First-Time Home Buyers: Don't Overlook This Step!

Most home buyers go through the experience of buying or selling a home only a few times in their life. Add to that the fact that those events are separated by a span of several years and it’s easy to forget the myriad of details involved. That’s where an experienced real estate agent proves an invaluable guide through the world they navigate every day. If you’re a first-time buyer, don’t attempt this journey alone!

Important First Step

In my many years as a real estate agent in Orange County, probably the most critical step I’ve seen first time home buyers overlook is the pre-qualification or pre-approval stage of the lending process. Knowing up front what type of loan and amount your lender will approve for you can really make or break your successful search for a home.

Why Pre-qualify or Pre-approve?

In this competitive real estate market where cash players and even multiple bids are common, sellers are more likely to consider buyers who come to the table with their financing prepared. Until you’ve talked to your lender, you won’t have defined that important piece of the home buying process.

It is actually preferable to get pre-approved for a loan rather than pre-qualified -- it involves gathering more detailed financial information and in some cases may even involve running a credit report. When you have a letter from your lender stating that you are pre-approved for mortgage financing, you put yourself and your agent in a better position for making a legitimate offer on your dream home when you find it.

What Does The Lender Want?

The lending business is based on risk assessment. The lower your risk of defaulting on a loan, the better the rates and terms the lender will offer you. Your risk level is estimated by examining your borrowing habits, credit history, employment history, and amount you’re able to apply to a down payment on the property, to name a few. If you have a lot of debt in relation to your income, outstanding judgments, child support or alimony, or any other financial contingencies, the loan approval process gets trickier.

The Market Is Changing, Are You Ready?

Orange County home sales volume for May was up over 11% compared to 2012, and the median price increased 24% compared to last year.* If you’re thinking of buying soon, talk to your lender and get your financial piece of the puzzle sorted out. Then find a trusted agent and begin your search!

A professional, licensed real estate agent has the experience, the knowledge, and the time and resources to help you find the home that meets your needs and help guide you smoothly through the entire process. For example, my clients not only benefit from my 15+ years’ experience in Orange County real estate, but they also have access to proven trustworthy and reliable lenders, escrow and title companies, as well as contractors and home inspectors. Choose someone who will remain committed to you throughout the journey, and who will treat your search as if it were for their own home.

Nanette Shapiro

(714) 924-0781

nanette.shapiro4@gmail.com

www.homesbynanette.com

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*Source: DataQuick

First-Time Buyer? How to make your Dream Home a reality:

June is upon us: Famous for all the dads, grads, and brides who are celebrating this time of year. College graduates and newlyweds are just starting out in a new life, full of big plans and dreams. Home ownership is usually a major item on their to-do list, but there are often hurdles to overcome on the way to fulfilling this dream.

Hurdle #1: REALITY

Most young adults face a gap between what they want in their first home and what they can realistically find, afford, and be pre-qualified for in their neighborhood of choice.

Before starting out on your home search, write down your list of top features in order of preference. Property location, number of bedrooms and baths, yard size, garage size, single or multi-level, detached house or condominium are all important questions the list should answer. Be prepared to compromise on some points on the list if your search fails to locate a property that miraculously meets every one of your requirements.

Hurdle #2: CREDIT & LOAN PRE-QUALIFICATION

Unless you’re in the position to pay cash for your home, you’ll need to borrow money in order to make the purchase. How much you’re able to borrow, the interest rate and terms of the loans available to you will depend on a number of factors, your individual (or combined in the case of a married couple) credit score being one of them. Your credit score is determined by your history of borrowing and repaying on things like revolving charge accounts, car or school loans, and so on.

Another crucial factor affecting your borrowing power is your ratio of debt to income. Lenders have strict limits on that number, and most borrowers with a ratio of 55% or more will not qualify for a loan, even if they believe they can afford the monthly payment. 

For example, let’s say you’re a newlywed with a combined income of $80,000 and $50,000 in school loan debt. Your income-to-debt ratio is 62.5% and would likely prevent you from qualifying for a mortgage. You can understand now why it’s so important to have your lender pre-qualify you for a loan BEFORE beginning your search: it not only saves time, but it also spares you any disappointment in finding a dream home that is beyond your reach.

A number of internet sites can help you with preliminary loan calculations based on your income, expected down payment on the property, and other factors such as debt and property taxes. The FDIC (Federal Deposit Insurance Corporation) offers some valuable information about credit for consumers here: http://www.fdic.gov/consumers/consumer/ccc/establish.html

Hurdle #3: INEXPERIENCE

Face it, the home buying process can be extremely complicated, time-consuming, and overwhelming, especially for first-timers. A professional, licensed real estate agent has the experience, the knowledge, and the time and resources to not only help you find the home that meets your needs, but to also help guide you smoothly through the process. Choose someone who will remain committed to you throughout the journey, and who will treat your search as if it were for their own home.

Are you ready to search for your first home? I can e-mail you my First Time Buyer Packet for a complete understanding of my services and what to expect from me in helping you navigate your way to owning your first home!

Nanette Shapiro

(714) 924-0781

nanette.shapiro4@gmail.com

www.homesbynanette.com

Make the Most of Home Improvements

The home improvement industry invariably launches into its busiest time of year each spring. The weather is more cooperative for work outdoors, plus many homeowners are eager to spend the annual windfall from their income tax refund on needed repairs or major upgrades. Aside from making home life more comfortable and enjoyable, home improvement projects can also improve your property’s future resale value. There are a few things to consider as you build your springtime “to-do” list.

WHERE TO BEGIN?

The list of project possibilities around the house can seem endless, and deciding what should have priority can be a challenge. Should you fix the leaky faucet or add on a bathroom? Paint the peeling exterior trim or update the kitchen? Most experts would agree that repairs and maintenance projects should come first in order to keep your home habitable. After that, larger remodeling or replacement projects like a kitchen update, home office, extra bathroom or bedroom, or even a swimming pool can be considered, and preferably with an eye on future returns. Important factors in your decision include your immediate needs and wants, how long you plan to live in your home, and of course, what you can afford. If selling your home in the not-too-distant future is a possibility, then the focus should probably be on projects that can translate into a better selling price.

GET THE MOST FOR YOUR MONEY

The National Association of Realtors and Remodeling  magazine recently published the informative “Cost vs. Value Report 2013” in which a variety of home improvement projects are evaluated based on cost and return on investment (ROI). The chart here illustrates the top ten projects covered by the report. Why do these projects have such a high cost recovery? Because they tend to improve a property’s “curb appeal” and increase its perceived value in the eyes of a prospective buyer!

SAVE THOSE RECEIPTS

Remember that the cost of major home improvements (versus normal repairs and maintenance) can factor in calculating the basis of your home when it's time to sell. The basis consists of the sum of the property’s original purchase price + purchase costs + improvements + selling costs – any depreciation taken (like the home office deduction). Subtract the basis amount from the final selling price to determine your final gain or loss, and that is the amount used to calculate any capital gains tax owed from the sale. You can see why, along with your mortgage records, it’s important to keep receipts and any other paperwork related to all major improvement projects as long as you own your home.

For more information about the basis of assets, read IRS Publication 551.

Nanette Shapiro 

714-924-0781 

nanette.shapiro4@gmail.com

DRE #0143577

The information provided here is not guaranteed and you should always consult with your tax professional before making any financial decisions that could affect your tax liability.