How and When To Buy a House

Buy a house? Is it easy?

Thousands of homes are bought and sold every day. So it must be relatively easy right? Well let's just say that it can be. So can a marriage.That was meant to introduce a little humor.

There are thousands of articles online on how to buy a house. Most of them are click bait or lead capture. I hope to use this article to attract those who want to buy or sell a home. However if it is not right for you I do not want to help you buy a home. You should rent or lease and I would gladly help you with that instead. So let's start off with some questions to see if you should be buying a home. No sales pitches.

For those who are buying a primary residence.

How familiar are you with the area you are thinking of buying your home in? In today's modern world it is shockingly easy to get to know an area on the other side of the world. With google you can even see house numbers in non gated neighborhoods. I recently had a oversees client inquire about a home in a gated community. So I went to the home and also made a 5 minute video of the community and it's amenities with my iphone. Technology is awesome. You can research schools, check traffic routes and travel times and answer almost any question about an area. A word to the wise some of those google images are not current.

Some common considerations when researching an area are.

• Travel times to work and toll expenses.
• Child care and immediate care.
• Schools both public and private.
• Groceries and necessities.
• Entertainment lifestyle and local culture.

Single Family Home Options

Let's talk about where most Americans live which is the suburbs. By suburbs I mean the area between the downtown section of major cities and rural America. Most homes in these areas are in subdivisions although not all of them. Subdivisions are either gated communities or non gated. They sometimes come as planned communities and may include community fitness centers, pools, parks fitness trails etc. Which type is the right type for you?

• Gated Communities-Currently the in thing in central Florida and most of California. California having more gated communities than any other state. I have linked to a video on gated communities. It is worth a watch. There are pros and cons to them. They add to the value of homes however they also add a monthly cost. Gated communities can be a major hassle at high traffic times in larger communities without enough gates. Also in townhome communities with younger residents who come and go quite often and frequently have visitors.
• Non Gated Communities-Most non gated communities have lower HOA and maintenance fees. That means you can afford more house,more toys or can diversify your investments because you have more cash. It also means you are going to see cars in the community you do not recognize and there will be more traffic.There are plenty of these non gated communities that have hundreds of homes and community pools etc. Non gated communities can be just as nice as gated communities. However you still want to notice how easy it is to get in and out of your community during the times you will be needing to. How busy is the street you leave on and how wide is the community's entrance. 
• Waterfront Homes -Taxes, bugs and foundation issues. Those are your primary concerns on freshwater. Flooding is covered by flood insurance. I personally love waterfront homes and currently live in a lakefront home. The taxes are higher. In fact what the government considers waterfront in some areas is hilarious. So let's skip to bugs. You are going to have more. Not necessarily mosquitos, we have very few. However we have spiders and Mayflies. You can battle them, learn to live with them or experiment and minimize them. Using LED Lights and Keeping your blinds closed at night will encourage them to visit your neighbor if you don't share your secrets.                                                                                                       Sometimes to build on these lakes you have to build up the shoreline. That earth will settle for 6 or 7 years. So if you buy a used home make sure to get an inspection. There is likely going to be cracks in the pool area and the stucco. Both issues are fixable in most situations and possibly still under warranty if the builder still exists.

Investment Homes and Lifestyle or Vacation Properties.

• Of these two, investment homes are the most commonly purchased. I will refer you to my Short Sales and Bank Owned Property page first. Now that has been said there are many other ways to buy homes at a good price. It takes effort and commitment but it can be done.You can search the obituaries and divorce records if you wish. Hey, people do it and do well at it. Better yet your Realtor can pull a list of homes that have been on the market for a while or have already expired. It only takes me 20 minutes to draft an offer for you. So you bid low and see where it leads. Some people are more motivated than you realize. I will only do this for people who show they have funds and sign a contract for representation with me. 
• Sheriff's Sales and auctions are covered in detail on my Short Sales and Bank Owned Property page linked above.
• Lifestyle and Vacation homes. First of all congratulations. Very few people reach the point that you are in. Let's talk about some options and things to consider. You probably already have an idea of where you want this vacation home and why that you do. But how can you put this home to work for you until you want to live in it full time. Or during the times that you do not want to visit it? Are you going to rent it out for a couple of years until you can move into it? If so you will probably need 20-25% more rent than your mortgage is for. The Company I work For Wendy Morris Realty handles almost 100 in our area.What about selling time shares? Make sure the company you use is responsive and knowledgeable.

Financing your new house

Are there any things that you can do to avoid potential problems. Yes there are. It starts before you get prequalified or pre-approved.

•  As soon as you think about buying or selling a home get a free credit report on yourself. You are entitled to one free credit report per year for free from the major credit reporting companies.
• If you are a homeowner ask yourself this. Have I had any work done at my house by a contractor. If the answer is yes you may have a mechanics lien on your home. If you are going to sell a home or own a home and plan on buying another consider pulling title on your home. This makes sure there are no liens on your property. It normally costs $75-$100 dollars. Sometimes things are there you do not expect.
• Get your credit in good shape and see how much of a down payment you actually have. The Bank will want to know where the funds for your down payment came from also. You can sometimes supplement what you have for a down payment with a seller's gift etc.
• Never ever misrepresent your finances to a bank.

Mortgage Lenders

Bear with me and ponder what I am about to cover. First a foreword about my experiences. I have used Lendingtree with success. I have used a mortgage broker with some success. However I am going to ask you to strongly consider at least talking to the lender your Realtor recommends. Have you ever noticed that when you buy a car that the dealers loan officer can always beat the deal you have with your bank? Here are two important things you may not know.

1. Mortgage Origination Fee-This is normally 1% of the total fee. It is also where most of the money comes from that a mortgage broker makes.To shorten this story the fees are going to be very competitive and very often flexible.
2. There are some terrible lenders out there. I am talking about the sources of the funds you actually borrow. Sometimes referred to as the mortgage underwriter. Mortgage underwriting is the process of the approval. You do not want problems right before closing.

I mentioned those two things because they are important to the buyer,seller,title company and the Realtor. You can rest assured that the companies that are known to cause problems at the last minute have a hard time getting recommended in our office. So where will they seek business? Online mortgage providers. Where else can they go?

Also when you work with the lender your Realtor recommends you normally get a local human being that you can call or even, god forbid stop by their office and actually speak to them. My last point on this topic is that I receive no compensation of any kind from any mortgage broker or company. Realtors just want successful closings.

How much/how much do you want to afford?

These numbers will vary depending on total debt, and a list of other factors. But here are the basic guidelines. Your new home should not consume more than 40% of your total monthly income if you are in great financial shape. Most likely the number should be lower when you consider maintenance and repairs etcetera. Your bank will say being closer to 30% is much better. You will have more cushion if a crisis arises. Or rather when it arises. I could fill a volume with banking mumbo jumbo but I gave you the best advise on it I could already. I will however ad this. Run from any Realtor or mortgage officer who pushes you to afford more, or to endanger yourself financially. There is a reason that banks put limits on lending.

Prequalified vs Pre-approved. Two terms having to do with your mortgage qualifications.Prequalified gets you pretty much nowhere. It just lets you know that in a perfect world this is what you can afford. Pre-approved means if everything you have represented to the bank is accurate and the home appraises for the right amount the bank will approve the loan. If nothing changes before the scheduled closing. The bank will notice any credit purchase before your close and those purchases can endanger your closing.

Any offer to purchase will either include a letter of pre-approval on top of it or a pre-approval to be presented within____ of the acceptance of this offer cover letter.

If you were selling a home and had two offers one with pre approval and one without which would you accept? Most likely one with the pre-approval.

Time to start looking!

Some of the best points I have already covered. So congratulations ! You are jumping into the buyer's pool headfirst. If you have followed the steps above and are looking in earnest then get a  full time Realtor. Ben Franklin once said that if you want something done get a busy person to do it. There are two reasons for this. They have done it before, and if they can't get it done they can not eat. Anyone can show up in a nice suit and a nice car. Get a Realtor with over 2 years of full time experience. Then you will most likely be ok. If they underperform call their Broker and get a replacement. Your contract is actually with the Broker anyway. The Realtor is kindof a sub-contractor known as a General Agent of the Broker.

After looking at 1-4 houses which is the norm for educated buyers, you will select one to make your home. Typically your initial offer will be 3-5% below asking price. If the home has been on the market for less than 2 weeks and a lot of people are looking then think closer to the asking price for your offer. Here is a super clue. The median sales price for your area (remember we are talking suburbia) is a great statistic to pay attention to. A properly priced median valued home and below should sell in 2-3 weeks in suburbia If it has been on the market longer, well then everyone else has said the price is too high right? Note to self, those are the people you would sell the house to next month. Higher priced homes are different because there are fewer buyers. However if 8-10 people have looked at any house and there are no offers it is priced to high.

When you have found the house you want

This is when it pays off to have a professional Realtor. Be upfront about what you want out of the deal. Listen to the Realtors suggestions and hopefully your Realtor will not have what we call comission breath. If your Realtor is more eager than you take a strong stance on your positions. If you do not end up with the house you are currently trying to get think about making a change.

Be ready for both potential acceptance, multiple offers and negotiations. Stuff happens be flexible but don't make commitments you can not afford.

Schedule your home inspection 

As soon as you are made aware that the homeowner has accepted your offer get your home inspector on the line and make an appointment. Also make your lender aware of the acceptance so you can start getting the appraisal lined up. You have the right to attend the home inspection and observe.However they can take 3-4 hours and you will probably get bored. Your Realtor should at least try to stop by and see the inspector at the home. I always have just to chat with the inspector for a moment. Most home inspectors follow a checklist and are very thorough. After all they are liable for missing items. They will send a report complete with photographs for you and your Realtor to go over. If there are major concerns you renegotiate with the seller. A good point here is that once the seller has been made aware of an issue in most states they must disclose that problem to future buyers.

The Appraisal.

Most of the time this goes fine if everyone else has done their job, been honest and the home passes inspection. Expect the home to get appraised for the exact amount that you need. After all you are a buyer and willing to pay that much for the home. Sometimes an additional amount is added to the sales price to help the buyer. This can be done in some states as long as the home will appraise for the new amount. It is complicated so ask your Realtor or finance officer for details if needed.

Title insurance

There are two types you will want. One for the lender and one for the owner. Get them both. Often the seller will pay for the owner's title insurance but this is not always the case. Ask for it anyway. This is another time I could go on and on. However it would not benefit you because you may be in another state. Your title agency and Realtor will answer these questions. I will just say to get them both is my recommendation. They not only protect you they will encourage quick action by your title company later if you have a problem. Why? The title company will not want there to be a claim on your owner's policy.

Ok we are finally here. The final walkthrough commonly done the day before closing. The home should be empty and there should not be a pod in the driveway. All of the owner's belongings should be removed. None of the fixtures should be removed and the house "should" be clean and ready to be handed over. Your Realtor will meet you there and help if any problems arise. Yes they do arise. But normally they are minor.

The Closing or Get your Keys Day

Awesome, it is finally happening. Here is some of what to expect. The buyer will need about 45 minutes to an hour do the paperwork and ask questions. The seller can do theirs in 20 minutes. The numbers may change a little but will be really close to the same. Be prepared for deviations. I always like to attend both closings. However this is not always practical.                                                                      It is definitely better if the sellers and buyers are kept separate. For some seller's this is an emotional thing. In "closing" try not to schedule your close at the end of the month or near a holiday. It is busier. I think the best days are in the middle of the month.

Thank you for reading this and I certainly hope it was helpful. It was by no means complete but it had some helpful suggestions. If I can help contactme here. I'll help you buy a house in Central Florida.