I attribute the success of my wife Ronda Stepp as a Realtor in both Texas and Florida to asking the right home buyer mortgage questions. A future home owner will often get the home buying bug spontaneously. Let’s be real for a minute, maybe the excitement comes on when driving by a new construction home that fits your image of a home, or you drive by the home on a block on your way to work that you have always admired and suddenly you see a For Sale sign posted. The immediate reaction would be to see it so you will either stop or contact a Realtor and ask when you can see it. The Realtor will begin asking you questions about income, time on your current job, are you married or buying the home alone. It may seem they are putting you on hold and in the excitement of the possibility of being a new home owner you may not even realize the Realtor is assisting you towards your dream. The first step for a Realtor is to pre-qualify you as a buyer. You would be surprised how many people want to buy or “look” and are not even near having the resources to buy a home. Having a good source of income, “a paying job” is critical to a borrower being able to meet this long-term financial responsibility. The first step of becoming a homeowner is to get pre-approved for a mortgage loan. Most first time home buyers may not realize the importance of this step. A pre-approval will allow a home buyer to place an offer on a home right away. Sellers want to know their buyers have the ability to buy their home because an agreed contract can tie a home up and take it off the market for several weeks or a few months and if an offer is not sound it will fail, subsequently the seller losing, time, money and possible other offers on their property for sale. A Realtor will pre-qualify a borrower verbally considers your yearly income and determines how much you could potentially afford to pay. However, the information provided is not verified by paystubs, W2’s or tax returns. A mortgage loan officer will pre-approval Letter issued through a mortgage loan officer will credit report, pay stubs and W2’s. This pre-approval letter is more in depth and allow a home buyer to place an offer but even so does not GUARANTEE a mortgage loan approval. The mortgage application process is very thorough and will take 30-45 days on the short side to reach closing (transfer of a home to new owners).
When a home buyer, future homeowner has planned ahead, taken care of their credit profile and realized they will need funds to close on a new home then this future home owner has ask themselves the right home buyer mortgage questions or been ask questions to qualify for a solid pre-approval letter. When a home buyer finds their dream home there is a difference between a strong offer and and not so strong offer. A strong offer will always include a pre-approval letter issued through a mortgage loan officer along with earnest money check. The earnest money will be held by the title company and applied towards the down payment at closing. This offer (sales agreement) once signed by the buyer and seller holds the property therefore a strong offer will include a pre-approval letter and holds the seller accountable to complete the transaction. There are other factors that can determine strength of an offer such as, less concession requests, no contingencies like “sale is contingent upon the sale of buyers current property”, type of financing and how quickly can they buyer close.
A good Realtor can not only save time for a home buyer and a home seller and can save many hours of unnecessary stress by the seller and buyer. A good Realtor ask good home buyer mortgage questions on your behalf. If you are a seller, pricing your home is essential to getting traffic through your home for sale, if you are a buyer, then looking homes within your budget will save you time and duress. A Realtor can provide a CMA (Comparative Market Analysis) for the property. A CMA takes into consideration similar homes sold recently in the area and the price paid, it will also show comparable properties on the market and how long they have been on the market. No buyer wants to over pay for a property but at the same time if their offer is to low, known as a low ball offer then their is the risk of a seller not believing in your sincerity. Making an offer within your budget based on recent home sales and asking prices of similar homes goes a long way in getting a signed Agreement.
If you are a buyer and have placed an offer and it has been accepted then the next step is the mortgage application process. One of the right home buyer mortgage questions will be what type of mortgage should I get? There are so many loan products now but every one of them has to meet strict guidelines and policies. Do you get FHA, VA, USDA, or Conventional, then there are variations of each of these. VA is reserved for military veterans so if you do not have military and a COE (Certificate of Eligibility) you can rule this out. Conventional Mortgage Loans are insured through PMI (private mortgage insurance) and therefore are going to have stricter guidelines to follow such as, amount of down payment, strong FICO scores for the best rates. FHA loan are insured by the government, banks love them because they are guaranteed through a government entity the risk factor to the lender is greatly reduced. Borrowers, especially first time home buyers with limited funds for down payment find them attractive because you can qualify with a minimum of 3.5% down and a minimum of 580 FICO score. Allow me to clarify, FHA does not loan money they insure loans approved through approved FHA lenders. FHA loans are currently the most popular loan program in the United States. USDA loans are great for first time home-buyers and are government sponsored through the Department of Agriculture to encourage home ownership in less populated areas. For someone to get a USDA loan they have to be in an area that USDA loans are available. This is a great program and has many merits.
I spent a short time in my younger years as a Realtor, in fact I was the youngest Realtor licensed in the state of Idaho at one time. The one thing that has not changed is location has the greatest bearing on property value and market need. For a home buyer to see the quickest return on their investment, finding a home in an up an coming area will see the quickest appreciation as a general rule. Of course there are never guarantees but near my home in Florida is an area that begin to sprout up 10 years ago, the planners said there will be businesses of all sorts. I thought when it started it would be a great area for my work and then I was transferred to another city. Ten years later I was transferred back to the Orlando area and this area was even more convenient to my work but there were not many grocery stores in fact, none. The prices for homes in the area remained steady and higher then many comparable areas, recently Sam’s Club began building their first store in the area. Now of course all the eating establishments are there, a college campus is there, a couple of golf courses and quick access to freeways that loop around the city. One of my clients did a refinance there and in 10 years has seen their house double in value even after the 2008 meltdown when they saw their home equity dip. My point here is this, when buying a home try to determine what your goal is, the average upward mobile professional will live in a house 5 years then move. When I was a Manager for a large national company I lived in 7 homes and after buying my first two homes that I said I would never leave I finally looked at the facts. Then next home I purchased realizing I wanted quicker home value appreciation we built new construction. When the home was finished it was valued $25,000 over what we paid. However, that same home in the same area is now locked in with many homes surrounding it and has no convenience factor for access to shopping, therefore other areas are going up in value and this area is now rather slow growth affecting the market demand in this area. If you make an offer on a home and it for some reason does not happen, hold your head up because there is usually a reason.
Can a home buyer place an offer on a home when they need to sell their property to buy the other? Yes, a borrower can make an offer on a home, knowing they need to sell their own property first. This presents challenges and may even be said it is not for the weak of heart. First, your offer on the property you want to buy needs to be contingent on the sale of yours, some buyers will not accept contingent offers. Second, there are no guarantees both properties will close, so be prepared for the what if’s, You could sell your home before the other is ready to close and need a place to settle for a few days to a few weeks, this is not that big of a deal, happens often but when kids are in school it can become a challenge. You could sell your home and the other not close for some reason or vice versa. Once again a Realtor can provide assistance here, knowing the market ups and downs are important. A Realtor can assist with temporary housing if you are caught between sale and buying. Should you list your property first and then locate a home to buy then be prepared there could be a gap between the sale of your current home to the home will eventually buy. Realtors are a gold mind of information. Good planning, early planning is always good and helps prepare yourself in advance.
You submit an offer on a home, supplied the seller with your pre-approval letter and given earnest money. What happens ? The seller will either accept, reject or counter your offer. This process can happen a few times either until it rejected with no counter offer or both parties comes to acceptable terms. Once the buyer and seller come to an agreement and the contract is signed, depending on the area you live there is inspection period, usually 5 to 15 days for an inspection, this varies from one area to another, using Attorneys or Title Companies for the transaction will also vary from one state to another. When an inspection comes back the buyer, seller, attorney or Realtor may negotiate further terms or conditions for possible repairs. If the buyer and seller do not come to an agreement a contract could be terminated, null and void and life goes on to the next adventure. One of your home buyer mortgage questions may be can you change your mind after submitting an offer? A seller or buyer can change their minds but for the buyer it could mean penalties and possibly losing the earnest money. For the seller if all conditions, perimeters were met it could turn into a legal nightmare, but realize this, there are many parameters, such as financing that need to be met. If you are denied financing this should not realize any penalties.
Every borrower applying for a mortgage on a property will be required to have an appraisal done on the property. The Lender will not loan anymore on the property than what a qualified Appraiser declares the value of the home or property. Once the appraisal comes back, if the property does not appraise as high as the property sales price then the buyer may choose to pay the difference out of their own pocket or ask to renegotiate the price based on the appraisal. This could go either way. The Lender may advise what the maximum amount is they will loan on the property using the appraisal as their source. An appraisal is not always what a property can and will sell for but it is what the lender bases its determination and value. This little twist in the road can often be avoided if the Realtor does a CMA, for the buyer overpriced properties can be eliminated and not get into your head. For the seller, over pricing a property can be avoided.
Your home is an investment, no two ways about it. A home provides stability and security but even with all the financial opportunities available a home is usually the single largest investment you will make in a lifetime. Historically a homeowner will have the largest share of their net worth in their homes in their later years for the average American. The equity you build in a home over a lifetime can be huge part of your retirement. Can you imagine a life time of being a renter? Even with the housing crisis of 2008, homeowners are seeing the value of their homes as part of their biggest nest egg. If you are waiting for the perfect time, look around, interest rates are at historical lows in the last 40 years.
The Larry Stepp Team at Gustan Cho Associates is available 7 days a week, holidays and weekends. We look forward to being your resource for information and guidance.
Larry Stepp 407-922-4755 LarryS.HomesNetwork@gmail.com