I. Overview
a. Find a house
a. Find a house
b. Make an offer (2-3 days to negotiate price)
i. You’re only required to put down $500 (not $1000) to bind the offer; and 5% (not 10%) down when you sign the Purchase & Sale Agreement
ii. Schedule house & pest inspections
c. Renegogiate based upon house inspection (about 1 week until you can revoke your offer)
d. Sign the Purchase & Sale Agreement (another week)
e. Apply for a loan (3-4 weeks until you get commitment letter)
i. It’s important to apply for a loan the day after you sign the P&S in order to comply with the mortgage contingency. However, if you have been preapproved for a loan, then you have already started the application process (and possibly paid a fee already for the privilege). But, you can still shop for rates.
f. Prepare for closing (about 4 weeks after your mortgage contingency expires)
i. Shop for home owner’s insurance
II. Before you look at houses
a. Useful books
i. 100 Questions Every First-Time Home Buyer Should Ask by Ilyce R. Glink. Extremely thorough; lots of useful tables and worksheets. In fact, I will skip over a lot of information because it is found in this book.
ii. If you’re clueless about buying a home by David W. Myers. A lot shorter than the Glink book, but provides a different perspective.
b. Determine your financial “comfort zone”.
i. Glink’s book has a useful worksheet (in the chapter “How do I know what I can afford?”) that is supposedly similar to what lenders calculate for a prequalification letter. Because you will probably be prequalified (or preapproved) for an amount that is much higher than what you would feel comfortable paying on a monthly basis, it helps to figure out your upper limit beforehand and STICK TO IT when looking at houses.
ii. The website of the Warren Group, http://www.thewarrengroup.com/home/wg/, allows you to look at the median prices of homes in various towns (in New England) over the past 10 years. Makes for interesting, if sometimes depressing, surfing.
c. Register for the website (for Boston): http://www.sharethecommission.com/
i. This website, from what I could tell, gives you access to a lot, if not all, MLS listings. And it seems pretty up to date. You can tailor your search to neighborhood, price, etc.
ii. Another potentially useful site is isoldmyhouse.com (I think) for properties sold by the owners (FSBO = for sale by owner?). These properties are not listed with the MLS. I didn’t use the site as much, and had trouble locating the contact information on a house that actually interested me.
iii. I’ve heard varying stories about how useful buyer’s agents are. Igor and I would probably have gotten one if the market were truly hot (and we didn’t look at newspapers or the ShareTheCommission website). Problem with buyer’s agents is that since they get some of the commission, they might push you beyond your comfort zone in order to close the deal.
d. Find a lender with reasonable rates & get a preapproval letter.
i. Some sellers (or their agents) won’t consider you without a preapproval letter. This letter requires a credit search and perhaps an application fee. Therefore, it is best if you find a lender with a low application fee, perhaps your own bank. You can find good rates around the time when you’re signing the P&S.
e. Find a real estate lawyer
i. Most people find a lawyer after they sign an offer. My advice: don’t sign ANYTHING until you consult a lawyer or your buyer’s agent.
III. Mortgage companies
a. What to ask (FAX information if possible)
i. What is your application fee?
1. NOTE: This question is applicable when you’re looking for a pre-approval letter. The rest of the questions can be asked after you have signed a P&S
ii. Can you guarantee my mortgage in my timeframe?
iii. Handling of loan
1. Will I be working with you throughout the process, or with an associate?
2. Do we need to meet, or can we communicate by phone, fax?
3. Do you sell mortgages on the secondary market? Do you still service these loans so that I pay the same institution for the duration of the loan?
iv. Do you have any programs for FTHBs? Are there limitations on salary, amount of loan?
v. Can you describe the types of mortgages that might be applicable to my situation? How can I avoid private mortgage insurance (PMI)? What are the rates (without points)?
vi. What is the breakdown of the closing costs, e.g. those shown on the Good Faith Estimate?
vii. Are there any prepayment penalties?
b. How I chose Gretchen Houghton
i. Everyone says credit unions are the best, but no one that I know here actually used them, perhaps because they’re not credit union members? In any case, thinking of CUMEX as a good fallback, I called representatives of 3 small banks and 3 large lenders (some not listed). CUMEX’s rate was better than those of the small banks, but not as good as those of some of the bigger lenders. Of the representatives, Betsy Bowles was the most helpful and the most on top of things. Wells Fargo also had better rates, but the conditions of CUMEX’s 80/10/10 program worked better for us.
ii. Although we haven’t completed the loan application process yet, I know Gretchen will be there for us. We actually got our pre-approval letter while negotiating our offer price on the house. This coincided with the time when everyone and his/her dog was refinancing. Although technically speaking, we didn’t need a preapproval letter, the broker was being a real pain about it, and ultimately, Gretchen came through with the type of letter the broker wanted. Just another argument for why you would want a preapproval letter BEFORE you make an offer on the house.
IV. Real Estate Lawyers
a. What to ask
i. Will I be working with you, or an associate?
ii. What is your experience doing real estate
1. Working with first-time home buyers (FTHB), unmarried couples, condos, etc.
iii. What is your fee?
1. Is fixed fee available?
2. How are phone calls treated?
iv. What is your role during the homebuying process?
1. Explain the process.
2. What is your schedule like? Do you work during evenings, weekends?
b. How I chose Karen (originally referred by Julia & Dan Flynn, no relation)
i. I personally talked with Karen, Alan, Janelle, & Joseph. Of the four, Joseph charged us for the initial consultation.
ii. Although Karen doesn’t offer a flat fee, I felt the most comfortable talking with her.
V. Home inspectors
a. What to ask
i. Are you doing the inspection, or is an associate?
ii. Fees & services
1. How much do you charge?
2. How long is the inspection?
3. What is included in the fee?
a. Do you inspect EVERYTHING: crawlspace, basement, signs of pests, roof, attic, etc.?
iii. Can you suggest specialized inspectors for radon, pest control, lead, asbestos?
iv. Are you a member of a professional inspection association, e.g. American Society of Home Inspectors (ASHI)?
v. Inspection report
1. How soon after the inspection will I receive a report?
2. What kind of report will I receive, a checklist or fully written report (with summary)?
b. How I chose Harold Prop (referred by Gretchen Houghton and CUMEX Mortgage Center)
i. Igor or I called everyone except Ray Jackson. We narrowed down our choices to Harold & Peter because I actually got to talk with them (as opposed to the assistant). I liked them both – they seemed knowledgeable and very informative. Peter was very much a salt-of-the-earth person. The final decision was based upon whose schedule better fit our needs.
ii. We also happened to have a coupon from Gretchen that gave us a free radon test.
VI. Locking in a mortgage rate
a. Locking in a rate is another stressful thing to do because it is like gambling. Will the rate go down or not? Once you lock in a rate, there is a penalty for unlocking it and locking in a new one.
b. Before you do anything, make sure you understand the procedure that your mortgage officer uses to lock in a rate (and how long the lock is good for). Generally speaking, rates cannot be locked in during 8.30-11.30 am each day. 11.30 am is when the new rates are posted.
i. Find out from your mortgage officer whether there is a difference in rates between mortgages (including the servicing) that are sold on the secondary market vs. those that are not.
c. An interesting site to check is http://www.bankrate.com/brm/news/sav/ratetrends.asp. It graphs the trends of rates of various types of mortgages, saving you the trouble of clipping interest rates from newspapers.
d. Make sure to get some sort of written confirmation that you have locked in a rate. You don’t want to be surprised at closing!
VII. Home insurance
a. What to ask (although you should get a printout of all this information)
i. What is the deductible?
ii. What types of property and possessions are covered?
iii. Describe the type of coverage:
1. Cost of home vs. market value
2. Building to code
3. Zoning coverage
4. Personal articles
iv. Ways to cut premium
1. Connect home security system to police or fire station
2. Raise deductible: $250, $500, or $1000
3. Don’t include the value of your land – just the house
4. Group plan options, e.g. employer, alumni association, credit union (check with your groups)
5. Buying other types of insurance with them, e.g. auto
b. Things YOU’LL be asked
i. Location of the closest fire department, fire hydrant
ii. Type of deductible you want to pay
iii. Amount of liability insurance, e.g. if someone gets injured on your property or you hurt someone outside of your property.
c. How I chose Nancy Bender (originally referred by Briana Burton & Karen Jennings-Flynn)
i. Maybe I was really tired at this point, but I didn’t gather as many names as possible. Also, I think this is the only time I talked with agents. In a way this was the easiest step because Nancy was referred to me by two different people, both of whom do not normally make recommendations unless really pressed. Still, I called everyone I could get, and Nancy gave me the best deal. It’s as simple as that.
