The Best Stress Fee Home Buyer’s Guide For Any Market

Most buyers who begin the process of looking for a home begin the journey filled with excitement and a bit of trepidation.

This is understandable when you consider that purchasing a home is one of the biggest financial decisions you will make during your lifetime.

Not only do we understand this, we believe that home ownership is something you can be proud of. We believe, it’s an honor and privilege to ensure that the home buying process is the most pleasurable experience possible.

Whether this is your first home or your tenth, this home buyer’s guide is intended to help you navigate the home buying process.

Let’s get started on the journey of getting you the home you want!

Top 10 Reasons To Buy A Home

1. Quality of Life – Homeownership is part of a better quality of life for most buyers. The quality of our living situation directly impacts how we feel.
2. Avoid the Tax Man | Tax Deductions – Buying a home helps you avoid the taxman with tax deductions for both mortgage interest and property taxes. Property taxes and qualified interest are deductible on an individual’s federal income tax return.
3. Spend Money to Make Money – With the right real estate consultant, homeownership and the potential for appreciation means that ultimately you have the opportunity to get a return on your investment.
4. Deferred Gain and Capital Gain Treatment – A homeowner can exclude up to $500,000 of capital gain tax if married and filing jointly or up to $250,000 if single or filing separately when you sell your home. The home must have been the taxpayer’s principal residence for the previous two years.
5. Principal Accumulation – As a homeowner, a portion of each amortized mortgage payment typically goes to principal, which in the long run is an investment.
6. It’s the American Dream – Owning a home is THE American Dream. We work with many first-time home-buyers, and it truly is a dream come true for them.
7. Independence – For many homeowners, one of the greatest freedoms is acquired through homeownership. They can get rid of their landlord and are no longer surrounded by neighbors in an apartment with thin walls. The freedom to do whatever they wish with their homes is a big incentive for many new homeowners.
8. Leverage – At the current interest rates, you can put your money to work somewhere else. These days you can still purchase a home for as little as 3.5% down.
9. Why rent when you can own? The real cost of renting at $700 per month with a 6% rental increase per year means you will pay $110,719 over 10 years. Just think, you could almost pay off a home mortgage for that amount!
10. Because you get to work with us!

5 Buying Tips When Purchasing A Home

These 5 home buying tips will save you time, money, and headaches.

1. Get Pre-Qualified – before you can seriously consider purchasing a home, it’s important to know exactly how much you can afford. This can be the scariest part of the buying process for some. It’s perfectly natural to be nervous, but we can put you in touch with someone you can trust to help get you pre-qualified.
2. Always Think Resale – In the US, due to the mobility of our economy, the length of ownership is about 5 to 7 years. This is important to keep in mind when looking for your next home. For instance, homes backing up to a busy street or railroad sell for less and take longer to sell than other homes in the neighborhood.
3. Aesthetics Can Be Changed – flooring, light fixtures, plumbing, paint colors, and wallpaper can all be changed. Don’t let the lime green wallpaper turn you off from your potential dream home. Think of how much fun it will be to make a home yours!
4. Don’t WAIT! – too often, we have seen home buyers fall in love with a property, wait a few days to decide because they are nervous, and the home that they fell in love with SOLD! If you love the home, don’t wait for someone else to live in YOUR home – be prepared to write an offer!
5. Compare Sales – to determine the best price to offer, or to know if the asking price is correct, look at the recent sales of similar homes, called “comparable sales.” Comparable sales are recent sales of homes that compare closely to the one you are looking to purchase, usually sold in the past few months. Specifically, you want to compare the prices of homes that are similar in square footage, garage spaces, number of bedrooms and baths, lot size, etc. Let us help you with a Buyer’s Market Analysis.

9 Critical Questions To Ask An Agent Before You Buy

Now that you have a background regarding the Reasons to Buy a Home and 5 Buying Tips, the question is how will you be able to make sure that you not only find your dream home but that you ensure that the real estate agent you choose to represent you has the knowledge and expertise to help you with the biggest financial decision you will make in the next 5 years?

Unfortunately, many people choose a real estate professional based on the idea that all real estate agents are basically the same. They sign with the first agent to come along, only to realize too late that they should have “shopped around.”

The following questions are designed to help you avoid that mistake by equipping you with what to look for when selecting an agent to represent you.

First, start by asking friends, acquaintances, and/or family for the names of real estate agents they know. A personal referral is the absolute BEST way to select your professional real estate agent. Once you have compiled a list of names referred to you based on a great experience, use this home buyer’s guide to help you determine which agent is the best for YOU. We recommend interviewing at least 2-3 real estate agents.

Here are the questions you should ask each agent:

1. Can you send me some information about yourself?
   Look for professionalism and consistency.
2. How do you approach your work?
   Look for a business person that has a strategy and a team to work with.
3. What is the dollar volume of homes you have sold in the last year?
   Beware of agents who use their company status vs. their own. The only exception is for new agents up to 1 year in the business. They will get good guidance from their Broker or more experienced agents so you will be taken care of.
4. Do you have a personal assistant or other support staff working for you?
   Most top agents employ (out of their own pocket) an assistant or staff. It is imperative that the agent has support in order to take care of the details of the transaction. How can your agent be actively showing homes to clients and working on the details of your closing at the same time? Things will fall through the cracks and that could cause critical problems for you.
5. What will you do to keep me informed?
   Do you want daily or weekly reports from your agent? Will the agent be able to meet these expectations? Determine how much communication you want, and then find an agent who will give you the attention and time you want and deserve.
6. Can you provide me with further resources I may need?
   The best agents have built strong relationships with their “Teams” and can often get expedient service or be able to “cash in a favor” for you should a crunch or problem arise.
7. Can you give me some references from other clients you have worked with?
   Don’t be afraid to ask for references. An agent who provides raving fan service and is proud of their work will be happy to provide references. Look at their ratings and reviews on sites like Google, Zillow, and Yelp.
8. What is the best way for me to get in touch with you?
   You should know exactly how to get through to your agent or assistant.
9. Are you a fiduciary? And how will you represent my best interests?
   Absolutely do not hire someone that you don’t believe will always represent YOUR best interests. Have your agent give you examples of how they represent their client. Remember that finding the home is the easy part, true representation begins when you sign a contract and continues through negotiation and closing. Ask around for horror stories and you will find that they don’t involve the home search BUT after the contract was signed!

Home Buying Process: 10 Steps To Buying A Home

1. Get pre-qualified with a lending specialist
2. Shop for your dream home with an accomplished real estate professional
3. Choose a top 2 list
4. Place an offer on #1
5. Be prepared for a counteroffer
6. Sign and date the effective contract
7. Take note of the option period
8. Order inspections and negotiate repairs
9. Terminate or proceed with the contract
10. After final approval, go to closing to sign and own your new home

In addition to the 10 steps to buying a home you will need to consider the following up-front costs in order to determine if you have the appropriate cash reserves to get started:

• Earnest money – typically 1% of the sales price – the amount of earnest money is negotiable and varies with the value of the property
• Option money – $100 – $350
• Inspection fee – $400 – $450
• Appraisal – $325-$425
• Credit report – $75

Now that you know the upfront costs, let’s explore what you will need in order to determine your buying power and how to get pre-qualified for financing.

The Pre-Qualification & Pre-Approval Processes

Now that you know you want to buy a house; how do you know how much you can afford and if you can qualify for a loan? The way to get started is to go through the pre-qualification and pre-approval process with a lending specialist.

Pre-Qualification versus Pre-Approval

1. Pre-Qualification is how much money a bank will lend you based on your income, assets, and debts. Pre-Qualification is typically done over the phone with a lending specialist. This is the first step to getting started in the home buying process. The lending specialist will do a minimal credit review over the phone which means discussing your credit background. When you begin the Pre-Approval process the lending specialist will check your credit but during Pre- Qualification, they will simply gather basic information regarding your financial and credit situation.
2. Pre-Approval is a more formal process and includes completing a loan application online and providing documentation regarding income and assets. During the Pre-Approval process, the lending specialist will ask for authorization to check credit in order to analyze debt ratios. Pre- Approval is typically done when you start looking for houses with a real estate agent or prior to writing an offer.

What Factors Affect What I Can Afford?

There are three factors that affect how much you can afford when you decide you would like to buy a home.

1. The down payment – do you have enough liquid cash to make a down payment?
2. Your ability to qualify for a loan – as mentioned earlier this is determined during the Pre- Qualification & Pre-Approval Process
3. The associated closing costs on your home.

How Much is My Down Payment? Most loans today require a down payment between 3.0% to 20%. Contrary to what many people think, there are still loans that have lower down payment requirements depending on the type and terms of the loan. Keep in mind, if you can come up with 20-25% down you will eliminate mortgage insurance.

How Much are Closing Costs?

You will be required to pay fees for acquiring the loan and other closing costs. These fees must be paid in full at the closing unless you are able to include them in your financing. Typically, closing costs will range between 3-6% of your mortgage loan.

What Does my Monthly Mortgage Payment Include?

Most lenders require that your monthly payment range between 29-36% of your gross monthly income. Your mortgage payment to the lender includes the following:

• The principal on the loan (P)
• The interest on the loan (I)
• Property taxes (T)
• The homeowner’s insurance (I)

This is what we call PITI and your total monthly PITI and all debt (from installments to revolving charge accounts) should range between 36-45% of your gross monthly income. These key factors determine your ability to secure a home loan: Credit, Assets, Income, and Debt Ratios.

How Much Home You Can Afford

Use the following chart to determine your monthly principal and interest payments at various interest rates for either a 15 or 30-year term:

1. Find the appropriate interest rate from the chart above.
2. Look across the column to the appropriate term to determine your interest rate factor.
3. Multiply the interest rate factor by your loan amount in $1,000s.

Example:

• Interest Rate = 6.5%
• Desired term = 15 years
• Interest rate factor per $1,000 = 8.71
• Mortgage = $200,000
• Monthly Principal & Interest = $1,742 (8.71 x 200)

Add your monthly insurance premium and your property tax to your principal and interest to determine your total monthly payment.

The above information is provided as a home buyer’s guide. We strongly recommend that you contact our lending specialist to determine exactly how much you can afford.

Loan Application Checklist

Most lenders will have you go online to apply in order to gain pre-approval. Following is the information you need to provide during the loan application process (these documents are usually uploaded to the lending specialist through a secured link):

General

• Non-expired Government ID and Social Security Number
• Name and a complete address for past 2 years of residence

Income

• Employment history, including names, addresses, and phone numbers for the past 2 years.
• Copies of your most recent pay stubs and W-2 forms (past 2 years).
• Verification of other income (social security, child support, retirement).
• Copies of signed tax returns including all schedules (past 2 years).
• Social Security & Pension Award letters.
• If you have rental property income: Copies of all signed lease agreements.

Assets

• Copies of all bank statements from checking/savings accounts (past 2 months).
• CD certificates and statements for retirement accounts (most recent 2 months or quarterly statement).
• Gift funds will need a gift letter as proof of gift.

Creditors

• Credit cards (current balances and monthly payments).
• Installment loans (car, student, etc.).
• Mortgage loans (property address, lender with address, account numbers, monthly payment, and balance owed on all properties presently owned or sold within the last 2 years). Bring proof of sale for properties sold.
• Childcare expense/support (name, address, phone number). [VA loans only]

Other

• Bankruptcy – bring discharge and schedule of creditors.
• Adverse credit – bring letters of explanation.
• Divorce – bring your Divorce Decree, property settlements, quitclaim deeds, modifications, etc.
• VA only – bring Form DD214 and Certificate of Eligibility.
• Retirees – bring retirement and/or Social Security Award Letter.

Hassle-Free Loan Process

Our preferred lending specialist provides the following 4-step process:

10 Commandments When Applying For A Real Estate Loan

Last but not least, these are important rules to follow to ensure a smooth loan process.

1. Thou shalt not change jobs, become self-employed or quit your job.
2. Thou shalt not buy a car, truck, or van (or you may be living in it)!
3. Thou shalt not use charge cards excessively or let your accounts fall behind.
4. Thou shalt not spend money you have set aside for closing.
5. Thou shalt not omit debts or liabilities from your loan application.
6. Thou shalt not buy furniture.
7. Thou shalt not originate any inquiries into your credit.
8. Thou shalt not make large deposits without first checking with your loan officer.
9. Thou shalt not change bank accounts.
10. Thou shalt not co-sign a loan for anyone.

We hope you have found this home buyer’s guide valuable. When you are ready, give us a call!