Whether You Rent, or Whether You
Buy, You Pay for the Home You Occupy
by Verna Acker
Tickling around the edges of your "wish-list" is the
remote idea that you would really like to buy a home. The "idea"
begins to take on a life of its own. It begins to creep into your
thoughts more and more often. But, between the idea and moving
day is a wide, deep, dark crevasse! Not really...if
you follow a few simple guidelines.
Most valuable to your endeavor is the helping hand of a competent
professional. Chosen well, that person can lead you through the
confusion of home selection, financing choices, inspection duties
and buyer's jitters.
Your first project is to find out how much home you can buy vs.
how much home you want to buy. A call to a real estate professional
or a lending professional will help you establish the guidelines
within which the lending community will require you to work. For
a 25 year fixed rate mortgage you can expect the payment-to-income
ratio to be 28 percent to 36 percent. Most 25 year loans are underwritten
by the secondary market. They do not want your principal, interest,
taxes, and insurance (PIT) payment to exceed 28 percent of your
gross monthly income, nor do they want your debt load (those needing
six months or more to pay off) to exceed 36 percent of your gross.
That will establish your qualifying point. You may, however, discover
that the lender will allow you a bigger payment than you are willing
to pay. Then you start from the payment and work backwards to
establish the home price that best fits your wishes. The real
estate professional should be adept at working through the general
discussion of what you want and how best to accomplish that goal.
That professional, after the initial qualifying meeting, should
then send you to a competent loan officer for the preliminary
conference and a pre-approval program.
Beware of the real estate sales people who conclude too quickly
that you can't afford to buy yet. I have gone to several happy
closings with people who had gone through five or six "turn-down"
interviews. Creative and alternative financing plans are "out
there" in abundance. FVA doesn't require a down payment.
FHA allows you to receive a gift for the amount of your entire
down payment from a relative. ARM's can get you in to the mortgage
with carefully designed upward increments over regulated periods
of time. If there is something in your "package" that
prevents you from buying now, there is help available to help
you re-shape your financing picture for a near-future purchase.
That help is as close as your telephone and as simple as choosing
someone who is interested in assisting you.
Real estate professionals, for the most part, are working as
agents for the sellers of property. That designation places them
in the position of working in the best interests of the sellers
of the property that is on the market. To fulfill their commitment
to the seller, that professional must be skillful in working WITH
the buyer. No buyer...No sale. THAT is NOT in the seller's best
interest. The broker is obligated to treat all parties fairly.
Without breaching loyalty to the seller, the broker is bound to
provide all information about the property, available financing,
and to assist in preparation of the offer. They have a duty to
give accurate and honest answers. They are bound by law to handle
all offers with skill. Providing competent assistance to the buyer
is part of the job that the seller is paying that agent to do.
Good agents respect that responsibility to the fullest degree.
Having established the price range within which you have chosen
to work, location and criterion should then be established. It
is important to keep your requirements as broad as possible. I
have sold a tall, white colonial with pillars to a buyer who insisted
they would only look at ranches. Or, they have chosen to buy in
a completely different location when the "perfect" house
showed up on the "perfect" lot, outside of the predetermined
area. Have you ever set out to buy a tailored outfit to wear to
the office and come home, instead, with the best outfit in the
world to wear on your weekend boat trip? Same theory.
Locating the right home can be frustrating and disappointing.
you may soon discover that calling off of real estate ads and
off of signs in yards is the least productive way of finding a
home. Frequently, these homes will already have accepted offers.
Industry guidelines suggest that the REALTORS® should not
indicate publicly that a home has an accepted offer until the
financing is secured. Consequently, For Sale signs do not necessarily
indicate the home is still available. The best solution is to
establish a rapport with a real estate person who will accept
the responsibility of informing you as homes become available.
In our office, the first thing we do each morning is to check
the update on the computer to see what was entered during the
last work day. An efficient listing broker will call buyers when
they bring a new listing into the office.
Care should be taken to choose your help wisely. Part-time or
less than dedicated licensees may be tardy in notifying you of
new listings. Establishing a relationship with one person who
begins to understand just what you are looking for and is willing
to go the extra mile to help you is imperative in an active real
estate market.
If you are a first time home buyer, chances are that your price
range is in the lower reaches of the average priced home in your
neighborhood. There you will find the competition to be extremely
fierce. Getting to see a home the minute it is on the market is
imperative. Since the competition is fierce, you may also find
yourself competing with other buyers who are just as anxious as
you to buy a home. I encourage buyers to start their financing
application process before they find their home. Most lenders
will have a pre-approval process, often called "The Passport
to Purchase." If you are in competition, the preapproved
buyer will have a "leg-up" against the other, merely
pre-qualified, buyers.
Make it your business to find out what every home in your chosen
community has sold for in the past year. Become the newest expert
regarding homes in your price range. Know what homes are selling
for, what they are appraising for, and anything else that you
can about the area you prefer. That way, when you find something
that you like, you won't have to be afraid to make a decision.
With all of this behind you, you have found the home of your
dreams, and you want to write an offer. Here is where you separate
the "men from the boys" when it comes to real estate
professionals. A competent, knowledgeable professional can guide
you through the contract in a sure and comfortable manner. Each
line will be explained as you proceed. Each fact or representation
that has been discussed will be written down. NEVER ASSUME ANYTHING!!!
If you are thinking about it, or if it is important, write it
in the offer. Don't assume that the drapes stay unless you write
them down. Don't assume the Franklin fireplace stays, unless you
write it down. NEVER ASSUME ANYTHING!!!
The most important clause in the offer to purchase is the one
giving you the right to an independent or professional inspection
of the property, at your expense. This does not ordinarily mean
that you can bring in your dad or your brother. This usually means
an "arm's length" disinterested party. Unless you are
an expert in structure and mechanics yourself, always get a professional
inspection. They may even discover things that the seller doesn't
know. A cracked heat exchanger or reversed polarity in the outlets
are difficult to know about unless the seller has experienced
trouble. A good inspector will not only look for faults, he will,
with great care, help you to understand the home. He may explain
about furnace filters, water heater elements, how to increase
the fill to prevent basement seepage, and how many years you should
be able to expect your furnace or roof to continue without repair.
Usually costing in the neighborhood of $200, this is the best
investment you can make. When you buy a used car for $3,000 or
$4,000 you take it to a mechanic to kick the tires if you aren't
an expert. Why on earth would you use any less care when you are
spending $100,000?
You have carefully chosen a competent lender. You have chosen
your home with confidence because you are fully informed about
the values in the community. You have a responsible and caring
professional helping to smooth the bumps and clear paths that
often get clogged with paperwork and confusion. All items on the
offer were written down so that all parties have known from day
one what the procedure is and what to expect from all parties.
As you proceed to the closing, all that you must do now is order
your moving truck, plan for your electricity and other utilities
to transfer and get your phone ordered. Except for the excitement
and adrenaline that is pumping through your veins, you are comfortably
ready for one of the most memorable days of your life. Few of
us forget our first home purchase. This is an occasion to be enjoyed.
With proper planning, it will be just that.
The author has been a REALTOR® since 1978.
