Straight Talk About Real Estate

We are finally at the last step of the home buying process! It has been a long road. There were probably several obstacles that you had to overcome. You may have had problems with the loan process, or the home inspection, or with coordinating the move. Problems during a transaction are normal. It is rare to experience a transaction that went perfect. There is always something unanticipated that comes up. Do not lose sleep over these problems. There are always ways to solve it.

In this last article on the buying process, I want to talk about moving into your new home. If you are purchasing a resale (not a brand new development), I can guarantee you there will be something wrong with the house. It may be something minor like a dent in the wall or stain on the carpet you did not see before. It may even be a more major issue such as a plumbing or electrical problem. Do not panic!

Remember, you are buying a used house. It is like buying a used car. Anything that goes wrong can be fixed. If a home warranty plan was purchased, be sure you call the home warranty company first. If it is covered by the plan, you will only have to pay for the service fee of about $50.

If you discover a problem within the first few days, and it looks like a pre-existing condition that was not disclosured by the seller, contact your agent and see if it is something the seller should be responsible for.

Do not assume that the seller should have the house in perfect condition for you, and anything that goes wrong is the responsibility of the seller. As I said, you are purchasing a used house. I’ve seen incidences where everything worked fine at the final walk through, but when the buyers moved in, the air-conditioning stopped working. In my own purchase, the pool filter went out within a month after we moved in. That is a normal part of homeownership.

You will experience many more such challenges (or headaches!) owning your own home. But remember, the benefits of home ownership outweighs all the problems. Don’t let the fixing and cleaning overwhelm you. Sit back and enjoy your home. Reflect on how fortunate you are to be one of the few who can actually hold a title deed to your own home.

Want to jump quickly to the other Buying posts? Here’s an index to help you out.

#1: Getting ready to buy
#2: Looking at finances
#3: Checking your credit
#4: Qualifying for a loan
#5: Determining the price to shop for
#6: Finding the location
#7: Proximity to your workplace
#8: Choosing your agent
#9: Cautions in the search
#10: Moving into your new home

As you begin your search for your house, there are three cautions:

1. Do not make any changes in your financial status or your employment status.
I’ve had clients charge new furniture on their credit card in anticipation for the move, and thus affected their loan qualification. Another buyer of mine lost his job and failed to tell me because he expected to get another job fairly quickly. Such information, even if it is a positive change such as a pay increase or promotion, need to be communicated to the lender and agent. You want to make sure the paperwork is current, and everyone who is working for you have accurate information. You do not want surprises during escrow.

2. Do not try to find the perfect house. There will be things in a home that you like, and that you will not like. Even if you built your own custom home, you will find things you don’t like after you lived there for a while. If the house meets your basic requirements and is in the location you want within your price range, do not be afraid to make an offer.

3. Do not be afraid to ask questions. As a agent who has done hundreds of transactions, I sometimes assume my clients know what I mean when I use real estate terms such as title, escrow, deposit, etc. I rather my clients ask me than be confused. If you want more information about such things as the neighborhood, the schools, the homeowner’s association, your agent may not know all the answers, but he/she should be able to direct you to the proper sources.

Now you’re ready to go! What’s the final step? How will I close out the series? Read on to find out!

Want to jump quickly to the other Buying posts? Here’s an index to help you out.

#1: Getting ready to buy
#2: Looking at finances
#3: Checking your credit
#4: Qualifying for a loan
#5: Determining the price to shop for
#6: Finding the location
#7: Proximity to your workplace
#8: Choosing your agent
#9: Cautions in the search
#10: Moving into your new home

Once you’ve determined your location and your price range, the next step is to choose an agent.

As a buyer, you are not obligated to any agent. However, it is best to work with one agent exclusively. Calling different agents is like going to a different dentist every time you need to see a dentist. Your real estate agent is a professional with whom you build a relationship. The agent should be someone who is well-acquainted with the area you want to buy, has strong experience in the field, is trustworthy, and a personality that you feel comfortable with. A recommendation from a friend who has had experience with the agent is usually the best way to choose an agent.

While you may begin your house search on the internet, finding a house you like is only 10% of the house buying process. Eventually you will need to agent to represent you. So I suggest you choose an agent first, and he/she will provide the expertise that you need while you can still do your own homework of searching on the internet.

While searching for just the right house, what do you need to look out for? What kind of caution should you take? Read on to find out!

Want to jump quickly to the other Buying posts? Here’s an index to help you out.

#1: Getting ready to buy
#2: Looking at finances
#3: Checking your credit
#4: Qualifying for a loan
#5: Determining the price to shop for
#6: Finding the location
#7: Proximity to your workplace
#8: Choosing your agent
#9: Cautions in the search
#10: Moving into your new home

In determining the location you want to buy in, a primary consideration is the proximity to your workplace.

You may want to buy in a neighborhood that is affordable and desirable, but if it is demands a long commute to work, would you have time left each day to enjoy the amenities? Check out carpool options, public transportation, and working from home possibilities before you buy a house where it requires a long drive during rush hour. During inclement weather seasons, it is not only frustrating but downright dangerous to drive a long ways home. I’ve had clients who said they don’t mind a longer commute if they can get a nicer home further from work. But after a few months, they are ready to move or find another job. Make sure you are realistic in determining the location of where you want to buy your home.

Once the location is determined, what’s next? How should you choose your agent? Read on to find out!

Want to jump quickly to the other Buying posts? Here’s an index to help you out.

#1: Getting ready to buy
#2: Looking at finances
#3: Checking your credit
#4: Qualifying for a loan
#5: Determining the price to shop for
#6: Finding the location
#7: Proximity to your workplace
#8: Choosing your agent
#9: Cautions in the search
#10: Moving into your new home

Now that you are prequalified for a loan, we can start talking about looking for a house.

The first step in looking for a house is to determine the location. One of the top reasons in determining a location is the school district. Most people who do not have children do not consider this factor. However, I have many clients who sell their houses with me tell me that they are selling in order to move to a school district they prefer. Inevitably they will tell me that had they researched the school systems when they bought their house, they would have bought in the district they preferred in the first place. “We didn’t know,” they say. “We were just looking for a house we liked.”

So I am telling you so you will know. Check out the school districts. Ask your friends with children and see what they say about the schools. Even if you end up not having children to take advantage of the school district, don’t forget that resale value of your home has a lot to do with the value of the location within preferred school districts.

There are other things you need to remember when looking for the location. How about your commute? Why look at the house’s proximity to your workplace? Read on to find out!

Want to jump quickly to the other Buying posts? Here’s an index to help you out.

#1: Getting ready to buy
#2: Looking at finances
#3: Checking your credit
#4: Qualifying for a loan
#5: Determining the price to shop for
#6: Finding the location
#7: Proximity to your workplace
#8: Choosing your agent
#9: Cautions in the search
#10: Moving into your new home

When should you start actually looking at houses? Not yet.

When you are prequalified with a lender, they would have told you the price of home you can afford, and what your monthly payment will be. Are you comfortable with that monthly payment? For some, what they can qualify for is higher than what their budget allows. For a full documentation loan with good credit, a lender will qualify you with a debt ratio of 48%. That means all your monthly debts payments combined - house payment, property taxes, homeowner’s insurance, plus any other monthly obligations that you have such as car payment, credit card payments, etc - do not exceed 49% of your monthly gross income. This doesn’t take into consideration what you might need to spend on other essentials, such as car insurance and food! Some lenders will even qualify you with a debt ratio of over 48%. I’ve seen buyers qualify for loans with a 60% debt raio because of their good credit.

The price of home you should look for is the one with the payment you qualify for or the one with the payment you feel comfortable with, which ever is LESS. I may qualify for a loan amount of $600,000 with a monthly payment of $4000, but I may only feel my budget allows a monthly payment of $3000. So the loan amount I should get is $450,000.

Now that you know what loan amount you can get, add on top of that the amount of cash investment, or down payment, and you will arrive at the price of home you should be shopping for.

Once you have the price, you need to look for a house. Where do you start? What should you consider in deciding on a location? Read on to find out!

Want to jump quickly to the other Buying posts? Here’s an index to help you out.

#1: Getting ready to buy
#2: Looking at finances
#3: Checking your credit
#4: Qualifying for a loan
#5: Determining the price to shop for
#6: Finding the location
#7: Proximity to your workplace
#8: Choosing your agent
#9: Cautions in the search
#10: Moving into your new home

How much of a house can you afford? Can you qualify for a $400,000 house? If you like a house that is listed at $450,000, can you qualify for $50,000 more?

The easiest way to take the guesswork out of qualifying for a loan is to go to a reputable lender. This does not always mean your bank. Mortgage brokers oftentimes offer creative solutions to your particular situation. But you must find one that is honest. By honest I mean they should not sell you the program that makes them the most money. Do they understand your circumstances and try to offer you the best loan option? Do they explain all options available and not just one type of loan?

The lender that you go to for prequalification is not necessarily the lender you will use to obtain your loan for purchase. To get prequalified, you should not pay any upfront fees. You are under no obligation to use this lender to obtain your loan. So at this stage of the buying process, do not worry about comparing rates and fees.

Be upfront with the lender about your financial situation. They can then figure for you the maximum price of home you can qualify for.

Just because you know the maximum price, though, doesn’t mean that’s going to be the actual price. How do you determine the price to shop for? What factors do you need to keep in mind? Read on to find out!

Want to jump quickly to the other Buying posts? Here’s an index to help you out.

#1: Getting ready to buy
#2: Looking at finances
#3: Checking your credit
#4: Qualifying for a loan
#5: Determining the price to shop for
#6: Finding the location
#7: Proximity to your workplace
#8: Choosing your agent
#9: Cautions in the search
#10: Moving into your new home

You’ve determined that you have a strong motivation to buy a house. You know how much monthly payment you can comfortably afford.

The next step is to check your credit. Most loan programs are FICO driven. This means the kind of loan, rates, and fees that you can obtain depends on your FICO score on your credit report. A FICO score generally ranges from 300 to 850. The higher the score, the better your credit. If your score falls below 660, you will have to consider getting a subprime loan instead of a A-paper loan. Subprime loans costs more and usually have a prepayment penalty feature.

It is a good idea to check your credit before you begin shopping for a house. In case there are any surprises on your credit report, you will want to take care of it before you actually apply for a loan. There could be mistakes on the credit report. If your name is a common one, another person’s credit could have been reported on yours. There could be misreporting, or perhaps loans that are paid off were not reported. You should take the time and effort to repair any errors.

If you have any outstanding collection accounts, it is a good idea to pay those off. It will help your credit score. When it comes to getting a home loan, the lender will require you to pay it off anyway.

Your credit score makes a big difference in loan options available to you.

It’s not the only factor in qualifying for a loan, however. How do you quality for a loan? When does this lead to determining the price to shop for? Read on to find out!

Want to jump quickly to the other Buying posts? Here’s an index to help you out.

#1: Getting ready to buy
#2: Looking at finances
#3: Checking your credit
#4: Qualifying for a loan
#5: Determining the price to shop for
#6: Finding the location
#7: Proximity to your workplace
#8: Choosing your agent
#9: Cautions in the search
#10: Moving into your new home

Now that you’ve determined that you really want to own your own home, let’s look at your finances.

The first question to ask is NOT “How much money do you have?” I ask first, “What is the maximum amount you feel comfortable paying each month for your housing payment?”

I had a client who was paying $1200 a month in rent, and was not saving any money at the end of the month. Does that mean he can only afford $1200 a month for a housing payment?

No. He knew he was spending more than he needed to for “stuff” and eating out. With proper discipline, he can put another $1000 towards his housing payment. Making a housing payment first will force him to cut out unnecessary spending.

A $1200 monthly payment and a $2400 monthly payment makes a big difference in what kind of house you can buy. I guarantee you that the house that cost you $2400 a month is a much nicer house than the one that cost you $1200 a month. If you want to enjoy a nicer house, are you willing to make some sacrifices? Where can you cut your spending in order to buy a nicer house? As I said in the previous post, you must have a strong motivation to own a home. You must be motivated enough to make some sacrifices.

Take a look at your spending habits. Figure out realistically what is the maximum amount you feel comfortable paying each month for your housing payment.

But this won’t get your qualified for a loan. What’s the missing step? How do you prepare your credit? Read on to find out!

Want to jump quickly to the other Buying posts? Here’s an index to help you out.

#1: Getting ready to buy
#2: Looking at finances
#3: Checking your credit
#4: Qualifying for a loan
#5: Determining the price to shop for
#6: Finding the location
#7: Proximity to your workplace
#8: Choosing your agent
#9: Cautions in the search
#10: Moving into your new home

I have had many people tell me they are thinking about buying their first home. But they have many questions and concerns. What should they do to prepare to buy a house? Where should they buy? Should they buy now or wait until they save up more money?

Many first time buyers don’t know enough about the buying process to know what questions to ask, or they ask the wrong questions.

This is the first in a series of posts on steps to buying your first house. If you are not a first time buyer, but have not purchased a home for a while, this will help you too as the real estate market has probably changed somewhat.

It is not easy nowadays to buy a house. Not only is it a large financial responsibility, but the legal issues and the complicated process can be intimidating for a first time buyer. There are also many questions dealing with each buyer’s unique personal circumstances that need to be discussed before making a commitment to buy. We will explore each step. If you have any questions about your particular situation, feel free to contact me or leave a comment.

The first step in buying a home is not about money. While buying a home is a financial investment, you first need to answer this question: Why do I want to buy?
If you have a strong motivation to buy, and willing to do what it takes, there will be ways to work out the financing.

There are many reasons you might want to buy a house. Some are financial and some are personal. Tax advantages, building equity, and safe investment return are all good financial reasons. While some people say they are buying real estate purely for investment purposes, there is always a personal side involved. I have found in my experience that buyers who say they want real estate as an investment still want to choose a house they like. Even if I show them a house that is a good value, they won’t buy it if they don’t like the way it looks and feels. So you must be clear about your motivation.

Why do you want to buy a house? You are tired of renting? You want to fix up a house the way you like it? Your motivation to buy must be strong. If you do not have a srong motivation to buy, you will not be able to make a decision when you start to look for homes available on the market. You will end up window shopping and find fault in every house you see. I know someone who says she wants to buy a house, but after two years, she still haven’t bought one. I don’t believe that there is no house out there that suits her needs. She just wasn’t motivated enough to make a decision. So it is not enough to say you want to buy a house because everyone else owns a house. Determine first if you have compelling reasons to buy now.

If they’re compelling, you’ll have to consider your finances and ask the right questions. What finances do you need to consider? Which questions do you need to ask? Read on to find out!

Want to jump quickly to the other Buying posts? Here’s an index to help you out.

#1: Getting ready to buy
#2: Looking at finances
#3: Checking your credit
#4: Qualifying for a loan
#5: Determining the price to shop for
#6: Finding the location
#7: Proximity to your workplace
#8: Choosing your agent
#9: Cautions in the search
#10: Moving into your new home