8 TIPS FOR FIRST-TIME HOMEBUYERS
Buying your first home is like life's other firsts: exciting even romantic and a little bit scary as you wade into new waters. You can ease the process and avoid being ripped off by knowing these eight pointsbefore you take another move toward home ownership.
1. KNOW THY AGENT:
Will Rogers, the great American cowboy wit, said "I've never met a man I didn't like." It's the same with real estate agents. I've never met one that wasn't friendly, smiling and brimming over with positiveness. Dig deeper to know what you're getting in terms of loyalty, knowledge and experience. The right agent is a tremendous help and often a necessity when it comes to finding the right house.
Get references from family, friends and colleagues. Ask to see their activity lists. These show every property they sold during the past year. You want an agent who's experienced in the area where you want to live and who deals with buyers in your price range.
A seller's agent works for and gives complete allegiance to the seller; a buyer's agent does the same for the buyer. Most states require agents to tell the buyer for whom they're working. Even in the rush of househunting make sure you find out this important piece of information. A buyer's agent will point out rather than gloss over any flaws with the house or neighborhood, help you negotiate a good deal, explain your other options and be unquestionably on your side.
BY LAW, A REALTOR HAS TO WORK FOR THE SELLER IF NO BUYER AGENCY IS SIGNED!
Tip: The cost will be the same whether you use the seller's agent or get a buyer's agent: The two agents will split the commission.
2. DON'T GO OVERBOARD:
Buy only what you can afford. Everyone can agree that a four-bedroom, three-bathroom house in mint condition on three lushly landscaped acres with a pool has more appeal than a two-bedroom, one-bath on a small lot. But there's nothing worse than winding up with such a big monthly payment that you've nothing left over for a vacation, the kids' camp or your retirement. A good rule of thumb: Your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes.
Remember that your mortgage payment is only one aspect of what you'll be paying. Budget for homeowner's insurance, property taxes, furniture, general maintenance and so on.
3. PICK THE RIGHT MORTGAGE:
Mortgages are available from banks, mortgage companies and credit unions. You can also get one through a mortgage broker, who will contact several lenders for you to find competitive rates.
Get mortgage information from more than one source, and get the same information from each so you can compare the offers. The Federal Trade Commission (FTC) recommends that in addition to finding out the basic interest rate you ask each lender:
1. Is the rate fixed or adjustable? When interest rates
rise, monthly payments for adjustable-rate loans
eventually go up, too.
2. What is the loan's annual percentage rate (APR)? This
includes the interest rate, points, broker fees and any
credit charges you may have to pay, expressed as a yearly
rate.
3. What will points be in dollars? Points are fees paid to
the lender or broker for the loan. Ask each potential
lender for a quote in the dollar amount (rather than just
the number of points) so you'll know how much you will
have to pay.
4. Is private mortgage insurance (PMI) required? If you make
less than a 20 percent down payment, the lender will
probably require you to purchase PMI, which protects the
lender in case you fail to pay. Find out the exact monthly
amount and how long you will be required to carry PMI.
You will also have to choose between a 30-year or 15-year mortgage. A 30-year mortgage will mean lower monthly payments but a higher interest rate. In the long run, you'll be paying more for your house because you'll be making more interest payments. With a 15-year mortgage, the monthly bill will be higher but the interest rate lower; thus you'll pay less for your house because it will be paid off in a shorter period of time.
Have each lender provide you with a written statement of all fees connected to the loan. Then, ask each to reduce one or more of the fees. Use the lowest amount of fees to negotiate with the other lenders to see if they'll reduce their fees.
Tip: If you have an excellent credit rating, you may qualify for a lower down payment through a special Fannie Mae program: The Flexible 100 requires no down payment while the Flexible 97 requires just 3 percent down.
4. GET A PREAPPROVAL LETTER:
This gives you substantial leverage: Sellers immediately see you as a serious buyer. Not only will you know the exact price range you can afford, you'll be able to negotiate a better deal and move faster when you see a house you like. Work with your lender to get preapproval you'll need to supply information to verify your income, credit history, debts and assets. The lender will then issue a letter stating that your mortgage is approved for a certain dollar amount for a certain time period. Don't confuse preapproval with prequalification: The latter is a non-binding estimate of how much mortgage you can afford.
Once you get preapproved for a mortgage, avoid taking on any serious new debt and make timely payments on all existing debts. Otherwise you risk degrading your credit rating partway through the buying process.
Tip: If you're charged a preapproval fee, negotiate to have it refunded at the closing.
5. LOCK IN YOUR INTEREST RATE:
Once you get what you think are the best terms possible, ask for a written rate lock. It will include the interest rate, how long the lock-in will last and the number of points to be paid. A lock-in protects you from a rate increase if rates go up during the time your loan is being processed.
6. PLAY IT CLOSE TO THE CHEST:
If you fall in love with a house, keep your feelings to yourself. Don't let the seller or the seller's agent know. Handing over that bit of information will empower them to hold out for the asking price. Keep in mind that there's always another house at the right price.
Tip: Visit at night and on a weekday. Most people look at homes on weekends in the daylight; before you buy, find out what the neighborhood is like at other times. Is it quiet? Noisy? Full of traffic? Dead as a doornail? Also, drive the surrounding few blocks in each direction from the house, to make sure there aren't unsavory areas or unexpected industrial sites nearby.
7. NEGOTIATE:
Before making an offer, ask the agent for a Comparative Market Analysis (CMA). The CMA lists the addresses of recently sold homes in the same neighborhood, with the date sold, the price and the number of bedrooms and bathrooms. Your offer should be comparable and not necessarily based on the seller's asking price.
Then, insist that the contract include two types of escape clauses: a financing (or mortgage) contingency and an inspection contingency.
If you make an offer but then are ultimately turned down by lenders, the financing contingency will release you from the contract. You'll also get back your earnest money (your deposit). If a professional inspection finds damage or structural flaws in the house, the inspection contingency will release you from the contract and your deposit will be returned. Usually you can also opt to use the inspection contingency to negotiate for repairs to the house or for a lower selling price. There are different types of inspection contingencies; work with your agent to put the type you want into the written offer you make on the house.
Tip: Never use an inspector recommended by the seller's real estate agent.
8. WATCH OUT FOR PREDATORY LENDING:
Every once in a while, the FTC issues a warning about unscrupulous lenders. Signs of trouble:
Being asked to include false information on your loan application.
Being asked to sign a blank form.
Being pressured into borrowing more money than you need or can afford. Being promised one thing but delivered another. If you get new numbers or new terms at the closing, ask for an explanation. Tell your lawyer you are prepared to walk away.
The bottom line is that "Knowledge is power." Written a long time ago by the English statesman Francis Bacon (1561-1626), it's as true today as then. Make it your personal mantra.
If you like to see listings with pictures of Short Sale,Foreclosed and Motivated Seller Properties, go over to http://www.flatheadhomebuyers.com and get our Whisper Report and while your there get information about our Foreclosure Home Tour.
Saturday, August 8, 2009
Kalispell Montana Real Estate
5 Powerful Buying Strategies
1. Don't Get "Pre-Qualified!
Do you want to get the best house you can for the least amount ofmoney? Then make sure you are in the strongest negotiating positionpossible. Price is only one bargaining chip in the negotiations, andnot necessarily the most important one. Often other terms, such as the strength of the buyer or the length of escrow, are critical to aseller. In years past, I always recommended that buyers get "pre-qualified" by a lender. This means that you spend a few minutes onthe phone with a lender who asks you a few questions. Based on theanswers, the lender pronounces you "pre-qualified" and issues acertificate that you can show to a seller. Sellers are aware thatsuch certificates are WORTHLESS, and here's why! None of theinformation has been verified! Oftentimes-unknown problems surface!Some of the problems I've seen include recorded judgments, childsupport payments due, glitches on the credit report due to any number of reasons both accurately and inaccurately, down payments that have not been in the clients' bank account long enough, etc. So the way to make a strong offer today is to get "pre-approved". This happens AFTER all information has been checked and verified. You are actually APPROVED for the loan and the only loose end is the appraisal on the property. This process takes anywhere from a few days to a few weeks depending on your situation. It's VERY POWERFUL and a weapon I recommend all my clients have in their negotiating arsenal.
2. Sell First, Then Buy
If you have a house to sell, sell it before selecting a house to buy!I haven't seen a contingent sale work in the last 3 years, unless it'swith a new home builder who has other houses to sell and can afford to put one on a contingency. Let's pretend that we go out looking forthe perfect house for you. We find it and you love it! Now you have to go make an offer to the seller. You want the seller to reduce theprice and wait until you sell your house. The seller figures that's arisky deal, since he might pass up a buyer who DOESN'T have to sell a house while he's waiting for you. So he says OK, he'll do thecontingency but it has to be a full price offer! So you see, you paidmore for the house than you could have because of the contingency.Now you have to sell your existing house, and in a hurry! Otherwiseyou lose the dream house! So to sell quickly you might take an offerthat's lower than if you had more time. The bottom line is that buyingbefore selling might cost you TENS OF THOUSANDS of dollars. I always recommend that you sell first, then buy. If you're concerned that there is not a house on the market for you, then go on a window-shopping trip. You can identify possible houses and locations withoutfalling in love with a specific house. If you feel confident afterthat then put your house on the market. Another tactic is to make the sale "subject to seller finding suitable housing". Adding this phraseto the listing means that WHEN YOU DO FIND A BUYER, you will have sometime to find the new place. If you don't find anything to your liking, you don't have to sell your present home.
3. Play the Game of Nines
Before house hunting, make a list of nine things you want in the newplace. Then make a list of the nine things you don't want. I call this"NINE OF THIS AND NONE OF THAT". You can use this list as a scorecard to rate each property that you see. The one with the biggest score wins! This helps avoid confusion and keeps things in perspective when you're comparing dozens of homes. When house hunting, keep in mind the difference between "SKIN AND BONES". The BONES are things that cannot be changed such as the location, view, size of lot, noise in the area, school district, and floor plan. The SKIN represents easily changed surface finishes like carpet, wallpaper, color, and window coverings. Buy the house with good BONES, because the SKIN can always be changed to match your tastes. I always recommend that you imagine each house as if it were vacant. Consider each house on its underlying merits, not the seller's decorating skills.
4. Don't Be Pushed Into Any House
Your agent should show you everything available that meets yourrequirements. Don't make a decision on a house until you feel thatyou've seen enough to pick the best one. Go to the Multiple Listingcomputer with your agent to make sure that you are getting a COMPLETE list. In the late 1980's, homes were selling quickly, usually a few days after listing. In that kind of market, agents advised theirclients to make an offer ON THE SPOT if they liked the house. That was good advice at the time. Today there isn't always this urgency,unless a home is drastically under priced, and you'll know if it is.Don't forget to check into the SCHOOL DISTRICTS of the area you'reconsidering. Information is available on every school; such as classsizes, % of students that go on to college, SAT scores, etc. You canget this information from your agent or directly from the school.
5. Stop Calling Ads!
A word of caution - agents create ads solely to make the phone ring!Many of the homes have some drawback that's not mentioned in the ad, such as traffic noise, power lines, or litigation in the community.What's not mentioned in the ad is usually more important than what is. For this reason, I want you to be very careful when reading ads.Remember that the person writing the ad is representing the seller and not you! The most important thing you can do is have someone on your side looking out for your best interests. Your own agent will critique the property with an eye towards how well it meets your needs and will point out any drawbacks you should know about. So whether you decide to work with me or not, pick an agent you feel comfortable with and enlist the services of that agent as a buyer's broker. Then you become a client with all the rights, benefits, and privileges created by this agency relationship, and you're no longer just a shopper. Did you know that many homes are sold WITHOUT A SIGN ever going up or an AD EVER BEING PUT IN THE PAPER? These "great deals" go to those people who are committed to working with one agent. When an agent hears of a great buy, who do you think he's going to call? His client, who he has a legal obligation to work hard for you, or someone who just called on the phone and said "keep your eyes open"? So to get the best buy on a property, I always recommend that you hire your own agent and stick with him.
If you thought this post was informative then I would like to invite you to get my report titled "10 Things you should know about buying Foreclosed,Short Sale,Distressed Seller Properties" this report will save you alot of time,headaches and money. You can also get my Whisper report that lists hundreds of Foreclosed,Motivated Seller and Short Sale Properties in Flathead County along with Pictures also ask about Foreclosure Home Tour.
Get your FREE information by going to http://www.flatheadhomebuyers.com/ or calling my office at Big Sky Properties 406-755-5666 and ask for Brett Kelly Owner/Broker
1. Don't Get "Pre-Qualified!
Do you want to get the best house you can for the least amount ofmoney? Then make sure you are in the strongest negotiating positionpossible. Price is only one bargaining chip in the negotiations, andnot necessarily the most important one. Often other terms, such as the strength of the buyer or the length of escrow, are critical to aseller. In years past, I always recommended that buyers get "pre-qualified" by a lender. This means that you spend a few minutes onthe phone with a lender who asks you a few questions. Based on theanswers, the lender pronounces you "pre-qualified" and issues acertificate that you can show to a seller. Sellers are aware thatsuch certificates are WORTHLESS, and here's why! None of theinformation has been verified! Oftentimes-unknown problems surface!Some of the problems I've seen include recorded judgments, childsupport payments due, glitches on the credit report due to any number of reasons both accurately and inaccurately, down payments that have not been in the clients' bank account long enough, etc. So the way to make a strong offer today is to get "pre-approved". This happens AFTER all information has been checked and verified. You are actually APPROVED for the loan and the only loose end is the appraisal on the property. This process takes anywhere from a few days to a few weeks depending on your situation. It's VERY POWERFUL and a weapon I recommend all my clients have in their negotiating arsenal.
2. Sell First, Then Buy
If you have a house to sell, sell it before selecting a house to buy!I haven't seen a contingent sale work in the last 3 years, unless it'swith a new home builder who has other houses to sell and can afford to put one on a contingency. Let's pretend that we go out looking forthe perfect house for you. We find it and you love it! Now you have to go make an offer to the seller. You want the seller to reduce theprice and wait until you sell your house. The seller figures that's arisky deal, since he might pass up a buyer who DOESN'T have to sell a house while he's waiting for you. So he says OK, he'll do thecontingency but it has to be a full price offer! So you see, you paidmore for the house than you could have because of the contingency.Now you have to sell your existing house, and in a hurry! Otherwiseyou lose the dream house! So to sell quickly you might take an offerthat's lower than if you had more time. The bottom line is that buyingbefore selling might cost you TENS OF THOUSANDS of dollars. I always recommend that you sell first, then buy. If you're concerned that there is not a house on the market for you, then go on a window-shopping trip. You can identify possible houses and locations withoutfalling in love with a specific house. If you feel confident afterthat then put your house on the market. Another tactic is to make the sale "subject to seller finding suitable housing". Adding this phraseto the listing means that WHEN YOU DO FIND A BUYER, you will have sometime to find the new place. If you don't find anything to your liking, you don't have to sell your present home.
3. Play the Game of Nines
Before house hunting, make a list of nine things you want in the newplace. Then make a list of the nine things you don't want. I call this"NINE OF THIS AND NONE OF THAT". You can use this list as a scorecard to rate each property that you see. The one with the biggest score wins! This helps avoid confusion and keeps things in perspective when you're comparing dozens of homes. When house hunting, keep in mind the difference between "SKIN AND BONES". The BONES are things that cannot be changed such as the location, view, size of lot, noise in the area, school district, and floor plan. The SKIN represents easily changed surface finishes like carpet, wallpaper, color, and window coverings. Buy the house with good BONES, because the SKIN can always be changed to match your tastes. I always recommend that you imagine each house as if it were vacant. Consider each house on its underlying merits, not the seller's decorating skills.
4. Don't Be Pushed Into Any House
Your agent should show you everything available that meets yourrequirements. Don't make a decision on a house until you feel thatyou've seen enough to pick the best one. Go to the Multiple Listingcomputer with your agent to make sure that you are getting a COMPLETE list. In the late 1980's, homes were selling quickly, usually a few days after listing. In that kind of market, agents advised theirclients to make an offer ON THE SPOT if they liked the house. That was good advice at the time. Today there isn't always this urgency,unless a home is drastically under priced, and you'll know if it is.Don't forget to check into the SCHOOL DISTRICTS of the area you'reconsidering. Information is available on every school; such as classsizes, % of students that go on to college, SAT scores, etc. You canget this information from your agent or directly from the school.
5. Stop Calling Ads!
A word of caution - agents create ads solely to make the phone ring!Many of the homes have some drawback that's not mentioned in the ad, such as traffic noise, power lines, or litigation in the community.What's not mentioned in the ad is usually more important than what is. For this reason, I want you to be very careful when reading ads.Remember that the person writing the ad is representing the seller and not you! The most important thing you can do is have someone on your side looking out for your best interests. Your own agent will critique the property with an eye towards how well it meets your needs and will point out any drawbacks you should know about. So whether you decide to work with me or not, pick an agent you feel comfortable with and enlist the services of that agent as a buyer's broker. Then you become a client with all the rights, benefits, and privileges created by this agency relationship, and you're no longer just a shopper. Did you know that many homes are sold WITHOUT A SIGN ever going up or an AD EVER BEING PUT IN THE PAPER? These "great deals" go to those people who are committed to working with one agent. When an agent hears of a great buy, who do you think he's going to call? His client, who he has a legal obligation to work hard for you, or someone who just called on the phone and said "keep your eyes open"? So to get the best buy on a property, I always recommend that you hire your own agent and stick with him.
If you thought this post was informative then I would like to invite you to get my report titled "10 Things you should know about buying Foreclosed,Short Sale,Distressed Seller Properties" this report will save you alot of time,headaches and money. You can also get my Whisper report that lists hundreds of Foreclosed,Motivated Seller and Short Sale Properties in Flathead County along with Pictures also ask about Foreclosure Home Tour.
Get your FREE information by going to http://www.flatheadhomebuyers.com/ or calling my office at Big Sky Properties 406-755-5666 and ask for Brett Kelly Owner/Broker
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