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House Buying Questions Continued

Well, it’s time to start clearing that up!

Because you will not be able to buy a house if your credit score is to low.

You definitely want to start working on credit problems now!
There is a number of agencies that can give you a hand with your credit problems.
A professional real estate agent and your lender can actually help guide you on how to fix your credit.

Work on fixing your credit and clean it up, so that you can buy your home.

Next question you may want to ask is how much should I spend for a house?

A good example here is how much do you pay for rent?
When you buy a house you and have a loan you will have the tax deduction of the interest you are paying at the end of the year.

That means you will be able to spend more per month on a house payment then you would for rent,

If you do buy a house, it will be your house and you have the right to do what you want to do with your house.

Now, if you buy a house were there is an association, you will have to follow the rules of the association.

If you buy in a historical area you will have to follow the rules of the historical area.

But in general, the house is yours and you can do what you want to your house.

When you are looking to buy a house, you want to make sure you buy in an area that is suitable for you.

There are a lot of different aspects to buying a house
and where you are going to look for that house.

Ask yourself these questions?
How far are you willing to travel for work and shopping?
How far are you from freeway access?
What kind of community are you looking for?
Are schools important?
What is the rating of the schools?

Now, once you have decided on the area you want
then the idea is to find a house that you can afford in that area.
Again, this may comes down to getting a mortgage loan, if you are not paying cash.

You can go to your bank or a mortgage originator.
In general, they can go over your numbers.
They are going to ask for your tax returns, your credit report and your pay stubs for the last few months.

They will want to see what you are making and now much they feel you can spend.

They will be looking at your expenses and deduct that from what they feel you can spend per month and decide on the amount you can spend for a house payment.

They are also going to look at your credit report and FICA score (this is the number the credit agencies’ use to grade your credit)

That will also be a major factor on whether or not they will give you a mortgage loan and at what interest rate.

If you want to get a fast idea of what you can afford,
you can look at your income for the last two to three years and take your average income per year.
Divide that by 12 to get your monthly income.
Subtract your monthly expenses.
Multiply that by 40 and that will give you an idea of what you can spend on a house payment per month.

Some loans will allow you spend more then 40% of your income on expenses, not including your present rent.

At the time I wrote this article, the interest rates were around 4 percent, The present interest rate may be a little higher or a little lower, interest rates are always changing.

Monthly Payments You Need To Deduct From Your Income.

Car payments, minimum credit card payment, child care, cell phone or any other monthly expenses you may have other than utilities.

Even if you have a zero balance on a credit card, the bank or lender is going to consider that you can use that card and in general deduct around twenty five dollars for each open credit card you hold even with zero balances.

So, you are not going to want to carry a lot of credit cards.

The balance after all the deductions for expenses will be what the bank or lender will see as the amount you can spend on a house payment per month.

Now, that amount this what you can spend for a house payment per month.

You can use our mortgage calculator to calculate your monthly payment.

Now that you have your per-approval and know the area you want to buy in, you will need to find yourself a real estate professional in that area.

I have to admit that not all real estate agents are equal in their abilities, so find somebody that you can work with and understand what you are looking for.

Someone that can guide you and go over the numbers with you. A real estate agent that understand the contracts and the terms of any contract you will be signing when making an offer on a house.

Don’t be forced into buying the first house that you see.
Again, I hate to say that, really, as a real estate professional myself, real estate agent/realtors get paid by commissions usage paid by the seller.

The quicker a buyer makes a decision on a house they want to buy, the faster we get paid.

Make sure the professional real estate agent you are working with understands what you are looking for and knows the price you can afford to pay for a house.

Make sure that the price you offer for a house is not over the value of the house.

The price of a house is based on the area the house is in and the prices of sold houses in the last 6 months in that area.

Remember that if the house does not appraise for the price you offered, the bank or lender will not give you a loan over the appraisal and your down payment.

The appraiser that does the appraisal get paid upfront and if the house does not appraise, you are out that money.

Right now in California appraisals cost around 450 to 550 dollars and up for an appraisal for a single family resident.

If you made an offer and the house does not appraise, you can try to negotiate with the owner, come up with more money for your down payment to make up the difference or back out of the transaction.

If you do decide to back out of the transaction after the appraisal, you will lose the money you paid for the appraisal plus whatever terms that you agreed to may in the contract for backing out of the contract.

For that reason make sure that the real estate professional you are working with explains everything to you as to the terms of the contract you are going to be signing.

Because once you make that offer, the terms of the contract in that offer if accepted are now the terms you have agreed to.
So, if you decide to back out of an accepted contract, your cost could be more than just your time and the cost of the appraisal.
Contracts are contracts, if you make an error or mistake in a contract you have signed and was accepted by the seller, it could cost you, so be careful, that just a word of advice.

When you are looking for a house, you don’t want to look for more then what you can afford.

I mean, home buyers have a tendency to want more than the numbers allow them to buy, finding the perfect house and not be able to buy that house can be a major disappointment.

So, be within the ballpark of what you can afford and don’t look over your budget.

Work with a real estate professional that understands the paperwork, the real estate contracts and the number of disclosures you need to review and approve.

Now that you have found
a real estate professional, you are ready to go and look for a house that is in an area you want and at a price you can afford.

Find the house you want to make an offer on
make sure that the offer you make gives you enough time to close on the sale.

If you cannot get your loan closed on time and the seller refuses to give you an extension, your could lose the house and owe expenses to the seller for time off market and other expenses.

If the seller agrees to give you an extension, the seller could ask for a pre-diem ( cost per day ) for everyday over the time the contract was to close.

Make sure you have time frame in the contract to do your inspections of the property, research and review paperwork that could affect the property and the appraisal.

During this time frame you should make sure you can back out of the contract without owing any cost to the seller or agents if you find something wrong or if the property does not appraise.

In California, that time frame is build into the residential purchase contract, unless it is changed by you, the buyer or seller and all parties agree.

In a number of other states, this is not true and you as a buyer need to give yourself that time.

It is important to do an inspection of the property you are about to buy.

You do not have to hire an inspector, but have someone that know what to look for and knows how to do an inspection of property.

You should do the inspection before you do the appraisal.

So, that if you do find a problem that the seller will not correct or a problem that would cause you to want to back out of the contract, you don’t want to have paid for an appraisal.

Let’s say everything looks fine you still need to be cautious.

You do not want to go out and buy furniture, get a new credit card, or do anything that could affect your credit or monthly payments, because your lender could do a last minute check on your loan and if they find changes that they feel effects you qualifying for that mortgage loan, they could want to do a review of your approval or even deny your loan completely.

If you cannot complete the contract with the seller, you could owe the seller for expenses and the agents’ commissions

Now that you have hired the right real estate professional, you have made sure you have the right loan for what you want and have found the right house, have open escrow (Here in California we have escrow companies, in other states it maybe with an attorney), escrow will get all the paperwork and monies together for the transaction to close.

Escrow will schedule with title to get the property transfer to you, the new home owner.

Congratulations

This is just an overview of house buying questions and what you will need to do and watch out for when buying a house.

Or you can call or text us at (909) 226-3551 Monday – Sunday from 8am to 7pm (PST) or Click Here To Email Meand let us find you the right house, the right area and even a lender to find you the right loan to work with. It’s can be that simple!

Steve Olmos, Dre#00812624, Homequest Real Estate
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