An Introduction for First Time Homebuyers in Cleveland Ohio

June 12, 2011 By Leave a Comment

Are you looking into what it takes to buy your first home in Cleveland Ohio?  Not sure where to begin?

Let me point you in the right direction, so your goals of home ownership may be attained!

The first step in home ownership starts with your understanding of what’s involved in the process of making your purchase.  Unless you have the entire amount of money saved up to buy your first home, you will need to get a home loan.  With that most likely being the case, your credit score is an extremely important factor along with consistent pay from stable employment.

Most first time homebuyers want to just start looking at homes right away.  It’s understandable.  But, you must first know what your price limits are.  You must first know what you can and cannot afford – before you set out to see what’s out there!  Meet with a lender FIRST!  Understand that your monthly mortgage payment will be made up of the amortized principal amount, the interest rate charged on your loan, the property taxes, and the insurance premiums (aka “P.I.T.I.”).  In addition to that, if you are looking to live in a condo, a cluster home, or a town home, then you will also have maintenance fees thrown into the mix!  Be comfortable with that total amount in your monthly budget!

In meeting with a reputable lender with whom you will discuss the various aspects of your loan options, interest rates, etc., you will be sharing with them all of your financial information (income, savings & assets), your social security information, etc.  Share any and all information with them, as they will be one of the most important people in your home buying process (besides ME!), and it will allow them to accurately guide you on getting your mortgage.  The lender will then pull your credit report to determine your credit worthiness.  Right now at the time of this post, the minimum credit score required to pursue an FHA loan is 640.  If there are any deficiencies that are in need of immediate attention, a reputable lender should be able to point you in the right direction to getting those items resolved and cleaned up.  The outcome of your meeting with the lender should be to obtain a Pre-Approval certificate or letter.  And, I cannot stress enough that you should have a REPUTABLE lender do this for you!  You want to be certain that when it comes time for you to “close” on your purchase, your lender can actually lend you the money you need!  Also, read more about what not to do before closing.

Once you’ve received your Pre-Approval, you are now ready to start shopping for homes!  But first, identify what it is you are looking for… and in your desired location.  Determine your list of criteria… your “must haves”, “like to haves”, and “do not wants”.  Know what you’ll be searching for!  Briefly start your “shopping” online.  That will give you a general understanding of what you get for the money.  Then engage in a REALTOR® (like ME) to help narrow down your search and guide you in your first home purchase.  Also, know the types of properties on the market.  You can read about the different properties for sale here.

A couple words of caution… Pick just one agent to assist in your home buying experience!  You will avoid any confusion, headaches, and hurt feelings in the long run!  I suggest that you choose someone that meshes well with your personality, etc.  Remember, they will be the conduit to your home purchase!  Also, avoid going to Open Houses.  Agents (representing the seller) are there to gather as much information about you as they can in order to use it against you in a negotiations if you should want to purchase that home.  Instead, schedule private showings of the homes that interest you with your chosen agent… the one who looks out for your best interests and negotiates for you to get you the best possible deal on your purchase.  Read more about Open Houses here.

How much will a real estate agent cost you?… Real estate agents are paid after closing from the seller’s net proceeds.  In most cases you do NOT pay your agent’s commission, so it makes good sense to enlist an agent (like ME) to help you with your home buying goal!  In certain situations though I must mention, namely in some distressed sales, some fees and/or costs may be pushed back onto you based on that particular situation.  Just be sure to know what you are getting into if you want to offer on a distressed sale property!

Also, be aware that some agents pass along hidden fees that they or their company charge you.  The fees may not be overly apparent and may not even be pointed out, but they are written into paperwork that you must sign.  I wrote another post regarding these fees, you can read more about Admin Fees, Broker Fees & Flat Fees here.  Rest assured, that I have none of those hidden (junk) fees!

If you would like any additional information, or if you have any specific questions regarding your desire to purchase property, please feel free to contact me by using the form below.  If you would like to read what other first time homebuyers have had to say about working with me, please feel free to visit my Testimonials page.

Contact Art

If you have any specific questions or if you are in need of my professional services, then please feel free to fill out the following form.

Thank you, and I will be in touch with you shortly.
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Comparable Sales and Your Offer Price

May 10, 2011 By Leave a Comment

Determining Your Offer Price

When you prepare an offer to purchase a home in Cleveland Ohio, you already know the seller’s asking price. But what price are you going to offer and how do you come up with that figure?

Determining your offer price is a three-step process. First, you look at recent sales of similar properties to come up with a price range. Then, you analyze additional data, such as the condition of the home, improvements made to the property, current market conditions, and the circumstances of the seller. This will help you settle on a price you think would be fair to pay for the home. Finally, depending on your negotiating style, you adjust your “fair” price and come up with what you want to put in your offer.

Comparable Sales

The first step in determining the price you are willing to offer is to look at the recent sales of similar homes. These are called “comparable sales.” Comparable sales are recent sales of homes that compare closely to the one you are looking to purchase. Specifically, you want to compare prices of homes that are similar in square footage, number of bedrooms and bathrooms, garage space, lot size, and type of construction.

If the home you are interested in is part of a tract of homes, then you will most likely find some exact model matches to compare against one another.

There are three main sources of information on comparable sales, all of which are easily accessed by a real estate agent. It is somewhat more difficult for the general public to access this data, and in some cases impossible. Two of the most obvious information sources are the public record and the Multiple Listing Service.

Comparable Sales in the Public Record

The most accessible source of information on comparable sales is the public record. When someone buys a home the property is deeded from the seller to the buyer. In most circumstances, this deed is recorded at the local county recorder’s office. They combine sales data with information already known about the property so they can assess property taxes correctly.

Provided there have been no additions to the property, the information available from the public record is usually correct regarding sales price, square footage, and numbers of rooms. This makes it easy to use the public record as a source of data for comparable sale information.

Accessing the data is another matter, at least for the general public. Realtors can generally look up this information through title insurance companies. The title companies either compile the data directly from the county recorder’s office or purchase it from other companies.

One problem with the public record is that it tends to run at least six to eight weeks behind. Add another four to six weeks for the typical escrow period and you can see the data is not current. The most current information is the most valuable.

Comparable Sales in the Multiple Listing Service

Most of the public is aware that the Multiple Listing Service is a private resource where Realtors list properties available for sale. Recently, the public has been able to access some of that information on such sites as Realtor.com, MSN HomeAdvisor, and others.

Once a property is sold and the transaction has closed, the selling price is posted to the listing in the Multiple Listing Service. Over time, it has become a huge database on past sales, containing much more information on individual homes than can be gleaned from the public record. This information is only available to real estate agents who are members of the local Multiple Listing Service.

Your agent will provide you with this data to help determine your offer price.

Comparable Sales – Pending Transactions

The most valuable information would be the most current, of course. A sale last week has more validity in helping you determine a purchase price than a sale from six months ago. The problem is that there is no actual record of the sales price until the transaction is completed. The information is not available in the public record because no deed has yet been recorded.

Neither is the information available in the Multiple Listing Service. Once a property is sold, it becomes a “pending sale” and all pricing information is removed from the listing. Prices are not posted until it becomes a “closed sale.” This protects the seller in case the transaction falls apart and the property is placed back on the market. It would give an unfair advantage to future potential buyers if they already knew what price the seller had been willing to accept in the past.

However, if a Realtor has a reason to know the sales price, they can usually find out through professional courtesy. Also, some real estate brokerages post sales information on a transaction board in their office.

Other Factors Influencing Your Offer Price

Gathering and analyzing information from comparable sales helps to establish the range of prices you should consider when making an offer to buy a home. More weight should be given to the most recent sales, but even so, you need to do a bit more analysis before setting upon the price you will offer. That is because you also need to consider the condition of the property, improvements, the current market, and the circumstances behind the seller’s decision to sell.

 

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Changing Jobs vs. Buying a Home in Cleveland Ohio

March 20, 2011 By Leave a Comment

Salaried Employees

If you are a salaried employee who does not earn additional income from commissions, bonuses, or over-time, switching employers should not create a problem. Just make sure to remain in the same line of work. Hopefully, you will be earning a higher salary, which will help you better qualify for a mortgage.

 

Hourly Employees

If your income is based on hourly wages and you work a straight forty hours a week without over-time, changing jobs should not create any problems.

Commissioned Employees

If a substantial portion of your income is derived from commissions, you should not change jobs before buying a home. This has to do with how mortgage lenders calculate your income. They average your commissions over the last two years.

Changing employers creates an uncertainty about your future earnings from commissions. There is no track record from which to produce an average. Even if you are selling the same type of product with essentially the same commission structure, the underwriter cannot be certain that past earnings will accurately reflect future earnings.

Changing jobs would negatively impact your ability to buy a home.

Bonuses

If a substantial portion of your income on the new job will come from bonuses, you may want to consider delaying an employment change. Mortgage lenders will rarely consider future bonuses as income unless you have been on the same job for two years and have a track record of receiving those bonuses. Then they will average your bonuses over the last two years in calculating your income.

Changing employers means that you do not have the two-year track record necessary to count bonuses as income.

Part-Time Employees

If you earn an hourly income but rarely work forty hours a week, you should not change jobs. There would be no way to tell how many hours you will work each week on the new job, so no way to accurately calculate your income. If you remain on the old job, the lender can just average your earnings.

Over-Time

Since all employers award overtime hours differently, your overtime income cannot be determined if you change jobs. If you stay on your present job, your lender will give you credit for overtime income. They will determine your overtime earnings over the last two years, then calculate a monthly average.

Self-Employment

If you are considering a change to self-employment before buying a new home, don’t do it. Buy the home first.

Lenders like to see a two-year track record of self-employment income when approving a loan. Plus, self-employed individuals tend to include a lot of expenses on the Schedule C of their tax returns, especially in the early years of self-employment. While this minimizes your tax obligation to the IRS, it also minimizes your income to qualify for a home loan.

If you are considering changing your business from a sole proprietorship to a partnership or corporation, you should also delay that until you purchase your new home.

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