Tag: Buying a house checklist

Buying your first home EVER! Gimme the keys!
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Buying your first home EVER! Gimme the keys!

MaryLeave a comment

You found a house! Your offer’s been accepted! Clear sailing from here on out, right?

Well, maybe, but you should know what comes next.

Earnest Money

As part of your offer you will submit a deposit, called “earnest money” (I did a video on that – check out my YouTube channel if you’re interested.) It’s basically putting some skin into the game so that you have some incentive to adhere to the terms of the contract and perform the duties that you are committed to on the schedule that you’ve agreed to.

You need to meet the deadlines and SO DOES THE SELLER. If you don’t, there is the potential that the seller keeps your earnest money and the house goes back on the market. If they don’t or the contingencies around inspections, appraisals and loans aren’t satisfied, you can break the contract and have your earnest money refunded.

What the heck are you talking about?

Inspection and Appraisal

Well, as part of the purchase agreement you’ll negotiate some terms, like an inspection, the fact that the your financing depends on the home appraising for the amount you’ve agreed to pay, that you can have your financing approved and ready to go by a certain point in the process.

If you decide that you are, or the seller is, willing to fix whatever is discovered in the inspection, or if you can work out a credit to the price to compensate for the issues (and there are ALWAYS some issues!), the process keeps moving – if not, you can ask for a refund of your earnest money and look for something else.

At the same time, the lender is completing your loan approval. You’ll want to be very responsive to your lender as they request documents etc, because missing a funding deadline can either delay closing or put you in breach of your contract enabling the seller to keep your earnest money and sell to someone else.

As a part of obtaining financing the lender will also order an appraisal of the home. The bank wants to know that the collateral on their loan (the home) is worth what they are lending you and they will be able to sell it and recoup their money if you default for some reason.

If the home does not appraise for the amount that you’re borrowing, a few things can happen. You can renegotiate the price downward to make up for the difference, you can come up with the cash to make up the difference, or you can walk away if the financing contingency is not met and specified in the contract.

On the flip side, homes have been known to appraise for MORE than you’ve agreed to – in this case it’s like you’ve been given a prize because it’s effectively instant equity in the home that you didn’t have to wait or pay for. Yay!

you get some equity! You get some equity! YOU get some equity!

Title search

While your lender is working on your loan, you’re having your inspections done and the sellers are making their repairs, the title company is doing a search to make sure that the title is clean and there are no other claims on the home so that you can take possession at closing. When you get to the closing table you will be encouraged to buy title insurance, and that is a very good idea! Should something come up in the future, you’ll be protected.

Walk through…

Now it’s getting real!

The night before or the morning of closing, you will go to the home and take a walk though. You’re looking at the condition of the home to make sure that everything you expect to see there is present and in the right condition, that the home looks the way it should and that when you sign the papers and the home becomes yours that the house is the way it should be.

Closing!

Your lender will let you know to the penny what you need to be prepared to bring to the closing table financially. They will also tell you how that money will be transferred – often it is simply a wire transfer from the bank.

You’ll sign a lot of loan documents that reaffirm the interest rate, dollar amount, how much the loan will cost you over the term, how long the term is, when payments are due etc etc. And, if you are in MN, you will leave with a set of keys to your home because you take possession immediately unless you’ve agreed to another arrangement.

Last thing!

If you will be living in the house, do NOT forget to file for your homestead exemption!! This is a big discount on your property taxes because you’re occupying the house. You’ll get this info at the closing table, but make sure you put it on the top of the pile so that you don’t forget.

And now you own a home! Congratulations!

mschumann@kw.com
Buying your first home – Part 2!
Home Buying

Buying your first home – Part 2!

MaryLeave a comment

Once you have determined that you are financially ready, you’ve selected an agent, and you have that pre-approval letter in hand, you are ready to start looking!

See what is out there…

Many buyers will have already started looking at what is on the market via online real estate sites, Realtor.com, etc, but be cautious with Zillow! It is notorious with agents for having very outdated or inaccurate information. People often find listings on Zillow that are under contract and not available or have not been taken off the site despite being sold.

You’ve selected a realtor, hopefully you had a conversation about what things you MUST have – how many bedrooms, where the home needs to be located, if it needs to be single level living, etc, so let them send you listings. You decide how often you want them – Immediately? Daily? Weekly?

We have access to the MLS and the information on there is ACCURATE. You won’t be looking at homes that aren’t available. We can select very specific areas via a drawing tool on a map, search by commute times to and from your job at particular times of day, add or eliminate homes based on very specific criteria that is important to you – patio space? Gym in a condo building? Access to a pool? Main floor bath? Let us send you what YOU want to see.

Understand how the market is behaving…

Buyers should look for a home that fits the 80/10/10 rule – 80% of what you love, 10% that you can change, and 10% that may not be your favorite but you can live with it.

Your agent can help you learn what the market is like in your area – is it a buyers market or a sellers market? What percent of asking price are sellers able to get on their homes? How long is it taking for sellers to get their homes under contract? Do sellers typically contribute to closing costs?

Realize that depending on the market you may not get your offer accepted on the first home. At this moment in Minneapolis, anyone buying a home under about $350K can expect to have some competition on their offer and also needs to be prepared to act quickly. In other words, it’s a sellers market and your best bet is to make the most attractive offer possible.

Head out and view properties!

Finally – start looking with your agent. Plan to give 24 hours notice if at all possible. Selling is hard – people want to clean, they may have kids and dogs they need to take somewhere, it’s just courteous. Best case scenario they have moved already and the home is available to show as needed, but be prepared to give some notice.

Do you have questions? Click one of the links below or leave a comment!

mschumann@kw.com

Buying a house for the first time!
Home Buying

Buying a house for the first time!

MaryLeave a comment

Part 1 of 3…

So, you’ve been thinking about buying a house and the process seems overwhelming and like a big black box. If you are wondering what steps you should take, start here.

Step 1 – Finances

This is the biggie for most people. You need to take a look at your financial situation and figure out if you are in a position to take this step and if NOT, make a plan to get there.

Know your FICO score!

This is the score that lenders use to determine your credit worthiness. It’s a combination of the 3 scores given to you by the credit agencies. You can sign up for a free service like Credit Karma and see where you are at a given time. Some lenders will accept credit scores as low at 620, but most want 640 or higher. And if your score is on the lower side and you can easily clean it up, it’s to your advantage to do that first – lenders charge higher interest rates to those that have lower scores, so your loan will cost you more.

Down Payment.

If you have been in the military, chances are that you are eligible for a $0 down payment mortgage. The VA mortgage is really the best deal out there – look for a video on that soon because if you have served this is definitely a benefit that you should be taking advantage of.

For the rest of us, the minimum down payment is typically 3.5% of the cost of the home. So, if you were to buy a home at the average price in the Twin Cities ($280,000) your down payment would be $9,800. In MN, you may qualify for downpayment assistance of up to $15,000 depending on where you live and other qualifications.

I did another video on my YouTube channel about FHA Loans, and also one covering a mortgage offered by Habitat for Humanity that has incredibly good terms for first time buyers. Check the link below this post to see my YouTube channel.

Closing Costs

This is the area that I think is often underestimated or not planned for.

You should be planning to have about 3% of the price of the home available to apply toward closing costs. These are separate from your down payment and while we are often able to get sellers to contribute to closing costs it’s not always the case. You’ll want to have this money available.

If you have it and the closing costs are covered by the seller – more to the good to you because you start your life in your new home with a nest egg to use for emergencies or things that you’d like to add. You don’t want to buy a home and then be “house poor”.

Find an agent

Did you know that the SELLER pays our fee?

Agents advocate for you and guide you through the process.

That’s right – you get the benefit of someone knowledgeable about the market, who knows how to navigate these transactions, works to make sure that you are protected, and you do not have pay their fee!

Things that you should consider as you decide who should help you with what is likely the largest purchase you will make –

  1. Is this their full time job or are they trying to squeeze it in around their other job and commitments? You want someone who isn’t doing this as a side gig, it’s serious business.
  2. Do you feel comfortable with them? Buying a home is also very personal and often can be stressful if there are extenuating circumstances, pick someone that you feel you can trust to be in your corner.
  3. Look for recent reviews or testimonials from other clients.
  4. Are they a solo agent or are they working on a team? If it’s a team, they usually have a lead agent that primarily handles sellers and then they assign buyers to other members of the team. So you may be passed around to a lot of different people in that situation vs working with a solo agent where it is a very one-on-one relationship.

Get preapproved!

good to go!

Preapproval means that the bank has decided that you are worthy of a loan after actually looking at your credit. It’s a step beyond “prequalified”. You will know what you can afford to buy and won’t look at places that are out of your range.

Having a piece of paper that says this is critical to getting your offer accepted by the seller. Sellers do not want to take their property off the market only to find out that you are unable to buy the home.

This is another benefit of finding an agent to work with – we are in the business and working with loan officers is our daily business. We know who is responsive and works on our client’s behalf (and who is not).

Agents want the best outcome so they will help you find a lender that will help you get there. They are NOT paid by lenders, there is no “kick back”, or any financial benefit to send a client their way. Agents benefit by having happy clients at the end of the day.

Have a question or are you interested in getting information about another topic? Are you thinking of buying a home in the Minneapolis area? I’d love to hear from you!

Tap an icon below or leave me a comment!

mschumann@kw.com