How to find the perfect home
Let’s face it, most people simply can’t afford the home they truly want. The trick is to find the house that has the least of what you DON’T want, and the most of what you do.
The home buying process can be a very emotional, draining, time consuming process. People have a lot of personal feelings invested in the place they live. They often remember their parents house, or friends growing up, and how grandma’s house always smelled like cheese. So, when looking for a house, Realtors often have to be psychologists, as well as financial and real estate experts. That is why it is important to find someone with your best interest at heart.
I always suggest using a Realtor. They will have the most market information available, and the buyer in most cases doesn’t pay the Realtor’s fee, the seller does. So it costs you nothing to use a professional, great deal for the buyer huh? You may be able to get a better deal by searching for sale by owners, but unless you know the legal aspects of buying a house, why leave yourself exposed like that? Also, the vast majority of houses are NOT FSBO’s, so you may also be limited as to choice.
Interview several Realtors. I like to go to Realtor.com, do a search in my area and simply email some of the Realtors there. You will be surprised at how many WON’T email you back. If you can’t get in touch with a Realtor, why would you want to work with them? Set up appointments to meet at least three of them. Learn what you are looking for first, (explained later) so you can tell them at this meeting. See if the Realtors are really people you want to work with, personality wise, etc. If all of them seem good, then narrow it down by who will work for you.
Again, tell them what you are looking for, give them your email and see who is the first person to email you back, who sends you the most relavant information, etc. I have had Realtor’s that said they really want to help me, but then sent me listings for 50% more than I told them I wanted to spend! If they don’t understand your needs, use one of the others. Then, pick the agent that is easy to contact, gives you the most service, and seems eager to help and get along with you to work with.
When deciding on what you want in a home, you first have to decide how much you can spend a month so you can find out what price house you can afford. Don’t let the “experts” fool you here, that is why there are so many foreclosures today. Mortgage companies will often approve you for up to 40 % of your income to be used as a home payment. This is much too high, unless you like foreclosure that is.
I like to keep it simple. One weeks pay should pay for one months house payment, the true cost. If you make $4000 a month, that is a $930 a month payment. What you talking about Willis, why not $1000? Do the calculation and you will see there are 4.3 weeks in a month, trust me. Again, something most “experts” never tell you.
To find the true cost of owership, you will have to do some estimating. Upkeep will be between 2 and 5% of your homes value a year. Add utilities, taxes, insurance, home owners fees, and any assesments. You might be surprised at how little is left after all these fees. It is going to also depend on the house, so you will have to do some estimating only at this point just to see approximately how much you will have left each month for the mortgage. Get down to specifics when you find the house you want.
Now, go to a mortgage company, a big one that isn’t going out of business today, and shop for a loan. If you have a bank you deal with, they might be a good source, although banks often cost more. I simply like to call around in the phone book and ask about rates, closing costs, fees, etc. Also, you can check online, but they often only show rates. Calling is quick and easy and you will be surprised how much information they will give you.
Again, here is where you want to do your due diligence and find someone that will work with you. Ask them to email you this information (to your junk email account, read my article on this), and see who responds. Email them back a couple times with more clarifying questions and again, see who is really willing to work. Pick the one with the lowest rates, lowest cost, and that is willing to work with you.
Go get preAPPROVED for the loan. Prequalification means nothing. You want a 30 year, fixed rate mortgage, with no prepayment penalty. This will give you the most flexibility, your rate won’t jump up like some adjustable rate mortgage, and if you want to pay it off in 15 years or less, you can.
Now that you have found the loan and the Realtor, it is time to get down to business. Let your Realtor know how much you can spend (NOT the loan approval amount remember, we are trying to stay out of bankruptcy). The Realtor will try to tell you to look at houses above what you want to spend because they will tell you to negotiate down. You can look at them, but be sure to tell him or her to look for cheaper houses as well. You don’t HAVE to borrow all you can either.
When looking for the neighborhood, consider your work, schools, entertainment etc. Ideally, I like to be near a good school district for resale purposes, that is near work, and has entertainment opportunities last. If you can’t afford all that, there is probably a reason. Popular neighborhoods are popular for a reason and also hold their value better.
Look for a smaller house in one of these areas. I like to have the worst (cheapest) house in the best neighborhood. That way, your house is not brought down by the value of someone else’s lesser house. If you still can’t afford anything, look further afield, or simply rent until you can afford to live where you want. Remember, homeownership is very emotional. If you live somewhere you hate, you will want to move right away, and probably won’t get out with half a skin.
Next, consider how your house will be used. Do you have parties 3 nights a week? Do you have 10 rug rats running around that need the space? Don’t consider just square footage. Some houses that are less than 1000 sq. feet are laid out better and more functional than houses twice their size.
Just consider the things you do in a house like cooking or entertaining. You may then want to look at houses with a bigger kitchen or family room or bar, what the heck. Make sure you consider any upcoming babies when figuring bedroom space and if you are going to use a bedroom for workout or office use. Also, make sure all your clothes and goodies will fit in the closet, including the things you will get in the future.
For most people, 3 bedrooms, 2 baths and a 2 car garage are ideal. This suits the average family, as well as having the best chance at resale. Avoid 2 bedrooms or no garage unless it is a steal. Even if you don’t need more, resale will be affected.
Look for houses that don’t need work. If all houses are priced the same per sq. foot, (and I find this the case many times) look for a new or like new home that will have the newer amenaties like whirlpool tub, wood floors, etc. Many new homes will often have a 10 year warrantee, just make sure the warrantee company is reputable and has been in business for quite a while.
Stay away from the 70’s shag carpet and funky cabinets unless you can get a true bargain. Older houses may be a bit cheaper, but from what I have seen it is usually for a reason. Would you buy a house of the same size for $10,000 less, if it needs $20,000 worth of work? That deal sucks. Don’t get trapped in the “We will fix it later when we get the money” trap either. It will never happen.
If you do want to do some work and save some money remember, it is easier to replace carpet and paint than to fix a foundation and roof, so look for the easy repairs for an older bargain. Stay away from fixing foundation, joists, termite damage, or sagging walls. If there is one thing wrong with a house, remember, the whole house is the same age, there are probably other things ready to go.
The best bargains I have found have been well cared for houses in the 2 to 10 year old range that are foreclosures. These are too new to be beat up (in most cases) too bad, and tend to be in newer neighborhoods and have better construction and ameneties. You can always make an offer on a foreclosure as well, so start low, you can always go up, not down.
Be sure your Realtor has an inspection contingency put into your contract. Get a home inspector to come out and check the home and if it doesn’t pass, the inspection contingency will make sure things get fixed or you can walk away. I have a home inspector do my inspections even though I could do them myself. Why not let him have the liability for the few hundred bucks I pay him? If I miss something, it is ALL on me.
If the house passes inspection and all the dots and I’s are crossed, you already have your preapproval, so you know you are going to be able to close. Just have YOUR REALTOR stay in touch with your mortgage company to make sure nothing changes. Make sure you rate is locked in, and if they come back and tell you they want to up your rate or charge you more closing costs (this has happened to me AT closing), walk away and find a different mortgage company if they won’t fix it (mine did). It is the principle. Isn’t it better to waste the few hundred dollars you already paid for appraisal and the like and not let the company take advantage of you? Most mortgage companies are honest, just use your resources like the Better Business Bureau and friends as well when you are picking who to work with.
After you close, figure out how you are going to move all your junk. Consider selling or giving away your used things, as this is a great time for Spring cleaning. Don’t get too carried away with new purchases though, as you will be amazed at how much you spend on new blinds, air fresheners, cleaning supplies and all those little things to get your new house in order. Take it slow, sink in to your new surroundings, and enjoy life a while before buying that new walk in humidor. See how you manage the payments for a few months, and save a little for repairs as they will happen. Enjoy your new house. By using these tips it shouldn’t become a burden like so many people have these days.
