You MUST Assemble a Killer Real Estate Team.
Good connections are very beneficial in all aspects of life. They’re productive for personal and business relationships, and very important when searching for homes. You need a killer real estate team on your side. I really want to emphasize the importance of this step. If you do this correctly, buying a house will be so much easier. Your “Real Estate Team” is made up of a real estate agent, lender, and title company. This article will focus on Lenders and Realtors because as a buyer, you will be in contact with these two people the most through your house search.
Start with a Real Estate Agent
You should ALWAYS have a real estate agent by your side, especially as a buyer. Why you may ask? To protect yourself! Find a real estate agent who will represent your best interests. You want someone that can speak eloquently on your behalf when you are not present. Someone who will stand up for you and fight hard if the seller pushes back about repairs you’ve requested. You need someone who will consistently look out for your financial interests and keep you up to date on the success of the transaction. This is the BIGGEST and MOST IMPORTANT reason everyone should get a real estate agent. The reality is some buyers’ agents will do a lot and some won’t do much at all. We are all created differently. Make sure that you choose a real estate agent with whom you feel comfortable! We’ve all seen that one agent who wears a suit 24/7 and has a fake and intense smile plastered on at all times. It just doesn’t feel genuine.
What Your Real Estate Agent Should Do For You:
- Be your free guide and counselor through the whole process.
- Communicate with the lender, title company, and seller so that you’re able to close on time.
- Clearly communicate with you throughout the transaction and answer all questions or, if they can’t, find somebody who can.
- Help you analyze price and value, and help you come up with a negotiating strategy.
- Accompany you during inspections. Assist in interpreting inspection results and negotiating inspection issues.
- Someone to buffer you from pushy sellers, the sellers real estate agent, and anyone else who is not looking out for your best interests.
- Build your ideal Real Estate Team.
- Connect you with service providers—inspectors, lenders, home warranty companies.
- Educate and update you on the purchase process.
- Provide listings for homes meeting your criteria.
- Organize showing appointments. Schedule and show you homes.
Remember, buyer’s agent’s services are FREE TO BUYERS. This should be the first step in your home buying process because you should start using this free resource as soon as possible. It is the real estate agent’s responsibility to guide you in the right direction. So, find somebody that you work well with and trust to get the answers you need!
Next Find a Lender
The second member of your team! You should contact a lender before searching for an Austin home. This is because you’ll need to know what your budget is before making specific decisions such as where to buy, how many bedrooms, features, etc. Let’s say you have your heart set on living in the popular, south Austin zip code, 78704. You start looking online at 3 bedroom homes and notice that the average list price is $500,000. After months of looking, you finally speak to a lender and realize that your actual budget is $350,000 max. At this point you need to reevaluate your whole plan. Maybe you start searching further south? Maybe you start looking at condos? Bottom line: know your budget before you go shopping. Trust me, nothing hurts like finding your dream home and realizing it cannot be yours.
Questions You May Want to Ask Your Lender:
- What will my payments look like if I put 3% down vs 20%?
- How much money will I have to come up with to buy a home?
- What’s the difference between pre-qualified and pre-approved?
- What kinds of mortgages should I consider?
- What will my mortgage cover?
- How can I quickly raise my credit score?
Why Should I Talk To a Lender Before Shopping?
Working with a lender shows that you are a serious buyer. We often put off this step because it’s not nearly as exciting as browsing pictures of homes and envisioning a future there. The truth is, you can look online all day, but put it on the list of other ways we waste time, next to Facebook stalking, Pinterest browsing, and Netflix binging. Don’t mistake looking online for productive house searching.
You need to talk to a lender before shopping because:
- You need realistic expectations. For example, if you make $35,000 a year, you cannot afford a $300,000 home by yourself. Your lender will tell you what your budget is and what you need to do to get into something within this budget.
- You need a pre-approval letter to show sellers that you’re a serious buyer when making offers.
- You should start learning about loan approval ASAP and begin to form a relationship with your lender. This way, you won’t feel lost when it comes to making an offer.
- The sooner you start the paperwork, the sooner it will be over. You need to start collecting documents for your lender to review, so that you can get pre-approved.
A lender will also let you know what you need to do in order to get approved. It may be as simple as fixing a minor credit issue that you thought was a huge deal. I’ve worked with clients who were very hesitant about contacting a lender because they were scared of what they might hear. After I put them in contact with a great lender, they realized what they needed to do to fix their financial situation and were approved in 4 months.
What is This Lender Person Going to Need From Me?
*The lender may ask for additional information
- Copies of your checking and savings account statements for the past 6 months
- Lenders look through hundreds of statements; don’t think they will sit there and analyze everything on which you spend your money. It’s like going to the doctor—they’ve seen it all.
- Credit score and history
- You don’t have to have a perfect credit score. Many lenders can work within the 685-715 range and will give you tips on how to improve your number.
- Recent paycheck stub, detailing your earnings
- A lender decides how much you can afford by reviewing your income stability and monthly income.
- Social security number
- All credit card accounts and the approximate monthly amounts owed on each
- Account numbers and balances due on outstanding loans, i.e. your student loans
- Income tax statements from the last 2 years
- Someone who can verify your employment—most likely your supervisor/boss
A Pre-approval Letter is a document you must have when ready to submit offers, if you want to be taken seriously as a buyer. They usually last anywhere between 60-90 days. To get a pre-approval letter, you’ll complete a mortgage application and provide your lender with ALL necessary documentation they ask for. This is very important. Remember, they are about to lend you a lot of money and need to make sure you are capable of paying it back! With less information, you can get “pre-qualified” instead of “pre-approved”, but sellers will go with a “pre-approved buyer” over a “pre-qualified buyer”. This is because there is less risk that the deal will fall through. If your lender gathers all this information from you once you go under contract, instead of before, they may find you actually cannot afford the home you put an offer on. STRONG BUYERS ARE PRE-APPROVED.
Down Payments: Today, 40% of buyers put down less than 10% and many put down as little as 3%. Your lender can show you what your payments will look like monthly and long-term, if you put down 6% vs. 10% vs. 20%. Even if you end up paying PMI now, you can cancel it when you have paid the mortgage balance to 80% of the home’s appraised value. Your lender can better explain how you can cancel PMI, based on your personal situation.
When it comes to down payments, I’ve found that many people are misinformed. They think that it’s required to put down 20% of the sales price. This is FALSE. While it is true that if you don’t put down 20%, you will have to pay Private Mortgage Insurance, it still may make sense financially to buy now, rather than wait until you have the 20%. After all, you still give money to a landlord every month.
Private Mortgage Insurance, or PMI, is a monthly fee anywhere between .05% to 5% of the principal amount of the loan. This fee protects the lender in case you default on your monthly mortgage payment. This amount is also included in your monthly mortgage payment, so you are not required to make multiple payments a month.
The Bottom Line: Realtors are free to buyers and can connect you with the people and information you’ll need to buy a house. Make sure to listen to your Lender and Realtor in order to have a smooth transaction. Don’t just browse through homes for sale, you need to do your due diligence first!