First Time Buyer

For many young couples, buying their first home is a sign of having "made it." The idea of the American Dream is still strong with this youngest generation, and nothing is a bigger part of that dream then home ownership in the Sarasota real estate market.

But for many, home ownership is like an impossible obstacle course. It isn´t just the mind-boggling cost of buying a home for the first time, it´s getting the right financing, as well as coming up with enough of a down payment and worrying about closing cost fees, as well. For those that have never been though it, the sheer length of the home buying process can be overwhelming.

The first thing that every young couple needs to do to increase their chances of getting the home of their dreams is to get their finances in order. Here is a helpful list of tips that will go a long way in impressing home sellers and bankers, alike.

Put together a budget that actually works. When most people sit down and create a budget, it´s based on what they want to spend per month. Of course, the amount you want to spend per month varies with things like emergencies, holidays and birthdays. A more reliable way to figure out your budget is to go through all of your expenses for the last six months and average it all out. That way, you have a budget based on what you actually spend instead of what you want to.

You must reduce your debt load to under ten percent. For some, this is a laughable goal. A large number of Americans won´t see a debt load this low their entire lives, but to put yourself in the best possible position for home ownership, you need to reduce your entire debt load, including student loans, credit card debt and car payments to between 8-10 percent of your total income.

As part of your new budget, make sure you write down every monthly expense and see if there is anything you can cut back on so you can save more and, in turn, have more for a down payment. Things like cutting back on the cable bill or other similar things may not seem like much but they can add up over time.

Don´t be afraid to take on a second job. It doesn´t sound like a lot of fun, but the few extra hundred dollars per week can really add up in the bank and every cent that you pay in down payment saves you in the long run, not just on financing but on the principal, too.

While taking on a second job might be a good idea, switching jobs tends not to be. The bank is going to look at employment stability as a major part of approving your loan. If you´re switching jobs 6 months before you apply, it´s going to send up a red flag. Even if it´s a higher paying job, having the tenure at your previous job is more important. Once you get the loan, then you can switch jobs all you want.

Do everything you can to polish up your credit history. You don´t have to have a spotless credit history to quality for a mortgage. If you did, only 15 or 20 people would own homes, but they can affect the interest rate you get. You can request a free copy of your credit report and then you can set your sights on improving it.

Save, save, save. Your down payment is the single most important part of buying a home. You want to pay as much up front as possible for several reasons. When you submit your offer to a seller, the bigger the down payment is, the better the chance your offer will be accepted. It also saves you wads of cash over the length of the loan since you´re borrowing less money and paying less interest.

Being a first time home buyer is scary. There are many different obstacles in your way but with the proper planning, the proper financial advice and the right realtor, you can be well on your way to owning that beautiful Sarasota home.
GBrey

What should I tell my Realtor?

For most people, especially first time buyers, the question of how much they should tell their real estate agent seems silly. The real estate agent is there to represent them and their needs and the more they know about what you can afford and what you can’t, the better job they will do. And in most cases, this is true, but you need to know exactly what kind of relationship you have with your real estate agent before you start to disclose personal financial information.

There are three different kinds of relationships you can have with your real estate agent. Let’s take a closer look at all three and we’ll see exactly what you should be saying to your agent and what you should be keeping to yourself.

You can hire your own real estate agent and have them work directly and only for you. This is the ideal situation because then you know that the real estate agent has nothing whatsoever to do with the seller and only cares about your financial interest and what is best for you. In this kind of situation, you can be completely open and honest about your concerns and your limitations financially. A downside to this choice, however, is that you will have to pay any and all commissions to the agent or broker.

A similar situation is when the real estate agent represents the seller exclusively. Again, this is good for the buyer since you know that you won’t have to be dealing with the same agent and watching what you say constantly because you don’t know if the agent is breaking the law by giving your personal financial information to the seller so that they have a negotiating advantage.

The most common set up is that the same broker represents both clients. In this case, the seller is the one who pays the commission, so some buyers can feel more than a little uncomfortable that the main concern of the broker is the sellers needs and not the buyers. There can be real trust problems with this set up since the buyer will feel like a second-class citizen. This set-up is called duel-agency and it is the most common method of selling a home. There are laws I place to help protect the buyer and the seller, alike. If an agent lets slip a piece of information, say, that the seller is very motivated because of a recent split with his wife and just wants to sell the home as soon as possible and he’ll probably take an offer that’s $10,000 under the asking price, the agent has just broken the law. The only time that this is allowed is if the seller has signed a legal document allowing this information to be shared with the buyer.

Of course this sharing of information would have to be caught and reported for any kind of prosecution to take place, which is why it can be almost impossible for agents who work for the same broker to get caught.

So, which decision should you make?

For those on a tight budget, it would be smart to go with the traditional duel-agency style, and simply watch what sort of personal information you share with your agent. Your real estate agent isn’t your accountant or your psychologist, so you don’t need to share every aspect of your life with them. On the other hand, if you can afford to pay your own brokers fees out of your own pocket, you might be better off with your own broker who you can be honest with about any limitations you have financially, or if you have fallen in love with a particular property, you can be honest about that too.

Knowing how open and honest you can be with your realtor is a pretty big deal. They are your lifeline through what can be a very confusing and expensive home buying process. But if you and the seller are using the same broker, watch what you say because you never know who is listening. If you can afford your own broker, it might be smart to simply take the financial hit and hire your own.
GBrey

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