Buyers

• Get pre-qualified. Meet with your mortgage broker to determine what size and types of loans you’ll qualify for.
  Get pre-approved. Pre-approval is different from pre-qualification. To be pre-approved for a mortgage, you will actually apply for a mortgage (often at the maximum amount of money you’re pre-qualified for) and receive a letter of commitment from your lender stating your pre-approved status. There is often a nominal fee attached to the pre-approval process, which your lender may allow you to pay at closing rather than up front. Pre-approval is a valuable asset to first-time home buyers because any offers you submit on properties are more likely to be given consideration by the seller.
• Make a list. In fact, make two lists. One list should include the features you absolutely need in any home you choose: number of bedrooms and bathrooms, square footage, lot size (especially if you have pets), storage space, etc. The other list should be your ‘wish list’, and should include features you would like to find in your ideal home: in-ground pool, granite countertops, hardwood floors, bay windows, master suite. When you’re buying your first home, you probably won’t be able to find (or afford) all of the features on your ‘wish list’, but it will give you an idea of what amenities are important to you and which you can comfortably live without.
• Find a real estate agent. A buyer’s agent is an important asset to all home buyers, but especially to first-timers. A reputable, professional Realtor, using the Multiple Listing System (MLS) can help you find properties in your ideal neighborhoods and price ranges. They can arrange showings, research properties, offer information and advice about the current market conditions, and help you navigate the entire home purchase process. Most importantly, they can act as an advocate for you when it comes time to enter price negotiations and decide on seller contingencies.

• Keep your focus. Create a file for all paperwork that pertains to your home search, including your pre-approval letter. This will prevent any important documents from getting lost. Other useful items include
  • A blank notebook and pens. Take notes on searched properties and jot down impressions of properties you’ve viewed. Also take notes on the area: are there any neighborhood features you like (shopping areas, parks, highway access) or dislike (abandoned homes, excessive trash, adult businesses, noisy street)?
  • A digital camera. If you see a home you’re interested in, snap a photo of it from the street. Also, take pictures (with the owner’s permission, of course) of homes you like at showings or open houses. This will keep your memory of the properties fresh.
  • Maps, brochures, and articles. Especially if you’re searching in master-planned communities, brochures will help you remember neighborhood features and amenities. Maps can help you remember the locations of properties you like, and show you nearby amenities.
• Visualize yourself living in a property. When you go to a showing or an open house, try to visualize your own furniture, accessories, and art set up in the home. Ask realistic questions. Are there enough windows? Are the hallways too narrow? Are the ceilings too high or too low? Try to determine which negative points about the home can be corrected with simple touches like fresh paint, and which would require a major commitment to fix. Also, if you have a lot of oversized furniture, you may find it helpful to take measurements (with the permission of the seller).
• Be objective. Don’t make an offer on the wrong house simply because you’re in love with its charm. When you fall head over heels for a property, ask yourself if it really meets your needs. Refer to your list of ‘absolute must-haves’ if you find yourself slipping. Remember, buying a home is a big commitment; you want to be sure that you won’t regret it a year from now.
• Be skeptic. If you’re unfamiliar with a neighborhood, scrutinize it from all angles. Drive through the area at different times of the day. Some areas that look inviting in the sunlight may not be so appealing after dark.

• Be thorough. Make sure that you have all appropriate inspections performed, and that the seller has met all inspection requirements and contingencies specified in your purchase contract. If the seller was required to make major repairs (like roofing, siding, foundation sealing) prior to closing, you may want to have a professional home inspector check out the property a second time. The additional cost is well worth it to ensure that all repairs are to code and of reasonable quality.
• Be Patient. It’s not always a quick step to closing once you’ve found your perfect home. It’s important to remember that each step in the process is important, and that rushing things may cause greater delays and expensive problems in the end.

When you buy a home for the first time, you’ll want a professional real estate agent on your side through the entire process. Trust Cindy Jasper and the HummerHomes Team to guide you through every step of the home purchase process with total dedication to your satisfaction. For more information, please call 615.300.4695 today, or email [email protected].

When it comes time to negotiate the sale price for your new home, it’s important to be prepared. Knowledge of the current real estate market, as well as a firm understanding of your personal financial capabilities, can make sure that the negotiations reach a conclusion you’re comfortable with.

When you’re ready to submit your initial offer on a home, your offer price should be based on a number of factors. Consider your offer price carefully. An offer that’s too high can cost you money, while an offer that’s too low may induce the buyer to refuse you outright. What you’re aiming for with your initial offer is a platform for mutually beneficial negotiation. Here are some questions to ask when considering your initial offer.

• What is the current market condition in the area? In this particular neighborhood?
• What have similar properties in this area sold for during the last 12 months?
• Why is the homeowner selling? If they’re moving because of neighborhood factors like excess noise, nosy neighbors, or (in the worst cases) escalating neighborhood crime, you should take these factors into consideration as well.
• Does the homeowner need to make a quick sale? Sellers who need to move fast may be willing to take a price cut in exchange for a short sale.
• What is the sellers’ time frame? What is the estimated closing date? In some cases, the sale of a home is contingent upon the seller purchasing and moving into their new home. Decide how long you’ll be willing to wait to move in to your new property.
• How long has the home been on the market? If it seems like an inordinately long time, there may be problems with the home, the neighborhood, or even with the seller’s disposition.
• Are there any major defects in the home that will need to be addressed immediately? An outdated kitchen can be fixed at your leisure. A leaky roof needs to be taken care of right away. Your offer should reflect the need for immediate attention. You will also have to decide whether you or the seller will be responsible for the repairs.
• How much did the seller pay for the home? In what year was it purchased? Knowing this information can help you determine the seller’s flexibility; sellers with a big mortgage to pay off don’t have as much room to maneuver. Also, if the seller paid more than they’re asking for the property, determine if the decline is due to a real estate downturn or a problem with the area.

As the buyer, you want to maintain the advantage in any negotiation. Here’s how to do it.

• Don’t get personal. While you should ask questions of the seller, try not to reveal too much about your own circumstances. Never disclose personal information like your income, the amount you’re able to afford for a down payment, or the time frame in which you need to move out of your current property. Ask your agent not to reveal these details to the seller or the seller’s agent.
• Practice your poker face. Even if you’re in love with the property, it’s not a good idea to let the seller know how much you want their home, because that will give the seller the upper hand.
• Don’t get emotional. There are a lot of emotional ups and downs that can occur during the home purchasing process. It’s best to keep your frustration (or your elation) tightly under wraps, and remain as businesslike as possible.

Frame your timeline

If the seller feels pressured to sell their property, the buyer has a singular advantage at the negotiating table. Still, it’s best to be cautious, since you don’t want to be rushed into buying a property you’re uncertain of just because the price is right. Rushed sales often mean big problems, so pay close attention to any contract concessions, and schedule a thorough home inspection by a reputable area professional.

If you’re comfortable with the general time frame that the seller is proposing, negotiate exact dates for the closing and the seller’s vacating of the property.

Choose a Fixed Rate Mortgage if you:

• Plan to remain in your home for a substantial period of time
• Like to know the exact amount of your monthly payment

When you choose a fixed rate home loan, your payment amount and interest rate will be guaranteed for the life of the loan – a period which might be 15, 20, or 30 years, depending on the loan you choose. If you choose to make extra payments toward the principal of your loan (in addition to your monthly minimum payments), you will be able to pay off your loan faster with no additional interest penalties.

Timing is everything when it comes to fixed-rate mortgages. If interest rates are high (or if your credit score dictates a higher interest rate), your rate will not change until the expiration of the loan, or until you refinance. However, if you apply at a time when interest rates are low, you’re guaranteed a great rate no matter how the market fluctuates.

Here are some advantages and disadvantages to the different terms of fixed-rate loans.

15-Year Fixed Rate

• Advantages
  • The loan will be paid off in half the usual time, an advantage if you plan to stay in the home for many years.
  • The amount of interest you’ll pay is far less than on a 30-year loan.
  • You’ll build equity more quickly as the principal is paid down.
• Disadvantages
  • Higher payments may be a deterrent for some people.
  • If you lose your job or your income changes, it may be harder to make these high payments.
    
    

20-Year Fixed Rate

• Advantages
  • The loan will be paid off in 2/3 the time of a standard 30-year loan
  • The amount of interest you’ll pay is far less than on a 30-year loan
  • You’ll build up equity more quickly than with a 30-year loan
• Disadvantages
  • Higher payments may be a deterrent for some people
  • If you lose your job or your income changes, it may be harder to make the high payments.
    
    

30-Year Fixed Rate

This is the most common type of fixed-rate loan. It’s also one of the easier loans to qualify for, especially for first-time homebuyers.

• Advantages
  • Lower monthly payments than with 15- or 20-year mortgages.
  • Maximum interest deduction for tax purposes
• Disadvantages
  • Equity builds slowly, a disadvantage if you plan to sell within a few years.

If interest rates are very high at the time you’re applying for your mortgage, if you expect your income to increase substantially within the next 12 months, or if you’re comfortable taking a risk with your monthly payments, an ARM may be for you.

ARMs are useful for owners who plan to own their properties for only a short time, as they can potentially cut down on interest payments. Generally, interest rates on ARMs are lower upon the inception of the loan that rates for fixed-rate loans. The interest rate on your ARM is tied to the prevailing interest rate, plus two to three points. Which index determines this rate will depend on your loan: indexes include the Certificate of Deposit Index, the Cost-of-Funds Indexed ARMs, the Treasury or T-Bill Rate, and the London Interbank Offered Rate (LIBOR). When interest rates on these indexes rise or fall, you can expect your monthly payment to respond accordingly.

As we have seen recently with the sub-prime mortgage crisis and the subsequent string of foreclosures nationwide, buyers who choose ARMs must be prepared for large spikes in their monthly payments if they intend to carry the loan past the duration of the initial interest rate. Ask your lender to calculate the maximum possible amount of your monthly payments based on your rate index and your rate cap (the maximum amount of interest you can be charged based on your loan agreement). If you’re not comfortable making the maximum possible payment for a period of up to one year, you should choose another loan package.

Here are some advantages and disadvantages to the different terms of fixed-rate loans.

• Advantages
  
  
  • Since initial interest rates are lower than with fixed-rate loans, you may qualify for a larger loan – and therefore a more expensive home.
  • Lower interest rates can save you money in the short term, especially if you plan to sell within a year or two.
  • ARMs are easier to qualify for than fixed-rate loans, and may be a viable only option for buyers with poor credit.
  • Monthly payments are much smaller during periods when indexed interest rates are low.
    
    
• Disadvantages
  
  
  • Spikes in interest rates may cause monthly payments to increase dramatically, often with little or no notice.

Convertible Adjustable Rate Mortgages combine the more appealing qualities of both fixed rate loans and ARMs. Convertible ARMs offer the initial low interest rates of a traditional ARM, but convert to a fixed-rate mortgage at a pre-determined rate after a specified number of years.

Government loan packages can be a tremendous help to first-time homebuyers, to people with lower incomes, or to veterans.

VA Loans are offered to veterans by the Veterans’ Administration. There are limits to the amount that can be borrowed, so this option works best for those purchasing low- to moderately priced homes.

FHA Loans are offered through the Federal Housing Administration. Most applicants will have to meet income standards to qualify. Also, you will need to look for homes that state ‘”FHA Approved” in their MLS listing or print advertisement. Some states also offer accessible home loan programs to lower-income individuals and families; ask your real estate agent for more information.

With so much information available over the internet – indeed, with many mortgage companies operating solely through the internet, without the use of brokers – it’s easier than ever for you to find a loan on your own.

When you’re shopping for that perfect home loan, there are some things you should remember.

• Interest rates change fast. Sometimes daily. If you find an unbelievable rate – attached to loan package you can live with – you should jump on it. Check out BankRate.com for up-to-the-minute rate information. E-Loan is also a good source of information.
• Make sure you’re comparing apples to apples. If you’re holding an ARM against a fixed rate mortgage, you won’t get an accurate picture of either.
• Sometimes it takes a little delving to figure out what a loan’s really about. A 30-year term doesn’t necessarily mean a fixed rate. Always read the fine print before submitting an application.
• Factor everything in. If you know the approximate amount you’re ready to spend on a home, you should be able to estimate your tax and insurance payments. Some sites have rate calculators that take these factors into account for you, but many do not. If you’re unsure – or if the site’s information is unclear – ask the lender for a statement of all points, fees, and surcharges associated with the loan before you submit an application.

A qualified mortgage broker can do a large portion of your research for you. They may also have access to loan packages that are not offered to the general public. Also, unlike a bank loan officer or a customer service representative at a lending company, a broker is paid to represent you, and will keep your best interests in mind. However, a mortgage broker may only write loans for a certain lender or lenders, and therefore may not be able to offer you the range of products you could find on your own.

The best way to find a reputable mortgage broker is through referrals. If you have friends or colleagues who have recently purchased homes, ask them about their broker and lender. Or, ask your professional real estate agent for a referral.

Sign on the Dotted Line

Once you’ve negotiated your final offer on a home, and you’ve signed the purchase agreement, you’ve officially opened escrow. For many buyers, this is the time when panic sets in. But as long as you remain organized and calm, and follow the expert advice of your Realtor, everything between now and closing can go as smooth as silk.

So that you can prepare and schedule accordingly, here’s a list of things you’ll need to do after you sign your purchase agreement.

The delivery of your earnest money shows that you are a serious buyer. This amount will be dictated by your purchase agreement, but it is often 3% of the total purchase price. This money is considered a deposit and will be applied to the total purchase price of the home. Your check will be cashed and the monies held by the seller’s attorney or by the broker’s trust account. Make sure that you have enough money in your account to cover this check – or better yet, get a certified check or bank check.

If for any reason the sale does not go through, you may be able to reclaim your deposit, minus standard cancellation fees. If the sale is forfeited through actions on your part, the seller may be able to keep this deposit as “liquidated damages.” When negotiating your purchase contract, you may want to consider adding a liquidated damages clause to cover any unforeseen events.

You’ll probably be in escrow for about 30 days, although that period is prone to vary. Over the course of those 30 days, every contingency specified in the purchase contract must be met. At the end of this period, when you open escrow, you will have reached an agreement with the seller about the closing date, contingencies, and any other contract conditions.

Although each purchase contract is different, most will include the following standard contingencies:

• Inspection contingencies. This requires that the property be inspected by a professional home inspector to ensure that the property has no undisclosed defects. You should schedule the inspection as soon as possible to ensure that you are satisfied with the condition of the property. If you are dissatisfied with the results of the inspection report, you may choose to cancel the purchase contract.
• Financing contingencies. This applies to you, the buyer, and states that you must secure financing within a specified period of time. If you’re already pre-approved for your mortgage, you’re one step ahead; you should have a letter of commitment from your lender in hand. If not, you will need to be approved for a mortgage before escrow is opened, or risk forfeiting your deposit. If you need additional time to secure your mortgage, the seller may provide you with a written extension.
• Title contingencies: This contingency states that the seller must provide marketable title. Have your attorney review the title to ensure that the seller’s ownership of the property is clear, so you don’t run into trouble down the line. Check into local and state property transfer laws to make sure that both you and the seller have complied fully with them.
• Insurance contingencies. In some states you will be required to produce a binder, or proof of insurance coverage, before you can open escrow. In order to avoid possible complications, it is best to apply for insurance as soon as your purchase contract is signed. Special coverages like earthquake, flood, or fire insurance may take longer to acquire.

Once you’ve fulfilled your contractual obligations, you’ll be ready to open escrow and close the sale. But before the closing date, there are still a few more details to take care of.

• Schedule a final inspection. This may consist of a simple walk-through with your realtor. If the seller was required in the contract to complete repairs, you may wish to have a home inspector pay a second visit, to ensure that all repairs are up to code. Make sure that all applicable permits for completed repairs are valid.
• Contact local utilities. Service should be turned on in your name as of your closing date. It’s best to call at least 2-3 days in advance in case the utility company needs to send a technician.

Now, it’s on to closing, after which you’ll be the proud owner of a new home!