1. The Home Buying Process

Hello, and welcome to this module. The Home Buying Process, you are now at a place where you are considering purchasing a home. So what I’m going to do is walk you through what this process is going to look like. So here is what we’re going to cover. So the first thing I’m going to get into is answering the question as to when you should buy. This is a big question that people have before they start wanting to purchase a home. Then I’m going to cover, are you ready to buy, kind of give you a quick little cheat sheet checklist, just to kind of see if this is a decision that you’re really ready to make, we’re going to get into the credit score for the best interest rate. So that way, you know, cause again, this is going to be a long term, not only purchase, but investment.

We’re going to get into some of the common home buying myths. I’m going to break down renting versus buying because this is a big question that a lot of people have. Then I’m going to break down the team. You want to start forming. And considering when it come to the home buying process and then lastly protection, just so you know, your rights as a informed consumer, especially if this is your first time purchasing a home. So let’s go and hop right in. So when should you buy now, there’s really no right or wrong answer to this, uh, because the real estate market is gonna, it’s gonna, it’s going to have ebbs and flows. So what you want to do is real estate is a local game. So how it has to do with what’s going on in your local community, your local state, your local city, and you really want to be looking at what the trends are, what the areas are in that particular city or state that has to has to, that has to be.. Happens to be growing a lot.

So for instance, you may say, I want to buy in the spring and there may be a lot more listings in the spring and you might end up paying more. You may say, Hey, look, I want to buy in the fall. And it may not be as many listings. And you may be at a sellers market or a buyer’s market. All these things, the moral of the story. What you want to do is figure out when you are approved to get the best house at the best location, with the best rates. And that’s when you should buy it. There’s not, it’s not going to be a perfect time, but if you go through this process and you follow a real estate trends in your market, you’ll be able to identify the best time to buy. Um, also you want to decide based on your income expenses and the location.

So again, mainly location. You want to make sure that where you’re buying because real estate is one of those things that generally is going to appreciate with value. So your location has a lot to do with, if it’s going to do that, then you want to also look at your income and your expenses. I’m going to cover a little bit more of this and another slide about the home buying ratio. Then we want to talk about, we’re going to start considering, you know, like I was just saying, is it better to buy in the spring or the winter? Again, it just depends on the bullet point above your income, your expenses and your location. Then, uh, in my opinion, there, there is no right season to buy. As I was already saying, it doesn’t really matter. And the best thing you want to do was the location I’m shooting.

You buy the property that fits your overall financial situation. And then when all of that makes sense, then you move forward because we just don’t want to rush into purchasing a home just because the real estate agent or the realtor, so to speak is encouraging us to get this great deal. It’s always going to be a great deal, great deals. Don’t go away. However, you’re the one that’s going to be responsible for the mortgage, the payments, the maintenance, the taxes, all of that stuff. So that’s asking, so are you ready to buy? So now that we, you know, we covered that. And so, but there’s a couple of things you want to think through. So the first thing is you want to do your due diligence. So before you even start this process, you want to start looking at properties and you have to thoroughly investigate every property.

You can use the internet. There’s several different websites that you can use. Zillow is a very, very popular website. Trellis, excuse me as another website. That’s really, really powerful. Those two are really, really solid places to go to start to kind of get an idea of what you want to do. Um, then you want to review any disclosures about the property. This is a biggie. A lot of people get kind of, they find a really nice property and they think that’s the one they want to do, but they don’t read any of the disclosures that come with the property. And there’s where a lot of the gotchas can happen. You also want to make sure before you even get to this process that, Hey, look, if you’re selling on a home and this is something that we cover later on you order the inspection.

So, you know, what’s going on with that house just because it’s cheap or it’s a good neighborhood. There may be some underlying things that you may not be aware of that their seller is not going to tell you per se, because they want to, they want to get, then we get rid of the house. Also, you want to check the title of the property. There are so many times where people will put a house out for sale, but not truly be the owner of the house. And then you buy a house that from somebody that didn’t even own a house, and then you want to also, um, take a self test on the Freddie Mac site. It’s really, really, really powerful as well. And you can go through that process. So, so the credit score for the best interest, this rate is a 760 arguably, that’s where you want to have your credit score.

You don’t need to be in the age, but that 760 is going to get us the best interest rate possible. So lenders are going to look at this and they’re going to it. The, as you already know, understand and get that your credit score is a number that reflects your financial behavior and your track record. So in order to obtain the best interest rate, I mean the best interest rate for lending, we want to have that 760. And even if you don’t, even if you, you have like low credit or bad credit, my suggestion, because this is a long-term purchase, yes, you can get into the house for as low as 620 or 640, depending upon the lender and the program. However you want to make sure that you’re just not getting, getting a, getting a house, just barely getting into it because your interest rate is going to determine your credit score is going to.. your credit, score, your income, your expenses, your DTI, your home buying ratio, all that stuff is going to determine how much mortgage you can qualify for in the lower your credit score.

The.. The lower, the buying power you have. And the more interest you’re going to end up paying, which is something we don’t want to do. Um, and like I’ve already broken down. We already know our credit score can range between 300 to 850. So that means we have the ability to obtain 550 points. So you already understand this. So 192.5 points is paying your bills on time, 165 points is managing your revolving credit. 15% of your points is length of credit and the way you get the link, it just making sure you continue to make great, great payments and keep good, good history with your accounts. 10% is types of credit. And then the last 10% is your inquiries. So the ones that we have the most control over is the 35 30 in the 10% when it comes to our credit mix, all of those combined is 412 points.

And then simply just addressing like inquiries or making sure we get new credit will help us get an additional 55 points. So all of those together is close to 470 points, 460 close to like 455 plus 412. We added a 50 that’s 467.5 points. And we want to put ourselves in position to get all of those points because once we, and you know how to do this because you, we want to get as high as possible when it comes to the credit score so we can get the best interest rate. So here’s a comment. Here’s, here’s a, here’s a few common home buying myths that a lot of people kind of get themselves caught up in. And before you even start this home buying process, I want you to be aware of these myths. So the first one is it’s a bad time to buy a home and I’m afraid I’ll end up in foreclosure.

So, um, it’s never really a bad time to buy a home. Like you want to make sure it’s a bad time to buy a home. If your credit is bad, you have an unstable income and you have high expenses. Absolutely. But if you have a stable income, you have done everything you need to do to have great credit. And you’re really, really great with, because you put together a cashflow program, you want to go in and put yourself in position to start owning. Um, here’s another thing. I almost need perfect credit to buy a home, but I can’t do anything to improve my credit rating. Obviously, you know, this isn’t obviously, you know, this is a myth, you know how to improve your credit. And I would suggest personally, you have the best credit score you can get, because this is going to be a marriage for home.

Then you here’s another one. I can’t get a mortgage. I’ve changed jobs several times in the last few years, or if I’m self-employed, this is a huge one. So it does not matter if you’re self-employed and it does not matter if you’ve changed jobs. The biggest thing is that, have you been able to maintain, even though you’ve changed up, how have you been in the maintain, a income source? Because what they’re going to do is look at your bank statements, and they’re gonna look at your, your tax returns. And although you may have changed jobs, or you may be self-employed that’s, what’s going to tell the story about how much home you can afford. Then home ownership is too expensive, and I have to have 20% down payment to get my mortgage. And that’s not necessarily true that they have multiple home. First time home buyer programs that wouldn’t require you to have those much down.

So that way you don’t have to do that. Obviously, you know, the less you, you put down, um, the more you will be, you might be subject to PMI and all this, but again, you don’t necessarily have to have 20%. There are ways around this, and there’s specific types of mortgages, which we’ll get into that you’ve been qualified for. And the mortgage process is too complicated and risky. It’s not, you just need to be able to do everything else and understand how to think like the banks, which you already know and put yourself in a position to get everything that the banks and the underwriters are going to want to look for. So that way you look like you’re lendable and a good risk to give money to renting versus buying. Now, this is a big, big, big one, and there’s no wrong answer when it comes to renting versus buying.

So because there are pros and there are cons to both. Typically, people say, Hey, look, I want to rent for the next one, one or two years, because I know I’m not going to be in this particular location for a long time. But if I see myself being in this location for the next couple of years, then maybe I should buy there’s no right or wrong answer here because everybody’s situation changes. Everybody’s situation is personal, personal, personal finance is personal. So you have to look at everything you have going on, not just the numbers, but everything that you have going on comprehensively in your life. So some of the benefits of home ownership though, just so you know is equity. So this is by far one of the biggest parts and benefits of being able to buy a home. Because as you start to pay down the mortgage, you now own an asset that is going to say, Hey, look, ideally, it’s going to appreciate, but the difference between what I owe and what my own is worth, I had an equity and that is what I call ownership.

And you don’t get ownership, obviously when you rent, the other thing is potentially depending upon how you file your taxes, this isn’t always going to be the case, but potentially you have tax breaks. Now there’s been a lot of taxes.. A lot of change to the tax system and between itemized deductions, extended deduction. So this has a lot to do with how you file your taxes. So you want all, always get a tax break, depending upon how you file your taxes. Obviously you want to speak with your tax advisor or CPA regarding that, but that is a potential benefit. And if you get a fixed mortgage rate, you, your principal and interest rate in that payment is the same. So essentially, you know, Hey, look, once I get this fixed mortgage for the next 30 years, assuming I don’t refinance, I don’t do anything differently.

That’s going to be the fixed cost for that bill for, for the next 15 to 20 years. And then there’s other techniques that you can also do to ensure that you pay your mortgage down a lot quicker as well. And the biggest one, as well as control. This is your home. You own this, well technically, yeah, it’s your home bearing the fact that you continue to buy your mortgage, but moral of the story is you don’t have to go and answer to a landlord. You don’t have to answer to anybody. You know, you are the owner, you are the landlord, you are the person who makes all the decisions and calls all the shots. So if you want to paint your house, you want to add an additional thing to your house, whatever you choose to do, as long as, as long as it’s within reason of your homeowners association, which typically will be it’s you, it’s your, it’s your, it’s your baby to do whatever you choose to do.

Now, some of the cons of home ownership that a lot of people don’t consider, and you really want to consider this going into a home buying transaction is maintenance. By far, this is one of the most expensive things, especially if you’re not taking care of your finances correctly. So this is why it’s so important to make sure you have a cashflow control system in place because home ownership is an asset. It is an investment. However, this is going to be a big responsibility just because you can afford the mortgage and the taxes and the interest rate and the, um, and the maintenance, the mortgage and the taxes doesn’t necessarily mean you can afford the maintenance. So we have to consider that in terms of our income. And then the other thing is, is it’s an unliquidated asset. You can’t go and say, Hey, look, I have to have this $250,000 house and get $250,000 today.

It’s, it’s an asset, but it’s it. You have to go through a process in order to get.. Liquidity in order to sell it. So it’s an asset on your balance sheet, technically based off the equity that you own in a house, obviously you don’t want to be upside down in a home, but it’s still an unliquidated asset. So, um, some of the cons to, um, renting though, is you have more flexibility. So if you want to get in and get out, you don’t have as much of a financial responsibility to put that much down. It’s just really based off, Hey, look, you put down your security deposit, you have your good credit and you can rent. And then you can get out of that particular transaction. And when you rent, you don’t have to worry about maintenance. That’s another thing. So again, tomato, tomato, no one is right or wrong, but for the long-term you want to be considering home ownership, because this is how you’re going to really truly build equity.

Assuming you do have that mortgage. Now, when it comes to the home buying process, one of the things that’s rarely talked about or not looked at as much is the team, and when you’re going out to purchase a home, you want to make sure you have a good team. So what I’m going to do is break down the team members you want to have. So that way you can make sure, make sure your home buying processes is successful. So, um, you want to think of a real real estate game, like , a basketball game, like a pick-up game. So you want to have the best players on the court playing to get your real estate transaction in order you don’t want to have, you know, somebody who doesn’t know how to play basketball. You know, you don’t, you want to have a good point guard.

You want to have a good shooting guard. You want to have a good center forward, small forward, all that good stuff you want to make sure you have. Um, each member of the team has a different role, different role. So that’s why it’s important to make sure that the team that you choose, they know they’re part of the real estate transaction and they’re specialists. They’re not a novice, they’re not somebody that’s just now starting, not a friend. And not saying that you can’t do business with your friend. Assuming your friend is a really, really competent professional. You want to do business with them. If they’re not a competent professional, even if you guys are friends, keep friends for friendship and business transactions for professional people who have already done this and demonstrate it in their own actual life. Based off the past clients that they’ve served, that they can get you the results as well.

So that’s really one thing you want to take in consideration. So the most important position is the real estate agent arguably. So you want to find a solid realtor, just like I was saying, you don’t want to get a brand new realtor. You want to get someone who’s going to be able to get the deal done. Who can push, who can push mixed up. It’s going to be your advocate. The other person you want to make sure is just like the, do you have the point guard, which is real estate agent, the shooting guard is going to be the loan officer or the broker, because they’re going to be the one that goes out and finds the financing or the mortgage for you to get the approval. So this second position is very important. The third position is a title company or the lawyer, typically, depending upon the state, some companies, some States allow just title companies.

Um, other States require you to have a closing attorney or a lawyer to make sure that all the documents are reviewed and everything is in good order. So you want to make sure you have that position covered. The fourth position is the property inspector. So you want to make sure.. and/or the appraiser. So you want to make sure that this property inspector in or appraiser is at a good place where they can make sure they’re giving you a good sound perspective of the property. And then the fifth position is the closing agent. So this is going to be the person who does all the closing at the real estate table. So this is your starting five. So to speak. Now, the last thing you need to be aware of as you’re going into this home, buying transaction is all of your rights. And you want to make sure if you’re just like boxing, you protect yourself at all times.

You always want to make sure, especially when you’re going into a real estate transaction, if it’s your first transaction, that you know what your rights are. So the first rights is the first one is the fair housing act. Now this act is available to you as a consumer to make sure that all the practices, whether it’s lending the real estate transaction, all of those things are being done to you legally and ethically. And you have all of the right information now just because there’s acts and things in place doesn’t mean that you can’t be, you can’t come across an unethical person. So you want to make sure you get a copy of the fair housing act. So that way you’re aware of it, then you want to make sure you understand RESPA or the Real Estate Sediment Procedures Act. This is another one you need to be aware of. And typically your lender will give you access to this particular information, but you need to be aware of it. And then the last thing is you want to be on the lookout for predatory lending. So what I’m going to do is right below this video, I’m gonna include both the links to the fair housing act in the real estate settlement procedures act. So that way, you know, but at this point you understand the home buying process and you’ve got a good feel for it. And I will see you in the next module.