12 steps to buying a home

shotguns

1. Choose a Realtor

A Realtor is your best asset in finding the right property and then making it yours. Your Realtor will educate you about the market, help you evaluate properties, negotiate a winning contract on your behalf, and represent your rights on the way to the closing table. The right Realtor for you is not only competent and reliable, but also someone you like and trust.  Plus, to buyers, the services of a Realtor are 100% free.

2. Get pre-Approved

Talk to a lender to set your price range. Your Realtor can recommend some great local lenders to contact. A lender will help you determine your price range, your monthly mortgage payment, and your out-of-pocket costs for purchasing your home. Once you are pre-approved, you can act quickly when you see “the one.” Plus, a pre-approval letter will make your offer look more attractive to sellers.

3. Search for a House

After discussing what features you are looking for and what neighborhoods suit you, your Realtor will send you property listings that match your criteria. If a house stands out, then your Realtor will set up an appointment and accompany you to see it in person. With a Realtor’s trained eye and expertise by your side, you are well-equipped to choose the right house for you and your needs.

4. Make an Offer

When you find the house you love, make an offer! You and your Realtor will strategize and compose an offer that is favorable to you and likely to be acceptable to the seller. Your Realtor will also research recent comparable sales, so that you can be confident that your sale price is in line with fair market value. Sometimes the seller makes a counter-offer and you may follow that with your own counter-offer. Your Realtor must be a great negotiator so that you get the best deal, considering all market factors and each party’s bargaining position.

5. Pay a Deposit

Immediately after your offer has been accepted, you have to submit a deposit check to the seller. The amount of this check is usually around 1% of the sale price. The deposit will be returned to you if you choose to cancel the contract due to unsatisfactory inspections, low appraisal, or failure of financing. If you choose to proceed with the sale, the deposit will be credited towards your down payment at closing.

6. Schedule Inspections

Inspections of the property will allow you to assess the condition of the property. Your Realtor can recommend reputable inspectors in your area. If there are defects that you were not aware of when you made your offer, then your Realtor will negotiate with the seller to either fix these deficiencies or pay an appropriate amount of money towards your closing costs. If the inspections or any other research into the property reveals that this is not the house for you after all, you will be able to cancel the contract.

7. Order the Appraisal

Your lender will require and order an appraisal to be done. The appraisal will inform the lender of the estimated value of the property to ensure that you are not overpaying. If the appraised value is lower than your sales price, your Realtor will negotiate with the seller to adjust the price. However, if the seller refuses to lower the price, then you may cancel the contract.

8. Obtain Insurance

Your lender will require that you obtain homeowners’ and flood insurance for the property. Your Realtor can recommend some reliable insurance agents. If possible, you should obtain these quotes during your inspection and due diligence period. Plus, getting quotes sooner rather than later will clarify your exact out-of-pocket costs at closing.

9. Hire a Title Attorney

Find a title attorney to verify the title, provide title insurance, and coordinate the closing documents with your lender. Your Realtor can recommend good title attorneys and companies in your area. The title attorney will assure you that there are no issues with or liens on the ownership of the property. If there are, the title attorney will remedy them before closing.

10. Get Final Loan Approval

Although you already submitted some documents during pre-approval, your lender will require you to submit additional documentation to verify your funds and income. Your loan application will then pass through the lender’s underwriter before it is finally approved and you receive your mortgage.

11. Attend the Final Walk-through

A few days before the closing date, you and your Realtor will walk through the house to make sure that it is in better or the same condition as the day that you made your offer. Make sure that the seller has fixed any defects that they promised to fix at the end of your inspection period.

12. Buy Your New House!

Shortly before the closing, the title company will tell you the final amount of funds that you must bring to closing. This amount will include your down payment, insurance premiums, escrows, lender fees, titles work fees, title insurance, and potentially prorated property taxes, rents, or condo dues. Any seller paid costs, including the amount you negotied after inspections, will be taken off your bottom line. The title attorney will have you sign all of the paperwork at the closing. Finally, you get the keys to your new house! Congratulations, homeowner!

Real Estate Myth: I want to buy a home someday, but I can’t afford a realtor

This will be the best news you’ve ever heard: I work for free.

OK, the truth is that I do get paid at the end of the day, but my fee comes off of the seller’s bottom line at the closing. My services to buyers are 100% free.

This is how it goes down: when a seller and listing agent sign a listing agreement to put the house on the market, the seller agrees to pay the commissions of both agents. The listing agent will take half and (be so kind as to) share the other half with the “cooperating agent” on the buyer’s side. Despite the fact that my check will come from the seller, my professional duty and loyalty will still be to my buyer clients, of course. (Another fun fact: that check actually goes to my broker/office who then cuts me my share.)

So what’s the deal if the house is for sale by owner?

First, for sale by owner properties are very rare (only 9% of the national market, according to the National Association of Realtors). Second, if it so happens that my buyer client drives by a sign and wants to see the house, I will still negotiate my fee into the contract so that it will be paid by the seller in the end.

I don’t think I knew this before I was a real estate agent. And I still have people asking me the cost of my help all the time, so I wanted to throw it out there. So if you’re thinking about buying a house (or getting close to thinking about it), you might as well call me up. It’s never too early to seek out the (free!) advice of a realtor. We may not be driving around listings next Saturday, but I will sit down with you and lay out the general buying process. Believe me, there are other myths to unpack. Also, there might be steps you do want to take ASAP, such as checking your credit score or learning about your lending options, because it could help your home-buying position and opportunity in the future.

Anyway, I’m always down for a coffee date.

Double to single shotgun conversions – how to un-shotgun your house

Obviously, we all know how prevalent shotguns are in the city of New Orleans. You need only to stroll down a typical street in any of the historic neighborhoods and count them up. Sitting on narrow long lots, the houses themselves take on the same shape, with room after walk-through room. This layout presents many obstacles for modern living — no privacy, no closets, and no real options to maximize space.

shotguns

A single shotgun or one side of a double shotgun may work for one person or a couple, but things get complicated when roommates or a whole family wants to occupy one. And in a city where half of all the houses are shotguns, what’s a typical buyer (looking for a 3 bedroom, 2 bathroom house) to do?

Converting a double shotgun into a single family residence is a popular choice. Since you’re still essentially working with a long and narrow floor plan, probably attempting to save some of the existing internal structure, and hopefully trying to feature the original fireplaces while you’re at it, conversions can still be tricky.

Here are some of the best shotgun conversion floor plans I have seen:

1005832_B01_12 1007116 1012542 1006131 1012510 1012610 1012309 Photo. Floor Plan 2000984 2008518 2007930 Floor Plan Photo. Photo. 2004652 Photo. 988873 988832As you can see, the main decision comes down to where you’d like your common space (living/dining/kitchen) to be. Some floor plans have it in one long strip, embracing the shotgun characteristic. Others opt for the front of the house, where most of the decorative mantles are traditionally located. And still others have brought it to the back of the house to connect it to the backyard and outdoor entertaining.

If you do find a double shotgun that need a makeover, construction loans may be a good option to finance the renovation.

how to pay for the “fix” part of your fixer-upper

It’s easy to get sucked into the Rehab Addict and Fixer Upper fantasy and dream of a future project of your own. Especially in New Orleans, where there are plenty of historic charmers on that market that are just waiting for some tender love and care. Some of you might even be saving up for a down payment on one. But renovation costs add up and where does that cash come from?

rehab

Well, the answer is construction loans. Construction loans provide funds for both the purchase and the renovation of the home. It’s basically a two-for-one deal: two loans within one closing.

I tell all my buyers to get pre-approved before even searching for a home. (Here’s why.) This is still important when you are considering a construction loan. Instead of telling you how much house you can afford, the pre-approval amount will tell you how much you can spend in total price and renovation.

Once you find your perfect (or imperfect, in this case) property and make an offer AND that offer gets accepted – there are some extra steps to a construction loan. The buyer has to find a licensed contractor who will estimate the cost as well as complete the work. This cost will get wrapped up into the total loan amount. The renovation must be completed within 6 months of the closing.

Construction loans come in FHA and conventional forms. The FHA 230(k) loan is for your primary residence only and covers necessary and more basic repairs. The conventional Homestyle loan has more leeway in terms of the type of property and the extent of the renovation. Questions? You know where to find me.

What documents do I need for a loan?

I have already discussed the importance of getting pre-approval for a loan before making an offer. This process can be relatively quick for a lender if the borrower has all of the necessary documents ready. So if you are shopping around for a house, start getting this list of information together so you can move quickly when you find “the one.”

Lenders most commonly request the following documents along with your loan application:

  • payroll stubs for the last 30 days
  • bank statements for the last 3 months
  • retirement or investment account statements for the last 3 months
  • IRS form W-2 or 1099 for the past 2 years
  • if you are self-employed, tax returns and schedules for the past 2 years
  • name, address, and phone number for employer(s) of the past 2 years
  • name, address, and phone number for landlord(s) of the past 2 years
  • monthly payment amount and balance due on all debts
  • account numbers for all debts
  • copy of divorce decree and/or child support decree
  • cash for credit report and appraisal of property

You’ll be glad you did this when the moment comes!

6 reasons to get pre-approved for a loan

Because many properties for sale receive multiple offers, buyers should aim to make their offer as attractive as possible. One way to get a leg up on (or keep up with) your competition is to attach a letter of pre-approval for a loan to your offer. Sellers are not just looking for the offer with the highest price, but for the offer that is most likely to materialize in a closed sale. A pre-approval letter from the buyer will assure the seller that financing will not be an issue.

The loan pre-approval process is pretty quick and simple. Buyers do not have to commit to the lender that provides pre-approval – they may shop around for the best financing deal after the offer has been accepted.

Here are 6 reasons why an initial loan pre-approval letter is important:

1. You may lose the house to another buyer.

If another buyer with an otherwise similar offer included a pre-approval letter, it is in the seller’s interest to prefer that offer to yours. In a strong seller’s market with multiple offers, it is likely that most buyers will include a pre-approval with their offer. A seller does not want to risk taking their house off the market only to find out the buyer does not qualify for a loan and cannot purchase the house. Even if you know that you will qualify for a loan – a loan pre-approval letter is the only way to prove this to a seller.

2. Some sellers require a pre-approval letter before considering an offer.

It is not uncommon for a seller to state up-front that only offers accompanied by pre-approval will be considered. Because we are in a seller’s market, sellers can afford to make this claim and stick to it. I see this condition stated in listing on MLS every day.

3. You can show the seller that you are motivated to go through with the sale.

Providing loan pre-approval shows that you are taking the home purchase process seriously. Determining what you can afford is an essential step for a buyer. Buyers who have not done so may be looking at houses casually and putting in offers willy-nilly. Sellers do not want to risk entering a contract with a buyer who does not intend to close on the house.

4. You may be able to afford more house than you think.

It’s impossible to know exactly what you can afford before getting pre-approved by a lender. This might be good news and change what you are looking for. You don’t want to double-guess your offer once you get approved (and worse, find a way to get out of the contract then).

5. You can find out the monthly expense of your house purchase.

Your lender will be able to tell you with a degree of certainty what your total monthly mortgage payment will be given a particular purchase price. The monthly payment includes principal, interest, tax, and insurance (“PITI”). Make sure you won’t be “house poor” when all is said and done!

6. You can take care of problems early.

There might be impediments to obtaining a loan that you were unaware of - erroneous credit report, lack of job tenure, etc. The lender will let you know what they are and how to fix them during the pre-approval process. You may be able to solve these problems before closing and avoid the deal falling through.

So be prepared and position yourself for success! Contact me if you want me to put you in touch with a lender who can pre-approve your loan.