From Scripps Howard News Service
When buying a house, many people discover they can’t afford as much as they had hoped and past financial sins come back to haunt them. If you’re among those considering a housing purchase this year, here are some points to consider from the Fannie Mae buying guide, “Opening the Door to a Home of Your Own”;
* If you haven’t been working steadily for at least two years, you may have trouble getting a mortgage unless there’s a reasonable explanation, such as recently finishing school or military service or seasonal work that leaves a gap in your record. “If you have been fired for cause such as excessive absences, have long gaps in your employment record or have dips in your income level that are difficult to explain, you should probably delay buying a home,” Fannie Mae says.
* Lenders are wary of people who don’t pay their bills on time. Your record is right there for all to see on national credit reports. Before you set out to buy a house, clean up your credit record,that is, establish a two-year record of paying bills on time. You can get a copy of your credit report from the three national credit reporting services, The fee is generally $8, but call the toll-free 800 numbers for details. They are Equifax, (800) 685-1111; Experian, (800) 682-7654; and Trans Union (800) 916-8800.
* For most mortgages, you’ll need a down payment of at least 5% of the purchase price. On a $120,000 mortgage, that would be $6,000. You also may need several thousand dollars more for closing costs.
* Before you start house hunting, figure out how much you can afford to pay. As a rule of thumb, count on spending no more than 28% of your gross (before taxes) monthly income on housing expenses-principal, interest, insurance and property taxes. All your monthly debts should come to no more than 36% of your gross income.
DETERMINE WHEN YOU WANT TO BE IN YOUR NEW HOME
If you buy today, you will probably close in 30-45 days from today. Typically, the seller may wish to occupy 15-30 days after closing. Does this time line fit your projected moving plans?
FIND OUT HOW MUCH YOU SHOULD INVEST IN YOUR PURCHASE
Arrange a counseling session with a competent REALTOR® or a prequalification appointment with a lender.
TO CHOOSE A REALTOR®, try to find one through reputation and referral. Find one who makes you feel that they are interested in you and someone who will commit to helping you. Expect the good REALTOR® to schedule a conference to discuss your needs, your wants and your financial situation.
TO CHOOSE A LENDER, ask a real estate professional for referrals. The experienced REALTOR® will have the names of lenders who have proven themselves regarding service and commitment. Go to “Questions the Lender Will Ask.”
WHAT WOULD YOU LIKE TO BUY?
A. LOCATION, LOCATION, LOCATION.
The three most important elements of your purchase. You can usually change anything except location. Consider geographic and social aspects of location.
Consider the size. If its smaller than you had hoped for, can you deal with the size or can it be expanded within your budget parameters?
Is it sound? Does it need repairs that you can handle? Are the necessary repairs and upgrades in your budget? Will the necessary changes be good investments in the event you have to sell later?
Does the property have any or all of the amenities you want? If missing, are they important. If important and missing, can you fix it?
WORKING WITH A REALTOR®
Did you know?
Very few homes sell through Open Houses. 1 in 400 homes sell through classified ads. Only half of the homes for sale are in the ads and Open Houses.
If you are serious about buying a property, it makes sense to work with a professional. The professional can make it easier. The first meeting is important. It is your opportunity to interview and get acquainted with the REALTOR® and you can help the professional understand your reasons for buying and the things that are important to you. Be sure to be candid about your motivations.
WHAT SHOULD YOU EXPECT FROM THE REALTOR®?
1. The REALTOR® will review the properties available and select those that meet your criteria.
2. The multiple listing service will provide access to most homes on the market.
3. The REALTOR® will arrange the showings.
4. The REALTOR® will provide property and finance information.
5. The professional will provide upon request enough information that will help you establish market values.
6. The REALTOR® will prepare your sales contract.
7. The REALTOR® will arrange for the presentation and negotiation with the seller.
8. The REALTOR® will assist you with financing.
9. The REALTOR® will help you arrange inspections.
10. The REALTOR® will follow through and will help take you through the closing.
HOW MANY REALTORS® SHOULD YOU WORK WITH?
REALTORS® work on commission. The best REALTORS® will only commit to you if you commit to working with them. The best REALTORS® will “back-off” if you are working with others. One good REALTOR® will benefit you by reciprocal loyalty. You will get better service if the REALTOR® knows you are loyal.
1. Rely On the REALTOR® to choose the properties you view.
2. Every 3rd property-Set 2 aside.
3. Keep discarding every 3
4. At the end of the tour of homes, throw out all but one.
5. If this were the last property in the world, would you buy it? If yes, consider an offer.
If no, hone your criteria so that the next tour will be more productive.
NOTE: Be sure to look at the property and not the condition.
HOUSE HUNTING WITH CHILDREN
From the Orlando Sentinel
* Take special care to talk to your children about the upcoming move. Deal with their concerns as they come up.
* Leave young children with friends, family or a baby sitter during the initial house hunt. House hunting is stressful enough and details of individual houses tend to blur after tours through several. Fidgety children can complicate matters. Going alone also will eliminate the potential embarrassment of having to ask the seller for bathroom privileges for your youngster.
* Include your older children in the house-shopping process as much as possible. Keep them occupied by letting them plan and pack a box or two of their special things. Seek their input on new décor and room design, and what kinds of features they would like to see in a new house and in the neighborhood. Make sure you inform your children that just because they would like an indoor Laser Tag arena that you may not be able to make good on such a request.
* Investigate the community. Track down the children. Locate things such as recreation centers, churches, movie theaters, etc.
* Once you have selected your dream home, if possible, bring your children along for a tour of the house and neighborhood. If this is not possible, take plenty of pictures of your new place, cool haunts, schools and share them with your kids.
SOME “INSIDER” SECRETS TO GETTING WHAT YOU WANT
1. GET PRE-APPROVED.
To make the strongest offer possible get “pre-approval.” The process takes a few days to a few weeks. With your pre-approval certificate, it’s like taking cash o the seller. If you are competing against other offers you will have a definite advantage.
2. DAILY SEARCH
When you are serious about buying, find a Realtorâ who is serious about helping you. Get your agent to do daily MLS searches.
3. SPEED IS IMPORTANT
don’t think you can look tomorrow or on the weekend. Look immediately and be prepared to make you offer on the spot.
4. WRITE A “GOOD” OFFER.
Write your offer to be accepted; not countered. While you are in-counter, someone else could be buying your home. Negotiation is only important to you when you get what you want.
5. THE PRICE
Asking price used to be what the seller hoped for. In a “hot” market, there may be multiple offers. The actual sale price can be more than asking. If you have done your homework before-hand, you will feel more secure when negotiating your offer.
6. BEST OFFER
If you are the only offer when you write, other offers may come in after you have written. Even if you end up in a multiple offer scenario, the seller may choose your offer, because you started better than the rest. It’s not scientific, but it can work!
7. THE BIG PICTURE
If you get what you want, you are the winner. The couple thousand dollars you might save could cost you what you really want. When you move in-you’ll look back and congratulate yourself.
NOW, LET’S WRITE AN OFFER
Remember: Once you choose, everyone else in the world will want it, too.
* Write your highest and best offer. (Across U.S. & Canada, the average property sells within 97% of asking.)
* It’s a “good deal” if you want it and you get it!
* The offer should be drafted carefully. Some guidelines follow:
* WRITE YOUR BEST OFFER Anytime you play “We will start here” you risk losing the property to another buyer.
* EARNEST MONEY The more earnest money you offer, the more confidence the seller will have in your commitment to the transaction.
* INCLUSIONS If you want an item included, it must be stated on lines 14/15. Whether or not it is shown on an office sheet, it isn’t included unless it is stated in the offer.
* TIME IS OF THE ESSENCE This means that the dates are extremely important. The “next day” isn’t good enough! Midnight on the day named is the “drop dead’ deadline. (Watch especially for loan commitment deadlines. Refer to lines 207-212 for more information on loan commitment deadlines.)
* OCCUPANCY AFTER CLOSING It is a good idea to offer to allow the seller at least a few days after closing. That way they aren’t forced to be “on the truck” at the closing. The seller usually prefers to have money-in-hand before they move their large items. Typically the per diem rate is 1/30th of your PITI.
* INSPECTION Go to the “Home Inspection” page for a complete discussion. Have your REALTOR® or your attorney explain the Right-to-cure option. Re: Defect defined: read the lines 266-270 carefully. We aren’t talking about a laundry list here. Defects must be significant and they must be discovered after the offer is accepted.
* ADDENDUMS The WRA addendum is a good one. Many companies use their own. Items are covered that may not be addressed in the offer, i.e. Underground Storage Tank, Basement Fuel Oil Tanks, Asbestos, Lead, Lead Based Paint, Radon, Safe Water, Well and Septic Inspections, Home Warranties, Code Compliance, Surveys or Boundary Maps, etc.
Check back for more items in the future.
Whether the seller or the buyer is dealing with the offer, the choices are the same: “Accept”, “Reject”, “Counter”.
Upon an accepted offer, upwards of 30 people are part of the transaction. There are lenders, loan officers, appraisers, credit checkers, inspectors, processors, and more.
If you work with a REALTOR®, follow the steps, do your homework and provide the information needed by the lender, you will be comfortable with your decision and should live “happily ever after!”
It is important that you don’t make any changes between the time you make an offer and the closing.
Don’t make job changes without the blessings of your lender – before the fact. A “new job” could kill your transaction, affecting the “time on the job” criteria.
A divorce can reduce your income. A marriage can change the loan application. If your new spouse has past credit problems, you will likely have a problem with credit scoring requirements. As with a contemplated job change, make no marriage plans without your lenders blessings. Poor timing could jeopardize your transaction.
Buying a car or other major item on credit can significantly change your debt ratios. Again, no major changes while you’re buying a home.
Sherman & Co.
819 Water, Suite 170
Kerrville, TX 78028