First Time Home Buyer’s Guide – Step 3 – The fun begins!

February 27, 2009

If you haven’t read part 1 or part 2 of this series, please do so now.

The Buyer’s Agent:
So, now you know how much home you can afford and you’ve saved up for a down payment. The time has come for you to find your first home!

Before you start searching, you want to find a buyer’s agent. It is important for you to have your own representation when purchasing a home. If you call the agents that have the property listed, they are obligated to be looking out for their seller’s best interest. The main reason agents put their names on their listings’ signs and ads, is because their commission gets doubled if they sell their own listing.

You can get a buyer’s agent, like myself, absolutely free because the commission is paid for by the sellers and is split. Not many people know this. It is their obligation and duty to make sure that you get the best deal possible and negotiate with the selling agent for you. A good buyer’s agent can also help you find a property that suits your needs because they am constantly watching the market and know what you are looking for. They also have tools to update you on potential properties automatically via email.

Probably the biggest benefit of having a buyer’s agent, is that you can tell them what properties you would like to see, and they can show them all to you at one predetermined time. Otherwise, you would have to call every single agent, set up multiple appointments at times convenient for all of them, and meet motivated salesmen trying to double their commission.

One little known fact, as a buyer you are responsible for turning on utilities and inspecting the property with professionals. You usually have 5-15 days to do this in. A good buyers agent can make sure this gets done correctly and on time.

Another thing to keep in mind is, most agencies charge a transaction fee. This is a $175-$200 fee, in Canton, Ohio area, that is charged at closing and is totally not necessary. My company and I do not charge this fee, saving you money. Ask your potential agent if their brokerage charges this.

The Search:
Of course, the internet is a great way to look for a home. This generation of home buyers is lucky because we can view lots of details about a property right from home. It used to be, you had to sit down with an agent at their office and flip through a black and white “catalog” of homes. I can still remember my parents doing just this. Here are a few sites to look for a home:

Tips for finding the perfect home:

In this buyer’s market, it’s not a bad idea to search a little above your price range and offer lower.
Determine exactly what you want and need. Bedroom count, garage spaces, basement, large kitchen, dining room, air conditioning, first floor laundry, etc.
Keep resale value in mind. A three bedroom home is easier to sell than a two bedroom and so on. Also, a pool can be nice, but those with small children generally don’t buy houses with a pool.
Consider maintenance on the property. If you have a 2 acre yard, remember you have to mow that. Long driveways need plowed. Wood siding needs painted every few years.
Watch the taxes and keep in mind which areas are higher than others.
If you have any questions about a property, ask your buyer’s agent to find out.

The Showing:
This is where the fun begins. When you are ready to look at your first home, it’s as easy as a phone call and a drive. You can probably get 2 or 3 showings in an hour depending on the distance from one another. Make sure all parties involved in the purchase go to the showing. Look in every nook and cranny to make sure you notice anything wrong.

Try to imagine yourself living in each home. Think about where you want to put your furniture, what color you would paint the walls, what is the best angle for viewing the TV. Vocalize what you like and don’t like, this way your agent gets a better idea of what you are looking for. Take the kids along and ask them which one is their favorite. Imagine how you would decorate or where you would work on the bike. Wonder if there is enough room in the driveway or sidewalk to teach the kids how to ride a bike. Ask yourself if you could see yourself living in this home 5 or 10 years down the road. Could you host thanksgiving dinner or host a euchre game? What would you change about the landscaping, or would you leave it like it is? Think about the dog (or future dog) and if there’s enough room for him/her to run around. Could you hold a family barbeque? Could you throw a football in the back yard? Most importantly, could you live there?

While it is a fun process to look for a home, it can be a little nerve wrecking. This is probably going to be the largest investment you’ve ever made. Often, first time home buyers get so nervous about buying the right property for them, they over analyze every home, and never end up finding anything they like. Remember that this is only your first home, and you can sell any time and move on to bigger and better. One thing to keep in mind is that when the real estate market bounces back, you could be sitting on a lot of equity because you bought during a low priced market.

Call or email me today to buy your first home! 330-412-2221 joey@whippleauction.com

Part 4: The offer! – Coming Soon!

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First Time Home Buyer’s Guide – Part 2

February 20, 2009

If you missed part 1 of this blog series, please read it before reading on.

Part 2: Getting pre-qualified with a lender.

Ok, You now have the small amount of money it takes to buy a house. That’s the hardest part! This next step is crucial… unless you can pay cash for your property. Please note, it’s going to take 30-60 days to close on a property once you have an accepted offer, and most of this time is spent getting your loan approved with the bank.

Determining your affordability

You are going to want to determine what kind of home you can afford comfortably. The easiest way to do this, is decide what kind of monthly payment you want to make. Your monthly payment is going to consist of principal, interest, taxes, insurance, and possibly mortgage insurance (depending if you put down less than 20%).

The latest interest rate I saw was at 5.5%, so for every $1000 you borrow, your principal and interest will be $5.68 at a 30 year term.

So, let’s do the math:

          $100,000 purchase price
          -    $3,500 down payment
        -------------
             $96,500 loan amount
         /    $1,000
        -------------
             $96.50
        x      $5.68
       -------------
              $548.12 principal and interest per month

Don’t forget taxes and insurance (which vary for each property), and mortgage insurance.

Let’s estimate based on one of my listings in plain township.

          $548.12  P&I
           $76.31  Monthly taxes
           $37.50  Homeowner's insurance
      +    $50.00  Mortgage insurance
       ------------
            $711.93  estimated monthly payment

All this can be worked backwards so you know how much home you can afford based on the maximum total monthly payment. So, if you don’t want to pay more than X dollars a month, then you can afford a Y thousand dollar home.

Choosing the lender
There are a few options out there for borrowers. Your first option is to decide whether you are going to borrow from a bank or mortgage broker. The main difference between the two is that a mortgage broker usually has a wide variety of loan programs from many different or a select few lending institutions. Where as a bank has a select set of loan programs from one lending institution; the bank they work for.

What does this mean? If you go into your local bank and ask for a mortgage, they are going to sell you a their loan. Your payments will be going to that bank. If you go to a reputable mortgage brokerage, they can shop from a wide variety of lenders to give you the best rate and terms. This also gives the mortgage broker the flexibility of finding the right program for your unique situation. Mortgage brokerages typically hire services from local small businesses like appraisers, helping the local economy, where as corporate banks typically keep everything in-house. I would recommend using a mortgage broker because they have less overhead so they tend to have lower costs, more competitive rates, are less restricted, and are more personable and understanding.

Make the call
Now you need to determine if a lender will sell you a loan based on your credit scores, household income, and other factors. Call your friendly neighborhood loan originator and ask them to pre-qualify you for a loan. This will take a few minutes of your time where they will ask you about how much you make, collect social security numbers, and the like. It is important that you answer honestly because you will have to prove everything you say when it is time to get approved for your loan. They will punch your numbers into their fancy computers and check your credit. Then they will let you know what you qualify up to and quote you a current interest rate. You could request a good faith estimate from these lenders to see their costs so you can compare to other estimates, however you will need to take some documentation and go to their office so they can accurately create one for you.

Whipple Financial Services, LLC is a great mortgage broker. Call Joe at 330-477-6762. ~~~ MB.802575.000

If you don’t qualify right away, don’t get discouraged. Whipple will work with you and point you in the right direction to be qualified ASAP at no charge.

Now, you are ready to start looking for a home, and this is where I come in. I can’t wait to show you how exciting this part is.

Step 3: The FUN begins… Finding your dream home!

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First Time Home Buyer’s Guide – Part 1

February 18, 2009

So, you want to buy a home? Great idea! It’s the American dream and it’s more possible than you probably realize. This is probably the best buyers market we will see in our lifetimes.

What makes this the best time to buy?

Prices are incredibly low
Interest rates are so low that borrowers are saving hundreds of dollars a month
The quantity of available homes is mind boggling
The government now has tax credits and down payment programs for first timers

The question I come across most often from first time home buyers is “How do I get started?”. This series of blogs will get you up to speed on what you need to do to get prepared and walk you through the whole process.

Step 1: Get your hands on some cash.

The days of 100% financing are gone like the wild west. You will most likely need some sort of down payment. Keep in mind there are Ohio government programs like OHFA that you could qualify to get most of your down payment paid for. The lowest down payment I have seen lately is 3.5% of the purchase price for FHA financing. Conventional is right behind that with 5% for good credit.

To put that into perspective, lets say you buy a $100,000 dollar home (which is a lot of home in my market) you will need minimum $3,500 for a down payment or $1,750 for a $50,000 home. Most lenders accept gifted money as well, so if you can borrow from Mom, Dad, Grandparents, Uncle Rob, that will work. There are also government programs to help you with the down payment. OHFA is a state program in Ohio that will pay your down payment and charge you a slightly higher interest rate on your loan.

There are a few additional items you may need to pay for, but many costs can be paid for by the seller if you ask them to. These fees are unique for every market.

Appraisal – Approximately $150 – $400 depending on which appraisal the lender requests. The appraisal is required by your lender to make sure your new home is worth what you are borrowing. Most of the time, the appraisal comes in at or above the purchase price. You will likely be paying for this.
Inspections – I will be going more into detail about inspections in this series, but you may wish to get your new home inspected by professionals. There are a few typical inspections. These include general home inspections($200) and wood destroying insect inspections($50-$75). There are other inspections available if you are concerned such as mold, radon gas, and lead based paint.
Title Fees – approximately $500 – $1500 depending on your purchase price and loan amount. In order to own the property, you will need to transfer the title to your name. This is done by a third party title company.
Lender Fees – Varies depending on the lender and the loan amount. You can work with your loan officer to keep these down.
Homeowner’s Insurance – Your first year will need to be paid by or at closing if you are getting financing.

Again, you can ask for the seller to pay for your closing costs and inspections at the time of the offer. So in essence, you might only require the money for part of the down payment, appraisal, and homeowner’s insurance. If the seller is unwilling to pay the closing costs, you could always raise the purchase price on a counter offer so they net the same amount. This way you don’t have to pay out of pocket for most of the costs of the transaction.

There is something called earnest money deposit that you could put forward with your offer to show you are earnest in purchasing the home and will be applied to your costs at closing. This can help to get your offer accepted, if the seller sees you are willing to risk money. If you rescind on your offer for no apparent reason, this money is forfeited to the seller. If you fail to get financing, the inspections are unsatisfactory, you lose your job, or any other good reason for breaking the contract, you will get this money back. This deposit can be any amount you chose and is optional, however, many foreclosed properties have a minimum amount required for acceptance.

It’s a good idea to have the first couple months of mortgage payments saved up also. You can also recoup the costs of buying a home if you purchase one in 2009 thanks to the stimulus package. First time home buyers are eligible if they or their spouse haven’t owned a home in the previous three years. They are eligible for $8000 tax credit that you don’t have to pay back if you own the home for more than three years.

Step 2: Getting Prequalified with a Lender

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