SIMPLIFY YOUR HOME SEARCH - ITEMS TO CONSIDER:

Price

Home Size

Home Size

If you are financing your home, request a pre-approval letter from a few lenders. This is a simple way to determine how much home you can afford to buy. An important variable will be the amount of your down payment - the more expensive the home, the larger the down payment - do you have that amount saved? Then consider whether you may buy a home that needs work - that money will need to be set aside from your down payment, unless you arrange a specialized loan that will fund remodeling. Price is both the most obvious and most complex variable to consider.

Home Size

Home Size

Home Size

What are the minimum (or possibly maximum) number of bedrooms, bathrooms, and square feet?

Lot

Home Size

Location

Do you have a minimum or maximum lot size? Topography or landscaping requirements? Do you want a large yard for gardening or low-maintenance, low-water plants?

Location

Floorplan/Architecture/Age of the Home

Location

Location may be defined by a particular neighborhood(s), or a description of an area - for example, within 1/2 mile of a freeway, but walkable to grocery store, restaurants. Or urban vs. country. Or waterfront, water view, etc.

Floorplan/Architecture/Age of the Home

Floorplan/Architecture/Age of the Home

Floorplan/Architecture/Age of the Home

Do you require a bedroom on the main level, or a master bedroom, or a room dedicated to home entertainment? Do you prefer a particular architectural style, or will only consider new construction? Do you need an ADU (mother-in-law) for family or guests, or to help make your monthly payment? Are you a modernist, or prefer historically significant homes from the early 1900s? Do you prefer low-maintenance, including roof, siding and landscaping?

Garage/Workshop

Floorplan/Architecture/Age of the Home

Floorplan/Architecture/Age of the Home

Do you require a 3-car garage or are you happy with a 1-car carport? Do you need extra workspace for your hobby?

Systems

Amenities

Amenities

Is having an air-filtration system a must, due to allergies? No air conditioner a deal breaker? Do you refuse to have electric vs. gas? Some of these “musts” may not belong on your “needs” list, if they are specialized and can be easily added after you buy your home.

Amenities

Amenities

Amenities

Do you want a large kitchen for entertaining? A large walk-in closet for your shoe collection? A covered deck for sun/rain protection? Do you prefer a home with an outbuilding, or with a mother-in-law suite? Do you want a fenced yard, or a yard that can be fenced in, for your pets?

PRIORITIZE & COMPROMISE

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Prioritize

Now that you’ve decided what you want, you may soon learn that it is highly unlikely you will find a home that matches all those “needs”. Time to make a list of needs vs. wants - but be flexible: a home that doesn’t meet all your “needs” may win out, because of an amazing amenity. Or you may decide to be prudent, and pass on the home with your dream 4-car garage, because it does not match several of your “needs”. That decision is simpler, if you’ve already made your list of needs vs. wants.

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Compromise

You may not be able to afford a home that has all the things you want to have. Or you and your significant other may not agree on architectural style and amenities. A big part of your early home search is adjusting your expectations to the inventory in your real estate market, and to accommodate the needs/wants of someone who is buying the home with you.


Remember to be realistic: a professional real estate agent will help you determine whether your criteria will match homes in your chosen area.


It's a good idea to ask your real estate agent to show you homes that don’t match your criteria, but they believe are worth consideration. A home that doesn’t match your criteria may be the one that appeals most to you, because of an extraordinary feature or an unusual amenity. This is a work in progress - provide your real estate agent with feedback, to help them refine your criteria.



BE PREPARED TO QUALIFY FOR A DESIRABLE HOME LOAN

Order Your Own Credit Report

Do not acquire new debt, make a large purchase, or open new credit cards

Do not acquire new debt, make a large purchase, or open new credit cards

Even if you have not had previous credit issues, ordering a credit report is a good idea. Mistakes can be made, and it might take months to get your credit report report corrected. A lower credit score might result in a higher interest rate. If your credit score is low, you may decide to delay a home purchase while you take steps to improve your credit score.

Do not acquire new debt, make a large purchase, or open new credit cards

Do not acquire new debt, make a large purchase, or open new credit cards

Do not acquire new debt, make a large purchase, or open new credit cards

Your focus when buying a home should be paying off debt, not acquiring new debt. Lenders want to see borrowers with stable and clean spending habits. In addition to credit reports, lenders will look at your debts relative to your income, called debt to income ratios. A better ratio translates to better loan terms. It is very important to NOT open any new store or other credit cards, unless it’s part of a debt repayment strategy.

Try To Not Make a Job Change

Do not acquire new debt, make a large purchase, or open new credit cards

Get a lender pre-approval letter. Better yet, get a few pre-approval letters.

Quitting your job, moving to a new company, or possibly even making a job change within a company can be a red flag for lenders. 


I realize that in a COVID-19 economy, that can be hard to do. Lenders are requiring borrowers to provide evidence of employment immediately prior to closing, so a layoff may halt your transaction.

Get a lender pre-approval letter. Better yet, get a few pre-approval letters.

Get a lender pre-approval letter. Better yet, get a few pre-approval letters.

Get a lender pre-approval letter. Better yet, get a few pre-approval letters.

These letters are helpful for two reasons: 


  • A lender’s pre-approval letter identifies how much a lender is wiling to lend you. This makes it simpler to set a price-range of homes you can afford.


  • You find the perfect home, and you want to provide an attractive offer (especially if you may have competition - the sellers are receiving other offers). Providing a pre-approval letter assures the seller that you have been pre-qualified by a lender, which means the subject-to-financing contingency is less likely to be an issue. 


Remember: sellers do not like buyer contingencies - they are potential “outs”, or reasons the buyer may not actually buy the home.

Shop Around for the Best Mortgage*

Get a lender pre-approval letter. Better yet, get a few pre-approval letters.

*A desirable home loan means more than a good interest rate. Items to consider:

Your current bank may be a great place to start, but they may not offer the best terms. This is especially true if you have an usual financial situation, you are hoping to finance a home that provides funds for renovation, or you have some credit issues. Your real estate agent can help you find potential lenders.



Be Prepared for Closing Costs


Buyers' closing costs include loan & escrow/title fees, homeowners and possibly private mortgage insurance (PMI), homeowners association (HOA) fees and property taxes. Once you have made an offer on a home, your agent can provide you an estimate of closing costs, not including your lenders fees.

*A desirable home loan means more than a good interest rate. Items to consider:

Get a lender pre-approval letter. Better yet, get a few pre-approval letters.

*A desirable home loan means more than a good interest rate. Items to consider:

a) Interest Rate - fixed rate vs. adjustable rate 

b) Loan Term - the number of years until your loan will be paid off. A 30 year loan term vs. a shorter, possibly 15 year loan term (see g, below for more advice on shortening your loan term).

c) Down Payment - the amount of money paid at closing towards the purchase price, expressed as a percentage of the purchase price. A larger  down payment means you have less money in savings for unexpected financial issues or planned remodeling costs, but will also result in a lower monthly mortgage payment.

d) Closing costs - In addition to standard loan fees, lenders often let you pay more money at closing, called points (expressed as a percentage of the loan amount), to buy down the loan’s interest rate. This may not be a good idea, if you don’t plan on being in the home for long. A quick calculation can determine whether the amount of interest saved by buying down the interest rate will be greater than the points paid at closing to buy down the interest rate. This answer depends on estimating how long you plan to live in your new home.  

e) Private Mortgage Insurance (PMI) - the size of  your down payment will determine whether a lender will require you to make an additional monthly PMI payment. PMI insurance helps lenders recoup losses, if a borrower defaults on their loan. A lender is less likely to suffer a loss, and a borrower is less likely to default, if they have made a larger down payment.

f) Prepayment Penalty - ask your lender whether  there is a prepayment penalty, if you choose to make extra payments on your loan (see g, below).

g) Prepayments - making additional payments to pay down your loan balance. Want to shorten the number of years you are making a mortgage payment? If a 30 year loan term means you will be making payments after you retire, you might want to get a loan with a shorter loan term. This means you will have a larger monthly payment, but you will also pay much less interest over the term of the loan. If you are worried about always being able to afford the higher payment and your 30 year mortgage allows prepayments, you could apply additional payments to your 30-year loan, when you can afford it. Search the internet for an amortization calculator - the amount of your monthly payment that goes to interest is ASTOUNDING. Or check out my blog post - Why Should I Invest in Real Estate? for a sample Amortization Schedule.


AFFILIATIONS & DESIGNATIONS

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