Closing the Deal
Closing the Deal
Learning is achieving; I live by it. I get this question asked at least a few times a week – what are the steps in purchasing a home today? It surprises me that so many renters aren’t as knowledgeable when it comes to taking the steps to owning their first home. After asking clients and friends, I’ve realized that it can be an emotional decision and some aren’t quite sure where to start and may get intimidated by the idea of having ownership of a piece of property. Not everyone wants to carry this task of ownership and deal with maintenance issues and their crazy next door neighbor complaining about how soon will they shovel their side of the curb. It’s understandable, some want convenience, fine. In all reality, NYC rents are getting outrageous and owning can sometimes be less dependent on how you budget yourself and utilize the tools set forth to obtain the right property that fits your requirements. Compromising and budgeting are essential when purchasing real estate. Not to bore you, but here are some tips and advice on purchasing your first home and what to prepare and to do and not to do when getting ready to buy.
It’s always nice to scroll through zillow.com during your work day, see what’s available and fall in love with a dream home. That is until reality hits and you realize the listing price is way too high, up in the millions or just way out of your budget, or at least that’s what you think. But if you really sit down and analyze what it may cost you monthly, you may be able to afford that dream home. The first step in purchasing real estate is gathering the necessary documents needed to qualify for a mortgage. Now if your purchasing in cash, you can easily skip this step and you wouldn’t need a mortgage because you’re liquid. But for others the documents needed for a mortgage are your last two years of tax returns, this includes your 1040 and w2s. Other documents needed are one month’s of pay stubs, last month’s bank statement and any additional income you have. Showing income determines your eligibility of how much you can borrow. Your mortgage broker can help you determine your eligibility after analyzing all the documents.
Down Payment –
Now that you have your documents together and you have your down payment set aside, hopefully, your next move is to meet a mortgage broker to see your eligibility. You can find mortgage broker’s at your bank or by doing a basic google search. The mortgage broker will go over the different options with you. Some common mortgages today are FHA (Federal Housing Administration) loans, these are programs issued by the government to help borrowers obtain more affordable loans. One most common mortgage is a conventional loan which is typically a fixed loan for 30 or 15 years, the interest rate here is fixed and not adjustable but you can always refinance. Aside from the income verification docs, another aspect of the process is your credit report. Your credit report can determine your eligibility as well. A higher credit score can lower your interest rate. If your credit score is too low you may not qualify for a loan. In this situation, you may have to hire a credit repair specialist to help you bring up your score.
Real Estate Agent-
Now you’re thrilled and just found out your pre-approved for a mortgage and you’re ready to start shopping. Your mortgage broker went over your loan amount and what your monthly payment would be and you’re set to lock in your first home. Your next move is to find a real estate agent who specializes in the neighborhood(s) your interested in. One way of connecting to a real estate agent is to do a google search or by browsing on streeteasy.com. Once you find a real estate agent to connect with, that will be your go-to person when it comes to questions on properties, getting access to the newest properties for sale and scheduling showings for properties. Make sure your agent is listed with the local MLS (multiple listing services). This service allows agents to have access to the newest listings that hit the market as well as access to listings listed by other agents. All agents are to follow a code of ethics in which they must work together and share commissions, this way no home buyer is left without seeing all available listings. There is no cost to hiring a real estate agent since they work only on commissions. Agents earn their money once they close on a property and their commission gets taken out from the sale price. Take advantage and hook up with an agent who knows their market to begin your hunt.
Closing Cost –
You’re almost done, you found your dream home and your agent is ready to submit an offer for you. Most offers to any property should be in writing. It isn’t required that when you present your offer in writing but it’s smart to do so. With the offer in writing you want to present your pre-approval mortgage letter to show that you’re eligible for affording the home. If you’re purchasing all cash, you will need to submit an offer letter along with a statement showing proof of funds (bank statement). Your agent will help you put together an offer letter to present to the sellers. Now your offer gets accepted and you’re ready to close on the home. Keep in mind even if your offer is accepted and the seller is ready to make a deal, your lender has to still approve this loan and property. Typically the lender will send out an appraiser to make sure the home is in good standing and that you’re not offering way above market price. An experienced agent will help you determine an offer for the home by determining the price per sqft in the neighborhood and of course the condition it’s in. Most lenders do this because they don’t want you to default on your mortgage payments and allow you to pay way over market value when its worth X amount. This tends to work in your favor. On the closing table, you will have to pay some if not all of the following fees; a lawyer to represent you and walk you through the contract of sale, which can cost you roughly $2,500.00, title insurance and search $1,800.00, and NYS and NYC tax 1-1.5%. Other costs can be the bank fee, your first month’s mortgage payment, and insurance. Aside from your monthly mortgage payment, you will have annual real estate taxes and homeowners insurance. These payments can be worked into your monthly mortgage cost.
With today’s NYC real estate market being a strong buyers market, interest rates are slowly climbing up from an average 3.8% to now 4.3%. With boroughs like Staten Island and the Bronx getting more attention and Brooklyn now one of the priciest cities in the country, it makes sense that it’s a strong real estate market. Rents are higher than ever in cities like New York which allows for more interested buyers to hit the market. It’s almost free to get a quote on what you may be eligible for in today’s home market. Get out there and weigh your options.