What tips do you have for First-Time Home Buyers?
- The first consideration should be, "How long do I plan on living in a home?" This is important because you can save money (interest fees and pre-payment penalties) by customizing your financing to fit your future plans.
- The next step involves talking to a Lender. Find out how much house you can afford. Everyone falls into a certain price range depending upon their income. Only a certain percentage of your monthly income should go towards a house payment. Otherwise you are risking a future foreclosure. Ask the Lender to determine your Income and Debt Ratios.
- Then, you should have your credit checked. With this information, the Lender can determine your credit worthiness as well as quote you an interest rate.
- Find out the Lender's Down Payment requirement. In other words, "Will I have enough money saved to put down on a house?"
- Inquire about any programs for First-Time Home Buyers and decide on the best option to fit your needs.
- Armed with all this information, you are ready to start looking for a home in your price range. Upon finding a home, talk with the Lender again. They can give you an estimate of your monthly payment and closing costs if you were to buy.
- Eventually, you will need to fill out a loan application, however, don't do this too soon. First, it is better that you understand your future plans, your current financial standing and Lender requirements.
- Predatory lending is on the rise! Beware of undocumented promises that sound too good to be true. Get things like "closing cost estimates" in writing from your Lender. Don't be afraid to ask questions. The worst question is the one not asked.
- Knowledge will give you confidence when its time to sign the sales contract. When this is done, the seller is assuming that the buyer is informed, competent and qualified to make the purchase.
Does your company offer financing?
No. Our company is not licensed to lend money. However, we can help you find a local lender. If you are needing financing, a good place to start is where you do your banking. If this does not work for you, then find a lender that will be up-front with you about their requirements and fees.
Will the owner finance a mortgage for me?
Generally, no. In most situations, the seller does not want to collect monthly payments from the borrower because of the default risk involved. Most sellers are not in the lending business and therefore cannot adequately determine a borrower's credit history, income, assets and liabilities.
Will the seller rent the property?
If the property is not being advertised "For Rent", then no. In the case of a Lease-Purchase, the answer is maybe. In most cases, the owner is looking for a normal sale. A Lease-Purchase is generally too risky for owners due to interest rate increases in the market over time. This can impact decisions by the borrower to buy when the lease expires. Also, there is a risk that the credit status of the borrower may be negatively impacted during the lease period. This could affect the borrower's abililty to secure financing later.
Will the seller improve or repair the property prior to closing?
Most owners sell their property "as is". These sellers are generally willing to negotiate on price but not willing to repair or improve the property prior to closing. However, if improvements are needed for a loan to close, and the cost to cure is minor, then most owners will do the necessary updates.
Has the property been appraised?
A Competitive Market Analysis is performed on all our listings before marketing begins. This process involves comparing the listing to other similar properties that have sold recently and properties that are currently for sale. It is similar to an appraisal and is used to set the asking price of the listing. Most lenders require an appraisal after a purchase contract has been executed by the buyer and seller. This is done by an Independent Appraiser and it will reveal the property's current market value.
If I'm borrowing money, what must I do before purchasing a property?
You must get pre-approved for your loan. Sellers do not want to "tie up" their property in a contract for an "extended" period of time. If the borrower's loan is eventually disapproved, the seller could lose precious marketing time and potential customers. By getting pre-approved, this risk is minimized and the loan processing time is reduced.
What is the bottom price that the owner will accept?
That question should not be answered verbally. There is more to a deal than just the price offered. The terms of the contract are just as important. Therefore, the only way to accurately determine a owner's lowest price is to sign a contract and put down an Earnest Money Deposit. This shouldn't be done until you are pre-approved for your loan and you understand the Lender's requirements. Then, the owner will be able to take your offer seriously by considering price and terms together. For more information about terms, talk to one of our staff or your lending institution.
How does the Earnest Money Deposit work?
When the buyer signs a purchase contract, they must also deposit earnest money with our company. This money lets the owner know that the buyer is "earnest" about the offer. Once a purchase contract is executed (*signed/dated and agreed upon by all parties), we are required to deposit and hold the earnest money until the consummation of the transaction. If the contract never becomes executed*, the earnest money is promptly returned to the buyer. Once an executed* contract is established, the terms must be met by all parties involved. Upon closing, the earnest money is applied to the buyer's closing expenses. Earnest Money may be forfeited if the buyer is in default of the purchase contract.
Will the owner pay for any of my closing costs?
Maybe. That usually depends upon the sales price offered, the motivation of the seller, how much the seller has invested in the property (mortgage/expenses), and what specific closing costs (and their amounts) you need the owner to pay. Keep in mind that the owner pays a commission to our company for securing a sale. Also, the seller generally has their own closing costs that they are responsible for such as deed preparation, and termite inspection or treatment.