TROY
JOWERS
Realtor®
Your Crescent City Connection!
JOWERS
Realtor®Your Crescent City Connection!
JOWERS
Realtor®
It
is imperative to put this step first in the process for several
reasons. Though everyone has some idea of what they can afford,
talking first to a mortgage professional is often an eye-opening
experience about the various expenses rolled into your monthly
payment. Second, there are often many "closing costs" associated
with buying a home that must be considered. Also, there are many
mortgage products out there and the right professional can help
you weight the many options. And finally, your ultimate goal in
choosing a lender upfront is the all-important loan
pre-approval.
It is often a surprise that your monthly payment will include
not only the principal and interest of your loan, but also
payments to your annual taxes and insurances as required by your
lender. You will heat the term "escrow" a lot in a home buying
transaction. It simply means that money is being collected and
saved toward some future payment. In the case of your monthly
payment, your mortgage company will often require you to pay for
your annual property taxes, home owners insurance, flood
insurance (if required), and primary mortgage insurance (if
required) on an advanced monthly basis. These insurances will be
discussed separately in the "Under Contract" section. For now,
it is important to know that a simple loan calculator on the
internet may not be telling the whole story of your monthly
payment like a mortgage professional can.
Here is an example of the difference:
On a $200,000 home, with 10% down, you're looking at a $180,000
mortgage. At, say, 6.5% interest and spread out (amortized) over
30 years, your monthly payment of principal and interest would
be about $1137.72. This is the figure most folks use to
self-determine what they can afford. Adding in a couple other
estimates for our particular market shows a different figure.
Methods for estimating property taxes in New Orleans and the
surrounding area may be found here. One
term you should know here is "homestead exemption." If the home
you are purchasing is your primary residence, then you may claim
this exemption to lower your annual property taxes in most
areas. On a $200,000 home with homestead exemption, property
taxes come to about $1694 per year, or $141.17 per month.
Insurance on the home varies greatly depending on location of
the property and coverage taken. For this example, we will use
$2500 per year as the insurance figure, or $208.33 per month,
and $50 per month for PMI..
Most mortgage companies will require you to "escrow" taxes and
insurance as part of your monthly payment. They will take these
payments and hold them until your taxes and insurances are due,
then pay them on your behalf. Primary mortgage insurance (PMI)
is a lender-required insurance usually levied on a mortgage
until there is at least 20% of the value of the home paid off.
For those putting 20% or more down, PMI is usually not required
by the lender. Using the tax and insurance info above, you can
see that the new estimated monthly payment balloons to over
$1500 per month!
Another way a mortgage professional helps you to understand just
how much house you can afford is by estimating for you how much
cash it will take to complete the buying process. These are
commonly called closing costs and they come from two sources:
our lender and the title company. The title company and its
charges will be explained later. For now, well briefly discuss
the mortgage based closing costs. Everyone knows about the down
payment, usually expressed as a percentage of the value of the
home you are buying (i.e. 5% down, 20% down, etc.). What you may
not realize is that there are many fees that must be paid to your
lender and mortgage professional for their services and other
incidentals. Items such as origination fees, appraisal fees,
etc. vary by lender and mortgage product and can be explained
and estimated by your mortgage professional. All of these fees
are in addition to the amount you plan to put "down" on the
property.
You may have heard the terms "conventional mortgage", "FHA
mortgage", "adjustable rate mortgage (ARM)", and many others.
These are descriptions of various loan types and loan features
that when combined in various ways make up the myriad of loan
products available to you. It is truly mind boggling when you
are presented with all that as available in the mortgage world.
It is your mortgage professional who can find or tailor a loan
program with your needs and interests in mind. Depending on your
cash situation, your credit situation, your employment
situation, and many other factors, your lender knows for which
products you qualify and which will fit your budget.
One last note on lenders: there are several types of mortgage
professionals out there to help you. Generally speaking they can
be divided into two main groups: a direct lender and a mortgage
broker. A direct lender works directly for a bank or some other
institution that will directly fund the loan. The upside is that
they usually are quicker to close the deal and can sometimes
have lower closing costs. A mortgage broker on the other hand
represents many lenders and can "shop around" for the best deal
and best-fitting mortgage product across a myriad of companies.
The advantage to a broker is that the deal they find for you may
more than offset the possibly higher closing costs over the term
of the mortgage.
When looking for a lender, just as with a Realtor, it is
important that you choose someone with whom you have good
rapport, as you will be working closely with them for several
weeks at a minimum. Also, you will be sharing very personal and
sensitive data with them, so a good working relationship from
the start is essential. Once you choose a mortgage professional,
they will gather information from you so that a pre-approval may
be attained. Keep in mind that pre-approval is NOT the same as
pre-qualification often touted on internet loan sites.
Pre-approval is more formal and requires documentation.
Pre-qualification may help you understand affordability to an
extent, but has no other real purpose in the buying process. In
addition to a reality check on affordability, all offers are
greatly strengthened by the submission of a pre-approval letter
from your lender. It shows the seller that you are a serious and
able buyer they'll want to do business with. Remember to keep
the lines of communication open with your lender, be completely
truthful, and remit requested paperwork and documents in a
timely manner. Once you've got a lender in your corner...it's time to
go shopping for your first home!
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2. Selecting A
Realtor
At the same time you're looking at
lenders, you'll also want to start choosing a Realtor. Of course
first time homebuyers will never make a better choice in the New
Orleans area than Troy Jowers and RE/MAX Real Estate Partners. Just
as with a lender, your Realtor must be someone with whom you have a
good relationship. Troy knows first-time homebuyers' needs and
anxieties, and loves to work with them. He finds nothing more
rewarding that handing over the keys at closing and placing the
proverbial "SOLD" sign on the lawn. You'll find that Troy takes the
time to explain in as much detail as you desire the process and
paperwork involved with buying a home. Communication is the key
problem home buyers have reported to the National Association of
Realtors (NAR) when unhappy with their Realtor. Troy is
flexible, very easy to reach and usually available one way or
another 7 days a week! And if he isn't, you'll be in touch with a
qualified colleague who can provide help on your schedule.
Contact Troy to
get started on evaluating your wants and needs today.
Our goal is not to simply sell you a house now, but rather to be
your real estate contact for life. We will fail at that goal is you
feel pressured, if you believe you have been tricked in any way, or
if you don't like the house you bought. Additionally, we don't only
want your business, but we want you to recommend us to everyone you
know, and that won't happen without securing your trust and
satisfaction.
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3.
Defining and
Refining Wants and Needs
Most folks already have an idea of their basic wants in a new home,
such as number of bedrooms, more or less yard, parking situation,
etc. We can take those wants, separate them from your needs, and
apply them to neighborhoods, floor plans, market trends, etc. Since
your first home is often not your last, we also want to make sure
the home you're considering will most likely be a positive return on
your investment when it comes time to sell it. Working hand in hand
with your lender, we will show you what and where you can afford,
fulfilling all your needs and cramming in as many wants as possible!
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4. The
Property Search
As mentioned above, we start out by assessing what it is you're
looking for in a home. Taking this information along with knowledge
of local neighborhoods and architecture, a thorough search is
performed of all properties available through the Multiple List
Service (MLS) used by all real estate brokers as well as foreclosure
and pre-foreclosure lists, and other sources. At this point you have the choice of
allowing Troy to refine the list so that you only see those that
meet your preferences as closely as possible, or you may elect to
have the daily raw list of properties sent to you. In either case,
you'll start a dialogue with Troy to narrow down which properties
look best on paper and maybe even do a drive-by of those properties
if the list needs further narrowing. In general, it is wise not to
look at too much more than 5 properties at a time. More than that
and all the details run together in your mind, plus fatigue sets in
(especially in our hot summers), and the houses seen later don't get
the same scrutiny as the earlier ones.
Some things to remember when actually seeing a house include being
on time. Often, we will be on a very tight schedule and other
Realtors will be meeting us to let us in to their listing, and
houses with occupants will often make plans to be gone during our
visit. In those cases, being late not only throws off our schedule,
but possibly the other agent's and the homeowner's as well. Please
be respectful of the property by not touching personals or items of
decor. Troy will often ask questions of the other agent or the
homeowner, please feel free to do the same.
These first visits will have already been screened for value and
location, so one of the most important things you can glean from a
first visit is the "feel" of the place. Does the house and the
neighborhood "feel" right? Can you see yourself and your belongings
in that space? Once we narrow the field down even further by those
particular homes that could potentially be home, then we'll
get into some serious market research. Troy will present all the
facts and figures in a concise and easy to understand format to
help you determine an amount to offer that is both beneficial to you
and realistic for getting an accepted contract. Getting to this
point can sometimes take days if the house that meets your needs is
already on the market, or sometimes take months if it is not. Then
it's time to pull the trigger and make a formal offer!
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5. The Offer and Counter-Offer Process
The State of Louisiana, like many states has a unified form used
statewide called the Agreement to Purchase and Sell Real Estate. It
is seven legal pages long and by order of the Louisiana Real Estate
Commission must be used in every transaction where a Realtor is
involved. When you decide on the price and terms you want to offer
on a house, we write those details onto this form and also let your
lender know. The lender will issue a pre-approval letter and the
signed offer is presented by Troy to either the listing agent or the
seller if the seller does not have another agent. In the offer,
there is a time frame (usually 24-48 hours) by which the seller must
respond. If they do not respond within that time frame, you are not
bound by the offer and may proceed with your search. If the offer is
accepted, then the Agreement becomes a legally binding contract, or
if the seller does not agree to all the terms, they may write a
counter-offer detailing the changes they wish to make in the
original offer. Then you will have a time frame in which to accept
the counter or make a counter to that counter, an so on until a
final agreement, or no agreement is reached. Below are some of the
items addressed in the Agreement to Purchase:
1. Basic information of the property such as the municipal address,
brief legal description, and lot size.
2. Detail what items are and are not included in the sale such as
kitchen appliances, furniture, window treatments, etc.
3. Conveyance or reservation by the seller of mineral rights.
4. Price and closing date for the transaction.
5. Financing, security deposit, and appraisal terms
6. Lease conveyance if the property (or part of the property)
currently has a tenant.
7. Details of inspection and due diligence rights and
responsibilities for the buyer.
8. Warranty or "as-is" information.
9. The requirement of clear title before the sale, proration of
taxes, and other costs as the property transfers owners.
10. Statements about the consequences of default by buyer or seller.
11. Informational references for mold related hazards and offender
notification.
12. Roles of real estate brokers and designated agents.
13. Lists of optional addenda, signatures, and acknowledgement of
seller's property disclosure (when required).
14. Any special requests such as seller paying for buyer's closing
costs, etc.
Once the offer or counter-offer(s) are accepted than the house is
considered "under contract" or "in escrow" and a roughly two-week
flurry of activity begins!
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6. Under
Contract and Inspections
Once under contract, several things happen simultaneously. As per
the purchase agreement, the security deposit must be paid to the
listing agent's company. This should be done as soon as possible to stay
within the confines of the contract. As mentioned before, the
purpose of this deposit is security for your faithful fulfillment of
the terms of the contract. It is held in a non-interest bearing
escrow account as prescribed by Louisiana law and is 100% refundable
if the deal does not close, yet the terms of the contract were
performed faithfully. If the deal does go to closing, then this sum
is applied to the amount of cash you owe at the closing.
Also, a fully executed contract with all signatures is forwarded to
your lender, and you should complete the application process with
your lender at that time. This is essential since often it is the
underwriting of your loan that takes the most time and determines
how long the contract period will go on. The quicker you complete
your application, the quicker it can go to underwriting. Your lender
will explain in more detail, but underwriting is simply the process
where your lender analyzes in great detail the information you have
provided through the application process. The goal is to have an
approved loan emerge from underwriting so that the deal may close.
The vast majority of buyers who are pre-approved have no trouble
with underwriting, although until underwriting is complete,
prospective borrowers are subject to changes in loan qualifications
and rules until the loan is actually made. So in some cases, you may
be asked to provide additional information as the underwriting
process progresses. Don't get frustrated! It is mandatory for your
mortgage professional to gather required information and you should
comply as quickly as possible.
Another copy of the contract goes to a title company. If you do not
have a preference, we have worked with almost all the local title
companies and can recommend one that will fit the needs of your
transaction. The title company and its team of lawyers, notaries,
and other staff are there to research the title to make sure that it
can be legally conveyed to you. Also, the title company collects and
disburses the funds at closing to make sure old mortgages and liens
and any other "clouds" on the title are taken care of before it
changes over to your name. They will also order title insurance on
your behalf which will cover you and your mortgage company in the
event some problem shows up in the future that the title company did
not catch. This is where the other part of "closing costs" come from
we mentioned in the "Financial Pre-Approval" section. Generally
speaking it is local custom to divide the title closing costs
between the buyer and seller where the buyer pays for all costs
associated with research and proving a clear title, and the sellers
generally pay for all costs associated with conveying the title,
cancelling mortgages, and the real estate commissions. When the
contract is submitted, the title company will contact you to gather
information needed for the title.
At this time you should also begin shopping around and gathering
quotes for homeowner's insurance and flood insurance. Usually one
insurance agent can handle both for you. However, flood insurance is usually
transferrable if the seller carried it, and can be assumed for the
same price the seller was paying. A transferred flood policy is
usually much less expensive than a new policy, and since all flood
insurance is part of the National Flood Insurance Plan, there is no
difference in coverage.
The inspection period is crucial because of the "as-is" clause
often included in
the Purchase Agreement. Once under contract, Troy will immediately
order a general home inspection and a termite inspection of the
home. Generally speaking this will cost between $300 - $500 for most
homes depending on size. The general home inspection tests and examines all visible
systems, appliances, etc. If any problems are found in the house,
the inspector will let you know what those are in a written report
and may recommend separate evaluation by the appropriate
professionals. For example, slow draining sinks may require a
separate plumbing or pipe inspection. These follow up inspections
are not common and do pose a separate charge. Termite inspections
are essential in south Louisiana, as there are 3 types of common
termites in our area. You inspector will explain them in greater
detail. Just keep in mind that in this part of the country,
particularly when you are looking at very old properties, they will
at some time in their lives have had termites. Your inspector is there to
make sure that they are no longer there and that any damage they
have caused has been addressed. A third recommended inspection for
older homes and neighborhoods is a video pipe inspection. This
usually costs $250-$350 depending on certain home parameters and
involves a camera that looks into the drainage pipes that run from
your house to the city's system. The purpose is to make sure there
are no obstructions, clogs, or the roots of our 150 year old oak
trees in your pipes!
Once all inspections have been done, if there are no issues then a
form is used to formally acknowledge the inspections were
satisfactory and that you as buyer will proceed toward the act of
sale. If unexpected problems are found, then decisions must be made.
If the problems are too much or too severe, you may elect to get out
of the contract and receive your entire deposit back. If the
problems are manageable, then we may complete an inspection response
form where we list the problems we want addressed and what we want
done about them. In most cases, for each discrepancy, we can either
ask for the problem to be remediated before the act of sale or we
can ask for a comparable amount off the selling price. This signed
response is sent to the seller who has 72 hours to respond one of
three ways: agree to the repairs or reductions, decline to make any
repairs or reductions, or pick and choose which they will address
and which they will not. Once we receive their answer, then we have
24 hours to accept their response or legally get out of the
contract with full refund of your deposit.
When the inspection period is complete and if you decide to move
forward with the purchase, then only one more major hurdle needs to
be jumped: the appraisal. Your lender will order the appraisal and
you must pay for it, generally about $400-$600. The appraiser will visit
the home then compare it to comparable properties to determine its
fair market value. The report will be delivered to your lender and
you. If the appraisal is equal to the purchase price or higher, then
underwriting on your loan continues toward the act of sale. If the
appraisal comes in too low, then we must notify the seller
immediately in writing. The seller must either agree to sell the
home to you for the appraised price or you may legally get out of
the contract with full return of your deposit. In any case, your lender will not make a loan on a
home for more than its appraised value.
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7. Final
Commitment and Closing
Once these hurdles are cleared, and when your final approval comes
through from your lender, then the date and time for the act of sale
are set. Within 5 days of the act of sale you have the right to walk
through the home again to make sure it is in as good or better
condition than when you put it under contract. Also, by the time of
the walk through, any agreed-to repairs from the seller should be
inspected for completion. During these final days, you should also
contact the appropriate parties for transfer of utilities, and
finalize your choice of insurance. If all is good, then we meet the sellers
and their agent at the title company to sign all necessary paperwork
to complete the sale of the home. It is also here that you will sign
all of your mortgage documents and remit payment for closing costs
you have incurred. All payments made to the title company must be in
certified funds such as bank checks, wire transfers, or money
orders. To accommodate small discrepancies, title companies are
allowed to take personal checks for small amounts at the table. You
will also need valid picture identification from all individuals
whose name will be on title and mortgage.
8. After The
Sale
After the sale is completed, your are
handed the keys to your new home. It is always advisable to change
the locks as quickly as possible since many agents, inspectors,
appraisers, etc. have all used the current lock system. In the
coming weeks, you will receive a copy of the Act of Sale recorded by
the municipality where your new home is located. If applicable, you
should take this as soon as possible to your local taxation and
revenue office to apply for homestead exemption. You will also
receive copies of your title insurance policy once completed. If you
have not received either of these documents within one month of the
closing, just give Troy a ring and we'll track them down.
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10. Tips from
RE/MAX on the Home Buying Process
This is from our RE/MAX office, and will point out a few more
things you'll want to think about when looking for your new
home. It is on a separate site. To see it, click
here and a new window will open. When finished at
that site, simply close that window to return here.
