Helping Buyers and Sellers with North Texas Real-Estate

Posts tagged “2014

House Hunting Part 11 – Closing


The day has come. The weeks of searching and gathering info, credit checks, inspections, and completing paper work finally ended. The last walk through appeared good and the house-hunter is cruising to closing.  Days before the fateful date the Buyer and his house-hunting guide receive a HUD-1 to review.  HUD is an acronym for the Department of Housing and Urban Development and the HUD-1 is a settling statement used by the closing agent to itemize all of the expenditures for both the Buyer and the Seller.  The Real Estate Settlement Procedure Act commonly called RESPA requires this form for all Real Estate transaction involving federal related mortgage loans in the United States.  This document has two columns; the first column is for the Buyer and the second is for the Seller.  The settlement has several pages, the first shows the amount due by the borrower, including down payment, property taxes, survey fees, as well as other closing costs and it also subtracts earnest money and the option fee from the amount. The total amount the Buyer must bring to the table is on the bottom left hand of the page as well as the proceeds the Seller will make from the sale on the bottom right. The second and third pages are detailed breakdowns of all the expenses for both parties and additional disclosures about title insurance and other miscellanies fees and finally a signature page.  Fees are paid with a cashier’s check written to the title company. The Buyer must also bring his/her driver’s license to prove whom they say they are when purchasing the home.  A copy of all the documents should be stored in a safe location. The survey is a handy document that could come in useful if the Purchaser sells the abode or decides to do an addition.

Typically, closings occur at the title company, sometimes closings happen at remote locations such as the Realtor’s brokerage or the house-hunter’s own office or home.  Closings also take place when one party is out-of-state, or even out of country. Most title companies can arrange for such closings.

At the title company, the closing agent takes control. He/she leads the house-hunter to a table and then presents the closing documentation. The stack can look like a telephone book and seem intimidating. A good closer will go over each document explaining the purpose of each, and sometimes the documents are repetitive.  The documents include mortgage terms and information, insurance, home warranty, survey and other required documentation. Closing documents vary depending how the Buyer purchases the home and/or type of home loan.  After closing, the tittle company submits the signed loan documents for funding and when the loan funds, the title company distributes the money to both Realtors in the deal, the payoff of the seller’s loan and to the seller.  After funding the house hunter gets the keys to a successful hunt.  A good house-hunting guide visits the house hunter about a week or so after move in to ensure everything is fine. Every real estate transaction is different and there is always special issues that need addressing. However, with patience, a clear head, and a good house-hunting guide these obstacles are easily overcome. See ya down the road.


House Hunting Part 10 – Home Stretch

The anticipation of receiving the keys and walking into the new abode is a powerful feeling.  The diligent house hunter found a home, placed an offer that became a contract and did all the necessary requirements for obtaining a loan…now what?  The Seller scrambles to arrange movers and have the house ready to hand over and to start their new life. The Buyer also plans for the move however; they remain anxious and ready to inhabit the new abode. During this phase many important things occur. The Title company verifies the survey and if needed orders a new one. They research the title to ensure no liens or other obstacles exist, they prepare the insurance commitment for the title policy and verify the property taxes.  The bank schedules an appraisal and the house-hunting guide prepares for the final walk through.  Meanwhile the Buyer plans the utility turn on date.  For some, time flies fast at this stage for others it drags on.1th

The survey shows all boundaries and improvements on a piece of property.  It solidifies the limits of the borderline the house hunter purchases. In some circumstances, the Seller will have a copy of an acceptable survey. This can happen with newer homes. However, if any changes to the building footprint or some permanent structure to the property occur such as a pool or additional walkway a new survey is required. The survey becomes part of the contract, and when a survey does not exist, the Buyer or the Seller can negotiate to pay for the new one; the title company hires surveyors.

The title company during this time researches the title abstract. The title abstract shows the history and the ownership of the property, they search for any liens or claims filed on the property so the Buyer has a clean marketable title. Title companies also issue title insurance policies to both the lender and the owner. Title insurance protects the Buyer from any unforeseen claims, hidden risks, or fraud against the property.  The insurance policy provides protection from financial loss as well as payment of legal costs necessary to clear such claims.  Title companies also examine property taxes to determine how much the Seller owes; the Buyer pays a prorate amount as shown on the HUD document given to both parties prior to closing.

During this time up until closing, if the house hunter is applying for a loan, the bank will conduct an appraisal. The appraisal confirms the collateral for the loan. For instance if the Buyer is purchasing a home for $150,000 and placed 10% down, $15,000 then the appraisal amount must be over or equal to $135,000. If the appraisal comes in below that price either the Buyer or the Seller must make up the difference. In the above example, if the listing appraised at $130,000 the Seller must lower his price by $5,000 or the Buyer must come up with the extra cash. Larger down payments and skillful negotiations lessen the chance of a low appraisal. Appraisals can make FHA and VA loans difficult because of low down payment requirements. A FHA loan only requires a 3.5% down payment while VA loans are as little as 0% down. Appraisals are also different depending on the type of loan. FHA and VA demand the house to be in a livable condition and could require certain repairs.  Structural issues and wood rot is big for FHA loans while air-conditioning and heating equipment must function as intended with VA loans. The house hunter must pay attention to home inspections and confer with his/her loan officer the requirements for the mortgage. If the Seller is notified about the repairs to satisfy the loan, the Seller may be more willing to fix the items.

As closing approaches, it is wise to conduct one final walk through, this is a courtesy provided by most Realtors. The final walk through gives the Buyer a peace of mind about the purchase and ensures nothing happened to the home prior to closing.  Most closings occur four weeks or more after the executed contract, anything can happen within that period.  Unforeseen circumstances such as a fire or broken water pipe can occur or Seller’s mischief, and if something needs correcting, there is time to figure the best course of action before the abode is closed.  Once the house belongs to the Buyer addressing those repairs becomes much more difficult and the Buyer may need to hire a lawyer or go into mediation.

At this point, the house hunter has nearly crossed the finish line.  This is a good time to schedule all of the utilities such as electric, water, gas, telephone etc. Plan to have these items turned on the day of closing so when you get the keys and go into the new abode you do not need a flash light. Also, be sure to purchase homeowner’s insurance, most lending terms require homeowner’s insurance and if the Buyer does not purchase it, the bank will and this route is very expensive. See ya down the road.

House Hunting Part 9 – Loans

5d489cfe-bbce-354dThe option period passed, the house hunter is now cruising to the closing date. Prior to searching for the new abode, the buyer requested a pre-qualification letter. During this stage, the lender discussed what loan options were available.  Choosing the right home mortgage loan can be a daunting process. So many different types and different conditions, does the Buyer want a fixed or adjustable rate loan. Then the house hunter must determine what kind of mortgage, the most common for Buyers are conventional, FHA and VA loans, some of the less common loans include USDA and Texas Veteran’s Home loans.

Fixed rate loans have the same interest rates year after year for the term of the loans. The Buyer’s monthly payment stays the same during the duration. This is true for whatever length of the loan from a fifteen year to a thirty-year. This is the best choice when interest rates are low. The House Hunter can lock in a good rate without fear of what will happen in the housing market.

Adjustable rate loans known as ARMS in the real estate world, the rate remains fixed for a pre-determined amount of time and then changes to reflect current interest rates. For instance the Buyer can get a 5/1 ARM loan, the first five years are fixed and then the remaining years adjust on a yearly basis. These types of loans are desirable when mortgage rates are high and indications exist the rates may fall in the future. When they do fall, the Buyer can refinance the loan to a fixed rate locking in the lower interest.

The next choice for the Buyer is what type of loan. The federal government does not insure conventional loans and they can be conforming to the rules and regulations of Freddie-Mac or Fannie-Mae or they can be non-conforming. They have less requirements than federally insured loans. The down payment is higher and if less than 20% the Buyer will need to purchase Private Mortgage Insurance (PMI).

The Federal Housing Administration (FHA) mortgage insured loans managed by the Department of Housing and Urban Development. The Federal Government insures the loan from default. Low down payments make this type of loan a great option for Buyers with little cash. The down payment is as little as 3.5% however, mortgage insurance is a requirement, increasing monthly payments.

The U.S. Department of Veteran Affairs (VA) offers a loan program for returning soldiers and their families. These loans are federally insured. They offer loans with no down payments and are a great option for our veterans. Paperwork is stringent however can be worth the trouble.

The USDA offers a loan through the Rural Housing Service and is a good option for house-hunters searching for a home in a rural town. Texas Veteran Loans created by Veteran Housing Program to help Texas Soldiers purchase a home with low-interest rates and no down payments.

During the contract phase of purchasing an abode the Buyer must take care not to make any other big expenditure. Do not buy a car or run up your credit cards during this period. Doing so could damage the Buyer’s chances of obtaining a loan and closing on the new castle.  See ya down the road.

House Hunting Part 8 – The Option Period

The negotiations went on for what seems like forever when the day everyone waited for finally arrives. The hunter gets the call from his house-hunting guide the offer is accepted.  Soon the Buyer has a copy of the signed and executed contract, victory!  The hunt is over…yes, but now the real work begins, time to reel in the catch. The earnest money and option fee is collected, earnest money goes to the Title Company, and the option money goes to the Seller. The typical stretch to close a contraOLYMPUS DIGITAL CAMERAct is twenty days; this stage varies depending on many things such as time needed by Lender or the Seller’s requirements. The Lender, Title Company and Buyer have quite a bit of work to do before the deal is closed. The first thing that occurs is the Buyer’s option period begins immediately after the executed contract and lasts usually ten days.  The house-hunter paid a nominal fee for this option and it allows the Buyer to terminate the contract for any reason without losing the Buyer’s earnest money. This provides the house-hunter with ample time to hire home and termite inspectors to find any damage not readily obvious. Inspectors are meticulous, going over nearly every reachable item, which is part of the home. Sometimes it is wise for the Buyer to hire specialty inspectors; if you suspect foundation problems, a structural engineer might be required or if buying an older home an electrical engineer will make the perspective owner comfortable about the wiring.

When the inspection is over, he/she issues a report. The report contains each deficiency in the home and used to negotiate repairs. Health and safety are the first concern and the Seller should be willing to make or compensate for the required renovations, if not the Buyer should walk. Other items such as cosmetic or code upgrades are also negotiable however; each item the Seller pays for will lessen the Seller’s final sales amount. Code upgrade items can be hard to request because they could have been within code when the home was build but are now not, and if the item is working as intended then the Seller may not agree. Never hurts to ask. Depending on how much the Buyer’s Realtor beat down the sale’s price will affect the amount of negotiation room the Seller has for repairs. The option period gives the Buyer leverage during this stage because the Seller knows the Buyer can walk away from the deal with no penalty.

This is also the moment for the Buyer to contact their lender to start the loan process. Talk to your Lender, present them the signed and executed contract, and begin collecting the necessary documentation. The Lender will ask for two consecutive years of income tax returns, sometimes three depending on the situation. They will also ask for proof of income, W2 forms, or pay stubs will work. Bank statements for the past 30-90 days for each account, including savings and brokerage accounts is required. The loan officer will also request proof of paying your rent on time for a year as well as credit account information, a paper trail for money gifted, address history, and divorce decrees. If the Buyer is self-employed then add in copies of checks from clients, credit card statements and a profit and loss statement for the current year. It is much better to get this information to your Lender fast to close your home on the scheduled closing date.

Yes, the house-hunter’s work is far from done when the home goes under contract. Your Realtor can help you with these steps.  See ya down the road.

House Hunting Part 6 – Pulling the Trigger

thCAML1JQPSometimes it is the first home you tour; sometimes the hunt goes on for months searching high and low for the perfect abode. With the list in your hand, you eliminate the wrong ones and each one you discard gets you closer to the one you will keep. All will click, the house will feel like yours, down to the layout, the features, the neighborhood, and you will know when it is the right one. Now you are ready to pull the trigger. If you have your pre-qualification or better yet pre-approval letter, are aware of your price limitations, and have some cash on hand, making an offer is easy.

First, your house-hunting guide should produce a comprehensive market analysis (CMA/Comp) of the house to determine if priced correctly. After reviewing a few listings, you will start to notice overpriced or undervalued houses, however until your Realtor completes a CMA you will not know for sure how much you should pay. The danger the house hunter must avoid is paying too much. Some types of loans have strict appraisal guidelines which could come back to bite you in the contract phase of the process. If the Buyer agrees to dish out, too much for the perfect castle, he/she may find the home does not appraise and if that is the case, someone must shell out the difference and this might create an awkward and unaffordable situation.

An offer is a contract only signed by one party, the Buyer. The Seller accepts the offer and signs the document and when executed becomes a contract. In Texas, we use the “One to Four Family Residential Contract” promulgated by the Texas Real Estate Commission (TREC). The offer states the exact address and legal description of the abode and shows the amount offered to purchase and what kind of loan you plan to use as well as the down payment. The down payment depends on the loan. A conventional loan can require 5-10% down, while a FHA loan only requires 3.5%. VA loans are as little as no down payment provided you qualify. Everything on the contract/offer is negotiable. The offer states the exclusions from the contract usually found on the Multiple Listing Services (MLS) info sheet and includes items the Seller wants to keep. This can include anything from curtains to built-in speakers. All in the home attached, nailed down, screwed in etc. is considered a part of the house and is only excluded using this portion of the agreement. In Texas, the Seller may keep the refrigerator. All other build in equipment must stay.

Earnest money is a guarantee the Buyer will come to the table at closing. Except for certain circumstances spelled out in the contract, the Buyer could lose this money should he, /she breaches or breaks the contract. Typically, earnest money is $1,000 for every $100,000 of purchase price and paid with a check made to the title company. The title company holds the money, which is returned to the Buyer at closing. The hunter must submit a copy of this check with the offer. The title company requires a current survey; in some cases, the Seller has a good copy of a survey yet in most cases, a new one is required. Who pays for a new survey is negotiable. If the listing needs repairs, there is a section of the contract to negotiate whatever needs fixing. Closing costs are also negotiable consult with your lender the amount a Seller can pay per loan terms. The offer also demands the Seller to submit a Seller’s Disclosure; provided the Seller does not give the Buyer a disclosure, the Buyer can terminate the contract at any time with escrow money returned. The Seller typically pays for Title insurance and the home warranty. The offer also states the estimated closing date. The closing date depends on some factors, usually how long the loan funds. The closing date can also hinge on the Seller or Buyer, when one can move in or the other move out, and instructs when possession of the abode takes place. Most of the time it is after funding of the loan, however maybe the Seller needs a couple extra days to move out, a temporary lease is submitted either with the offer or during negotiations. The option period can cost $100-$150 and gives the Buyer typically ten days to cancel out of the contract for any reason what so ever and not lose the escrow money. If the contract is broken during this period all the Buyer loses is the option money. If the option is not used the money is returned at closing. A “Third Party Financing Addenda” is attached to the offer when the Buyer is obtaining a loan. A good Realtor will help you with the offer and should explain every detail.

Submitting an offer to the Seller’s representative consists of the contract signed only by the Buyer, the “Third Party Financing Addenda” if a loan is involved, a copy of the escrow check and a copy of the option check. Once sent off, it is time to say a prayer and cross your fingers. Sometimes the response comes right away and sometimes the answer takes a few days. Making an offer is exciting, fun and nerve-racking however, the joy has only begun. See you down the road.

House Hunting Part 5 – The Hunt

3ed91851102c1cb5535e8528df1ee8adYour heart flutters; maybe you breathe a little faster, an excited energy takes over, you are ready. You did your search, compiled a list of potential abodes, and found a good hunting guide to help with your hunt.  A pre-qualification or better yet pre-approval letter in hand, you are prepared to start the expedition in earnest. Your Realtor will contact either CSS (Centralized Showing Systems) or call the Seller’s representative to schedule showings. Some brokerages have their own scheduling process however most use CSS. There are three types showing confirmations, “Go” sometimes called “Go and Show” is typically a designation for vacant properties. It means the listing is approved and ready to show. “Courtesy Call” is also an approved viewing; however, CSS contacts the Seller to alert them. “Appointment Required” CSS calls the Seller to schedule a showing. Occupied dwellings typically require a one hour advanced notification prior to the actual visit. The house hunter must be aware of these factors when scheduling homes.

Your house-hunting guide gave you the address for the first walk through. You meet your Realtor at the first house. On the door handle, you observe a device. Those are key locks; they house the keys to the front door so the Realtor can gain entry.  They are either a combination lock or a SUPRA lock box. The combination locks are older types of key storage and usually found on lower end or vacant abodes. The SUPRA Lock box is blue and requires a battery operated key card to open. The Realtor punches in a code and the box opens with the key. With this device, CSS tracks who is in the home and automatically shuts down access after 9 PM.

The home is now open for your review. Provided the Seller’s Realtor has coached the Seller well, he/she will not be in the house during the showing. Nothing is worse than having the owner over your shoulder while you look. Not only is the situation awkward but it also lessons the chance of you buying the place. When investigating the house pay specific attention to the walls, areas around door and window openings, and try the doors. If you notice cracks above window and door openings and/or if a door sticks while trying to open or close then the abode could have foundation problems. North Texas soils contain large deposits of clay. Clay expands when wet and contracts when dry. The soils dry in the summer heat and swell during autumn rains. The uneven lift can cause damage to concrete slabs. This is one reason why so many foundation repair ads are in the DFW area. Cracks in the ceiling are typically not a big issue. Gypsum board and joint compound are brittle products and with large span ceilings, even walking in the attic or the wind can cause cracks. Also, pay attention to the kitchens and restrooms. Make sure they function and the appliances and fixtures are in serviceable condition.

Try to picture yourself, your family, and friends in the abode. Make a mental plan how your furniture will fit in the spaces. Properly staged homes will make your job easier. Personal photos on the walls, the old worn comfortable chair, or other knickknacks can make the hunter feel like a visitor and not a potential owner. Investigate storage space; a house can never have too much storage. Do not worry about paint color or carpet because those are easy, cheap fixes, and sometimes corrected during the negotiation phase. Check the backyard, is it fenced, is it big enough, does it include a pool?

House hunting is fun; however, certain things should be avoided. Do not use the bathroom; remember the home is not yours. Do not bring food or drinks inside. Also, do not discus negotiations or finances inside the house. If you need to talk about those items, wait until you are outside. Sometimes Sellers will plant recording devices in the rooms in hopes to catch those types of conversations to strengthen their bargaining hand. A good Realtor will give you a MLS (Multiple Listings Services) info sheet about the abode. Take notes and try not to schedule too many showings in one outing. Houses can blend and a feature you thought you remembered in one home could actually belong to another. Relax and enjoy the search and remember that each abode you cross off the list brings you closer to the one you will pull the trigger on. See ya down the road.

House Hunting Part 4 – Selecting a Hunting Guide

20090429223736  The late night searches ended. With a warm cup of coffee at your side and your spouse checking in on you every now and then, you compiled your list of perspective abodes. The prize of your hunt could possibly be included yet you are not sure. The photos look nice, the price is right and you love the neighborhood.  Nevertheless, those pictures do not tell the whole story. Realtors take pictures of only the things they want you to see and exclude all the blemishes a home may have. Now it is time to take the hunt on the road. You need to schedule visits and to do this you need a hunting guide, a licensed Realtor. However, how do you choose one?

Selecting a Realtor is one of the most vital aspects in-house hunting. It may seem a daunting task with so many out there. Just google the tem “Realtor” and lists of perspective guides appear. How do you know which one is right for you? It is difficult. Let us start with the basics, what is a Realtor?  A Realtor is a real estate agent who is a member of the National Association of Realtors, a real estate agent is an individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker. Negotiates and arranges the showing of property, listing property, filling in contracts, listing agreements, and purchase contracts. Real estate agents generally are licensed to operate under the supervision of a real estate broker. They come from all occupations and are required in Texas to obtain 180 credit hours of classroom study followed by a computerized exam.  A college degree is not required.  All Realtors start at different places in their lives. Some set out from the start to become a Realtor while others begin after completing another career. Some are full-time and others work side jobs. The basic services of agents are the same throughout the industry and are not difficult. What distinguishes one from another are the intangible items.

In picking the right hunting guide, there are many things to consider.  Experience, for example may be important yet some types of experience hold more value the others. A Realtor who has been in the business for the last twenty-five years might be a good guide however they may also be so busy that they are unable to show you a home in a reasonable time or they may pass a client who is searching for a less expensive house to another non-experienced representative.  A new agent may cause you to pause, however remember every Realtor does more or less the same thing.  This does not mean the new agent is the way to go because there are ‘bad’ new agents as well as “good” ones.  Some potential house hunting guides possess other valuable experience. Some come from the construction industry and others from a financial background, this kind of knowledge can help the hunter.  Ask friends, coworkers, or local family members for their recommendations. Word of mouth is the best advertising a Realtor can get. If that is not available, go to the Texas Association of Realtors website, they have a Realtor search engine. When searching on Zillow or some other website to find homes usually the listing agent’s photo and contact info accompanies the listing. In Texas, the listing agent may also work with the Buyer causing an intermediary status. The Broker assigns the same agent to work both sides or delegate another representative to handle one side of the deal. Usually the listing agent stays with the Seller since they have a closer business relationship and the other goes to the Buyer. This is not the ideal situation for the hunter because he/she is either working with the Seller’s Realtor (by law they are to keep both sides of the deal separate) however in reality could cause conflicts or having the Broker choose your Realtor which is also not a good idea. Any licensed Real Estate Agent in Texas may show other listings besides their own. This is a critical concept for the hunter to remember.

Make sure your house-hunting guide is able to access the MLS (Multiple Listing Services), CSS (Centralized Showing Services) and is a member of the Texas Association of Realtors. Realtors from major brokerages such as Prudential, Century 21, Keller Williams, etc. have marketing advantages over some of the smaller independent brokerages however in reality; this helps Sellers more than Buyers.   Personality is also a trait to consider. Is your hunting guide friendly, honest, conscientious? Is he/she prompt? Do they explain all the steps required to purchase an abode?  The qualities are objective yet significant and something only the hunter can answer. The hunting guide is perhaps the most important person by your side during the hunt. He/she will send you listings, schedule showings, write offers, negotiate deals, and coordinate between the lender, Title Company and the Buyer. They help you with the process all they way to closing and check up with you after moving into your new castle, so choose carefully. See you down the road.

House Hunting Part 3 – Scouting

You did all of your homework. You contacted a lender and you know your price limitations. You honed in your wants and needs, determined your desithCA9CN550red locations to live. Your weapons sharpened you are ready for the hunt. Scouting is the next step. Not too long ago newspapers and magazines were your best choices to find a new house. Today the internet is king and by far the best place to start the search. Most folks sit in their home offices, usually at night, when the kids are asleep with a cup of coffee or a glass of their favorite Pinot in front of a computer screen clicking away on one site after another. There are many web sites to choose. Some of the more popular ones are, Trulia, Zillow, Homefinder and All you must do is write in a location input the price range and a few other details and bam, a whole page of available houses appear. Seems so easy yet you must take care.  Unfortunately, independent listing websites are not monitored for quality and on some of these sites; anyone can post a home for sale. The hunter may find the perfect abode only to discover the house sold two months ago or you may find a fictional abode. Some unscrupulous Realtors place false advertisements on these sites only to get your business, when you call the Realtor accompanying the listing for a showing, he or she will tell you “sorry it just sold; however I know a few like this one I can show you.”  I have heard stories of Realtors placing a ‘for sale’ sign in front of their own homes they are not intending to sale and snapping a photo to place on the web to get business. Not all Realtors are like this; however, there are a few bad eggs. Not all web listings are bad; the prudent hunter needs to be aware of the pitfalls. is the best search website on the net. gains their information from the MLS (Multiple Listing Services) even so you must verify.

This is a good time to find a Realtor. A Realtor who is connected with the MLS can verify if the web listings are true. They can also set you up to receive fresh listings by email. A Realtor will take the information you gathered and place it in the MLS to limit the search to your criteria. The houses you receive are true with no worries of expired or fraudulent homes. A Realtor who misrepresents a listing on the MLS might be , or banished.  If you are not ready to seek a Realtor, another good place to search is on brokerage sites. Some of the major brokerages in North Texas include, Prudential, Century Twenty-one, Keller-Williams to name a few. Most brokerages have reciprocity agreements with competing brokerages to display houses. The listings on brokerages sites feed directly from the MLS and are true. Craig’s List and the Green Sheet websites also advertise homes, however again be aware of fraudulent Sellers.

The internet is a powerful tool. Over 37% of hunters start the hunt searching on the internet. Another 38% start with a Real Estate Professional who also uses the internet. With so much information on houses at your fingertips, the hunter should have no problems scouting for the perfect castle. …See ya down the road.

House Hunting Part 2 – The Gathering

John-Ferneley-Preparing-for-the-Hunt-102155 You have your pre-qualification letter; better yet, you went ahead and applied for a pre-approval letter. You know the limitations the lender has placed on you concerning how much you can spend on a home. So, what is the next step? The lender has shown you how much of a loan you can qualify for; however that may not be how much you really want to spend. The next step is to budget. Collect monthly bills from the last six months. Compare your monthly expenses with your monthly income. Include estimated grocery, gas, eating out and any other type of expense. Determine how much of a monthly payment you can afford. There are several good, free mortgage calculators on the internet, better yet contact your lender and he or she will give you a monthly payment estimate you can work backwards from there to determine how much you can spend. Include the down payment in your calculations. This step will save you from wasting time looking at houses you cannot afford  plus save you from any heartbreak if you fall in love with a an abode that is financially out of reach.

Now the fun begins. This next step will focus you for the hunt. As any good hunter, you must determine your prey, study its characteristics, and recognize the beast so when the right one comes along you can pull the trigger. To hone in on the target, I suggest making a list. Get a blank piece of paper, notebook paper is fine. On the top, write the maximum price you can afford to spend on your new castle. Leave the first three lines blank and draw a line down the center of the paper to create two columns. On the lines above list the areas you would like to live, perhaps the location of work, good schools, affordable neighborhoods, or just preferences. Include different counties, towns, or subdivisions. These two lines will focus on your hunting territory. Over one column place the title “Needs” and over the second column use the title “Wants.” Under the “Needs” heading, list everything you need in a home. Some examples could include acreage, how many bedrooms, the number of baths, square feet, swimming pool or no swimming pool, age of house, trees on the lot. The “Needs” list are items you cannot live without.  When you are searching for a home on the internet or doing a walk through you have a basis to eliminate the listing. If the abode has all of your “Needs,” you may consider jumping on it and making an offer. The “Wants” column is for niceties. Things you do not need but if the listing has it all the better. You would not necessarily eliminate the house however; you may keep an eye out for something better, and if the something better is nowhere to be found, possibly this one is for you.  These items might include trees, pools, spas, privacy fence, dedicated library etc. When searching for a used home there is some give and take. If you cannot distinguish your “Needs” from your “Wants,” an existing abode may not be what you are looking for and maybe time to consider new construction.

Even though you have everything written down, the list is not in concrete. As you search, your tastes might change. You may list a basement as a “Need” you would soon discover basements are not common in North Texas due to the clay soils. You may find a couple but not many and you may want to adjust your “Needs.” Sometimes you may see a “Want” in a particular house and decide that is not for you, and that is okay, remove the item from the list. Maybe you want to expand your search area or situations have changed so you can increase/decrease your maximum price. The list will simplify things and make it easier to make a logical choice on your new abode and help you pare down the choices. The next Blog will focus on how to hunt…See ya down the road.

What Lies Ahead for North Texas Real Estate in 2014

thCAK4BIB3The presents are gone, the tree is down, and the ornaments placed away. Christmas is over and we are inching our way to 2014. Hard to believe an entire year has passed. Before we move to what lies ahead we must take a quick look back at 2013 to what brought us to this point in Real Estate. Unemployment remained high especially for those who have been without a job for more than two years and are off the official employment count. The launching of the Affordable Care Act, NAS phone tapping scandal and the government shut down all created unease in the market. Nonetheless the economy inched upward and so did home mortgage rates. In December 2012, the rates were at 3.5% now they sit at 4.65%, home prices in the DFW market have also increased by 10.3%. Texas is fortunate with our pro-business environment and low taxes. While other states experienced an exodus of workers Texas saw a huge influx of Buyers. In North Texas, low inventory was the norm. The market was good in the spring and early summer however, as homes sold listings dwindled, and Buyers became frustrated. New construction abodes skyrocketed as builders took advantage of the lack of existing houses on the market.

In 2014, we start the year much the same. Potential Sellers are sitting on their abodes waiting for prices to increase. This is no surprise; houses in Dallas are 12% below actual value while in the Fort Worth region are 20% below actual value according to Forbes magazine. Forbes also predicts home prices will rise 29% in the next three years. We are sure to see home prices on the upswing this year and as prices increase beyond owed mortgages, Sellers will get off the fence and list, especially those who are under water and finally seeing some relief. New construction will also continue strong at least until there is an equilibrium of existing and new houses on the market.

Rising prices are good for the Seller but no so much for the Buyer. The days of 3% interest are gone unless some unforeseen disaster occurs. The predictions I read show mortgage rates climbing to 5.5%-6.0% in 2014 of course this is an educated guess. Again many things can influence rates, however if trends continue this appears accurate. Higher rates mean less purchasing power for Buyers. A Buyer qualifying for a $200,000 home could only qualify for an $180,000 home by the end of 2014.

New lending requirements are also occurring in 2014. In January the Qualified Mortgage, QM rules go into effect. This means lenders will require borrowers to prove their ability to repay a loan. It also limits the debt-to-payment ratio to 43%. This rate is standard for many loans today however lenders will not allow compensating circumstances such as large down payments or large monetary reserves. Loans will also be harder for self-employed individuals to obtain. On the flip side, fees for originating a loan is capped at 3% of the loan. This is especially good for those purchasing lower priced houses. The new rules shall limit some potential Buyers and will have an impact on the 2014 Real Estate market.

All in all the market appears it should be stronger than 2013. The U.S. economy is strong and the ship is slowly righting itself if government will stay out of the way. For Buyers purchasing a home sooner is better than later however if you are a Seller it is tempting to wait for the prices to increase. 2014 should be an adventure, midterm elections are on the horizon, and who knows what will happen internationally. We are in this adventure together and it promises to be a good year house hunting in North Texas. See ya down the road!