About the Course
Course description:
How to Buy A Home
THE CHECKLIST
1. Analyze your situation: YOUR LIFE
2. Find the Location you want to live
3. Preapproval/Financing
4. Find the right agent
5. Write the deal: The contract/negotiations. Low ball, not emotionally attached, closing cost, “all the BS”, 15 day inspection period.
6. Inspection: 10 days due diligence
7. Renegotiate on inspection deficiencies
8. Closing/ Money Transacted
9. Utilities Activated/Move In
I KNOW YOUR WORRIES AND FEARS
-Scared
-Large Commitment
-Never Done It
-You may move, then what
-Don’t Know How Too Purchase
LET ME JUST TELL YOU SOME REASON TOO BUY
Reasons to Buy
-Pride of Ownership
-This money is in your home and indirectly your piggy bank
-At the end of the year, your loan has decreased by that much more principle you’ve been paying
-You haven’t thrown that money out the window
-You can write off the interest on your taxes, which lowers your taxes, and increases our savings
-Appreciation (The market naturally increasing in value)
-Improvements/ Renovation (New kitchen/Bathroom/Floors/Paint/Landscaping………….)
THIS IS NOT COMMON SENSE FOR MOST PEOPLE, THAT’S WHY I’M HERE! HERE TO HELP YOU THROUGH THE LARGEST PURCHASE OF YOUR LIFE!
SOOOOO LET’S GET INTO THE EXPANDED INFO, THE STUFF NOBODY TEACHES YOU TO THINK ABOUT
STEPS:
1. RECOGNIZE WHERE YOU ARE AT RIGHT NOW: The reason why this is important, is so YOU understand the situation you’re in, which is the only way to move forward.
-Financial/ Job Situation: Do you have a stable job? Is there a possibility of being moved or relocated FOR ANY REASON? Are you planning on getting a promotion? These are the types of questions you need to ask yourself when evaluating your JOB SITUATION. If you don’t have a 9-5 job, what does your income actually look like? Is the income you receive stable; do you have a few years under your belt to feel confident that your situation will continue? Being self-employed can be difficult at times to show a lender you are capable of purchasing a home of your own. Expect in this situation you’ll need to provide extra documents to the lender to show you’re able to purchase and have cash in the bank to back the loan.
-Family Situation/Spouse: Do you have kids to raise, and do they plan on going to college? What is the financial situation of your significant other, do they have a job to help with investing in a home? Do you have dual income with no kids? Are you a single parent with multiple kids? This is important to evaluate, because now you are not making a decision based on what you think is a good move, but on the best interest of the loved ones around you. I don’t care if you have the cash now to afford a home, but you need to think long term and look at your family situation as it moves into years down the road.
-Debt: What is the total debt you have, I MEAN EVERYTHING! Car payments (for how much longer), credit card debt (what’s the interest rate), student loans (how much and is it deferred), a line of credit outstanding? This is usually a tough pill to swallow. People do not like to talk about the debt they have, because this leads to others judging on whether the decision was a good or bad one and this leaves people upset. People tend to recognize good debt from bad debt, but either way, they don’t like to talk about it.
-Future Plans: Are you planning on living in that county, city, or state forever? Do you plan on retiring in this home or location? Where do you see yourself in the next 5 years, working for the same company? What about in 20 years? What about retirement, think you will retire in the area you’re living now? It’s great to live like you’re free and easy, but it may be a good idea to start thinking about this stuff sooner than later.
2. IDENTIFY WHERE YOU WANT TO LIVE:
-Your Life Style: What type of hobbies do you have? Are you a mountain/woodsy type of person where you need to be within minutes of hiking trails; or are you a water sports person that needs to be by the ocean, river, or lake? Some people love the city life. Does the night life fit your style, and do you need places that are within walking distance to what you TRULY LOVE? I’m asking you to really ask yourself what are your hobbies and maybe your job will dictate what type of location you live in, but at least you can be proactive in finding a home that fits YOU.
-Price: Are you looking at ocean front property, or something maybe a little further inland? Are you looking at a condo right downtown overlooking the park, or do you think a train ride may be worth the extra few minutes to commute? You will quickly realize by being REASONABLE what price range will be in your budget (We will get to how this works in a second) This will help you narrow down something that is realistic and will save you and your agent time finding something you can AFFORD.
-Work Commute: The work commute is something most people do not take into consideration! They figure they can buy an inexpensive house outside of town and JUST DRIVE TO WORK. Does it make sense for you to make a hour long drive to work in order to fit the price range and lifestyle you want? People neglect the work commute and the REALISTIC toll it takes on them, their significant other, their vehicle, their wallet, and health. Evaluate this situation! Does it make since to drive 2 hours to work every day, or does it make sense to buy something a little more expensive that is closer to your job?
-Neighborhood/Community: Now, everyone is into different things at different stages of their life. For some maybe night life is extremely important for you? Do you need to live where there is a strong bar scene and live entertainment? For the older crowd, what type of school system do you want your kids to attend? How is the community or neighborhood comradery? Is there any planned construction that will be built anytime soon? Once again, YOU are identifying where YOU want to live.
-RESEARCH ALL THE INFO (HOMEWORK): I certainly did not give you all the items you should look into while searching for a location, but at least it helps you get a jump start on what to think about.
3. SET UP FINANCING
-Find a Mortgage Company: There are a thousands of mortgage companies out there (some good some REALLY BAD), and it is very important you feel comfortable working with these lenders. You will be working with these people throughout the buying process and they will be asking you for bank statements, W2’s, and other documents to facilitate you getting the loan on your new home. My recommendation is that you shop around to see who is the most competent and professional company while getting the best interest rate.
-Pre approval: First and foremost, they are going to ask you for your social security number to see what type of credit you have and any outstanding debts you have. You will also need to provide the mortgage company with current pay stub, W2 forms and tax returns for the last 2 years, and lastly the last two months of bank statements on ALL of your accounts (I MEAN EVERYTHING) Be prepared to have all these documents ready to streamline the process and get you pre-approved for a long based on your financial status.
-Debt to income ratio: This ratio is comparing your total income to the total amount of debt you have. If you have too much debt and not enough income, this ratio will lower the amount of money the lender can give you towards a home. Moral to the story: LESS DEBT=LOWER RATIO= MORE MONEY TOWARDS A HOME.
GIVE EXAMPLE WITH $100K income, 50K between 20K student loans, $350 car payment, 10K cc debt
-Loan Types: (ASK YOUR MORTGAGE COMPANY ABOUT THE PROS AND CONS)
Federal Housing Administration (FHA)
Conventional Loan
Adjustable Rate Mortgage (ARM)
Veterans Affairs Loan (VA)
-NOT ADVOCATING, BUT CO-SIGNER: THESE PEOPLE ARE ON THE HOOK FOR YOUR DEBT.
THIS DRIVES YOU TO WHAT SHOULD YOU AFFORD
-IDENTIFY WHAT YOU CAN AFFORD
-Down payment: Do you have the 3.5% down? Do you have the reserves in your bank based on what the mortgage company told you? It changes with different loan types and whether it is an investment property or your primary residence, but just know you’ll need to have cash in your bank account on top of the deposit.
-Monthly Payment: Based on the chart above, think about what you will be spending each month on the mortgage, can you really afford that home you WANT, or should you think about something a little smaller or a little less expensive?
-Plan for Unexpected Expenses: Have you done your homework and researched how much electricity is going to cost you? What are the peak seasons for that location in the summer or winter? Do you pay for your own water and sewage? Is trash going to be another expense? Maybe you’re buying a property that has a Home Owners Association (HOA), and they pay for all the above expenses. Act as if you have already bought the property you are looking at, and write down all the expenses that will be associated along with the mortgage, and see if the property your buying is the right PRICE FOR YOUR SITUATION. Don’t forget to look at property taxes and insurance.
4. YOUR AGENT (YOUR REPRESENTATION)
Your agent is the link between you and the seller. This person needs to match the qualities of your expectations.
– Matching Personalities: If you’re an older couple looking for a home, you probably want an agent who is a little older and more seasoned. On the other hand, if you are a wheeler and dealer, you probably want an agent with some spunk to keep up with your personality. Find the agent that fits your personality, negotiating skills, and style.
– Knowledge: Most people would assume that if you are working with any agent, then THEY MUST BE AN EXPERT, WRONG! Yes, we always want someone who is competent to help you find the house you want, but sometimes you just GET STUCK WITH AN AGENT. (Read below)
-Examples of how to get “STUCK with an agent”: Here’s a situation, some people walk into an “open house” on a Sunday afternoon, and the agent standing the open house asks “are you working with an agent”, and you say “no”, that agent then offers to show you some properties and now you are ethically obligated to use that agent for the deal, even though you KNOW NOTHING ABOUT THIS PERSON!
5. NOW “The Deal”
-Looking for the home: ICONIC PROPERTY, it is very important to buy places that are landmark locations. For example: Top floor, corner unit, ocean front, view of the ocean, over looking the pool…. These are just example of traits that people should be considering when buying real estate. Buy ICONIC PROPERTYIES.
-Writing the offer: YOU MAKE YOUR MONEY WHEN YOU BUY IT! So much information to talked about here.
-Contingency Financing
-Additional requests
-This is your time to ask for the world…..
-MAKE YOUR AGENT WALK YOU THROUGH THIS
-Possible Counter Offer: NEGOTIATE, THAT’S WHY YOU HAVE AN AGENT
-Acceptance: Seller agrees to the contract and signs the purchase contract.
-Earnest Money: This is money that you place as a good faith to the seller, showing that you are serious about going through with the deal. If you do not cover yourself in the contract, this money can sometimes be “nonrefundable” if you are unable to perform the duties as a buyer.
6. Inspection Period: This can be as long as you want if it is written in the purchase contract. Typically, this is anywhere from 10-15 days. At this point, you can cancel the purchase contract for anything you deem unacceptable for you. So much information to be talked about here.
– RIGHT INSPECTOR: Your best interest, walk property before inspector with notes, after inspection, ask the questions and have them earn their paycheck!
STORY: HIRE FOR A JOB, SINK HOLE, WATER PRESSURE— SIMPLE CHECKS
7. Renegotiate after inspection: If house is solid, proceed. If there are minor or even major issues, this is a balancing act. Be cautious as to not lose a deal over “minor” things, but ensure you are getting the greatest value for your purchase. Make a list (agent provided) based on inspection, and ask that the issues be corrected. Worst case is they say NO and you continue with close anyways.
8. Closing: Signing documents, you get your loan documents and your closing statements (all money that is being moved and to where), monthly payments, how the title is being recorded and sent to the city…. All the administrative things. You can do a mail away close (notary required/and fee), or in person at the Title Company or Attorneys office… State dependent.
7. PLAN THE MOVE AND MOVE IN
-Ensure your agent gives you a list of all the utilities companies are in your area so you can call prior to close to have them on when you move in!
Definitions:
-Purchase Contract: A sales and purchase agreement (SPA) is a legal contract that obligates a buyer to buy and a seller to sell a product or service. SPAs are found in all types of businesses but are most often associated with real estate deals as a way of finalizing the interests of both parties before closing the deal.
Layman’s Term: This is the agreement between buyer and seller for a piece of real estate
-Title Company: A title company makes sure that the title to a piece of real estate is legitimate and then issues title insurance for that property. Title insurance protects the lender and/or owner against lawsuits or claims against the property that result from disputes over the title
Layman’s Term: They protect you from any “Title Issues” that may be hidden to the property.
-Escrow Company: Is a third-party company to make sure everything during the closing proceeds smoothly, including the transfers of money and documents. Escrow protects all the relevant parties by ensuring that no funds and property change hands until all conditions in the agreement have been met.
Layman’s Term: These people are the middle man between the buyer and seller parties that control all the money.
-Good Faith Estimate (GFE): is a form that lists basic information about the terms of a mortgage loan for which you’ve applied. If you applied for a mortgage before October 3, 2015, or if you are applying for a reverse mortgage, you will receive a GFE.
Layman’s Term: This is showing you how much you’re paying every month in principle, interest, and any other expense towards your mortgage payment.
-HUD-1: Standard form in use in the United States of America which is used to itemize services and fees charged to the borrower by the lender or broker when applying for a loan for the purpose of purchasing or refinancing real estate.
Layman’s Term: This is the breakdown of all money associated with the purchase.
TAKEAWAYS
– REMEMBER ICONIC PROPERTY
-Based on Pre-Approval (DO NOT OVER EXTEND YOURSELF)
-Negotiate!!!! You make your money when you buy!
-Plan for Unexpected Expenses (10%).
Ways to Make Money Off of Your Homes
1.Principle/Mortgage Payments
2. Deprecating Scale/Tax write offs
3. Appreciation/Renovations
Number of videos in course: 1