If you are considering purchasing a home or refinancing—you can go to quickenloans.com or lendingtree.com along with local mortgage lenders in your area—to determine what loan will best suit you—and your family. You can compare closing costs, APR's and Par rates to determine what loan will best serve your—and your family's long-term interests.
Learn how to apply the— “Keys to Success”—in your life
Questions From Potential Home Buyers:
Q: Why do I need a down payment to purchase a home?
A: Even though you may qualify for a 100% loan if your credit score is high enough or you may receive down payment assistance it is important from a psychological point of view to not only put money down but to have an established emergency fund.
By doing the above I have found that homeowners find ownership more rewarding and they tend to be able to weather financial storms that come their way.
With little or no down payment I have seen purchasers walk away from their obligations due to frustration and hopelessness. The key is to do all you can on the front end to prevent getting into a situation where you will be forced to walk away or find yourself in a hopeless situation.
Q: What are the down payment assistance programs available?
A: There are many programs available at the local and state level. There are also targeted homebuyer incentives for police/firefighters, educater's, and nurses available in many areas of the country. HUD also offer low down payment options on some of its inventory of homes.
Q: How can I improve my credit situation and credit scores before I purchase my house?
A: It all begins by properly analyzing where you are at credit wise. That means pulling your credit reports and obtaining your credit scores.
From that point you will know what you need
to do to bring your score up and clean up your credit reports if there is a
need to do so. For
a comprehensive approach to analyzing and improving your credit reports and
credit scores click on this link.
Q: What Is The Complete Home Buying Process In Your Opinion?
A: It starts with preliminary home buyer pre-qualification to post-closing in my opinion and based on the way our company operates.
A professional real estate agent should be concerned with more than just your ability to purchase a home---they should also be concerned with your ability to maintain and keep your new home.
Therefore, “preliminary pre-qualification” is a vital step. Don’t skip this step, many homeowners have skipped this step in the past to their own peril (loss of house, financial difficulty etc.).
The preparation that you put into buying a home on the front end will pay great dividends on the back end if you do it the proper way.
I often have the home buyer or home
seller pull their credit reports and obtain their credit scores.
Although they may not see it now this will help them start to take control of there financial affairs if they aren’t doing so already. Assuming their credit and credit scores are satisfactory we move on to the next step.
A quick front end and back end ratio analysis is then performed.
If their credit and credit score situation is unsatisfactory they correct them (usually within 12 months) and we then move to the next step.
Assuming you have no bankruptcies,
judgments or other public record data on your report it can normally be cleaned
up within 12 months if you have the right cash flow and are disciplined in
paying off outstanding debt and paying your revolving and installment accounts
in a timely manner.
I often have the potential home buyer pull their credit from the three major credit bureaus and have them obtain their credit scores as well. This gives the consumer confidence that they are in control of their own financial destiny.
While working with buyer’s I try to implement a comprehensive strategy in their home buying pursuit.
It is important to begin at the cash flow (budget) analysis point and move forward from there. I look at their total financial situation so I can be of the most benefit to them (assuming they agree to the complimentary service).
From there we can see if there is discretionary income available after all variable and fixed expenses have been paid.
I then perform personal balance sheet, income statement and net worth analysis to get an even better look at their financial situation so I can be of the most benefit to them (again assuming they agree to the complimentary service).
Front and back end ratio analysis would then be performed again.
I then analyze all of this based on family size, future goals (retirement, college, etc.) financial needs and wants and other factors that may be present in their situation.
I then decide if they qualify based on their down payment saved, emergency fund, cash flow situation and their ability to reach their goals based on what they stated above.
I also look at other factors (compensating) and non-compensating as well—such as a future financial windfall, other household income that will not be included on the loan application, expected increase in family size, child going to college and any other factor that could potentially have a negative or positive effect on their home purchase.
Assuming all of the above turns out
to be positive I inform them of the home buying process in greater detail.
I then inform them of the advantages of getting pre-approved as opposed to pre-qualified (more negotiating power).
Be aware that not all real estate agents will be concerned with your “preliminary pre-qualification” but you should be—you have to live with the choice and decision you make well into the future, so it is important that you get this step right.
Once they are pre-approved we begin the home search and once a home is found to their liking we put an offer contract on that property (along with earnest money deposit).
After negotiation and a final sales price and terms are agreed to the buyer performs an inspection (usually a professional inspector is hired) based on the time limits specified in the offer.
If there are problems of concern to the purchaser we counter the offer and negotiate until a final sales price is agreed to. Once all contingencies are met the contract moves forward and the closing occurs.
Once the contract is accepted you make formal application for the loan (unless buying with cash) and once you receive the loan commitment letter (a contract between you and the lender—make sure you understand what you are signing) and the process moves forward.
Once the inspection is complete and repairs are negotiated the contract continues to move forward. If no agreement is reached the contract may become null and void.
Assuming the contract moves forward and closing approaches after you receive your mortgage commitment, the attorney will submit a title insurance binder along with other legal paperwork required by your lender.
Once everybody has signed off
approval a closing date can be set.
It is highly recommended that you do a final walk through of your soon to be new home prior to closing.
The final walk through allows you to reconfirm the condition of the house prior to closing. This normally happens a day or two before closing.
Don’t skip this step because this is usually your last chance to verify that there has been no change or damage to the property, all agreed on repairs have been made, appliances you expect to be there are still there and that the seller’s personal belongings have been removed.
Don’t assume anything. A lot can happen between having your offer accepted and getting to the closing table.
If possible it is not a bad idea to do another walk through several hours before closing just as an added security and peace of mind effort.
Make sure that you bring photo identification to the closing. This is required since 9/11.
Real estate closing can often be exciting and stressful at the same time. There are many legal papers being shuffled back and forth, as well as checks for large sums of money being exchanged among parties.
At closing, the seller gives the title to the buyer in exchange for the purchase price that is stated in the contract. The seller also delivers a deed, title evidence, property survey if required. The buyer brings insurance, termite letter, cashier’s check etc.
You will be required to sign final mortgage papers, IRS Form 1099, a form known as the HUD-1 statement or Uniform Settlement Statement and other closing documents. The attorney will explain the purpose of each of these.
In addition what the seller or buyer brings to closing will vary depending on your locale, so be aware that state laws vary on buyer and seller responsibilities. In addition, who brings what will vary based on how closing costs were negotiated.
In most cases, there are no warranties after closing. The only defects that you can make notice of or complain about are defects that you can prove were known and/or hidden defects that were not disclosed or could not have been found out about through a reasonable investigation.
Post Closing is critical. Utilize a cash flow budget. Stay in touch with your agent. Your deed and mortgage will be registered and filed at the county recorders office.
On a day when you have time it may be wise to go to the recorder’s office a month or more after closing to ensure that the deed and mortgage was properly recorded.
Be sure to save all of your closing paperwork in a safe place. You will need some of it for your taxes as interest, points, and now MIP or PMI is now deductible on your tax return.
The deed and abstract should be placed in either a fireproof box and/or safe deposit box.
The documents are very important and due care should be utilized to safeguard them. They are an inconvenience to replace and will cost you valuable time and money.
Also file your homestead exemption by April 1st of the year after closing in the County in which the property is purchased.
In Georgia you will save on your
property taxes (must be owner occupied residence) and it is worth the effort if
you are an owner/occupant.
The above home buying process assumes 1st time buyer with no house to sell!
Also remember that all home buying situations are different and may require a more detailed offer and closing than that listed above
Use the above home buying process as a guide only as each situation will be unique.
Q: You comment quite a bit on your site about “buying a home the right way. “ What makes you so sure that the way you suggest is the “right way”? Isn’t that a subjective opinion.
A: Yes in a sense you could say that it is subjective, however it is also based on over 15 years of real world (objective) behavior of many of my past clients.
The preliminary pre-qualification checklist is a proven success. In addition intuitively it makes financial sense to analyze your cash flow, pay down your debts to a manageable level, create an adequate emergency fund, keep your house payment at a reasonable ratio so you are not “house poor”, and other positive financial moves prior to making what many consider the biggest purchase of their life.
Be advised that no system or approach to home buying is 100%, however doing the above will greatly increase the odds of your home purchase being an enjoyable endeavor and you will be thankful you did it the right way well into the future.
Furthermore, when you contrast the normal home buying process with that of the “right way to purchase” there can be no dispute that “the right way to purchase your home” is far superior to the normal way of purchasing a home.
Q: As a Home Purchaser should I get a Home Warranty?
A: The choice of whether or not you should get a home warranty can often be a difficult one. It is imperative that you have the home properly inspected, you know the age of the home along with the age and working condition of the appliances, plumbing and HVAC systems.
Home warranties generally cover appliances, heating and air conditioning and plumbing.
Whether or not a Home Warranty
policy is appropriate for you will depend on your personal situation—from
finances to your risk tolerance level. To
learn more about Home Warranties and how they work click on this link.
Q: I bought a time share several years ago and I now want to sell. Are there any good companies out there that can sell it for me?
A: Although I rarely deal with timeshares this is what I have seen in this industry for the most part.
Most companies that I have seen as of late are charging a listing fee and in most cases they don’t sell the time share. In cases when they do it is usually at a steep discount.
I have not come across a really good company out there to sell your time share through.
That is not to say there is not one out there, but I have not come across one in recent years.
It is my opinion you never should have
bought a time share as it was initially a bad purchase unless you
totally loved the area and planned on using it religiously.
You should have purchased the time share at the beginning with the end in mind. At that point you would have realized that trying to sell a time share without incurring a loss was highly improbable.
However, savvy time share sales agents only tell you about the pleasant side of owning a timeshare for the most part.
Time shares that were purchased for 15 thousand dollars or more are now selling for less than 2 thousand dollars in many parts of the country.
It may be best to try to sell to
someone who is at the timeshare during the week you have bought out for
the time share instead of using a potential rip-off company.
You can also utilize the various media (print, web, word of mouth, flyers etc.) to get the word out that you have a time share for sale. Just be aware that they are practically worthless in most cases and expect a low offer if you get any offers at all.
Q: Should I Purchase My Atlanta Area Home As A Lease Purchase?
A: Many Lease-Purchase homes are often advertised by sellers in local newspapers, on for sale signs, the internet and other media and potential home buyers often seek them out in their strong desire to own their own home.
Let’s look at the potential lease-purchase from a buyer’s and seller’s perspective.
As a purchaser if you did not initiate
the lease-purchase offer or someone who represents (i.e. agent, attorney
etc,) you did not initiate it, the offer will more than likely not be
in your best interest.
This is usually what occurs when a potential home buyer sees a lease-purchase ad in the various media and respond to it. They usually have no idea of the home buying or financial planning process and want to own a home at all costs.
They will be easy prey for a savvy home seller and/or their
representative because they are not fully aware of the process and they
are not in proper position to negotiate the terms and price.
Sellers and/or their representatives
normally will structure the sales contract in a manner that will
maximize the terms and sales price to their benefit and minimize the
terms and sales price to your (purchaser’s) benefit.
Those are some of the reasons I dislike lease-purchases from the buyer’s perspective.
In addition at the end of the lease purchase you will be locked in to that specific property at the specific price that you agreed to, regardless of market conditions.
If prices of homes have risen or fallen you are locked in. The
purpose of a lease purchase is normally to buy the purchaser time so
that they can get their credit to a level where they can qualify for a
loan at a good rate.
Once you qualify for a loan at a good
rate you have the potential to purchase ANY property, so why limit
yourself to one particular house.
Most lease purchases offered through Multiple Listing Services where you have to deal with real estate agents are usually for one year and usually not more than two, as real estate agents are concerned about their commission and will normally not accept an offer beyond that period.
Other seller’s who offer lease purchases without the assistance of an agent may offer a longer lease-term than three years but they will more than compensate for the longer term by structuring the terms and sales price in their favor.
If you must purchase a lease-purchase it is imperative that you draft the terms and sales price yourself or with the assistance of a competent real estate agent or other professional.
A better option if you feel you really want the property and don’t want to lose out may be a lease option purchase where you are not locked in to that purchase and you can opt in or opt out.
Again structuring the terms and purchase price is key so make sure you utilize competent professionals.
An even better option (and one that I
really like) for you may be to continue renting and get your credit
score and reports to a level where you qualify for an FHA or
Conventional loan at prevailing market rates (competitive interest rate)
and then purchase the home of your choice with no lease purchase
premium included or a lease option fee included.
Again make sure you, have a low debt load, you are pre-approved as opposed to pre-qualified, you have a six month emergency fund or other compensating factors at work and you are properly positioned to purchase.
By being ready, willing, and able to purchase you and your agent should be able to negotiate a better deal in most cases than if you were to go the lease-purchase or lease option route.
About Frequently Asked Questions:
The above FAQ's were answered by Thomas (TJ) Underwood. Thomas (TJ) Underwood is an active real estate broker in the state of Georgia and is the writer behind The Wealth Increaser, Home Buyer 411, Home Seller 411, The 3 Step Structured Approach to Managing Your Finances, Managing & Improving Your Credit & Finances for this MILLENNIUM and CREDIT & FINANCE IMPROVEMENT MADE EASY—FREE GUIDE.
He is the creator of TheWealthIncreaser.com where he regularly blogs about helping consumers improve their credit, finance and real estate pursuits in an intelligent, consistent and proactive manner. He’s always looking for ways to make intelligent finance improvement happen for those who “sincerely desire” success in their future.
You can contact him from a number of sources but the most direct way is to contact him through the contact us block that can be found at the bottom of this page.
Learn how to apply the— “Keys to Success”—in your life