Helpful Tips: Make Your Dream Home a Reality
- TNE Magazine
- Sep 2, 2016
- 6 min read
Sure, owning a home is the American dream. It's also the largest investment most of us will ever make, so go into it knowing everything that is and isn't required. We had a chance to talk to the Southern California Real Estate Guru Sharde Morris, who took the time to give up these first time home buyer tips that everyone should consider before going out to get the that dream home.
What you'll need:
1. Enough money to make monthly mortgage payments. Duh! If a mortgage payment will bust your budget, you can't get rid of your landlord yet. Use a mortgage calculator to estimate your monthly payment.
A. Evaluate assets and liabilities. So you don't owe too much money and your payments are up to date. But how do you spend your money? Do you have piles of money left over every month, or are you on a shoestring budget? Track your spending for a couple of months to see where your money is going
a. The back-end ratio shows what portion of income covers all monthly debt obligations. Lenders prefer the back-end ratio to be 36% or less, but some borrowers get approved with back-end ratios of 45% or higher.
b. Typical most mortgage lenders will request 2 recent pay stubs, the previous 2 years' W-2s, tax returns and the past 2 months of bank statements -- every page, even the blank ones.
B. The self-employed or independent contractor will normally need a solid 2 years' earnings history to show a mortgage lender.
C There's not a fixed debt-to-income ratio that lenders require, the old standard dictates that no more than 28% of your gross monthly income be devoted to housing costs. This percentage is called the front-end ratio.
2.Enough income to pay property taxes and homeowner's insurance. The mortgage isn't the only cost you'll have each month. You also have to pay taxes and insurance. If you can't make those payments, say bye-bye to the house.
3.The ability to maintain the property. You must keep a home in good repair or it will lose value and you'll lose money. You can do the work yourself or hire it out. Either way, you can’t ignore peeling paint and windows that won’t close, like you did when you were a tenant. Although, the old adage holds true. If it ain't broke, don't fix it. For resale simple renovation after the sale can boost the value of the investment by thousands.
A. Want to keep up your curb appeal, but make sure you don't over improve for the area. Some houses have a cap on them, which means it will be worth a certain amount no matter what the homeowners do to make improvements.
Side Note: Make sure you call the utility companies that service the house you are considering and ask for an estimate of what the cost will be, whether there are any budget plans available, etc. Will the gas budget for your car go up if you are moving further away from the places you frequently visit? Budget all of these expenses and see if you can still afford the house.
4.A decent credit record. If you have lots of late payments, have declared bankruptcy or left old debts
unpaid, it's harder to get a mortgage. And if you do get one, your bad credit record will make you pay a much higher interest rate.
A Free Tool: To get a sense of where your credit stands, go to myBankrate to collect your credit report and score today, free and with no obligation.
Side Note:Just because you pay everything on time every month doesn't mean your credit is stellar, however. The amount of credit you're using relative to your available credit limit, or your credit utilization ratio, can sink a credit score. The lower the utilization rate, the higher your score will be.( Ideally, first-time homebuyers would have a lot of credit available, with less than a third of it used.)
What you won't need:
1. A big down payment. It's best to make a big down payment so you can skip paying private mortgage insurance (PMI) and lower your monthly payments, but it is possible to buy a house for almost nothing down.
2.Experience. In most major cities, real estate companies hold home-buyer education classes for first-timers. Go, even if you have no immediate plans to buy. The information you get can lead you to other sources of help like grants and funding sources. There are many different options based on profession (grants for teachers, farmers, etc.) as well as the area of the potential house (whether it's in a rural area, high-poverty area, etc.) What to know before a house walking through:
3.Before you begin to house shop, you need to have an idea of what kind of neighborhood you want to live in and the style of house you want. Start by making a list of items to check. Home-buying is an emotional process. Ideally, you should set aside all your emotions when evaluating a house. Practically, that is impossible. Instead, make a checklist of your must-haves, nice-to-haves and other essentials. Then print copies of this checklist.
A.Every time you visit a house, take the checklist along with you; take photographs so you can cross each item off your list. If you fall in love with the house and your checklist shows that the house has none of your must-haves.8.If you're going to live in a city, you often have to sacrifice space.Think long-term and think re-sale.
B.Are you planning to have kids? Will you be taking care of elderly relatives? You might be planning to live in your first home for only a few years. In that case, who is your target audience when it comes time to sell the house? If you buy a house in a very bad school district or a house on a very busy street, when you are ready to sell the house, most families with children will be out of your list of potential buyers.
4.Look beyond the staging: The psychology does work; staged houses look far better than houses that are still being occupied. d.When you are considering a house, mentally try to remove the staging. e.Pay more attention to the layout of the house and the structure itself. Ugly wallpaper and paint can be easily fixed later.
5.Ask for the homeowner’s association contract before you make a decision: If your long term plan is to rent out the house asked for a copy of the HOA contract after going to an open house in the area. Sometimes none of the houses in that neighborhood could be rented out. If you are buying a house that is part of an HOA, it is absolutely essential to read the HOA contract before you do anything else
Make an Offer:
1.When you're house shopping, you can't pull a number out of a hat. The three most important matters when it comes to negotiation are information, preparation and realism.
A. Find out what other homes in the area have sold for, how long ago the sale was and what amenities they had. The market determines the value of a house so, try not to fixate on the list price of a house. Instead, consider the fair market value (an estimate of what a buyer would pay a seller for any piece of property).
2.The three most important matters when it comes to negotiation are: the information, preparation and realism.
3.It is important to have a home inspection especially if you are looking to buy an aging or older house. They look past the visible surface to the infrastructure, inspecting plumbing and looking for faulty fixtures and waste lines. They check electrical systems to make sure they aren't overloaded or a safety hazard. They also look at possible structural problems like the foundation, walls and floor joists.
4.Be sure to read your contract before you sign it: A house is probably the largest purchase you will ever make in your life, so make sure you understand the terms of your contract. If you don't understand any of the terms, ask your mortgage broker and your real estate agent. If they won't explain the terms clearly to you, fire them; there are enough people who will be more than happy to help you and work for your business.
Not that you have the tips from the best. Game On People! Go out and get that house that you have always dreamed of.
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