Prudential Gary Greene, Realtors Homebuyer Guide

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Prudential Gary Greene, Realtors Homebuyer Guide

• A Step by Step Process to Owning the American
  Dream

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The American Dream of Homeownership

• Owning a home. It is the American Dream.
• Many people simply assume that it is always to
  their advantage to buy a home, and for most, it
  is.
• Take a moment to review the advantages and
  disadvantages to see how your situation fits.

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The Disadvantages of Owning a Home

• Renting
• More fixed costs for term of the lease.
• Not gaining equity, but not losing any either.
• When the lease is up, you can just move.
• There is generally less work in maintaining a
  home or apartment.
• Smaller amount of up-front cash.

• Buying
• More variable costs.
• Equity may go up, down, or stay stagnant.
• If you want to move, home generally must be sold.
• Work needs to be done by you--or paid for by you.
• Generally a larger initial investment--the
  downpayment.

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The Advantages of Owning a Home

• Renting
• No matter what happens with the value of the
  home, you will never gain equity.
• Limited--or no--ability to personalize your
  living quarters.
• No tax advantage to renting. Your landlord gets
  any and all tax breaks that are available.

• Buying
• Over time, the mortgage balance decreases and
  equity builds, even if the value does not
  increase.
• The ability to remodel and redecorate the home to
  match your needs and desires.
• There can be tax advantages attached to home
  ownership. Consult competent legal and
  accounting advice for details on your situation.

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If Homeownership Suits Your Situation

• It is important to make a realistic shopping
  list in an attempt to narrow your choices of
  properties.
• Hunting for a home can be a time-consuming
  process, especially if you have not determined in
  advance the parameters of your search.
• Many home buyers make the mistake of
  misinterpreting a WANT as a NEED.
• It is important to be able to differentiate
  between what you really need and what you would
  like to have.
• Many wants can be changed in a home if the house
  doesnt have that feature now, you can change it
  later.

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Examples of Home Buying Needs and Wants

• Examples of NEEDS
• Enough square footage for comfortable living.
• Enough bedrooms to accommodate the family.
• Adequate number of bathrooms
• Eat-in kitchen
• Garage or closets for ample storage needs
• Lot size to accommodate childrens play area.
• Proximity to a specific school

• Examples of WANTS
• Carpeting color, paint color, exterior color,
  roof color, etc.
• Pool or Jacuzzi unless for medical reasons
• Wood floors
• Bay Windows
• Built-in entertainment center
• Brass lighting fixtures
• Skylights or a pretty view.

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Develop Your Own List of Needs and Wants

• Take the time to develop your own list of needs
  and wants.
• The goal is to put emphasis on finding a home
  that includes all of your needs and as many of
  your wants as is practical--yet remains in your
  budget.
• Once you have a clearer view of what your home
  will need to have, looking for a home will be a
  great deal easier!

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Develop a Budget

• The development of a household budget is a
  desirable activity both before you make a real
  estate purchase as well as consistently during
  your ownership.
• By preparing a budget while you are looking at
  homes, you can better focus on mortgage payment
  goals and how the new house will affect your
  total expenses.
• Maintaining a budget can help prevent potential
  financial disasters as well as point you in a
  money saving direction so you have more funds
  available for those things you need and want.
• You will need a little time to develop a budget.
• Most importantly, get everyone involved in
  spending involved in developing the budget.
• Be realistic in your budget assessment. Make
  provisions for possible increases in some items
  for example, insurance, taxes, school tuition
• Then look for ways to get control over your
  budget.

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Items Needed to Develop a Budget

• All current monthly loan payments.
• All other monthly expenses such as child care,
  dues, etc.
• Records of variable expenses for example,
  utilities, food and car repair from the last 12
  months. This will give you an estimate of your
  monthly expenses.
• Records of annual or semi-annual expenses such
  as insurance and taxes.
• An estimate of what your new mortgage payment
  will be. Our loan officers can determine this
  for you for free or visit www.GaryGreene.com and
  calculate this information on the mortgage
  calculator link!
• Records of non-fixed expenses for example,
  medical expenditures, new tires. This will give
  an estimate of average expenses of this type.
• Records or an estimate of personal expenses.
  entertainment, travel, etc.
• Get a current copy of your credit report. Go to
  www.equifax.com or www.experian.com.

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Qualifying for a mortgage

• Part of the mortgage application process will be
  the determination of how much house you can
  afford based on your income.
• The two ratios computed are the front ratio and
  the back ratio.
• Front Ratio The total mortgage payment
  including principal, interest, taxes and
  insurance PITI as well as any condo or
  homeowner association fees divided by your total
  GROSS income.
• Traditionally, this ratio must be below 28.
  Example With a gross income of 3700 per month,
  a total mortgage payment PITI of 973, the
  front ratio would be 26.
• Back Ratio The total mortgage payment PITI
  and homeowner association fees PLUS any car
  payments, credit card and any other loan payments
  divided by your total GROSS income.
• Traditionally, this ratio must be below 36.
  Example With a gross income of 3700 per month,
  a total mortgage payment PITI of 973, a car
  payment of 212, 1 credit card payment of 59 and
  1 credit card payment of 43 for a total of
  1251, the back ratio would be about 34.
• It is important to remember that the amount of
  mortgage you will qualify for is the maximum.
• If you qualify for a 100,000 mortgage and you
  have 15,000 available for a cash down payment
  and closing costs, you are qualified to buy a
  maximum of 115,000 home. Do not push yourself
  beyond your financial capability.

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Qualifying for a Mortgage

• What mortgage options are there for those with
  poor credit?
• There are lenders available for many of those
  with tarnished credit reports, however, they
  involve a higher risk to the lender, and the
  interest rates are higher.
• Many buyers are unaware of what their credit
  report says about them. If it is unfavorable,
  they have to scramble to get the problems
  handled.
• You can avoid these hassles by getting a copy of
  your credit report and examining it for errors
  that need to be corrected and accounts that need
  to be handled. Go to www.equifax.com or
  experian.com
• What options are there for buyers with no money
  down and no cash for closing costs?
• Actually very few. Since the mortgage payment
  takes a good portion of your income, lenders will
  want you to have your money involved from the
  very beginning.
• There are options for low down payment 5 or
  less mortgages such as FHA and the seller could
  absorb some closing costs usually 3-5 of sales
  price. To buy a home with no cash down is rare.

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Mortgage Pre-Qualification and Pre-Approval.What
is the difference and why do I need both?

• Pre-qualification is the process where the lender
  will look at a basic copy of your credit report
  and use the information you supply to determine
  how much mortgage you can afford based on income.
  No accounts or employment information is
  verified.
• Pre-Approval occurs when all credit and
  employment is verified and is approval of the
  mortgage subject to the appraisal of the property
  you have chosen to buy.
• Final Approval occurs when the property has been
  appraised, all documentation is in the hands of
  the lender and all contingencies have been met.

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Get Pre-Qualified and Pre-ApprovedBefore you
Begin your Search for a home

• Why get pre-qualified and pre-approved for a
  mortgage before you begin your search for a home?
• Because you, your agent and the seller from whom
  you eventually buy your home will all benefit!
• How you benefit It answers immediately with
  precision the question, How much home can I
  afford to buy? It gives you and everyone
  involved a clear sense of direction.
• How your agent benefits By knowing your
  financial parameters, your agent can spend more
  time looking for homes that fit and less time
  pursuing dead ends. No matter how much you might
  want a 4000 square foot house for 275,000, you
  can only buy what your approved maximum loan
  amount will allow.
• How the Seller Benefits It strengthens your
  bargaining position. Your offer stands out in a
  case of multiple offers for the same house. A
  seller pays far more attention to an offer with a
  real buyer than one who will make loan
  application soon.

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Prudential Gary Greene, Realtors has Mortgage
Services Available for Free, No Obligation
Counseling.

• We have Compu-Fund Mortgage services available
  for a free, no obligation loan counseling.
• You can visit www.CompuFundMortgage.com for more
  information.
• Here are some helpful hints to prepare for making
  a successful loan application
• Dont build yourself a mortgage mountain. Be
  certain it is comfortably affordable. Stay
  within the 28 and 36 guidelines.
• Get your budget under control.
• Prepare to pay off small debts. Having 3 credit
  card balances is not a good thing. Prepare to
  pay them down to 0 balances.
• Begin to gather documentation. You will
  eventually need
• W-2s and the income tax returns from the last
  few years especially if you are self-employed
• copies of pay stubs,
• copy of your credit report
• records of child support and alimony
• bank statements for all accounts

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Compu-Fund Mortgage is Available for Free, No
Obligation Counseling.

• Do not forget about closing costs. In addition
  to your down payment, you will need to reserve
  funds for closing costs. Depending on the type
  of loan, these costs can range from 3-5 of the
  mortgage amount, and will be paid in cash at the
  closing. They cannot be borrowed funds.
• Consider points when comparing. Your total
  mortgage cost will be determined by 3 factors
• the interest rate,
• the term and
• the amount of points.

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Enlist the Support of an Agent to GuideYou to
Happy Homeownership!

• We are experienced and trained to guide you
  through every step of the process to Happy
  Homeownership!
• Select representation through Buyer Agency.
• When an agent represents the buyer, that Agent
  represents you and your interests above their own
  and owes loyalty to you, the buyer.
• A Buyer Agency Representation Agreement clearly
  spells out the obligations of all parties. Most
  often your fee is paid by the commissions offered
  by the seller.
• Visit www.GaryGreene.com and click on
  RealtorConnect to get connected to a realtor who
  specializes in the area youre interested in.

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The Role of the Real Estate Community

• Types of Agency Representations
• Sellers Agent - represents the seller in a real
  estate transaction.
• Sellers Subagent - is a subagent of the listing
  broker and represents the seller.
• Buyers Agent - represents the buyer in a real
  estate transaction.
• Intermediary - By written consent of the parties,
  the broker represents both the buyer and the
  seller. The broker must treat all parties
  fairly, but has limited duties to both.

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What Type of Home Do You Prefer?

• The process of buying a home is a series of
  decisions--a sort of real estate what,where,when
  and how.
• One of the first decisions is the what.
• Single-family homes. Your ownership includes the
  house and extends to the limits of the property
  line.
• Townhouses. Your ownership includes the lot on
  which your house sits as well as the entire
  structure.
• Condominiums. Your ownership is limited to a
  single unit and a shared interest in all of the
  common areas.
• One type may be more suited to your budget and
  lifestyle than another.

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Finding a Home

• With an organized house buying plan, you can
  minimize a great deal of the emotional impact of
  a major life change.
• By determining your buying power, your wants and
  needs, and having an organized search plan
  through an agent, your chances of a stress-free
  experience are much better.
• We are proud to offer our web site,
  www.garygreene.com as the premiere search tool
  for the home of your dreams.
• Take a tour of all homes listed and available in
  Houston!
• You will also find the most unique area of all -
  our home services division. This service can
  handle all of your moving arrangements for you!

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Finding a Home with Your Real Estate Agent

• If you physically look for houses before you have
  your own agent, you may not have the
  representation you want. Remember, a For Sale By
  Owner or a New Home Sales Office is representing
  himself and his own interests. A home buyer
  always benefits with agent representation.
• Choose an agent that you feel comfortable with
  and who understands and responds to your needs.
  They should be good listeners. We have the best
  agents in this area!
• Visit www.GaryGreene.com and click on
  RealtorConnect to get in contact with an agent
  that specializes in the area youre interested
  in!
• A good agent will help you keep a scorecard to
  compare homes you have toured.
• They will also help you stay in an affordable and
  comfortable price range.
• Maintain your perspective--and your cool! You
  may find an acceptable home on the first day--or
  the tenth. The important thing is to get the
  home that is best for you!

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Setting a Value on a Home

• Two of the most frequent questions we receive
  from potential home buyers are
• How much should I offer for a house? And
• What is the normal concession from the selling
  price?
• Unlike the automobile business one of the other
  major purchases where prices are negotiable real
  estate does not have an established selling price
  or a specific cost.
• It is impossible to give standards as to what
  is fair as every property stands on its own price
  and merits.
• This is where a real estate agent is invaluable.
  Constantly attuned to the latest market data,
  value assessment is their specialty.
• A Buyers Agent can develop a Comparable Market
  Analysis for homes in the area in which you are
  interested.

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Making An Offer on A Home

• One of the most common misconceptions among home
  buyers occurs when it comes time to making an
  offer on a home.
• Many believe that even though they have tendered
  an offer to the sellers, that their options are
  still open.
• To some degree, this is correct. TREC
  promulgated contracts contain an option clause
  that enables a buyer to opt-out at any time
  during the option period. The option clause is
  often used to have an inspection performed to
  determine the structural and mechanical integrity
  of the home before purchasing.
• After the option period passes without opting
  out, however, your contract becomes binding.
• Your agent will guide you on all of the items
  that need to be addressed in an offer
• The proposed selling price our offer.
• Any concessions you desire the seller to make.
• Any financing contingencies. You can state the
  maximum interest rate, and specific terms, etc.
• Any home inspection contingencies
• A clear definition of precisely what is to be
  included in the sale. Do not assume that certain
  items are included. Be sure to read what is
  included on the promulgated form, and include
  that which is not but desire to receive with
  title.
• The amount of earnest money your deposit that
  is being tendered with the offer.
• We will be happy to provide you with a sample
  Residential Sales Contract to familiarize you
  with it contents.

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The Art of Negotiation

• When it comes to real estate matters, the 3 most
  important aspects of an effective negotiation
  are
• 1. Information
• 2. Preparation
• 3. Realism
• Information--Once you have found a home you are
  prepared to buy, the first step in your process
  of negotiation is to determine the fair value for
  the home. Your agent can be of great help here.
  Real estate agents can develop a Comparative
  Market Analysis. A CMA will show exactly what
  properties similar to the one in which you have
  an interest have sold for.
• Condition also has much to do with the ultimate
  selling price. Does the home to which you have
  an interest shine above or fall below the others
  that have sold? Agents are invaluable in this
  area also.
• Extra Amenities can be a factor.
• Motivation--if possible, find out the sellers
  reason for selling.

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The Art of Negotiation

• Preparation
• Just having the right information is not enough.
• The most important factor is your emotional frame
  of mind. Keep your excitement in check or you
  will lose the value of the information you have.
• Your Financial Frame of Mind - your power here
  comes from being pre-qualified and pre-approved
  for a mortgage.
• Set a realistic limit and then stick to it. You
  cannot be afraid to let it go.
• Plan your work and work your plan. Organize your
  information and have it quickly available.

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The Art of Negotiation

• Realism
• Do not turn the seller off by making a low ball
  offer on a well priced home. Negotiations will
  most likely be stopped, and if re-opened, the
  seller may stand on list price.
• In Houston, most homes that sell are within
  95-97 of their list price. This varies
  according to neighborhood. For best results,
  consult your agent.
• An unrealistic offer on a home that meets your
  needs and is priced correctly could end up
  costing more than it would with a realistic
  offer.

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Inspect!Inspect!Inspect!

• Depending on the type of financing you choose,
  there should be either 2 or 3 separate
  inspections on the home you want to purchase.
• The first should be your own inspection, the
  second should be a professional inspector by a
  reputable person. Should you select a government
  loan FHA or VA, the third inspection should
  come at the time of the appraisal, which to some
  degree amounts to a mini-inspection.
• Do not, however, rely on this appraisal as your
  only inspection of the property!
• We cannot emphasize enough the value and
  necessity of an extensive home inspection. It
  saves you money long-term!
• Inspections are designed to disclose defects in
  the property that could materially affect its
  safety, livability, or resale value. They are
  not designed to disclose cosmetic deficiencies
  example, an interior wall that needs paint touch
  up.
• You will need to determine on your own those type
  of items that will need attention dont expect
  an inspection to reveal them to you.
• Our realtors have access to top-notch inspectors
  and can arrange the inspection for you!

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Residential Service Contracts

• Residential Service Contracts, also known as home
  warranties can save you a bundle in repair costs
  after you move in.
• A Residential Service Contract covers repair or
  replacement of some major and minor items and
  components of a home. Typically, they are 1 year
  in duration, beginning at the time you take
  occupancy.
• Many cover central air and heat, electrical,
  plumbing, water heater, and some appliances like
  refrigerators, etc.
• The seller may offer or you may ask for them to
  furnish you with a Residential Service Contract.
  We recommend American Home Shield, and we include
  their policy in our presentation materials.

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The Final Walk Through

• Shortly before the date of the final closing, it
  will be necessary for you to make a final
  inspection of the house that you are
  purchasing--a final walk through.
• Take your time on your final walk through
• Check the house from bottom to top
• Pay attention to items important to you
• Watch for areas where furniture and rugs may have
  been when you originally looked at the house.
• If an item is missing or there is trash left
  behind, deal with it now.
• Make sure the home is as you expected.
• Deal with any potential problems. If you see any
  items that need to be addressed, let your agent
  know so it can get handled before closing.

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Moving Contact List
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Planning for Your Move

• Check your contract and confirm with sellers
  regarding possession of the home and moving date.
• Once confident you are proceeding with the
  purchase, begin to toss out things you do not
  want to move. It simplifies your life, too!
• If you need moving assistance, log on to
  www.garygreene.com to arrange your moving plans
  for free.
• Prepare a list of all those who will need to be
  contacted at your new home utilities, etc. or
  call our Personal Move Coordinator to do this for
  you at 1-800-231-0707.
• Make a list of items you need to buy for the new
  home. Draperies, blinds, shower curtains, etc.
• Start packing early. Box anything you are sure
  you will not be using before moving day.
• Set up a staging area where items that are
  ready to be moved are placed.
• Mark every box and carton with its contents and
  also what room in the new house you want it
  placed. Saves movers time and saves you
  aggravation!

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Bringing it all HomeThe Closing

• Closing is the proverbial signing on the dotted
  line the process of which will put the title to
  the house in your name, verify homeowners
  insurance on the property, commit in writing to
  the terms of the mortgage, and usually, put the
  keys to the house in your hands.
• What Items will you need?
• A Closing Cost Estimate This should be given to
  you by your agent at the time of the contract,
  and then given to you by the Lender, a Good Faith
  Estimate, shortly after the application for the
  loan. This should be a reasonably close estimate
  of funds you will need at the time of closing.
• Homeowners Insurance Policy This must be
  secured prior to the date of the closing.
  Home-Link can handle this for you.
• Settlement Statement Obtain a copy before
  closing, if possible. It tells how the various
  funds will be dispersed.
• Certified Funds You will need certified funds
  for closing costs and down payments. You will
  also need a copy of your drivers license.
• The closing is your final opportunity to make
  certain that everything related to the purchase
  of your home is correct. It is important,
  therefore, to do adequate preparation prior to
  the day of closing.
• A home is one of the largest investments in your
  lifetime.
• At Prudential Gary Greene, Realtors, we realize
  the importance of this life changing event and
  try to make your move as smooth as possible.

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Services You Can Expect to Receive From Any of
our Associates!

• Listen and respond to your needs.
• Advocate of your best interests.
• Advice, Counsel and Opinion
• Fiduciary Duties.
• Negotiate in your behalf.
• Financial Assistance on your settlement.
• Disclosure of Adverse Facts.
• Confidentiality.

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My Commitment to You

• To Communicate with you regularly through every
  step of the process until we reach the results
  you desire.
• To show you all homes that suit your needs and in
  the price ranges you can afford.
• To provide you with accurate Comparative Market
  Analyses of homes you are interested in
  purchasing.
• To negotiate the best possible price for your
  home with the least inconvenience to you.
• To work according to your time table.
• At your discretion, provide you with a Concierge
  Consultant to assist in any move related needs
  for FREE!

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From all of us at Prudential Gary Greene,
Realtors

• Thank-you for viewing our presentation on
  First-Time Home Buyers!
• You have many choices of Realtors
• Now that you know more about the home buying
  process, know this about our services and the
  company that stands behind us.
• Your Success is Our Utmost Priority!