Friday, September 16, 2011
Things Wedding Couples Should Know when getting their First Home
Unless you are very lucky, in all probability, your first home won't likely be a dream home. If it is, congratulations, you have accomplished more than most of us have not. For most couples, the dream home just does not happen right away, in reality it's a goal to shoot for and to get there you have to take things step by step and work together and discuss things and plan things and one day if you do things right you will eventually get to your dream home and you will have accomplished something special together.
Before embarking on your home search, there are basically six options to consider. Buy a new dream home, build a new home, buy a fixer upper, buy a nice townhouse or condominium, rent a home or apartment, or rent a room from a family or friends until you can afford a home of your own. For most wedding couples, buying a new dream home or building a new home isn't likely in your budget. If you can afford to buy a fixer upper or a townhouse or condominium, that tends to be a better option. Pick up a handyman's fix-it yourself guide for the home or find a local handy man and little by little do projects around the house. If you have to rent, then the goal is to start saving for your house, and likely it will have to be a fixer upper or townhouse as your next step. Will get into projects to do with fixer uppers, townhouses, or condominiums a little later in this post.
Unless you are so lucky and have a lot of money to buy a home. In all probability, you will need to find a mortgage lender, but even before that, you should run your credit. You are entitled to run a free credit report three times a year. You can get a free credit score at www.annualcreditreport.com , www.freescore.com , or www.freecreditreport.com . Your credit scores are tracked by three companies, details which are talked about back on step 97 on another post of this blog. If you or your spouse have issues with your credit, you should attempt to do things improve your credit score, either make contact with the credit companies and resolve some credit matters or find a credit specialist to help you on your behalf to fix some of your credit woes.
Once you have your credit under control, you need to meet with a mortgage lender. Some options you have available, meet with a mortgage broker, a mortgage banker, a commercial banker, a savings & loan, a credit union, a private individual that can lend you money, investor, stock brokerage firm, or a government first time buyer program. It's a good idea to shop around and meet with at least three mortgage lenders and try to come up with someone you feel you are comfortable with and can explain the mortgage world and can give you the best deal and term and rates.
In many situations, after you get married, your credit scores combining will have little effect on your credit score after which you get married. Matter of fact, the combining of credit scores with one score better than the other will help, your combined assets and earning power should allow you to get higher mortgage power. However, in some cases, if the credit scores are such as one person's credit score is outstanding and the other person's is really bad. It may be best for the person with the great score, get the house in their name before you're married and work on improving the score and get added as a co-owner at another point in time. Another point if you both have bad credit, you may be best to find a co-signer who the mortgage company will hold equally responsible if payments are defaulted. A mortgage lender should give you advice on the matter after evaluating your situation.
It's important to note, as couple are planning their wedding they will incur some debt and you want your debt manageable when preparing to buy a home. Couples with too much debt, may find a tough time qualifying for a home load and may face higher interest rates. You need to consult with a financial analyst or loan consultant to help determine where your debt level should be relative in order to determine the amount of a home loan you may qualify for.
In general there are five main factors that will go into the determination of what level of house you can afford. The five factors are credit score, your debt, your income level, available cash, and the term of the loan. Basically mortgage lenders require that a combination of your mortgage payment plus other monthly debt payments be less than a certain percentage of your income, typically the mortgage company is looks for the payments amount be no greater than 40 percent. If you have high revolving credit, this could substantially limit the size of the mortgage you can get.
Mortgage companies would like to see a down payment of 20% of the price of the home. However often they can work with you and have available in some cases, whereby you only have to put down 5% of the price of the home. The more cash you can bring to your closing on the house, the better terms, the lower the interest rate, the less money you are going to have to pay for your monthly mortgage.
Where to Find your Down Payment
Save your Tax Refund.
Borrow Money from Parent's or Other Relatives.
Sock away a Percentage of your Monthly Salary over Time.
Sell Stuff on EBay, your things, family things, friend's things, that is no longer wanted. (Work a split %).
Ask Seller for Help on Down Payment or Closing Costs.
Check Out Government Programs for First Time Buyers.
Take a Second Job Whereby all Monies are Applied to New Home.
Find a Better Paying Job.
Ask for a Raise.
Sell Assets, Previous House, Extra Car, or Other Assets.
Organize a Special 50/50 Party (Sporting Trip, Casino Night, Art Show, or Golf/Tennis Outing).
Tap Into Retirement or Savings.
The term of the loan is another factor in determining monthly payments. The terms offered usually will be at a fixed rate mortgage for 15, 30, or 40 year terms and are more ideal when interest rates are low. Using these factors, your mortgage person should be able to lay out your monthly payment amounts would be and determine how much of lending money you qualify for and the levels of payment for different levels of down payment.
When you finish your meeting with your mortgage person or bank letter, you should request a pre-approval letter with these amounts so you can use when bidding for a home. Sometimes be careful when using a pre-approval letter, if you are bidding on a home that is less than the amount in the pre-approval letter, you may not want to show this pre-approval letter to the seller, this may show the seller you can qualify for a more expensive home and may allow the seller to think you can afford a higher price, when you are negotiating an offer, the seller might come in with only a small counter offer.
Also to mention, there are other mortgage programs available, there are adjustable rate programs called (ARMs), these programs allow lower payments at the beginning of the mortgage and kick in at a higher rate at a later point in time. Rates in these programs adjust periodically, may be good in some situations, especially in the future when you expect a big increase in salary.
After you have your pre-approval letter from your lender, you now want to focus on finding a nice home. The next step is identifying a place to live. You might want to consult with an area that may interest you, ask around with people you may know from the neighborhood. Talk to the Chamber of Commerce, check out the schools and crime rates in areas of interest. Finally, once you know of a community that peaks your interest find a good Realtor in the area to talk to. Be careful though of mom and pop realtors.
Once you have found a good Realtor, stop in first and talk to the broker, ask for three of the top agents with whom you can interview, choose one of the the agents you feel you most comfortable with and connect with. Ask about their experience, how they operate, ask what there strategy is when putting in an offer, and ask if they will do a CMA on a house you are interested in after you target a home to put a bid in. Once you have chosen a Realtor to search a home with, ask if they can come up with about six or seven homes to look at and give them the criteria you are looking for, home price, the areas you are interested in, the size of the home and the rooms you need for the home, often for newlyweds this may be 2 or 3 bedrooms, is a garage important.
Plan to spend much of a day looking at homes, when you are done, you want a chance to talk things over with your spouse, as the home you choose to bid on needs to be a win-win agreed by both of you. Make sure if you can, the both of you goes on the appointment and afterward you can come to an agreement, talk privately with each other before making a decision, a Realtor may offer his/her opinion which is fine and good but the decision should be decided upon the couple and you have heard thoughts from the Realtor, your decision should be your decision and you should not let the Realtor over influence your decision.
The next step is do a CMA (Comparative Market Analysis) on the house you are thinking of bidding for. With a CMA you are looking at houses that are similar to the house you want to put a bid in. This includes Active Listings, Pending Listings, Sold Listings, and Expired Listings. You want to do a comparison on from 6 to 12 properties against your targeted house. The CMA is used to give you an idea of what the price of the house should be worth. The CMA should lay out your targeted house you plan on bidding for, against other houses similar. When you do a CMA focus most on recently Sold Listings.
Adjustments you need to account for when doing a CMA from your house to comparative houses. If you find a good Realtor, the Realtor should know what adjustments should be made for comparative analysis. For example an extra bedroom might be worth $5,000 more in the area and neighborhood your in. You should make adjustments from the targeted house you are bidding for against these comparable variables. Adjustment factors will be different for different areas and neighborhoods in the country. Your Realtor should
find a table in the area or find from another Realtor what each of the adjustment factors should be.
Comparative Market Analysis Adjustment Factors
Adjustments for Square Footage
Age of Construction
Amenities (e.g., Swimming Pools, Landscaped Yard, etc.)
Upgrades (e.g., Newer Kitchen, Newer Bathrooms, Newer Roof, etc.)
Number of Bedrooms
Number of Bathrooms
Number of Living Space Rooms
Number of Garage Units or No Garage
If your property is pretty much the same, there should be no adjustment, you should go down the list and include the puts and takes against your property which should give you an idea of what value of the property tells you what your property should be worth. Also if it's possible, take a look at some of the homes in person of some homes in the CMA before you make your bid.
Say your property you are interested in is listed at $470,000. Your CMA from a few different properties compared against your house comes out to about $435,000. The goal is to try to get the house at $435,000. When you start the bidding to get to your target you want to split the difference, the $435,000 is your mid point meaning your opening bid should be about $400,000. Also work and talk things over with the Realtor with the splitting the difference strategy. I myself was a Realtor at one point and found that the split the difference worked really well. You make an offer, the seller counters and you counter back. More often than not, the split the difference strategy worked.
As mentioned before, you should have a pre-approval letter when you submit your first bid on a house. If the pre-approval is significantly higher, you will want to contact your mortgage person and see if he can send you a pre-approval letter with a lower amount in line with the amount you want to offer on the house. You don't want the seller know you have a little buying power when you are in the offer counter-offer process. Most closings will take around a month, it can take a few months in some cases such as when the sellers need to find a new home for themselves or their new home is being built and is contingent on their home being ready. Also the mortgage application process sometimes takes longer.
Once you have a deal, contact who you are going to get your mortgage from and meet with them to finalize all the paper work. Also find yourself a closing lawyer, one who is highly experienced with Realtors and has a lot of experience in Real Estate deals. Many lawyers who are not Real Estate lawyers, put you on their back burner and focus on legal matters, don't get the paperwork you need done efficiently, and they make lame excuses to keep them out of trouble. If you don't know a realty lawyer yourself, ask the realty office for the names of three good real estate lawyers they recommend, interview each of them and use the one you feel you are most comfortable with.
If after you have gone home shopping looking at 6 or 7 houses in a day, if you don't see a home you look, don't feel pressured by your real estate agent, that you have got to pick one today. Tomorrow and the next day, can be another day of looking. Real Estate buying is a major decision, the house you pick is going to be a part of your life for at least a few years and even possibly many years in your young lives. It's important that you make a decision you are going to be happy with. Stick with the Realtor though, unless you are not happy with their services, they have sacrificed their time and effort and expertise, trying to find you a house and they more than likely get paid a commission only for their efforts if they find you a home. Only after a few attempts, and you don't find a house, try things out with another Realtor.
After you have reached an agreement on buying a home, you should get a home inspection and also want to get an independent reputable company. The home inspection company checks the home on behalf of you to insure the home is in good condition and that their are no problems. Make sure when the home inspection is performed on the house you plan to buy, you want to get shown and told about potential problems and how to operate and how to clean specific items in the home. The home inspection typically takes about three hours to complete and many home inspection companies afterward, offer a detailed report of the home inspection which is like a service guide to your home.
A home inspection usually is very detailed report all about the home. It generally includes a review of structural elements, exterior evaluation, roof and attic, plumbing systems and components, electrical, appliances, and garage. Some home inspection companies may not be licensed to handle certain inspections in the home and an independent contractor may be needed. An independent inspection may be needed for asbestos, radon testing, termites, mold, pest control, and lead. If any problems should arise from the home inspection, you should review the home inspection report with your lawyer. Your lawyer and you then should decide whether to ask for a credit to fix a problem or have a contractor come in. Be sure both you and the seller are comfortable with the contractor to fix the problem, some contractors are notorious for inflating the price of service.
Another service you should order is an appraisal on the home. An appraisal is very similar to a CMA (Comparative Market Analysis) is the home really worth what the market says it's worth. Appraisals are often ordered for a Mortgage Company that is processing your loan or you can ask for one independently. Sometimes price adjustments on the price of a home is brought about from the appraisal, though this does not happen often. The loan may not get granted, unless there is a price adjustment based on the appraisal.
Also, a day or two before the closing when you sign the papers for the house. You should perform a walk through to insure nothing has changed on the original condition of the house since you put the offer in and no other problems has arisen from the original offer and the house was left in good condition, be sure a mess is not left behind, many things are not left in the house when the occupants moved out. Generally you perform a walk through with your Realtor, for many a walk through is exciting, as you see the house as your house and in another day or two when the house finally becomes your home.
At the day of closing, you can expect an hour and a half of signing papers. You may sign your autograph to over 100 pages of documents, your wrist may even get sore after signing all those documents. Some buyers read everything before signing and some buyers just sign papers to get things over with. Don't go crazy trying to read everything, just read in details things that are very important.
As was said in the beginning of this post. Most of the time, the houses you buy are fixer uppers and is not your dream house. Over time you want to fix up fixer uppers so when the time to upgrade comes, you will have an easier time to sell the house. You want to get your floors looking great. If you have a dirty carpet, rent a steam machine and get out the stains. If the carpet is old replace it with neutral pastel color carpet, get a medium grade carpet, don't get a cheap carpet that wears and stains easily. If you have hardwood floors, sand, stain, buff, and polish them. If you have vinyl floors that don't look good, get stick on squares, Pergo floors, cork replacement or replace with less expensive floor tiles.
Paint your house if it needs a paint job. If this is not your dream house, you want to paint the house inside and out and you always want to paint your house in neutral colors. Stay with neutral until you get to your dream house when you plan to move no more. Don't go crazy painting, maybe have a house project once a quarter.
It may be painting, getting rid of clutter in the garage, putting up an organizing tool shelf, or replacing shelving or changing lighting. Talk things over with your spouse and plan a day once a quarter where the two of you devote one day a quarter sprucing up the house.
If it comes to a time when you just bought the house or are planning to sell and the house has a lot of rooms that need painting, you may consider a house painting party, have family and friends over for a day of painting and you just have to make sure you have enough paint, paint buckets, and paint brushes and protective covering and paint thinner. After awhile make sure you supply the pizza or Chinese food to thank the gang for their help. Beware, though even some friends who are excited to help you out, they may not be so careful and leave drops of paint decorations or paint footprints on the floor.
Don't forget all the other project for the house too, focus on the front door, it's what people notice most. Either give it a beautiful paint job or replace it with a beautiful door. You may also need to upgrade appliances, change knobs and railings, replace toilets and fix leaky faucets, replace windows and molding. Give your house a dress-up. The day you put your fixer upper on the market, you want everything to look well. Keep shower walls patched up and clean, have your bathroom looking good, with the color decor in the bathroom near the same as you would in a color schemed wedding. You should work over time have a nice looking towel bar, everything looks in place and the room has good lighting and not so much clutter, everything including soap dishes, body cream, shower gel, bath towels, toilet paper holder, toothbrush holder, and a decorative candle makes the space look cute.
As for your bedroom, you want a comforter that makes the room look absolutely beautiful. You want matching window treatments and nice looking dresser drawers. Get your closets organized, that looks beautiful when you open them, with neat closet hangers, have shoe racks and a neat looking hamper for dirty clothes. Maybe a nice painting for a focal point. One day when you have a seller, you want them to think that this room looks nice and has a feeling I'm home.
Even around the house, make your kitchen a show piece, with a particular color scheme. Do the cabinets show well and does the kitchen have a nice counter top. Create pretty shelves to hang your bigger pots and pans if you have room, create a beautiful space for appliances you would like to use such as your microwave, coffee make, toaster oven, blenders, and can openers. Even in some homes that have a kitchen you might include a sofa couch where as one is cooking another can sit comfortably and talk. The key in your kitchen is organization, have neat shelving and make every spot a beautiful spot. Also beautify your dining area, if you have beautiful dishes have a show case for your beautiful dishes and when you have company have a beautiful service table to display foods. The keys is for both your kitchen is for everything to look nice and organized and have no areas that look like clutter.
Set your living spaces so your couches and chairs are comfortable and inviting for talking and a space for entertainment area to watch television and if you have a home office try to keep that space organized too, you want to get in a good habit of not creating cluttered areas. Get yourself some baskets to keep your newspapers and magazines organized and a basket for breads and if your cabinet is overloaded a place in your garage and organizers in your garage too. Don't forget even keeping your finished basement neat and organized.
Create a nice seating area on your porch or your backyard. Create an open area for entertaining for backyard barbecues and for fun and games. Create a yard hobby with a flower garden, potted plants, a bird feeder, a birdhouse and a wildlife refuge, a vegetable garden or even display a water feature.
In essence you want to little by little work on projects for your fixer upper, so before you know it you are looking to upgrade and it may take buying a couple of fixer uppers until you reach the goal of your dream home. Get into good habits of keeping your home nice so when the time comes to sell, the person sees your home as desirable and your house becomes an easy sell and the efforts you have made in upgrading your fixer upper will have paid off. Before you know it you will be in the home of your dreams and by then too you will have a family too to share a home of your dreams with! Don't forget to work on your fixer upper and your dream home together with your spouse.
See you on the other side!