Congratulations – you’ve made a decision to buy a home. Whether it’s your first home purchase or many years from a prior purchase, it’s time to take the first steps. 

What are some of the things you need to give consideration to?

• What type of home are you looking for? You have lots of options to consider! It’s a good idea to start where your needs are. If you have a spouse and no children, you may be quite content in a 2 BD 1 BA home on the third floor with no private yard. If you have a large dog and two kids plus a home office, a traditional home with a decent sized yard may be in order. If you’d like to be a landlord and have help with your mortgage, a duplex, triplex or fourplex can be a great investment.
• What kind of payment fits your family budget? Remember that your mortgage payment will also include property taxes and homeowners insurance. In addition, you will have utility bills that will need to be factored in to your monthly housing expense.
• Have you saved for a downpayment and buyer’s closing costs? Most mortgage loans require a downpayment toward the purchase of a home, whether it’s a condo or duplex. This may be 3.5% of the sales price or higher, depending upon the program. There are also buyer’s closing costs that are required before you take possession of your new home, generally about 3% of the sales price. For example, a 350K house might have a downpayment of $12,250 as well as closing costs totaling approximately $10,500 (you can ask a seller to help with some of these costs, but they are not obligated to).

Time to Get Preapproved

You’ve taken a hard look at the budget and your needs, and you’ve built up a nest egg that can apply toward a downpayment and your closing costs. The next step is seeing what kind of home loan you are eligible for. It’s time to enlist the help of a mortgage lender. These experts take a big picture look at your financial position and credit worthiness to determine the maximum they can loan you in the purchase of your home – be prepared with a few items to help them help you:

• Think about the payment you are comfortable making. You may qualify for a larger home than you need. Remember to factor in taxes, insurance and utilities for the property – this information is generally available in MLS when you begin your home search with an agent’s help. As a renter or newly independent adult you may not have had to think about these expenses.
• Collect the information your mortgage lender will need to prequalify you, typically the following:
  – last two years taxes and W2s
  – last two months of bank statements
  – last two paystubs
  – last 401k and/or investment account info
• Find a mortgage lender you will enjoy working with! You may want to shop around and seek recommendations from friends or real estate professionals. Some lenders have special expertise that may apply to your unique situation (like VA loans or first time home buyer programs, or rehab loans used to purchase a foreclosure). Consider choosing a local lender who can be reached during normal Alaska business hours, versus an online lender that is difficult to reach.

Must Have Versus Really Wants – Which Home Fits the Bill?

You’ve met with a mortgage lender you gel with and decided what kind of property you’d like to purchase. You’ve been issued a pre-approval letter or 90 percent letter which states what kind of loan you’ll be using, the downpayment required and the maximum purchase price for which you’re eligible. It’s time to familiarize yourself with the housing market and what kinds of homes and features are available that will meet your needs, versus what qualifies as a dream home with everything you could ever want (at an amazing price).

What should you do next?

• Create a two column document to detail what you absolutely need (in one column) against those things that would be a plus. For example, you may need a 2 BD/1 BA condo with one carport, but you would love to have a garage and pantry and two living areas. If you are making this decision with someone else, be sure to think about what you would be willing to compromise on.
• Choose some possible locations. Location is a HUGE consideration when selecting a home. Is it near work? How long is the commute? If you have children, is it in the school district you desire? Are other activities nearby? Which areas feel safe to you?
• Enlist the help of a real estate professional. An agent who is familiar with the area can be a great resource. We love to help buyers and answer those pesky questions that you may be reluctant to ask. While we are happy to give our opinion, our greatest desire is helping you to discover what you want and highlight some potential solutions. We know this is one of the most important decisions in your life, and not to be taken lightly.

What Your Agent Can Provide

You’ve got your smart phone, created a specific Zillow search and you’ve checked out a couple open houses but you’re just not sure if you have everything necessary to make a fully informed decision. Should you risk consulting with a REALTOR (C)? Yes! As a buyer’s agent, we represent you and your interests. We are committed to providing you great service at no charge. We know that it may take a little while to find that home that makes your heart sing – and there are lots of considerations along the way. Be sure to pick an agent whose personality jives with yours – don’t be afraid to interview a couple first!

Here are some benefits to working with an agent who really gets YOU:

• We see the “invisible” stuff and send it to you, including any documents associated with the listing. A particularly useful one is called a property disclosure, which includes everything the current owner knows about the features and systems of the home. What has broken and been fixed? What has been upgraded or replaced? It should all be listed here.
• We can show you any property in MLS. Open houses aren’t the best way to see a home, and neither are photos online. An open house does provide a good opportunity to see the area in person and to experience the layout of a home but the agent there is representing the seller and not you. Private showings are a great way to look at a property with no outside pressure and fewer time constraints – let your agent set an appointment that works for you!
• Is the price of the home competitive? Your agent can research in the Alaska MLS system – we see what homes in the area have sold for, how they are similar/different and what the sellers’ helped with in terms of buyer closing costs–all information you needs to make an educated decision on whether this home is a contender.

Do you have any tips to recommend? Add them to the comments section below!

You’ve Found “The One” – Make an Offer! Tune in for Part II

• You’ve found at least one dream home that seems to tick most of the boxes.
• You’ve researched and read all the documents about the property that your agent sent you.
• You know what you’re pre-approved for and what you can afford versus what you WANT to afford.
• You have enough money in your checking account to write an earnest money check to go along with the offer paperwork, too.

So… It’s time to make an offer!

Click here to read Part I: Do Your Home Buying Homework

What goes into your offer?

Your agent is trained to help walk you through the process of writing an offer. The offer form is long and looks intimidating, but it serves an important purpose. It details exactly what you are willing to give in order to buy the specific property you want, and has protections built in and deadlines that both parties need to adhere to.

Here are some things to think about as you compose your offer:

1. Asking price is one thing, but what is the maximum sales price you are willing to pay? You will most likely offer less to start unless the home is priced to sell and you really like it.
2. Will you ask for the seller to pay any of your buyer’s closing costs? These costs are charged by the mortgage lender at closing and total about 3% of the total loan amount. Sellers are not obligated to pay these, but sometimes they are willing to assist.
3. What else do you want to include in your offer as contingencies (items that must be satisfied for you to agree to buy the home)? A certain closing date? Do you want the home to be professionally cleaned before closing? Is there a special chandelier that you want to stay with the home? Do you need the yard decluttered and mowed before you move in?
4. What items do you expect to come with the home? Carefully review the bill of sale they provide, or create one of your own to clearly document what you expect (i.e. refrigerator or window coverings) and how much you’ll pay for them with a separate check.

Meet your agent and write your first offer

Once an offer is made, sellers always have three possible responses: accept it, reject it, or counter it (negotiation has begun!). It is good to always be prepared for a counter offer unless your initial offer is extremely low (which can simply cause a non-response and may result in hurt feelings).

Waiting for a response

Waiting for a response to your offer can be an exciting time. Whether you realize it or not, the agreement your agent turned in for you has started a timeclock. You’ve given the seller a deadline to respond. They and their agent need time to get together and carefully review the offer you’ve submitted. If there are competing offers, they will need to review those as well, and they may call for your best and final offer in that case.

While you wait to hear some news, it’s good to put yourself in the seller’s shoes. Think about their potential response, and how you might respond to it. If you have looked for months and this MUST be your new home, you’ll be more  likely to meet their counter. If you know there are other homes out there that will work fine for your family, you may be willing to step out of the negotiation process and move on if they don’t concede in certain areas.

• How will they likely feel about the amount – is it close to a full price offer, or a bit low? A “lowball offer” may elicit a negative reaction from the seller.
• Did you ask for a price concession AND closing cost assistance? If so, they will be mentally deducting both dollar amounts as money/profit they stand to lose.
• If the sellers counter your offer, decide what is most important to you: The total sales price (i.e. your monthly mortgage payment) or seller help with your closing costs (if you are short on cash in hand). The seller may only be willing to concede one of these items.

Inside the seller’s mind (Psychology 101)

• Is the home more of a fixer upper than move in ready? They may be mentally calculating how much money they will need to spend on inspector-required repairs.
• Is the home new on the market? They may not respond to a lower offer if they feel other buyers may want their home more and are willing to make a stronger offer.
• How strong is your financing? They will look at your loan and ask their agent how likely it is to be underwritten and how much of a downpayment it required.
• Does you offer have lots of contingencies that other offers may not? Are you asking for a longer closing period? Is your offer contingent on the sale of an existing home? These factors can make your offer look less desirable to a seller.

Do you have any tips to recommend? Add them to the comments section below!

You’ve Received a Response – What Happens next? Tune in for Part III

Tune in to my next blog entry for tips on what when a seller responds to your offer!