Finding the right Tampa Bay Home, and making a prudent financial investment is more involved than just "Buying Right." You also need to "Finance it right". Even Experienced Homeowners Make Costly Mistakes When Buying And Financing Their Home It’s no surprise that borrowing $100,000…$200,000 or more is a lot of money. And how to FIND the right home…how much to PAY for the home…how much to BORROW…and on what FINANCIAL TERMS can literally mean tens of thousands of dollars MORE or LESS in your pocket! If you’re like most people, the decision to buy a home involves a number of stresses and strains. For about 80% of buyers, it’s the single largest financial transaction of their lives. Mistakes in any part of the buying process can cost you thousands. TIP #1: Use a
Real Estate Buyers Representative Yes, it’s true. And the question you have to ask yourself is… "Is this person going to represent MY interests?" Think about this: If you had to go to court, would you use the same attorney the opposing side was using? I think you know the answer! But did you know that by creating a "buyers representation" with your agent, you not only get someone representing you, but…A buyers representative doesn’t cost you a nickel more than any other agent. Even though they represent you, they’re still paid out of the standard commission. Buyer representation is easy to enter into, and will support Only your interests. This includes finding your home, helping with financing, and negotiating the best possible deal for You...A buyers representative will keep everything about you and your deal Confidential, Greatly simplify the buying process and can refer you to inspectors, title and escrow officers, and other service providers you’ll need. You’re probably pretty clear that, in order to find the right home and save money, you need someone competent and professional to represent YOUR interests. Our Team will evaluate the value of your chosen home so you buy the most home for your dollar…the very same way I described earlier…Negotiate the best possible deal for you so you avoid costly traps and pitfalls…Help you locate the most affordable financing in the market and for your situation…Assist in co-ordinating inspections, appraisals, escrow and title services. Once you have read this report completely, make a list of areas you would like to discuss, and call me at 727-399-1347 'Max' TIP #2:
Understand What You NEED In Your Next Home. What you’ll find is your needs are fairly basic. It’s the "wants" that take a little more time to clarify. Here is a list of needs you should consider BEFORE looking for your home: General price range of home -
we’ll cover this ahead when discussing financing options and the amount of home you
can afford. TIP #3:
Understand What You WANT In Your Next Home. Now, let’s take a look at what you don’t like about your home. Do you hate the flat roof? Do you hate the master bedroom layout? Are the bedrooms too small? Is the kitchen too far from the garage? If you dislike something with your present home, you’re going to dislike it with your new home. So the better you can identify these items, the more likely you are to avoid them. Here’s a good suggestion: Take out a piece of paper and draw a vertical line down the middle. In the left column, write down everything you like about your present home. In the right column, write down everything you dislike about your present home. It’s also important you understand WHY you dislike something. Now, from your list of "likes," let’s compile a list of features you want for your new home. Now, here’s an important tip that will help you really narrow your focus. Take out another sheet of paper and put two columns on it. On the left hand side, you will be listing out the features of your home. And on the right hand side, you’ll be listing out the benefits. For each feature, you want to list the benefit of that feature. Features tell you what something IS: 3 bedroom, 2 bath, 3 car garage, etc. Benefits tell you what something DOES. Benefits fulfill desires. For example, a great room concept (feature) will be ideal for entertaining friends and family at special times (benefit). So on the left hand side, you would put "great room.." And on the right hand side, list out all the benefits (or reasons) for the "great room" design: Family entertaining, business entertaining, Thanksgiving holidays with the family, etc. Understand What Each Other Is Looking For, And Why. If you’re a husband and wife looking for a home, this exercise will eliminate many disagreements down the road. You will both understand what the other wants, and WHY they want it. Rank each feature in terms of its importance to you and your spouse. You’re both going to live in the home, so you better understand what the other is looking for. For example, a well designed gourmet kitchen (remember, list ALL the features of the kitchen you’re looking for) may rank high with a woman, while having a workshop may rank high with a man. Try to understand each other’s priorities. Most People Have More Dreams Than Money. Ranking will also show you areas you may need to eliminate because of price constraints. And by having each person rank the importance of the features they want, you won’t be eliminating a high priority item and putting additional stress on an already stressful time. TIP #4:
Understand How Much Home You Can Afford. The first guideline is the Payment To Income Ratio. This guideline compares your income - or your total household income - to the amount of mortgage payment you’re considering. To calculate the "payment" part of the formula, the lender will take the mortgage payment (principal + interest) and add to it Property Taxes and Insurance. Hence the term "PITI" (principal, interest, taxes, and insurance). Usually lenders will loan up
to 28% of your total household income. But before you think you’re home free,
there’s something else you need to know…It’s called the Debt To Income
Ratio. Debt refers to ALL the major monthly payments other than your mortgage payment
(PITI). To arrive at this amount, the lender will consider… Each mortgage company sets different limits on your Debt To Income ratio. Which is why it’s critically important to find a Motivated Lender. Don’t follow the "canned" financial advice like you hear on Radio or see on TV. Most of that advice is "rule of thumb," and designed for the lowest credit rating and highest interest rates. Think about this…If you spend 2 or 3 days to find a loan that saves you $40,000 to $150,000 over it’s term, your time is WELL WORTH SPENT! Doing a little homework on your own will literally save you thousands over the term of your loan. TIP #5: Save
A Bundle When Financing. And just in case you were looking for a specific "rule of thumb," for financing your home, you should know that there are NO General Rules Of Thumb About Financing Your Home. Each case is different, and your personal financial circumstances will have an impact on how much home you can afford. However, you MUST understand the relationship and impact interest rates, term of loan, points, and type of loan can have on your overall financial picture. Let’s start with the
"amount financed" first. Many people often pay cash or put 20% or more down as
equity. The answer for how much you
can put down on your home is different for most people. Here’s a simple and fast way to "ballpark" the actual annual return on investment you get from the money you put down on your home: Take a look at the homes in your area. How much have they appreciated, each year on average, over the past 5 years? For example, you might find that values have increased an average of 1.5% a year. Now, take the total cost of your home, multiply that value times 1.5% (the average expected annual appreciation of your home). For example, a $150,000 home increasing value at 1.5% for the first year. Thus, the home will be worth $2,250 more a year from now. Now, divide the amount of increase in your home ($2,250 in the example) by the total amount of Down Payment you put into the home. For example, if you put down 20% (or $30,000), then $2,250/$30,000 = 7.5%. Now 7.5% sounds like a fair investment. But the question you need to ask is this: Can you make more than 7.5% elsewhere? And did you notice something else here? Had you put down just $15,000, your return on your Down Payment would be 15%! Remember: Putting more money into your home may make your banker happy, because it lowers the risk of getting his money out if you default. And it may make your overall payment a little lower…But it may be a wiser decision to put less into your home, IF you can locate an alternate investment that will pay greater interest on your hard-earned equity. Now, let’s shift gears a little and talk about the impact Term and Interest rate will have on your overall financial picture… How INTEREST RATE and TERM can
make or COST you thousands. And here’s the clincher: Just ONE percentage point on a $150,000 loan can cost you almost $37,000 over the term of the loan! TWO percentage points will cost you over $72,000!! Your banker might tell you his
"slightly higher rate" is only a matter of $103 a month in payment. But YOU
should know better! Take a look at the table below… That’s money taken out of your pocket if you don’t look for good rates! And if you think interest rate has an impact on your overall financial picture, take a look at what modifying the TERM of your loan can do… Here’s another example of
a $150,000 loan at 7% interest. But this time, we examine the total interest paid when you
select a 30 year vs. a 15 year vs. a 10 year amortization… The "bottom line?" Estimate the maximum amount of payment you can afford, and adjust TERM and INTEREST RATE of your loan to minimize the amount of total interest you’ll pay. But then your banker cuts in and says, "but the interest you pay is Tax Deductible…" And you should know this: If you’re in the 28% tax bracket, for every dollar in interest you pay, you only save 28 cents. Don’t go spending a dollar to save 28 cents if you can help it! Here’s How To Instantly Know How Many Points You Should Pay…Another consideration in the formula is the amount of POINTS your lender will charge you to initiate your loan. And what you’ll notice is there’s a GAME being played with you. And if you don’t know the rules of the game, YOU LOSE! Sitting across from a banker while he throws obscure numbers at you like you’re a human dartboard can be pretty overwhelming. And frequently you’ll hear terms like "7.5% with 1.5 points," or "7.25 with 1 point." All-the-while you’re thinking to yourself, "I have no idea what the financial impact of this guy’s blabbering means to me." And quite frankly, your banker knows…The Less You Know About What You’re Paying The Better For Him. So hopefully this little "ballpark" example will help you quickly determine the best points-to-interest rate for you. How many points should you pay, and what formula is best for you? Here’s a little help…If a banker is giving you several options of interest rates and points, you need to sort out the financial consequences so you don’t lose money. Say, for example, you were considering 2 loans. Both are for $150,000, and both are 30 year amortization. DEAL #1: One loan he offers
you is 7.5% with 0 points for origination… The first thing you need to
think about is how long you’re going to live in that home. The average homeowner
spends about 5.5 years in their home before selling for whatever reason. So, for example
sake, let’s say you plan to live in the home 5 years. Here’s how you determine
which deal is better… Here’s an Example… The result? If you stay in your home for 5 years, you will NOT recoup the points you paid up front with the savings in a lower interest rate. Recoup time is about 6 years and 2 months to breakeven. So your best bet would be to select loan #1. If, however, you planned to keep your home beyond 6 years and 2 months, you’d be better off with loan #2 (i.e. the overall savings in interest rate will exceed the amount you paid in points - not considering the time value of money). Are you starting to see how important it is to understand your home’s financing? How important it is to shop for the best rates, terms, and points? Now, let’s move on to another important secret for buying your home… TIP #6: How
You Evaluate Homes Will Save You Thousands And Heartaches! Before you buy or refinance your home explore the "total market overview" of exactly what is going on in the Entire market. Then narrow your analysis to local market information. You want to know 2 things: Understanding these parameters will save you thousands of dollars when you make an offer on a home. I frequently perform both of these analysis for my buyers, in an easy to understand format, so you know Exactly what you’re buying! Let’s say you’re now pre-qualified with financing, and you’ve also found a number of homes to preview. The Way You Inspect A Home For Sale Can Save You Enormous Amounts Of Money And Time It’s now time to find not only a home that fits your needs, but a home that will be a good investment. What are some of the things you should look for? The first thing you should consider is called "siting." Siting involves evaluating 3 areas: Location, Lot siting, and Home siting. The general location of the home you’re considering could determine how happy you’ll be living there, and what kind of an investment you’re buying. Drive the area, browse the local stores, pick up the local newspaper and get a general feel of the local environment. The second area you need to consider is Lot siting. Lot siting has to do with Where your particular lot is located in the subdivision you’re considering. Review a plat map of the entire subdivision. Note where your home’s lot is located in the subdivision. Is it near a common area? Does it capture better views than other lots in the area? Is it more private, or shaped better than other lots? Lot siting in a neighborhood will give you a basis for knowing how well the home will appreciate vs. other homes in the neighborhood (assuming the home is reasonable). You want to look at the Home siting. How well did the builder take advantage of all the amenities the LOT offers a home? Are the views great? How’s the curb appeal? Is there a balance between front and back yards? Do you see any drainage problems because of where the home has been located on the lot? Think through these things as you visit each home. Now, as you approach your
home, there are other things you want to keep in mind… Take a look at the structure of the home? As you go through the home, windows and doors should be square, and they should close correctly. Look around windows and doors for cracks. Check corners of rooms for sloping or tile/wood cracks. These may reveal foundation or water problems. Now think about the floor plan of the home. Is it functional? Do the common areas flow the way you want them to? Are the halls narrow and long, or are they open? How far will you have to carry the groceries from the garage? Are the rooms the right size and height for your desires? Now, check the roof and ceilings. Is the roof the type you prefer? Is it in good condition? When was the last time the home was roofed? Now make a basic check of the plumbing, mechanical, and electrical systems. Do drains and toilets work correctly? Is the property connected to sewer, or will you have to deal with a septic system? Is the electrical wiring up to code? And are the mechanical systems working properly? Make sure you get these systems inspected by a licensed contractor or inspector Before you close any deals. TIP #7: Save
Thousands Writing Your Offer And Negotiating Your Deal. If the home has been on the market for over a year, perhaps it’s because the seller hasn’t been motivated enough to sell. Or perhaps the home hasn’t sold and he/she is very motivated. I you’ve been looking for 4 months, your kids are late for starting school this year because you haven’t found a home yet, and you now have found the right home, YOU may be very motivated to buy! Here’s a tip you should bring to any real estate transaction… Move Heaven And Earth To Avoid Emotional Attachment To The Home You’re Considering. Hold back your emotions when around the home, or you might get clobbered when negotiating the purchase. And that’s ONE reason why you need a Realtor® representing you during any transaction. The middle person alone will help save you money. So let’s say you have a Realtor® representing you (make sure it’s a Buyers Agent, or you could lose a bundle!), and you’re ready to write an offer. What’s the single best
piece of information you can have? It’s the comparable sales and market data for the
entire market, and the area. That all Realtors have available to show you. Now,
here’s what you want to do… Now, take a look at what the average selling price is compared to the listing price. You may notice that most homes are selling for about 3 or 4 percent less than their offer price. If that’s the case, you know the original offers were LESS than this amount. Take this into consideration when making your offer. And leave plenty of room for negotiating. Now, make sure you visit several of the other listings in the area. How does your home compare to the other homes? Is the home you’re considering in similar shape? Is it better sited? Is it bigger, smaller, better style, better landscaping, etc.? These factors will help you determine how much you should pay for your home vs. how much others paid for similar homes in the neighborhood. Now, take a look at the average market times for homes in the area. If they’re long (evaluated on a market by market basis), the market may be soft, and you might have more negotiating room with your offer. You’re now ready to make
your offer. At this point, I highly recommend you work closely with a BUYERS AGENT to
structure your offer. They will talk about strategies such as The correct answer depends on your personal situation. And you need to work closely with your Realtor to strategize your offer. TIP #8: Be
Financially Prepared - Ahead Of Time! Here are 3 of them. The truth is…There Is Absolutely No Incentive For A Traditional Banker To Serve Your Interests. What you want to do is find a mortgage lender who is MOTIVATED to take your loan. One who represents many different products, and can offer you many options for making your loan most affordable. Here’s an important tip: Ask your Realtor to refer one or two lenders to you. Why? Because Realtors have some leverage power over lenders, because they send clients. After all, your Realtor and lender both want to see the transaction close. There’s power in numbers and influence. Use it to your advantage. Now, the second thing you want to do is GET PRE-QUALIFIED with a lender. Better yet, try to get PRE-APPROVED. Why? Because the first question any home seller will ask when an offer is presented is "Is your buyer approved for a mortgage?" And rightfully so! The seller doesn’t want the deal to fall through because you couldn’t get financing. When they accept your offer, their home comes OFF the active market. If you fall through, it costs them time and money. Plus, there’s one more reason to get pre-qualified or approved…You Will Have Much More Power To Negotiate Price And Terms When You’re Financially Qualified! When you have money behind you, the seller knows your serious. And a serious buyer ALWAYS has more influence to negotiate. So do yourself a favor, GET PRE-QUALIFIED or PRE-APPROVED! |
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