If you are looking to buy a home, the process may seem overwhelming. Planning well in advance can save you time, money, and stress. Whether you’re ready to start preparing or just wondering about the home buying process, we’ve created a list of important steps to lead to a smooth home purchase:
18 months before your home purchase
Check your credit score: Each of the credit bureaus – Experian, Equifax and Trans Union – offer one free credit report a year. Check your report for any errors and dispute them if you find any. This free credit report does not include your actual credit score; a payment is usually required to see your FICO score. Check your score, and if necessary, meet with a financial advisor to improve them. To secure the best interest rates, you’ll want a score over 700. To request a free credit report or for more information, click here.
Downsize living expenses: Eliminate as many monthly debt payments as possible. Doing so will only increase your borrowing capacity. Pay off and consolidate as much of your consumer debt (credit cards, student loans, auto loans, etc.) as you can prior to applying for a home loan.
Consider where you want to live: This is an important factor you’ll face when it comes to preparing to buy a home. The location you decide on will impact the type of home you choose, cost of living, the social scene, and even access to public transportation. Take into consideration everything that is important to you in a new location. Make sure you can see yourself living there for years to come.
Create a budget and savings plan: Now that you have an idea of where you want to live, you can make a budget. Determine how much you will have left after all your monthly expenses for mortgage payments, homeowners’ insurance, home repairs, and other housing-related expenses. See how much properties are selling for in your ideal location. This will give you an idea of how much you will need to save for a down payment. It’s a good idea to have saved at least 3-5% of the sales price of a home in your price range. For example, if you want to buy a $300,000 home, plan to save about $9,000-$15,000. Regardless of your budget, it’s never too early to start saving!
12 months before your home purchase
Meet with a lender: It is best to learn how the mortgage process works early on, especially for first-time buyers. Your lender is there to ensure you have all the information you need. Even if you have gone through the home buying process before, be sure to ask your lender for a checklist of items to take care of ahead of a home purchase.
Learn the market: Now is the time to hire a real estate agent.* Your lender should have some suggestions of realtors if you don’t know where to start. Your agent is there to represent you and will provide you with vital information about the market. Ask your agent if they can set you up with email notifications of new houses that hit the market in your budget or preferred neighborhood. Even though you are not necessarily pulling the trigger yet, when it is time you will know what your home buying power is and exactly where you want to move to. Keep in mind that you’ll be working with your agent for a while, so make sure you choose someone you trust. For more information about choosing a real estate agent, click here.
Gather your documents: The lender will typically require two years of information. While this can be a tedious process, it is vital. To stay organized, create a secure folder on your computer to save all your pay stubs and bank statements, in addition to tax returns and W-2 forms.
6 months before your home purchase
Learn how to break your lease: Your current lease might not end when you are ready to move into your new home, so it is important to find out your break lease terms and month to month terms with your current landlord. Having some flexibility on your lease is helpful and knowing your exact parameters can take off some of the pressure. That way you are aware of and prepared for any fees or having to find a new tenant.
Learn the tax implications of buying**: Owning a home may considerably lower your taxable income. This typically allows you to claim less on your withholdings. Be sure you know what changes will occur so you know what to expect when tax season comes around. For more information about how home ownership will affect your taxes, click here.
Simulate a mortgage payment: To make sure you’ll be able to afford having a larger monthly living expense, live as though you are already paying your budgeted mortgage payment. For example, if your rent is $1,500 and you can afford $2,000, pretend you are currently paying $2,000. See how this impacts your normal budget so, if needed, you can make adjustments.
Send your lender updated documents: Keep your documents updated! The home buying process takes time and it is likely you’ll have a document or two to add or change. If a new tax return was filed or a new W-2 was given, be sure to send these items to your lender as soon as possible.
3 months before your home purchase
Know your buying power: When you are very close to buying, you should know your numbers to get to the most important part of buying a house—your mortgage amount. You’ll need to provide your lender with numbers such as how much you have for a down payment, your debt-to-income ratio, and your assets in order to get pre-approved. Once your lender has these numbers, they will pull your credit and identify the loan type and amount that you qualify for. Once you know what your price range is you can finally start looking at houses.
Look closely at houses: At this point you may be able to officially begin the home buying process. If you love something that you see online or that you drive by, contact your agent to arrange a visit. Take full advantage of the visit by taking note of what you like and dislike. Do you like the neighborhood? Is it conveniently located to places of interest? What is the traffic like? Touring will also allow you to get a feel for what kind of house you can expect to find in your price range. Be prepared to tour a lot of houses! It can take a while before you find the place you want to call home.
* NFM Lending is not affiliated with any real estate companies. You are entitled to shop around for the best lender/real estate company for you.
** NFM Lending is not a Financial Advisor or Tax Consultant. Please make sure to consult your own Financial Advisor or Tax Consultant regarding the use of your personal tax refund.
The TILA-RESPA Integrated Disclosure (TRID) Rule will take effect on October 3, 2015. TRID will significantly change the way real estate transactions are processed and settled. To avoid delays and to ensure that each settlement goes as smoothly as possible, it is important for real estate agents to be informed of all of the changes TRID will introduce to the closing process.
New Documents When TRID goes into effect, there will be two new disclosure forms: the Loan Estimate (LE) and the Closing Disclosure (CD). The LE will combine and replace the Good Faith Estimate and the Truth in Lending disclosure. The CD will combine and replace the HUD-1 and the final Truth in Lending disclosure.
The LE is a form that explains the loan’s features, terms, and risks. This form is due to the borrower within three days of their submitting a loan application. The CD provides the borrower with final details about the loan, including projected monthly payments, fees, and other costs. This is due to the borrower at least three days before closing.
New Timeline The new disclosures will also instate new timelines for real estate transactions. The lender now has two new deadlines. They are required to provide the borrower with the LE at least three business days after loan application, and to provide the borrower with the CD at least three business days before loan consummation. Click here to view a timeline chart.
The latter deadline can, in some instances, delay closing. If the lender does not provide the borrower with the CD three days before closing, a scheduled closing may be delayed. Additionally, there are some cases in which a re-disclosure, or another three-day review period, will be necessary. If the lender provides the borrower with the CD, and the loan terms in the CD are significantly different from those detailed in the LE, a re-disclosure will be required. Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB) has specified the following three situations under which re-disclosure would be necessary:
An APR increase of more than 1/8 of a percent for fixed-rate loans, or 1/4 of a percent for adjustable loans (A decrease in APR will not require re-disclosure if it is based on changes to the interest rate or other fees.)
The addition of a prepayment penalty
The loan product itself changes, (i.e., from fixed-rate to adjustable-rate)
Preparing Clients for these Changes
In order to avoid closing delays or confusion when TRID goes into effect, it is important to spend some time reviewing the new forms, so that you can answer any questions your client may have. Keep the new timelines in mind when drawing up contracts, coordinate closings carefully, and avoid any last-minute changes or negotiations. Encourage your clients to review the documents they receive carefully, and to communicate with the lender and ask questions. Finally, avoid making promises that cannot be kept. Initially when the new disclosure forms are implemented, loans and purchases may take longer to close. Make sure your clients are prepared for this possibility.
Knowing how Know Before You Owe, or TRID will change the mortgage industry will help you better serve your clients, and prevent delays in closing or other issues. The CFPB and the Mortgage Bankers Association have published resources for real estate professionals to educate themselves and their clients on TRID. These resources can provide further information and answer some of your questions about how these changes will affect you and your clients.
For more information about TRID, and how NFM Lending is preparing for TRID, click here.
When you think about branding yourself as a real estate agent on social media, Google Plus may not be the first social network that comes to mind. If you have a successful Facebook page or Twitter account, then another social media account might not seem necessary; however, Google Plus offers its users many perks that can benefit you and increase your online visibility. Here are four Google Plus tips to help improve your branding and online reach.
Search Engine Optimization
Google automatically ranks posts from a Google Plus page higher than it would rank a business page from another social networking site. When you post links, videos, or photos to your Google Plus page, those posts will show up as top results in Google searches. This means that if a potential client is searching online for information, and your posts are relevant to their search, then your posts and profile will be some of the first results they see.
Google Plus is full of communities that you can join to meet other industry professionals, network, share news, promote your website, or ask questions. Join communities related to real estate and post your own blogs, or links to your website. This is a great way to build an audience for your content. You can also engage with community members in other ways, such as commenting on their posts, or posting questions for them to answer.
Analytics Your time is valuable. Google business page analytics allows you to save time by posting content that is relevant to your specific audience. Analytics show you the traffic to your page: how many visitors are viewing your page, which posts are more popular than others, how many new visitors you have versus how many are returning visitors, and more. This allows you to tailor your content to suit your audience and learn more about your followers. For example, if you see that your posts about home renovation aren’t driving much engagement, but your posts about home buying are, you know to post more articles about home buying in the future.
Drive Website Traffic You can also use Google Plus to drive business to your website. Share your link and invite your followers to check out your blog posts, customer reviews, online applications, or anything else you want to share. Post it to your main page, then share it to the different communities you belong to. Not only will you reach a wider audience, but these posts will be highly ranked in Google searches, driving more search traffic to your website.
Google Plus is a highly valuable tool for real estate professionals. In this competitive industry, online presence and branding are essential. Using Google Plus business pages can improve your online visibility, help you educate potential clients more effectively, and build relationships with other industry professionals. Click here for more information about Google Plus.