HOW TO BECOME A HOME BUYER
HOW TO BECOME A HOME BUYER
You are about to embark on one of the most important and exciting decisions in your lifetime, the selection and purchase of your home. It is a decision that will bring you years of comfort and joy. Yet, the idea of spending your free time evaluating homes and neighborhoods, figuring your down payment and monthly costs, applying for a loan, and finalizing the purchase can be an overwhelming process.
For some buyers, the process is tedious and confusing. This is why consulting a professional realtor is a smart decision.A licensed Real Estate Agent can help you find a house, efficiently and quickly. Discuss with your agent the type of home you believe will be right for your needs. Is your family growing? Do you entertain a lot? Garden? Barbecue? Work at home? Are you a chef? A wardrobe buff? Are you a fixer-upper or a total couch potato? Your Realtor’s expertise and experience will be crucial in helping you find the right home of your dreams. He/she has access to the Multiple Listing Services (MLS), which provides information on virtually every home for sale in the market. This is a useful tool because it provides the most current comparative information available for more informed shopping.
In addition, your Realtor will show you homes that you can comfortably afford. He/ she will have the resources to help you understand how much a lender will let you borrow and on what basis it is calculated. Once you have calculated a price range, your Realtor will work with you to establish criteria that will lead you to the right home.
When you are ready to make an offer, your Realtor can assist you. He/she cannot suggest a lower price than what is listed, but he/she can tell you what comparable homes are selling for in the same neighborhood. Your Realtor will act as the intermediary between you and the seller who is likely to also be represented by an agent. If there are negotiations over price, closing dates, contingencies, disagreements and items – such as appliances – to be left or taken, your Realtor will be your representative. Once your offer is accepted, you will have a lot to do in a short period of time.
It is almost a requirement nowadays to be pre-qualified by financial institution (mortgage lender, banker etc ) before you write your first house offer. Your Realtor will direct you to a lender, and inspection and insurance professionals for your escrow and title needs. He/she will keep you on track and organized.
SHOP SMARTER … NOT HARDER
Fine tune those dreams of your nest home by working on the answers to two questions:
How Much House Can You Afford?
Though you may be willing to spend until it hurts, the name of the game is how much you can afford based on the lender’s calculations/requirements. Your realtor will put you in touch with a lender that he/she trusts to help you through the financial process of pre-qualifying (targeting the amount that a financial institution will lend you.)
Mortgage lenders are chiefly concerned with your ability to repay the mortgage. To determine if you qualify for a loan, they will consider your credit history, your monthly gross income and how much cash you’ll be able to accumulate for a down payment. So how much house can you afford? To know that, you need to understand a concept called “debt-to-income ratios.”
The standard debt-to-income ratios are the housing expense ratio and the total debt-to-income ratio. These are also known as the front-end and back-end ratios, respectively.
Front-end ratio: The housing expense, or front-end, ratio shows how much of your gross (pretax) monthly income would go toward the mortgage payment. As a general guideline, your monthly mortgage payment, including principal, interest, real estate taxes and homeowners insurance, should not exceed 28 percent of your gross monthly income. To calculate your housing expense ratio, multiply your annual salary by 0.28, then divide by 12 (months). The answer is your maximum housing expense ratio.
Back-end ratio: The total debt-to-income, or back-end, ratio, shows how much of your gross income would go toward all of your debt obligations, including mortgage, car loans, child support and alimony, credit card bills, student loans and condominium fees. In general, your total monthly debt obligation should not exceed 36 percent of your gross income. To calculate your debt-to-income ratio, multiply your annual salary by 0.36, then divide by 12 (months). The answer is your maximum allowable debt-to-income ratio.
Take a homebuyer who makes $40,000 a year. The maximum amount for monthly mortgage-related payments at 28 percent of gross income is $933. ($40,000 times 0.28 equals $11,200, and $11,200 divided by 12 months equals $933.33.)
Furthermore, the lender says the total debt payments each month should not exceed 36 percent, which comes to $1,200. ($40,000 times 0.36 equals $14,400, and $14,400 divided by 12 months equals $1,200.
‘When I was at home, I knew I was at a better place’
Lenders use slightly different formulas for arriving at “total monthly house payment”. These costs generally include your mortgage principal and interest payment, property taxes as a monthly figure, and hazard insurance as a monthly figure. These four items are referred to as PITI (principal, interest, taxes & insurance). If you’re required to pay private mortgage insurance (PMI) because your down payment is less than 20%, this PMI payment will also be included. If you decide to buy a condominium or town house, the monthly homeowner’s association fees will also be included. Keep in mind, these formulas aren’t cut and dry and things change from lender to lender, so your best bet is to do your research and make the comparisons for yourself.
What Type of House Do You Want?
Perhaps you know exactly what you want….2,200 square foot ranch style home on a wooded lot. If so, your Realtor can look immediately for only that type of house. On the other hand, if you don’t know what you want, but “you’ll know when you see it”, you need to complete the “Needs and Wants Checklist”. It will help you define what you really “have to have” and really “want to have” in a house and neighborhood. This will help your Realtor considerably when searching for the right homes to show you. When you look at homes, bring this list with you so you can keep a record of your notes on each of the homes you will be touring.
Do you have any questions? Let’s talk real estate a little .. Call or text Bo – 405-812-1572
About the Author:
The above information was provided by Bo Kociuba a long time resident of Canadian County in Oklahoma. Bo is a Broker’s Associate and has been helping people sell and find new homes in Oklahoma City Metro for almost 10 years.
Together with her partner Buster Elliott they work as The B&B HOME Team.
Both are multi-million producers and long time Canadian County residents.
You may contact Bo via email: Bo@BestOklahomaHomes.com or by phone 405-812-1572.
Let’s TALK REAL ESTATE and learn about current conditions of the market.
The B&B HOME Team serves towns of OKC Metrowest : Yukon, Mustang, Bethany, Piedmont, Tuttle, Blanchard, Newcastle and OKC Metro: Edmond, Oklahoma City, Moore and Midwest City.
The B&B HOME Team specializes in Residential & Commercial Real Estate, Ranches and Recreational Land and Land Development.
They serve Oklahoma and OKC Metro: Yukon, Mustang, Bethany, Piedmont, Tuttle, Blanchard, Newcastle, Edmond, Oklahoma City, Moore and Midwest City.
You may contact Bo:
Whether you plan to buy, sell or relocate to our beautiful State of Oklahoma we are here to offer professional service and consultation.
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