THE MILLENNIAL BROKER'S
TO LANDING YOUR FIRST HOME
This is the first step to walking into your very own home. This guide will help you navigate the home shopping experience, and make your purchasing process as smooth and seamless as possible.
MEN LIE, WOMEN LIE... NUMBERS DON'T.
— JAY Z.
SAVE CASH FOR A DOWN PAYMENT AND OTHER EXPENSES.
You need to take into heavy consideration the cash you’ll need to buy your first home. To start, there’s your down payment which is typically between 10 and 20 percent of the purchase price.
As you save, don’t underestimate how much money you’ll need — you might be surprised at how much cash you’ll need for closing.
After your initial conversation with a banker or mortgage broker, you provide information for a detailed background check and financial check (tax returns, credit check and income history). You will then receive a letter from a lender stating how much they would be willing to lend you, valid for approximately 60 days (can be extended).
Based on information you provide (bank statements, pay stubs, etc.) during your conversation with your bank or mortgage broker, you can qualify for a specific loan amount, once you finalize certain documents.
CHECK YOUR CREDIT!
In addition, having your credit check performed at the earliest point of time will help you identify any issues that might need to be sorted out prior to applying for a mortgage. If there are issues with your credit, you might want to speak with a credit score consultant.
I hope this isn’t a a surprise, but getting a mortgage requires a good credit score. It’s a good time to check your credit reports for errors and possibly invest in a few months of a daily credit score monitoring service.
— GRANT CARDONE
SOME STRATEGIES TO IMPROVE YOUR CREDIT SCORE
A fast way to improve it by a few points is to pay down credit card balances so that you’re below 10% of total usage compared to how much credit you’re allowed. (ie. If you have 50k credit line, keep your balance below 5k). At that point, keep your balance at that mark or below for two months before you apply for a mortgage. Meaning – if you buy something and go over the 10% mark, pay it off right away to consistently stay below 10%.
You’ll want to avoid applying for credit (for example, a new credit card or car loan) until after you’ve closed on your new home. When you apply for new credit as such, it’s called a “hard pull” and it will lower your credit score.
If you’re purchasing a home with a spouse or other co-buyer, your mortgage lender will likely consider both buyers’ credit scores in the application process.
An important thing to keep in mind is that improving your credit score significantly can take at least six months, so plan accordingly!
SHOPPING FOR A MORTGAGE
Too often, home buyers leave mortgage shopping to the last minute and watch their dream home go to another bidder who had financing in order. Mortgage pre-approval is a free and non-binding process that presents you as a serious, qualified buyer when buying your first home.
Comparing two mortgages can be confusing. There are fixed-rates and adjustable rates, or ARMs, which are priced very differently. You can take out a mortgage for 30 years or as little as five years (interest rates are typically higher the longer the term of the loan).
Most buyers should look at fixed-rate mortgages and, indeed, the 30-year fixed rate mortgage is the most common kind of loan, by far. Still, it doesn’t hurt to become familiar with how mortgage rates work and the different kinds of loans that are available.
You may also want to run some scenarios through a mortgage calculator to see how different terms and rates will affect your monthly payment.
A fixed-rate mortgage charges a set rate of interest that remains unchanged throughout the life of the loan. Although the amount of principal and interest paid each month varies from payment to payment, the total payment remains the same, which makes budgeting easy for homeowners
The interest rate for an adjustable-rate mortgage is a variable one. The initial interest rate on an ARM is set below the market rate on a comparable fixed-rate loan, and then the rate rises as time goes on. If the ARM is held long enough, the interest rate will surpass the going rate for fixed-rate loans
What you don’t hear about off the bat, is that mortgage lenders charge fees that aren’t necessarily reflected in the interest rate. There can be fees for appraising the home, checking your credit, and preparing documentation.
HIT THE PAVEMENT, BEGIN SEARCHING
You’re now ready to have fun with it. Let’s be real, we all love online shopping! You can browse neighborhoods, search for market trends and be notified about all open houses. The more you browse, the more apparent what you want will change till eventually it will be clear EXACTLY WHAT YOU WANT (or need)!
You may be that buyer that goes from “I want to buy” to “Let’s put in an offer” in 3 weeks or it can take as long as a year +! It’s a matter of knowing what you want, waiting till you find it, and not hesitating when you find it… I repeat… NOT HESITATING WHEN YOU FIND IT
This is also a time that you can contact me with any and all questions so that I can assist in making this process as seamless (and fun) as possible for you! You should also feel comfortable being honest with your expectations, your financial situation and your timeline. Please also don’t be alarmed when I ask a million and one questions too… That’s what I’m here for, to dissect and provide assistance and clarity.
MULTI FAMILY HOME VS. SINGLE FAMILY HOME VS. CONDO VS. COOP
There are a few key differences between owning a condo and owning a co-op. Owning a condo is like owning house. Those who buy condos, or houses receive deeds and specified pieces of real estate, while those who buy co-ops, maintain shares of corporations that own the buildings where their units are.
Condos are typically more expensive from purchase to closing. Single family homes and two family homes will come with lower monthly costs because you don’t have to pay monthly fees to the building, but you’ll also have to handle any issues on your own when they pop up…
SINGLE FAMILY HOME
A single-family home is an independent residential structure that sits on its own land and is designed to be used as a single dwelling unit, having just one kitchen, unshared walls and unshared utilities,
MULTI FAMILY HOME
A multi-family home is a single building that’s set up to accommodate more than one family living separately. That can range from a duplex, which has two dwellings within a single building, to homes or small apartment buildings with up to four units.
Condo ownership implies actual ownership of the apartment while the common areas of the building are owned jointly. Compared with owners of more traditional co-ops, condo owners have more leeway in terms making modifications to their apartments as well as in terms of renting them out.
In a co-op, instead of owning the property itself, you own shares of the corporation that owns the property in the co-op.
The number of shares you own is directly related to your apartment’s size, meaning if you own a larger apartment in the co-op, you have more shares than someone in a smaller apartment in the building.
LET'S MAKE A DEAL
Now that you’ve found THE ONE, I’m here to help you put in a competitive offer. There’s different intangibles that go into what makes for the best offer to start out with. This can include how long the home’s been on the market, comparable homes on the market, whether you’re offering all cash or not, and the sellers time line, to name a few.
There could be a negotiation process that takes anywhere from a day as long as up to a week.
Good if a listing has been on the market for some time, or has just had a price drop that indicates the owner is eager to sell.
Offer 15% Under
Shows that you're serious and ready to get a deal done and not play games. This type of offer is best right when a home has just hit the market.
Offer List Price
This or even higher is what you'll see when the inventory is low and the market is extremely competitive.
Offer 10% More
CONTRACT REVIEW & ATTORNEY DUE DILIGENCE
Once you have an accepted offer, now it’s time to get into contract (purchase agreement). But first you’re going to need to pick a real estate attorney. I highly advise not using the first one that pops up on google, but using a highly recommended one. Your contract of sale is a HUGE part of your purchase, and having the best person representing you on this is going to be vital.
In the grand scheme of things, paying around $2500 - $3000 for your attorney will make your life easier for the time being and years to come than if you use an attorney for half that price. Trust me, I’ve seen both ends, and having the best representation on your team is very important.
The contract will specify the agreed upon price as well as any conditions and contingencies. Be sure to stay calm, objective and patient during this part of the process. Remember this isn’t personal…
This is also when you should shop for title insurance, you won’t be able to get your loan without it.
GET THE INSPECTION
YOU'VE MADE AN OFFER, IT'S BEEN ACCEPTED…🥳
You’ve made an offer, it’s been accepted, you’ve chosen and attorney and they’ve started to iron out the contract… now you need to make sure there’s nothing wrong with the home, especially something that can be detrimental to living there. Be sure to stick with a common theme throughout the process and pick a reliable inspector that comes recommended to you. Either I can, or family & friends can definitely recommend someone that they have trusted in the past.
You should always attend the inspection. The inspector will be able to point out things within’ the home that you may not notice on your own. It’s their job to inspect every inch and they know what to look for. This will leave you prepared and comfortable to going on to the next step.
LET'S MAKE THIS PACT!
Once the attorneys iron out the contract, you will sign and send over (the biggest check you’ve ever written in your life!) the deposit of what is typically 10% of the purchase price as your deposit for the home, which is put into escrow.
Next, the seller will countersign the contract and send copies to you, the buyer.
YOU ARE OFFICIALLY IN CONTRACT!
APPLICATIONS ON APPLICATIONS
You’ve decided the type of mortgage you want, now you need to apply for it. Plain and simple, A loan application is used by borrowers to apply for a loan. Through the loan application, you will reveal key details about your finances to the lender. The loan application is crucial to determining whether the lender will grant the request for funds or credit, and at what rate they will lend at.
CONDO / COOP APPLICATION
A NYC condo application is similar to a purchase application for a co-op apartment. The length and level of detail required will vary depending on the condominium, but a NYC condo application will generally be substantially shorter and simpler of a form vs a co-op board package.
Many coops have strict financial requirements than your typical mortgage broker or bank who is arguably taking more risk by loaning money for your purchase. It typically takes at least two to three months to close on a co-op once you have a signed contract.
THE INTERVIEW... TO PURCHASE MY HOME? YUP!
A co-op board interview is scheduled once you've submitted your coop purchase application and have been conditionally approved. At this point you’re about 99% of the way there… The board has reviewed and conditionally approved your application at this point, so the co-op board interview is a final opportunity for them to evaluate you in person. This can take up to 2-3 weeks as you might have to wait till the boards next scheduled meeting.
THIS IS IT
You actually made it through one of the most commendable transactions of your life. It’s time to do your final walk-through, which will either be done the day of or the day before your scheduled closing.
The closing, is where the ownership of the home is finally transferred from the seller to the buyer. This is going to feel like a large business meeting, because it is…
Be prepared to review and sign a lot of documents. Don’t be alarmed if last minute issues arise as they often do. Just remember that everyone else in the room does this all the time and we’re all there to help you get over the finish line and get the keys to your new home.