5 SECRETS TO BUYING THE BEST HOUSE FOR YOUR MONEY

1. Get "Pre-Approved" - Not "Pre-Qualified!" Do you want to get the best property you can for the least amount of money? Then make sure you are in the strongest negotiating position possible. Price is only one element in the negotiations, and not necessarily the most important one. Often other terms, such as the strength of the buyer or the length of escrow, are critical to a seller. In years past, were told to get "pre-qualified" by a lender. This means that you spend a few minutes on the phone with a lender who asks you a few questions. Based on the answers, the lender pronounces you "pre-qualified" and issues a certificate that you can show to a seller. Sellers are aware that such certificates are WORTHLESS, and here's why! None of the information has been verified! Many times unknown problems can come to the surface! Some of the problems I've seen include recorded judgments, alimony payments due, glitches on the credit report due to any number of reasons both accurately and inaccurately, down payments that have not been in the clients' bank account long enough, etc. so the way to make the strongest offer today is to get "pre-approved". This happens AFTER all information has been checked and verified. You are actually APPROVED for the loan and the only loose end is the appraisal on the property. This process takes anywhere from a few days to a few weeks depending on your situation. It's VERY POWERFUL and a weapon I recommend all our clients have in their negotiating arsenal.

2. Sell Your Property First, Then Buy the House If you have a house to sell, sell it before selecting a house to buy! Contingency sales aren't nearly as strong as one that comes in with a ready, willing and able buyer. Consider this scenario: You've found the perfect house - now you have to go make an offer to the seller. You want the seller to reduce the price and wait until you sell your house. The seller figures that this is a risky deal, since he might pass up a buyer who DOESN'T have to sell a house while he's waiting for you. So he says OK, he'll do the contingency but it has to be a full price offer! You have now paid more for the house than you could have because of the contingency, and you have to sell your existing house in a hurry! Otherwise you lose the house! So to sell quickly you might take an offer that's lower than if you had more time. The bottom line is that buying before selling might cost you THOUSANDS of dollars.

3. If you're concerned that there is not a house on the market for you, then go on a window-shopping trip. You can identify possible houses and locations without falling in love with a specific house. If you feel confident after that then put your house on the market. Another tactic is to make the sale "subject to seller finding suitable housing". Adding this phrase to the listing means that WHEN YOU DO FIND A BUYER, you will have some time to find the new place. If you don't find anything to your liking, you don't have to sell your present home.

4. Play the Game of Nines - Before house hunting, make a list of things you want in the new place. Then make a list of the things you don't want. You can use this list as a guide to rate each property that you see. The one with the biggest score wins! This helps avoid confusion and keeps things in perspective when you're comparing dozens of homes. When house hunting, keep in mind the difference between "STYLE AND SUBSTANCE". The SUBSTANCE are things that cannot be changed such as the location, view, size of lot, noise in the area, school district, and floor plan. The STYLE represents easily changed surface finishes like carpet, wallpaper, color, and window coverings. Buy the house with good SUBSTANCE, because the STYLE can always be changed to match your tastes. I always recommend that you imagine each house as if it were vacant. Consider each house on its underlying merits, not the seller's decorating skills.

5. Don't Be Pushed Into Any House Your agent should show you everything available that meets your requirements. Don't make a decision on a house until you feel that you've seen enough to pick the best one. A decade ago, homes were selling quickly, usually a few days after listing. In that kind of market, agents advised their clients to make an offer ON THE SPOT if they liked the house. That was good advice at the time. Today there isn't always this urgency, unless a home is drastically under priced, and you'll know if it is. Don't forget to check into the SCHOOL DISTRICTS of the area you're considering. Information is available on every school; such as class sizes, % of students that go on to college, SAT scores, etc. You can get this information from this web site.

6. Stop Calling Ads! Please note - ads are sometimes created to make the phone ring! Many of the homes have some drawback that's not mentioned in the ad, such as traffic noise, power lines, or litigation in the community. What's not mentioned in the ad is usually more important than what is. For this reason, Be very careful when reading ads. Remember that the person writing the ad is representing the seller and not you! The most important thing you can do is have someone on your side looking out for your best interests. Your own agent will critique the property with an eye towards how well it meets your needs and will point out any drawbacks you should know about. Pick an agent you feel comfortable with and enlist the services of that agent as a buyer's broker. Then you become a client with all the rights, benefits, and privileges created by this agency relationship, and you're no longer just a shopper.

Did you know that many homes are sold WITHOUT A SIGN ever going up or an AD EVER BEING PUT IN THE PAPER? These "great deals" go to those people who are committed to working with one agent. When an agent hears of a great buy, who do you think he's going to call? His client, who he has a legal obligation to work hard for you, or someone who just called on the phone and said "keep your eyes open"? So to get the best buy on a property, We recommend that you hire your own agent and stick with them.

With inventory diminishing daily and multiple offers being extremely common, it is of great importance that you position yourself to have the "Best Chance" to get your offer accepted. You enhance your chance of getting the home of your choice by doing the following:

• Get pre-approved for the purchase:
  This takes very little time and is of great value. At this time, identify the price range for which you qualify and which fits your lifestyle.
   
• Submit a strong competitive offer:
  Submit the offer as if there will be multiple offers.
   
• Include substantial earnest money deposit:
  Acceptance of an offer is sometimes determined by the amount of the deposit. A larger amount may signify a bigger commitment to the seller.
   
• Minimize or eliminate contingencies:
  The fewer contingencies, the stronger the offer.
   
• Make a buyer profile available:
  Time on the job, flexibility, reason for purchasing seller's home, etc.
   
• Be prepared to preview a new property quickly:
  Homes sell sometimes in hours. Be prepared to make decisions quickly and be accessible to change the terms instantly.
   
• Buyer and agent to have instant communication access:
  Let us maintain instant access to each other via office phone, voice mail, fax, pager or cellular phone.

• Copy of your Purchase & Sale Agreement.
• Your present mortgage information.
• Two year history of employment and verification of all income sources.
• If self-employed, copies of past two years Federal Income Tax Returns.
• Information about your checking, savings and credit card accounts.
• Name, account number and outstanding balance of each of your debts.
• Application deposits.
• Information about any assets.
• Information regarding any other assets that will be used as funds to close.
• If FHA - Copy of Social Security card and photo ID.
• If VA - Certificate of Eligibility or DD214.
• If Employee Relocation Client - include relocation information and copy of offer, promissory note and copy of check on bridge loan.
• Ocean National Bank - Richard Haney, Mortgage Loan Officer
• One Stop Mortgage Services - Eric LaFleur, Owner/Broker
• Wells Fargo Home Mortgage - Edward Johnson, Home Mortgage Consultant

• Are both fixed-rate and adjustable mortgage loans available?
• What is the interest rate?
• How long can I "lock-in" the financing at the current interest rate?
• Is a float down lock available in case rates drop after I have locked in?
• What are the other fees a lender may charge me in conjunction with my loan?
• Are funds for a second mortgage available?
• On adjustable loans:
   
  • How often will the interest rate be adjusted?
  • Is there a maximum limit on each rate change?
  • How often will the monthly payment be adjusted?
  • Is there a ceiling on payment adjustments?
  • Can the term of the loan be extended?
  • What is the maximum rate that can be charged over the life of the loan?
  • Is there any potential for negative amortization?
  • Is there a pre-payment penalty clause? This involves extra charges for paying off the loan before maturity. About 80% of all loans in the United States are paid off early.
  • What is the "grace" period? How late can a monthly payment be made before a late charge is assessed? What will happen if a payment is missed?
  • If you sell your house, will the new buyer (if he/she qualifies) be able to assume your mortgage at the same interest rate?
  • Do you have to pay "points" to get your new mortgage? Usually lenders charge points for the cost of giving you a mortgage loan. A "point" is 1% of the loan.
  • Will the lender require mortgage insurance?
  • Is the loan serviced locally or is the servicing sold?
  • Ask for a written "good faith deposit".

The interest rate stays the same throughout the term of the loan - usually 15 or 30 years - so the principal interest portion of your payment remains the same. Payments are stable but initial rates tend to be higher than adjustable rate loans and often cannot be assumed by a subsequent buyer.

Balloon Mortgage

This is a loan which must be paid off after a certain period. The advantage they offer is an interest rate that is lower than a mortgage that is made for 30 years.

Adjustable-Rate Mortgage (ARM)

The interest rate is linked to a financial index, such as a Treasury security or a cost of funds - so your monthly payments can vary up or down over the life of the loan - usually 25 to 30 years. Interest rates can change monthly, annually, or every 3 or 5 years. Some ARMs have a cap on the interest rate increase, to protect the borrower. Other terms relating to adjustable-rate mortgages:

• Adjustment period: The length of time between interest rate changes. Example: one year ARM-interest changes annually.
• Cap: The limit on how much an interest rate or monthly payment can change at each adjustment or over the life of the loan.
• Conversion clause: A provision in some loans that enables you to change an ARM to a fixed rate loan, usually after the first adjustment period. This may require additional fees.
• Index: A measure of interest rate changes used to determine changes in the loan's interest rate over the term of the loan.
• Margin: The number of percentage points a lender adds to the index rate to calculate the ARM's interest rate at each adjustment.

VA Loan

The VA does not lend money, it guarantees a portion of the loan so that lenders who originate the loan feel comfortable with their risk. Qualified veterans can obtain loans up to $203,000 with no down payment. VA-guaranteed loans can be combined with second mortgages and are assumable upon qualifying by any future buyer.

FHA Loan

FHA does not lend money or make a loan; rather, it insures loans. The down payment can be as low as 2.25%. Discount points may be paid by either buyer or seller. FHA charges a 2.25% up front Mortgage Insurance Premium (or as little as 2% for a first time home buyer) that can be financed in the mortgage amount or paid in cash (no premium is required for condominiums). The borrower must also pay an annual Mortgage Insurance Premium or .5% which is collected monthly.

Seller Assisted Second Mortgage

The seller of the house lends the buyer enough to make up the difference between the purchase price and the down payment plus first-mortgage balance (a commercial lender may also make this kind of loan). The terms including the interest rate, are based on buyer/seller agreement. It is often a short-term (5 to 15 year) loan; sometimes "interest only" payments until the term date when the balance is due in full. A buyer can then refinance the home.

Assumable Mortgage

Buyer "takes over" or assumes the mortgage obligation of the seller (with concurrence of the lender). The interest rate doesn't change and is sometimes lower than current rates. Often the loan fees are less as well.

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