Aug. 13, 2016
This is a fairly comprehensive and lengthy guide, while helpful for the first time home buyers, will explain procedures for anyone purchasing a home in the Bonita Springs, Estero and San Carlos Park – Fort Myers, Florida areas.
The biggest challenge a many millennial and first time home buyers will face is figuring out where to get started. Many first time home buyers, due to lack of experience, find it a daunting task to work toward purchasing a home. Saddled with a combination of student debt, lack of understanding of the home buying process and not understanding credit or credit scoring are a few of the sources home buyers can easily get under control with a little guidance and patience.
A recent article from Nerd Wallet states that, asked what potential first time home buyers believed were the biggest obstacles to getting a mortgage, millennial renters gave these answers, in order:
Insufficient credit score or history
Affording the down payment or closing costs
Insufficient income for monthly payments
Too much existing debt
Clean Up Your Credit and Start Saving Money
If you are wondering how to buy a home in Bonita Springs, Estero or San Carlos Park and need a little help setting goals here are a few guidelines that can get you pointed in the right direction.
First and foremost if you’re a first time home buyer and new to the responsibilities of home ownership I am going to tell you a few things that might surprise you. Don’t think of this as a lecture but words of wisdom, especially if your parents have not been home owners. This also applies if your parents were home owners but experienced foreclosure or short sale during the late 2000’s housing bubble crisis. Here’s something for you to chew on: We are all a product of our own experiences unless we consciously goal set and plan for a different outcome. · Home ownership is not going to be handed to you. You’re going to have to work for good credit. To that end:
You must go on a diet, a financial diet. You need to spend less and save more.
It will not happen overnight. Anything worth having is worth working hard for. I am not telling you that to be condescending … we just live in a microwave society and you’ve been conditioned to expect things immediately and home ownership is one of those things that will not happen easily or overnight.
The Path to First Time Home Ownership
Anyone can buy a home within a in a few years if they make calculated choices, plan well/goal set and develop financial discipline. Here are a few tips to get you started that you are going to have to practice daily for the rest of your life if you want to earn a home and successfully own the home for years to come.
First, speak to a qualified, local lender who was recommended by a real estate agent. You will set your plan up for failure if you go to a random internet loan site online. You need an experienced professional who knows the local market to give you advice. If you think it’s going to be bad news … just rip the Band-Aid off and get it over with. If you believe that you have credit issues you need to learn about them all in order to fix them. A good loan officer will offer advice to help you remove a few credit dings.
Like most experienced real estate agents, I have a list of outstanding mortgage brokers who have helped my buyer clients get on the path to home ownership. Simply ask and I can email you their contact. If you’d like to physically sit down with them they are located in Bonita Springs, Estero and Cape Coral so you can pick a convenient location.
Second, quit spending money you don’t need to spend. Do not purchase things impulsively and stop spending money on daily habits like ice coffee or consumable, throw away items. You will need to prove to a lender that you have a history of both earning and saving money in order for them to give you a mortgage for a new home. Set a personal goal to save at least 10% of what you think you will want to spend on a home purchase or what the mortgage broker helps you decide is a comfortable price range. Want to buy a $200,000 home? Start by setting a goal to save $20,000 before even looking at the first home for sale.
Third, pay your bills on time and pay down your existing debt. Quit charging purchases that you can’t pay off immediately and pay down large balances on credit cards and revolving credit accounts. When your credit is maxed out you appear as a risk to financial institutions. They want to lend money on real estate but not if there is a risk or likelihood that they won’t get paid back.
Next, keep your eye on the prize. If home prices go up, you must not get discouraged. The market is ever changing and in a few months or even a few years the real estate market will be totally different. I promise. If homes are not affordable today they could become affordable in a year or so when inventory builds up again. Trust me, I’ve sold real estate in the Bonita Springs and Fort Myers area since the late 90’s and I have been through a few cycles, including the worst of the worst, so I know your time for home ownership could be just around the corner even if you feel it’s out of reach today.
Last, financing programs. There are many programs including VA and FHA programs which afford a first time home buyer the ability to put no money down or very little down. The FHA program allows for closing cost contributions from the home seller if they agree to it. Your experienced real estate agent along with your mortgage broker can help you understand these programs better.
The short story is to save, save, save. Pay your bills on time. Plan and goal set for a minimum of 1-2 years and you can likely own your own home.
Hidden Benefits of Home Ownership & Good Credit
The added benefit to saving to purchase a home is that you will also receive better rates on insurances, even automobile insurance. Premiums are lower with better credit. Even utility companies will throw you a bone because they reward those with good credit history with low or no security deposit; for an electric account, for example. You can change your financial life by adopting better practices and goals in your daily life. You can change your financial life even if you weren’t raised with “best practices” of finances and decide to make better choices.
First Time Home Buyers – Presenting the Offer
One of the reasons that I decided to post this primer on my website www.LifeInBonitaSprings.com is because of the experiences I have every day as a listing agent especially as it applies to first time home buyers in San Carlos Park. To qualify my opinion you first need to understand that I have been a real estate agent in Southwest Florida for quite some time. I’m closing in on my second decade of helping home buyers and home seller’s with their real estate. While I’ve worked extensively in the Bonita Springs and Estero, Florida area the rising home prices in 2016 have motivated buyers to look for affordable homes in South Fort Myers.
We Want to Buy Your Home & We’re Awesome!
As a new home buyer you have already worked hard to be eligible to purchase a home. You may have never thought how your real estate agent or your buyer’s agent communicating with the listing agent of a property can influence whether your offer is accepted, counter offered or even acknowledged. I’m going to task you with following up with your real estate agent to make sure you get the service you deserve.
Request a few things of them such as conveying your story to the home seller. You or your agent can write a letter explaining how much you love/needed/want the home and convey any sense of endearment to show the seller your interest in the home. Your real estate agent should “sell” you to the seller or seller’s real estate agent. There is nothing wrong with going so far as to include or present a letter with the offer and even a picture of you or your family. It can’t hurt tug at the heart stings a little so you win the interest of a home seller especially when there are multiple offers.
Speed and follow up are supremely important in real estate transactions. Make sure your agent gets you a leg up with your offer being the first submitted when a listing is new. From the listing agent perspective I can tell you, the buyer, that if your agent doesn't notify the listing agent that there was an offer sent ... it will die a lonely death in a spam folder. Consider this … if the agent didn't notify the listing agent of the offer they also didn't tell the listing agent a few key things that could really help you win this home. A day later there could be a competing offer, or two, coming in and diminishing your home buying leverage.
How Can I Make Buying Your Home Easier?
This open communication and dialogue the buyer’s agent has with the listing agent means that they could have explained the offer to the listing agent, the reason for some of the terms or discussed which terms could be flexible. Home buying is about more than price. You know that "fast closing" you may have offered thinking it was a good thing? Well, in some circumstances it isn't. Maybe the seller's need an extra few weeks. I’m still not sure why an offer is even delivered without asking what would best benefit the seller so that you can accommodate that request if it is within the possibility. Who is that home seller? What are their plans? Where are they going? How can we help them get there with less hassle so that they consider our offer above others?
Millennial home buyers, you need to hold your agent's feet to the fire. You're losing leverage right off the bat by not having your offer properly presented most of the time. My experience as a listing agent shows me this every day. My experience as a buyer’s agent has gone more smoothly when I’ve endeared the buyers to the sellers.
The First Time Home Buyer Contract Review
Here’s a standard that I use and a great tip for Millennial and first time home buyers to ask for: To help ease your mind you can request a blank contract to review long before finding and buying your first home. You should be familiar with it long before you find yourself face to face with writing a real offer.
Post Contract - Inspection and Underwriting
Your contract is a written agreement to purchase a home. You will have “contingencies” built into the contract to protect your interest and your escrow deposit in the event you are unable to close. Two of the largest contingencies that will have to be satisfied prior to closing will be the home inspection contingency and the financing contingency.
Your mortgage will be processed and the lender has a system of checks and balances to make sure you’re within the guidelines of risk ratio in order to release funds to you. This is the official definition of the process: Mortgage underwriting in the United States is the process a lender uses to determine if the risk of offering a mortgage loan to a particular home buyer (borrower) under the parameters of the mortgage guidelines.
Examples of mortgages underwriting items the lender will request could be items such as:
Evidence of earnest money
Employment history or employment contract
Pay stubs. Explanation of large deposits
Copy of a gift letter
Verification of employment
Copy of the executed sale contract
Credit score above a certain numerical range
Debt to income ration to not change significantly
It cannot be stressed enough that from the day you first speak with your lender until after you close the purchase of your San Carlos Park home that you do not initiate any new lines of credit and you do not make any large purchases. You shouldn’t make any small purchases if you’re struggling to get into a home. Every penny counts so you should employ the strongest financial discipline you can muster for the several weeks between contract and closing. This is important: Be patient and be frugal or you can be denied a mortgage even after your initial preapproval.
When you turn a document that was requested, such the latest pay stub, by your mortgage broker/loan officer know that there is more work on the “back end” that you won’t see. Let’s say, for example, that you turn your pay stub in on Tuesday, the loan officer then sends it to underwriting for verification and to be verified and recorded. You are not the only loan in the mortgage department so it could be Friday or even Monday before it is even recognized. That is why time is of the essence. When a request is made of you by your loan officer or lender, fulfill the request as soon as possible because there will be underwriting delays.
Post Contract: Inspecting San Carlos Park Home
If you’ve found a home and written a contract your next course of action would be to get your home inspection on schedule. Most home inspectors can be found by obtaining a list from your real estate agent. They will know home inspectors who work in the geographic area and who may be more experienced or thorough. You will be provided a list of home inspectors or can Google and find your own but it might be worth your while to structure a question to your real estate agent such as, ‘which inspection companies would you consider above any of the others if you were inspecting a home for your own purchase’? An experienced real estate agent deals with home inspectors on a regular basis. They know which inspection firms are sharp and thorough. We can’t tell you who to use but we can answer questions to help you screen the inspectors you’re considering.
There are a variety of home inspections that you have the option of ordering besides a general home inspection such as termite-wood destroying organism inspection, pool inspection, septic inspection, mold inspection, radon inspection, wind mitigation inspection, four point inspection. Your agent can help you understand which of the inspections you’d be likely to order. Some inspections such as termite/wood destroying organism and four point could be a lender requirement. As a basic home buying guideline, the general inspection, termite and wind mitigation would nearly be the standard order for a home purchase.
Home Purchase Charges both Expected & Unexpected
If you are considering being a first time home buyer ask yourself this while you are planning and goal setting: What is the real cost of purchasing a home in San Carlos Park beside the down payment? To enter a home buying transaction with your eyes wide open you’ll want to fully understand that the moment that you have an executed contract there will be a clock that starts ticking.
There will be time sensitive obligations to fulfill such as applying for your mortgage which will have a fee of $300-500, depending upon the lender. Usually paid in advance outside of closing.
There will be home inspection fees which vary by the scope of inspection. The expense $300-600 would be a guideline but could go higher with pool, septic, mold, radon and wind mitigation inspections. Usually paid in advance outside of closing.
The property appraisal, if not put on the settlement statement may have to be paid for in advance. $300-900.
Prior to closing, utility accounts will need to be established. Whether in South Fort Myers or in Bonita Springs the power company may require a security deposit, as well as the water/sewer company. This varies by utility and the home owner’s credit rating. Remember, credit also gauges a consumer’s insurance rates, too.
Last but not least, home owner and flood insurance (if needed) may have to be paid in advance, also. Those fees vary dramatically in Southwest Florida depending upon the age of the home, construction type, location and elevation of the home plus the credit history of the consumer obtaining the policy.
All of these fees are a great reason to save as much of a financial cushion as possible before engaging in a home purchase in San Carlos Park or Bonita Springs, Florida.
If you are a millennial home buyer or a first time home buyer and would like expert guidance through the home buying process in the Bonita Springs, Estero or Fort Myers, Florida area call or text Chris Griffith at 239-273-7430.