I bought my first home at 22, fresh out of law school, and I have been buying and flipping ever since. Let me help you make home buying more of an adventure than a headache and heartache. I guarantee that if you follow these 10 steps, you will find the whole experience rewarding and exciting.
Because I enjoy real estate and travel, one of the only television shows I DVR and watch is House Hunters International. A couple is usually trying to find a house or apartment to buy or rent in a foreign country. And of course, because it’s reality TV, the couple has divergent ideas as to what each want. One wants a 2/2 in the country near outdoor activities and the other wants an apartment in the city center near shops, work and transportation. Well that makes for an interesting TV show, but not for real life when trying to find a home. So, talk it out, decide what you really want and need. Be forward thinking as to how long you want to stay in the home and what you future needs might be with regard to family.
Know WHAT you are looking for; spend time deciding WHERE you want to buy. Do you want a family-friendly area, a trendy and up and coming area, something in the city-loft area or beaches? Research the average pricing in the preferred area and pricing trends. Historically, real property values increase around 3% per year; so if you are looking to buy in a year, plan accordingly. If you can’t readily research these issues – look to realtors or others who can assist in your research. More on that later.
I hate to say it, but most mortgage company’s lending decisions are based on your credit worthiness – think credit score. Everything from mortgages, car loans, auto insurance, apartment rental and utility security deposits – essentially anything involving money and economic risk – is the sole concern of the lender. Review your credit score, and if necessary, take steps to improve it. This can easily be done if you spend time working directly with the credit reporting agencies (Experian, TransUnion and Equifax). You can review your report each year for FREE at freecreditreport.com. You can object to irregularities by sending the appropriate form letters to the agencies and then following up to ensure the Credit Agencies make the updates and corrections. All the credit repair forms and information are readily available online. This process may take 4 to 6 months, so give yourself some time to work the credit repair issues. There are also tricks as to how you can increase your credit score by as much as 20 points, by knowing when to request the credit report. All these issues can be addressed by a competent consumer-law attorney in a brief consultation with a service like VideoLawyerOnDemand.com.
I’m talking mortgage broker, realtor and attorney/title agent. These professionals are there for you and usually at a very minimal fee. A good team can answer your questions and walk you through the whole process, so you can accomplish your goals. A mortgage broker assists in getting a great low rate mortgage; a realtor finds you the property of your dreams and BOTH of get paid only when you buy a property. So, use their expertise, but of course, be considerate of their time. An experienced real-estate attorney is also an invaluable resource and usually can address you questions at a very nominal fee.
As noted above, with VideoLawyerOnDemand.com, you can consult with an experienced real-estate attorney for as little as $49 for 20 minutes! But an experienced team of professionals can keep you out of trouble, and save you thousands of dollars and sleepless nights.
You MUST know what type of loan you are eligible for, the terms and rates. Working with an experienced mortgage broker in advance will give you the knowledge of your economic capabilities. You don’t want to waste your (and your Teams) time looking at properties you can’t afford or don’t want, because you are just wrong on your financing abilities.
When you have a mortgage pre-approval, it shows realtors and sellers you are knowledgeable and ready to buy when you find a property that fits your needs. Having a pre-approval allows you to quickly make decisions and get the best deal. And don’t just get pre-qualified, you should get pre-approval. This means the lender or mortgage broker has verified all your income, expense and credit qualifications, and has confirmed your ability to secure the loan.
When you have determined what and where you want to purchase, and established how much you can afford, you now should unleash the power of technology! Start utilizing programs such as Zillow.com or Realtor.com that will work for you 24/7 and search for properties that fit your exact criteria, and instantaneously alert you when comparable properties are listed. When you have done all your homework and have a pre-approval in hand, you can be first to snag the ideal property.
This is a pet peeve of mine. Once you’ve done all the work of saving for a down payment, cleaning your credit and all the items listed herein, and you have the mortgage Pre-Approval in hand, DON’T go out and change your spending or purchasing habits. Don’t buy a new car or furniture for your new home that you have under contract, as this will alter your pre-approval and may change your eligibility. I’ve had circumstance where buyers were no longer able to close on the loan and ultimately not purchase the property.
As part of your purchasing and relocation process, you will ultimately need to review your current lease situation, and determine your legal and financial obligations to the landlord. Consult your real-estate attorney (think VideoLawyerOnDemand.com). Do this early in the process, as some leases may require 60-days’ notice and the average contract takes 45 to 60 days to close. Having a smooth transition from tenant to property owner will greatly reduce your anxiety.
If you are a first-time home buyer (or within a certain economic or demographic classification), you may be eligible for down-payment assistance or reduced mortgage rate terms. There are many loan programs that may be available to assist you, so keep your eyes and ears open to these opportunities. Again, talking with your experienced Team (realtor, mortgage broker and attorney) and attending local real-estate seminars or talking with local HUD representatives may provide some real insights as to beneficial loan programs. Programs are not only available for first time home buyers, but also aged, low income, military, green construction and target areas of town. Take some time, do the research and it will pay off handsomely.
There are typically two time periods where the buyer can and should take advance of their right to inspect the property.
The first inspection period under is the standard “due diligence” inspections that give the buyer a reasonable – usually 15 days – period to complete the inspections. And I strongly recommend you have multiple inspectors (roof, A/C, electrical, gas, plumbing, survey and any other necessary trades) complete thorough inspections. I guarantee, every property has an issue that will require repairs. Your money will be well spent, as you don’t want to be buying someone else’s problem. Address the problem and you can reduce the price or insure the repairs are properly completed. There may be issues the seller is unaware of (aluminum wiring, improper fence line, no permits on structures) that will cost you thousands of dollars later to repair or replace. Some conditions may even be dangerous or hazardous, and must be repaired.
The second inspection is the final walk-though. This is typically completed on the morning of the closing, to make sure there has been no casualty loss or damage to the property since your prior inspection, and that the required repairs have been satisfactorily completed. Your purchase may have also included appliances or other items you need to insure remain on the property. If all is well, both buyer and seller can happily go to the closing and complete the sale.
Saving money is the name of the game, but make sure you’re not penny wise and pound foolish. In other words, trying to avoid spending pennies for sound advice that will pay for itself into the thousands of dollars in savings and protection from liability, can become something you may regret and cannot be undone.