sound business decisions based on your personal situation. 

1. Inspect, Inspect and Inspect – Go over the inspection report with a fine tooth comb. Make sure the report was done by a professional organization. For condo purchases go over the CC&Rs, By-Laws, and Association Fees. Don’t take anything for granted… inspect everything! 

2. Imagine the Property Vacant – Your furnishings and decorations will be the ones filling this new residence. Don’t, Don’t, Don’t be swayed by beautiful furniture; it leaves with the owner! 

3. Income + Lifestyle = Mortgage Payment – Sit down with your professional real estate agent and honestly discuss your income level and living expenses. Take into account future considerations, children, add-ons, amenities, and fix-ups. Your dream home is certainly worth a sacrifice but don’t mortgage your entire future. 

4. View Several Homes – See at least 7-10 properties. Don’t move too slowly but don’t move on the first property you see. With your agent’s help you should be able to view enough properties to get a good overall perspective of the home market. When you find the right property all the legwork will be worth it. 

5. Utilize Your Team – By aligning yourself with the right real estate professional you will have an entire team at your disposal. Utilize your lender, title rep and agent. Each of them should work hand in hand for your benefit. Explore all the options before you sign. 

6. Be Columbo – Check out all costs and expenses before you sign. Utilities, taxes, insurance, maintenance and homeowner dues if applicable. Make sure all utilities (gas, electricity, and water) are on during your walk-through so you can inspect everything in working order. Ask lots of questions and be very detail conscious. 

7. Do a Final Walk-Through – Visit the property after all furnishings have been moved out to be sure there are no surprises. Be absolutely positive the property was left exactly as you had agreed upon in the contract. Things that could have been spotted in a final walk-through are often unintentionally overlooked. 

8. Plan For Flexibility – Closing dates are not written in stone. Allow for contingencies and have a back-up plan. If you or the sellers need a little more time to conclude the final arrangements, don’t let these delays upset or frustrate you. These types of circumstances are not uncommon in a real estate transaction. 

9. If It’s Not In Writing, It Doesn’t Exist – All promises and discussions should be in writing. Don’t make any assumptions or believe any assurances. Even the best intentions can be misinterpreted. Have your professional keep an ongoing log in writing of all discussions and get the seller's written approval on all agreements. 

10. Loyalty Breeds Loyalty – Be open, honest and upfront with your team. Hard feelings and disloyalty will cause headaches, delays or may even keep you from getting into the home you worked so hard to locate. Take the time to select the right team in the beginning and your first home purchase will be a pleasing and memorable experience.  

Doing research on how to buy a home is itself an investment – in time. On the one hand are the shelves of books on the subject – helpful, yet sometimes tedious in their detail. On the other hand are specialty Websites with short, sharp home-buying tips that sacrifice depth and introduce pop-up invitations to apply for mortgages, credit reports, or real estate listings. Even the most hardened researcher can have a tough time telling the forest from the trees. If you are gearing up to buy a house, you may need at least one self-help guide, if only as an anti-jargon dictionary that will help you tell your ARM from your JUMBO.

The professionals are gung-ho to entice you into the real estate world. The government offers big tax incentives; banks compete to loan out massive mortgages while realtors woo from here to eternity to get new clients.

What most buyers, especially first-timers, do not realize is that they are doing the government, the banks, the Realtors, the construction industry, and the overall economy a favor. If owning a home seems synonymous with the American Dream, it could be because fencing solid citizens inside a white picket mortgage for 30 years is very good for business. Apart from feeding the earnings of bankers, builders, Realtors, inspectors, lawyers, and insurers, a new homeowner usually forks out lavish amounts on furnishings, appliances, home decorating, gardening, and a whole slew of ancillary products that bolster the local economy.

“If there’s one thing I could have changed about our home-buying experience, it would be my own attitude,” says Paul Hardiman, who with his wife Katrina Connolly purchased a first home last year. “We were so anxious about the process itself, getting the down-payment, finding a mortgage broker and then a realtor and so on, that we never truly realized these people were working for us, and not the other way around. Had I stopped to think about it at the time, I would have demanded a lot better service.”

“It’s not so much that we were taken advantage of,” said Connolly, “but we probably would have gotten more house and better service for our money had we been more assertive. But we were overwhelmed. After months of looking around we saw there was a squeeze in our price range and that affected our judgment. The brokers, Realtors – everyone we dealt with were all upbeat and kind of hurried, like if we slowed for a second we’d lose something. That damaged us in the negotiations.”

John Adams, a broker, investor and author on real estate, agrees “in the world of real estate sales, you are the most important person in the entire process. It’s easy to think everyone else carries more weight than you. The seller owns the house and has all the money. The agent talks fast and has an answer for everything. The lender may decline your loan application, and on and on. But the truth is that you, the buyer, are the one person in this transaction who makes it all happen. If you decide to not buy, the entire process comes to a grinding halt.”

Adams urges buyers to flex their consumer muscle by doing basic research to ensure they understand everything that is happening around them. “Just because we don’t apply for a 30-year mortgage once a week doesn’t mean we have to take the first one that comes along,” he said. Adams advises buyers learn new terms, apply new concepts, and take the time to understand what you’re getting into. And when something happens that doesn’t make sense, demand a full and complete explanation from the professionals working on your behalf, he said.

“If you plan from the beginning to approach the home buying process intelligently and with confidence,” Adams said, “you are more likely to emerge at the end of the day with a house you’ll be proud to call home, and the knowledge that you made the right decision.”

You are about to make what will most likely be the largest transaction of your life: your home mortgage. Unfortunately, many homebuyers do not take the time to research some of the little but weighty intricacies of mortgages. Researching the mortgage process takes little time compared to the tens of thousands of dollars it could save you.

Doesn’t it make sense to become as completely informed as possible before you buy your next home? This special report is designed to help you avoid nine common mistakes. Remember that the right lender can help you make good, sound business decisions based on your personal financial situation.

1. Find a Reputable Lender This is the most important choice you can make when starting the mortgage process. If you don’t trust your lender, you are in for a long and stressful home-buying experience.

2. Pricing Don’t be lured into a mortgage company strictly by promises of low rates. Find out how long the advertised rate is guaranteed for. Make sure there is enough time to close on your loan. Some companies may make these “promises” but will try changing the rate prior to closing. They may claim that your “lock-in” rate has expired so make sure you have the expiration date in writing. In some cases, the lender may even try to delay your closing to break the “lock-in” rate. In other cases the delay may be beyond the lender’s control. Make sure to allow yourself plenty of time for closing. Delays in the process are common and everyone (builders, title companies, even yourself) is responsible.

3. Programs You will see several programs that offer special low-interest rates. Keep in mind that they may not be the best programs for your situation. Make your lender explain what programs they feel best serve your needs and more importantly, why.

4. Fixed or Adjustable Rate Mortgage (ARM) Conventional thinking is that fixed is always better and while this is sometimes true, it is not always the case. The key here is to ask, “How long am I going to live at this property?” An ARM can actually be a better choice if you are going to be in the home for a short time. The average for how long a first time homebuyer keeps their mortgage is less than four years. In general, the longer you plan on staying in your home, the better a fixed rate mortgage will suit your needs.

5. Don’t try to bottom out the market Deciding when to lock in to a mortgage rate can be difficult. Many people will float, trying to guess when rates have hit bottom. Unfortunately, a lot of times they will wait too long and end up with a much higher interest rate. There is nothing wrong with floating but keep a close eye on economic indicators. Your daily newspaper or even the nightly news can be an excellent source of information on the latest interest rate activity. As closing nears, it might be worth locking in.

6. Negotiate problems prior to closing Its common for a problem to arise before closing. Waiting until closing will rarely be in your best interest. For instance, if you accept $400 at closing in lieu of the seller making a repair and after closing you find that the repair will actually cost $600, you’ve obviously made a poor decision. Whether the builder agreed to add an item and has not or the seller has made a repair that is not acceptable to you, discussing a solution prior to closing will give both parties time to analyze and determine options.

7. Be prepared for closing costs In addition to the down payment, you will be required to pay fees and other closing costs at the time of the final transaction. Closing costs typically range from 2 percent to 6 percent but will be dependent upon your situation. Lenders must provide you with a “Good Faith Estimate.” The “Good Faith Estimate” will breakdown all costs so that you may know what to expect at closing.

8. Close at the end of the month When making a mortgage payment, you will be paying interest that has accrued from the previous month. Upon closing however, your lender will charge you prepaid interest for the date the loan is recorded through the end of that month. Therefore, one way to lower your closing costs is to close in the latter part of the month. This will lower the amount of prepaid interest that you must pay.

9. Look out for hidden fees Check for certain miscellaneous fees such as inspection, notary, and document preparation. These types of fees can mean hundreds of dollars in closing costs. Remember that this is your money at stake. Never should you be afraid to ask for explanations of fees you are being charged.

Income. Debt. Down Payment. Closing Costs. Two Years Income Tax Returns. Assets. Liabilities. IRAs. You want WHAT? Just what can I afford?

Buying a home in today’s marketplace is a bit intimidating. And your new home purchase is likely to be one of the most important decisions you’ve ever had to make. Usually it’s one of the single most valuable assets you’ll own.

Before you invest hundreds of hours searching–and to avoid any heartbreak if you find yourself unable to qualify for your dream home–sit down with a lender. Your lender can perform a simple verbal prequalification in about twenty minutes and a full-fledged prequalification in about 5 days.

Pre-qualification not only allows you to focus your search in the correct price range, saving a lot of wasted time and frustration, but it can also give you an edge when competing with other offers on a home that you find. If a seller is deciding between two offers, yours who has been qualified and another unqualified offer, they are much more likely to pick yours. Pre-qualification will also give you leverage when negotiating with a seller in a non-competitive atmosphere; it essentially makes you a cash buyer.

The amount of home that you qualify for will be determined by three key factors: your down payment, your ability to qualify for a mortgage and closing costs.

Whereas a current homeowner can rely on equity from their home sale, a first time homebuyer is limited to the money they can save. The days of having to put 20 percent down on a home are in the past, although putting a large amount of money down definitely makes it easier to qualify for a mortgage and to get the lowest interest rates available. With the various programs that are available today, you can put as little as 3 percent down on a home.

There are two basic guidelines that lenders use to determine what size mortgage you are eligible for:

1. Your monthly mortgage payment of principal, interest, taxes and insurance (PITI) should not exceed 25 to 28% of your monthly gross income.

2. Your monthly housing cost (PITI) plus other long-term debt should not exceed 33 to 38% of your monthly gross income.

Specifically, most lenders will consider 4 key factors to determine your ability to qualify for a home loan:

1. Income This first element can include not only your gross monthly income and secondary income (commissions, bonuses) but also your history of employment, stability of income, education, even potential for future earnings.

2. Credit History This encompasses your history of debt repayment, total outstanding debt, highest balance, and your highest monthly debt balance.

3. Assets Your assets consist of cash on hand, savings and checking accounts, CDs, stocks, bonds or any other type of liquid asset.

Property The home you are planning to purchase will be appraised to determine the market value. The estimated value must be sufficient to secure the loan. Lenders will loan you no more than a certain percentage (usually 95%) of this value.

Keep in mind that in addition to your down payment, you will also be responsible for paying fees for the loan and closing costs. These will be required at the time of closing unless you qualify and choose to have these included in your financing.

  • Closing Costs generally will range between 2 percent and 6 percent of the mortgage loan, depending on the loan and lender. You will be provided with a “Good Faith Estimate” of closing costs so you can know what to expect.

  • “Points”, which are one-time charges equal to one percent of your loan amount, may be required by your lender at closing.

Your closing agent will charge a fee at the close of the sale.