Buying a Home

The path to your new home.

Find a Realtor - Do Your Homework

It is important to do your homework when choosing a real estate agent. Do not be afraid to meet with many different agents. After all, they are competing for your business and this is what makes the real estate industry successful. Ask them the following questions:

How many years of experience do you have in this industry?
Make sure they are technically proficient in using the digital tools, Internet, and technology to represent you. This is very important!!
What professional certifications do you hold? This can indicate their level of education and technical expertise to give you the service you need in todays marketplace.
What services will you provide for me as my agent? Will you by my agent or will I get passed off to another team member?
How will you represent me as a buyer?
Can you provide as much information as I need about homes in the area that fit into my price range?
Can you provide all of the different scenarios with the sale of property I may purchase? (as far as additional fees, etc.)
Explain the paperwork that I need to sign.

Once you have chosen an agent, it is important to establish specific goals that you would like to meet. It is very important to communicate with your real estate agent and that, in turn, your real estate agent communicates with you. Like most reletionships, this one thrives on communcation, loyalty and trust. By working with one agent you will improve the process and result. Because of the Southeastern Minnesota Assocation of Realtors Multiple Listing Service, we can show you every home that is on the market.

Talk to your realtor about:

The area you want to live in.
The kind of home you are looking for. (You may want to make a list or brainstorm about the features and amenities that you find most appealing in a new home.)
How much payment you can afford and are comfortable with, how much cash you have available for the initial investment in a home and how much money a lender will borrow you.

Get Pre-Approved with a Lender

Make an appointment with a lender to be pre-qualified for a mortgage loan. We have a list of mortgage officers with proven track records. In this volatile and ever changing market, an experience and knowledgeable loan officer is vital.

Search for your New Home

Pick out a few days to go look at homes that are on the market that most closely meet your needs and affordability.
Use our search engine to search for homes from any computer with Internet access. Our search engine will show you all of the homes that meet your search critira. We do not harvest any personal information (email, user id's, passwords, etc..) from the use of our search engine. It is strictly there as a public service.
Your agent will give you a summary flyer on each property you see. This is for you to keep and take notes on.
As your intrest in a property increases, your agent will go over various State mandated forms.

Write an Offer

After you've found the right home, your agent will help you write an Purchase Agreement. There are a number of forms needed to complete the Purchase Agreement. There are disclosures statements, financing and inspection addendum which are used in most transactions. Your agent will help prepare the forms, with the appropriate language, in your best interest. Attached to offer is an earnest money check which is usually part of your of down payment.

Your agent will present your offer to the seller. Because of the changes that are rapidly impacting our world and the real estate market in particular, your agent must be technically savvy to present your offer in person or via a technology tool. Frequently we have completed entire transactions with clients located all over the United States via email, web meetings and digital senders. Many offers are Counter offered back to the potential buyer. Your agent will guide you through the process.

Foreclosures and Short Sales - These are properties where the lender is involved to varying degrees in the purchase or sale of the property. Frequently, because of the process each lender, government entity and applicable law require, the home buying experience can be pushed out additional months and even years. If you are purchasing a home under these conditions, your agent will guide you through the process.

Once all parties agree on price and terms, the buyers and sellers have an accepted contract which is leaglly binding to all parties. The date of acceptance is when both parties have a signed copy.

Apply for a Mortgage

Once you've agreed to terms with the seller (offer presented by your Realtor), you apply for a mortgage. You will write a check for $300 (Conventional Loan) and $425 (FHA Loan) for appraisal and up to $50 for a credit check. This money is non-refundable. It is part of your closing costs. Additionally your Lender will be asking for the following information:

Copy of the Purchase and Sale Agreement.
Your present mortgage information (or 12 months rental history).
Two years history of employment and verification of all income sources.
If self-employed, copies of the past two years income tax return and year to date profit and loss.
Two months checking, savings and investment account information verifying your liquid assets.
Name, account number and outstanding balance of each of your debts.
Information regarding any other income to be used as justification for the lender to determine a mortgage amount.
Information regarding any other assets that will be used as funds to purchase the property.
A Certificate of Eligibility or DD-214 form if you are applying for a VA loan.
If you are a relocating employee, include relocation business contact information and information on a bridge loan if applicable.
Two pieces of ID, such as your driver’s license or passport and social security card.

Closing the Deal

Once a purchase agreement has been accepted the buyer and seller perform their duites as required by the terms of the Purchase Agreement. Most buyers and sellers will use a Closing Service that will work to ensure a smooth closing for your transaction. This is a very cost effective and effective way to complete the transaction and get you into your home. The Closing Services informs the agents of potential documentation that may be necessary for individual situations and they work with lenders and title companies to close the transaction smoothly.

Consider your Insurance Needs

Insuring your home is like making an investment in your future. You work hard to have a home and homeowners insurance protects you and your family from someone or something from taking it all away.

There are many different forms of insurance:

Title Insurance - which protects you in the event that the title on your property has a lien, unpaid taxes, or other legalities that would make it invalid.

Homeowners' Insurance - which protects your home from fire, theft and other liable coverage.

Flood Insurance - which protects your home from flood damage.

Home Warranty - which offers buyers and sellers the piece of mind that should anything unexpected happen (due to normal, every day wear and tear) of the home's appliances, heating, air conditioning, plumbing, and electrical systems, it will be repaired (or replaced in some cases) for you without costly fees.

The Closing Process

Once you find the home you want to buy and there is an accepted Purchase Agreement, there are several required additional steps prior to the sale.

Step 1: Contingency removal: the most common contingencies are inspection, financing and the sale of your current home. These conditions must be removed or waived in writing before the sale on your new home can close.

Step 2: Appraisal and title report: your lender requires a formal appraisal to confirm the value of the home which is used as collateral to secure the loan. The title report ensures that the seller has clear title to the property and has the right to transfer ownership to you.

Step 3: Prepare closing documents: title companies or real estate attorneys prepare documents that confirm the transaction, prorate funds, etc..

Step 4: Signing of closing documents.

Step 5: Signed documents go to the lender for final review.

Step 6: The deed is recorded and funds disbursed.

Step 7: The seller receives the proceeds and the moving van arrives.

Step 8: You get the keys to your new home! Congraualtions!!

There are many opportunities for surprises or delays in a transaction. Part of our expertise is in troubleshooting problems that arise in the closing process, including anticipating and preparing for potential problems before they arise.

Please call or e-mail Jim, Jeff or Jim at any time if you have questions or would like more information about the closing process.

Settling In

You have unpacked boxes, arranged your furniture and feel complete with your moving task. What's next? There is always an adjustment period when you move. It is important to understand that what you, your spouse and/or children may be feeling is completely normal.

Here is a list of a few things that may help:

Urge everyone to talk about how they are feeling.
It is important to get outside and tour the neighborhood or take a drive and visit some new places around the community.
E-mail old friends and neighbors to let them know about your new home and community.
Start a list about what they like about:
- Home
- School
- Neighborhood
- Community
- Church
- Friends
- Teachers

For information on the many resources avaiable in the area, contact Jim and Jim.

Buyer Information Sheet

A guide to helping you determine what you want/need to buy, where and what you can afford – and questions we normally ask to begin a search for your ideal property

What is your reason for buying (relocating, size, etc…)?
How soon do you need to be in a new home?
Do you have a property to sell first (what is your equity, how long has it been on the market )?
What do you like or dislike about your current property?
Have you talked to a lender and are you pre-qualified for a loan?
What price range can you afford for a new property?
Where would you prefer to live?
General likes/dislikes you have for a new home?
What style of home would you like?
Age of home acceptable to you?
What size of lot/yard do you need?
How many bedrooms, bathrooms do you require?
House features you would really need?
Other features you would like to have if possible?
Are there any special needs to consider for your family?
Location requirements for job, schools, etc…?

Townhomes and Condominiums

Are they for you? Condominiums and townhouses offer an affordable option to single-family homes in most areas. But consider these facts before you buy.

Storage. Some have storage lockers, and others have "built in" storage areas and some limit the storage to personal areas to store belongings.
Outdoor space. Yards and outdoor areas can vary from complex to complex. Make sure to check out the Rules and Regulations of your Association. However, if you are tried of yard work, snow removal, exterior maintentaince, etc.. this may be the perfect option for you.
Amenities. Many condo properties have swimming pools, fitness centers, and other facilities that would be very expensive in a single-family home.
Maintenance. Many condos have onsite maintenance personnel to care for common areas, do repairs in your unit, and let in workers when you’re not home.
Security. Many condos have keyed entries and or even door attendants. Plus, you’ll be closer to other people in case of an emergency.
Reserve funds and association fees. Although fees generally help pay for amenities and provide savings for future repairs, you will have to pay the fees agreed to by the condo board, whether or not you’re interested in the amenity or not. Many Condominiums and Townhomes have a home owner's association, or HOA, it is very important that you read the Covenants, Conditions and Restrictions. If you are not completely aware of every little detail in those guidelines, you could unwittingly break many of the rules and the rules can vary signifcatly from Assocation to Association.
Resale. The ease of selling your unit is more dependent on what else is for sale in your building, since units are usually fairly similar. Single-family homes usually are more individual.
Freedom. Although you have a vote, the rules of the condo association can affect your ability to use your property. For example, some condos prohibit home-based businesses. Others prohibit pets. Read the covenants, restrictions, and bylaws of the condo carefully before you make an offer.
Proximity. You’re much closer to your neighbors in a condo or townhome. If possible, try to meet your closest prospective neighbors before making a decision.

Credit Scoring

Five factors that impact consumer credit scores - in order of importance:

Payment History has a 35% impact. This has reference to paying debt on time and in full (+), number of late payments (-), judgments(-) and charge offs (-).
Outstanding Credit Balances have a 30% impact. Debt ratio of outstanding balance to available credit is important. Keeping that below 50% is wise and below 30% even wiser. It is never a good idea to close an account; the debt ratio will go up and the number of seasoned lines will decrease. Pay outstanding debt down as close to zero as possible and evenly redistribute the remaining balance among the open lines of credit. The increased interest incurred by moving a balance from a 0% card to a 23% card will be minimal relative to what the increased mortgage debt might be with a low credit score. Hitting the maximums of available credit on a card can be very negative. It may be worth calling and asking the credit company to increase your available credit to lower the debt ratio, IF they can do so without a hard credit inquiry.
Credit History has a 15% impact. The length of time a particular credit line has been opened is important and is a stronger case for a higher mortgage amount.
Type of Credit has a 10% impact. A mix of auto loans, credit cards and mortgages is positive, rather than more credit cards.
Inquiries have a 10% impact. Hard inquiries for credit will negatively impact the score. Auto and mortgage inquiries receive special treatment and 20 inquiries can be made in a 14- day period for auto or mortgage and will be treated as only one inquiry. The maximum number of inquiries that will reduce the score is 10. Any inquiries beyond that [11+] in a six -month period will have no further impact on the borrower. Each hard inquiry can cost 2-50 points on a credit score.

How Long Does Information Stay on a Credit Report?

Credit information can, and usually does, stay on a person's credit report for seven years. Collections stay on the report for seven years from the date of last activity– whether that is the date the account was filed as a collection or date the account was paid in full.

Here is an example:

A borrower had a collection for $300 filed against them in October of 2001, and has not paid it. It is now September of 2008, so in a few weeks that collection can come off of the credit report. (The borrower will probably have to request all three credit bureaus take it off.) However, the borrower applied for a loan today, and the loan officer tells the borrower that the debt has to be paid off in order to be approved. Since the borrower has the money, they pay it off. Because the date of last activity is now September 2008, the collection will show on the borrower’s credit report until September 2015 – another seven years.

Type of Information & Length of Time ON Credit Report

General credit information - 7 years
Collection - 7 yrs from last activity
Bankruptcy- 10 yrs
Foreclosure- 12 yrs. from date filed
Garnishment- 12 yrs. from date or entry or 7 yrs. from date satisfied
Judgment- 12 yrs. from date or entry or 7 years from the date satisfied
Tax lien- 12 yrs. from date or entry or 7 years from the date satisfied

** Note - Dismissed garnishments, judgments, and tax liens are not reportable.

Monitor and Fix Credit Reports

You can get one free credit report every year from each of the three national credit bureaus: Equifax, Experian and Trans Union. Order from a different bureau every four months. Order free annual credit reports by phone at: 1-877-322-8228 or on line at www.annualcreditreport.com/cra/index/jsp.

Only the credit grantor or credit bureau can remove incorrect information.

Request creditors & credit bureaus delete outstanding debt incorrectly charged to you or yet to be cleared. They have an obligation to react within 30 days. If you choose to pay off an outstanding debt (less than two years old) mark the back of the check "accepting this check is evidence that the transaction is complete and this charge will be deleted from my credit." You may be able to use the cancelled check if the outstanding debt is not removed.

Increasing Your Credit Score

A good credit score can mean the difference between a low mortgage rate with conventional financing and a restrictive, higher-rate loan. There are some simple, but important steps you can take to clean up your credit.

Look for any past due balances on the credit report and bring them current.
Reduce all outstanding debt as near to a zero balance as possible. If unable to pay all debt down, evenly distribute any remaining debt among open credit cards, or consider opening a new line and transferring some of the balances. Try to keep balances below 50% of available credit; below 30% would be even better. Do not close existing accounts.
If married, keep separate credit cards. This provides flexibility in transferring some or all of the balances to one spouse to increase the credit score of the other. This provides the possibility of one spouse becoming the sole borrower and it does not change the ownership of the home.
Request an increase in available lines on cards to reduce debt ratio only if your credit card company can do that without a hard credit inquiry.
Pay off past dues and charge-offs within the last two years. Beyond two years, it will have no impact on your score if wiped out. In fact, the act of paying it off can actually take your score down temporarily.