SO YOU WANNA BUY A HOUSE? HERE ARE 5 THINGS YOU SHOULD KNOW SOURCES: https://camillestyles.com/ https://artesiantitle.com/
1. First thing’s first: get prequalified. Looking for a house is exciting and many people want to dive right in by looking at houses that they think they can afford. However, before we look at properties it’s important to know how you intend to pay for the property and make sure we have a clear understanding of what you can afford. Choosing a mortgage broker or lender who has loan programs that fit your situation is crucial. The lender has the ability to make or break your dreams of home ownership. There are many factors that play into how much house you can afford such as credit score, debt to income ratio, income, and job stability. A good mortgage broker will be able to work with you and suggest ways for you to improve these factors so you can either qualify for a better interest rate or qualify at a higher price point. Additionally, most seller’s will not accept an offer from a buyer that does not have a pre-approval letter. 2. Count your pennies. “Down payment” refers to how much cash you will be paying upfront at closing towards the property. When most people think of the necessary down payment, they often default to 20%. However, there are many options that require much less cash out of pocket. We don’t see them as often, but there are loan programs that will allow you to put 0% down which can be very appealing to some buyers. A FHA (Federal Housing Administration) loan will allow you to put as little as 3.5% down, but there are limits on the house you can purchase and you will carry what’s called PMI (Private Mortgage Insurance) for the life of the loan. The majority of Conventional Loans will have options for as little as 5% down. The caveat with putting less than 20% down is that you will typically carry PMI until you reach 20% equity in the property, as you’re seen as a higher risk than someone putting a minimum of 20% down. In a multiple offer situation where you may get in a bidding war, a buyer with a higher percentage down will often be seen as a safer bet and has a better chance of being chosen by the seller. 3. Timing is everything. Every market will have variations in when is the best/worst time to buy. Historically there are a few best practices to follow. Everything boils down to supply and demand. You ideally want to look to buy when the fewest buyers (or competition) are out there. The catch is that during these times, inventory is lower and there are fewer houses to choose from. The spring and summer are typically the busiest times of year, so as a savvy buyer, these should be the times you avoid. Generally, the best time of year to buy is the fall and winter. People with children tend to try and move during the summer as not to disrupt their kids during the school year.
4. Once you’ve found a place, here’s what happens: Run a CMA (Comparative Market Analysis): This will help you determine a fair offer price on the property. Every deal is different and depending on the situation this could be an offer at, below, or above asking price. Present Offer: The goal with any offer is to elicit some sort of response from the seller. Sometimes low ball offers will not even be enough for the seller to counter back. However, if you feel the lowball offer is fair, don’t be scared to do it. You just have to be prepared to walk away and lose the house. Offer Accepted: Congratulations, you have successfully negotiated the terms of the deal and are now under contract! Now you will need to write checks for the Option Fee (if you have one) and Earnest Money. The Option Fee is paid directly to the seller and the Earnest Money is paid to the Title Company. We will go over those below! 5. What no one tells you. Just because you’re qualified for a certain amount doesn’t mean you should spend every penny of that. You know and understand your financial situation and lifestyle better than anyone else, so do not get out of your comfort zone when it comes to the mortgage amount. Homeownership comes with much more responsibility and costs than renting does — you no longer have a landlord to call when your refrigerator breaks — so make sure you leave a cushion for yourself! The last thing I want for any of my clients is to be house poor, especially in a great city like Austin where there are so many other amazing things to spend your money on. DO NOT take out credit on anything else while you’re going through the home buying process. Wait until you have keys in hand before opening a credit card to buy new shiny appliances or anything else. Opening additional lines of credit will affect your debt-to-income ratio, which can and typically will adversely affect your home loan. Don’t be fooled by pretty staging furniture. Often times seller’s will “stage” their home with beautiful furniture that always looks pristine. This is a great thing to do as a seller, but as a buyer you need to pay attention to details of the home, not the distracting decorations. When looking at remodeled homes, the flooring, backsplash, and countertops are all good things, but what about the big ticket items that aren’t so sexy? How old is the roof, HVAC, plumbing, wiring, etc.? These are the items that will cost you big money down the line to replace and should be considered when finding your dream home. Don’t rush, but when you find the right one, don’t wait! Buying a home is possibly one of the largest financial decisions you will make in your life, so do not rush into something. Take your time to make sure you know what you are getting yourself into. However, when the right house comes along, depending on your market it may only be there for a day, so be ready to submit offers once you have a clear understanding of your wants and needs.