Buying Your First Home – Step 2 Getting a Loan
When it comes to getting a loan, there are a number of loan programs available, so you need a really good mortgage broker to help you find the best one for you. Often first-time home buyers go on the internet and find what looks like the best interest rate and plan to get their loan online. Don’t do that! I’ll tell you why….
Buying your first home can be a pretty overwhelming process and you need to be working with someone you trust and can talk to face-to-face. Ask friends and family members in addition to your real estate agent for recommendations. Interview two or three people and choose the one you like the best. You’re the customer, and they don’t get paid if you don’t buy the house, so they’re working for you. You want someone who feels like a partner in this process.
LOAN APPLICATION
The first part of getting a loan is filling out the application. You can often do this part on-line. You will then be asked to come in for an interview and bring in documentation. Plan on submitting the following in addition to proof of your id and social security number.
• Bank statements for 2-3 months
• Last two years tax returns
• Last three pay stubs
• If self-employed, you will probably need Profit and Loss Statements in addition to tax returns.
• Rental and/or mortgage information
• Proof of all funds, including gift funds
If you hope to borrow some of your down payment or closing costs, some loans will not work for you. Gift funds may be allowed but be prepared to show proof of check and deposit from recipient and recipient may be asked to submit bank statements showing they had the funds to give you.
WHAT’S THE BEST LOAN?
When comparing loans, look at the APR for each loan to see which one is really the better deal. The APR includes the annual interest rate plus all the costs of the loan. Often the loan with the lowest interest rate isn’t the cheapest loan. Compare “apples to apples” by looking at the APR. By law, a lender is required to give you a Truth in Lending Disclosure, which will show the APR.
WHAT ARE YOUR COSTS?
Ask the loan broker to give you a list of all your costs that you will be expected to come up with at closing. Your down payment is your biggest expense but you will also have pre-paid interest, loan fees, homeowners insurance, property taxes, possibly HOA fees, title insurance, ½ of escrow and recording fees. You may be surprised by how much these additional costs will add up to. It’s best to be prepared ahead of time so you aren’t unpleasantly surprised a week before closing.
A FEW TIPS…
I know you’re excited about your house and want to start buying new furnishings and fun things to put into it. Hold off….don’t buy anything new until you’ve closed on your loan. The lender’s underwriters will be checking your bank accounts and credit report right up to the last minute. You want to show as much money in your accounts as possible and the least amount of money on charge cards or other loans.
Stay patient as they ask you for more and more documentation. It will seem never-ending but the underwriters have to be very careful that they don’t make a mistake and approve a loan to someone who can’t pay it back. The nice person who took your loan application isn’t the decision-maker but hopefully they can “go to bat” for you if you need some support.
APPRAISAL
Two things have to work together for you to get your loan….you have to qualify and the house has to qualify. The appraisal is how the lender determines if the home qualifies for the loan and different loans have various requirements. An FHA or VA loan will have much stricter criteria than conventional financing and will be looking at health and safety issues in addition to determining a value for the house. If the appraiser makes the appraisal contingent on work orders being completed prior to closing, or determines the value is less than sales price; negotiations with the seller may need to be re-opened and this is where having a good agent is invaluable.
I’ve linked above to one of the lenders I trust and I can send you a list of others. Please feel free to email or call me anytime…
Buying Your First Home – Step 1 Making the Offer
Recently my daughter entered into a purchase agreement for her first home, and I was reminded of how confusing buying your first home can be. We were texting or on the phone almost daily as she struggled to navigate the process. Even with an agent she liked and trusted, she was totally overwhelmed.
If you or someone you know is buying their first home, I hope this blog will help you….
STEP ONE –MAKING OFFER
• Finding an agent….You’ve found the perfect place and feel you have a great agent to help you. In most states, your agent will be a “Buyers Agent” but if the house is their listing, they will be a “Dual Agent”. This should be disclosed to you in writing before you sign any paperwork. If you don’t understand the difference, be sure and have them explain it to you. If you call the agent on the sign, you will be dealing with the “Listing Agent” for the Seller, who will become a dual agent if they write up an offer for you.
If you don’t have an agent, ask friends for recommendations or go online and read agent reviews.
Choose carefully as you will be working almost daily with this person for 1-2 months and you need someone you like and trust. Ideally, find someone who specializes in working with first time buyers.
• Determining the price you want to offer…
Do your research by first going to the county web site. Check the Assessor’s Office for assessed value and compare the description of improvements with the listing for the house. Next, go to the Recorders Office to see what documents have been recorded on that parcel. You should be able to see what the seller paid for the house, how long they’ve owned it, and any liens or judgements on the property. Ask your agent to do a quick CMA (market analysis) so you can see how much similar homes in the area have sold for and average time on the market. A new listing will probably have a much firmer price than one that’s been on the market for a long time.
• What inspections or contingencies do you need as part of your offer?
Most first time buyers will need to make their offer subject to financing and its really good strategy to offer a pre-qualification letter from a lender showing you can qualify for a loan for the amount of your offer. You will also want a home inspection, well and/or septic if applicable. If you need a little more time to research neighborhood or your use of the property, ask for a 7-10 day feasibility contingency, so you can have an “out” if your research reveals issues that aren’t readily apparent. During your inspection or feasibility period, visit the neighborhood at different times of the day. Meet the neighbors and check with the local police department about crime statistics, sex offenders, etc. If you have children, check out the schools and daycare and after-school programs available. I also like to know the percentage of rentals to owner occupied homes in the area.
• Strategies for negotiating offer….
Sometimes going for the cheapest price isn’t necessarily the best tactic. In my daughter’s case, she was scrambling to come up with the money for down payment and closing costs and she would’ve done better by offering closer to full price and asking the seller to pay a portion of her costs. Also, if you suspect the home needs repairs, and you negotiate really hard on the price, the seller may be less likely to pay for the repairs after the inspection.
• Buyers Remorse….
You see something you love, get excited and write an offer, and that night you can’t sleep because you’re terrified you’ve made a terrible mistake.
This is very normal and often happens to first-time buyers. It’s a HUGE decision and may be the biggest one you’ve ever made…your fears are justifiable, but take a deep breath…. If owning your own home is really something you want, you just need to take baby steps and know that you have an option to rescind the contract if new, unforeseen information arises.
Places in the transaction where you can walk away if you have to…
–During the Inspection or Feasibility Period if serious problems with the house are disclosed and seller is unable or unwilling to fix them. (you will lose cost of home inspection and any additional inspections or studies)
-During your loan application process if the loan you want is not available or you don’t have adequate funds, after all costs are totaled. (you may lose loan application fees)
-After the appraisal, if home comes in under value and seller is unwilling to negotiate a new sales price. (you will lose appraisal fee and any loan application fees)
If you back out of the contract at any time, other than those listed above, you may lose your earnest money and/or face legal ramifications. You should consult an attorney prior to considering this option. The inspection, feasibility, and loan application all have specific time frames to be adhered to. Ask your agent to give you a “timeline” so you don’t miss these very important dates.
First Impressions – Tip for Marketing Your Home #2
I know you’ve heard it said many times….”Curb Appeal”. What does this really mean and how can you improve it when it comes to preparing your home for sale?
The first thing I’d recommend you do is to get in your car and drive around your neighborhood and look at other homes. How do they look to you? What features do you find attractive? What places look unappealing and why? OK…now that you’ve done that, come back to your place and pull up in front. How does it look?
- Does it appear well-kept?
- Does it look like it needs work?
- How does the front door look? If it has a screen door, is it in good shape?
- Is the front walkway and porch inviting?
- Are the shrubs trimmed away from the house?
- Do trees block the view of the house from the road?
Sometimes, very little change needs to happen to make your home much more attractive to buyers. The big trees that you’ve always loved because they give you privacy, may not be helping the appearance of your home. Taking some limbs off at the bottom of the tree, may make the house look more approachable. If the screen door is older and the dog may have knocked parts of it loose, take it off and store it in the garage or repair it. Little things like a scratched up front door or trim that’s showing some exposed wood, will give the impression that the house “needs a lot of work”, when maybe it doesn’t. If you have children and pets, the doors can take a real beating but that doesn’t necessarily reflect the condition of the home. A little paint can go a long way and is a very inexpensive way to improve the buyer’s first impression of your home.
Spring is an excellent time to put your home on the market and a pot of flowers on the porch (next to your freshly-painted front door), will send the message that this is a house that feels like “home”….
I don’t stink!….Tips for Marketing Your Home #1
You’ve decided to sell your home and plan to put it on the market in the spring….what can you do between now and then to increase its marketability?
In today’s busy market, sellers might be tempted to relax when it comes to preparing their home for buyers. I often have to remind them that its like selling a car. You wouldn’t take a dirty car filled with old food wrappers and empty pop cans into a dealer and expect a good trade in amount. Nobody wants to take on somebody else’s stinky lifestyle so the first thing you need to do is thoroughly clean your house and eliminate the stinky areas….
This involves more than dumping the garbage. There are other areas in our homes that stink….the laundry room, the kids rooms (especially their closets), the area where we feed our pets or have the cat box, the back porch where we sneak a cigarette on occasion, the carpet, the furniture and the kitchen. All these areas carry our odor and guests can smell it as soon as they walk in the door. We get used to it so we don’t even notice it…unless it gets really bad. If we love to cook with a lot of onions and garlic, the smell of those two items can cling to the rooms of our homes, our clothing and our furniture for days.
The best way to identify your “stink” is to have a friend, who you trust to be totally honest, come into your house and tell you what they smell….good and bad. We have a saying in real estate, “If you can smell it, you can’t sell it”. This isn’t totally true because eventually we can sell anything but you don’t want your house sitting on the market for months…Put the time in at the beginning and reap the benefits in price and time on the market.
A great resource for information on home buying, marketing and creating a lovely home can be found at http://www.houselogic.com
Living on a Non-Ferry Island
People ask me all the time what it’s like to live on an island with only 40 year-round residents? Don’t I get bored? Lonely? Go stir crazy? Sometimes….but in general…No.
I love the quiet and the safety that comes from living in a rural environment that is buffered from the often-bizarre world at large by a pretty big body of water. Have I dropped out of society by living out here?
Maybe a little bit, but not really. I still stay in touch with all the world events by internet but my energy is focused on the things that I have some chance of impacting. I support my community by staying active with the school and reinforcing positive interactions with the children that go there. I volunteer as a EMS coordinator and am available as a support person in case of emergency. I’m active in a weekly market in the summer which has been wonderful for building “community” between the permanent population and the owners of 2nd homes on the island.
Gratefully, I’m able to offer my friends and family a lovely, peaceful setting to escape the stresses of jobs, traffic and city life and unwind. I nurture my own soul by dabbling in art, growing organic vegetables and enjoying the beautiful nature that surrounds me and I stay active so that I can be healthy as long as I can.
I have an awesome life and I recommend the lifestyle to anyone who wants to embrace a life a “little less ordinary”.
Buying a 2nd Home
I specialize in an area that is very attractive to the buyer looking for a 2nd home. For some people, the idea of having a 2nd home is a very foreign concept. They ask me why does a person feel the need for two homes…or even want to maintain two homes? They tell me they’d rather spend their money on ski vacations or a new boat or car and put whatever is left into a 401K or similar investment account.
From my experience, most people who buy a 2nd home see it as an investment in their family. They are wanting to create a place for their family to gather and really get to know one another. If they have grown children, they want to re-meet their children as adults and share adventures with them. If it’s a single person or a couple without children, they tell me that they want to create for themselves, their friends and/or siblings a “special” getaway, where they can leave their stresses and cares for a couple of days or a week, and relax. They see it as a “gift” they are able to give those they love.
I’ve often heard middle age couples sheepishly say, “we’re spending our children’s inheritance”, but when I ask them what they’re wanting to purchase; they state that they want their children to inherit something more lasting than cash and something that is a becoming a vanishing commodity….especially for the middle class. When I bought my first investment property, (a vacant lot with beach access) I saw it as a forced savings account that I could enjoy as I paid into it. I could sit on the beach and have a bonfire or harvest oysters and crab and have a lot more fun with my investment than I could ever do with a bank statement.
Money disappears so quickly in our current culture! I’m old enough to remember when $100,000 was a lot of money and you could buy a Rolls Royce for $10,000. Yes, we can work hard and leave our heirs a big bank account but how long will it last? When you purchase a piece of property or a 2nd home, it becomes the legacy that they can enjoy for years with you and continue to enjoy after you’re gone….cherishing the memories that you created together.
The Tiny House Movement
Did you know that there is a current movement happening where people are deliberately choosing to move into tiny homes? These homes can be permanent residences on a concrete foundation or built on wheels for flexibility. Companies are popping up throughout the country specializing in tiny homes and the Tiny House Blog has a great following of individuals looking for new ideas and inspiration.
Fun island tree house
When we bought our property on Decatur Island in 1990, we cleared a small area in the 100 year old orchard and set up a couple of tents around a fire pit and that was our “home” base for the first summer. We quickly realized that we wanted to be able to come to our property year-round so we built a small 6×10 redwood shed and fitted it out with a double bed, three bunks and an antique wood-fired trash burner that served as a cooking surface and heat source. The redwood shed is now used for storage but I can see it out of my kitchen window and smile at all the memories it contains.
In the islands, tiny houses are a wonderful option for affordable vacation “getaways” or year-round homes. Designs are available for kits and pre-built cottages that are 120 to 700 square feet and most tiny homes can be built for $15,000 to $50,000. San Juan County offers an “owner builder” permit option for structures less than 1000 square feet. Exciting projects are being developed by Tumbleweed Tiny House Company and Frontier Fortress out of Wyoming.
Decatur Island “Tiny House”
Why do people want a “tiny home”?
“I want to enjoy my life and not be a slave to a mortgage”
“We want to live simply so we can focus on what we feel is important”
“Tiny houses are cute”
“We want to create a place that reflects our unique needs”
“We can build a home and pay cash for it”
“I want to travel but want a small place to come home to”
“I’ve always wanted to build my own place”
