Are you looking to buy your first home? Maybe you’re looking to buy your (hopefully) last home or retirement home. Or are you looking to buy a home as an investment? This guide will answer all of your questions as comprehensively as I can put in this guide. Of course, I’m also just a call or email away at 713-597-2006 & EnihBody@gmail.com. Okay, let’s dive right into the basics: First-Time Homebuying.
First-Time Home Buying
This category is important because there are approximately 125.82 million homeowners in the United States (roughly half of the adult population). If you want to join the ranks of the millions of American citizens who do not rent their residence then you must follow the steps. The absolute first step before you get in your dream home is to get Pre-Approved. This means that a bank will review your financial health via credit scores, monthly expenses, special eligibility (Military, Teacher, Firefighter, etc.), and other factors to determine how much you can afford as a monthly payment (and therefore what your budget is for a home).
The next step after getting pre-approved is discussing your ideal home characteristics with your Realtor. She or he will work on finding the best home. This can be done on an individual home basis or a tour of homes. The most efficient way of viewing homes is in a tour. There should be no more than 3 tours. If there are 4 or more tours and there has been no contracts sent out then there is an issue with expectations and they should be reevaluated.
After the ideal home or homes have been selected, you should be sending offers to those homes. Your realtor should be determining what is the correct price for an offer and negotiating the terms of the contract based on experience and skill. Once your offer has been accepted, you must submit the option fee and Earnest Money Deposit. The option fee is a daily fee that is charged to the buyer and paid out to the Seller of the home. The option fee gives the buyer the right to back out of the contract during the option period. The Earnest Money Deposit is paid out to the title company and lets the seller know that you are serious about purchasing the home.
During the option period, inspections are ordered to determine the condition of the home. While these come back and are quite extensive, they should be taken with a grain of salt as inspections are not made to affirm the buyer that they are purchasing a perfect home, but to inform the buyer of any potential inadequacies of the home. Here’s a secret: No Home Is Perfect! If you saw the inspection reports on some of the New Construction homes I’ve seen, you’d think that they’d need to start over again! All jokes aside, the inspection report is a great tool to avoid any potential windfalls either currently or in the future.
After the inspection period, the bank will be trying to finalize the documents to complete your package. The closing is next and the title company will handle the paperwork to ensure that you receive the property in a clear & legal title. At the closing table, the realtor is typically present to help clarify any paperwork that might be too complicated to understand. After the closing is done, the keys are conveyed and you have the keys to your new home!
Downsizing Your Home
Ok so you’ve been through the homebuying process and you’re ready to buy a home that doesn’t need all the space that you currently have or that matches your new budget. The key to getting the most out of this part of your life is selling your current home for as much as you can as soon as possible and using that money to help reduce the expenses in your next home. While you might have a number in mind based on your research, getting pre-approved and getting an expert price analysis of your home will help you have a more accurate price of home as you search.
One-story homes have a higher resell value in general and have lower operating expenditures because you don’t have to maintain temperatures in two different zones. You also need to look at one of the silent killers when it comes to homeowners: taxes. Texas has higher property taxes than other states because there is not Income Tax. This does affect your payments and you should aim at keeping them within a tolerable range because as we all know, taxes always go up. Protesting taxes can alleviate the growth but it can only help slow it down.
When looking at purchasing there’s a number of places we could start. We’ll first start with intent.
If your intent is to flip a home then you need to understand how much money you will make on a home is dependent upon the After Repair Value of the home and how much you buy the home for as well as the repairs and other fees. Other fees include holding fees, commissions, etc. A full analysis is required before purchasing any home. This category is different from the previous ones in that buyers are more likely to get Pre-Approved from a Hard Money Lender or not use a lender at all and pay for the home in cash.
If your intent is to lease the property out then it is important for you to understand how much you want in cash flow. While it is fairly easy to find a home that you can rent out for more than the mortgage payment, the real task is to determine how much you want in monthly cash flow. You will need to carefully analyze every portion of your monthly payments which are commonly referred to as PITI. PITI stands for Principal, Interest, Taxes, & Insurance, the components of your monthly payment.