Buying a Home with RE/MAX in Paradise

1. Determine How Much Home You Can Afford

The best way to start your home buying process is by determining your budget. After all, this progression can be complex enough without looking at homes that are outside you price range. The lender will first need to determine your debt-to-income ratio (DTI), which is just what it sounds like – your monthly expenses versus your monthly cash intake. This includes all the bills you must pay, divided by your gross monthly income. To secure a qualified mortgage from most lenders, your DTI should be no higher than a certain percentage. But remember that’s the “outside” number you can spend – but it doesn’t mean that you necessarily should. Talk to the lender about the difference of what you are “pre-approved” for and what you are actually comfortable paying.. these can be two different numbers! By building some breathing room into your budget, you will be able to enjoy your new home without having it become a source of financial stress. 

2. Did You Save for a Down Payment?

The mortgage payment is only one piece of the puzzle. It’s also important to make a sizable down payment, which will save you a good chunk of money over the life of your loan.

Here’s how:

• A down payment of 20% or more will exempt you from private mortgage insurance (PMI). That’s a fee your lender will typically require with a down payment of less than 20%, in order to make sure you don’t “default” on the loan (meaning walk away from the home). While the cost of coverage is based on risk factors, such as your DTI, credit score and more, it’s just one more expense that any homeowner would prefer not to have.

• A bigger down payment will often result in a lower interest rate; that’s because a lower loan-to-value ratio (LTV) decreases the lender’s risk.

• The bigger the initial payment against principal, the less interest a borrower will pay over the life of the loan, potentially saving thousands of dollars.

• A bigger down payment results in smaller monthly payments because there’s that much less that you owe on the house.

• Smaller monthly payments could positively influence future borrowing power, which means you are more likely to qualify for a car loan, credit or other financing.

3. Get a Mortgage Pre-Approval and Choose a Lender

Before we can begin previewing homes, you will want to shop around for mortgage lenders. In today’s housing market, the seller wants to have confidence that you will be able to purchase the house if you make an offer, and that comes through a preapproval.

If possible- you will want to get “conditionally approved” before writing offers. The lender will pull your credit report, decide (at least tentatively) on a preapproval amount, and help you choose a loan type (fixed-rate, FHA, conventional, etc.) and loan “term” or length (15 years, 30 years, etc.) that’s right for you. The lender will essentially collect all documents needed to determine if you will indeed get approved- the only thing you need is the address of the home you want to purchase! This can put you one step closer when it comes time to making an offer on your dream home.

4. Find the “Best Fit” Home

Well, finally we got to the good part, right? Of course, this is a matter of opinion. For some home buyers, this step can be overwhelming- especially in past markets! Our job is to help you prepare for the current market conditions while also understanding that there is no “perfect” home when buying with budget restrictions. At times, we may be looking at how to make “BEST FIT” become perfection. Setting you up with these expectations will help remind you that sometimes we have to make some concessions when purchasing your new home.  As with any decision-making process, the more data we collect for you as the buyer, the less likely you are to make mistakes with your purchase and less likely you have buyers remorse. This usually comes with us realtors over analyzing the home on your behalf! This is critical to best serving you as our buyer so you can BUY WITH CONFIDENCE!

5. Help You Make a Smart Purchase Offer

So, you’ve settled on “the one.” And now we’re back to the finances and how to make a smart purchase offer. This is where us, the real estate agents, will shine;-) We will make sure to provide you comps for the community to help guide you on making an appropriate offer.

As your agent- we will help put a vast array of criteria into perspective... to start- we will reach out to the listing agent to see what the current competition you are facing in order to best advise you on an offer. Some questions we ask the agent- are there any terms your seller is looking for (closing date, etc)? Are there any other offers on the table? 

And remember that your offer includes more than just the round number of the purchase price. You also want to include “terms,” such as how soon you need to be in the house, and “contingencies,” such as whether you need to sell an existing house first.

This is also the time at which us, as your agents, will add your preapproval or proof of funds to the purchase offer package, proving that your is financially capable of having a successful transaction.

A purchase offer usually also requires including an earnest money deposit (often 1%– 3% of the home’s value) that will be put into escrow. That money is due within three days of going under contract and will stay there in a third-party account (usually RE/ MAX) until a week prior to the closing, and then it will get wired to the title company to be applied to the down payment and mortgage closing costs. 

However, if the sale falls through because you changed your mind, you may forfeit that money (if it is outside of the inspection and financing contingency deadlines). The earnest money can be safeguarded through the contingencies you negotiate as part of the offer; one such contingency can be a clean inspection.

6. Hire a Real Estate Attorney (Title Co)

Yes, we’re adding someone else to the cast of characters – a real estate attorney.

In some states, having a real estate lawyer is required; in other states, you’re not mandated, but can still be smart to have, especially for complex legal situations... in Florida- it is required to have a Title Company or Attorney handle the transaction. The title company or attorney will be determined by which box is checked on the contract (buyer chooses/pays title fees and policy or sellers chooses/pays title fees and policy). In the market we are in, the best offer will indicate that you as the buyer will be choosing and paying title fees and policy.

A real estate attorney and title company is specially equipped with knowledge to answer all the legal questions, and also look over the purchase agreement, title documents and other paperwork to make sure it’s all in good order. While a real estate attorney/title company adds one more expense at a time when you might feel overwhelmed, the peace of mind that one can provide can be well worth the investment.

Again, since a home is one of the biggest purchases you will ever make, your homebuying checklist should include ensuring that you have taken every step to assure your due diligence.

7. Schedule a Home Inspection

It’s impossible to accurately judge every aspect of a house’s integrity and fitness before making an offer. This is where a home inspection comes into play. Although you’ll bear   the fee, it’s well worth it in the long run, because a home inspection will protect you from unforeseen costs and liabilities. For example, you’ll know how much “roof life” is left, whether the foundation is failing or if the electrical system is up to par. The home inspection is also likely to reveal minor problems. Don’t worry, almost every inspection does, so there’s no reason to panic.

Instead, you can use these issues to your advantage as a bargaining chip for negotiating seller concessions or a reduced overall purchase price, given of course that you signed an inspection contingency. And check with your real estate agent to find out if this is appropriate – you want to be wary of nickel-and-diming a seller in a hot market.

In addition to a general home inspection, you should consider ordering “specialty” inspections, such as mold.

8. Prepare For Closing

Assuming that the inspection passes, you’ll soon be ready to close. This is when you want to make sure your finances are in order so that you are ready when it comes time to pay all costs due at closing. You’ll also want to avoid making any purchases or financial changes that can affect your credit score.

During this waiting period, your lender will arrange to have an independent third-party conduct an appraisal of the property. If the appraised amount is significantly lower than the agreed-upon purchase price, you can ask the seller to lower the price or assume some of the costs due at closing.

You’ll also want to look into homeowners insurance; while you’ll want it anyway, you’ll likely need to show proof at the closing if your home is financed with a mortgage.

9. Close On Your New Home

The big day is here. Get ready to sign a lot of papers, but don’t worry: it will feel exciting in the end. You’ll also need to bring a lot of documentation to your home closing; your real estate agent and mortgage lender will help you with the specific list, but you’ll definitely need the following:

• Identification 
• Receipt of wired funds for closing costs
• Proof of insurance 
• Your patience (there are lots and lots of papers!)

And then, the magic moment comes when you get the keys to your new home. 

Congratulations!

It’s time to cross the threshold and enjoy the comfort and ambience of your brand-new home! You’ve earned it.