Make Sure You Work With a Lender Before Starting Your Home Search

Lately, I’ve talked to a number of buyers who think they can skip the pre-approval before they start looking at homes. There are a number of reasons why this is a mistake!

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I get emails and calls on a daily basis from people who want to look at homes but don’t want to get pre-approved. However, getting pre-approved is a very important part of buying a home.

First of all, don’t forget that we are in a seller’s market right now. If you find a home and there are multiple offers on it already and you haven’t talked to a lender yet, then you can’t make an offer. Sellers in this market want to make sure that potential buyers have been pre-approved and are prepared to make a purchase.

Pre-approvals also help you make sure that you are in your price range. Just because you read an article online that says interest rates are at a certain level doesn’t mean that’s the rate you would get with a 10-year loan, 15-year loan, or 30-year loan. Online articles also tend to skip overpaying a mortgage insurance premium.

When a lender pulls your credit, they’ll talk to you about your payments, how much money you can put down, and what kind of house you can afford. A lot of people say, “I pay $1,200 a month for rent, but I could pay $1,500.” How do you know for sure? Have you looked at your debt-to-income ratio?

You need to work with a lender. Don’t go online and get pre-approved. This is one of the biggest investments you will make in your life, so you need to make sure that you are working with the right lender. The right lender will make sure that you have the right loan for your situation and guide you down the right path.

Most Realtors will send you to a lender they trust. If you talk to a lender online, we don’t know what kind of advice you’re getting. Some online lenders will tell you one interest rate and give you another. We will put you in touch with a lender so that you can sit down and have an in-depth conversation with a trusted professional.

You need to work with a lender you can trust.

Keep in mind that if you get pre-approved and it takes you six months to find a house, then you need to talk to your lender again. Interest rates might have changed and the market is constantly changing, so you need to talk to your lender to make sure that you are making a good offer on a home.

Again, home sellers in today’s market are only interested in serious buyers. They want to make sure that you can afford their home. The best way they can figure that out is to look at the pre-approval you submit with your offer.

More and more lately, people tell me that they don’t need to get pre-approved to look at a home. There are agents out there who will work with those buyers, but good agents will require a pre-approval. It only takes about 15 minutes to get pre-approved, and it takes 45 minutes for you to have a more in-depth conversation with your lender and lay out the best home-buying plan for your financial situation.

So, don’t skip the pre-approval! If you have any other questions about getting pre-approved or buying a home, give me a call or send me an email. I would be happy to help you!

The Reality of Purchasing a Rehab Home

Rehabbing a home might seem like a breeze on HGTV, but there are a few things that you need to know about purchasing a rehab property.

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A lot of people watch HGTV and decide that they want to do a rehab and create the home of their dreams. Unfortunately, many people do not know how to actually buy a rehab property.

Most people will say to me, “I was approved for $100,000 and the house is only $50,000, so I will have plenty left over to fix up the property.” When you get pre-approved for a mortgage, that is not the same loan that you need for a rehab property. You need to go after a rehab loan.

Let’s say you like the floor plan of a home but you don’t like the kitchens or bathrooms so you want to redo the property. That’s great! You will probably end up with a great deal and have a lot of equity at the end.

However, let’s say that the house is $100,000 and sitting in a $140,000 neighborhood. In that case, the house is already priced for the condition of the home. You can get a $2,000 or $3,000 rehab loan to get the home where you want it to be, but the seller will not sell you the home at $50,000 or $60,000 because they have already discounted the property according to its condition. You really need to consider what you are looking at and the home prices in the neighborhood.

Other people want to use rehab loans simply because they want to redo a $250,000 house. They want to change the layout, knock out some walls, and redo the kitchen. The thing is, that’s not the seller’s problem. If you don’t like the house enough to make an offer and do the updates that you want, then it’s not the seller’s responsibility to come down on the price for you.

You need to go after a rehab loan.

If you want to do a rehab, then you need to have your contractors in place. You need to know your costs and figure out if the changes you want to make are doable. For example, what kind of kitchen do you want? Will the kitchen fit into the home? A lot of rehab loans require that you submit a bid from your contractor with your offer. Someone from the bank will make sure that those numbers line up. You also need to make sure that your contractor is insured and has the resources to get your rehab done.

If you want to replace the windows or do a basic kitchen remodel, then you can look into a stream loan. These are useful when you like everything about the house but you just need to make a few tweaks to turn it into the home of your dreams.

Ultimately, you need to make sure you have your lender and contractor lined up right away when purchasing a rehab home. If you have any other questions about rehab properties, just give me a call or send me an email. I would be happy to help you!

The Toxic Effect of Buyer’s Remorse on Home Sales

In our current market, buyer’s remorse is happening more than usual. This can have an adverse effect on home sales, but there is a way you can avoid it.

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Pittsburgh is a seller’s market right now, which means there are a lot of buyers for each home. Buyers are negotiating harder and bidding higher than they normally would’ve just to get the deal. Here’s the problem, though—they’re also having serious remorse after the fact. 

If you’re a buyer in our market and you want to avoid buyer’s remorse, you need to know what you want. Do you really want that house? If you’re not sure and you put in an offer anyway and it gets accepted, that can lead to problems in the transaction. 

When you enter a home sale feeling that you bid more than you normally would have on that home just so you could have it, you might not feel like negotiating when the home inspection comes along. Perhaps you saw another house and wanted to keep looking while the inspection was going on in case something better came up. Many agents are actually accommodating this trend, which gives you even more reason to not want to negotiate with the seller. 

This is pretty unfair. The seller took their home off the market and chose to work in good faith with you to get to the closing table. They worked with you, and you chose to put in an offer on their house. Give them the opportunity to work with you. You don’t know what they’re willing to do to move the transaction along. You have no idea what’s in their head in terms of where they want to move or how quickly they want to move. 

If you’re not sure you want to buy a home, then don’t put in the offer. Another house will come around. If you lose a house in the process because you weren’t ready or you didn’t know if it was the perfect house for you, that’s okay. 

If you’re not ready to purchase a home, don’t purchase it.

If you made the decision to put that offer in, though, work with that decision and work with the seller. 90% of the time, it will work out for you. There will never be a perfect home or one that doesn’t have issues during the inspection. When you buy a home, it’s called ‘homeownership’ for a reason. 

In any case, most homes come with home warranties anyway. If yours doesn’t, ask for one and keep it on the home—especially if its mechanical systems are old. That way you can alleviate some of the repairs. As a homeowner, you will have to negotiate taking on some of those repairs. 

If you’re not ready to purchase a home, then don’t purchase it. Wait for the right one for you. At the same time, if you put an offer on a home, be fair and negotiate on it. If you want the seller to be fair with you, you also have to be fair with them. 

If you have any questions about this or any other real estate topic or you have a topic in mind you’d like to see me discuss in a future video, please give me a call or send me an email. I would be more than happy to help you.