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first time home buyers guide

First Time Home Buyers

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Buying a home for the first time is not hard or complicated. What matter is finding the right agent to help guide you through the process. Let’s chat and meet to discuss how I can help you buy that first home faster and without the drama. Check out the buyer’s guide I’ve put together for buying your first home.

My First Time Home Buyers Guide

Step 1 Take a Hard Look at Your Finances and Establish a Budget:

Determine your current expenses and income. In addition to obvious items like rent, utilities, loan payments don’t forget to include the miscellaneous like haircuts, eating out, dry-cleaning, fuel for vehicles and any other expenses you usually incur during the course of a month. Also add in the possible new expenses of owning a home such as lawn maintenance, cost of water for watering trees, shrubs and lawn, Homeowner Association dues and increased utility costs. I can recommend a lender who works with first time buyers who can help you with this.

Step 2 Ask for help finding a lender or ask me for a recommendation

No one should “google” a lender for buying their first home. Ask family or friends for a recommendation. I can also help you out with a recommendation. The next step is  to meet with your lender to “Run the numbers.” The lender will help determine what your comfort level is on how much payment for a mortgage each month. The lender should be able to make recommendations about which loans are best for your buying situation too. Once a loan and monthly payment is determined, the lender will also figure out down payment and closing costs too. When your finished you should have a pre-approval to share and give me to buy your home. In a seller’s market we need a pre-approval to be successful with an offer

A pre-approval will place you in a stronger negotiating position when you place an offer on a property. You are letting the sellers know that you are serious and that you can afford that dream house. In addition, by having secured financing, the time period from offer to closing can be shortened.

Step 3 When Do I Need Money?

Your earnest money check will accompany your Purchase Offer Contract (normally 1% of the offering price). At the time of loan application, your lender will usually require some funds to be collected for the appraisal and credit report (approximately $400). In the case of new construction, the builder will require anywhere from 50% to 100% of the upgrade costs to be paid at the time the upgrade is selected.

When the mechanical/structural inspection (home inspection) is completed, the inspector will require payment (approximately $350). All other monies (including down payment, termite inspection, proration of taxes and others) will be collected at closing.

 

Step 4 Setting Up the Search for Home 

Determine a geographical area that suits your needs for commute time, proximity to shopping, schools and recreation. Decide whether a townhouse, condo or a single-family home fits your lifestyle. Determine amenities you would like to have in your new home – number of bedrooms, number of baths, garage, fireplace, garden tub, square footage, size of lot, fenced yard, one story or multi-story.

Step 5 Making an Offer, and Completing the Purchase

Once we find the right home, we will make an offer quickly. We will make our best offer to win the home. Once we are in contract, I will work closely with your lender to make sure the home can be financed. I will work closely with you to get seller disclosures and reports, schedule and perform inspections on your behalf, and negotiate any issues that occur during the escrow. If everything is acceptable to you, and there is no issue with the financing we will typically close within 30 days of the offer being accepted.

Step 6 Close of Escrow and Moving

Approximately after 21 days in contract we should be getting loan documents and going to the escrow company to sign documents in the next week or so. I will accompany you to the signing to make sure everything is correct to the purchase contract, and to help answer any last-minute concerns. You most likely will be moving after the home is recorded into your name. I will contact the listing agent and make sure the owner transfers important information about the home (utilities, ongoing maintenance, service contracts, etc.). I will also deliver the keys to your new home as well after the deed is transferred to you and the contract says you can take possession. Congratulations you’ve bought your first home!

How to make a winning offer to buy a home

How to Make a Winning Offer to Buy a Home

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We’ve all been there including myself. You see the right home at the right price online. You rush over to the open house, its swamped with buyers. You want the home and want to make a great winning offer. How do you win the home? If you’re buying in 2020, your offer to purchase will likely be up against offers from other just as motivated buyers. Learn ways you can make your offer stand out from and be the one that gets accepted.

Please note these strategies are intended for a hot seller’s market and negotiations with multiple competing offers. Market conditions and strategies will change over time. Every offer is unique. In no way should this article be treated as legal advice or as a substitute for the advice you should be seeking from your attorney or buyer agent. 

Ways to make your offer better with a loan

Submit a pre-approval not pre-qualification letter with the offer

This is basic if you are buying a home with a loan. A pre-qualification letter isn’t going to win in a multiple offer situation in fact you might not even get a response from the seller with one. In a seller’s market you need a pre-approval letter and not from an internet lender who sent an email saying you are “pre-approved.” Find a reputable bank and letter to provide you this critical item.

Shorten the time period in the purchase contract for loan and appraisal contingencies

The typical timeframe in the California Residential Purchase agreement is 21 days for this contingencies/conditions to be removed. Buyers can get more than pre-approved for a loan. If you can get fully approved subject only to the bank appraisal and clear title, consider getting a loan commitment letter.

Ask your lender to email and call the listing agent after you make an offer

This simple touch makes a difference and inspires confidence in the seller that you will perform and close the purchase since the lender is good and you as a buyer are solid.

Finance only 80% of the purchase if you can

Not only are you showing the buy you have more money to buy the home, but you can also look and see if your lender will waive the appraisal contingency for the purchase. Waiving the appraisal contingency will help show the seller you are a stronger buyer.

Review any reports, disclosures, and inspections the seller has made available

Get pre-sale inspections, reports, and disclosures if available prior to making an offer

If available these reports can help you streamline what you need to do to purchase the home. You may be able to shorten timelines, pay for items or seller costs, remove contingencies, not pay for your own inspections (accept the seller reports/inspections will save you money). Also makes you a savvy and smart buyer to the seller because you didn’t ask them for an inspection they already paid for.

Make the terms in the offer stand out

Find out when the seller’s preferred date and write it into the offer.

In a competitive situation you want to do all that you can to reasonably address the seller’s preferred terms. Giving the seller their preferred closing date is a great way to tip the scales in your favor. 

Pro Tip: Find out the seller’s preferred date and close 5-10 days early and offer the seller to remain in the home after the close and at no cost. In the end this wins more often than not. The seller isn’t moving until the home is sold, they have the money from the sale, the seller have the time to move out and at no cost.

Make a 1%+ earnest money deposit with your offer

The California residential purchase agreement allows up to 3% of the sales price for a deposit subject to liquidated damages. The typical earnest money check is about 1% of the offer price. Make your offer stand out by submitting a higher than average earnest money amount. Including a check with your offer should be sent as well.

Include proof of funds with your offer

Showing the seller, you have all the money available to purchase the home helps validate you as a strong buyer. You can do this with a letter from your lender saying that proof of funds has been provided or verified or send over a redacted (hide the account numbers) bank statements. More importantly if you are financing over 95% of the home purchase with a loan, showing the seller you have more cash available will help them not discount the seriousness of your offer because of the loan terms.

Waive the appraisal contingency if possible and you are comfortable doing so

If you have an 80% or lower loan amount to the sales price often the lenders can waive the appraisal contingency. Work closely with your lender to see if a waiver is available prior to making an offer. If you waive the appraisal contingency and the bank still requires an appraisal for the loan. If the home doesn’t appraise for the loan you may put your deposit at risk if you don’t complete the purchase.

Consider modifying the appraisal contingency for the loan

If the home doesn’t appraise that you will bring the additional funds to close. This is a risk to the earnest money deposit you made to purchase should you not perform. This strategy should be discussed with your agent.

Don’t make the buyer pay for a home warranty

If you want a home warranty purchase it, if not don’t ask for the seller to provide one anyway. You will learn about the home during your inspections and even if the expense of a warranty makes sense.

Don’t make your offer contingent on the sale of your current home

Instead, work with your lender to get pre-approved for financing which doesn’t require you to sell in order to buy.

Pay for closing costs

Closing costs and other extra fees affect the seller’s bottom line and could cause you to miss out on your dream home. Another option is to increase the offer price to pay for any closing costs. Discuss with your lender if you are buying with a loan if this is allowable.

Add an “escalation clause” or “writing first and countering last” to the offer

An escalation clause is a real estate contract, sometimes called an escalator, that lets a home buyer say: “I will pay x price for this home, but if the seller receives another offer that’s higher than mine, I’m willing to increase my offer to y price.”

In theory, an escalation clause is fairly simple. In practice, there are a lot of details involved with this clause. Again, you should really discuss this strategy with your agent

Shorten contingencies if possible

As much as possible, shorten each contingency deadline (financing, inspection, etc.) to the fewest number of days possible. Talk to your buyer agent about an appropriate number of days for each contingency. The type of property you are buying also should be taken into consideration. For ex, a property on acreage with easements, a private road may not be in your best interests to shorten your investigations.

Purchase the home and property “as-is” subject to inspections

If the property doesn’t have any inspection reports or disclosures available before you make an offer this is a risk. However, a diligent effort on your part can establish the condition and quality of the home and if there is deferred maintenance you need to repair. Showing the seller, you will take the home “as-is” and not request repairs with a financial contribution from the seller make you a stronger buyer. Again, this should be discussed with your agent and you should be comfortable making an offer with this condition.

Write a letter to the seller

Sellers want to like the future owner

Create a connection with your sellers by writing a thoughtful letter. For example, if the sellers raised their family in their home, write a letter which explains why their house is perfect for you and your family. Have everyone in your family sign the letter (the kids with crayons), and include a family photo. Most buyers choose not to write a letter, but very often it’s the personal letter that’s the deciding factor in a multiple offer situation. 

Make the first offer

First offers win more often than not

The first offer has the biggest impact to the seller. In general, there is psychology at play here. The seller is always unsure if the house will sell quickly and for full price. Although there may be competing offers the first offer will be the most impactful. It shows commitment since usually the buyer knows the market, see the home as soon as they can, and quickly submits an offer. These are all signs that the Buyer is very committed to completing the purchase and buying the home

Why Your First Offer is Always Your Best Offer

Final Thoughts

Very often it’s not just the price that determines the best offer. Usually it’s about the offer as a whole, the overall tone of the negotiation, and who the seller trusts are the best fit for their home. That’s why it’s so important to work with an experience local buyer’s agent who sets a positive tone during the negotiation while working with you to assemble a great fair offer.  

Please note these strategies are intended for a hot seller’s market and negotiations with multiple competing offers. Market conditions and strategies will change over time. Every offer is unique. In no way should this article be treated as legal advice or as a substitute for the advice you should be seeking from your attorney or buyer agent. 

finding the best lender

How To Find The Best Home Lender

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Before buying a home it’s important to understand your finances to buy a home. Often friends and family can be a great resource for finding a local lender for a home loan. Here is some advice and how to find the best lending pro to help you purchase a home if you are using a loan to buy.

When you buy a home, you’re in it for the long haul. You’ll have a mortgage payment for 15, 20 or 30 years, so it’s smart to understand what you need, the process, and picking the best loan officer to help you get a loan for your home.

How to Look for a Lender/Loan Officer

Finding a mortgage lender involves more than just getting a good interest rate; you want to work with the best mortgage companies, staffed by professionals who will guide you through the process. However ultimately you want to work with a loan officer/loan professional that you trust, can communicate effectively, and answer all you questions.

Before you start the search for your personal banker/lender/loan officer, you will need to do some work.

The Home Loan Journey

To get a jump-start on the mortgage loan process, use these tips to help you find the right lender and the right loan for you.

1. Review Your Credit and Income

Not everyone can qualify to buy a home; you have to meet certain credit and income criteria to assure mortgage companies you can repay the loan. The first step is to look at your credit score which is currently a feature in a lot of banking apps like Wells Fargo, Chase, Bank of America, etc

A low credit score signals that lending to you is risky, which means a higher interest rate on your home loan. The higher your credit score and the more on-time payments you make, the more power you’ll have to negotiate for better rates with potential lenders. Generally, if you have a score under 580, you’ll have a tough time qualifying for most types of mortgages. Don’t be discouraged by your current credit score if you think its too low. A good lender will have local resources to help you improve your credit score through “credit repair.” At this point just know what your approximate credit score is.

The lenders will look at your monthly bills and payments you make every month. There are ratios called “debt to income’ that need to be looked at to make sure you can afford to make the payment. Next, try to pay off high-interest debts and lower your overall level of debt as quickly as possible. the lower the “debt to income” the more credit worthy you are for a home loan. Paying off credit cards and recurring loans before you buy a home will also free up more money for the down payment.

2. Know the Types of Home Loan Lenders

Understanding the major players will help you navigate the crowded lending field. Here are the most common types of home lenders:

  • Credit unions: These member-owned financial institutions often offer favorable interest rates to shareholders. Most like.y you will have to join the credit union if you obtain a loan through them.
  • Mortgage bankers: They work for a specific financial institution and package loans for consideration by the bank’s underwriters.
  • Correspondent lenders: Think local mortgage loan companies that have the resources to make your loan, but rely instead on a pipeline of other lenders, such as Chase, to whom they immediately sell your loan.
  • Savings and loans: Once the bedrock of home lending, S&Ls are now a bit hard to find. But these smaller financial institutions are often community-oriented and worth seeking out.
  • Mutual savings banks: Another type of thrift institution, like savings and loans, mutual savings banks are locally focused and often competitive.

3. Find the Right Lender and Loan Officer to Work With

It’s easy to get a rough idea of what the home loan rates are by simply Googling “30 year home mortgage rates.” It’s also to find a “home loan calculator” to see what you can roughly afford for the budget for home. You can spend time on search looking for the “best rate for home loan.” Just be aware the rate offers out there are usually for a perfect buyer with excellent credit, 20% down, etc… In the end until you go through the credit application, credit check, and funds available for down payment and closing costs you won’t have an accurate picture of the actual cost of owning a home with a loan.

I recommend you connect to friends and family to find a good local lender and loan officer to work with. If you have a agent for buying a home they can provide a solid recommendation for a local lender to help you. The world of lending is ultra competitive and the best rates are often available to any lending professional to get you the best loan for your home buying.

It’s more than just the rate and terms for your home loan, it’s important that your lender is used to working with buyers like yourself for a home loan. Whether you are a first time buyer, a person with undocumented income, self employed, etc it helps to use a loan officer who can package you up for the best loan for your home buying situation.

4. The Right Questions to ask Your Lender and Read the Fine Print

Once you have some names, it’s time to ask:

  • How do you prefer to communicate with clients — email, text, phone calls or in person? How quickly do you respond to messages?
  • How long are your turnaround times on preapproval, appraisal and closing?
  • What lender fees will I be responsible for at closing? (Fees may include commission, loan origination, points, appraisal, credit report and application fees.)
  • Will you waive any of these fees or roll them into my mortgage?
  • What are the down payment requirements?

5. Get Ready to Home Shop With a Pre Approval Letter

Once you find a great lender, you need to get a pre approval letter to go home shopping. Getting a mortgage pre approval letter before you start looking at houses will tell Seller’s you can buy a home when you make an offer. The letter shows the seller that you’re a serious buyer whose loan is likely to close. It’s evidence that a lender has evaluated your finances and figured out how much you can afford to borrow, and therefore how much house you can afford.

Getting preapproved now will also save time later. When you’re ready to make an offer on a home, lenders will already have the information they need to process your home loan.

To get pre approved, you’ll have to provide your lender your financial information. Here’s a list of what a lender will typically ask you for:

  • Social Security numbers for yourself and any co-borrowers
  • Bank, savings, checking, investment account information
  • Outstanding debt obligations, including credit card, car loan, student loan and other balances
  • Two years of tax returns, W-2s and 1099s
  • Salary and employer information
  • Information about how much of a down payment you can make, and where the money is coming from

Once you get pre approved always ask what could help you get a lower payment. Also ask if this is the best rate they can provide? Ask if you should lock the rate and if its costs you anything to lock the rate, and how long the lock is good for.

Principal and interest payments on a mortgage aren’t the only costs of buying a home; you should ask your lender about others, including closing costs, points, loan origination fees and other transaction fees. If you’re unsure of something, ask for an explanation. I recommend prior to shopping for home you understand the total cost of owning a home on a monthly basis.

Final Thoughts

Although there are a tremendous amount of resources on the internet for “how to” and “learn more” about buying a home with a loan. Don’t forget to rely on family, friends and real estate agents to help you get started to find the best loan officer to work with you. Rates are in general very competitive and you should be able to determine if the rate and terms of your home loan is fair. However working with a loan officer who communicates well, answers your questions along the way, works hard for you goes a long way to help you succeed in your goal of owning a home.