UNDER CONSTRUCTION - THIS SITE IS BEING UPDATED DAILY
Start here if this is your first time buying a home!
Once you've gone through these steps, you'll be as ready as a seasoned homeowner.
[0:00] INTRODUCTION. Hello and welcome everybody to my First-time Home Buyer’s Crash course for first-time home buyers looking to buy their first home. Sorry, that’s a working title.Hey! My name is Christian and I’m a real estate broker in Washington State. That’s the Washington STATE with bigfoot, not all of the political corruption... so just to distinguish between the two.
I work mainly in the Puget Sound region which is in Western Washington and primarily focus on Gig Harbor and Seattle which are my two hometowns. But I’ll go wherever duty takes me. Anyway, if you’d like to use me as your real estate agent, please contact me, you’ll find my contact information in the link below. I’d love to talk and start a conversation after this video.
HERE’S A HAPPY LITTLE LINK TO CONTACT ME
[0:53] WHO IS THIS FOR COURSE FOR? But enough of that for now, what are we going to be covering in this First-time Home Buyer Crash Course? Well, I’ve designed this home buyer crash course to be for those who are like, “I have no idea how to buy my first home. What’s the first step? What do I do? All I want to do is escape my parent’s basement! Or my cramped apartment building. I need a house! How do I get one?” Well, you’ve come to the right place. I’m not sure how you found this video. Hopefully you put something into Google or into the “YouTubes” maybe you found another video and it kinda linked and chained and now you’re here! Well, regardless how you found this video you’re in the right place.
[1.26] THE TLDW OF HOW TO BUY A HOUSE. Before we get into our first-time home buyer crash course let’s look at the home buying saga. And it looks like this: You have money, or you find someone who agrees to give you money, then you go looking for people who want money for their home, and if you go to them and say, “Hey is my money good enough for your home?” and they agree, then congratulations you’re a homeowner. Pretty simple right? Pretty boring right? You know what we need? Just like any good story, any good saga, it needs personal growth, character development, financial growth (oh, I like that one), it needs toughening up, it needs training, mentorship, and personal sacrifice. And when do those happen? Those happen in the set of prequels I’ve made. And they’re only missing one thing, and that’s you! I’ve made them so you can have a kick ass home buying saga. And lucky for you, they’re in this home buying crash course!
[2:37] So, let’s look at the storyboard for this home buyer crash course. Here are the 5 episodes that’ll take you from zero to home buying hero. Sorry for the cliche, but I think it gets the point across well that we can see here starting with our first episode.
[2:52] Ep1. The Introspection
[3:34] Ep2. The Financial Growth
[4:20] Ep3. The Personal Growth
[5:20] Ep4. The Training
[6:11] Ep5. The Mentor
Anyway, that’s it for our prequel story board. Again, if you’re interested in working with me as a real estate agent, I’m a real person, with a real job and I work in Washington, you know bigfoot, my contact information is down below.
HERE’S A HAPPY LITTLE LINK TO CONTACT ME
Once you've completed this crash course, you'll be highly trained in:
Are you ready for Episode 1?
If the wordpress website isn't loading the YouTube links, the videos can be found here
Episode 1 - Part 1
Episode 1 - Part 2
[0:00] Intro. Oh we don't have that in our budget? Dang it. Alright, anyway then, we’ll just move into the intro. Hi! Welcome everyone. This is episode 1 of this crash course for first-time homebuyers looking to buy their first home. Yeah if that sounds like you, you’re in the right spot. But I do recommend you watch the previous video if you haven’t already where I introduce everything that will be covered in this series. If you’re too lazy to watch that video, let me quickly introduce myself.
[0:30] Hi, my name is Christian! Real quick again Hi, my name is Christian! I’m a real estate agent in Washington State, and I work in the Puget Sound region mainly in the cities of Gig Harbor and surrounding areas and Seattle and surrounding areas. Those are my two hometowns and the ones I know the best. So I can give you the best advice on those. If you’re not a first-time homebuyer, meaning you’ve done this at least once already, this will be a great refresher course for you then, and if not and you’re already an expert, then I’ll have videos just for you back in the main channel and if you’re looking to sell your house those videos are also in the main channel, so just click back and you’ll find them there. And if they’re not, they will be shortly.
[0:58] Contents of this Episode This first episode will cover two major topics. Our first major topic will be
[1:40] Before we begin, a word from our sponsor… me! Yeah! And I asked me, to ask you to please subscribe to this channel, we are going to cover a lot more than just first time home buyer videos. We’re also going to cover how to sell your home, how to become an investor, and eventually how to be a developer. Yeah! We’re going to be covering proformas and all that fun math. So I wanted to inform you that that’s at least that is the kind of content that will be coming out. And of course leave a comment down below and smash that thumbs up button. At least once because it’ll really help me with the YouTube algorithm and I’ll be so grateful. I’ll also make content just for you if you ask nicely! So leave a comment down below how to buy a home with zero down and I’ll make a video just for you! So show me some love and I’ll show some back. Alright, back to our regularly scheduled program.
[2:30] Alright, Episode 1 - Introspection. Introspection is defined as:
To be, or not to be: that is the question:
Whether 'tis nobler in the mind to suffer
The slings and arrows of outrageous fortune,
Or to take arms against a sea of troubles,
And by opposing end them? To die: to sleep;
No more; and by a sleep to say we end
The heart-ache and the thousand natural shocks
That flesh is heir to, 'tis a consummation
Devoutly to be wish'd. To die, to sleep;
To sleep: perchance to dream: ay, there's the rub;
Bad acting? Terrible accent? Well who wrote this anyway? It has nothing to do with real estate. Bill who? Well, tell Bill he’s fired! I’m fired? WHAT?!
TECHNICAL DIFFICULTIES PLEASE STAND BY
[3:46] OK, maybe not that much introspection is required, but a little bit of soul searching is recommended before buying a house. And why is that? Well, because most likely, you’re signing up for a 30 year fixed rate mortgage. Well, there's great things about that, but there's also the fact this is a huge financial burden. You’re essentially promising the lender that, “Hey I’m going to pay you back every month, on time, for the next 30 years.” Wow, that’s the most adult thing to do next to paying your own taxes and saving for your own retirement. So I won’t fault you if that sounds too scary and you want to remain Peter Pan for a little while longer. However, I do recommend that you work towards wanting to trade in your TInker Bell for Ka-Ching Ka-Chinger Bell.
Sorry, I’m gonna give you a few seconds for your eyes to roll back forward. Uh… there we go! Yeah, the reason I made that bad pun is because I’m trying out my new comedy standup routine… No, it’s a terrible segue into this point: and that’s that homeowners have 40 times the net worth of renters. /bad acting/ And I want my fellow millennials to get rich… /bad acting/ Oh my god, will he stop with the bad jokes? Ok, yes I promise… until next episode or the next joke .
[5:03] So what I hope is driving you to buy a house is not all the FOMO (or fear of missing out) that's going on out there right now. But it’s because you’re trying to make a financial savvy move. And you might ask yourself: “Well if it’s such a financially savvy move, why doesn’t everybody do it?” Well, the government did try to have everybody do it and they got close. They got to almost 70% of American’s into their own homes. And you know what happened? Was 2007-2008 and the collapse of the housing market happened. And that’s because the government said, “Lenders we want more people in houses, give them all loans, even if they can’t pay them.” And so they did, and the next thing that happened people didn’t pay their loans, they bit off more than they could chew, and boom the whole economy crashed… so I want to make sure you’re not GOING TO DOOM US ALL.
[5:43] The risk that you’re signing up for is that if you don’t pay off your mortgage, not only do you lose your home and everything you’ve been putting towards it. It also ruins your credit and credit follows you for seven years and most likely you won't be able to buy another home for 7 years (3 years with FHA). So, please take it into consideration. With that said, I will try to teach you as much as possible in this series of videos. However, experience is the best teacher after all, so some things you’ll just have to learn the hard way and trial-by-fire. But at least you'll know the trial-by-fire is coming so you’re not taken unaware. With that said, let's move on to buyer’s remorse.
[6:30] Because buyer’s remorse, especially with property, is very real and unlike an uncomfortable pair of shoes, with property you can’t exactly go back and get a refund. No, once that deed is in your name, it’s yours and you’re stuck with it unless you go around and sell it, but if you sell it too soon after buying it, you end up losing money. And on top of that, you’re being charged monthly for something you don't like. So I hope to prepare you with this video on things you should be looking for before you leap into a piece of property. Remorse comes in two flavors. The first is subjective; which is when you just personally don't like the property. It’s not defective or anything, it just doesn't match your lifestyle or taste. And then second, there’s objective remorse which is when it turns out it’s going to be too much of a financial burden on you to either repair it, or fix things, or the mortgage is just way more than you bargained for. You’re living paycheck to paycheck now and you thought you want to cap out and buy the best home (aka expensive) you can and now you are dreading that rainy day. And that’s the worst type of remorse really and that’s really the only remorse I can help you out with because I can’t really help you with your personal tastes… so let’s go over some ways to avoid that objective remorse and to get you well situated into becoming the expert home buyer to know exactly know what you’re in for. So, I’ll be asking you some questions.
[7:53] The 7 Question Exam
These questions come in the form of a grueling exam. Designed to test your mettle, your character, and your fortitude. Yep, we will be testing your financial preparedness, your willingness to make lifestyle sacrifices and your ability to make long term commitments. I’ll be asking you 7 questions and after every question I want you to answer: “yes” “no” or “maybe.” Then after each question I’ll be expanding on why your answer is so important. But before we begin, why don't you grab a pencil or a pen and a piece of paper. Yeah, we’ll begin then. Let the testing begin muahaha… Alright, it’s half past freckle, I think I’ve given you enough time.
1. [8:46] Do you have stable income?
2. [10:22] Do you have any cash saved for a down payment?
3. [10:55] Are you comfortable managing debt?
4. [12:27]Do you have an emergency fund?
5. [13:21]Do you know how much “home” you can afford per month?
6. [14:06]Are you willing to make lifestyle sacrifices?
7. [15:42] Do you want to stay in the same area long term?
So, how did you do? Don't worry if you didn't get 7/7. Just keep watching and we'll get to 7/7 together
[0:04] Intro. Hi and welcome back to part two! Sorry for the interruption, it's just been difficult that time since you know… technical issues aside and unforeseen characters getting murdered and a terrible terrible letdown of an ending... Yeah! This is shaping up to be one of the better Game of Thrones episodes.
Part 1 was running a little bit long anyways so I was actually able to split this in half and add more into part 2 than I originally planned. So, I'm glad it happened. I'm glad there was a silver lining for more real estate content for you to enjoy. I hope you were able to use the lou got a refreshment and you're now ready and itching for more educational content... so let's get right into it!
[0:56] Buy vs Rent: The 5-Year Rule. I'd like to first begin this renting versus buying comparison by introducing the 5-year rule. What's the five-year rule? The 5-year rule is kind of a rule of thumb when it's financially beneficial to rent versus to buy. So, this is regardless of all other factors, this is just for monetary sense. Okay, renting is better for your budget if you're planning on spending less than five years in a single place. This means one single property, not a neighborhood, or a city, this is just the one property. Okay, more than five years? Better to buy! And why is that? Four factors:
[2:59] Fear the FOMO. But don't worry if you missed out. While there is a lot of fomo, you want to do things the right way. And for example, if you compare yourself to your friends, and your friends are like, “Dude look at my Zillow! It says I made $70,000 over the past year on my house!” But it turns out the house that they bought is the first house they got their offer accepted on... and they're quite not happy with the house... and now they have to think about selling because it's not working out for them, and now suddenly they have to pay 10% of the value of the house on selling costs. So if they made $70,000 and it's gonna cost them $40,000 to sell, they're only left with a $30,000 profit... assuming that they're in that house for more than two years. If not, they're gonna be paying short-term capital gains tax on that. So that’s something to consider. So if you think about it they're really not that much further ahead of you.
When it comes to houses you have to think in terms of hundreds of thousands and millions of dollars, because that's really how they impact net worth. Good investing advice states that, “best time to invest was yesterday the second best time to invest is today.” So, the best time to invest for you is right now. Just because you didn't invest in the past doesn’t mean you shouldn’t ever start. So start today and make the right choices today and you won't fall into these dumb traps that your friends are going to fall into. They’re going to be paying all these fees that they didn't know they have to pay. But I digress…
[4:15] 5 Reasons Renting is Better Than Buying. What I wanted to really say is that the 5-year rule does underpin the fact that renting is more financially responsible than buying in some situations. I'm going to cover these briefly. I know many of you are renters, so you have a lot of first-hand experience, so I'm not going to belabor the points. We'll blast right through them and perhaps even become aware of one you didn’t previously know and go “Oh! That's really a good one, maybe I should be doing that!” So, let's just cover them real quick and then we'll go into why buying is superior to renting.
Alright, now for the quick rundown:
Anecdote: My wife and I were making roughly $100,000, before taxes, in income. And we were able to, in the span of two years, save up a $100,000 that we used as a down payment for this house. We set aside 50% of our income and put it towards our nest egg. So, please take that consideration when you really think about how much you actually need to spend on yourself. Don't tell me it's not possible... If I can do it, you can do it, and I know you can.
[8:38] 5 Reasons Why Buying is Better. Okay, now we've covered all those awesome reasons why renting is so great, why would anybody want to buy? Well, while everybody has their own reasons, I think the most common driver is the need for more space and the need for more space usually comes from: having kids, wanting to start a family, or you want pets and you need more room a bigger yard, or you have hobbies, or you have an rv or you have a wood shop, or something else you can’t find room for in the city, or you just want privacy... you want a nice little green buffer around you and you don't want your neighbors looking into your bathroom window anymore. You can probably get something you're looking for in the suburbs, in the commuter belt (if you're not telecommuting to work now), for around the same price that you're renting an apartment for.
So, what else do you get for buying some property? I mean, besides extra elbow room? Well I'll tell you! We're going to explore five benefits of becoming a homeowner:
[15.47] How to Cheat the 5-year Rule: Want to cheat the five year rule? You do that by becoming a landlord. Yes, if you have to leave the property that you just bought, and you don't want to lose any money by selling it, you can just rent it out and have somebody else pay your mortgage! Voila, it's taken care of and in 30 years time, you'll never have to worry about making another mortgage payment again…. as long as you have good steady reliable tenants in your house. In fact, this is an investing strategy. You can apply for a new mortgage and do this every year. I'll go through all of this stuff in greater detail in my investing course.
But first, this is the first time home buyer course so I'm not going to get into all the nitty-gritty details. I'm just throwing it out there to let you know that okay it's not the end of the world if you buy a house you don't like or your job makes you move. Just go rent it out yourself or pay 20% to a property management company if you don't like being a landlord yourself. Simple.
Building Wealth: My favorite thing as a real estate agent is actually helping other people build Wealth. I mean that's really my passion is making money. When I think of what I like to do when I'm bored... I like to make money. Once you adopt that investor mindset, like I did, it actually becomes fun to not spend money and turn your money into more money! I’ve actually turned this into a passion: helping other people make money. So I get paid for helping you make money! That's a great win-win scenario isn't it? I'm even doing this [YouTube] for free so you don't have to pay for it!
Millennial Woes: I especially love helping my fellow millennials get into that wealth creation pipeline. That's because our generation got the absolute short straw. Not only did we graduate in the middle of recession (I graduated in 2009 and my uh the college speaker is essentially uh good luck guys you won't be able to find a job just you know just sit tight and just like suck a lemon until things recover) on top of that we're burdened by student debt and then only to find our bachelor's degrees were no longer worth anything... they just flooded the market with degrees. We did “what was right.” Our parents said get a degree to stand out and you need it to get a job. Then all of a sudden everybody has one [a degree]. Now to get a job you need work experience, and if you don't, then you need a master's degree or phd. This means more student debt and more time wasted not making any money. On top of that have you seen all the prices go for everything? Things have gone up like 400%. It's like housing, education, insurance, healthcare…. wages... No, not wages. Definitely not. Wages are stagnant. We're expected to pay all this money and of course we can't build any wealth.
This is why I'm so passionate about other ways to make money. Because otherwise you can be treading water for the rest of your life. It's hard enough putting money into your retirement fund as it is right now. In fact I'i'm going to show you a graph right now. It's going to compare millennial wealth versus boomers. Here you can see the difference between boomer wealth and millennial. By the time they were age 35 boomers, already owned 21% of US household wealth. Millennials on the other hand only own 3% at the same age of 35. So I’ve taken it upon myself to help my fellow millennials with this youtube channel or with my own personal work with you.
So let’s get through the first time home buyer’s course first, because after all, you're still looking to buy your first home. And I know, talking about investing is a little bit out there, but if you get into the mindset this is just the first start of your investing career, you will know that the sky's the limit. So, if you're ready to start your journey, get on to the next episode and I'll see you there again.
Step 2: Number Crunching
Content includes: Income-to-debt, lenders and you
**Spoiler alert: I'm going to spend a good deal of time going through the "money bit" of real estate. It's the most important part of the transaction. Simple as: no money, no house. Therefore, I feel it is well worth my time to give you a solid foundation before you meet with a lender. With that said, let us proceed.
Unlike those online cooking recipes, I'm going to cut right to the chase. We will being by looking at your Debt-to-Income (DTI) ratio. Lenders look two different forms of DTI, the Front-end and Back-end ratios (more on that below), when determining how much money (if any) they will lend you. Lenders look at your promised long-term incoming and promised out-going monies, otherwise known as your:
And here are some examples of long-term debt:
It's pretty easy to calculate your own DTI, simply take your long-term debt and divide it by your gross income.
If you haven't already, I also highly recommend starting a budget since you'll be researching those numbers anyway. There are many apps that allow you to track your spending and plan a budget. I recommend using Mint - it's a great app and free to boot! Ok, chop chop, lets get to it!
Once you have your numbers
NOTE: Just before you read any further - remember, these are house-hold numbers. If you're married you'll need to combine both spouses' information. If you're single or an unmarried couple you'll just use your individual numbers.
Since I can't see your screen I'll just take a guess at the numbers on your end. Let's say you're paying $1,600 in rent, $100 toward your credit cards interest, and $300 toward student loans. Your monthly debt payments come to $2,000 total.
Now for your gross income. Again, since I can't see your screen I'll just take a guess. Let's say your employer is paying you $6,700 per month before taxes and deductions. (If you are a 1099 worker, this will be the average of your last two years of net income)
This means that your Debt-to-Income Ratio ($2,000 / $6,000 = 0.333) is equal to 33.3%
OK, so what does this all mean?
This is where the 28/36/43% Debt-to-Income (DTI) Ratios come into play. These are specific DTI barometers that lenders look at to see how much debt you can take on and still be approved for a mortgage.
The 28% Rule - Total Housing Expenses aka Front End Ratio. Your future housing expenses shouldn't be more than 28% of your gross income. Meaning, if taking out a mortgage would cause you to spend more than 28% of your gross income on housing expenses, the lender would unlikely lend you for the full amount you're looking for. Housing expenses can be categorized as PITI: monthly principal, interest, property taxes, and insurance payments. If you are moving to a place with Home Owners dues, income them here as well. Example: If we know our income of $6,000/mo we can find out our maximum allowable PITI expenses ($6,000 x 28%) are $1,680.
The 36% Rule - Total Debt aka Back End Ratio. This your total "allowable" debt. Meaning, if taking out a mortgage would make you spend more than 36% of your gross income on total monthly debt payments, the lender would unlikely lend you for the full amount you're looking for. This includes the above total housing expenses (PITI) plus any additional debts mentioned in the bullet points above. Example: If you gross $6,000 per month, 36% of that would be $2,160. This means if your PITI has already spoken for is $1,680 of the total allowable of $2,160 then all you are left with is $480 for all other debt obligations (car payments, student loans, etc).
**side note: 28% and 36% are not fixed percentages. Most lenders can accommodate you here and there but it'll come in paying a little bit more per month. However, there is a limit to how much debt you can take on and still qualify for a Qualified Mortgage. and that is the: The 43% Rule - Highest DTI. This is the highest ratio a borrower can have and still get a Qualified Mortgage. Simply put, you qualify for mortgages that aren’t predatory.
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So let us get that debt into shape and our credit score polished!
Here's some advice to improve your credit score!
AND HERE'S SOME SUPER ADVICE TO REDUCE YOUR DEBT!
Increasing you income
Sometimes there's no magic bullet to reduce your debt and you have already a decent credit score. In this case it might make sense to look at ways to increase you income. This subject will be less specific that the previous because while it might be easy to say, it's much harder to achieve. There are also cautionary elements to this because if you go more than 6 months without a job or your rely solely on 1099's versus W2, your income sporadic income might not be the best thing.
There are are lots of youtube videos on these subject so I wont belabor the point. It's not a guarantee but well worth the consideration.
OK! that was lot to take in. When you feel comfortable with your DTI (this might take a little time) it's time to proceed to the next step.
Next is Step 3 : How much house can I afford?
Step 3: How much house can I afford?
Content includes: How much house can you afford?
Next we'll explore how to ballpark our house budget. Visit this website so we can go through the numbers together. You'll see something like this:
Start plugging in your own numbers; first, adjust the household income and monthly debt to reflect your own situation. Second; adjust the credit score. Third; enter the amount of money you'd would be using (or have available) for down-payment plus closing costs (you'll see the Mortgage Insurance appear if you plan on putting less than 20% down) and adjust the loan type (most likely a 30-year fixed rate).
Now lets look between the AFFORDABLE and STRETCHING slider. Remember the 36% and 43% from the previous step? Here we see those percentages in action. Remember, anything higher than 43% means you wont be eligible for a qualified mortgage.
Play with your input numbers to see how you can tweak your house price. What does going from "average" to "good" credit score. With that in mind, what would it take for you to change your financial situation?
Keep in mind, if this is your first house, it's OK for it to be less than ideal. At this point in time I want to help you build your equity. Therefore, first and foremost we need to get you in control of a leveraged asset in which you can quickly build equity and enjoy equity though appreciation. And together, you and I, will come up with a plan to help you climb that property ladder. With that in mind, lets look at several ways to get you into a house, even with little to none down-payment:
So that was a fun little exercise don't you think? But in the end, these are all hypothetical numbers. Take a quick breather and digest the information that was just presented.
Once you feel comfortable with how your numbers are lining up and even perhaps made a budget to hit your goal; it's time for the next step, where I get into the riveting world of mortgages! Yay!
Mortgages are the next topic so buckle up!
Next is Step 4: Mortgages - Who, What, Where, When, Why and HOW MUCH?!?
Step 4: Mortgages - Who, What, Where, When, Why and HOW MUCH?!?
Content includes: Understanding your mortgage, Local Lender, and unless you'll be paying in all cash for a property, you'll be looking for a mortgage.
The Who?
A "mortgage" is basically a legal agreement by which a lender gives a loan to a home-buyer and once all the payments have been completed the lender no longer has a potential claim on a property. With a mortgage, the home-buyer has both legal and equitable title for the property, meaning they own rights on that property. In order for the lender to claim back title to a property, in the event of non-payment by the homeowner, the lender will have to go through a lengthy legal proceeding.
In Washington State, we have what's called a "Deed of Trust" versus a mortgage. This means that the title to a property is held by a third party, the "Trustee." Should the home-owner stop paying their mortgage, the lender can skip the lengthy court proceedings and simply ask the Trustee to sell the property. I will be using the term "mortgage" in lieu of "Deed of Trust" since mortgage is such a familiar term to most people.
In simple terms, payback what you owe, and then some, or else the bank will take your home away.
The What?
Part I: National Programs
Mortgages come in all shapes and sizes. However, since many of them aren't relevant to most home buyer's, I'll be limiting them to the most commonly used. Here is a short list of national programs available to first-time buyers:
National programs: Conventional / Fixed rate and FHA loan. Here is an excellent article that I suggest you read to get a better understanding. If you are in a hurry here is a quick summary:
It's also important to know that conventional mortgages are more strict when it comes to DTI requirements. Remember those numbers you previously crunched? This chart shows the allowable DTI Front-end (housing) and Back-end (total debt) ratios for a conventional and FHA mortgage. Gut check: which one do you think you will qualify for?
Part II: State Programs
Washington State also has a host of programs if you haven't owned a home in more than three years. It's a good idea to see if you qualify for any of them.
Here's some quick highlights:
Eligibility requirements:
Here's a quick summary of the first-time home buyer loan programs available in Washington:
With so many programs available to get you into a home its highly advisable to have a conversation with a lender sooner than later. This brings up my next point.
The Where?
So where do you get a mortgage? You've probably heard of the Wells Fargo, Chase, and Bank of America. But this it is not recommended to go through these major institutions. First of all, they are cumbersome and slow. Second, they have poor customer service, Third, lack local knowledge of forms and contracts, and most importantly don't even participate in the state first-time home buyers programs we just went over! Local lenders are far more responsive to clients, transparent and will spend the time educating about what's the best option for you. They also have a reputation to uphold. If they don't preform, we'll stop recommending them. Real Estate Agents, such as myself, will recommend you the lenders that have proven themselves time and time again enough to earn our trust. Lenders are instrumental to the real estate deal, again the money thing, so make sure we know they can be counted on during crunch time.
The Why?
OK, obviously the "Why" is you need money and they have it. But for this question I'd like to make the "Why" rather bit more about the lender's side of things. So for this reason, the "why" is more like: Why should we give you a loan and why should we trust that you'll pay it back? Now that you know where to get a hold of a good lender, they will ask you to supply them with some basic information about your financial picture.
The HOW MUCH?
Your mortgage is primarily made up of Principal and Interest paid over the term of the mortgage. The total amount of these two will remained fixed for the duration of the mortgage. However, the weight of each will change after each payment. Interest will be weighted heavily in the beginning while principal will be weighted heavily towards the tail end of the mortgage. So you might be asking, "If they're combined why should I care? What's the difference between Principal and Interest?" Well here's a basic definition of the two:
It'll make sense when we look at this amortization graph below. On a $500,000 mortgage, after on year, you would have paid a combined total of $29,079 in principal and interest, but of that you would have only paid $8,616 in principal. Paying principal means you are accumulating equity in a property. And there's still $491,384 in principal that needs to be paid off before the house is truly yours.
At year 24, you'll have paid as much in interest as in principal. (Roughly $350,000 into each bucket) with $154,000 principal remaining. At the 30 year mark, you'll have paid back the full principal of $500,000, plus and additional $372,370 in interest. While $872,370 seems like a lot for a $500,000 loan, if you were to hold on to the house for 30 years and it only ever appreciated at the low rate of 2% per year, your $500,000 would be worth $905,860. You'd come almost $33,500 on top.
I skipped the topic of interest rates in the above graph to keep the example simple. But there's a correlation in the housing market between interest rate and housing prices. For every 1% that interest rates go up, housing prices decrease by 10%. The inverse is also true. Why is this? Because as interest rates rise, the cost of borrowing goes up tremendously. The difference in "Interest Paid" between a 2.75% and 3.75% interest rate loan on the same $500,000 mortgage mentioned above is almost a whopping $100,000 over the life of the loan.
Bonus Round: PMI
I've mentioned Private Mortgage insurance or PMI several times. It's a way of lenders insurance themselves in the event that someone stops paying since they added less than 20% of their own money to the deal.Therefore, the lenders see you as a risk and will charge you additional interest points in addition to tacking on Private Mortgage Insurance (PMI) fees to your monthly payment. This PMI is eventually canceled when your equity in the property reaches 20%. If you want the cheapest mortgage, have a credit score above 740 and put at least 20% down.
As you can see this stuff can get pretty complicated and there are a variety of paths available to you depending on your financial situation. Therefore I highly recommend you again to talk to a lender.
Next is Step 5: What does working with a real estate agent get me?
Step 5: What does working with a Real Estate agent get me?
Content includes: Buyer representation and FAQs
Before we get into the fun bit, I would like to first go over the basics of what I do as a Buyer's Representative so you'll be completely informed of my services and what I do before we meet.
What is Buyer Representation?
It simply means a contractual relationship between the buyer and his or her broker in the finding and purchase of their home. We also call this concept Agency. Agency defines your legal rights in dealing with a real estate broker. I will be providing you with a pamphlet entitled, LINK: The Law of Real Estate Agency. This pamphlet summarizes the Agency Law for the Washington State.
How does it work?
There is a seller's side and a buyer's side of every real estate transaction. As your broker, I will represent you, the buyer. We will sign a Buy Agency Agreement with each other, a contract that solidified our relationship and defines my responsibilities to you and your responsibilities to me. I will negotiate on your behalf and use all my capabilities to ensure we find you the right home for the right price.
What are the benefits to you?
State Law requires that I treat you honestly and fairly. That I disclose all material facts known by me, to provide you with the Agency Law pamphlet, to be loyal to you - that I will not disclose any confidential information that you have shared with me, to advice you and to assist you in your home buying process.
My commitment to you goes beyond the State Law. As your buyer's broker, I will give you my loyalty and my commitment to your needs. You can trust me. I am working for you and we are a team. Each of us will have responsibilities to one another and each of us will communicate continuously throughout our relationship. I want the majority of my business to come from referrals. My commitment to you will express that. I want you to feel like I have done such as great job for you that you will refer me to your friends and family.
Are there any disadvantages to the buyer?
There really are none! Our contractual working relationship puts your interest first. You have hired me to be in your corner. We can be honest with each other and I will become your negotiator and teammate throughout our relationship. You are committed to me and I am committed to you.
Is it good for the seller?
Yes! Working with a buyer's agent is great for the seller. A buyer's agent is more prepared and has made sure their buyer is ready to go through with the purchase. A vetted, motivated, and educated buyer is what the seller is looking for. A buyer's broker represent only the buyer so the parties don't have to worry about misrepresentation.
Will it cost me extra?
No. The commission I get paid at the end of the day for successfully completing my job (I don't get paid until we find you a house) comes from the Seller's side. In fact both agents get paid from the seller's proceeds at the end of the sale. On the rare occasion there is a For Sale By Owner where agents aren't compensated, I we can talk about my fees then. For Sale by Owners end up selling their houses considerably under market value so that well makes up for my commission.
What if you are representing both me the buyer, and the seller in the purchase of my new home?
We call this Consensual Dual Agency. In this care I would have the written consent of both parties and a statement explaining my compensation. I would take no action that was adverse or detrimental to either party. I would be very careful not to disclose any information provided by either party to one another. I would disclose any conflicts of interest. I would adhere to all other elements of the Law of Real Estate Agency required by the State of Washington and my contractual relationship with you.
Helping you find and purchase a home is only one part of my job. I will also:
Whew! That was a lot of info! But the good news is that you graduated "First-time home owners" boot camp.
Next: Proceed to the Home Buyer's Guide!
If you are a seasoned home buyer or have just completed my First-time Home Buyer's Guide, start here!
I've outlined these steps to give you insight of how we will work together to buy your new home
Welcome!
So you've decided your ready to buy some property?
Well you've come to the right place.
My website and videos are geared to those that want to be proactive in their home buying. The ability to have me repeat a point, skip ahead, and try-before-you-buy me allow me to help you to become an awesomely well-informed consumer and more importantly - a future friend. I hope before we even begin with your very own home search I will have won your trust and have proven myself as knowledgeable, capable, and competent to you.
Already feeling bold? Here's a link to contact me today!
Are you willing to put your trust in a complete stranger?
This undoubtedly a pretty tall order and also why in Real Estate most of our business comes from referrals from past client and friends. A referral is more than just a recommendation, it is a transfer of trust in the biggest investment of most people's lives. So when a real estate agent is referred by someone, they must be pretty certain in the agent's ability to preform, otherwise they might end up with egg on their face.
However, not all folks have friends or family they can ask for trustworthy real estate agent, perhaps a terrible experience the last time made them distrust all agents? Or perhaps they have recently moved, or are preparing to move, from California or Texas to Western Washington. How do they pick a trust worthy agent out of the hundred of strangers?
My answer to this question is this step-by-step guide into getting you into your home. I hope I can educate, entertain and win your trust, all from the comfort of your couch.
Wondering we'll cover in the steps ahead?
It's my secret sauce on how I will be helping make you make good decisions. Here's a quick executive summary to what I cover in my Home Buyers Guide:
Step 1 - Greeting, meeting, and consultation - This is our first meeting where I will get the chance to ask you a bunch of questions to get to know you better and understand what type of property is right for you.
Step 2 - Getting pre-approved and becoming an Astute Buyer - Review there wisdoms to make ensure you'll be getting your mortgage as planned. After you meet with your lender of choice, our education process will continue with a second buyer consultation meeting. Here I will go share previously experience, come up with a game plan and prepare your expectations when it comes to the home buying process.
Step 3 - Viewing Properties - I will arm you with the know-how and print-outs to become an expert property hunter. I will inform you how I will ask you poignant questions to gauge your interest in the property and how we will be using a rolling top 3 to find find your favorite home.
Step 4 - Putting in an Offer - What are the components/forms to a potent contract?
Step 5 - Closing Process, Keys, Closing Costs and next steps
Step 7 - The Not so FAQs of home ownership of county living
Let's proceed to Step 1: Rent or Buy?
Step 1: Meeting, greeting, and consultation
Content includes: Our first meeting
Hello! Pleasure to meet you. My name is Christian and I'm an advisor and a problem solver. I help people do what they already want. Although I am in the sales business I'm not a salesmen, I'm a more of a consigliere for you and your family. Main sole purpose is to do what's in your best interest, and for me to know what's in your best interest I will be asking you a series of foundational questions. We will need to set about an hour aside for our meeting to give us a chance to talk about the market conditions, the buying process and give me an opportunity to ask a series of questions so I can help you find a home that matches your needs:
Property Funnel Process (CURRENTLY ON HOLD - IN THIS MARKET SINCE THERE IS SUCH LITTLE INVENTORY AND PRICES ARE BANANAS)
In a normal market this would be the process that we'd use to make sure we find you a great home. The funnel concept takes all of the properties that might work for you and funnels it by your set of criteria. This process of elimination quickly removes properties that don't work for you. This way we can filter through thousands of houses (including new construction, for sale by owner, and foreclosures), narrow it down to a dozen or so, and then comb either online or by paying a visit in person. Through this method we will establish a rolling top three until we have sifted through all of the available properties. Once your final three contenders have been identified, I'll do a comparative market analysis (CMA) one each to determine what a good value for them is.
Most other agents do the exact opposite of this process. They start with a process of election vs the process of elimination. The buyer will pick a handful of properties they would like to go to visit each week and then run out and look at all those properties. How many properties were missed or overlooked during a period of 10 weeks due to this one-at-a-time approach?
With the funnel method, not only do we make sure we won't miss any properties that would have fit your criteria, but we also eventually make sure the ones that you like the most, you don't overplay for.
Scale of 1 to 10
This is a little exercise will give me an idea of where you are in the process, from the scale of 1 to 10. This will give us clarity on the things that need to take place before you are ready to have bought a new home. Things such as having to: finding the right home, selling your house first, and finalizing a loan are common hurdles that buyers must overcome before they can take the plunge.
Dream Home Exercise
I'll keep this one as a little bit of a surprise - I can't give everything away now can I? But what I can share is this: I'll be asking each of the buyers to make a list of what they want in a home... and then help determining your whys instead of your whats.
Intrigued? Click and and find out what this cryptic message means!
Cash or Loan?
At this point I'll ask you if you will paying cash for the the home or will you be getting a loan. Since 70-80% of people use a loan to purchase a home, asking whether you have already met with a lender and have gotten a loan arranged is a crucial step towards successfully getting you into a new home.
If you already have a lender you plan on using, I'll highly recommend getting a second opinion. If you don't already have a lender in mind, I can recommend several exemplary local lenders you can pick from. It's really important that we can get you qualified as soon as possible so we can strike while the iron is hot!
HOMEWORK: Talk to several lenders and find one you like. I can recommend to you three highly reputable lenders you can interview. Once you find one you like, find out how much you qualify for. Without this we would be shopping blind.
Once you've done this, let's proceed to Step 2 - Pre-Approved Duties and Showing Property
Step 2: Pre-Approved Duties and Becoming a Astute Buyer
Content includes: Duties to your credit score and what to expect in the coming weeks
Ready, Set, Go!
After you meet with your lender, we'll now know how much you are qualified for. But, before we run a search to find houses that match you budget, I'll double check that your price range matches that of your "wish list houses." If your must-haves are non-negotiable, it might mean we need broaden our search area.
Once your chosen lender gets you preapproved we'll know what price range to look in. From this point onward your credit cannot change significantly or it will derail your mortgage. Until you successfully close on a house you shall not:
Education day!
Whether it's your first time shopping for a houses, or its been a while, looking at properties online is one thing, but seeing, feeling, breathing, experiencing them in person is another. We'll arrange to see 3-5 homes over the course of a day, thereby giving me the opportunity to understand your likes and dislikes. It will also give you an opportunity to get a better sense of what you can get in different areas in your price range.
According to the National Association of Realtors, buyers typically search for 10 weeks and looked at a median of 10 homes in person.
Before we enter battle, I want you to be prepared for what is about to happen. The next four steps will give you clarity and confidence in what you should expect coming into this crazy market:
Is there anything we've missed?
Now's the time to to find out if there is anything we've missed during our 1 out of 10 exercise. It's best to address these before we get into the middle of negotiation a contract.
Review the Market
Preparing for the market you're about to enter is vital to staying calm and collected. I will share statistics and stories about other buyers' experiences to help you make better decisions.
Preparing Expectations
When we find a home you like, I'll notice that you start doing what we call the dance. You will start giving signals that you like the home. When I see you do the dance, I'm going to ask you this question, "Can you see yourself living in this home?" If you say yes, I'm going to ask you, "Is this a home you would like to own?" If you say yes, I'll ask you if you want to write a contact.
Preparing for Negotiations
At the end of this day we do a hypothetical: we will pretend that the final house we visit is the one you want to put an offer on. Normally, we will do this after we find a house you like, but in this market most offers are written immediately after touring a home. Therefore, we will discuss our strategy for making a successful offer. We will tailor the offer to how long the house has been on the market. We will have a strategy for a house that has sat without an offer for 3 weeks versus a house that came on the market that very day.
In this market, we want to discuss negotiation strategies and ways to reduce or eliminate contingencies - such as inspection, loan, and appraisal contingencies.
A Purchase and Sale Agreement basically boils down to 5 negotiating points:
With all this ammo in your arsenal you'll be well prepared for the upcoming battle.
Next: Proceed to Step 3
Step 3: Viewing Properties
Now we get to the fun part!
What I'll do to prepare you
Before we head out I'll equip you with some information. This packet is equipped with:
If you happen to see a house for a sale that wasn't included in our tour, don't hesitate to ask why it wasn't included into our itinerary. Usually we have enough time, depending how far apart the houses are, to see 6 homes on a trip. However, due to the inventory shortage we might only end up seeing one or two houses that fall within your criteria.
Touring a house
Alright - we've arrived at our first house! What's next? If you've seen one of those property hunting shows you'll have a good idea. Armed with the THE HOUSE HUNTING CHECKLIST from my Perfect Buyer's Packet, I'll let loose upon the house. Your job is to visit each room and give them the thumbs up or thumbs down. Once you've completed your exploration I'll ask you these two questions to gauge your interest in the house:
If you haven't yet checked out my Perfect Buyer's Packet I suggest you do it now. My web based Buyer's Tour Guide also has a simple 5-start rating system and comment section if that's more your cup of tea.
What are the odds of finding the house?
In a market that has more inventory, and is more buyer friendly, these are the odds that you'll find a home that you'd like to put an offer on:
However, in this market we only have a few days before a house goes under contract at it might be that we only have one or two houses on our itinerary. This obviously lessens the chances we'll find a home you like. So don't be disheartened if the first few times out we don't find a home you like.
That's the one (of three)!
The first clue that you've found a house you really like is that you start doing the dance. You start imaging how furniture will be arrange, what different rooms will be used for, paint colors and decorating ideas, etc. At the end of our tour I'll ask you to:
Remember each home becomes increasingly difficult with each new house you see. So how to we keep the best and forget the rest?By asking you these three questions. They are designed to separate the wheat from chaff:
When you've finished your house hunt and back on your couch I'll ask you to do a little research of your top three and see if we can eliminate one or two. I'll ask you to:
In a more normal market I would run a market analysis on your top three contenders to make sure you wouldn't overpay for any of them. Which leads me to my next point...
Current Market Warning
In this market many houses go for above asking. When you are not purchasing a house with cash, your mortgage lender will send an appraiser out to determine the value of a house once you're in contract. This means even though you are willing to pay $600,000 the lender might only think that the house is worth $500,000 leaving you with a out of pocket difference of $100,000. Just because you think it's worth so much, doesn't mean the bank will.
So... are you ready to put in that offer?
Next is Step 4: Offer submission, inspection and negotiation
Step 4: Contract forms, submission and contract process
Content includes: Understanding your mortgage, Local Lender, and unless you'll be paying in all cash for a property, you'll be looking for a mortgage.
We'll draft up a purchase and sale agreement ahead of time so when we do find that property, so we can submit an offer immediately. While we'll go over this information before we go looking at properties, it made the most sense to include them in this section. So lets go over what you will be signing.
What makes one offer better than another?
When draw up a purchase and sale agreement it's basically a "I want to buy your house from you for X dollars." The rest of the forms and addendum are contingencies, or protections, that allow you to withdraw your offer should something go wrong.
Here are some of the most common forms and the protection they provide you. The less of these you include in your offer, the more risk you are putting on yourself but makes you offer stronger in the seller's eyes because there's less chance for you to back out.R
Required Forms
Standard Forms
As Needed Forms
Current Seller's Market Forms (these are frequently used in this market but put great risk on the buyer)
Just remember the less of these you use, the cleaner the offer, the cleaner the offer the more risk you burden, the more risk you burden the higher likelihood your offer will be accepted. Here's a infographic on how to structure an "offer to win."
Since no transaction is ever the same we'll need to sit down and discuss which of these forms are right for you. Since we drafted a purchase and sale agreement and it's already in the pipeline, all we need to do is plug in a couple numbers, have you authentisign, it and we're off to the races!
Offer submitted!
This part is a little nerve wracking. The waiting period. Once we submit and offer to the seller we either wait for their offer review date or we include a deadline that they must accept our offer by or else it expires. There are several outcomes:
Let's assume it get submitted, whats next?
Next is Step 5: What does working with a real estate agent get me?
You're in contract!
Now that you're in contract, time is of the essence. This means that there are several immediate deadlines you need to meet. We'll sit down, review deadlines and plot them on a handy calendar, like this one, so nothing goes amiss.
Here's a simplified version of events:
Buyer Closing Costs
Besides your mortgage there are other fees that you are responsible for that are part of your real estate transaction. These are called buyer closing costs and consist of:
The only out of pocket costs which can't be rolled into your mortgage are typically the home inspection, lender appraisal and your down-payment. It is possible to ask the seller to help pay for title insurance and escrow fees, but in this market this isn't recommended.
You get the Keys!
You'll have access to your house that evening. Since there can always be some hiccups during crunch time, it's best to schedule your move-in date a couple days after closing. A home warranty might be of interest to you if you appreciate piece of mind should any of your appliances, plumbing, roof, and major building systems. Base price for a home warranty runs $450 per year with $100 deductible.
I will stay in touch to see how things are going and periodically check in on how things are going. I will be happy to answer any questions you might have and can refer you to some reputable plumbers, electricians, roofers, etc) should you need their services.
Property Reviews
Once a year I will provide you with an update on the value of your home. Since your home is most likely your largest investment it's important to be informed how your investment has been preforming. If you're keen on having your real estate build you wealth, then using this equity that has been accrued in your home to purchase investment property is one savvy way to do so. I can absolutely guide you in this process.
Future Outings
Being part of my real estate family, I welcome you to be partake in my future yearly outings. These outings will be for the whole family and are an all-paid for retreat where all of us can get outdoors, relax, and have a good time. We will get to know each other better and hopefully form life-long friendships. I hope you will want to join in on the fun!
Hi there! I'm a licensed Real Estate Broker in the State of Washington and I work out of the Windermere Gig Harbor office.
>>Click here if you'd like know more about small-scale real estate investing.<<
No matter where you are in your buying process you'll find videos and guides to make you an informed home-buyer.
Just follow the steps below! You got this!