Seven Steps to Home Ownership

I was recently invited to be the real estate agent keynote speaker at a home buying seminar at the University of Utah alongside my loan officer colleague, Nelson Barss. During the seminar, I was really impressed by the eagerness of people to buy a home. There seems to be an inherent desire in all people to own land and a home of their own.

I thought I would share the presentation. The following information from my presentation will be helpful if you are thinking of buying a home for the first time or if you are going into round 2 or 3 of homeownership. Who couldn't benefit from an occasional homebuying 101 refresher course?

Seven Steps to Home Ownership
Based of a Keller Williams Model

1. Decide to buy
2. Hire a Real Estate Agent
3. Secure Financing
4. Find Your Home
5. Make An Offer
6. Perform Due Diligence
7. Close & Move In


1. Decide to buy
When to buy?.... When can you afford?

Utah Starter Home:
List price: $150,000
Loan: $150,000
Credit Score: ~700 /Rate: 4.3%

$756 - Principle & Interest
$125 - Property Tax
$25 - Homeowners Insurance
$138 - Mortgage Insurance
Payment: $1,043/month

…$150,000 Home, Payment: $1,043/month

Median Salary
*UofU Grad Starting Median Salary: Yearly: $44,200
*according to Payscale.com, 2011-2012 payscale report

Monthly Income: $3,683
$1,043 payment is 28% of Your income

…$150,000 Home, $1,043 house payment is 28% of income

Debt Limits
Debt Limit for Borrower = 50%
Wise Debt Limit = 40% of Income

40% of $3,683 is $1,473
$1,473 for debts - $1,043 for house
$430 remains for other debt


2. Hire a Real Estate Agent
Who? Why? How Much $?


Who?
The buyer is the Hiring boss:
Hire someone with at least 2 years full-time experience
Many agents are part-timers with little experience or availability

Why? An agent is:
Market Analyst – Ensure you don’t overpay
Liaison – Lender, Title, Inspector, Contractor
Contract Specialist – Buying a house = Contracts
Negotiator – Knowledge of what’s negotiable
Trained Eye – Mold, Meth, Shingles, Appliances
Knowledge – Short sales, Foreclosures, etc.
Secretary – Scheduling, Research
Finder – Full-time hunter of homes

How Much $?
A buyer pays: $0.00 Zero
Seller’s Pay Commissions
Listing agent & buyer agent split the contracted percentage %
Commissions are not added to price
Prices cannot be higher than appraisal


3. Secure Financing


Loan Officer - Crucial:
Preapproves your loan (required for offer on home)
Helps determine your best mortgage option
Submits Purchase Contract to Underwriter
Gets appraisal & title commitment
Obtains funding for closing






4. Find Your Home
The Fun Part




Location Location Location
Wishlist: Analyze Values Needs & Wants

Establish a “Hotsheet” with your agent
Your agent will set up auto-emails of homes that match your specifications

Multiple Listing Service or “MLS”
www.utahrealestate.com Give your agent MLS listing #’s of houses you’re interested in and let your agent schedule multiple appointments


5. Make An Offer
The Nervous Part

Price—offer must reflect true market value of the home
Terms—address timing and financial considerations & what's included
Contingencies—“conditions” that allow you to opt out
Seller Concessions— common in a “Buyers Market” — Seller may pay closing costs (saving a buyer thousands)

Real Estate Purchase Contract (REPC)
Purchase Contract Approved by the State
Ensures you are protected as a buyer if drafted properly




6. Perform Due Diligence
Courting the Home


Property inspection - structural or hidden issues
Hire a home inspector
Cracks or crumbling in the foundation
Cracks inside the house over windows
Water stains in ceilings, floors, or walls
Faded or worn shingles
Mold or Meth issues


7. Close & Move in

Pre-closing responsibilities include:
Appraisal, title search, and title insurance.
Keeping yourself mortgage worthy!
Doing a final walk-through of home.
Countdown to closing includes:
Getting your settlement statement, certified funds, evidence of insurance, and transfer of clear title.