The decision to buy as home is as personal as deciding who to marry or even when to start a family. It’s a big decision and one that you should not take lightly. The average home buyer starts their home search on-line and immediately calls an agent to typically ask where the property is located at, how much are the taxes or even if the property is still for sale? 1 out of 2 buyers typically attend an open house 6 months to a year before seriously starting their home search. That was 2005 and from 2000-2004, there were many loan products available to first time home buyers or just buyers in general who simply had to show interests in buying a home.
In the real estate industry, we had a term for people who could qualify to buy without an income, a job or assets called NINJA. (No Income, No Job, No Assets). From 2000-2004, it was easy to qualify clients to buy with little to no money down and in some cases, clients were allow to buy home home with 106% financing (that 6% was allotted to their closing costs). Well, that was then and this is now. Not only did buyers have little skin in the game (very little to no down payment) in some cases, buyers were allowed to finance with up to 50% debt to income ratio, a ratio that should be no more than 36%. A good rule of thumb and one way to manage your finances is to not pay more than 36% of your gross monthly income in monthly debt. FHA Lender might allow up to 45%, but that may change in the future. In the meantime, here are some ways to prepare yourself, especially if you are a first time home buyer.
Top 5 ways to prepare for home ownership in 2010: It’s different, but in a good way.
1. First things First: Get Your Docs In Order. In 2010, the mortgage qualification process is stringent and purposefully difficult so that non-serious buyers can be deterred from applying. (Almost ironic for me to say or type that since you probably hear that interests rates are low, prices are lower and the tax credit is ending). Obviously, there is a significant amount of advertising on the radio, on-line and on television or even from your local agent to get you interested, but you should get your docs in order first to be considered a Serious Buyer. Start by collect the following items:
- W2 from 2009, 2008, 2007 or 1099s.
- 1-3 Months of Bank Statements.
- 1 Month of pay stubs or 2 of your most recent pay stubs.
- Verification of Rental-12 months of canceled checks.
- Driver’s License/SS Card
- Proof of employment: 2 years or more. Lateral changes in the same industry is ok. Ex: Different employer, same job, same pay scale. Contract of Employment if applicable.
- 401k statement. Some people choose to borrow from their 401k plan.
- Paid Receipts of any and all derogatory collections or judgements against you. (You can find out what your credit looks like when you speak with a loan officer-Part of Step 2).
Step 2.Meet with a loan officer preferably one recommended to you by the agent you align yourself with (aligning yourself with an agent is step 3). Find out how much house you qualify for. As a general rule of thumb, if you can buy up to 3 times your income. If you have a spouse or buying the home with a relative, include his/her income and multiply by 3. Be aware or mindful of approimate taxes of the towns you are looking to buy in, possible mortgage insurance and your down payment/closing costs. Finally discuss first time home buyer programs, living where you work down payment assistance programs, FHA 203K, etc.
Step 3. Align yourself with a tech savvy agent, an agent who can set you up with automatic emails of new listings in your area. With your agent, establish your wants and needs within your budget. It helps to have a wish list with features you can live with and features you can live without. Discuss short sale pre-foreclosure, REOs and new construction sales and estate sales as they different from resale, which is owner to buyer. When you align yourself with an agent, choose an agent that communicates the same way you do with email, text messages, face to face or over the phone, fax, and smoke signals (just kidding); simply choose someone that is accessible, trustworthy, experienced and professional. It helps to get a referral from friend or family member, but when you call around, you may meet an agent that you connect with. That’s the person you should continue to work with. Have your agent discuss the different types of agency relationships in New Jersey and
Step 4. Look at houses and explore different neighborhoods. This is the fun part! Typically, you will work with your agent during the week in some cases and mostly on the weekend. Be willing to having to reschedule appointments. Know that some houses are not clean but cluttered and you may want to discuss with your agent if this is a turn off for you.
Step 5. Once you find that house that you really like, ask your agent for comps, a CMA or PTA. These are generally comparable sales in the area that might help suggest value of the home. Negotiate when necessary. When your offer is accepted, you have a 3 day review period to have an attorney make changes to your contract before it becomes legally binding. You’ll have the home inspected and negotiate any major repairs or concenrs with your agents help well you are completing the loan application process. Your attorney will order title, prepare a HUD statement with debts and credits and Walla! One or a few days before closing, you will do a walk thru to ensure the house is in the condition you want to receive it in and you will close.
Post By Audeliz Angie Perez (160 Posts)
Angie Perez is a NJ Circle of Excellence award winning real estate agent for Weichert, Realtors in Edison. She sells anywhere from 12-25 houses per year on a consistent basis since 2005. Ms. Perez is primarily a buyer's agent on 60% of her real estate sales where she represents rental income investors, first time home buyers & trade up home buyers of 1-4 family homes within specific towns encompassing 4 NJ counties: Union, Essex, Middlesex and Somerset County. Many of Ms. Perez's clients appreciate her ability to negotiate favorable real estate deals for them. Many of her clients commented that her research abilities, her honesty, her knowledge of local market trends and her proficiency to manage multiple real estate transactions from start to close are some of the reasons why she was hired as their agent of choice. Please call, text or email Angie Perez to ask if she lists or sell in your town. If she can not help you, Ms. Perez would be more than happy to help or refer you to someone who can.
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