BUYER’S GUIDE ®
Whether this is your first home or you’re a seasoned home- buyer, I’ve put together a simple guide that will help you understand and manage the home buying process. This guide will help you:
- Pinpoint a comfortable price range
- Understand up front closing costs
- Help you understand APR and what determines interest rates
- How your credit score impacts your interest rate
- Mortgage Do’s and Don’ts as you prepare for home ownership
- Understand how to properly prepare for a mortgage
- Learn how important it is to select the right Real Estate Agent
Your Top 5 Success Factors: My guide will help you gain an understanding on these important questions:
- Are you ready to buy a home
- What should you be looking at prior to applying for a mortgage?
- What checklist should I follow prior to beginning my home search?
- Identifying your ideal home and making the right offer
- What happens after the offer is accepted: How to ensure a smooth process and avoid common mistakes
Are You Ready To Buy A Home?
Know your total cost of the mortgage: this includes one- time fees and down-payment requirements of your mortgage. A solid loan originator will help you gain a clear picture and offer solutions that best fit your situation. Employment history, credit score, amount you have saved, whether you’re a first time home-buyer, veteran or self employed; know which products you qualify for to determine your fees, interest rates, and how much of a down payment is required. I work with top loan originators that can help you should you need assistance. If you do, please click this link and I will recommend my mortgage team.
- Cash Reserves: depending on what you qualify for, you may qualify for a no down payment mortgage or a mortgage that allows 100% of your down-payment to be gifted funds. Regardless of what mortgage product you select and/or qualify for you should also have cash reserves entering into home ownership. Unexpected costs to maintain the home, home improvements and unexpected changes in employment are all reasons you should be prepared for unforeseen circumstances
- Financial Stability: If one spouse was suddenly laid off, could you pay for your mortgage with the other spouse’s income? If you’re self-employed, do you have residual income from many clients or do you rely on a few clients for your income? If the economy took a slide, how would that impact your business? Take a good look at your income and determine the risk factor of a sudden change of employment or decrease in your business revenues
- Understanding your credit? Credit is your personal track record of your ability to pay back, on-time, your personal debts. While most people have encountered some form of set back; it’s important for you to be financially healthy when owning a home. If you’ve encountered credit difficulty, click here for my video that will show you how to improve it. Some people decide to get a mortgage now, with so-so credit, and are able to refinance once their credit score has improved to obtain a better interest rate. Getting solid advice from your Realtor® and mortgage loan originator is highly recommended.
What should you be looking at prior to applying for a mortgage?
- Credit: the higher the score, the lower the rate. Also, is your credit score getting better or getting worse? A Declining credit score doesn’t necessarily mean: “don’t get a mortgage”. It just means you should take measures, which in many cases are simple measures to boost your credit score. Click here for information on improving your credit.
- Your Debt To Income Ratio: This means how much debt do you carry between credit cards and revolving accounts vs. how much income you have. This is how banks determine how much of a loan they are willing to give you.
- Collateral: the appraisal of your home by a licensed appraiser will provide the lender with its market value should you default on your mortgage and that liability came back to the lending institution. What you qualify for will include such factors as amount of downpayment, your income/assets and your credit.
- 2 year work history including W2’s (self employed 1-2 years tax returns depending on the products available to you) * self employed year to date profit/loss statement
- 1-2 years tax returns
- Most recent pay stub that reflects a minimum of 30 days income or other proof of income
- Proof of pension income (if applicable)
- Social security and disability payments (if applicable)
- Dividend earnings
- Child Support (optional)
- Alimony (optional)
- Asset verification
- Bank statements (last 2/3 months)
- Earnest money deposit copy
- Car loans, student loans, credit card, auto payments, personal loans
Selecting the right Mortgage Professional– Its critical to work with someone that asks the right questions and is able to provide you with options. In many cases, the traditional 30 year fixed mortgage may not be your best option. It is worth meeting someone you can trust and I would be delighted to assist you. I believe in a team approach to handling your needs and my team is solid and trustworthy.
- Shop APR (click here for interest rate education video we created)
- Pre Qualification: This is an excellent start if you’re considering home ownership. This is simply an estimate of what you would qualify for should you proceed with a formal application to obtain a mortgage. Pre-qualification is non binding; meaning, you nor the lender is obligated to proceed.
- Once you receive a pre-qualification letter, then its time to work with me so we can come up with a game plan to and solidify exactly what you want for your new home.
Identifying your ideal home and making the right offer
-Identify the type of home and features you really MUST have
Type: single family, condo, gated community, duplex
Features: Open floor plan, big lot/small lot, wooded lot
-Other features to consider: school district, taxes
The Value of The Real Estate Agent:
For 99% of people, this is the biggest purchase they will ever make. As such, selecting an agent that truly knows the market, is a full-time agent with the time and resources to find the right properties, knows the contract forms and is capable of helping you negotiate the best possible price is critical for your overall financial landscape.
A good real estate agent is your partner. You generally do not pay compensation to your Buyer’s Agent when you buy a home. Real estate commissions are most often paid by the seller of the home.
In Texas, Buyer Representation is established with a Buyers Representation Agreement. Please see the Information About Brokerage Services form (link to form)
Buyer’s agents work for the buyer
Seller’s agents work for the seller
Builders salespeople work for the builder
My value proposition includes:
- Leveraging my technologies to help you find exactly what you are looking for
- Knowledge of the local market including neighborhoods, schools, pricing, public safety and taxes
- Helping you negotiate a fair price
- Doing the research for you and providing you with options that fit what you’re looking for
- Continued education to stay on top of changes to the Texas contract and forms, market conditions and much more
- Proactive communication, honesty and integrity
What happens after the offer is accepted
Step 1: As soon as you are under contract, I will collect your Earnest & Option money checks and deliver them to the title company and seller/sellers agent. You should quickly order the property inspection (inspector list here or link to PDF?) and homeowners insurance (specifically request they run a CLUE report when giving you a quote)
- Property Inspection: There are numerous types of inspections. An inspection is meant to evaluate, at minimum, the structural and mechanical condition of a property. Remember that every home is inspected using the most current building codes. Every home will have a laundry list of items that could use attention; the older the home, the longer the list.
The following items are our main points of concern: Foundation, Roof, HVAC, Major Plumbing and Major Electrical.
Depending on how large the home is and the age, the price will vary. Most of the time on a home under 3000 sqft, an inspection will run around $350 or less (septic systems, pools, sprinkler systems and other equipment will incur additional charges in order to be inspected). You should also have a wood-destroying insects/termite inspection completed, usually around $80-120.
- Homeowners Insurance-Your loan requires insurance covering the property Most homeowners purchase a Homeowners policy which provides coverage for the house as well as your contents and liability related to the home. Property insurance provides a level of coverage to recover a percentage of the cost of repairing or rebuilding the home in the event of damage or catastrophe due to covered perils. I have insurance agents on my Real Estate Team to make this part of the process easy and seamless. If you are happy with your current auto/renters insurer, you should start with them. The policies and their coverage and exclusions vary from company to company. I strongly suggest that you compare different companies to find the policy & coverage that you are most comfortable with.
Step 2: Work closely with your mortgage loan originator to complete your application
- Full income and asset documentation: watch this short video “Documentation stage” for a list of do’s and don’ts
- Rate lock: a qualified mortgage loan originator will advise you when he/she believes the best time to lock your interest rate
- Rate Lock? This means as you are waiting for final approval, your interest rate will not move. The decision to lock is based on your risk posture and the advice given to you by your loan originator.
Step 3: Loan Processing
- The loan processor may contact you with additional information they may need. This is a normal part of the process. The process comes to a complete stop while they wait to receive the needed information/documents-it’s VERY important to provide the information within 24-48 hours MAX.
- Should you buy down your interest rate? As a rule of thumb, 1% of the loan amount is equal to one discount point ($1,000 paid on a $100,000 mortgage to earn one discount point on interest). With rates currently being so low, it typically doesn’t pay to buy down your interest rate. Your loan originator will provide you with scenarios to help you make your own educated decision.
Step 4: Underwriting
- Underwriters are the people that use your information as well as financial formulas to make a decision on your mortgage.
- Once approved, the loan processor will schedule your closing
- Closing is when the title of the house is transferred from seller to buyer.
- GFE (Good Faith Estimate): this will be mailed to you within three business days of application submission
- You will either need to wire funds or bring a cashiers check or bank check to pay for your closing costs at the date of closing
- During the loan processing & underwriting phase, you need to choose your Home Warranty company and level of protection. I have a list of companies that my clients and colleagues have used successfully. You are always welcome to choose any company (and there are a lot to choose from!).
Step 5: Closing
- I plan to attend all of my client’s closings. Once a closing date has been established I meet with you with a checklist to ensure a smooth closing and we will also schedule a final walk through of your new home!
- PLEASE NOTE-there have been a lot of scams going around where you receive wiring instructions from what looks like a trusted source (your Realtor®, title company, lender…), They look legit, but have actually been “spoofed” (copied). You should only receive wiring instructions from your title company and when you do, go back to the very first email you received from your closing team and call that phone number and ask you closer/escrow assistant to read you the correct wiring account number. If it doesn’t match, let your closer know and notify me as well and above all, do NOT wire money to that account! Be especially alert if you receive a change to your original, verified wiring instructions. You will NEVER receive wiring instructions or changes from me or your lender!