Buyer's Resources
Buyer's Agent for New Homes
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I was recently asked by a buyer, "I have heard that a realtor fee is built into the cost of the home purchase. Can you tell me what the realtor actually does for the buyer in this situation?"
Why use a buyer's agent for a new home? Because the builder's agent's job is to get the best possible price and terms for the builder and your buyer's agent's job is to get the best possible price and terms for their client, you! That is the number one reason. And, your agent has usually been through this process many more times than you and knows from experience what the pitfalls are and where to look for them.
Other than this, here are some reasons to use a buyer agent and some services you should expect.
As a Buyer's Agent, I provide these additional services:
Have you pre-qualified even before you walk into the subdivision office so that your negotiating position is as strong as possible.
Know the builder's history and reputation particularly with post sales service and warranty because even the best constructed home will have problems that will only show up after you've lived there a while.
Do comparative market analysis in the local area around the subdivision so you will have a good concept of the home's value before you sign a contract.
Know about any problems with the subdivision or the area that may not be known or mentioned up front by the builder's representative.
Know about resales of homes in nearby or even in the same subdivision that will affect your negotiating position.
Know about special incentives such as upgrades that may be available but won't be offered without negotiation.
Know if the builder may stand to benefit by closing out a particular segment by the end of the current quarter or if there are other time constraints that might strengthen your negotiating position.
Review all the bonds and assessments on the home you select.
Review the contract to make sure there are no misunderstood provisions.
Follow the transaction through escrow, assuring that everything is being done according to the contract, in a timely manner.
Assist in watching over the construction if you are absent or out of town.
Be with you when you select your upgrades. (It might be better for you to spend upgrade allowances on Landscaping, Escrow Costs, etc. rather than inflated builder upgrades). With the money saved you can shop for items such as carpet, drapes, etc. on the open market.
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Buying a home is the largest purchase most people will ever make. Homeownership has great benefits. Homeownership also comes with certain responsibilities.
Are you ready for homeownership? Look at your current situation and determine if:
- You have a continuing and reliable source of income prior to applying for the loan.
- You have a credit history that shows you're ready for homeownership.
- Your total debt is manageable and you can afford to take on the costs associated with homeownership.
- You have money saved for a down payment and closing costs.
Once you fully understand your current situation, it's important to look at the pros and cons of homeownership to make the best decision for you and your family.
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Benefits of Home Ownership |
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Homeownership has many advantages - both financial and personal. But buying a home is an important decision. Look at the benefits and the differences between homeownership and renting to better understand if owning a home is right for you.
What are the benefits of homeownership?
- Tax savings.
You may earn significant tax savings because you can deduct mortgage interest and property taxes from your federal income tax and many states' income tax if you itemize your deductions.
- A more stable monthly housing expense.
Your monthly housing loan or mortgage expense can remain the same for the life of your mortgage, depending on the type of loan you choose.
- Equity.
You may build equity in your home over the life of your loan, which allows you to plan for future goals like your child's education or your retirement.
Homeownership is not right for everyone. It may not be the right time in your life or you may not like the commitment associated with owning a home. Here are some differences between renting and homeownership:
- Renters are typically free from maintenance obligations such as repairs or lawn care.
- Homeowners often have more freedom in decorating, landscaping, etc.
- Renters can move more easily and more quickly than homeowners and there are higher costs associated with buying and selling a home.
- Homeowners have a financial investment and may build equity in their home.
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How Much Can You Afford? |
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To get a quick idea of what you can afford to spend, multiply your annual gross income (before taxes) by 2.5. For example, if your annual household income is $50,000, you might be able to qualify for a $125,000 home. This is just a rough estimate - the actual number will vary based on factors such as your debt and credit history.
Mortgage lenders typically use the housing expense and debt-to-income ratios to more accurately determine how much you can afford to spend on your mortgage.
- Housing Expense Ratio
Mortgage lenders recommend that your monthly mortgage payment should be less than or equal to a quarter of your monthly gross income. This percentage can change based on the type of mortgage you choose and sometimes the area in which you're looking to buy.
- Debt-to-Income Ratio
You need to factor your other debts into determining an affordable monthly mortgage payment. Mortgage lenders look at whether your total debt is larger than 30-40% of your monthly gross income. Remember, debt is not just credit cards and student loans. It can also include alimony, child support, car loans, and housing expenses.
A mortgage lender, a housing counselor, or consumer credit counselor can help you better understand these guidelines. Before you talk to a financial professional, you can organize your financial picture by creating a budget [PDF 76K ]. Don't forget that you also have to save for the down payment, closing costs, inspections costs, moving, and other related expenses.
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What Are the Risks? |
| Check For Properly Working Appliances/Fixtures: |
- Bathroom
- Sinks
- Showers/tubs
- Toilets
- Vent fan
- Heating fan
- Appliances
- Dishwasher
- Stove
- Oven
- Ice maker
- Garbage disposal
- Range hood
- Refrigerator
- Freezer
- Microwave
- Trash compactor
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- Kitchen
- Kitchen cabinet doors
- Drawers
- Sinks
- General
- Lights (interior & exterior)
- Windows
- Heating system
- Ceiling fans
- Hot water system
- Air conditioning system
- Electrical outlets
- Door bells
- Doors
- Water purifier
- Fireplace damper
- Garage door
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| Ensure House Is Well-Built & Systems Are In Working Condition: |
- Exterior
- Brick bulging or cracking
- Shingles missing or broken
- Siding rotted or missing
- Gutters damaged or need to be cleaned
- Concrete cracked in sidewalks/driveway
- Basement
- Water seepage in basement
- Cracks in foundation
- Poor ventilation
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- Interior
- Sub-flooring damaged or loose
- Cracked walls or ceiling
- Cracked tiles
- Loose plaster
- Flooring damaged
- Soft, springy floors
- Water stains near windows
- Water stains on ceiling below bathroom
- Water stains in attic
- Pipe insulation missing
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Myths About Homeownership |
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Lenders evaluate mortgage applications a lot differently today than they did even 10 years ago. And even more has changed in the last 20 years. What used to close the door to homeownership may not be a factor today.
Here are some common homeownership myths:
Myth: You need great credit to become a homeowner.
Fact: You may still be able to buy a home with less-than-perfect credit. And remember, you can improve your credit over time.
Myth: You need to put 20% down to buy a home.
Fact: There are many types of mortgage products and programs that allow low and no down payments. But remember to factor in other costs such as closing costs, property taxes, moving expenses, and repairs.
Myth: You can't buy a home in the U.S. if you're not a citizen.
Fact: If you're a legal resident, you can purchase a home in the U.S.
Myth: If you don't have a bank account or credit cards, you can't qualify for a mortgage.
Fact: Having a bank account is always a good idea and helps you establish credit. However, lenders can approve you for a mortgage even if you don't have a bank account or credit cards. You'll likely need to keep records showing a history of payments you've made for items such as rent, utilities, and car payments.
Myth: Lenders share your personal financial information with other companies.
Fact: By law, banks and other financial institutions are restricted in their uses and disclosures of information about you. In some situations, you may choose to restrict the disclosure of your information if you don't want it to be shared.
Myth: If you're late on your monthly mortgage payments, you'll lose your house.
Fact: If you have a financial hardship, like the death of your spouse or a medical emergency and fall behind, it's possible to keep your home and get back on track if you contact your lender early.
Myth: You can't get a mortgage if you've changed jobs several times in the last few years.
Fact: Not true. You can change jobs several times and still get a loan to buy a home. Lenders understand that people change jobs. The important thing is to show that you've had a stable income.
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