Residential Real Estate Basics – The Home Buyers Guide


Houses Bought As-Is for ALL CASH! Fast Closings!

Buying real estate is considered one of the biggest and most important investments made by most people. Investing in a home or rental property carries a price tag in the tens of thousands of dollars – and in many cases – the hundreds of thousands of dallars, unlike an auto, piece of furniture, tools or anything else except one’s retirement fund. It is for this reason that the real estate investor must be prepared to make good buying decisions.

But, you may ask, how do I make good buying decisions relevant to real estate property if I have no knowledge of, or experience in that field? And this is a great question and a very legitimate concern shared by a majority of first time home buyers and even some seasoned homeowners. There are probably a number of practical ways to answer this question while addressing these concerns, but having a guide – which we’ll call The Home Buyer’s Guide – to which you can refer may be the easiest to work with.

So please consider certain important steps to be taken when you’ve made the decision to purchase a home, and are therefore on the verge of making your first appointment to view homes, but haven’t yet walked into a real estate agent’s office or made contact with a home seller. Although you are very close to making that first home-viewing appointment, it will do a world of good to take a step back and put it off a little bit longer while you do some home buying preparations per… The Home Buyer’s Guide:

A) Preliminaries

1 – Contact the 3 credit bureaus (namely Equifax, Experian, Trans Union) and request your Credit Report. This should be free of charge and it will show you what is in your credit profile. Having this information will help you eliminate any unpleasant surprises after deciding on a suitable home.

2 – While you’re awaiting the Credit Report, gather your Employment and Financial Documents (namely Last 2 Years W2 Forms and Last 30 Days of Paystubs, as well as Last 2 Months of Bank Statements), and make sure you can explain any large deposits (usually $1,000 or over) that are not job related.

3 – Your down payment will range from 3.5% to 20% of the home’s appraised value (not the seller’s asking price, two figures that are invariable different). Make sure that the money which you set aside for this purchase is well seasoned (meaning that it existed in your account for at least 3 months prior to using it for the earnest deposit and/or down payment.

4 – If you have children, schools will be one of the important considerations in deciding on your new home, so you’ll need to do some extra work to determine what schools are where. You can do this by contacting the school board and requesting this information.

5 – Once you have completed the above steps, and before you contact a home seller or real estate broker, you may wish to contact a mortgage lender to request a pre-qualification analysis and/or pre-approval based on your income, credit and financial information. This step will enhance your “qualified buyer” status in the eyes of the home seller, and perhaps strengthen your negotiation position.

B) RWAB – Ready, Willing and Able to Buy.

1 – Everyone who contemplates buying a home is not necessarily a qualified home buyer. Only when you are Ready, Willing and Able to Buy, as determined by your lender and the down payment or earnest deposit you placed in escrow and your signature on a contract of sale/purchase agreement makes you a qualified buyer. But the preliminary work you would have already done (the above steps) satisfies many of your own questions in this regard.


2 – To purchase through a Real Estate Broker/Agent or not to, is a question many would-be home buyers contemplate because they think that dealing directly with the home seller will help them to get the home at a reduced price (namely a price minus the broker’s commission). Keep in mind, however, that a home seller who is selling without an agent is most likely trying ALSO to eliminate the real estate broker’s commission and keep the money for him/herself. When you both want to cut the agent out, someone usually ends up losing.

3 – You may need to hire a Real Estate Attorney, depending on where (what state) you are making the home purchase. Most home buyers seem to feel more secure (or comfortable, if you will) when they are represented by a lawyer. If you are purchasing real estate in New York, New Jersey or any of the Northeastern states you’re going to need a lawyer. In some Southern states, you need only an escrow agent (title company) and maybe a real estate broker. Part of the attorney’s job is reviewing the contract of sale to make sure it’s legal as well as protective of your rights.

4 – Be prepared to complete a mortgage loan application for, and pay an appraisal, credit report and possibly an application fee to the lender you select to borrow mortgage money from. Keep in mind that these fees are NOT Refundable once the work is done. However, you may request (or insist upon) a copy of the Property Appraisal Report for your own records, but also to refer to because that report will determine how much you may end up paying for the home AND how much your down payment will eventually be.

5 – One of the most important reports you will need as a home buyer is a Title Report. This report consists of a history of the property you are buying. It’s a chronological account of everything that ever happened to or affected that property since it was constructed, including what is referred to as a “chain of title”. The chain of title is like a string of owners of the property and should be intact (unbroken) at the time you assume ownership.

C) Ownership – Your Piece of the Rock

6 – Title Insurance can be obtained from the same company that issues the Title Report. This type of insurance protects your ownership of the property you’ve purchased, but it also protects the lender’s interest in your property by insuring the new mortgage which you gave to the lender in exchange for the funds you borrowed to complete your home purchase.

7 – Proof of ownership comes in the form of a Deed. In most cases this is a Bargain and Sale Deed with a Warranty against Grantor’s Acts. The important thing is that, after all you’ve gone through in preparation, pre-qualification, pre-approval and selection of, and the process of buying your home, you now have a Deed, which by all established real estate norms, makes YOU the proud owner fo your very own home.

The 30 Year Fixed Rate Mortgage – Still Your Best Option?


During my years as a real estate broker and mortgage lender representative, the 30 year fixed rate mortgage was the best option for most first time home buyers, and in many cases, home owners who were refinancing. This was true for a number of reasons, most important of which, was the lower monthly payments based on a longer term. The 30 year fixed rate mortgage was, at that time, the most popular FHA-insured mortgage type and FHA mortgages were the mortgage of choice in most markets where I did business.

However, the 30 year fixed rate mortgage was also the first choice of most conventional borrowers for some of the same reasons. The total payments were spread over a longer period of time with the interest rate set for the entire term of the mortgage. That having been said, is the 30 year mortgage still an industry standard, and does it meet the specific needs of today’s mortgage borrower? Since your financing needs are, in many cases, very unique you may wish to choose a different mortgage type.

There have been many changes in the real estate and mortgage market over the last 4 years – brought on primarily by the subprime mortgage meltdown – but even if the 30 year home loan is still an industry standard, is it the right choice for you? The answer to this question will depend on a couple of factors. If, for example, you intend to sell your home within a 5 to 7 year period it may be best to take advantage of the lower rate 5 or 7 year ARM (Adjustable Rate Mortgage) because since the total payments on a 30 year mortgage are spread over a longer period of time and the interest rate set for the entire time of the mortgage, the interest rate carried on it is higher than that on an ARM.

As we mentioned, the plus side for a 30 year home loan is lower monthly payments. This attraction is somewhat dimmed by the fact that you pay $1000s extra in interest; But, your interest is 100% tax deductible (unless the US Congress changes this feature as they may be contemplating) which does lower your after-tax cost.

It offers you some flexibility so that if your financial situation changes and you have more money you can pay it off in less than 30 years, this while keeping the low monthly payments. Your payments are smaller so, in reality, you can purchase a larger roomier home. To show an example of the interest difference between 30 year home loan rates and one of the other mortgage types.

On a 30 year, 250,000 dollar loan using 4.5% interest rate your monthly payment of interest and principle would be $1,266.71; But over the next 30 years you will have paid approximately $337,500 in interest alone. Now with a 15 year home loan rate on the same amount, but a lower 15 year rate of 3.5%, you will pay $1,787.21 (principal & interest) per month and over the next 15 term, you would pay $131,250 in interest which would save you approximately $206,250 dollars.

Those numbers suggest that, if you have the will power to invest the savings gained from the lower (30 year mortgage) monthly payments, it still could be a good choice to go with the 30 year mortgage. Especially if you can find an investment that the long term payoff matches or exceeds what you would save in a 15 year mortgage. Another factor to consider is how fast you want to accrue equity in your home or to own it outright. 30 year mortgage loans take much longer for you to build equity.

The 30 mortgage is certainly attractive, and the vast majority of home buyers opted for 30-year loans based on everything that was already said; And although there have been discussion about a 35 or 40 year mortgage, and some lenders have adopted these longer term mortgages, they were never as popular as the 30 year mortgage.

However, there are still many other mortgage financing options to consider, and probably the biggest question you have to ask yourself when considering a mortgage loan is what are your financial goals? What loan plan will help you the most to reach that goal? It is clearly to your advantage to look into other home financing options for the best mortgage available for you and will best accomplish your financial goals. It may surprise you that, because of your personal situation, other plans may be more suitable for you.