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So you’ve come to the decision it is time to be a homeowner….now what?

As we say in Boy Scouts ---- BE PREPARED!!!

A Buyer consultation is very important so we know what you are looking for, what to expect on your timeline, and....WHAT TO EXPECT FROM YOUR REALTOR.   You should know what steps are next.

 

1. Unless you are fortunate enough to have tens thousands of dollars in your savings or your family is filthy rich you’ll need a loan like 98% of the USA.   Let’s get pre-approved.

 

Skip Pre-qualification and lets get right to a written Pre-approval.   Our preferred lenders will perform an extensive check of your finances including your credit rating, whether or not you’re a first-time buyer, what your debt load is, how much money you have to put as a down payment, etc. This figure will be a much more reliable estimate of what you can afford.

 

In KY, pre-approved buyers are preferred over those that are merely pre-qualified. Being pre-approved lets the seller know you have gone through an extensive financial background check and there should be no unexpected obstacles to you buying their home.  It also puts you in the BEST NEGOTIATING POSITION possible.

 

Once that is ready and you have talked to the lender about your Budget comfort zone, we can begin looking at homes.

Your agent should provide you with a blank contract to review prior to making an offer so nothing is a surprise or if you have questions.

2. Make 2 lists,

if you are married or two people are buying the home you both need to agree on these two lists.  

List #1  TOP 3-5 NEEDS in your next home

  • for example_
  • How many bedrooms do you need?  
  • How many Bathrooms do you need?  
  • Do you need a garage or just a shed? 
  • Do you need a basement?
  • Do you need a home without stairs?
  • Do you need handicap accessible features?

List #2  TOP 3-5 WANTS in your next home

  • Do you want a fixer-upper?
  • Do you want a move in ready or turn key home? (turn the key and move in)
  • Large yard?
  • Fenced Yard?
  • Basement?
  • Garage?
  • Sidewalks?
  • Flat yard?
  • Home Owners Association YES or NO?
  • Brick?

Using these lists we can narrow your options in the current market to about 10 houses.  If you look at too many homes on the web or in person they will begin to run together, trust me on this, keep the number of homes to a minimum.

3. The best homes sell very quickly! Be ready.

At the time of this writing we are in the strongest sellers market of our lifetime in the Greater Louisville area market.

Be Ready to leave work at lunch or for an hour if the right home hits the market.  Prepare your employer (if possible) to step out occasionally.   Also prepare to see homes in the evening, daytime is better for seeing everything but sometimes it just can't be avoided in the evening.  Remember, YOUR REALTOR has a family too and we help more than one client at a time. 

4. Making an offer-There are different way to make offers on a property so this is where experience counts! 

standard offer- no competing offers

There are many ways to get information we can use to negotiate for you.  If you find the one, and there are not 5 other people wanting the same house.  Look up the address on Google, you will find the first 3 pages will be other Realtors tagging showing the MLS info so skip to good content.   Use terms such as "fire" "damage" "theft" etc to see if there are any underlying issues not disclosed by the seller.  When you view the house, use your intuition, your gut feeling, what ever you want to call it. 

  1. Did it smell damp or wet in the basement?
  2. Was it clean?  Interior and exterior condition will say volumes about maintenance of the home.
  3. Was there furniture missing that should have been in a room?
  4. Was there clothes for all members of the family?  This could indicate a divorce and this is a strong negotiating position.
  5. Talk to the neighbors....ask about the neighborhood and let them talk, the neighbors will always say more than the seller disclosure.
  6. READ THE SELLER DISCLOSURE! The items written on the seller disclosure as 'broken' or had past issues are something the buyer can not ask to be repaired.  The buyer will sign the provided seller disclosure with the offer stating the buyer understands the items have issues.
  7. Make a reasonable offer.   Making a low-ball offer is usually an insult to the seller and they are less likely to cooperate.
  8. STOP WATCHING HGTV!  Really stop it.   The rehab shows are not real life.   They provide false hope to buyers.

Multiple offer situation---Competing buyers

  1. Have your checkbook ready- (millennials get a checkbook) having your Earnest Money Deposit ready is very important to the listing agent.
  2. Make your best offer!!  Be prepared to offer asking price or higher than asking.   Relying on your Realtor for detailed pricing is good but after seeing a few homes you should be able to get the feel for the market.
  3. Write a letter to the seller from your family to theirs.  Cheesy yes, but making your offer have character or a 'face' is important when the listing agent is presenting the offers.  It will make a difference in most cases.
  4. Remember that every seller's motivation is different.   Its not always about the highest dollar. Ask what the seller needs to make any offer good for them.   Closing time? Possession after closing?  Sometimes the answer is emotional and the seller wants a family to replace them or their parents in the home.
  5. Be prepared to lose the deal.  It happens.

5. You have an accepted purchase agreement, now for inspections.

You need to inspect the property.  Even New construction has issues.   We will provide a list of licensed home inspectors we have used in the past and have found them to be informative.  We prefer home inspectors to be helpful not ones who scare the buyer.   Every house has flaws and characteristics that need maintenance in the future.  

You may not get a new roof because it has a tab missing or a few nail pops.   Be reasonable. 

Normally we will draft a "request for repairs, corrections or replacements" using the home inspection.  The rule of thumb is....Is it broken, dangerous, or missing?  If not indicated on the seller disclosure you previously signed with the offer, we can ask the seller to repair, correct, or replace the item. 

If you are paying "non broken house price" you should get a "non-broken house" at closing.  Sometimes this is not the case.  If you are 100% set on a location knowing the house needs updates or repairs you get what you are paying for.  Just make sure it is safe.

6. Loan Processing/Underwriting

This is typically the longest period of the entire process.  

If your Loan officer asks for documents get them quickly.  Delays during this time are critical. 

You appraisal is also ordered during this time.  Lets talk briefly on appraisals.

The appraiser may just drive by the house or they make go in.  Depends on several factors.  Your Realtor or Loan DOES NOT choose the appraiser.  It is a random order selection legislated by the federal government.

Many times the number comes in the same as the purchase price, don't be alarmed.  An appraisal is an opinion of value ordered by the lender to support the purchase price with a licensed professional, not just the REALTOR or buyer.  They want an outside opinion not party to the contract.  If you ordered 10 appraisals on the same house they would all be different but very close.

7. Walk through prior to closing

You will reserve the right to see the house prior to closing.  This will cover a number of things. 

  1. Did the repairs get completed?
  2. Are the appliances agreed to remain still in the house? Are they the same as agreed?
  3. Did they tear out the cabinets, carpet, etc?  Yes, it has happened
  4. Is it in the same or better condition as when you entered into the purchase contract?

8. Closing

The day has come, take your Government issued ID and CERTIFIED funds to the closing.  You will get the required exact number at least 3 days prior to the closing as of October 2015.

 

 

Top 10 Credit Don’ts During The Loan Process

  1. Don’t Do Anything That Will Cause A Red Flag To Be Raised By The Scoring System. This may include adding new accounts, co-signing on a loan, changing your name or address with the bureaus. Generally, the less new activity on your reports during the loan process, the better.

  2. Don’t Apply For New Credit Of Any Kind. Including those “You have been pre-approved “credit card invitations that you receive in the mail or online. Every time that you have your credit pulled by a potential creditor you could lose points from your credit score. Depending on the elements in your current credit report, you could lose anywhere from one to twenty points for one hard inquiry. For lender inquiries as of Jan. 2007, any indicial inquiries count as one incident through a duration of 45 days.

  3. Don’t Pay Off Collections Or Charge Offs During The Loan Process. Unless you can negotiate a delete letter, paying collections will usually decrease your credit score immediately due to the date of last activity becoming recent. If you want to pay off old accounts, consider doing it through escrow at closing.

  4. Don’t Max Out Or Over Charge Your Credit Card Accounts. This is typically the fastest way to bring credit scores down 50-100 points. Try keeping your credit card balances below 30% of their available limit at all times during the loan process. If you decide to pay down balances, consider doing it across the board - meaning, pay balances to bring your balance to limit ratio to the same level on each card (i.e. all 30% of the limit, or all 40% etc.)

  5. Don’t Consolidate Your Debt Into One Or Two Credit Cards. It seems like this would be the smart thing to do; however, when you consolidate all of your debt into one credit card, it may appear that you are maxed out on that card and the system will penalize you as mentioned in above item #4. If you want to save money on credit card interest rates, consider waiting until after closing.

  6. Don’t Close Credit Card Accounts. If you close a credit card account, you may lose available credit and it might appear to the FICO that your debt ratio has gone up. Also, closing a card may affect other factors in the score such as length of credit history. If you have to close a credit card account, think about doing it after closing.

  7. Don’t Pay Late. Stay current on existing accounts. Under the new FICO scoring models, one 30-day late could cost you anywhere from 50-100 points. Points lost for late pays may take several months if not years to recover.

  8. Don’t Allow Any Accounts To Run Past Due—Even 1 Day! Most cards offer a grace period; however, what they may not tell you is that once the due date passes, that account could show up past due on your credit report. Past due balances can also drop scores by 50+ points.

  9. Don’t Dispute Anything On Your Credit Report Once The Loan Process Is Started. When you send a letter of dispute to the credit report agencies a note is added to your credit report. In many cases when an underwriter notices a dispute they may not process the loan until the dispute is removed.

10. Don’t Lose Contact With Your Mortgage And Real Estate Professionals. If you have a question or not if you should take a specific action that you believe may affect your credit reports or scores during the loan process, your mortgage or real estate professional may be able to supply you with the resources you need to avoid making mistakes that could drop your credit score or affect your loan.

 

 

 

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Adam Borders
Realtor,  Broker- Assoc GRI, CRS, SRES
Greater Louisville Assoc of Realtors
502-296-2979
adamborders@kw.com
Keller Williams Louisville East
9911 Shelbyville Road suite 100
Louisville Kentucky 40223
502-554-9500
REALTOR
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