Hi, Mr. Chuck. I'm your host. And in this episode, I'm going to talk about buying a home. That what everybody needs to know the 10 steps, and buying a home, and what every realtor will tell you is the most important thing. But first, I'll be back in 33 seconds. Welcome together, we're going to explore our personal finances and figure out how to improve them. Whether you're just getting started in life on your finances, or you may already have a home, or you're struggling to get credit cards under control, reduce debt increase. wealth.com is a weekly podcast to educate those to improve personal finances, whether it's eliminating debt, or making smart investments, location, location, location, that's the most important thing you need to know about buying a home. And every real estate agent will tell you that you can find these articles in my show notes. And the first article on our work from is the 10 most important steps to buy a home from Zelo. Zelo is a website where all the homes and at least in United States are listed with a value. And the first thing you got it no matter when you plan to buy, there are a few things you should know on the average, the process of buying a home takes roughly six months. This includes about 4.4 months to shop, plus 30 to 45 days to close the process of buying a home that includes more than just touring homes, you need to review your credit and financing option and find the right real estate agent make offers and negotiate get an inspection prepared to move in and eventually close on your new home. So step one, check your credit score. Now I'm going to assume that everybody has been working on getting their debt paid down, get those credit cards under control, maybe have them all at a zero balance and pay off at least one of your car payments. And if you're renting, that's a good thing because it won't account against your debt to income ratio. If you're buying a second home or a kind of selling buy, then that will count your current house will count against your income ratio. So you got to sell first and then by after you get your credit score check, you need to figure out how much of a home you can afford. So what's the maximum? You need to figure out what your monthly payments, how much can you afford a month of payments, if you're paying 800 1200 dollars a month in rent and not having much of a problem and you're saving money, I'm going to be a good guest that a monthly payment of about 1200 dollars, or that range that you can afford. Remember, it's not only the mortgage payment, but it's real estate taxes, homeowners insurance, and some repairs that you make throughout the year. Got to figure all that in. If you have a budget, how much of your income will that Eat up. If you over 43% of your income, you're not going to get financing. If you're close to 43% of your income, and you're going to have a tough time getting financing. If you're at 25%, that would be great. Because now you have plenty of extra money to do everything else that you used to doing and it's not gonna be a financial burden on you when you buy that home. The advantages of owning a home versus renting is when you get ready to move, you sell the home. Slow, more hassle takes a little bit longer, but you get your money back. So you're in reality should be living rent free, or very low rent if you want to look at it that way. So once you figure out how much you can afford, you probably should see if you can get pre approved. Now you need to know your numbers and find a lender. See if they will finance you have given them their information, let them do a credit check on you and do all those things because that's going to happen later. So if you do it now, you might be able to afford more house than what you originally thought, with the interest rates being so low, round 3%, maybe a little less, maybe a little more, you should be able to afford a lot more home. Because you're paying a lot less interest. Make sure that you ask your lender, if you don't have the enough down payment of say, 20%. To avoid paying principal mortgage insurance PMI, if you would make extra payments over the first year or two, will they then remove the PMI, once you get enough equity built up in the home without having to refinance, that way you can keep that low rate, because rates might go up, when by the time you get to that. So once you get pre approved, now you need to look. So I always say even though they claim the work and for you, the buyer, ask yourself, who is paying them? Who are they going to be more loyal to, they're going to be loyal to the person panel, they might when you try to make an offer, they might say well, no, that's way too low, they'll never accept that you should, and they're going to try to talk you into making that first offer, maybe higher, or maybe going over the list at selling price. And be aware I'm going to talk about some more of that later on. So once you get the agent, you're happy with them, it's a personality thing, if you if they know the area where you're interested in, they should be able to tell you right off the bat, how much a home is gonna cost. And if it's a two bedroom home and a one car garage, it's gonna be X amount, if it's a four bedroom home, a two car garage with a bigger lot and it's going to be X amount, they should know that pretty much off the top of their head. So then it's just a matter of start looking for some homes, see what's out there. And the agent or probably take you around, they might say your your range, you're looking for$325,000 home range, but your high end would be 375,000, they might take you to look at a home that's listed for $400,000. And go look at it because you need to know what you get for the amount of money it's gonna cost you What's a $400,000 home words it located, how new it is, how nice it is, what school district, how close shopping centers and all those things. And then when you come around and look at a $290,000 home, it's kind of even though is a lot less, you're still in your mind comparing it while I'm paying a lot less for this home, it's got one less bed bedroom and it's got a bath and a half instead of two and a half baths. But I don't need two and a half baths but a bath and a half I can get by on it's got a two car garage, which is the same size as the other one. It's got a full basement, the basements finished off. So I can actually start using it right away, things like that. And again, its location, the if it's in an area that's up and coming and or building new homes there, it's gonna be a little more pricier because more people are looking in that area. If it's in an area that's starting to run down, it's going to be cheaper because less people want to live there. Now if you got an older area, or you got some remodeling going on right now maybe Okay, I can buy this home for $200,000 I can remodel it for $100,000 and I have a house that in five years from now might be worth $400,000 so you doubled your money. Got to be aware of everything that's going on. So once you find the home that I guess you would say it's your dream home. Then you make an offer and this is be where the real estate agent is working for the seller. And what I do is before I make the offer, once I got it narrowed down I go back and look at at least two houses with a pen and paper. I go through it I looking at the UPS Their ceiling to see if there's any brown watermarks on it. I'm looking at it how much insulation in the attic? Do I see any brown watermarks up there? I'm in a basement looking for anything that might be deteriorating like the, the walls being pushed in or cracks in the block or the blocks actually coming out a crack in the mortar is okay. A crack through a block could be a sign of some future problems. As it looked like it's been flooded? Does it look like it's damp down there? Is it finished off? This is smell musty? Things like that. And you go through and you list or the the bathrooms? Do they need to be updated? Is to kitchen? Is that been recently remodeled? Or is it remodeled back in the 80s? Things like that? Does it come with appliances or not write all that down. And then you want to go through and put an estimate in there, how much you think is gonna cost you to fix these problems, then what I always did, I took the listing price, and I list everything down the amount of money, I subtracted it out, I would no not make a offer higher than whatever that number was, I usually started a little bit lower. Because when I was buying a house, the mortgage interest was high. So it was not a seller's market, it was more of a buyer's market because you had to pay a whole lot more, you was paying more in interest. So you're getting a lot less houses. So you definitely didn't want to be overpaying for anything. So once you make the offer and accept it, then you got to get your guy, your inspector to inspect the property. Now this is going on the mortgage company is doing their paperwork, because they're gonna be scheduling a survey and inspection for themselves as a title search those type of things. And you can get your inspector in there. And there's two things you really want him to tell you. You want to tell him? Are there any major problems with this house? Or I maybe should not buy it? And the second question would be, is there any problems with the houses maybe not major that keep me from buying it, but may have to be fixed or replaced within the next two years. Because then you can try to negotiate down a little bit more, if you come to that point. It's probably too late. But you got to know so you can plan for those things. Once you get your financing is pre approved, if you did that, if not your financing has been approved and they set a closing date you got to call your insurance agent to get insurance policy on that house, you tell them the date of the closing and the house and the load the address. And they would have the policy written up and got a pre pay that in advance and a receipt of that goes to the mortgage company because they want to know it's paid for because they're giving you the money to buy it but they want to make sure they're protecting their investment. And then after that your real estate taxes and your insurance will go into an escrow. an escrow is what the mortgage company holds money aside for you to pay the real estate taxes and homeowners insurance. When that comes do you pay it every month with your payment, they keep the money and then when it's due, they pay whoever. And the next article is similar but a little bit different. I'm going to talk about that coming up next. That information was in the first article. Now I'm going to go over to the second article and see if there's anything different there. Step one here start your research early on. As soon as you can start reading websites, newspaper magazines, and real estate let listing make a note of particular homes you're interested in and see how long they stay on the market. Also note any change in an asking price. This will give you a sense of the house trends and specific areas. That would depends on your area if you're having people moving in and it's a popular area. You know, take a look. I mean you're doing your research in advance is that Four and a half months that you're looking at, start looking for what you're interested in, in the neighborhoods that you're interested in. How many houses go up for sale, and say a week or a month, how many homes are sold in a month time? How fast are they turn it over, those houses go up for sale and sold the next day. It's possible, there's a lot of homes that are bought and sold that never get listed. All these things are going to affect the selling price. Because when you determine the value of a home, it's based on the selling price of similar homes, and the same general area, or the same neighborhood the same housing development per se. So if you're buying a two storey four bedroom, two car garage with a full basement home, you look in that same neighborhood. And the last 30 or 60 days, how much did four bedroom two car garage was a full basement sell for in that neighborhood. You add them together and divide it by the number that you added together. And that's your average. And that should be the range where you should be looking at that range is more than you can afford, well, then you need to start looking somewhere else. So determine how much house you can afford. And you can do that by going to an affordability calculator. And then this article here, discovered calm home loans, articles, 10 steps to buying a home, they have a link to that. And they also say you know, auto savers plan, he should already have pretty much your down payment and then some because you still need an emergency fund, especially if you're going to have a mortgage that's say larger than your rent payment. Maybe you need to increase that emergency fund because you would hate to put 20% down live there for a year lose your job and then lose the house. On this saying you need to plan ahead and get pre qualified and pre approved for credit but for your mortgage. Find the right real estate agent real estate agent are important partners when you're buying or selling a home real estate agents can provide you with helpful information on homes and neighborhoods that isn't easily accessible to the public. Their knowledge of the home buying process negotiating skills and with the area and familiar with the area you want to live in can be extremely valuable in the best of all it doesn't cost you anything to use an agent their Commission's are paid by the seller of the home. Remember that they are working for the seller, even though they're directly working with you. And maybe they're negotiating, gotta be careful, they may be negotiating with you to get the price up. That's why I make a list of everything that's wrong with the home. To justify to the agent, why my my offer is so low, you can make an offer. And then they won't accept it. Maybe they'll make a counteroffer. And maybe you can counter that offer. It's a process as to negotiation. Don't forget that. Don't just say well, that's listed for 300,000 I can afford 350,000 there's a couple other people interested I'm just going to offer 350,000 and oh, oh, so the guys just sold it for 50,000 more than what he wanted for it. Why are you paying more for home than what they want for it? I'd never do that I'd walk away. But that's me. So depending how bad and the reasons why you want to be in a neighborhood, get a think about that before you do those things. how's it gonna affect your budget? What percent of your income is that mortgage, real estate taxes and how gonna take up shouldn't be more than 30% 35% 43% you won't get the mortgage approved 25% and your budget way under control. You're gonna have a happy life and you're gonna have plenty of money to save for retirement to save for children's colleges, to pay for things have car payments. whatever else you have to do in life, you're going to be much better off and happier Okay, then it says here makes it make sure to check out the little details of each house. For example, test the plumbing by running the showers see how strong the water pressure is and how long it takes to get hot water. Try the electrical system by turning switches on and off, open and close the windows and doors to see if they work properly. This is basic stuff is also important evaluate the neighborhood and make a note of things such as, are the other homes on the block well maintain? How much traffic does the street get? Is there enough street parking for your family and visitors? Is it conveniently located near places of interest to you, schools, shopping center, restaurant parks, and public transportation? all important things to know. Plus, how close is it to the airport does the airplanes fly over how close is it to a train track, your trains go by on a regular basis. They may not go by during the day when you're there, but a train co by every two hours starting at 10pm at night and going to 6am in the morning. Maybe you should go back in the evening to see if the trains are going by. And then even if it's close to a railroad track, take as much time as you need to find the right home, then work with your real estate agent to negotiate a fair offer based on the value of comparable homes in the same neighborhood. Once you in the seller reach an agreement on the price the house will go into escrow, which is the period of time it takes to complete all the remaining steps in the home buying process. Get a home inspection. Because a home inspector will tell you if there's anything bad tell him the inspector when you hire him. You want to know one, all the major problems that this house might have and to all the little things, things that you may have to fix within the next two years, or not. Like the hot water heater is six years old. Well, they usually last eight to 10. So it might be needing replaced in two years. How do you know when a hot water heater needs replaced? When you no longer have hot water and you go in the basement and you got a flood of water on the floor. Work with a mortgage banker to select your loan, I would today go with a 30 year fixed loan. Because the interest rates are so low under 3%. Around 3%. Don't do anything fancy like the balloon loan, adjustable rate mortgage arm. Don't do anything of that the money is so cheap now you should be buying a home. And it also gives you the ability to buy more home than what you can afford because you're paying less and entrust have the home appraised the mortgage company will do that coordinate the paperwork, close on the sale and close on the sale and then eventually move in. It's just about closing the sale you just go in, sign some paperwork and turnover your down payment. That's all that's all about and get the keys to the property. And then you can move in any time. After that. I'll be back in a minute. With a wrap up, you can share this episodes with your friends, I'm open for any suggestions for improvement, or for information that you would like to hear about in the future. You can go to my Facebook page and leave me a message I'm more than glad to respond. To find my Facebook page go to reduce that increase wealth.com and click on that Facebook icon. Also the show notes and a full transcript is at the same website. Thank you for listening. Now, my final remarks. Buying a home is not a scary proposition. If you're prepared and know what you're doing, you know how much you can afford. You know where you want to live. You can find the home of your dreams, working with a real estate agent. And earlier I said insurance agent but I was referring to a real estate agent Sorry about the mess up there. I got a good real estate agent they can direct you to the neighborhood. They should know about the neighborhood they should be able to tell you about how much it's gonna cost to move in that general area. They'll be able to tell you where you can afford to live. If you have a pre approved loan already, that will work with you. Remember real estate agent Kids are paid by the sellers. So they may lean towards the sellers benefit more often than not just a fair warning. Once you pick your home you can afford it your offer was accepted then it's just a matter of waiting for the closing get your guy in there to inspect the home and the mortgage company will do a title search a an appraisal and a survey of the property to because they're interested in protecting their investment, the mortgage to you. Once you get down with the closing, you get the keys to the house. Good luck. Then one thing I do is take care of it and upgrade it, remodel it and make it your own.