HOME BUYER'S GUIDE
REAL T TEAM, the realtor side of the Scott Brown Group serving the realtor needs of Denton, Texas and the Greater Denton Area, sends along a huge congratulation on buying your new home! REAL T TEAM realizes the importance of buying that perfect home and we are glad to have one of our seasoned REALTORS® assist you in your purchase.
Purchasing a new home is a huge decision, and an exciting one as well. The REAL T TEAM is committed to making the experience of purchasing your home enjoyable and hassle free. The reasons for deciding to purchase a new home are many and it is important to discuss them with your REAL T TEAM REALTOR® right from the start. Here are just a few reasons you many be looking to purchase your new home:
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1. I am tired of throwing money each month on rent and want to start building equity.
2. I have outgrown my current home and need to expand.
3. I am getting married.
4. I have a new job or promotion.
The next thing to consider is how soon do you want to be settled into your new home? This takes a little thought and consideration to assess all the variables in your current living arrangement:
1. When is my lease up or how long will it take me to sell my current home?
2. Will I need to hire movers or will I mov e myself?
3. Do I want my children to finish out the current school year?
4. Will my company help to pay my relocation costs?
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SELECTING YOUR AGENT
Choosing a real estate sales professional may be the most significant decision made during the buying process. The experienced agents at REAL T TEAM focus on your needs. Our professionals analyze your financial situation and goals to ensure that you receive the most profitable and enjoyable experience possible while providing you with guidance throughout the process of your purchase. If you are buying a home our real estate professionals can assist you with:
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Getting started
Preparing your finances
Choosing a neighborhood
Finding a home
Preparing for your move
Preparing offers
Vendor Coordination
Negotiating
Contracts
Closing
Inspections
Legal issues
Real estate terms
Leasing/ refinancing
If you are selling your home, the REAL T TEAM can assist you at every stage of the process:
Getting started
Tips for making your property look its best
Pricing your home
Marketing your home
Showing your home
Screening buyers
Security
Negotiating
Contracts
Closing
Inspections
Legal issues
Real estate terms
Leasing
Whether you are in the market to buy or sell a home, here are some important things to keep in mind when selecting your agent:
1. Select an agent you can trust: Trust is the foundation for a successful relationship. Pick an agent you have confidence in and can work with. By working together you will identify your needs and match your individual goals with an agent's industry experience and expertise to achieve the best results possible.
2. Verify your agent is a REALTOR®. All realtors are licensed real estate agents; however not all licensed real estate agents are REALTORS®. The difference? REALTORS® go beyond basic requirements in the areas of knowledge, professionalism and service, and are pledged to uphold the strict REALTOR® Code of Ethics, which means your interests come first.
3. Understand how your REALTOR® conducts business It is important to understand the level of service you will receive. Some agents work on a team or with assistants, which allows them to work with more clients. Other agents prefer to work individually and handle all issues personally. Either option can be very rewarding if handled properly. An agent who works individually and maintains the proper number of clients can provide excellent support. Likewise, a team can provide excellent service, but it is important to understand who you will be dealing with on specific issues and to make sure you interview those agents as well.
4. What resources and advantages does your agent possess? Make sure the company maintains a website that helps you track your searches, notifies you of new listings matching your criteria, and provides you with useful information throughout the buying process. Many people prefer to do online searches and research on their own in the privacy of their home.
5. Have your agent provide references. Make sure you follow up and call the references. Much can be learned about how an agent conducts their business and if their style is compatible with the way you do business.
6. Understand the communication process. Developing an agreement upfront as to how an agent will contact you (email, fax, phone), as well as how often weekly when a listing matches your criteria, etc., will save you time and make the entire experience more enjoyable.
7. Be familiar with the different types of agents and what they do:
a) Seller's Agent: Works for the firm that holds a seller's listing. Buyers should not give confidential information to a seller's agent because the agent's loyalty is with the seller. You can assume any agent is a seller's agent unless you have signed a buyer's representative agreement to change that status.
b) Buyer's Agent: Signs an agreement to represent a buyer in a home search and sales transaction. It is critical to find a buyer agent you can trust and depend on. Buyer agents should not disclose confidential information to sellers.
c) Dual Agent: Represents the buyer and the seller in the same real estate transaction. Dual agency can be confusing and must usually be agreed to in writing by both the buyer and the seller.
8. The next step after identifying an agent to work with is to sign a Buyer Representative Agreement. This creates a principal-agent relationship wherein the broker is the agent for the buyer. The broker then represents the buyer under the laws of agency.
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PREPARE YOUR FINANCES
In calculate your buying power, the key is to determine how much down payment you can afford while maintaining your monthly payments at a comfortable level for your given financial situation. To calculate your buying power, examine your budget and think about your monthly income and expenses and how much these vary. Be mindful of other considerations such as the larger the home you buy the more rooms you need to fill with furniture, insurance premiums for homeowners insurance, utility costs, etc. Typically, individuals qualify for up to a third of their annual gross income minus their debt. Credit ratings also factor into the equation.
Pre-Qualified versus Pre-Approved: In terms of loan procurement, there are fundamental differences between being "pre-qualified" and "pre-approved."
Pre-qualifying for a loan is a simple process and is an estimate of how much you can borrow based on non-verified income and credit information. This is generally done over the phone and is not a formal loan approval.
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Pre-approval is the set amount you have been permitted to borrow by a financial institution or lender. Pre-approval is a more involved process because the lender will perform an extensive check on your current financial status, taking into account all pertinent information regarding your finances. This will give you the exact amount you are approved for and the interest rate as well. Being pre-approved offers the seller assurance that you've gone through a thorough financial background check, so there should be no unexpected obstacles to buying the home.
Documentation Needed For Loan Process:
1. Last two years income tax returns & W-2 forms.
2. Statements from all of your bank accounts for the last two months to verify your funds – checking, savings, mutual funds, money markets, certificates of deposits, 401k or other retirement accounts.
3. If you are self-employed, your business records and tax returns for the last three years may be requested.
4. Pay stubs and additional income such as Social Security, pension, interest or dividends, rental income, child support, alimony, and any supplemental income you may have.
5. Be prepared to provide the account numbers, current balances and the minimum monthly payments of all credit accounts, such as loans, credit cards, child support and other payments you make each month. Paying off small debts will help improve your qualification.
Understanding Fixed Versus Adjustable Rate Mortgages (ARMs)
With a fixed rate mortgage, the interest rate is set for the entire term of the loan, typically 30 years. Rates are based on the 30-year U.S. Treasury Bill. The advantages are, easy to project future monthly payments, stability if you plan to be in your home for a long time, and if interest rates rise, your rate remains the same. The down side: if the interest rates drop, yours remain the same. Shorter-term, fixed rate mortgages (15 or 20 years) carry lower interest rates and higher monthly payments – the advantage being, you will pay less over the life of the loan. Longer-term fixed rates have smaller monthly payments, which makes budgeting easier.
Adjustable rate mortgages (ARMs) have lower rates early on than a fixed rate mortgage, and then are subject to rise and fall periodically, depending on the economy. During the adjustment period, the interest rate (varied depending on current market rates) is fixed, and then is adjusted periodically based on a money market index – usually the one-year U.S. Treasury Bill or the London Inter Bank Offering Rate (LIBOR). The lower initial rate of an ARM can help you qualify for a larger loan. An adjustable rate mortgage is a good choice if you know you're planning to move again in a few years. It might also be a good option if you know your income will rise over time.
Some Helpful Financial Terms You Need To Understand
1. Basis Point: One one-hundredth of a percentage point. For example, if the rates rise from 7.45% to 7.50%, then they have gone up by 5 basis points.
2. Loan Length: This is the life of the loan. Industry standards dictate the norm at 30 years; however 15 and 20-year loans can be negotiated.
3. Rate Reduction: This refers to steps taken to reduce your interest rate. Shorter-term loans (15 or 20 years) carry an inherent rate reduction because you will pay less over the life of the loan than you would, borrowing the same amount over a longer term. Additionally, shorter-term loan rates are typically one-quarter to one-half percent lower than long-term loans.
4. Monthly Money: This refers to monthly payments in relation to loan terms – the shorter the term, the higher the monthly payments.
5. Rate Cap: This refers to a cap on how a rate on an ARM can reach, during each adjustment period as well as over the life of the loan.
6. Income Increases: This especially important to consider if you are taking on an adjusted rate mortgage. If you know your income will rise over time, an ARM might be a good choice for you.
7. Rate Changes: How often rates are adjusted, as well as when the first adjustment occurs, is dependent upon the terms of your ARM loan. After the first adjustment, subsequent adjustments typically occur every six months to a year, and sometimes longer.
8. Rate Configuration: When calculating your ARM rate, your lender adds a margin, usually between 2 and 4 percentage points, to the index. Again, the rate will adjust based on a money market index – usually the one-year U.S. Treasury Bill or the London Inter Bank Offering Rate (LIBOR).
9. Home Purchase Closing Costs: There exist numerous closing costs, from appraisal, transfer taxes, Escrow deposit for taxes, title search and insurance fees, loan origination fee to application fee and credit report fee, to name a few. Consult with your agent to see what applies to you.
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There are many factors to consider when selecting a neighborhood that is right for you. One person's idea of a perfect neighborhood may not be yours. It is extremely important to investigate the neighborhood where you plan to purchase your home. Make sure it matches your lifestyle and personality. Drive through the entire area at different times of the day and night during both the week and weekends.
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When evaluating a neighborhood, here are some important things to consider:
1. Drive time
2. Current real estate market
3. Quality of schools
4. Property values
5. Crime rate
6. Air quality
7. Traffic patterns and congestion during different times of the day
8. Future construction
9. Homeowners Association (annual fees and restrictions)
10. Location relative to schools, employment, hospitals, shops, public transportation, prisons, freeways, airports, beaches, parks, stadiums and cultural activities such as museums, concerts and theaters.
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Involve the family early on in the decision and get them excited – or at least comfortable with the idea. Children are bound to be worried about losing friends, starting in a new school or getting to know the neighborhood. By involving them early, you can set a positive tone and create some excitement about the new home and neighborhood. Proper planning should minimize problems. Remain calm! With so much to coordinate, some things may go wrong. Proper planning should minimize problems but remember to stay focused on the positive – the reasons you are making the move such as a newer house, better neighborhood, job promotion, etc. Ask your real estate agent for help! They are professionals who are trained to help your home buying process be as successful and enjoyable as possible. They are a great source for advice in every aspect of the process.
Do-it-yourself (DIY) packing can potentially save you a great deal of money if done right. If not done right, it can cost you not only more money in the end, but potentially irreplaceable items as well. Here are some helpful tips for DIY packing:
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1. Don't overload one box with too many heavy items. Keep in mind the suggested weight limit for the size of the box you are filling and don't exceed that.
2. Don't skimp on cheap tape. Quality packaging tape is designed to adhere properly to boxes and reinforce seams.
3. Don't leave empty spaces in boxes. Plan ahead. Start saving old newspapers to crumple up and fill any gaps.
4. Due to their weight, books should be packed on-end in numerous smaller boxes. While it may be tempting to try and fit them all into one larger box, their combined weight can easily break the box.
5. Labeling your boxes will save you a huge hassle when unpacking and organizing in your new home. This will also assist movers with unloading them to the correct room in your new house. When it's all said and done, that Sharpie just may be your best friend.
6. Assemble boxes according to the directions printed on them, making sure not to pack them upside down. And take the extra step to label mark them "this side up."
7. Do not pack valuables, such as expensive jewelry, check books, or anything that is irreplaceable to you. Transport them yourself.
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When you have found the home you would like to buy, it is critical to work with your agent to perform the necessary due diligence on the selected property. Once you have assessed your goals and done your research, present an offer as soon as possible. Here are some things to keep in mind when preparing your offer: If possible, try to understand the seller's reasons for selling. It is extremely useful in understanding why the house is being sold and whether the seller is under pressure to sell. Although the agent representing the seller cannot disclose the reasons without the seller's approval, you have every right to ask the agent or the homeowner. Review the Seller's Disclosure Notice thoroughly. This is the document where the seller describes many aspects of the home including past and present issues that have or need to be addressed. Determine your down payment. Although this may seem basic at first, the down payment is critical as it not only affects your finances, but also determines whether or not you need to pay PMI (private mortgage insurance).
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Your REALTOR® will write up the contract with you. The contract protects you as well as the seller. A fair offer that protects both parties allows for a smooth and successful transaction. Although real estate agents are forbidden from giving legal advice, they can greatly help you understand the process and assist you in representing your interests. Once both parties have reached a point where the deal is acceptable, you must be certain that you have a legally executable contract.
Your agent will prepare an offer that will become a purchase agreement upon acceptance by the seller. Below are items that need to be addressed in the offer (but not limited to):
1. Parties of the contract and legal description of the property
2. Sale price (offering price)
3. Inspection rights and possible repair allowances
4. A provision that the buyer may make a last-minute walk-through inspection of the property, generally a couple days prior to the closing
5. Financing arrangements and terms – for example, all cash or subject to your obtaining a mortgage for a given amount
6. Seller's promise to provide clear title/ownership
7. Survey information
8. Amount of earnest money and related details
9. Associated fees and party responsible for payment. Once you submit the offer and the seller accepts it, you are legally bound to follow through on the contract. Our real estate professionals can help you sort out all the legal and financial decisions so that you get the most value for your investment. REAL T TEAM's goal is to make your experience as enjoyable and successful as possible.
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To really gain some insight into what price range is acceptable to sellers and how they might proceed in the negotiations, it is important to know as much about the seller as possible, including their motivation for selling. Once again, the seller's agent can only disclose this information with the seller's approval; however it is your right to ask for this information even though a seller does not have to disclose their reasons for selling.
A good agent will represent you through the offer, negotiation, and acceptance process. They will review the written offer with you to make sure that you thoroughly understand the purchase, terms, and conditions of the sellers offering. They will help you understand the issues and how you are affected. Your agent's primary responsibility is to protect your best interests throughout the negotiations and should have the knowledge and expertise necessary to make sure that you receive the best price and terms available. Once you have made an offer to purchase a home, your real estate agent will inform you of all the procedures, timeframes, and responsible parties in order to proceed successfully to closing. For example, the property may need to be formally appraised, surveyed, inspected or repaired. Depending on the specifics reached during the negotiations, you may pay for some, all, or none of these items.
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Your agent will coordinate with all the parties involved and keep you informed as to the results of the various procedures. Occasionally issues arise during certain phases prior to the close such as during the inspection or title search. The terms of the contract will dictate your options. Your agent will advise you throughout this process and to help ensure your interests are protected. Some sales go smoothly while others may necessitate a great deal of work to close. Either way, your agent will be there with you every step of the way. The key to a successful negotiation is to keep in mind that the end result must make both you and the seller happy. Keep in mind throughout this process that many people are personally attached to the home they may be selling and try to keep emotions at bay. A win-win situation is always best and sometimes requires compromise from both parties involved.
Negotiation Factors:
1. Are they moving up or down the housing scale?
2. Are they moving to a better location?
3. Are the sellers divorcing or making a career change? They may want out quickly.
4. Estate sales often yield a bargain in return for a fast sell.
5. Every month a vacant house remains unsold represents considerable extra expense for the seller.
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VENDOR COORDINATION
By its very nature of it, home buying is a very emotional time and many people become very attached to their homes. Although you need to love the home you plan to buy, put those emotions aside during the negotiation process and inspection phase.
Our professional real estate agents can save you hassle and headache by supervising the selection and coordination of any vendors needed to meet your real estate needs. REAL T TEAM's experience will be invaluable in making sure that everything is completed on time and in a professional and legal manner. Once your offer has been accepted, your REALTOR® can help you coordinate the different vendors you will need to communicate with. Here are a few examples:
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1. Inspection: A property inspection, a foundation inspection, and an environmental inspection may need to be completed to ensure that the property is up to the standards set forth in your written agreement. Any problems at this point will hinder the contract process so having these procedures completed in a professional and timely manner is imperative. A licensed professional should be hired to conduct a thorough inspection of the home as well as inspection for termites. A buyer has a right to be present during the inspection and many inspectors encourage you to do so. The primary purpose of the inspection is to educate the buyer in order to make an informed buying decision. A trained eye will be able to identify many of the more severe and/or expensive problems that an untrained eye will not – such as electrical, plumbing, mechanical or structural issues. Certain issues uncovered during the inspection can delay or nullify the contract. The inspection report should be reviewed carefully and timely in order for you to understand your options.
2. Repairs: All repairs should be completed by professionals with the proper experience to the related problem. Make sure you receive a signed receipt detailing the repair work.
3. Insurance: Homeowner insurance is critical at this point and the closing cannot proceed without it. Insurance experts will advise you to obtain insurance equal to the full replacement value of the home. Also, remember to only insure your home and not the land it sits on. Your insurance agent will be able to walk you through the options such as deductible levels and help you decide what best suits your unique circumstance.
4. Home Warranty: Home warranties are no longer just for new homes. Warranties can save you time and money down the road. They are cost justified and can ensure you get exactly what you paid for.
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Before closing, the buyer will make their final walk through to make sure all necessary repairs that have been agreed upon have been completed. A few days before the closing, your real estate agent will contact the parties involved in the closing, advise them of any needed documentation and forms needed, and any other action necessary for closing, so that the entire closing can proceed on the date and time planned. There are a number of details prior to closing that you need to be aware of and your real estate agent can help you create a checklist before the property changes hands. Proper planning greatly reduces stress and helps pave the way to a smooth closing:
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1. The title company collects all documents, including sales contract, mortgage papers, title commitment, homeowner association transfers, property tax information, etc.
2. The title company orders appraisal and survey.
3. Closing date and time is scheduled.
4. The buyer should receive closing documents in advance in order to review.
5. Final walk-through of the property ensures all repairs were made and everything is in order.
6. Prepare a cashier's check in the amount equal to your down payment plus closing costs less your earnest money.
7. Make sure that all of the local services (electricity, gas, lawn care, cable) have been dealt with or changed.
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CONGRATULATIONS!
On the day and time scheduled for your close, you will generally meet at the title company to commence the purchase of your new home. Here you will sign all the documents and present your cashier's check to the closing officer. Although other forms of payment such as a wire transfer may be acceptable, the cashier's check is generally the instrument of choice. If no contingencies were made for something such as a lease back (buyer agrees to lease property back to seller for a short period) keys are delivered and the move-in process can begin.
Congratulations on your new home purchase!
