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Courtney Colby

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  1. Should I even Purchase a Home?
    1. - Research market conditions on your own & with a local REALTOR
    2. - Declining vs. Stable vs. Growing Markets- know what you are getting into!
    3. - It?s ok to rent?in some markets this may be the best choice
    4. - Bottom Line: If you?re not sure, rent for a year, then purchase

 

  1. Do I have the Ability to Purchase a Home?
    1. - Do I have a good credit score (>620)?
    2. - What is my Debt-to-Income (DTI) Ratio (<50%)?
    3. - Get Pre-Approved with a Lender

          -- Three Loan Types:

         1.      VA:  100% Financing

         2.      FHA:  96.5% Financing

         3.      Conventional: 80% Financing

 

  1. What Type of Home Should I Purchase?
    1. - ?Bread & Butter? 3-bed, 2-bath, approx 1,500 sq ft, 2-car garage
    2. - Price: If possible, cheapest home in nicest neighborhood
    3. - Location: Where are the nice, safe neghborhoods?
    4. - Best school district: will help resale!
    5. - Will this home rent ?well? if I can?t sell in 3 years?
    6. - Avoid Condos and Townhomes

 

  1. Should I use a Real Estate Professional?
    1. - Yes! It?s no cost to you as the Buyer
    2. - You?ll receive expert service & advice about the local market

            i.      Legal Protection

          ii.      Negotiation Assistance

         iii.      Smooth Process from beginning to end

 

  1. What Should I Look For in a REALTOR?
    1. - Number of Years in Business
    2. - Production History?how many houses do they move each year?
    3. - Educational Background
    4. - Investor in local Market
    5. - Experience with First Time Home Buyers
    6. **If you are relocating outside of Enid, I can interview and find the right REALTOR for you in your new town!
    7.   

      THE HOME BUYING TIMELINE

      (Plan for 30-45 Days from Beginning to End)

       

      1. 1. Decide You are going to Purchase
      2. 2. Get Pre-Approved with a Lender (shop around!)
        1.     a. Know Your Purchasing Power
        2.     b. Pick Your Price Range
        3.     c. Get a copy of Your Pre-Approval Letter
        4.     d. Get a Good Faith Estimate (GFE) so you know your closing costs/interest rate
      3. 3. Make Contact with Your REALTOR
        1.    a. Give them advance notice of your Home finding trip
        2.    b. Have them send you listings
        3.    c. Provide feedback to help them learn your requirements
      4. 4. Arrive at your location and begin looking at homes
        1.    a. Take notes on each property as you walk through them: good and bad!
        2.    b. Your REALTOR can show you ?For Sale By Owner? (FSBO) too!
        3.    c.Narrow down choices and take second/third looks!
      5. 5. Decide on the home you want
        1.    a. Ask your REALTOR to research comparables (run comps) to determine if asking price is reasonable
      6. 6. Components of the Contract:
        1.    a. Purchase Price (start low, best if within 10% of asking price, if priced fairly)
        2.    b. Earnest Money (typically $500 - $1,000)
        3.    c. Closing Date (expect 30-45 days from contract acceptance)
        4.    d. Inspection Schedule (typically done within first 10 days)
        5.    e. Repair Allowance, if applicable (typically $500)
        6.    f. Type of Financing you plan to use
        7.    g. Closing Costs (do you want seller assistance?)
        8.    h. Deadline for Seller to Respond (24-48 hrs)
      7. 7. Once you have a signed contract
        1.    a. Typically 10 days to secure financing
        2.    b. Typically 10 days to complete inspections

                     i.      Your REALTOR should schedule/be present at all inspections

                   ii.      You can be there too: ask questions, learn!

                  iii.      If costs to make repairs comes back high, re-negotiate or walk away

    8.              1.      You will get your earnest money back if you walk away

        1.    c. Lender (bank) will conduct appraisal after inspections

                     i.      If appraisal comes in low, re-negotiate or walk away

    9.              1.      You will get your earnest money back if you walk away

    10.  

      1. 8. Approx. 1 week Prior to Closing
        1.    a. Contact Utility companies to request service be transferred into your name on day of closing
      2. 9. Day Prior to or Day of Closing
        1.    a. Do a final walk-through of the home!
        2.    b. Ensure all repairs were made, and no new issues have arisen
        3.    c. You will be accepting the home in it?s ?as is? condition!
        4.    d. Review Your Settlement Statement (HUD)?check costs against your GFE

                   i.      Ensure earnest money has been credited back to you

    11.  

      1. 10. The Closing Table
        1.    a. Anticipate 1 hour to close
        2.    b. If bringing money, have a certified/cashier?s check (no personal checks), or you can wire the money to closing office
        3.    c. You?ll receive keys/garage door openers/access codes, etc.
        4.    d. Get a copy of everything you sign and keep it in a safe place!
        5.    e. Congratulations?you are now a homeowner!

       

    12.  

    13. Quick and Dirty on Home loans

       

      For more detailed information I recommend Yahoo Real Estate online for more detailed information.  They have some very good information on lending, home buying, etc.

       

      Remember to ?shop around? mortgages at different companies, get multiple good faith estimates (GFE), and bid one company against another for the best deal on rates and closing costs.  Always compare closing costs and rates on the good faith estimates to your closing/settlement statement at closing.  Remember the devil is in the details!

       

      Federal Housing Administration (FHA) Mortgage/Loan

                 

                  -Generally a 30 year fixed rate loan is best option

      -Loans are backed by the Federal Government, low lender risk

      -Small down payment (minimum of 3.5% of purchase price)

                  -Smallest mortgage insurance amount compared to conventional/VA

                  -Generally lower interest rate than VA loans

      -Very ?lax? income and debt to income, credit score standards, easy to qualify

      -Buyer can request/negotiate seller to pay up to 3% of loan costs

      -Seller can not pay for down payment

      -Never a prepayment penalty (penalty for paying off the loan early)

      -These loans are ?assumable,? (i.e. someone else can assume your loan)

      -Moderately strict home inspection requirements (not a big deal)

       

      I believe FHA is the best deal for first time home buyers right as now as long as they can come up with the 3.5% down payment.  It is better than VA loans because the funding fee added to the VA loan is expensive, and buyers may start ?upside down? (where loan amount is higher than home value) on the house, and it may take more than three years to build enough equity to cover the funding fee, when you add in the additional costs to sell the house. VA loans are better for longer term purchases.  Also some of the mortgage insurance with FHA loans is reimbursable if the home is sold during a certain period of time.  The VA funding fee is not recoverable once you sign on the dotted line.

       

      Veterans Association (VA) Mortgage

       

                  -Generally a 30 year fixed rate loan is best option

      -Loans are backed by the Federal Government, low lender risk

      -No down payment required

      -Very ?lax? income and debt to income, credit score standards, easy to qualify

      -Very expensive ?VA Funding Fee,? either 2.15% or 3.2% of purchase price

      -Funding fee can be added to mortgage/loan amount, paid outright, or paid for by seller

      -Buyer can request/negotiate seller to pay up to 3% of loan costs, funding fee

      -Never a prepayment penalty

      -These loans are ?assumable!? Can help with resale!

      -Very strict property inspection requirements

       

      VA loans are the second best option for first time home buyers, if they don?t have the 3.5% down payment for an FHA loan.  VA loans can be structured so that there is zero money out of pocket for the buyer.  However see the paragraph above why FHA loans are a better option for military folks only living in one place for three years and who plan to sell their home after that three year period.  The first time you use your VA loan ?option? the funding fee is 2.15%, the next time it will be 3.2% of the purchase price. Also because of the strict inspection standards some sellers will not sell to buyers looking to use a VA loan for the purchase.

       

       

      Conventional Mortgage (fixed or adjustable rate)

       

                  -High down payment requirements: Usually 5-10% of purchase price minimum

                  -Stricter lending standards (DTI, credit score, etc)

                  -Interest rates are usually lower than FHA/VA loans

                  -If you do not put down 20% of the purchase price, you will also have to pay PMI

                  -Sometimes there is a prepayment penalty: make sure your loan does not!

                  -Loans are not usually assumable

                  -No home inspection requirements

       

                  Tough loans to obtain for first time home buyers, unless you have the 20% for the down payment. There are higher lending standards, and who has 20% of the purchase price to put down at 25 years old?  The PMI you pay if you only have 5% to put down on the house will make the loan more expensive than an FHA or VA loan.  The same is true if you try to do two loans to avoid PMI (i.e. called ?piggy back? loans) where you get one loan for 80% of the purchase price, and another for 10%, 15%, or even 20%, to get to 90% or 95% of the purchase price financed.  You still end up paying more in closing costs and on the monthly payment.

       

      Fixed Rate Mortgage

       

      -Interest rate is fixed for 10, 15, 30, 40 years.

      -Rates usually (but not always) higher than adjustable rate loans

      -The longer the term, the higher the interest rate

       

      Adjustable Rate Mortgage

       

      -Interest rate is fixed for 1,3,5,7, or 10 years, then adjusts for remainder of loan

      -Rates usually (but not always) lower than fixed rate loans

      -The longer the ?fixed? term, the higher the interest rate

       

      Primary Mortgage Insurance (PMI)

       

      -Extra money the lender charges you ever month when you don?t have at least 80% of the

      property value in equity (85% for FHA) to cover the lenders losses in case you default.  This is protection for the lender and does not help you, but you pay for it.       

       

      PITI (Principle, Interest, Real Estate Taxes, Insurance)

       

                  -These are the things that make up your monthly payment.  Keep in mind mortgage payments are made in arrears.  For example on June 1st, you are making your payment for the month of May.  The principle and interest are your loan payment, your yearly RE taxes are divided by 12 and you pay into them monthly, but the bank will only make one big payment when the taxes come due.  The same goes for your property insurance. 

       

      Escrow account

       

      -Where the bank holds your real estate taxes and insurance payments to be made each year.

             

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