It Takes a Team
It takes a team of people to get this goal completed. Having a professional and responsive real estate agent and mortgage officer are critical to making this process a successful and satisfying one.
Choosing a Real Estate Agent
Buying a property requires making many important financial decisions, understanding complex issues, completing a lot of paperwork and negotiating. It helps to have an expert in your corner when undertaking such a large purchase. I can guide you through this process, and also provide you with access to property listings before they hit the general market.
Here are some factors to consider when choosing your real estate professional:
- Look for a full-time agent – one who has experience completing transactions similar to yours.
- Interview a few agents: Are they familiar with the area in which you are interested?
- Ask how much time the agent will have for you, and if they are available when you’re generally available.
- Ask about their credentials and education: A good agent will continually strive to improve and gain knowledge of the latest real estate trends and hold the highest designations in their respective fields of expertise.
- Does the agent return your calls promptly? Time is money when attempting to buy a property.
- Ask for a list of properties they have sold or a list of references.
- Choose an agent who listens attentively to your needs and concerns. Pick an agent, with whom you feel comfortable.
Choosing the Right Lender /Mortgage Consultant
Consult with a mortgage specialist to get familiar with their style, requirements and loan programs. I would be happy to suggest lenders we have used successfully, who have proven themselves competitive and capable even with problem properties or poor credit.
Interview several lenders to evaluate the following:
- Ability to explain things clearly and return your phone calls in a reasonable time period.
- Competitiveness of interest rates, costs and fees.
- Availability of loan programs that suit your credit profile and desired property.
Get a preapproval. In most markets, even in a Buyer’s market, you need a preapproval letter to be successful and helps avoid any surprises once you’re in contract. In a Buyer’s market there may be competition so having your finances in order and a preapproval letter make you a stronger candidate for the home of your dreams. In a Seller’s market, they will look at your offer more favorably and is a checklist item for a good listing agent.
Choosing the Right Kind of Loan
Today there is so many types of loans (and borrower requirements) on the market that it is beyond the scope of this page to list or explain them all. Your lender is the best person to help you select a loan program to suit your needs. Below is a summary of the three most popular loan types we see in practice; for more detailed information click the link at the end of this page.
- Fixed loan:The fixed rate loan assures your monthly payments will stay the same over the life of the loan, which is typically between 15 and 30 years. Fixed rate loans may be best if you intend to hold the property for a long period of time, say over 7 years.
- ARMs (adjustable rate mortgages): ARM’s may be suitable if you plan to sell or refinance your home within the next few years. The starting interest rate is typically lower than a fixed rate loan, saving you money initially. However, it is important to understand the index, the readjustment interval, the capitalization rate and downside risks of an ARM before making a final decision to use this type of loan.
- Intermediate ARMs: Also called Hybrid Loans, these loans can offer fixed interest rates for the first 3, 5, 7 or 10 years after which the interest rate adjusts with the market every 6 months or year thereafter.
Get Pre-Approved by a Lender
There are several benefits to going the extra mile and getting a pre-approval letter. First of all, you will know exactly how much real estate you can afford. When you find a property you want to buy, your offer will be in a better positioned than someone less prepared. Finally, being pre-approved is more efficient; it reduces the amount of time it will take your lender to fund your loan. Be prepared to provide comprehensive documentation, which the lender may independently verify, including but not limited to:
- Job and career status
- Monthly debt payments
- Cash available
- Total assets and debts
The mortgage broker will need copies of the documents you began gathering in the first phase of the loan process, including:
- Either 2 years of W-2 forms from your employer or 2 years of tax returns if you are self-employed
- Recent pay stubs
- 3 months bank and money market statements
- Brokerage, mutual fund and retirement account statements
- Proof of other income sources (alimony, trusts, rental income, etc.)
- Credit card statements
- Auto /boat / student / miscellaneous loans
- Drivers' license or form of ID
- If you're not a US citizen, then copy of your green card or visa
- Copy of any existing mortgage debts if you are applying for a home equity line of credit or another mortgage
The bottom line is it is important to have the foundation of your team identified, including your real estate agent and your mortgage consultant, before looking at houses.
Time to Begin the Search
Once you have a core team consisting of a Real Estate agent and Mortgage Specialist you can begin the search process. Teaming with your real estate agent at this point in the process is key and will help streamline your search. Discuss the characteristics of your real estate purchase with your Real Estate agent and together you can start broad and discuss all possible areas and neighborhoods and then hone in on the areas that do interest you. Next, you can discuss style and condition of the ideal home. Throughout your search keep in mind the potential long term resale value of the properties you are considering.