Pragmatic Guide to Buying A Home
It is more important to us that you buy the right home and not just any home.
Here at Poli Mortgage we pride ourselves on responsible lending, responsible lending after all, is the cornerstone to responsible buying. We’ve been able to thrive through the toughest times the real estate market has ever seen. The reasons for this are many, a very loyal customer base, a great team and responsible lending practices.
Our goal is to educate you on all aspects of the home buying process. When you’re armed with the right information, your home buying process will be smoother and surprises are unlikely.
Pragmatic is a term that describes an individual who makes a decision with the potential consequences in mind. Buying a home is a large investment, there is no such thing as a redo and there is no way to take a month off, without consequences.
Keep in mind that a responsible buyer will reap massive rewards from home ownership:[list style="check"]
- Pride of Ownership
- Tax Benefits
- Equity Appreciation
These are just a few of the benefits of owning a home.
Owning a home is the American Dream and we want to make sure that you are able to achieve the American Dream and avoid a nightmare.
How to Get Started
Many mortgage companies will tell you that the process starts with a pre-qualification. This isn’t completely true.
The first step should start with you doing some homework. It makes sense to sit down and do some basic planning.
Where to Live
Carefully considering the city, town or even neighborhood that you want to live in for a long period if time, simply makes sense. Numerous factors go into considering the actual location:[list style="check"]
- School Systems
- Neighborhood Appeal
- Work Opportunities
- Nearby Amenities
- Distance from Family[/list]
These are all points to consider when making the decision on where to buy. You don’t want to allow the Tail to Wag the Dog. In other words, you may not want to allow what you can afford, to determine your ideal residence.
Now that you have a neighborhood picked out, or at least an approximate location where you would like to buy, it’s time to do some basic research online.
As you’re doing online research, you will visit Realtor websites and such, don’t pick a Realtor out of the bunch just because they have a listing you see and like. You will want to work with a Buyer’s Agent who has your interests in mind, not that of the seller.
[note color="#fbf7b2"]Please read these two articles carefully:
Do I Need A Buyer’s Agent
Those articles should have given you some insight on why you need an agent working for your interests and how to not anger the Realtors you work with. Both very important topics when buying a home.
But, we’re not choosing an agent right now, so let’s move on.
The fact is that the perfect neighborhood may or may not be in your price range. That’s not to say you may be able to find a hidden gem in your perfect neighborhood, you may, particularly in this buyer’s market.
For the most part however, really good neighborhoods maintain a particular sales price range and we’re only doing basic prelim research at this point. You just want to consider what the overall range is so you know you can afford the area.
Start out by looking at you current financial resources. If you’re paying $1,000 per month for rent and you comfortably have money left over each and every month, then you know you can afford at least $1,000 to $1,500 each month in mortgage payments.
If you are struggling each month to make a $800 monthly rent payment, you may want to save up for a larger down payment and even consider advancing your current career in some way prior to buying a home.
Mostly, you have a feel for what you can afford but, doing a simple budget in advance will help you make your home buying decision.
You’ll want to consider your future expenses:[list style="check"]
- Mortgage Insurance
- Basic Home Improvements
- Utility Bills
- Commuting Expenses
- Snow Removal
- Retirement Savings
- Life Insurance
- Lovely Surprise Maintenance Expenses[/list]
Some of these expenses are new to you if you’re a first time home buyer. Some of them are currently covered within your rent and some of them you are already budgeting for.
While it may appear to be an insurmountable amount of new monthly expenses, you’ll learn to manage everything quite quickly. When these monthly expenses are a surprise, is when people get into trouble.
You will also want to remember that mortgage interest and in some cases mortgage insurance is tax deductible. You will want to consult your tax professional in this area but, it is likely that your tax return each year will be higher than it was when you were renting. This alone can help out with a number of the expenses mentioned earlier.
Now that you’ve done some simple homework and you’re comfortable with a range of what you can afford and where you will want to live, it’s time to get a pre-approval letter.
A pre-approval letter is much more powerful than a pre-qualification letter. This is important to understand. Only mortgage lenders can provide rock solid pre-approval letters. Mortgage brokers typically cannot provide a pre-approval, only a pre-qualification.
At Poli Mortgage, we provide pre-approvals at no charge to you. You should not pay for a pre-approval in any case.
[note color="#fbf7b2"]If you are concerned about your credit rating please read this article:
You can get a pre-approval letter over the phone, this is the most common means of getting your letter. It is not necessary that you visit the mortgage office to achieve this, you can if you’d like but, it’s not necessary.
The information you’ll need for a pre-approval: [list style="check"]
- Two years of income history
- W-2 statements for all borrowers on the loan
- Name and address for all employers
- 2 months of bank statements and all asset statements (401-k or IRA)
- Social Security Numbers for all borrowers
- 2 years of address history for each borrower
- Dates of Birth for all borrowers[/list]
The mortgage officer will take all of this information to fill out a full application and pull your credit.
Once credit is pulled and evaluated, all of the information from your credit report will populate into the application. At this point the mortgage originator will determine how much you can afford on a monthly basis.
Now that you have a Solid Pre-Approval Letter in hand, you can choose a Realtor to represent you in the home buying process.
Choosing a Realtor
Hopefully by now you have read the two articles mentioned earlier, Do I Need A Buyer’s Agent and Realtor Etiquette, if you haven’t, read those now.
As you now know, the right Realtor will play a key role in the process. The wrong Realtor could pressure you to buy the wrong house. You should also now understand some basic Realtor Etiquette. This too will keep you out of trouble.
At Poli Mortgage Group, we work with an extensive number of Buyer's Agents on a regular basis. If you would like a referral for a great Buyer's Agent in your area, we can certainly help you out.
Your Buyer's Agent will arrange "showings" for properties that meet the criteria you give them. It is common for a buyer to look at a large number of properties prior to making an offer. Even after you make an offer, you can continue to view potential properties.
Making an Offer
It’s a Buyer’s Market. This means that the buyer should remain in relative control over what they pay for a home. There should be a decent amount of supply and you should be able to get a pretty good deal. Some markets are far better than others and this can play a role but, be sure you’re being pragmatic and not too emotional.
Don’t be too stingy however. This doesn’t mean that splitting hairs should keep you out of a home that really works well for you based on your criteria and the criteria mentioned earlier. In other words, don’t let a couple thousand dollars keep you out of a $250,000 deal that works for you.
It is important to be aware of the pitfalls of "settling" for a home just because the seller is ultra-flexible. Remember that you are going to be calling this place home for a number of years. Remaining as aware of the consequences of buying the wrong house as you are of over paying for a home is important. This is a delicate balance, but one your Buyer’s Agent should be able to help you with.
When you make an offer you will have to put up a small deposit with the offer, this shows the buyer’s side that you have some “skin in the game” and you’re serious. Typically a deposit that accompanies an offer will be in the $500 to $1,000 range.
Your Realtor will present the offer to the Listing Agent and they will present it to the seller.
At this point one of 3 things will happen:[list style="check"]
- Seller will accept the offer
- Seller will counter-offer
- Seller will reject the offer without counter[/list]
Usually, the seller will counter-offer unless you have made a full price offer. This is ok, you have the right at this point to counter again with a slightly lower number.
The seller will ask the listing agent for advice on the viability of the potential buyer. A few factors can contribute to the advice the listing agent gives the seller. As strange as it may sound, this decision is not all dollars and cents. Some offers are simply stronger, even if they aren't the highest offer.
Some of the contributing factors include:[list style="check"]
- Amount of down payment
- The reputation of the lender
- The strength of the pre-approval letter
- The speed of execution on the buyer’s side[/list]
Real estate is very local and listing agents need to protect the seller to every extent that they can. That being said, they need to make suggestions based on past experience. The presence and quality of financing is often the deciding factor when an offer is being discussed on the seller’s side.
When you work with Poli Mortgage Group to buy a home, you can rest assured that the listing agent is aware of us and they know we have a reputation for performing on time.
We are the lender on a vast majority of our transactions and they know this gives us a level of control over the process that exceeds most of our competitors.
[note color="#fbf7b2"]You can take a moment and read some of our testimonials from past customers to hear it from an independent voice if you like: Independent Poli Mortgage Reviews[/note]
Now you know a little bit more about us and our level of service in the real estate community.
Purchase and Sale Agreement
[note color="#fbf7b2"]Let’s skip ahead a little, your Loan Officer will guide you step by step through the underwriting process, so there’s no need to mention that here. They will help you choose the best program that fits your needs and so on. They will provide you with a checklist and timeline to be sure that the process moves smoothly on the financing side.
Read this article to learn more about available programs:
Loan Officers are supported by some of the hardest working people in the mortgage business, they’re called Mortgage Processors. Not to say that Loan Officers don’t work hard they do, but, Processors are the engine that drive the internal workings of each deal. This is coming from a 12 year mortgage originator!
Behind every great Loan Originator there is at least one or maybe two great processors. The processor will keep an open line of communication and provide updates, they are the key to hitting all the important dates in the Purchase and Sales Agreement. Don’t be alarmed if you speak with your processor more than your Loan Officer throughout the middle of the process. You’re in good hands.
Purchase and sale agreements are legally binding documents and they should be read carefully. There are certain performance dates that must be met or, your deposit could be at jeopardy. Be sure to read through the contract prior to signing it and if you have questions, consult your buyer’s agent or loan officer.
These contracts vary by state and there would be too much to cover here. But, it is simply good advice to consider retaining a lawyer to represent you, for review of your purchase contract and for the closing.
[note color="#fbf7b2"]Reference this article for more information on Buyer’s Legal Representation:
Closing – The Big Day!
You started by saving up for a down-payment, you learned the process, you researched, you budgeted, you picked the perfect neighborhood, you found a great lender, you made offers, signed agreements and finally it’s time to realize some fruit for your labor.
First off, Congratulations!
The lawyer’s office or title company that performed the Title Search on behalf of the lender will now schedule your closing.
[note color="#fbf7b2"]Not sure what a Title Search is, read this article:
The closing will sometimes happen at the Registry of Deeds, your lawyer’s office, the seller’s lawyer’s office and even occasionally at the Realtor’s office.
At least one day before you close, you should get a chance to go over the HUD 1 Settlement Statement. You can first review this with your Loan Officer, Processor and even your Realtor. Ultimately, if you decide to use a lawyer, you’ll want your lawyer to go over it with you so you understand how the numbers work.
This document lays out all the financial details, where the money is coming from and where it is going, in great detail.
Once you’ve made it this far, you’re most likely in pretty good shape. But, don’t forget to the simple things:[list style="check"]
- Transfer utilities
- Shut off unnecessary utilities
- Arrange movers
- Forward your mail
- Alert friends and family of any new phone numbers
- If you switch Internet Service Providers – alert people of your new email
- Register kids for school
- Alert your employer of your new address[/list]
Plan your housewarming party!
If there is anything at all we can do to help you buy your first home, please feel free to give us a call and one of our highly qualified Loan Officers will be more than happy to answer your questions.
Toll Free: 866-353-POLI (7654)