Guide to Purchasing Home Part I

In this article, our goal is to assist homebuyers in their journey through the process of purchasing real estate.  We hope to make buying homes simpler and explain many advantages and pitfalls of buying real estate regardless if you are a first time home buyers, investor or have purchased homes before.  This article is compiled from over 15 years of experience is sales and rental of many single family homes, condominiums, businesses and commercial properties.  We believe if we could assist only one family in reducing their stress in purchasing their home is worth the time to research and write these series of articles on the process of purchasing real estate.

Mortgage Qualification

This should be the very first step, which home buyers should take before even searching for a home or contacting a Realtor®.  Contacting lenders first and asking to become pre-approved for a loan offers the following benefits:

• The Price Range
  • Based on each buyer’s financial standing the lender will calculate their creditworthiness and how much mortgage loan they can afford.  The Expense/Income Ratio plays a significant role in most lenders decision on how much of a loan to offer each person.  This means a buyer making a substantial income does not necessarily will qualify for a loan if the monthly fixed expenses such as student loans, car loans or credit card payments are too high.
• Placing an Offer
  • When it’s time to place an offer on a home you like, the sellers and their Realtors® will ask for a letter of Pre-Approval from a reputable lender and most probably would not waste time on unqualified buyers, especially in sellers’ market when they have other offers to entertain.
• Credit Problem
  • To issue a Pre-Approval letter, the lenders will run a detailed credit report on buyers.  At times, the home buyers are not aware of issues on their credit report till lenders notify them.  Some of the credit issues such as errors ad paid out accounts could easily be resolved by contacting the 3 credit bureaus, which will help the buyers credit scores.  A higher credit score will generally result in better rates and terms for loans.

First Time Home Buyers Guide to Purchasing Homes

For first time home buyers, our first advice is to learn how to overcome the anxiety of buying their first home that could result in rushing into unfortunate situations.  Being anxious to own the first place to call one’s home is the tempting factor that could prevent the first-time home buyers from patiently conducting their due diligence on the properties or perhaps failing to evaluate their real financial ability to purchase a home in a certain price range.  In the following segments, we will walk you through different stages of the home purchasing process and assist you in employing the right real estate professional to walk you through every step of the home buying process.   While assistances from different professionals such a licensed Realtor or mortgage broker is a must but beginning step for the first time home buyers is to assess their financial standing on their own.  This includes the financial assessment of the homebuyer’s ability to pay the down payment and closing costs as well as the purchase and payoff of the mortgage on a home in a timely manner.

1-     Financial Assessment by the First Time Home Buyers

The joy of owning a home could often alter the judgment of the first time home buyers on evaluating their true financial ability in paying the monthly mortgage payment.  To avoid such mishaps, the homebuyers must familiarize themselves with different charges that together will become the monthly mortgage payment.  To get to this number homebuyers must always factor in the costs of the homeowners’ association fees (if applicable), insurance and taxes along with an allowance for incidental expenditures for repairs and other unexpected expenses.  Not having enough saving as a cushion for such items will eventually put the new homeowners in financial hardships that may result in severe financial hardship and even the loss of their long awaited dreams of homeownership.  Home buyers should also evaluate the stability if there are any changes to their jobs and income stream.  Having savings that could cover total housing expenses for at least 6 months will offer the security when disaster strikes.

The first time home buyers could also ask their mortgage broker for an approximate cost of closing on the amount of the loan they are pre-approved for.  These costs are to cover the down payment, pro-rated taxes, pro-rated insurance, appraisal fee along with all charges associated with mortgage origination and underwriting.   It is important for the homebuyers to do their homework to find out about the down payment assistance programs that are sanctioned by the federal government and local municipalities.  The amount of the down payment assistance could be substantial and it is offered in a form of a low interest to no interest loans and grants to first-time home buyers.  Currently, the average down payment assistance in different US counties amounts to $11,565.  For more information about the availability of such down-payment assistance programs in your area please visit:  Florida Housing Finance Corporation

2-     Finding the Right Real Estate Professional

Engaging in any real estate transaction in the State of Florida requires a Real Estate Salesperson License or a Real Estate Broker License.  There are distinct differences between a licensed real estate professionals and Realtors.  Any person who obtains a real estate license could engage in selling, buying and renting of properties in the State but cannot be called a Realtor® unless he or she joins the local, state and the National Board of Realtors or Associations.  All Realtors® are required to take an oath to conduct themselves in a professional manner and most importantly preserve the public interest during any real estate transaction.  There are also many classes and workshops available to all Realtors to assist them in polishing their trades and specializing in specific fields.  Some of these workshops are conducted as educational courses that result in obtaining different designations by the attending Realtors.  Some of the better-known designations are Graduate Realtor Institute (GRI), Transnational Referral Certification (TRC), Certified residential Specialist (CRS), Accredited Buyer’s Representative (ABR) and Seller representative Specialist (SRS).

Look for additional information on HomeBuyers Guide to Purchasing Real Estate Part II