Tips to Buying a Home
So with all of the hype and buzz about how Nampa is the “best-run city” in the United States for infrastructure and Boise continuing to top national charts, you have decided that maybe THIS is the time for you to buy a house. NICE! Then you remember, you’ve never taken a Homebuyer Education Course and the Home Buying for Dummies from Barnes and Noble is $2 for a book that we both know you wouldn’t read… We have got your back! Below we go through what you should know before walking through an open house, what the process looks like once you get an offer, and the best ways to make sure everything is ready by the time you get your new keys. If nothing else maybe you will laugh once or twice. Thank you again for stopping by our blog!!
When should I start preparing to buy a home?
Now, whether you are in high school, married with 4 kids, or just filed bankruptcy, there are things that you should be doing today to set up your future! How you handle your finances currently will have a dramatic effect on your ability to buy a home whether it is this week, next year, or in ten years! When you get to a point that you feel confident in purchasing a home, your credit score, available liquid money, and current debts all play as major factors.
Credit is now a factor constantly and if you are unable to show a credit history it may be difficult to rent an apartment, buy a house, lease a car, etc. Most lenders that like to broadcast their “Best rates in town” show you what a nearly perfect score looks like. If you want to have an amazing interest rate, have an amazing credit score! There are a number of banks and financial institutions that provide tips for credit building as well as plenty of blogs out there like this one from NerdWallet. Get a credit card, a small loan, or become an authorized user and BUILD BABY BUILD!
2. Save, save, save
For whatever reason there is a myth out there that you are supposed to have 20% or 30% saved up before buying a home, THIS IS A LIE! Let’s just dissect this a bit farther, bear with me; the median home price in Ada County is about $280k so according to this statement, if you wanted to buy a home in this market you would have to have $56,000 saved up. Now, each dollar you put towards your purchase will affect your monthly mortgage and if you have that much, you are doing a great job, but there are programs out there that are now assisting buyers to buy a home with 0.5%. These new programs are constantly changing and improving so it’s important that you have a trusted mortgage professional. If you need one, we are happy to recommend a few ;) If you want to see how your down payment affects the life of the loan you can check out a mortgage calculator. This is one that we use fairly often here.
3. Stick out your job
Your boss sucks, the hours are horrendous, or you have that one coworker that won’t stop eating your lunch and then acts like he didn’t realize that your pulled pork mac and cheese wasn’t his tuna sandwich when you call him out on it…..yeah okay Jeff; whatever you do, don’t quit your job! We are seeing that most lenders want at least a full year of work history for hourly/salary employees and two years for self-employed. Now there are certain occupations that will allow you to receive a pre-approval and specific instances that will allow you to move jobs and still be approved BUT BEFORE YOU DO ANYTHING LIKE THAT TALK WITH YOUR LENDER!!
How do I buy a home?
Now that you have a little bit of money saved up and you have mentally decided it’s time to quit renting, now what?? There are many steps between pre-approval and being able to sleep in your new home, but you should be mindful of the steps to ensure everything is smooth. You shouldn’t be stressed throughout the home buying process, you should be excited!
In the Beginning
Agents, Real Estate Agents Everywhere
According to our MLS, there are currently 7,531 licensed real estate license holders and 68% of buyers only interviewed one agent. This includes the “got my license to sell my grandma’s house”, “help with real estate in the summer”, and “I thought real estate sounded fun at the time” people. Before you begin your shopping you will want to choose an agent to act on your behalf and help you understand. When you interview agents you should know what you are expecting from them so that you can make sure you don’t get stuck with a “I can only show you homes when I want to” agent. DON’T LET ZILLOW DECIDE WHO WORKS FOR YOU! Sure, let them suggest some people but do your own homework. Will they show you homes on your time? How do they tend to communicate? Do they have experience? The list of questions can go on and on and on, but find someone that you feel comfortable with before your sign a contract.
2. Before You Shop
Once you have made your choice for a real estate agent or real estate team (which has become very popular now), the next thing to do is to speak with a lender. Once you talk with a lender, they will request a bunch of documents and verify your information in order to give you your own, handy-dandy pre-approval letter (cue golden light and angelic singing)! I recommend meeting him/her in person, asking them all financial questions that you may have, and making sure you are comfortable listening to their advice. IF YOU WANT TO SAVE MONEY ON CLOSING COSTS, SHOP FOR A LENDER! Any of you that may be reading this and work in mortgage brokering, don’t hate me for saying this; NOT ALL LENDER FEES ARE THE SAME!! There have been multiple times that my clients have switched lenders in order to save money, either by reducing closing costs, getting a better rate, or avoiding certain fees that specific lenders might charge you. SHOP AROUND, once your credit is pulled once, all of that information can typically be used to compare different lenders and save you some $$$.
3. Know What You Want
There are different types of real estate for different needs and one of the first things I suggest is taking a look at a questionnaire to narrow down what it is you are looking for. Most people assume that if they figure out the number of bedrooms and bathrooms, their agent can fill out the rest. If you are single, don’t want to deal with a yard, and hoping for a lower price point, why not consider a townhouse or condo? If you are using a lower income and want to have a property that pays for itself, why not consider an income property? A general exercise that makes sure you and your agent are efficiently viewing properties is to list out your home “needs”, “wants”, and “deal breakers”. We also put together a questionnaire clients here, in case you are ready to be helped.
The Home Buying Process
When you have gotten all of your metaphorical ducks in a row, it’s time to start actually shopping. You are going to hopefully see a number of homes, find a layout that you like, realize what you can afford, and hopefully find a house to make into your home. As your preferences change, please PLEASE PLEASE notify your agent. Then he/she won’t keep sending you homes that disgust you and will be able to help filter out homes that won’t work for you. Let’s see what happens after you find a house.
Depending on the price point, the condition of the home, and current market conditions you may or may not be in a multiple offer situation. If that is the case, it's important to know that there are many aspects of an offer not just a price! Some of the other major aspects of an offer include closing date (when will the house be sold and keys exchanged), earnest money (how much cash are the buyers depositing up front as a show of how serious they are about buying the house), and cash to close (how much of the offer is financed versus cash present).
Once the offer is accepted, you have a time period to deposit earnest money that is predetermined and outlined in the offer. Earnest money can be in the form of cash, cashiers check, personal check, and we are seeing typical earnest money of about 1% of the loan.
As of last year, Idaho Real Estate purchase and sale agreements include two inspection periods with specific deadlines. The primary inspection is for a home inspector to walk through the home and point out the items that he/she feels you should know prior to owning the home. The secondary inspection is typically for all of the other inspections with the property including a survey, well test, water potability test, etc. Now, I always warn clients that the inspector’s job is to point everything out that may be wrong with the home and some inspectors will point out EVERYTHING. I have had inspectors call out plants growing too close to the home, paint on the fence peeling, and doors hanging at sub-optimal angles. Typical inspection reports will be over twenty pages, filled with some major issues and a number of minor issues but as the potential owner, anything that sticks out to you must be relayed to your agent so that any further issues can be inspected by a licensed professional.
Generally the order of operations is as follows: 1) Home Inspector walks through home 2) Inspector sends buyers reports 3) Buyers decide on which items they would like addressed in writing and submit to sellers 4) Sellers use their time period (outlined in offer) to have items investigated by professional 5) Sellers respond in writing which items to address
AS A BUYER, you get to choose whether or not you are satisfied with the seller’s response. Depending on the deadline in the original offer, you may even have the opportunity to walk away from the property and keep your earnest money. If you are unsure what that means, please have the conversation with your real estate agent.
3. Walk Through
Now that you are satisfied with the repairs being made to the property, you get to wait for the repairs to be done. Once the repairs are completed, you are entitled to an initial walk through as well as a re-inspection for the repaired items only. Most home inspectors will re-inspect the items they originally called out in their report for a minimal fee/free. You are also permitted a “final walk through” a few days before closing to make sure that when you take possession of the home, it is in the condition you expect it to be. That means the sellers didn’t leave a giant hole in the wall when they moved out their sofa or that there are no tears in the linoleum from taking the washer and dryer out. IT IS IMPERATIVE YOU USE YOUR WALK THROUGHS and if your agent isn’t encouraging them RUN!
Now that you have made it through the repairs and everything seems to be in order, your lender should have an appraisal done. Most of the time the preceding steps are all taking place because you have chosen an amazing real estate professional, but it is easier to think of the items separately. If you are financing your loan, the lending professional will require an appraisal as a CYA. They are about to lend you a good chunk of money for the property and want to make sure if there are any issues and they have to take the house back and sell it, they aren’t going to lose money. As a buyer, the appraisal protects you from overspending, just in case your agent doesn’t ;)
The Home Stretch
You have done it, you fought against all of the other buyers to come out on top, the sellers happily met all of your demands, and the home itself is immaculate and when you open the front door you hear golden trumpets. WOW! The home isn’t yours quite yet though.
As you approach your closing date, your lender, agent, and closing officer are all going to work together to fill your inbox with documents to sign. Some of them will have specific deadlines and time sensitive signatures so best practice is sign them asap. Nobody wants to be THAT person that forces closing to be later than expected because a document wasn’t signed appropriately.
It’s finally time to sign the last documents at closing! (HOORAY!) Make sure that you bring a valid photo ID and a check with you to closing. Wait, a check?? Sometimes the actual closing statement may be off, or the lender has to adjust something at the last minute. Either way, I caution you to be prepared. Hopefully you won’t need to actually use the checks but it can save you the headache of closing late.
2. Funding and Recording
After you sign your name 651 times and the paperwork is taken away, you get to play the waiting game. Typically, if everyone is on top of things and both buyers and sellers have signed in the morning, you may record and fund the same day. Recording being the paperwork is sent over to county and funding being that the money for the house is sent to the seller’s account from your lender. After the house has funded and been recorded you are officially the proud owner of your new home and you will receive the keys. At that point, unless you have agreed to a delayed possession, you get to start moving things in and the sellers should be completely out of the house.
BOOM!! You are now an official home owner. We think that is a reason to celebrate and want to organize a house-warming party in your honor. We like to handle food, drinks, and invitations to give you a humble-brag opportunity to show off the new home. We typically celebrate 3-6 weeks after closing, so that you have the ability to organize the house and make it into your home. In fact, in order to make your move easier we let you utilize our moving trailer so that you don’t have to use Uhaul or sweet talk your buddies with trucks.
If you have read all of this and felt it helped you out, please leave a comment below or share it with someone else it might help. It helps us out TREMENDOUSLY :)