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BUYERS: ARE YOU WILLING?

 

(This is the finale of a three part series for homebuyers , outlining the process and steps to take that will result in your successfully buying a home, whether you are a first time homebuyer or a move-up buyer .)

 

There is nothing more exciting than buying a home.

 

So far, you have gone through the rigorous process of combing through your finances and credit to ensure that you were able to buy a home . You’ve corrected any deficiencies in your credit, and have contacted the appropriate professionals to assist you with your home buying search and financing.

 

You have also identified the reasons that make you ready to buy a home . The combination of your personal needs and wants has lead you to identify the type of house that you want to buy , and the time frame in which you will need to complete the home buying process. As a matter of fact, you have already located the specific house that you want. Your new home is in the perfect neighborhood. The house is in the right price range, has all of the amenities that you desire, and although it may have a few issues, they are nothing that you can’t deal with.

 

 

So the final question remains: are you going to buy this house ?

 

Whether you have or have not already chosen a realtor to work with you as you prepare to buy a home, this is the last of the three main questions that any realtor will be asking as they guide you through the home buying process:

 

1. Are you able to buy a home ?
2. Are you ready to buy a home ?
3. Are you willing to buy a home?

 

The focus of Part 3 in this series addresses the third and final question: Are you willing to buy a home? What will actually get you to commit to the process of buying a home? What will it take for you to make an offer on a home?

 

So, what does it mean to be willing to buy a home?

 

Being willing to buy a home is the most difficult aspect of the home-buying process to address – but in the simplest of terms, it is your call to action . It requires you to marshal all of your emotions, reasoning, and information that you, the buyer , have gathered up to that point to commit yourself to completing the process that you started with your first home search.

 

Being able to buy , and ready to buy , will become a total waste of time on the part of everyone involved – the buyer , the seller, the realtors representing both buyer and seller, the mortgage lender – if you, the buyer , do not act on your desire to buy a home.

 

Being willing to buy a home is most seriously impacted by the type of market that we are in – and always comes with the question “When?”  

 

In a seller’s market , when the demand for houses exceeds the supply of houses for sale , the   answer to the question “when” is always “right now!”, because you as the buyer   never know if 1) the price is going to rise, and 2) how much competition you have for that exact same house from other buyers .

 

In a buyer’s market, where the supply of houses for sale exceeds the demand, the answer to the question “when” can range from “right now” to “not yet…” , depending on the readiness of the buyer , and what expectations the buyer brings to the process: will prices drop further? Is this the best bargain I can get for a home like this?

 

The challenge for all buyers in a buyer’s market is for you to realize that now is the time to buy . Speak with your Realtor about any concerns that you may have about buying now. He or she will be able to help you navigate though the issues which are hindering your willingness to buy . Also realize that special incentives, such as the current $8000 First Time Home Buyers Tax Credit, are only available for a limited time, so if those incentives are a part of your calculations, you should act on them as soon as possible.

 

 

Being willing to buy is the final step that you, the first time homebuyer , or the move-up buyer , must take to accomplish your goal of buying a home.

 

So, what are you waiting for? Let’s go buy a home !

BUYERS: ARE YOU READY?

 

(This is the second of a three part series for homebuyers, outlining the process and steps to take that will result in your successfully buying a home, whether you are a first time homebuyer or a move-up buyer .)

 

Great! You have made a decision to buy a home for the first time, or perhaps the second time, in your life. Exciting, isn’t it?

 

 

But what brought you to the decision to buy a new home?

 

Whether you have or have not already chosen a realtor to work with you as you prepare to buy a home, this will be one of the three main questions that any realtor will be asking as they guide you through the home buying process:

 

1. Are you able to buy a home ?
2. Are you ready to buy a home?
3. Are you willing to buy a home?

 

The focus of Part 2 in this series addresses the second question: Are you ready to buy a home?   Knowing what your motivation is for buying a home is key in determining how serious you are about completing all of the steps, and answering all of the questions, that are involved in buying a home.

 

  So, what does it mean to be ready to buy a home?

 

  Being ready to buy a home addresses a very wide range of     factors that answer the question “Why?” The answer(s) to that question can be as varied and complex as the number of buyers who have to answer that question.

 

There are some answers to the question “why do you want or need to buy a home” that will, just by their very nature, have more weight to them in your decision to buy a home.

 

 

The following list gives the major reasons why people want or need to buy a home. This list is not meant to be an all-inclusive neither exhaustive list, nor will they all apply to all buyers equally, but they generally tend to be the consensus of what most buyers report as reasons for wanting or needing to buy :

1. Job/military relocation
2. Getting married/just married
3. Seeking/establishing independence
4. Growing family
5. Desire for a better area/neighborhood
6. Empty nest-need to downsize
7. Unsatisfactory current living arrangements
8. Upcoming lease renewal with significant increase in rent  

 

Wanting to buy a home may come with several other behind-the-scenes motivators, such as the recent $8000 First Time Home Buyer’s Tax Credit, programs that offer down payment and/or closing cost assistance, knowledge of the tax benefits that come with home ownership, the pride of having something to call one’s own, low interest rates, and the fact that it is currently a buyer’s market.

 

However, no matter what type of market we are in, none of the factors that motivate people to want to buy can ever trump having the need  to buy.

 

 

Being ready to buy because there is a need that is fulfilled by acquiring a home of one’s own is the most powerful motivator there is – especially if there is a time component involved. Lease is up within the next six months? Job relocation is scheduled within the next three months? Getting married in the next five months? A new arrival to your family is coming in the next four months?

 

 

These are all compelling reasons to get the home-buying process started. Of course, you should first hire a Realtor and make sure that you are able to buy a home when you make the decision to buy a home .

 

Having compelling reasons to buy a home will make it easier for you to follow any recommendations by your realtor and/or mortgage professional that will bring you closer to achieving your goal of home ownership.

 

 

 

BUYERS: ARE YOU ABLE?

 

(This is the first of a three part series for homebuyers, outlining the process and steps to take that will result in your successfully buying a home, whether you are a first time homebuyer or a move-up buyer .)

 

Buying a home has always been an exciting endeavor. The steps to buying a home, however, have always been somewhat confusing to many homebuyers , even those who have already bought a home and are looking to buy a new home.

 

In my experience in meeting with prospective homebuyers, the conversation generally goes something like this:

  Buyer : Oh, you’re a realtor! I’ve been looking for a home!

  Me: That’s great! Are you working with a realtor?

  Buyer : Not at this time . We’ve just started looking.

Me : That’s good for you to know. Have you been pre-approved for a mortgage?

  Buyer : No …

 

In today’s market, many buyers start their search for a home on the internet, but do not have a game plan for how to go about actually purchasing a home.

 

The first thing that all prospective homebuyers should do is to hire a Realtor to help guide you through the process. Hiring a Realtor usually takes place through what is known as a Buyer’s Agency/Broker Agreement. This generally means that the Realtor is legally responsible for 1) helping you to both locate the property that you wish to buy, 2) providing you access to other services which are relevant to the homebuying process, such as mortgage, home inspection, and legal services, and 3) when you are ready to actually purchase a home, negotiating on your behalf and protecting your best interests. It also means that the Realtor that you have hired is the sole contact that you should have when looking for a home, as sellers also have Realtors looking out for the seller’s best interests .

 

The Realtor that you hire should address three important questions as they guide you through the process of buying a home:

 

1. Are you able to buy a home?
2. Are you ready to buy a home?
3. Are you willing to buy a home?

 

The focus of Part 1 in this series addresses the first question: Are you able to buy a home? This is the first question that needs to be asked because without the ability to buy a home, the other two questions, and indeed, the whole process, becomes an exercise in futility, and an unproductive use of both your time and the Realtor’s time.

 

So, what does it mean to be able to buy a home?

 

Being able to buy a home encompasses the following:

1. Income/debt ratio
2. Credit score
3. Amount of money for down payment/closing costs

 

The price of the home you can afford, and the interest rate that you will pay on the mortgage, are determined by the amount of your debt relative to your income, and your credit score. Your Realtor should provide you with at least three mortgage professionals to choose from, and the one you choose will ask the relevant and appropriate questions to determine whether you are indeed able to buy a home.

 

 

If you have been planning to buy a home for some time, and have the cash reserves for a down payment, then your mortgage amount will be less than the actual purchase price of the home. You should also have some reserves for the closing costs associated with buying a home – attorney’s fees, lender’s fees, insurance, appraisal, taxes, etc.

 

Even if you do not have a lot of money for a down payment or for closing costs does not mean that you are unable to buy a home, if your income and credit qualify you. There are down payment assistance programs available; talk with your lender about your options. Your Realtor can discuss with you the options available for covering your closing costs, should you be unable to cover most or all of the closing costs.

 

But what happens if you are not able to buy?

 

There are generally two main reasons why a prospective homebuyer would be considered unable to buy a home – lack of income, and poor credit.

 

There are many reasons why a person’s income is not enough to qualify to buy a home, at any price range. The thing to do in those cases is to decide if buying a home is really what you want, and if it is, then you must engage in some long-term strategies to improve your income. Taking a second job or improving your skills to qualify for a higher paying job are certainly options to consider. Reducing the amount of debt that you owe is another way to improve your income, because it will show that you have more money available for buying a home.

 

Credit issues are another matter entirely. The first step to correcting any deficiencies in your credit is to know what is on your credit. Prior to contacting a mortgage professional, you can access your credit report free of charge once a year through annualcreditreport.com .

This service provides access to your credit report from the three major credit reporting agencies – Transunion, Equifax, and Experian. Identifying what issues you have with your report is the first step in correcting them. If the items on your report that are negative are accurate, then you must correct those items. If there are errors, then you have the option of challenging those items on your own. Should you be unsuccessful in getting the credit bureaus to correct the deficiencies, you can contact credit repair and restoration companies to assist you, and there are several available here on ActiveRain and also through my website.

 

Depending on which mortgage professional you choose, they may also be able to assist you with programs designed to help you correct any deficiencies in your credit report.

 

Knowing that you are able to buy a home is the first step to complete in the home buying process.

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Via Steve Kappre, Gloucester County, NJ Loan Officer/Mortgage Planner - 856.419.3561 (Treasury Mortgage):

With all the excitement of the first time home buyer tax credit, buyers often get confused and miss out on other important options.

As a first time buyer, don't let the excitement of the $8,000 tax credit cause you to miss out on many other home buying options. It isn't uncommon for a buyer to confuse the federal tax credit with seller credits, down payment assistance, or first time home buyer grants.

First time home buyers have many options.  Utilizing one option does not hold a buyer back from utilizing one or more other options allowed to them as a first time home buyer. This article is written not to go into great depth on each option, but to help you realize the different options available as a first time home buyer and how to utilize each/all of these options.

Read on to understand some common terms and how to take advantage of each option.

Tax Credit

The federal tax credit is the (up to) $8,000 incentive that everyone is talking about. Most home buyers that haven't owned a home in the last 3 years will qualify for this. In general, this credit is realized as a credit for you when you complete your taxes in the spring of 2009 (for 2008's income).

For example, if you would have normally received $2,000 back after completing your 2009 tax returns, the tax credit would add an additional $8,000, to make your total amount received $10,000. For additional information and guidelines, go directly to First-Time Home Buyer Credit: Answers.

Seller Credit (Seller Concessions)

A seller credit, better known as seller concessions, is a scenario when the seller agrees to pay a certain amount of your settlement costs. The seller may pay a percentage, such as 2, 3, or 6% of the purchase price, or they may pay a dollar amount, such as $2,500 or $5,000.

For more information on understanding seller concessions visit Understanding Seller Concessions | Seller Paid Closing Costs | Seller Contributions | Seller Assist.

Grants for First Time Home Buyers

Many people miss out on first time home buyer grant options. Once a buyer hears about the $8,000 tax credit, they sometimes go deaf to other options, either out of excitement or because they don't realize they can utilize more than one option.

A grant is a program often issued by a county or state that offers funds to the home buyer for the purchase of a home. Either a flat dollar amount or a percentage of the loan amount is used to calculate the funds offered. A typical grant percentage would be 2, 3, or 4% of the loan amount. For instance, 4% of a loan amount of $100,000 would give you a $4,000 grant.

Grants can be utilized for down payment requirements and/or to pay for closing costs. Depending on the purchase price and the grant selected, a grant can sometimes even cover all requirements the buyer has concerning both the down payment requirement and closing costs.

Down Payment Assistance

As of the date of this article, down payment assistance in the traditional sense is not available.Down payment assistance programs (DAPs) were an option where the seller would indirectly give a buyer the money needed for down payment requirements. These transactions in general had a higher default rate then most, therefore this option is no longer available. Examples were the Nehemiah program or the Genesis program. There is a movement to reinstate these programs. The mentioning of DAPs here is simply to help you differentiate and not confuse them with other options.

How to Utilize More Than One First-Time Home Buyer Option

Here's where the rubber meets the road. A common example of utilizing all of the above options is as follows:

1. Buyer meets with grant official or loan officer for qualification requirements pertaining to a specific grant option. In our example the buyer will use an FHA mortgage, which requires a 3.5% (of the purchase price) down payment. The purchase price is $100,000, therefore the down payment requirement for this would be $3,500.
2. Loan officer and buyer determine that the use of a 4% grant would be the wisest choice. Since the down payment requirement is $3,500, the financed amount will be $96,500 ($100,000 - $3,500). Based off of $96,500, a 4% grant would be $3,860 (loan amount x 4%, or $96,500 x .04)). Compare the grant amount with the buyer's down payment requirement of $3,500, and the grant amount is $360 more than the required down payment amount. This type of grant covers the down payment requirements and some additional funds to be applied towards the closing costs.
3. Assuming closing costs are $5,000, here is how you can determine what to request from the seller to get the closing costs paid as well. We can subtract the extra money left over from the grant, in this case $360, from $5,000. Our sum is $4,640. FHA requirements allow the seller to pay up to 6% of the buyer's closing costs. We don't need all 6% (or $6,000), we only need $4,640 from the seller. So when the purchase of the home is negotiated, the buyer's agent negotiates with the seller's agent that the seller will agree to pay $4,640 towards the buyers settlement fees/closing costs.
4. Buyer goes to settlement needing $0 to close, and in fact they will get back the money already deposited with the real estate agent and lender.
5. Lastly, the buyer can still maximize the use of the federal tax credit and receive their $8,000 after filing their 2009 tax returns.

All-in-all, in our scenario the home buyer will receive $16,500 for purchasing a home ($3,860 grant + $4,640 seller's concessions + $8,000 tax credit).  The buyer is able to utilize three separate home buying options and in the end, still have their own money in the bank, which will then get boosted in several months by the $8,000 tax credit. Now THAT is the kind of lending and buyer representation that creates solid, well founded home owners, which is exactly what we all desire.

By working with knowledgeable professionals, you can utilize multiple buyer options to make your home buying experience an amazing event!

 

If you would like more information, as a buyer, seller, real estate agent, real estate office, financial planner, college or other party, feel free to contact Steve Kappre directly on his cell at 856-419-3561 or via e-mail at steve@stevekappre.com.

 

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Steve Kappre is a Mortgage Planner with Treasury Mortgage. Steve specializes in;

• All areas concerning First-Time Home Buyer Mortgages, grants, down payment assistance, police and fire loans, rehab loans, and more.

• Reverse Mortgages

• Equity Management strategies for high-end homes and high net worth individuals.

Contact Steve Kappre directly at 856-419-3561 or at www.stevekappre.com

Via Dee Neal Philadelphia Real Estate (Exit Tri-State Realty):

I wonder, do you have "THE TALK" with your buyers? If so, what are you saying?

I recently referred a buyer out to my partner. She has been calling me for about a year. I would hear from her every couple of months when she would have a question on real estate. She was back and forth with her decision to buy a home and decided a couple of months ago to take the dive. I was happy for her that she had finally made her choice. BUT, my plate was full. I was working with quite a few buyers at the time she called me and I knew I wouldn't be able to give her the attention and care she needed so I decided to refer her to my right hand man in real estate because I knew he would take good care of her.

My partner would call me on updates on what they were doing and I'd check in with her from time to time to see how she was doing. Her road has been an emotional one. She found a home pretty quickly, submitted an offer, and it was accepted. Problem: the listing was a short sale and shortly after the agreement was signed, the seller decided she wanted to keep her home and her bank granted her a loan modification.

A few days passed by and she found another home, an offer was submitted and rejected because the seller accepted a higher offer.

After a couple more disappointments, she calls me and tells me how discouraged she was getting with this process and how it was so emotionally draining. Then I had an "Ah haaaaaa" moment. I referred out but hadn't had "THE TALK" with her.

*I make sure to have "THE TALK" with all of my buyers.*

I told her that since we hadn't gone out together, I hadn't had the chance to have "THE TALK" with her like I have with all of my other client's on our first outing. She says to me, "Well what's that?" Then I began to give her the talk:

"Ok, I'm just going to give it to you real here. This is not meant to scare you but to prepare you. This process can be a bitch at times and at times it can be your best friend. I tell this to everyone so when these ups and downs come, you're well prepared and you're expecting it. This search can get on your nerves. What you're going through is typical and honey, you ain't seen NOTHIN' yet. I've seen worse. I sometimes like to liken this process to labor. It can suck and take you through all types of pain and the best part about it is the birth at the closing table. You get anxious. You get emotional. No matter how thorough and proactive we are, a wrench can come from any direction and knock you off your square. You can have your eyes set on a house and your offer can get rejected. You can have your eyes set on a house and be in contract and then the inspection comes and unveils a bunch of issues that you never expected. And while we can simply ask the seller to make repairs, they can and sometimes will give us hell about them. There can be issues with the title. And let's not talk about the bank who can wait until the last minute to drop a bomb that that you may or may not be able to recover from which is why I always give the advice to always have more money than is expected for closing costs for those little "just in case moments". Now once, again, I don't mean to scare you but I need to make sure to prepare you."

Her reply, "Wow, I never knew. So what I am going through is typical?" "Yes ma'am," I said to her.

A couple weeks later when she started to get discouraged because she hadn't found anything else to her liking yet, she called me and thanked me for "THE TALK" because had she hadn't heard my brutally honest talk, she would've thrown in the towel in her search.

What I find is that my talk, though brutal, is effective. Every time a buyer faces a challenge, I get the same response, "You told me to be prepared for these things. I'm glad you did."

So, back to my original question, do you have "THE TALK" with your buyers?