HOME BUYER S CHECKLIST 1) Make sure you re (really) ready. You have a stable job. You can see yourself living in the same town for the next five to ten years. You re prepared for the extra work that comes with homeownership. 2) Create your home wish list. Use the chart below to determine what s most important to have right now e.g. location, number of bedrooms, a yard. Check out different neighborhoods, home styles and listings online to get a feel for what s most important to you. 3) Figure out what you can afford. Request your credit report from all three credit bureaus (Equifax, Experian and TransUnion). Fix any errors right away. Determine a down payment amount (ideally 20 percent to avoid paying private mortgage insurance). Calculate how much you ll need in an emergency fund (for the unexpected maintenance or repair costs). 4) Gather necessary documents. Collect proof of employments, including pay stubs and past tax returns. Print out bank and investment account statements from the past 30 days. Compile your previous addresses and current landlord s contact information. 5) Research mortgages. Request quotes from multiple lenders and comparison shop for loans. Get pre-qualified for a loan (many sellers won t even consider a bid unless you are prequalified). Must Have Nice to Have Someday
HOW TO LOOK AT HOUSES Water problems Stains on basement walls Stains on ceilings Moss, mildew or stains on lower siding Stains or mildew on underside of roof Soggy areas in yard Eroded areas in walkway or driveway Building lines that are not straight or true Roof that sags Walls that curve Windows or doors that look crooked Porches that lean or sag Structural problems Diagonal cracks above doors and windows Slipping or shifted foundation Floors that feel spongy or uneven Inside doors or windows that don t fit Houses that are built on wood posts or sill beams on ground Utility systems Very high heating or air conditioning bills (ask to see these) Leaking plumbing, especially the main water line (turn on the water and look) Main electrical service that is too small Odd smells, such as sewer gas Lack of insulation in attic Serious finish problems Signs of termites or ants Old, flaky paint Wavy or spongy siding Worn roof or a roof with several layers
HOME BUYING GUIDELINES Get pre-approved for your mortgage prior to shopping for homes. Compare mortgages an artificially low interest rate could have hidden costs. When interest rates are low go for a fixed rate mortgage. If you have to resell soon, don t buy an unusual house. Even if the quality of the school district doesn t matter to you now, remember it might someday to another buyer. Brand new homes may be lower in maintenance costs, but can be higher in out of pocket expenses. There are no perfect homes. Be ready to make compromises and concessions. Know what s most important to you and give on those things that aren t. Location, location, location some things don t change. Supply and demand is a critical issue. Be ready to move quickly when you find what you want. Pay attention to floor plans. Changing layout of rooms can be costly. Be an educated buyer. Learn as much as you can about the market before you buy. Always make your offer to the seller contingent on having a home inspection it s money well spent. Remodeling kitchens and baths can be very expensive check these out carefully. Imagine the home vacant. Do not be swayed by decorating the furnishings will leave with the seller. Vacant homes appear larger than they are. It may be a good idea to measure to make sure your furnishings are going to fit. Landscaping is there not just to make the home look good t can save thousands of dollars over the years in utility bills. But the best home you can afford in the best neighborhood you can afford. You are almost always better off with the least expensive home in the area rather than the most expensive. Pay attention to the original listing date of the properties you look at; sellers tend to me more flexible the longer the home is on the market. Be honest and open with your agent; he or she works for you and can best help you if they have a good understanding of your needs. You ll know the right home for you when you see it and it will have very little to do with logic don t ask us how that works it just does!
Avoid Roadbumps with Appraisals Here are some items an appraiser will flag when doing an FHA/VA/USDA appraisal. Most items will be required to be repaired prior to closing and some will require an inspection from a licensed professional in that specific industry. 1. Peeling paint interior or exterior. 2. Cracked or broken windows. 3. Missing handrails on any stairs. 4. GFIs near a water source (kitchen, laundry, bath). 5. Water, dampness, mold or signs of mold in basement. 6. Cracked or heaving basement foundation/floors. 7. Roof issues, leaking or damages shingles. 8. Grade around foundation. 9. Furnace/AC little to no life remaining. 10. Termite Damage. 11. Any significant safety, health and/or structural problems. 12. Adequate, unobstructed entry and exit into and from home. 13. Properly functioning electrical system/outlets. 14. Properly functioning plumbing. 15. Septic or well issues that are obvious will require additional inspections.
FINANCIAL PLANNING TIPS FOR FIRST-TIME HOMEBUYERS While buying your first home is a big decision, there are also lots of small decisions to make along the way to homeownership. To help you navigate the process, we ve gathered suggestions for avoiding some of the most common mistakes. Know your budget Set a budget. Calculate a monthly home payment that takes into account how much home you can afford, then discuss this amount with your lender. Making sure you can meet your projected future home payment is probably the most important part of successful homeownership. There are several affordability calculators online that can give you a rough estimate of what you can afford. Include PITI (principal, interest, taxes and insurance) in your budget. Mortgage calculators will show you how much you'll pay toward principal and interest every month. Remember that you'll also have to pay property taxes and homeowners insurance. Some financial institutions will require you to contribute these funds monthly along with your principal and interest payment. Be sure to talk to your lender to understand what will be included in your monthly payment. Know how much cash you'll need at closing. When you buy your home, you ll need cash for a down payment (see how much you should put down) and closing costs (estimate your closing costs). The down payment typically varies from 5% to 20% or more. Putting less than 20% down will typically require you to pay for private mortgage insurance (keep reading for more on that). Closing costs could be about 3-7% of the total loan amount and will include charges such as loan origination fees, title insurance and appraisal fees. Budget for private mortgage insurance. For conventional financing, PMI is typically necessary if you don't make at least a 20% down payment when you buy your home. Make sure you know how much this cost will be and factor it into your monthly home payment budget. Research your utilities. If you're moving into a larger home than you're used to, a home that is newer or older than you're used to or located in a climate that's hotter or colder than you're used to, ask your real estate professional to find out what the home's energy bills have typically been. This can help prevent being surprised by a higher utility bill than you're expecting. If you're moving into a new community, find out about water costs, too.
FINANCIAL PLANNING TIPS FOR FIRST-TIME HOMEBUYERS Don't forget miscellaneous expenses. Be sure to budget for moving expenses and additional maintenance costs. Newer homes tend to need less maintenance than older ones, but all homes require upkeep. If you're considering a condo or a home with a homeowners association (HOA), remember to include HOA dues in your budget. Keep in mind that you should have an emergency fund on hand to prepare for any unexpected changes in your income (like reduction in your wages) or unexpected expenses (like medical bills). Manage your debt carefully after your home purchase. Sometimes your home will need new appliances, landscaping or maybe even a new roof. Planning for these expenses carefully can help you avoid one of the most common causes of missed mortgage payments: carrying too much debt. It's important not to overextend your credit card and other debts so you stay current on your payments. A smart start Research your mortgage options. As a first-time homebuyer, you re undoubtedly anxious and excited about moving into your new home, but take the time to step back, do the research and learn the differences between the various types of mortgages so you ll know which one is best for you. Know your credit score. As soon as you decide to start looking for a home, check your credit report and credit score with any of the 3 major credit reporting agencies: Experian, TransUnion and Equifax. If you find any mistakes that need to be corrected, addressing these issues early will put you in a better position when it s time to buy a house. Find a responsible lender. When you choose a lender, pick someone you feel good about working with. They should listen to you and put your needs first, and they should be able to explain your home loan options in plain terms. It s a good idea to interview potential lenders to find the one that s best for you. Get prequalified for a mortgage before you start shopping. Knowing how much you can borrow will let you keep your search focused on the homes that are right for you. Getting prequalified will provide you with an estimate of how much you can borrow before you start looking at homes.
USDA/FHA/GOV T PROPERTY REQUIREMENTS Paint: If the home was built prior to 1978, any peeling, chipped or cracked paint on the exterior or interior will have to be corrected. These areas must have all loose paint scraped, primed and painted prior to the inspection. Areas to check are: windows, sun exposed areas, garage and doors. Rails: All steps and stairways, if 3 steps or more, must have a handrail for safety. There must be railing on decks if the surface of the deck is high enough to be deemed a safety hazard. Electrical: The electrical system must meet the home s basic needs. If the current electrical supply appears to be inadequate for the home, the appraiser may require a qualified electrician to determine the proper capacity required. The appraiser is required to test a representative of electrical switched and lights. NO exposed electrical wiring is acceptable. Appraiser Access: The appraiser is required, at a minimum, to make a head and shoulders inspection of the attic area. The appraiser will need a clear path to all crawlspaces for inspection. The appraiser must have interior access to all detached garages and other outbuildings. HVAC: The heating and cooling system will have to be tested. Any programmable thermostat should be set to manual. Utilities: If the home is vacant, or it s an REO property, all utilities will have to be on and in working order (water, electrical and gas) at the time of the appraisal inspection. Garage door opener(s): Must be tested for functionality. Well & Septic Systems: Properties with well and septic should have a site map of their location made available. They should also be clearly marked with a stake (drain field, septic tank and well) or some other marker when possible. A well located within the foundation walls of a dwelling is not acceptable. Shared wells may serve existing properties that cannot feasibly be connected to an acceptable public or community water supply system. A shared well shall have a shut-off valve on each dwelling service line as it leaves the well. A shared well shall service no more than four living units or properties. A shared well must have a shared well agreement and shall be binding upon signatory parties and their successors in title. Drainage: If any area around the home has negative drainage (sloping towards the house), this area will have to be corrected.
USDA/FHA/GOV T PROPERTY REQUIREMENTS Safety Issues: Items that are considered deferred maintenance typically aren t required to be fixed, unless they are deemed to be a safety issue. Safety issues could be large cracks or settling of walkways, loose windows or doors, trees too close to the roof or power lines, faulty steps, major settling of the foundation, etc. There must be adequate access/egress from bedrooms to exterior of home. At least one window in each bedroom must open and close freely in order to allow escape in case of fire. Roof: Leaking and/or worn out roofs must be inspected and then repaired. If there are three or more layers of shingles on the leaking/worn roof, then all existing shingles must be removed before re-roofing. Roofs must have at least 2 years of life left (no leaks). Plumbing: Major plumbing problems will require inspection and repair. Faucets and plumbing shouldn t be leaking. Water heaters must have a non-adjustable pressure relief valve and plumbed to the outside or within 12 of a concrete floor. All water heaters must be installed per local building code regardless of location. Appliances: All appliances that are listed to be sold with the property must be in working order. Flooring: All flooring must be in place, must have flooring above the subfloor (i.e. carpet, tile, wood). Manufactured Homes: Must be built after June 1976, and have the HUD seal (a small metal tag approximately the size of a credit card) visible on the exterior of each section). If the seal is missing HUD can issue a Letter of Label Verification e-mail or fax request to Manufactured Housing Standards Division. An interior HUD data plate is typically required by the lender. The living area must be at least 400 square feet. The property may not be within a FEMA rated flood zone (A or V). The manufactured home may not be within a condominium project. Skirting is required. Condominiums: Projects must be at least 51% owner occupied and may not have a right of first refusal clause in the association documents. Condominium projects must be on the HUD approval list unless spot loan approval is given. USDA Insured Loans: The subject parcel may not be sub-dividable under its current zoning designation. FHA Loans: The appraiser may also check for soil contaminants around the property. If there is any indication of hazardous materials leaking or leaching into the soil, an additional inspection will be required. *Based on publicly available information as of 02.08.2018 and is subject to change.
IT S TIME TO MAKE AN OFFER Put yourself in the seller s shoes and imagine how they will react to everything you are about to put in your offer. Oral promises are not legally enforceable when it comes to the sale of real estate. Please be sure you have communicated everything you want in the offer to your agent. Price Have your Realtor to a comparative market analysis for you. That will show you the fair market value of the property. The following factors could affect your offer price: Earnest Money Property condition New home improvements Market conditions (supply and demand) Seller s motivation Seller concessions do you want them to give you a carpet allowance or are you asking them to help with closing costs? If you are expect to pay a little more! You will be putting up some money to show the seller you are sincere about purchasing his or her home. Your agent can give you guidelines for how much this should be. Financing Contingency You will probably need to get a mortgage. Even if you have been preapproved, the lender will still need time to have the appraisal done, order title, etc. Your agent can advise you as to how much time you need. Home inspection Don t skip this. Even if you think you can check out the house yourself or you want to save the money a professional inspector charges it s money well spent in the long run. But remember, no home is perfect and small maintenance-type things found by the home inspector should not be part of any renegotiations with the seller. And don t skip your final walk-through just because you had a home inspection. Other inspections and contingencies Discuss with your agent other possible inspections and contingencies that you may want to add to your offer. Disclosures Make sure you received all the proper seller disclosures. Federal law requires the seller give you a lead based paint disclosure if the property was built prior to 1978 and most states or local areas require the seller to disclose any material defects of which they have knowledge. Look over these documents carefully your recourse once you signed them is limited by the laws that govern them. Multiple Offers It doesn t have to be a hot market for a seller to have the luxury of choosing between multiple offers on their property. If you find yourself in a multiple offer situation, don t panic and don t withdraw your offer you may be the highest bidder and won t even know if you putt out. Go through at least one round of negotiations before you decide to withdraw. Have a price in your mind of where you want to go and stay in the game until that price has been reached. Too many buyers lose the property by pulling out too soon.
OFFER ACCEPTED! WHAT S NEXT? Home Inspectors: If you ve negotiated a home inspection as part of your contract, you will need to coordinate this with your agent. If you choose to be present for the inspection, your agent must also be present. Appraisal: Your lender will send an appraiser to the home to appraise its worth. Mortgage Commitment Letter: You will receive this from your bank saying that your mortgage has been approved. Utilities: Be sure to notify companies of your move date. (If you are moving to a house that has an LP tank, you will need to reimburse the seller for the remaining LP in the tank at closing.) Insurance Binder: If you are getting a mortgage, then lender requires that you get insurance for your home. You must get this one week or more before closing. Post Office: Notify them of your new address. Closing Statement/HUD: Get a copy of this from your attorney or bank 3 days before closing. This will have all the closing costs for the transaction. Also make sure you know the time and place of closing. Your bank will be the one to set this up. Final Walk-Through: This will take place the day before or the day of closing in order to make sure all is to your satisfaction. Closing: You will meet with the attorneys and possibly the sellers to sign the final paperwork. This usually takes place in the attorney s office or the bank. Be sure to bring your checkbook to pay for any incidental expenses that may arise (LP left in tank, etc.) Don t forget your picture ID!