FAQs

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This question has more to do with where you are in life, rather than your financial capacity. For example, purchasing a home requires money. Due to the cost of purchasing a home, including transaction cost, and the time it takes to purchase a home, it is understandable that some people, who move frequently, are less willing to purchase. It has been well documented that younger households are more mobile and change jobs more frequently than their older counterparts. Therefore, many hold off purchasing a home. Conversely, many young, mobile people find home buying as an opportunity to build wealth. These individuals purchase a home with the expectation that even if they move, they can rent it out and use that home as an income generator and equity builder.

Furthermore, some rent homes due to a lack of information on the home buying process and resources available to them. I was speaking to a young lady who told me that her family was planning on renewing their home lease. I mentioned to them that there is a new home buying program in her area that would provide down payment and closing cost assistance, for her purchase. She was surprised to learn that she could purchase a home without bringing any money to the table (both closing cost and down payment paid for) and that her mortgage would end up being less than she was paying for rent. I taught her about the process and provided her with resources and information to help her make an informed decision. She is now a proud home owner, paying less in mortgage than she was paying in rent – not to mention that her home has more space. Her story is not uncommon. There are two realities in play here. The first is that there is a lack of information provided to potential new home buyers, and more needs to be done to ensure that consumers are fully informed of their opportunities.

Additionally, it would not take long to notice the plethora of literature that indicates that rents are on the rise. In almost every market, rent has been on a steady rise. If you don’t believe me, ask any one you know that has been renting and ask them “has your rent increased over the past two to three years?”

Too often I have been in conversations with clients and they approach purchasing a primary residence the same way that they approach purchasing an investment property. The difference in the two typically has to do with the questions they ask themselves before purchasing. Additionally, the best time to purchase will largely concern the market that you are purchasing in and your own personal financial standing. For example, in many markets the best time to purchase a home is between September and February. Why? Because many people are not purchasing during that time, so you have less competition and can often get great deals. However, in some markets it does not matter the season, there is always a steady flow of buyers to these neighborhoods.

Furthermore, there are often other variables that should be factored into your home purchase. The factors include: how much space do I need/want; do my kids have access to a high-quality school, parks, recreation centers, etc. I met a guy who was living in a two bedroom condo with a wife, two kids, and a baby on the way. He said that he wanted to purchase something bigger, but wanted to wait for the market to shift before doing so. I told him that your desire to purchase is motivated by your desire to have more space for your family. Also, it is challenging to try and time the market. The point is that while you should consider the market, you should not limit your decision to such a moving target.

Purchasing a home for many people is one of the largest purchases they will make in their lives, and is a little scary.  Purchasing a home is a stretch, given the various costs included, and should be taken seriously.  Home buyers should consider what bank programs and loans are available to them.  It’s not simply about if the bank could provide you a loan, but if they have a loan program that fits your needs.  Furthermore, your lender should be able to inform you of your purchasing power.  There are different ways to approach your determining of your purchasing power.  One way is to find a community and ask your lender if you could afford the area.  They would then determine if you could afford in that price range.  Another approach would be to determine the size of the mortgage payment you could afford each month, and ask your lender what home price would result in that payment.  Whatever the approach, I encourage you to speak with a lender and determine if you can afford to purchase.  Lastly, keep in mind that homeownership typically has unforeseen costs, such as home maintenance, but this is often overshadowed by the tax deductions that come with home ownership.
The amount of money you need to purchase a home will largely depend on your loan program, and the price of the home that you are purchasing. Several of the costs associated with purchasing your home will be a percentage of the price of your home. For example, you will be expected to put down 1-2% of the sale price for your Earnest Money Deposit (EMD); 2-3% of the sale price for closing cost; and depending on the loan program you choose (FHA, Conventional, VA Loan, etc.) 3.5-20% for a down payment. Wait, it is not so bleak! In some markets, you can get a seller subsidy to assist you with your closing cost, and if that is the case and you close on the home, you will be get your EMD check back. You will also need to plan for paying for your home inspection and home appraisal.

One of the most important steps in purchasing a home is getting a home inspection. While the house may look gorgeous, you never know what is behind the walls. Getting a home inspection has two benefits. The first is that it helps to avoid major problems with the home. Once you determine what challenges are with the home, and trust me, there will be challenges, you should determine which ones do you want to negotiate with the seller to repair—or, if you would like to walk away from the home. In addition to having the option to ask the seller to make repairs found on the home inspection report, you may also negotiate that they give you a credit at closing so that you can choose fix the items yourself.

A typical inspection will investigate the foundation of the home, electric, plumbing, heating, roof, and more. The size of your home will dictate how long the home inspection will be. The second benefit of the home inspection is for the inspector to teach you about your home. Your home inspector can use the time of the home inspection to educate you on best practices for maintaining your home. They could teach you how to winterize your home and check things like sump pumps.

Oh, and don’t skip inspections on new construction. Just because its new doesn’t mean that it does not have problems.

Absolutely. Some people drive by new construction sites and see the signs inviting people to come view these well decorated model homes. As they walk into those homes they are confronted by a sales people who give them the impression that they have their best interest in mind, and that the person walking in does not need a realtor. However, remember that the sales person working at the new construction works for the BUILDER. They have dual or competing interest in the deal- wanting to please you the buyer and wanting to please the seller. When hiring a realtor, you have someone who represents you only and will have your best interest in mind.

Once the parties have agreed on the terms of the offer/contract, and proper initials and signatures are pinned, you have what is called Ratified Contract–a contract to purchase your home at terms agreed on by all parties. After that, your closing (when you are provided the keys to your new home) should be between 30 and 40 days. On your contract, you should have a closing date included. Of course this date could be shifted, and your closing could be more or less that 30 – 40 days. For a speedy closing, work closely with your realtor and lender, to get all need documents in on time.
1. A loan officer that is fairly easy to get in touch with and a nice, pleasant personality. If you don’t feel comfortable talking with them, it will be unpleasant all the way through.

2. A lender who is LOCAL. It is very important for them to know the area and market and to be able to do an appointment in person when needed. Several people complete their loan application in person, and especially with a first time homebuyer, it is very important that the buyer understands all the details of the loan documents.

3. A lender who is a bank or owned by a bank. Mortgage lenders who work for a bank are held to a higher standard and often have better control over their files. That is not always true with the largest 2 or 3 banks because they are so busy with high volumes of cases. However, banks typically go the extra mile to make sure everything is done properly.

4. A lender with specialty and community programs especially structured for your area and your market, in order to make sure you are exposed to all the opportunities and programs available to you.

5. A lender with experience. It takes years to really understand all the ins and outs of the mortgage business.

6. A lender that has local, if not in-house, processing, underwriting and closing. If difficulties arise as you move toward closing, a loan officer with a local presence can manage the last few days with local underwriters and closers to make sure the closing goes smoothly.