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So now you know you need a realtor in order to find your best home, but how do you know which realtor's right for you? Join Jeremy and Beth Ellis as they hash out how to find the perfect realtor, especially as a first time home buyer.
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YouTube - Podcast - Pinterest Course - Shine InsuranceFull Transcript:
McKenzie Goodrich: This is the New Home Buyers Guide podcast brought to you by the New Home Buyers Guide, a comprehensive online course that lays out the nine steps to finding and buying your dream home. Get it now at newhomebuyersguide.net.
Jeremy Goodrich: Hey there, new home buyers, it's Jeremy Goodrich, your host for the New Home Buyers Guide podcast. And we are on episode nine and in some ways in episode nine, the ninth episode of this show, we're digging into the thing that you kind of probably thought you were supposed to do first, right? Because you think you're supposed to go out and find a realtor and then like that's what happens. Like you go find a realtor and everything else works out and realtors are awesome and they're going to be a center piece of the process and really the person that holds your hand during the home buying process. But as we've learned in previous episodes, there's a lot of work to be done before you even contact that realtor for the first time. You got to work on your credit, you got to work on your down payment, you've got to get that pre-approval letters, which most good realtors are going to expect you to have before you even contact them.
Jeremy Goodrich: Because really if you go out and you see a house and you love it and it's awesome and it's perfect and you don't have the money to pay for it because that's what the mortgage lender is going to do, right? Then you really can't make an offer and your sort of stuck. So any good realtor knows that you've got to have the money side figured out before you even go out and look for houses. So here we are at episode nine and we are ready to go and find that person who can walk us through the process, who knows the local market and understands what's going on with houses in the price range that you need to be at. What's good about that price range, what problems you'll find in that space, whether it's really hard to find a home for say $200,000 if that's what you're looking for. Or if there's lots out there on the market and you have some leverage in the way that you make offers and stuff like that.
Jeremy Goodrich: Realtors obviously are the experts in not only how to buy and sell homes, but what's going on in the home market in your community. And so the person you pick has got to be somebody good, somebody right for you, someone who fits your personality and is actually going to care about you, not just about making the money at the end of the deal. There are all sorts of great service providers out there in all industries, real estate, insurance like I am and everywhere else and there's lots of terrible ones too. There are people who are out there really trying to make your life better, to really truly help you. And there are people that are just trying to make money off of you and of course everybody has to make some money, right? Like its part of business, but there's people who are doing it in a great way and people who are doing it in kind of a slimy, crummy way.
Jeremy Goodrich: And so what you want to do is figure out where are those good realtors are, the ones that are going to really help you. And I brought back someone who came to us in an earlier episode and she really is an amazing realtor that I respect so deeply and she takes such great care of her clients. And so I came back to her and I asked her to describe for us three things that we should look for when we're trying to find the right realtor. And her name is Beth Ellis and she runs Tim Ellis Realtors and Auctioneers. Her dad started this years ago and then she took over and they both work together now as realtors and as auctioneers in that space. And so I asked Beth, how do we find a good realtor? And that's what you're going to hear in this episode today. Let's get to it. Maybe one of the most important things you'll do in the home buying process, how to choose the right realtor.
Jeremy Goodrich: We are going to talk about the three steps to picking the perfect realtor. Obviously you want to work with a realtor that is the right match for you as a human being, you as a family, and that is going to help you to find your perfect home. And Beth's going to explain to us three things that we should look for when trying to find that perfect match in a realtor. Right?
Beth Ellis: Right, right. So the first thing that I think is super important is to ask people you know, and you trust. So ask your family and your friends and your colleagues who they've worked with before, what the experience was like, if they would recommend the realtor that they worked with before, because those are people that you already know and trust and they're going to give you recommendations of people that they already think are going to be a good match for you.
Jeremy Goodrich: And are there, like when you're talking with your mom or your friend or whatever, are there questions that you might want to ask that would help you to understand what that realtor is like or just kind of like, how did it work for you?
Beth Ellis: Right. Well I think how did it work for you is the best first question, but then I think you can talk a little bit more about the process. Things like how accessible was the realtor, how clearly did they answer your questions? How much time did they take with you explaining how the process works? For a first time buyer the process can be kind of daunting because they don't really know what the expectations are, what the process is. And so they need to find someone who is familiar working with first time buyers and who is really patient and a good explainer of the process.
Jeremy Goodrich: Yeah. So are there realtors that like to work with first time buyers and realtors that just don't?
Beth Ellis: Probably.
Jeremy Goodrich: Yeah.
Beth Ellis: Yeah, I think that's a fair question. I like working with first time buyers. The thing that I like about it is it's new, it's fun, it's exciting, it's the biggest purchase they probably will ever make. And when I see a first time buyer at the closing table getting their keys, it's pretty groovy.
Jeremy Goodrich: Absolutely.
Beth Ellis: So that part of the process I really like, I think about when I bought my first house and kind of how that went. And so for me, I like that kind of client a lot because it's a really happy experience.
Jeremy Goodrich: Yeah. So when someone's referring a realtor to you, the question, were you a first time home buyer when you worked with them, may or may not be a valuable question to ask.
Beth Ellis: Sure.
Jeremy Goodrich: About that realtor.
Beth Ellis: Yeah. And a lot of people, I mean we're a small town and I have lots of clients who I've done repeated deals with. And so a lot of the referrals that I get are from my clients who I've done three, four or five transactions with. They may have been a first time buyer with me or not, but I think just the fact that they keep coming back is a pretty good sign of the referral.
Jeremy Goodrich: Absolutely. Okay. So the number one most important way to find the perfect realtor is definitely a referral.
Beth Ellis: Right.
Jeremy Goodrich: And you'll find a referral if you live in the town and have for a while, it's probably easy because you have family and things of that nature.
Beth Ellis: Right.
Jeremy Goodrich: Are there ways to get a referral in a town that you may be, you're moving to, as opposed to one that you've lived in for a while?
Beth Ellis: The best way to find a realtor in a market where you're not familiar, where you're not living right now, is to read online reviews. My clients review me a lot and they are very clear and honest about what they say, what they think. They have, you know, if you go to Zillow and Trulia and the big online third party sites, buyers can look at those reviews. They can really dig down, they do a star program, but then they go back and they have a section where people can write whatever they want. And those are really helpful because I think that helps people get kind of the vibe of the person. So if the review says they answered all my questions and they were really great and they were accessible and I felt like I was taken good care of, that kind of gives you a sense of the person.
Jeremy Goodrich: Right, absolutely. So they're going to be maybe good for a good first time home buyer because you know you're going to have questions.
Beth Ellis: Right.
Jeremy Goodrich: And that kind of thing. Okay. So really your number two, I think we dug into it there was, is online reviews, would that be the second way to find the perfect realtor for you?
Beth Ellis: Right. Online reviews or the other thing that they could do if they're coming here for a job, if they're coming to IEU or [crane or cook 00:08:48] or Bloomington hospital system, whatever it is, they can also connect with those employers. Like I work with a lot of the IEU schools and departments where they connect me with their new hires. Well, the new hires don't know me, but the new hires know the people who are hiring them. And that's another good connection for out-of-town people.
Jeremy Goodrich: Okay. So if you're coming into a town for a job, most of the time we are in some way or another-
Beth Ellis: Right.
Jeremy Goodrich: If we're changing from one town to another, there's a reason we're doing so.
Beth Ellis: Right.
Jeremy Goodrich: And so connecting with whoever's bringing you to that town and saying, "Hey, who are the great realtors to work with in the town?"
Beth Ellis: Exactly. Because the employers are not going to send you to somebody who's, well frankly not very good because they want you to take the job and be happy here.
Jeremy Goodrich: All right. Okay, cool. So connecting with an employer, that's almost a third one here, I'm not sure what number we're on, but we've got, you know, getting referrals, looking at online reviews, connecting with your employer and kind of get a referral from them. And so do you have others there?
Beth Ellis: The best final step for making your decision is to actually meet with the realtor in person. And I would recommend this for any new buyer to actually set up an appointment to meet with a realtor in person, talk through the process, see if you're compatible with your style, with your work schedules, and see if it's a good fit. So I recommend that every new buyer sits down face to face for an hour with the realtor and make sure that it's a good fit.
Jeremy Goodrich: Okay, cool. Well Beth, thank you so much for sharing those three different ways that we can find the perfect realtor for us. If someone wants to find you, how can they do so?
Beth Ellis: The best way to find me is by email and my email is [email protected].
Jeremy Goodrich: Cool. Thank you so much.
Beth Ellis: Thank you.
Jeremy Goodrich: All right, so there it is. Beth just broke down some serious knowledge for us. We started off with finding referral sources in the town that you already know, maybe that is family or friends, maybe that could be an insurance agent or a lender. If you already know one of those elements, an insurance agent, a lender, or a realtor, ask that person you trust for the other two and get a referral from them. So really those referrals are the number one thing Beth said helps you find the right realtor for you. If you're moving into another town, looking at online reviews and really finding someone who has, has online reviews and has reviews that fit your personality style. When people are talking about their experience with that realtor, it sounds like someone who you could really connect with, that makes total sense.
Jeremy Goodrich: The third one was to talk to, you know, especially if you're moving into a town that you aren't familiar with, talk to whoever recruited you to be there. If you are coming to a town for a new job, talk to those folks about who their suggestions are for a realtor in town, because they obviously want you to be happy at your start of your new job or whatever you're doing in that town, and they're going to refer people that they know are going to be the best for you. And then finally Beth's bonus, fourth thing to do was simply sit down with that realtor, connect with the person, see if you vibe with them, see if they are the type of person that you want to interact with. And one of the most important decisions you're going to make in this element, this part of your life, and simply vibe off of them. See if you like what you see, see if you feel like it's going to work and then you're going to be able to connect.
Jeremy Goodrich: So thank you so much to Beth Ellis for talking to us about that. If you want to find her, look up to Tim Ellis Realtors and Auctioneers online. You can find her if you're around Bloomington, Indiana. If not, use her advice to find the best realtor for you. Okay, and now some action steps, so first, head over to Instagram and follow us at New Home Buyers Guide. We put lots of stuff up there, great posts, great information, just trying to kind of create a community in that space. If you want to go to the posts with the Red House on The Hill, that's our podcast logo, and you can share your questions, your comments, give us some love, give us some hate, whatever. Do that in the comment section, we want to hear from you, we want to know what you learned and maybe what you want to learn in the future that we didn't hit on today.
Jeremy Goodrich: Okay, one more thing. Home buying is tricky, the process has clear winners and losers. You know that because I was a loser the first time I bought a home and home buyers remorse is real. Sometimes you just truly get it wrong, so you need to know if you've got your financial ducks in a row and to understand the timeline that you're going to go through to anticipate the hidden costs and all the steps along the way. How are you supposed to do that when you've never done this before? We totally get it. Well, easy. You're going to go to the newhomebuyersguide.net. That is newhomebuyersguide.net and sign up for our e-Course. You'll get walked through the process step by step. Think timelines, checklists, videos, expert interviews, and more. It's like this podcast, but totally beefed up and ready to walk you step by step through the process. Remember, you are about to make one of the biggest purchases of your life. Do yourself a favor that will last maybe the next 30 years and head over to newhomebuyersguide.net. All right, until the next time, happy home buying.
There's a lot that goes into getting a mortgage. Join Jeremy as he interviews Ryan Langley, VP Branch Manager of Ruoff Mortgage in Bloomington, IN, on just how to get there.
Freebie:
Get your money right video series
Level up:
New Home Buyer’s Guide comprehensive ecourse
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If you enjoyed this episode, stick around:
Thanks for listening!
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YouTube - Podcast - Pinterest Course - Shine InsuranceFull Transcript:
Jeremy Goodrich: I'll introduce you again and then I'll pick the one I like better.
Ryan Langley: Okay. No problem.
Jeremy: We'll see how this intro goes. All right. Hey this is Jeremy from Shine Insurance and today I've got a special guest on our channel and his name is Ryan Langley. Ryan is the vice president branch manager of Ruoff Mortgage here in Bloomington, Indiana. He's a mortgage lander, and he has tons of information for us about exactly how to go about getting a mortgage and the processes you should think about. Now, in this video we're not going to talk about kinda the back end of very ends of the process. We're going to talk about maybe the most important part of the mortgage getting process. I don't even know if that's an actual phrase, but we're going to talk about the five steps you need to take before even considering buying a house. So Ryan, thank you so much for being with us today.
Ryan: Thanks for having me.
Jeremy: Okay. I'm really excited, I've decided I want to buy a house. I'm going to go out, I'm going to get a realtor, I'm going to start looking at houses right away. Is that what I should do?
Ryan: No.
Jeremy: And so why not?
Ryan: Yeah. Getting the realtor is definitely part of the process.
Jeremy: Mm-hmm (affirmative).
Ryan: You're going to want to kinda keep that part of mind up front. But there's several steps that you should take prior to going out and rushing out and making an offer on a home. For starters, most realtors are going to want to make sure that you've got your ducks in a row and have taken some steps to make sure that you're ready to buy a house before they can even start showing you the home.
Jeremy: What do you mean by ready to buy a house? What do I need to be to be ready to buy a house?
Ryan: Sure, sure. The first thing that I will always advise anybody that comes into office that's just thinking about it, just at the very early stages, is to take care of those things that you know might be an issue in your credit report.
Jeremy: Mm-hmm (affirmative).
Ryan: You know that you've got some late pays, or you routinely pay late on the credit cards, due loans, auto loans, you name it, on the type of debts that you may have out there. Make sure you get your house in order regarding your current debt obligations. That doesn't mean pay them off necessarily, but that definitely means make sure that you're current on every single payment and that you have been current on them. If you're habitually late on your payments each month, that's often times viewed as a negative on your credit report and your credit score will reflect that.
Jeremy: Mm-hmm (affirmative).
Ryan: That would be one of the very first things that you should think about if you're thinking about purchasing a home, is making sure that everything's up to date and you're paying things on time.
Jeremy: So figuring out your credit score is really that number one?
Ryan: Mm-hmm (affirmative).
Jeremy: Being up to date on payments is one way of addressing your credit score. When you see people trying to fix their credit scores, are there some more important things than others?
Ryan: Number one thing is, on all debt is make sure that you're current. One of the worst things that you can do is to get late and stay late on it.
Jeremy: Mm-hmm (affirmative).
Ryan: If it's a... One or two here and there that are over 30 days. Most credit bureaus don't report until you're over 30 days late on a payment.
Jeremy: Mm-hmm (affirmative).
Ryan: You've got some leeway time in there most often. But you really want to make sure that everything is paid on time. Now paid off necessarily, 'cause some debt's a good thing. But you want to make sure that everything's current.
Jeremy: Having your credit in order, and the best way you can do that is by keeping everything current, keeping your debts paid. Not necessarily paid up completely, like paid down.
Ryan: Mm-hmm (affirmative).
Jeremy: But your debt's up to date. Okay. What's the next thing we should do to get our house in order before buying a house?
Ryan: Next thing you should consider is taking a look at your finances and getting a good idea of what you feel you may be able to afford.
Jeremy: Mm-hmm (affirmative).
Ryan: That may not be necessarily what the lender will tell you later on, but it's always helpful for a lender if we got a general sense of the price range that you're looking in.
Jeremy: Mm-hmm (affirmative).
Ryan: For a first time home buyers, it obviously depends on your current income situation.
Jeremy: Mm-hmm (affirmative).
Ryan: It depends on if you're single. Depends on if you've got multiple incomes in a household. There's a lot of factors that you would take into consideration yourself and there's all kinds of calculators out there online that you can log on and see to get a general sense of what a payment may look like and what they may look for. And a very good starting spot would be what are you paying in rent each month.
Jeremy: Mm-hmm (affirmative).
Ryan: Are you struggling to make that payment as it is right now? Or, are you making it easily and you can afford some more payment? A very good starting spot would be to kinda look at where you're at on your rent payments, versus what you might be able to afford on a monthly basis on a mortgage.
Jeremy: Okay, cool. If I wanted to look up one of those calculators, what might I choose for my Google search?
Ryan: You can go to ruoff.com.
Jeremy: Okay.
Ryan: We've got calculators on our website that you can use, and that's typically where I would direct you to go and find a good calculator to use. You can also use any numerous websites, bankrate.com. There's a lot of other ones out there-
Jeremy: Okay.
Ryan: That would be sufficient.
Jeremy: Mortgage calculator.
Ryan: You can type in "mortgage calculator", and you'll get a 100 different options on finding it.
Jeremy: Okay.
Ryan: They're all going to be accurate. You put in, for the most part, most first time home buyers are going to be looking for a 30 year fix mortgage, so you type in "mortgage calculator", use the rate that they've got in there just for an example, that doesn't mean that's what rates are currently, but that does give you a general sense of where you would be on a monthly payment.
Jeremy: Okay. I'm going to get my credit in order, I'm gonna look at what I might be able to do as far as a payment goes using my rent as a great example of a place to start.
Ryan: Mm-hmm (affirmative).
Jeremy: Then ruoff.com mortgage calculator would be another wonderful place to kinda figure that out. Okay, that's the first two. What's the next thing I should do?
Ryan: Next thing you should do, before reaching out to a lender, which will be step four, but before we get to step four, step three is to start thinking about the preliminary documentation. Yes, it does take a lot of paperwork, or what can feel like a lot of paperwork at times...
Jeremy: Mm-hmm (affirmative).
Ryan: To get a mortgage, to obtain a mortgage.
Jeremy: Mm-hmm (affirmative).
Ryan: The base amount of documentation that almost every single mortgage lender will ask you for would be a driver's licence or a passport, your last two years federal tax returns, last two years W2s. If you receive W2s, your most recent pay stub, and your last two months complete bank statements that may show any assets that you have available for down payment. That would be the core group of items that you would need to get. Of course, it will always depend on your situation, depends on if you're self employed, depends on if you've got additional businesses that are attached to that. Those things can change, but that would a very good list of things that you should think about, just getting upfront before even calling the mortgage loan officer.
Jeremy: Cool. If you didn't write that down, we put it down in the notes right below this video. You can look at the list of things that you should have ready before you even call a mortgage lender. Okay, so that was step three, get your documentation in order.
Ryan: Mm-hmm (affirmative).
Jeremy: Step four, you've kind of already alluded to, let's go for it.
Ryan: Step four, that's when you're calling the mortgage lender and you set an appointment. Often times, as a first time home buyer, it would be helpful to meet face to face, but anymore in this day of age where we can access anything online, the vast majority of mortgage lenders are going to have that option for you to go out and apply for a mortgage online.
Jeremy: Mm-hmm (affirmative).
Ryan: Though, anytime a first time home buyer, if you're looking... The mortgage lending process has become so complex and there's so many regulations and so many documents out there, any time that you can get face to face with a lender I would suggest that you do so.
Jeremy: Mm-hmm (affirmative).
Ryan: So that they can help thoroughly explain the cost and the fees and everything that's associated with the process. More often than not, the mortgage pre-approval process should take anywhere from an hour to an hour and a half.
Jeremy: Mm-hmm (affirmative).
Ryan: It shouldn't take much more time than that.
Jeremy: Mm-hmm (affirmative).
Ryan: If it does, you can go back to our previous video and hear what I have to say about the communication piece.
Jeremy: Mm-hmm (affirmative), and that is the-
Ryan: It all comes back to communication.
Jeremy: Yeah, and that video is the three different things to think about when you're choosing a mortgage lender, and you can see that on the Shine Insurance YouTube channel as well. Step four, going ahead and contacting the mortgage broker and getting pre-approved for a loan. Okay, what's step five?
Ryan: Well, step five, what I did have is you want to save some down payment. Well, that may not necessarily be true for everybody's scenario.
Jeremy: Mm-hmm (affirmative).
Ryan: We do have loan programs where you can have zero percent down, loan programs where it only takes three percent or three and a half, and that money may be coming from a relative in the form of a gift.
Jeremy: Mm-hmm (affirmative).
Ryan: That's definitely something we can add to our list if you're considering receiving a gift there's different loan programs that we will accept it and different loan programs that will not.
Jeremy: Receiving a gift as a down payment for a mortgage?
Ryan: Sure. Certainly.
Jeremy: I see. So, your dad or mom wants to pay the down payment as a gift and some tax benefit potentially happens there.
Ryan: Certainly.
Jeremy: Some companies will let that happen and some won't.
Ryan: Well, most companies will, but it does depend on the mortgage product itself. It depends on whether or not it's FAG or conventional loan, USDA, or a home ready product where it allows for a three percent down.
Jeremy: Mm-hmm (affirmative).
Ryan: There's a lot of programs that have different rules and regulations, which you really want to make sure that the mortgage lender that you're working with is knowledgeable and understands those rules, and which products can be used... Either that you use a down payment as a gift form and which ones you can not.
Jeremy: Right, okay.
Ryan: But I would say the fifth and final thing that we should discuss leading up to the mortgage is get a general sense of who you're going to want to work with as a realtor, if you're going to be shopping for homes.
Jeremy: Mm-hmm (affirmative).
Ryan: And also get a general sense in your home owners insurance, which is a very important piece that's always, or often times, not always, but often times overlooked in the beginning stages of the process is you want to kinda have a general idea of who you may want to work. I would always, always encourage you to use a local insurance company versus going online, just like I would always encourage you to use a local lender verus going online to find a lender.
Jeremy: For the same reasons, because the advice is better, the contact is better, the communication is better and then that's true for I think both sides. Okay, so step five was...
Ryan: Step five would be to get a general sense of who you're going to use for as a real estate agent and who you would be using for your home owner's insurance.
Jeremy: Okay. All right, cool. Well, that sounds really good. All those things, and I think what's so great about talking about this right now is both you and I see, as we see people purchasing homes, that they don't do a lot of this stuff ahead of time. Then it becomes a disappointing scenario. Instead, I really think buying a house should be fun.
Ryan: Yeah.
Jeremy: But it can very quickly turn into a lot of work, tragedy, disappointment, things of that nature. I think the five steps you've talked to us about today will help folks to avoid that.
Ryan: Absolutely.
Jeremy: Okay. If folks want to come and find you for a mortgage, how can they do that Ryan?
Ryan: The best way to contact me would be to call, phone number here in Bloomington, which is 812-650-3800, and also be found online at www.ruoff.com. That's R-U-O-F-F.com Or send an email directly to [email protected].
Jeremy: All right. Well, thank you so much for taking some time out of your schedule today to help us understand mortgages a little bit better.
Ryan: Thank you for having me.
You know credit scores are crucial for any major purchases. But do you know how your score's made? It's from all the little spending moments in your life. For real, every single one, from the good things you do (like paying your bills on time), to the mistakes you made (whoops, you forgot one), to maybe even some errors that are bringing you down. To find out what's going on with your credit report, we'll walk you through how to access it for free from each of the credit bureaus. From there you'll learn what to do if you find any mistakes in your report, and how to fix things that are right but not so great for you. All of this will help you when the day comes for you to purchase your dream home. Listen to learn how to fix yours now.
Freebie:
Get your money right video series
Level up:
New Home Buyer’s Guide comprehensive ecourse
Contributors to this episode include:
If you enjoyed this episode, stick around:
Thanks for listening!
More great stories & information at:
YouTube - Blog - Podcast Insta - Pinterest - CourseFull Transcript:
McKenzie Goodrich: This is the New Home Buyer's Guide Podcast brought to you by the New Home Buyer's Guide, a comprehensive online course that lays out the nine steps to finding and buying your dream home. Get it now at NewHomeBuyersGuide.net.
Jeremy Goodrich: Hey, new home buyers, Jeremy here. This is episode seven of the New Home Buyer's Guide Podcast. Where hopefully we are changing you from confused to excited, from wondering what the heck this whole home buying process is about to owning the process and owning the home of your dreams that's the right investment for you, and the right home for you to spend some time in. Maybe it's five years, maybe it's 30 years, maybe your grandkids show up at this house and talk about all the stories over the course of the last 60 years. Who knows, but we're going to make a smart investment right now.
Episode seven is the second episode in our credit series, understand your credit. So, episode six we really dug into how to find your credit, and I talked about a way, kind of a workaround, to go out and find your credit score for free, and get at least two of the three different credit scores that are out there, your Experian, Equifax, and TransUnion scores, which make up kind of the trifecta of your credit score scenario. And to go out and get at least two of those in a free way.
Now, you can go out and get your credit score in a way that costs money, but this was a free way so you could get a sense of your credit score. Then, I dug into exactly what that meant. And really, if you have 740 or higher, you're going to get the best loans, with the best interest rates. If you have a below that, depending on where you're at, you can have different types of scenarios, and I really broke that out.
So, this episode is about how to address your credit if it is problematic. If you have less than a 740 score, then we can really dig into your credit score, and figure out if there are ways to fix it. So, let's do it, let's dig in right now, and let's make your credit score better. All right, here we go.
Okay, before we get too deep, I wanted to let you know that there is an infographic for this episode as well. On episode six we had an infographic to walk you through how to find your credit, and if you go to the show notes at newhomebuyersguide.net/episode7, you will find an infographic there as well, this time for how to fix your credit. So, everything we talk about in this episode is laid out in a step-by-step way. So I might go and get that right now and then listen to the rest of this episode, so it all makes sense.
So, what we need to do first is we need to get our credit report. Not our credit score, our credit report. Your credit score gives you a number that's easy for you to understand, and know where you stand when it comes to credit. Your credit report breaks down all the details of why your credit score is the way it is. All your credit cards, all your loans, your auto loan, your mortgage, all that kind of stuff, the details of what you have when it comes to your financial situation is going to be a part of your credit report.
What we're going to do right now is we're going to go to a federal site called AnnualCreditReport.com and we're going to get our credit report. Now, you can only do this once every 12 months for free. I'm going to go to AnnualCreditReport.com, and it is authorized by the federal government. It's required by law that they let you once per year get an annual credit report. So again, this is a podcast, I'm not going to show you how to go on the site, but if you go to AnnualCreditReport.com, you're going to walk through a process, you're going to enter your information, you're going to take the steps that they ask you to take.
Then, when you're finished, you will get a file that is your credit report. That file will look crazy. It'll have all the details, all the information, like I already said about your mortgages, your auto loans, your credit card loans, all those details. So go ahead and go through that process right now. Go ahead and pause this episode, and go through the process, do everything you need to do until you have that annual credit report up on the screen. When you've got it done, start this episode again and we'll go from there.
All right, so you got your credit report, and you're looking at it, and it's like, "Oh my gosh, these people know so much about me." It's probably 20 years of mortgages, and auto loans, and credit cards, and even credit cards you closed are probably on there, and information, old names if you changed your name, all kinds of information on that credit report. Tons of things about you. It's a little scary how much they know about you. But you have it there, and now you can go to analyzing your credit report and trying to figure out how we can increase your credit, how we can fix it. Let's talk about that.
Step one, step two on this infographic, but really the first step in fixing your credit is disputing errors. This is the single quickest way to fix your credit. There are three credit reports that you should have in front of you. One is from Equifax, the other from Experian, and the third from TransUnion. Each of those are the three different reporting agency, and that information comes together to create really your ultimate credit score that will affect your mortgage or your pre-approval for a mortgage. If you go through either any of those, and you see issues, you see things that are on there that shouldn't be in there, maybe someone else used your identity, that's a common problem with people's credit score, an issue that comes up on credit reports. Maybe there's something that you never really had. Maybe there's something on your report that was actually an old boyfriend, or girlfriend, or something like that.
If there's anything wrong with your credit, then we're going to fix that, we're going to go through the process of fixing that right now. It's not exactly easy, but it's definitely worth it. So if you have the infographic right in front of you, you can just click on the click here to learn how in the second section. If you don't have that in front of you, then you can go to www.consumer, C-O-N-S-U-M-E-R, .ftc, Frank, Tom, Charlie, .gov. That is www.consumer.ftc.gov, and it's going to take you to the Federal Trade Commission site, that is how to dispute errors on your credit report. It's pretty old school how you're going to have to go about this.
Essentially, you're going to have to create a letter. You're going to send a letter to one of the three credit reporting agencies depending on which one has the problem. If all three of them have a problem, then you're going to wan to send the same letter to all three credit reporting agencies. If you want to just call them and kind of get information about where you send this, there's a phone number you can totally do that at. But basically, if you want to do this, you're going to need to come to this page, and then you're going to click the our sample dispute letter, then I would just copy this information into a Word document or whatever. You're going to dear sir, or madame, blah, blah, blah. Then you're going to explain the item that is in your credit that is incorrect.
You're going to describe that in the letter. And if there are any things that you've enclosed, documentation, payment records, court documents that support your position, you definitely want to put those in there. You want to do everything you can to convince them that this is incorrect and it should be removed from your credit. Then you're going to ask them to please delete or correct the dispute item as soon as possible. And you're going to send them out to them. Or send these letters out to them.
Now, it takes a little while to get the letters to these places, but hopefully when they get this, they'll see that there are inaccuracies in your credit score, and they will fix those. When they fix them, those inaccuracies will not be affecting your credit anymore, and can very quickly increase your credit score. So that was step two in the process is to dispute errors.
Step three is, you know, these next steps are pretty straightforward. This is just getting your financial situation right. So, if you see red flags in your credit report, maybe these are credit cards that you have bills due and haven't made payments, or maybe you didn't even realize that they were behind and they are. Maybe you've not been current on the monthly payments on your auto loan, or your mortgage, or something like that. So you're going to see what is behind, and you need to get that current, however you can, you need to get those bills current, and then stay current.
So that may mean setting up reminders, or automatic withdrawal for all your monthly bills. If you get current and stay current for six months, and even a year, you're going to see your credit score increase dramatically. So that's number three, is get those bills current if they are behind, and you can see that in your credit report.
Finally, if you can reduce your debt to income. I know, easier said than done. I realize that. But it will increase your credit score substantially. It doesn't mean you have to close credit cards. In fact, many financial advisors would say you don't want to close credit cards. Part of your credit score is how much open credit you have, and then how much debt you're carrying in that. So if you have $10,000 of open credit cards, maybe one is a $2,000 credit card, the other is a $5,000 credit card, another is $3,000 credit card. And that you're not maxing those cards out, then your credit score can really be based on the difference between how much open credit you have and how much debt you're carrying on that.
So if you have $10,000 of open credit, but you're only carrying $1,000 of debt inside of that $10,000 of open credit, then that's a good thing. It shows a ratio of only 10% of what you have available used. So having open credit is okay, but carrying a balance in those credit cards is what can really hurt you. So if you can pay off some of the debt on those credit cards, I would not suggest closing the credit card, but paying it off is totally cool, and a great thing to do. Then, if you can increase your income, obviously, that is changing jobs, or something like that, finding a second job, having more income that you can show as a part of your credit report is going to raise your credit score.
So three things you can do to fix your credit after you've gotten your annual credit report from all three reporters, TransUnion, Experian and Equifax, is to dispute any errors simply by sending a letter to the reporter that has the error in it. If all three of them have an error in it, then you want to send that letter to all three. Get your bills current, if you have anything behind you want to get those bills current and keep them current for a period of time, six months is the minimum, a year is even better. You'll see your credit score increase dramatically. Finally, reduce your debt to income. That could include lowering your debt amount by paying down your carried balance on your credit card, or it could include increasing your income, getting a second job, or a higher paying job so that the ratio of carried debt to income is farther apart.
All right, that was episode seven, we dug into how to fix your credit. I hope you're feel empowered, I hope you feel like you understand even if your credit is in the dumps, or just kind of not the best, I hope you understand maybe how you can fix it. Now, you have your credit report in hand, you can see the problems, maybe if you're lucky, there are actual issues, you know, that you can write in and have them just fixed and sort of magically make your credit go up. But more than likely you've got some work to do on your debt to income ratio, and you can do that. You just have to take the time, you have to budget, you have to think about what you're spending money on, and put those things together so you can get your credit back in order.
Okay, so we've really kind of nailed all this stuff that has to happen beforehand. So in episode eight, I'm super pumped, because we are going to dig in with a great mortgages lender who's going to talk about the five things you need to do to get a loan, right. So this is the next step in the process. You got your credit right, you've got your down payment that you're working on, you're kind of getting the process down, but we've got to get pre-approved. We can't go looking for houses, we can't hire that realtor, even though realtors don't cost any money, as we found out in the former episode, but we can't connect with those people until we have a pre-approval letter, so important, and we'll hear about that in episode eight.
Okay, now some action steps. So first, head over to Instagram and follow us @NewHomeBuyersGuide, we put lots of stuff up there, great posts, great information, just trying to kind of create a community in that space. If you want to go to the posts with the red house on the hill, that's our podcast logo, and you can share your questions, your comments, give us some love, give us some hate, whatever, do that in the comments section, we want to hear from you, we want to know what you learned, and maybe what you want to learn in the future that we didn't hit on today.
Okay, one more thing, home buying is tricky. The process has clear winners and losers, you know that because I was a loser the first time I bought a home. And home buyer's remorse is real. Sometimes you just truly get it wrong. So you need to know if you've got your financial ducks in a row, and to understand the timeline that you're going to go through to anticipate the hidden costs, and all the steps along the way. How are you supposed to do that when you've never done this before? We totally get it. Well, easy, you're going to go to the NewHomeBuyersGuide.net, that is NewHomeBuyersGuide.net, and sign up for our e-course.
You'll get walked through the process step by step. Think timelines, checklists, videos, expert interviews and more. It's like this podcast, but totally beefed up and ready to walk you step by step through the process. Remember, you're about to make one of the biggest purchases of your life, do yourself a favor that'll last maybe the next 30 years, and head over to NewHomeBuyersGuide.net.
All right, until the next time, happy home buying.
Credit scores play such an important part in the home buying process. It determines what you prequalify for, what kinds of loans you can get, and how much house you can afford. Listen to learn how to find yours for free.
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McKenzie Goodrich:
This is The New Home Buyer's Guide podcast, brought to you by The New Home Buyer's Guide, a comprehensive online course that lays out the nine steps to finding and buying your dream home. Get it now at NewHomeBuyersGuide.net.
Jeremy Goodrich:
Hey there, home buyers, it's Jeremy, that guy that bought his first home with no information, nothing done right, but you are not going to be that person. You are going to be better because you're listening to this podcast. You're downloading maybe some of the checklists and different resources we've created. You're hiring the right realtors. You're finding the right lenders. You're making sure that your down payment is starting to be saved for. On this episode, we're really going to dig into the other thing you need to do before you start the process of buying a home, and that is addressing your credit score. Your credit score is one of the key players in this process. Really the first thing you need to get right before doing anything else. It's like building a house. When you build a house, you set the foundation. The thing that everything else sits on, and if you don't have the foundation right, then the rest of the house obviously is not going to be doing good things when it's sitting on top of a bad foundation.
The foundation of the home buying process is your credit score. The financial score that is based on your financial behavior over the course of like, I don't know forever basically, and we'll dig into it. So, this episode deals with how to find your credit score. I want you to know that in the show notes page, and you can find the show notes page by going to NewHomeBuyersGuide.net-episode6. In the show notes page, we have an infographic that we refer to throughout this conversation, and that infographic is really going to help you find your credit score.
Just to give you a little forward thought, our next episode is going to be how to fix your credit score. So, after you found your credit score, let's say it's not very good, or you have a problem. Then there are ways that you can fix your credit score, and the next episode is going to go into that. So this episode is all about how to find your credit score. The next episode is all about how to fix your credit score. When we're done, hopefully you'll know that you have an awesome credit score that's going to make the whole rest of the process that much more smooth, and if you don't, it's totally okay. You'll know how to address it and how to fix it, so that can make the process even better.
All right. Let's do it.
(music)
Credit is a key factor in the home buying process, really the first factor. So whether you're just thinking about buying a home, and you may not even want to make any moves for the next year or so, this is still something that's incredibly important for you right now, to understand your consumer credit. That credit score that you get based on your financial behavior in the world and how it can affect your borrowing process, the mortgage process, and ultimately getting the home of your dreams. And it all really starts right here with figuring out what your credit is.
I laid out a couple of infographics. As I mentioned, you can get that infographic at NewHomeBuyersGuide.net/episode6, and it really just shows you two different steps you're going to need to do. The first one is to get your score. The second one is to understand what that score means. Now, you can go out on the web and get your credit score in all sorts of different ways, but here's the important thing to understand. Your credit score is based on an annual credit report. We'll get into the credit report a little bit more when we talk about fixing your credit score, but it's based on an annual credit report that uses money you borrow, if you're behind on any payments, any of that kind of stuff. It creates a score for you, a financial score of how you handle your finances.
We can go out and get that by paying money from the three different sources, the Equifax, Experian, and TransUnion. There's lots of places online where you can pay money or pay a subscription and they'll tell you your score updated every month even. They send you an email and just tell you what your scores are, so you can really really keep track. And if you want to do that, that's great, but it costs money, and there is a way to do this. It's not the perfect way, but there's a way to do this without paying any money at all.
So, I found two sites, FreeCreditScore.com and then CreditSesame.com. Each of these draws for free one of your three scores. Free Credit Score draws from Experian, and Credit Sesame draws from TransUnion. So, you can go ahead and get those credit scores for free. Now they want you to sign up for their monthly. They're going to try and sell you stuff in there, and try and sign you up for their newsletter, and all that kind of stuff, but you can work around that. So, let's start with FreeCreditScore.com. I'm actually going to log into FreeCreditScore.com right now and I'm going to visually go through the process and describe that to you. Obviously this is a podcast, so you won't be seeing that, but if you do jump into that space and walk through it, you should see basically the same process that I'm going through. So, let's dig into it.
I'm at FreeCreditScore.com and we're going to go in here and get your Experian credit report completely free. So, it's not giving you all three of your credit numbers, but it will give you one of them. You go through the process. Now I'm not going to go through it in detail, but you're going to put your name in, your last name, your email address. I would suggest un-clicking send me all this credit information. This is just trying to sign you up for special offers and things of that nature. So, un-click that. Put your current street address, all that kind of information asking why you're checking your credit, and submit and continue. After this screen, they're going to ask you your social security number. They're going to ask you some other identifying pieces of information.
That's going to ultimately get you to a screen that pops up a number. It'll give you that number, the single Experian, in this case, credit score, and while it isn't perfect, it isn't all three of your credit scores which combine to make your whole credit outlook, one score is going to give you really a pretty decent sense of what your credit situation is. So, going to FreeCreditScore.com and filling out your information, getting that one Experian credit score is step one.
The CreditSesame.com, again basically the same process you're going to go through here. They're going to want your email address, some of your information. You're going to create a little password. If you have check boxes to not get their newsletter, go ahead and do that. While they're trying to sell you something on the back end, they will give you a free credit score without having to buy anything at all. With Credit Sesame, it's the TransUnion credit score. So by getting both of those, you're going to have a sense of what your credit score is.
What does that mean? Well, you know what you can do is look at the bottom of the infographic at NewHomeBuyersGuide.net/episode6, and I created a little layout. Again, it's very basic information, but something to get you started about exactly what your credit score means associated with getting a mortgage. Again, what's our goal here? Our goal is to get pre-approved for a mortgage that ultimately will help us to purchase a home. If we're not pre-approved for a mortgage, we cannot purchase a home, and unless you've got hundreds of thousands of dollars sitting around, you've got to get the mortgage. And to get the mortgage, your credit score is going to be involved. So, let's look at the options.
We've got a 740 or above. In general, if you have a higher than a 740 credit score, you're going to get the best mortgage options at the best interest rates. If you're 740 or above, hooray. You are in good shape. You've got great credit and you're ready to get pre-approved for a mortgage.
If you're 640 to 739, this isn't terrible. That's okay. A lot of people are there. What that means basically is that if you go to apply for a mortgage right now, you may not get the best rates out there. Mortgages, different kinds of mortgage products or different kinds of loans use your credit to decide whether you qualify for those loans. If you have under 740, you may not qualify for some of the best ones. But at 640 to 739, you're still going to qualify for solid standard loans with decent interest rates. Again, you'll need to talk to mortgage lenders to find out more details about that, but you should be okay. You know, at 640 to 739, if you're not in a rush, you still may want to try and fix your credit, and you certainly want to at least listen to the next episode of this podcast where we talk about how to fix your credit, because I give you some information over there that could fix your credit really quickly.
If you're at 710 and you go to fix your credit and you find some things to fix and end up with 750, well that's awesome. Now you've crossed the line of 740 and you're in the best category. So, 640 to 739, not too much to worry about, but you may not get the best options.
Finally, 639 or below, this is the credit place where, can you get a mortgage? Yeah, you may be able to get a mortgage and you may be able to find the right mortgage for you. It may work out perfectly. There's plenty of people with lower credit scores who still go out and find mortgages and purchase new homes. So, don't take away that it's impossible, but definitely take away from this video that your credit is something to look at, is something to analyze, is something to potentially fix, spend a little time making better, so that you end up in a better financial position when you go to get pre-approved for a loan. So, 639 or below, definitely want to see how you can potentially fix your credit maybe quickly or maybe over the course of six months to a year, and put yourself in a better financial position for when you actually do go out and get pre-approved for a mortgage.
All right, so there it is. Episode six, how to find your credit score. It's a workaround, the free way. You can certainly pay to find your credit score in ways that maybe are a little bit easier, but certainly aren't free, so we showed you a free way to do that. In episode seven, we will talk about how to fix your credit. So, if you found your credit is under that 740 mark, it's definitely a good idea to check out episode seven. Now some action steps. First, head over the Instagram and follow us at New Home Buyers Guide. We put lots of stuff up there, great posts, great information. Just trying to create a community in that space. If you want to go to the posts with the red house on the hill, that's our logo, and you can share your questions, your comments, give us some love, give us some hate, whatever. Do that in the comments section. We want to hear from you. We want to know what you learned and maybe what you want to learn in the future that we didn't hit on today.
One more thing, home buying is tricky. The process has clear winners and losers. You know that because I was a loser the first time I bought a home. Home buyers remorse is real. Sometimes you just truly get it wrong. So, you need to know if you've got your financial ducks in a row and to understand the timeline that you're going to go through to anticipate the hidden costs and all the steps along the way. How are you supposed to do that when you've never done this before? We totally get it. Well, easy. You're going to go to the NewHomeBuyersGuide.net. That is NewHomeBuyersGuide.net, and sign up for our e-course. You'll get walked through the process step-by-step. Think timelines, checklists, videos, expert interviews, and more. It's like this podcast, but totally beefed up and ready to walk you step-by-step through the process.
Remember, you're about to make one of the biggest purchases of your life. Do yourself a favor that'll last maybe the next 30 years and head over to NewHomeBuyersGuide.net. All right. Until the next time, happy home buying.
(music)
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Jeremy Goodrich: Hey there, new home buyers, Jeremy Goodrich here. I am that guy. That guy that bought my first home many, many years ago and had no idea what I was getting into. I didn't use a realtor, I didn't have an inspection, I didn't have a clue what documents I was signing, and I ended up, you guessed it, buying a beat-up old house that I spent years fixing only to sell for way less than I bought it for. When it comes to home buying, I am the story of what not to do. But that guy, that guy is not you. You are two times smarter, you're three times more organized, and you're ten times better looking than he was. You're going to find the right home for the right price, and you're going to have fun doing it. That process starts right here with the New Home Buyers Guide podcast. We're glad you joined us. Hey there, new home buyers. It's Jeremy and we are at episode five of the New Home Buyers Guide podcast. This episode is so important, it's all about down payments, but very specifically down payment assistance programs. If you qualify, governments at state, local, and federal levels could potentially help you buy a house by giving you some money for the down payment. Our guest today is going to talk in detail about that process, so you can see if you qualify for that program and if it's something that you can try and do, because it is really like free money. He'll describe that, so I don't want to over state it. Listen to our guest and let him describe how the program works. Our guest today is another friend of mine who works in the home buying process. He's a lender, that means he works for a bank and he puts together loans for people so that they can buy a house. He specializes in loans that connect with first-time home buyers that maybe qualify for down payment assistance. I've been lucky enough to have him help lots of times with questions that I have or my clients have had about lending, and this particular question, I really wanted to dig in with him, because I think the answers are fascinating. Our guest today's name is Kevin Cade. He works at Old National Bank, and he's going to talk about down payment assistance programs. I hope you enjoy our conversation. Thank you for being with us today. Kevin Cade: You're welcome, Jeremy. Good to be here. Jeremy: We're going to talk about something really specific today. We're not talking generally about mortgages, we're talking about down payments, and specifically down payment assistance programs. Programs for people who could use assistance with their down payment. I guess maybe the place to start is, what's a down payment? Kevin: Well, a down payment is a requirement by any type of loan program you have for folks to put money down to qualify for that particular program. That varies from agency to agency, basically. Jeremy: And are there common amounts that someone, that a bank expects from someone for a down payment to give them a loan? Kevin: Well, there's minimums. For example, Freddie Mac and Fannie Mae, conventional type loans, require a minimum of 5% down. But they also have programs that allow 3% down with income restrictions, so the folks have to make under a certain threshold of income to qualify for the lower down payment programs. They also typically have to have some kind of home buyer training for those two programs. Jeremy: So, someone who doesn't have the money for a down payment, doesn't have that 5% of the purchase price of the home that they want to buy, do they have options for help with that? Kevin: They absolutely do. The government, basically, local, federal, and state, each provide different programs for down payment assistance. Here in Bloomington, Indiana, we have what's called the HAND department, it's a department of the city of Bloomington that provides training and down payment assistance to folks who are purchasing properties in the city of Bloomington. The Federal Home Loan Bank also offers a program called the Home Ownership Program, better known as HOP, and that's a different amount of down payment assistance, and it is a federal type program. And then, at the state level, the Indiana Housing Community Development Authority also has a program that is based on the amount of loan you're getting. These programs all require some type of home buyer training and a maximum amount of income that the people that want to qualify for it, based on the number of folks in their family, have to qualify. Jeremy: So let me see if I've got it right. Generally, if you don't have the money for down payment, and you still want to purchase a house, there are some options. They come from the government, generally, and they could come from either the federal or the state or your local city government, potentially. And there are stipulations associated with that. Kevin: That's true. Jeremy: So, income would probably be the major one. Is that right? Kevin: Yes. And the income parameters for those programs are basically the same. It depends on the family size. It's a percentage of the median income in the area you live in, or the county you live in. For example, with the HAND department, I'll give you a couple of examples that'll kind of give you the range. If you have a couple, or two folks that are trying to qualify for their down payment assistance, they have to make less than $39,950 household income. And it goes all the way up to eight, so if you have six kids in a family with the parents, the maximum amount of income is $65,900 on that program, so they have to make less than that. Jeremy: So in our city, Bloomington, Indiana, we've got these numbers based on median income in our town, and so likely if there is a city program where other people live in different cities, these numbers would be different because they would be based on the median income in that city. Did I get that right? Kevin: That's correct. And all that's based on population density or demographics and income averages within each of those areas, basically by county. Jeremy: Okay, cool. So let's say I fit the income expectation for either a federal, state, or city program. What do I need to do to apply for that? Kevin: Well, the first thing you have to do is, you have to take some kind of home buyer training. There are a number of ways to do that. As an example, the HAND department here in the city of Bloomington offers a home buyer training class almost quarterly. It varies somewhat, but they learn about every aspect of buying a home. I've actually referred people to that program that don't even qualify for the down payment assistance, but that want to learn about the process of getting a home, which can be very complicated. They take that training just to find out about home owner's insurance, the mortgage process. A realtor speaks and talks about the process of looking and finding a home. A home inspector talks about how home inspections work and why you should have one. There's a variety of good knowledge they gain from taking these classes, and it also qualifies them then for the down payment assistance. Jeremy: Okay, so you have to fit an income, and a lot of times you have to take a class. That class could be in your local space, like the one here in Bloomington, or I think there's some online classes sometimes for the federal assistance, too. Different types of classes that you need to take that teach you about how to buy a house and how the process works, right? Kevin: Absolutely. For example, the mortgage insurance companies online usually offer home buyer training. So that qualifies you for the same down payment assistance. Jeremy: Okay, cool. And so, how much money can you get? How much assistance is possible with these down payment programs? Kevin: It varies from year to year. They do change every once in a great while. The city of Bloomington, for example, is a $5,000 down payment assistance program. The home ownership program with Federal Home Loan Bank is an $8,000 down payment assistance program. You can use those in tandem and actually have $13,000 of forgivable down payment assistance. Jeremy: Wow. So you can use more than one if you qualify for them and follow through with the expectations of them. Kevin: Not all banks offer the option of doing both, but some of us do. Jeremy: So, is your mortgage lender in control of whether you can do these programs or not? Should you go to the lender first and ask them if they do these programs before doing them? Kevin: Absolutely. First of all, if you're trying to do both, you want to make sure that the bank you're talking to or the lender you're talking to offers both. The banks sometimes have their own requirements for these programs. Credit score, for example. It might be a higher threshold that you have to have as far as your credit score to qualify at one bank as it would possibly for another. Jeremy: Okay, cool. All right, super cool. I didn't realize you could do more than one, which is really, really neat. So you can even do more than one. Kevin: Absolutely. Mm-hmm (affirmative). Jeremy: But you definitely need to talk to your mortgage lender ahead of time, it sounds like that's a major factor in the process. If you're working with a lender that doesn't accept any of these programs, Kevin, would you suggest then looking around for maybe another lender that's capable of handling these programs? Kevin: Absolutely. Just as important as if you're checking to see if a bank offers the type of program you do. For example, not all banks do VA loans. If you're a veteran of the military service, that's an excellent program. It's 100% financing, they don't have the mortgage insurance on that program, they're a little more lenient on credit, because they understand someone that's gone out of the country to fight for their country literally sometimes loses control of the ability to make their payments and that kind of thing. So it's a great program for military folks. Jeremy: Okay. Lastly, is there really anything else that folks would need to do as a part of this program, they're going to their lender, they're making sure that the programs fit, they're talking about their income, making sure that their income fits, they are going to the different programs, potentially looking at more than one. Is there anything else that they would need to do as a part of this process that would be important for them to know? Kevin: No. Absolutely not. That's probably the most important thing, just like you want to research lenders when you're trying to make a decision. Maybe not every lender in one area, but at least choose two or three to see what their rates are, what their closing costs are, if they have these programs. All of the aspects of borrowing money, it's really important to make sure you're getting the deal you want and that you're qualified for it, and they offer what you need to do as far as down payment assistance or any other type of aspect of mortgage lending. Jeremy: Okay. Do they have to pay this down payment assistance back in any way? Is it a loan of some kind? Is there anything associated with that? Kevin: That's a great question. No, it's actually forgivable. Both the HOP program and the HAND money, for the city of Bloomington, are forgiven over a five year period. They forgive 20% of the down payment assistance. After you've owned that home for five years, you don't owe it back. So you have that equity in your property at the very beginning, and ultimately, it's forgiven. Jeremy: I see. So you can't turn around and sell the house three months later and essentially get that money back out. That's sort of how it's set up. It's forgiven over time. Kevin: They would prorate how much you owe them back at whatever point you might pay it off if it's early. Jeremy: All right. There it is, the down payment assistance program could get you up to $13,000 for the down payment on your house. If you think you're eligible, or potentially eligible, the first step to take is to go talk to a lender in your town and ask them about their down payment assistance programs for the type of loans that they offer. Look for them to talk about local programs in your city, state level programs, and federal programs, and ask them if you can combine those programs together, and then ask them exactly what steps you need to take to get that down payment assistance. What an awesome, awesome thing to have available to you if you're in an income bracket that makes sense to have those things. Thanks so much to Kevin Cade for sharing that information with us. If you want a comprehensive online course that walks you all the way through the home buying process, we have created it for you. There are checklists and videos and a private group just for members. You can find all of this at NewHomeBuyersGuide.net. If it isn't the best bit of home buying advice you've ever experienced, we will gladly refund your money, but really, when you see the price, even a third of the information we provide and the community that is behind that pay wall would be 100% worth it. Until the next time, happy home buying.
Buying your first home is on the horizon... but are you ready? Listen to find out.
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YouTube - Blog - Podcast Insta - CourseFull Transcript:
Jeremy Goodrich: Hey there, new home buyers. Jeremy Goodrich here. I am that guy. That guy that bought my first home many, many years ago, and had no idea what was I was getting into. I didn't use a realtor. I didn't have an inspection. I didn't have a clue what documents I was signing. I ended up, you guessed it, buying a beat up old house that I spent years fixing only to sell for way less than I bought it for. When it comes to home buying, I am the story of what not to do. But that guy, that guy is not you. You are two times smarter. You're three times more organized, and you're 10 times better looking than he was. You're going to find the right home for the right price, and you're gonna have fun doing it. That process starts right here with the New Home Buyers Guide podcast. We're glad you joined us. Hey there, home buyers. Jeremy here, and welcome to episode 4 of the New Home Buyers Guide podcast. This is episode is all about the things you should do early in the process, so if you are someone who is thinking about buying a home, maybe you want to do it soon, maybe you're starting to look around at houses, driving by on a Sunday afternoon starting to thinking through that process, but you're not really sure what you should be now, this episode is absolutely for you. We're gonna break down the four things that you should be doing now, even six months a year, two years before you go into the home buying process full on. But, if you're about to dive in, it's still relevant. Check out these four steps that you should take. We're gonna dig into each of them. When you walk out of the other side of this episode, you'll have a real understanding of things you should know about your own finances, things you should know about setting up the process, so that when you go to lenders, when you go to realtors, when you put yourself in the position of actually getting ready to buy that house, they are all gonna respond really, really well, and you're gonna get the best deals on everything, and have the best service providers because they can see that you're ready to rock and roll. Okay, let's dig in. All right. Number one is addressing your credit. Your credit score is super important, probably one of the most important parts of the home buying process. Your credit score is created by all the money interactions you've had with lenders over the course of really, your lifetime. That could be credit cards. That could be money you borrowed for buying a car, or something like that. That's even the bills you get every month, so for your electric, or for your TV, those kinds of things. They're all inside of a system, and if you keep up with your bills properly, pay your bills on time, pay back your credit cards over a course of time properly, then you're gonna have a higher credit score. If you've had problems, haven't been able to make payments, have even gone through bankruptcy, or something like that then you're gonna have a much lower credit score and that's gonna affect everything. The first thing you want to do right now, way before you even start deciding to buy a house is, address your credit score. How do you do that? Well, I created a video series on exactly how to do this, so if you want to find your credit score, learn how to fix your credit score, head over to our Instagram page, and click the link that's up in the top part. It has some freebies that we give away, the master checklist for our course, and some other stuff. One of those is finding and fixing your credit, so Get Your Money Right, I think is what that freebie is called. Go to Instagram, click that link, and then click Get Your Money Right, right behind there, and there is a three video series to teach you how to find and fix your credit. That really is one of the first things you want to address as you're setting yourself up to buy a home. Number two is the down payment. When you buy a house you usually are going to be borrowing money from a lender, or a bank who is gonna help you pay for the house, and then you're going to pay them back over 15, or even 30 years. But, they expect that you put some money down at the beginning. That's called a down payment. A lot of times that's 3 to 5% of the purchase price, so if you're buying a house for $100,000 that would be 3 to $5,000, and if you're buying one for $200,000 then obviously that's 6 to $10,000. For someone who's buying a house for the first time that can be a ton of money. And if you haven't thought about it ahead of time then you're stuck without a down payment, and even though there are ways that you can buy a house with very little down payment, or no down payment at all, you don't want to be in that situation, so start saving now. Maybe you ask for money towards your down payment for birthdays from family members, or maybe you have a family member that can help with the down payment, a lot of people do, and a lot of people don't, especially if you don't have anyone else who can help with those financial down payment pieces. You definitely want to start ahead. Save $100 bucks a month. Save $50 bucks a month. Save $25 bucks a month. Whatever you can do to set that money aside. Then have a sense of how much you want to buy a house for. What's the cost of the house that you think is going to fit you? Is it $100,000? Is it $200,000? Try to at least get a 3 to 5% down payment. There's some people out there that say you shouldn't buy a house unless you have a 20% down payment. If you have the luxury of making a 20% down payment, you can avoid some costs associated with that sale, but just start with 3 to 5%. What's it gonna take to save up 3 to 5% to have for the down payment at the point that you're ready to purchase that house? The third thing you need to start thinking about right now is, what your budget is going to be for your home payment for the payment of the mortgage on your home? Obviously, you're gonna be borrowing some money, and if you went out and got a $500,000 house then you're gonna have a $3,000 a month mortgage payment. You're probably not gonna be able to handle that. It's going to be totally bad. You want to understand right now exactly what you can borrow, so you can start thinking about what kinds of houses are available in your town. I think the best way to do this is, if you're paying rent right now, think about how much money you're paying in rent because if that's working out then you know then that's a fair amount of money that you can pay out on a monthly basis and it would be okay. It would fit your budget, right. Then you can go online and look at mortgage calculators. There's tons of them. Just Google it, you'll find a ton of them. Figure out how much you could borrow, what the total amount you can borrow is, so that you would have a monthly payment that's similar to what you're paying in rent right now. That'll give you a great sense of how expensive the house can be that you can buy in your market. Now you'll know, okay, if I want to pay basically the same amount I'm paying in rent right now then I can buy about $150,000 house, or something like that. It gives you a great sense right away of exactly what price the house can be that'll fit into your budget. Finally, number four. It's time to start understanding the local real estate market. You want to get a sense a little bit of where things are at? Are prices going up, and up, and up, or are prices going down? Why are either or those things happening? Real estate markets are similar to the stock market, or anything else. They can go up because of demand. They can go down if there is less demand. That's the way the market works. The better you understand that before you even get involved in it the better you can know when you decide to start looking for a house where the market's at, what you can expect as far as competition, are there going to be 10 people trying to make an offer on any good house in this town immediately when it goes onto the market, or is the market a little softer and you might be able to offer a little bit less money then maybe the person who's asking, and still have a good chance of getting that house because the real estate market is working in your town? Obviously, a realtor is a perfectly good way to deal with this situation. We're definitely going to suggest that you get a realtor when you get closer to the actual buying process, but having some knowledge by going online and looking what houses are for sale, by driving around and seeing what the prices are, you're gonna know where the market is at, and be able to jump in with that realtor when you're ready to buy the house with full knowledge of how the process works. And then the realtor will give you even more knowledge. They'll say, "Okay, well this is how it's working right now, and here's some inside information that you're not going to get from going on Zillow, or Realtor.com, or whatever." They'll help you take it to the next level when you're actually in the process of buying your own home. Okay, so to review. Step one, deal with your credit. Start addressing it right now. Find out what your credit score is. If it's not good, go find your credit report, figure out how to start fixing it. The second thing is a down payment. You need to start saving right now, or planning for how you're gonna make that down payment at least 3 to 5% of the purchase price of your new home. Number three, you want to figure out how much you can afford to buy. I suggest using the amount you're paying for rent right now, and figuring that out with an online mortgage calculator to understand exactly how much a house could cost that would fit into your budget. And then number four, finally get a sense of the real estate market in your purchase area, or your local area if you're going to buy a house in your own space. Figure out if the prices are going up, if the prices are going down. If there's very few houses on the market and that means it's going to be a hard market. It's going to be tough to get a house, or if there's lots of houses on the market and very few buyers, and then it'll be a little bit easier to get the house of your dreams. Episode 4 hit the surface of the four things you need to do before buying a house. But, as you already know there is oh so much more to this process. If you want a comprehensive online course that walks you all the way through the home buying process, we have created it for you. There are checklists, and videos, and a private group just for members. You can find all of this at newhomebuyersguide.net. If it isn't the best bit of home buying advice you've ever experienced, we will gladly refund your money. But really, when you see the price even a third of the information we provide, and the community that is behind that pay wall would be 100% worth it. Until the next time, Happy Home Buying.
To get a realtor or not, that is the question... or is it? Hit play to learn why you should never buy your first home without a realtor.
Freebie:
First time home buyer - get your needs met
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New Home Buyer’s Guide comprehensive ecourse
Contributors to this episode include:
If you enjoyed this episode, stick around:
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YouTube - Blog - Podcast Insta - CourseFull Transcript:
Jeremy Goodrich: Hey there new home buyers, Jeremy Goodrich here. I am that guy, that guy that bought my first home many, many years ago and had no idea what I was getting into. I didn't use a realtor, I didn't have an inspection, I didn't have a clue what documents I was signing, and I ended up, you guessed it, buying a beat up old house that I spent years fixing only to sell for way less than I bought it for. When it comes to home buying, I am the story of what not to do. But that guy, that guy is not you. You are two times smarter, you're three times more organized and you're 10 times better looking than he was. You're going to find the right home for the right price and you're gonna have fun doing it. That process starts right here with the New Home Buyers Guide Podcast. We're glad you joined us. Welcome back new home buyers to episode three of the New Home Buyers Guide Podcast. I'm Jeremy Goodrich, your host, and I'm real excited about this episode. It's a super short episode, only about a five minute conversation and answers one specific question. That question is how do your realtors get paid? Because, it's a great answer and you definitely wanna hear exactly what the answer is to how realtors get paid, because as a buyer it's important to understand that. It really is important to have a realtor on your side as you're walking though the process. We'll talk more in future episodes about why that's so important. In fact, if you're early in the process right now, you're just considering the home buying process, you're getting your credit right, you're saving for your down payment and you haven't been pre-approved for a mortgage, then it is not the right time to hire a realtor. We're gonna set you up in the course, in the online course at newhomebuyersguide.net, we walk you through the exact process of getting set up and tell you exactly when you should hire that realtor. 'Cause realtors, good realtors, the kind of realtors you wanna work with expect certain things to be done before you even contact them. We'll address that in the course. But right now I just wanna give you a little bit of information about realtors in general, and that is how realtors get paid. I brought a great friend of mine, a wonderful realtor, her name is Beth Ellis, and you'll hear her voice in multiple different episodes of this show, as she describes to us different parts of the process of buying a home. Without further ado, let's dig right into the conversation with Beth Ellis how realtors get paid. How do realtors get paid? Beth Ellis: That is a really good question. Honestly, first time buyers are not comfortable asking that, because they're not sure how the process works. Jeremy: Yeah. Beth: Generally speaking, the way that it works is when a realtor lists a house for sale, they have negotiated a commission with that seller. When they put that house in the MLS, which is our homes database, they have agreed to cooperate with the buyer's realtor and pay them at the closing. The buyers, it's great news for the buyers, they don't pay us. The sellers pay the realtors and that is negotiated upfront like I said with seller of the home. The nice thing is that realtors can show buyers any house that's for sale in our market that's been listed by another realtor or by their own company. We don't have to show just the ones that we have for sale, because we know that we're gonna get payed if our buyers buy any of those houses that are listed on the market. Jeremy: Okay, so let me see if I get this straight. A buyer does not pay for a realtor? Beth: Right. Jeremy: A seller pays for both realtors? Beth: Right. Jeremy: Based on a negotiation they did before listing the property? Beth: Right. When they sit down and meet with the listing realtor, they negotiate out a commission. They agree to that, that's part of the listing contract that the seller would sign with their realtor. Then when that person puts that house for sale in our MLS database, it clearly shows that they are cooperating with the buyer's agent, and that the buyer's agent will get paid at closing if that buyer buys that property. Jeremy: Is there a wide array of amounts of money you can get paid? If you represent a buyer, do you necessarily know what you're gonna get paid? Beth: I do know what I'm gonna get paid, because the listing agent puts that information on the private side of the realtor database of our MLS database, and there are wide varieties of fees that we get paid. We do not have a standard or a set fee, it's illegal for us to get together and say we're all gonna charge one million dollars for each listing. That fee is always negotiated between the listing agent and the seller. Jeremy: Okay, can you give us some example of what that fee could look like, somewhere ... Is it a percentage [crosstalk 00:05:41]? Beth: It's a percentage of the sale price, not of the list price. Jeremy: Okay. Beth: Depending on what the listing agent did with the seller, some of those people split that fee evenly with the listing agent and the selling agent, and sometimes they don't split it evenly. Jeremy: Okay. So, seller pays both realtors, that's based on a percentage usually of the selling price. Beth: Right. Jeremy: Could vary for different scenarios, but ultimately if you're the buyer, if you're a buyer and you're hiring a real estate agent, you don't really need to worry too much about that. Beth: Exactly. I tell my first time buyers there is absolutely no reason to buy a house without a realtor. Because, one, you don't pay us, so that's good news. Two, we know what we're doing. Usually first time buyers don't know what they're doing and there's no good reason for them to try and navigate through that process without a professional person helping them get the best deal on the best house for them through that process. Jeremy: So not only do you get the service of having a professional who's inside the industry helping you walk through it, but you ultimately don't even have to pay for it? Beth: Right. Jeremy: Okay. Well, I don't see any reason to buy a house without a realtor. Beth: Absolutely. Jeremy: Thank you Beth so much for being with us. If someone wants to find you, how can they do so? Beth: Sure. My email is [email protected]. Jeremy: There it is home buyers. There is absolutely zero reason not to have a realtor on your side while you're looking for homes, while you're deciding exactly what fits into your budget and your idea of a lifestyle you wanna live, helping you to negotiate the process, helping you to walk through all the steps that happen from the very beginning, to looking at houses, to negotiating the offer on the house of your dreams, to the closing process at the very end. All those steps are helped by a realtor, and it doesn't even cost you any money. There's no reason not to have a realtor. All right, what are your questions? Head over to the Instagram page, the New Home Buyers Guide Instagram page and find the post for episode three and tell us what you liked, what you didn't like, what questions you have about this episode and what questions we could answer in future episodes that will help you to have a better home buying experience. Also, if you want a comprehensive online course that walks you all the way through the home buying process, we have created it for you. There are checklists and videos and a private group just for members. You can find all of this at newhomebuyersguide.net. If it isn't the best bit of home buying advice you've ever experienced, we will gladly refund your money. But, really, when you see the price, even the third of the information we provide and the community that is behind that paywall would be a 100% worth it. Until the next time, happy home buying.
So your friends are snapping pics of their new homes and posting them all over Insta... But does that mean it's time for you to get yours? Listen to find out.
Topics:
Freebie:
First time home buyer - the master checklist’s comin' your way!
Level up:
New Home Buyer’s Guide comprehensive ecourse
Contributors to this episode include:
If you enjoyed this episode, stick around:
Thanks for listening!
More great stories & information at:
YouTube - Blog - Podcast Insta - CourseFull Transcript:
Jeremy Goodrich: Hey there new home buyers. Jeremy Goodrich here. I am that guy. That guy that bought my first home many, many years ago and had no idea what I was getting into. I didn't use a realtor. I didn't have an inspection. I didn't have a clue what documents I was signing, and I ended up, you guessed it, buying a beat up old house that I spent years fixing only to sell for way less than I bought it for. When it comes to home buying, I am the story of what not to do. But that guy? That guy is not you. You are two times smarter, you're three times more organized, and you're ten times better looking than he was. You're going to find the right home for the right price, and you're going to have fun doing it. That process starts right here with the New Home Buyer's Guide podcast. We're glad you joined us. Welcome new home buyers to episode two of the New Home Buyer's Guide podcast. In this episode, we're going to break down the question, "Should I buy a house?" Obvious first question, right? That is absolutely the first topic you should address in your home-buying journey. So it makes sense that we break that down right from the beginning. But before we dig into that question, I want to offer a quick overview of the journey we're embarking on and how it will transform your home buying experience. I mentioned in the first episode how the New Home Buyer's Guide came to be. So if you missed it, definitely head back over there and take a listen. What I could never have realized in 2015 when I created that first video is how many people we would truly help. Hundreds of thousands of first-time home buyers like you have watched our videos on YouTube and purchased our online course at NewHomeBuyersGuide.net. What started as a way to answer simple questions for our insurance clients that were first-time home buyers has become a comprehensive nine-step approach to organizing and understanding the home buying process. And that's what we're going to continue to do with this show. In every episode we'll talk through a specific question that you either have or you should have, then we'll offer some quick and easy answers. Along the way, we'll talk with experts and other first-time home buyers just like yourself. In fact, if you'd like us to answer a specific question or even talk on the show, why don't you head over to NewHomeBuyersGuide.net and share your question in the chat feature right there on site. Okay. Let's dig into our first official topic. I'm willing to bet that in the last month you've been sitting on the couch scrolling Instagram and seen a friend celebrating the purchase of a new home. Or maybe you were at the fitness club running on a treadmill and imagining being able to have a workout space in your own home, and you thought to yourself, "I need to buy a house." Immediately after that thought, I bet other questions rolled into your head. Do I have enough money? Is it the right time to buy? Do I even know what to do? And that is the point where you say, "Oh, forget it! I have no idea what I'm doing and buying a house is totally stupid anyway." So who's right? Did your Insta-friend make a smart decision? Or did they just tie a financial chain around their ankles for the next 30 years? Well, it could be either. So let's dig into how you can tell the difference between the two. All right, so let's get into it. We're going to dig into four questions that have to do with whether it's the right time for you to buy a house. Let's talk about each real quickly, and then we'll dig in. The first one is, does it make financial sense? Buying a house is not all about the money, but it is one of the biggest investments you might make over the course of your life. So it's smart to think about money of course as a part of the conversation about whether you should purchase a home. Is it the right time? There are right times and wrong times to buy a house. We'll talk a little bit about that. What if my life changes? We'll talk a little bit about what parts of life are kind of the right times to buy and maybe when they aren't so much. And the finally, what are the hidden costs? Sometimes we get caught up in the surface of the home buying process, and there are definitely some hidden costs that I'll uncover for you a little bit so that you can have a sense of what all is in there. Then finally, the fifth question that just might make you change your mind about the process, we'll dig into that at the very end. So let's get going. Let's start with money sense. Does it make sense to buy a house right now based purely on money? And I'm going to create a scenario for you that'll just give you a sense. Obviously I don't know what your particular scenario is, but let's just say you were renting, and you're renting for $1000 a month. I just pulled that out of my head and it's very even and that's nice. So $1000 a month. And let's say you could buy a house and have a mortgage for exactly that same $1000 a month. The nice thing about that scenario is no change in your monthly out-of-pocket, right? So let's look at the differences and how they compare. Let's start with renting. So you're monthly rent, we already said it. $1000 a month. Easy. Okay. After five years you will have spent a whopping $60,000 renting your home, and after 10 years we'll double that of course and it will be $120,000. So over 10 years, and that's a super long time I realize, but it just gives you a sense. You'll have spent $120,000 renting your home. Well worth it, you've lived in that home for 10 years. You've had a roof over your head and all those kinds of things. But you will have put that amount of money out. So let's look at what you got for that. Well, obviously you got a place to live. There's a value to that, there's no question. But did you get any equity? Did you gain any financial scenario because of that renting? Well no, you didn't. You didn't gain any equity at all. Did the value of your home increase over the course of time? If you buy a home for $150,000 right now, 10 years from now it's probably going to be worth more than that. It depends on the market of course, but it can increase in value. And of course if you're renting you would not have that. What about your upkeep expenses though? Did you have to replace the roof? Did you have to replace the furnace? Did you have to repaint the house? No. You didn't have to do any of that stuff. That's part of the positive to renting, right? And that also costs you zero. So that's a really good thing. So you didn't gain any equity. The value of your home that you owned didn't increase, that's another type of equity, and you didn't have to pay any upkeep expenses either. Let's look at buying. Let's say you're going to buy a $150,000 house. I looked at this, I tried to figure out okay, well what could we get to $1000 a month? What's realistic? And so a $150,000 house with a 30-year, 5% fixed-rate mortgage. Now there's a lot in that and I'm not going to dig into it right now, but that's a pretty common type of mortgage. So if you got that mortgage and you paid $7500 down payment, then that would add up to about a $1000 a month payment. So that would give you a sense of exactly what you can get for that $1000 a month. About a $150,000 house if you get the right loan. Your monthly mortgage would be $1000. Over the course of five years you will have spent exactly $60,000, the same as renting, and over the course of 10 years you will have spent $120,000. So the out-of-pocket costs on the surface are exactly the same as renting. You'll have spent the same amount of money. What would your equity be? Well, I looked it up and I looked at what that basically would add up to, and just paying $1000 a month down on a 30-year mortgage, you'd have about $13,000 of equity after five years. So that's pretty good, right? Now your house is likely going to increase in value as well. I've chosen a very low 2% increase value. It's possible that it could go up by more than that, but this is a safe number. If it increased in value by 2% per year, you would have another $15,000 that you had made off of your investment in your own home. So there's $28,000 more there after five years than you had before. You'd also have upkeep expenses though. And when I looked at really the details of it, I figured $2000 a year is ... it might even be low guess really, but let's just use that $2000 a year. You would have spent $10,000 on upkeep expenses. After 10 years, we would do the same thing and we would just basically double those. Now you've got $62,000 of equity that you would not have had if you had rented the house. $62,000. But you also have upkeep expenses at $20,000. So after 10 years with these very conservative numbers that I'm making up, you would have $42,000 of equity, essentially, in this property. Then that means if you wanted after 10 years to sell your house, you likely could make $42,000 off of it. Now you could of course make a tons more, and if things went wrong you could make tons less. But this basic premise gives you a sense of what the value of owning a home is. You're going to grow that equity and the value of your home is probably going to go up, and so you increase that value as well. And with this very conservative look after 10 years, you could have $40,000 in your pocket that you would not have had if you were renting. That's just a way to look at it. So renting, you gained zero dollars over the course of that time. In buying, you gained up to $18,000 ... that's after five years I would think. Then after 10 years, you know, the same. Renting you don't have any equity at all, buying you have about $42,000. Again, I feel like I need to say this is based off of generalized numbers that I came up with, but based off of what I see in the market, what I see in growth. In fact, I think these are super conservative numbers, and that you could make a lot more money off of your house over the course of 10 years than $42,000. But you could make less as well obviously, depending on the market. So does it make money sense? Well, buying definitely has the potential to be a lot better for you over the course of time than renting. Because when you're renting, you cannot grow that equity. On the other side, renting you don't have any of the risk. You don't have any of the expenses, and so there are some things there too. But I think in general buying a home, if you can do it, and if all the things I'm going to talk about after this line up, then it does make money sense to own your home rather than renting your home. There's a reason tons of people have investment properties that they want to rent to you. Because owning that home is valuable, and they can make money off it and they've realized that. If you own your own home, then you get in on that investment capacity and ability. You get to make money too instead of having someone else make money off of your rent. So it does make money sense, assuming those basic premises that I just created. So the first topic in answering the question should I buy a house was, does it make financial sense? And I laid out that, yeah. Most of the time it probably does. The next question has to be, is now the right time to buy? I wanted to go back to an ancient Chinese proverb that ... When is the best time to plant a tree? The best time to plant a tree is 10 years ago. I just showed you. If you had bought a house 10 years ago, it's very likely that you would have equity up to $40-$50,000 in the house that you owned. But when's the next best time to plant that tree? Well it's obvious, and that's today. If all these other pieces make sense. If it all lines up for you right now. If your finances are right, if the market is right, then today is a great time to buy. If it works for you. If it makes sense, then today is a better time to buy than five years down the road, because you want to start building that equity and you want to get that increased value in your home as soon as possible. Does that make sense? Okay. Building equity takes time, so the sooner the better if you're going to buy. But, there are two things you got to get right first. You know, there's a couple of things that you really do need to get right first. The first one is your credit. It is not the right time to buy, in my opinion, if your credit is bad. If your credit is in bad shape ... and look. We're going to dig into your credit in the next couple of episodes. We're going to really figure out what's going on with your credit. And if it is a problem, we're going to help you fix it. So don't worry too much about it, but takes time. It takes time. And if your credit is bad right now, it just might not be the right time for you to buy. You can force it with bad credit. You can get a loan a lot of times and force yourself into a home ownership situation, but I see a lot of folks who don't have good credit putting themselves in bad situations and ending up buying a house they shouldn't have bought. Just wait. Wait a couple years. Get your credit right. Get yourself put together on the financial side, and then buy a house. It makes so much more sense. On that same line, you got to start saving up for a down payment. 10% is awesome. 5% is really the minimum that you should put down. And most people don't just have that money. I used that $7500 example earlier. I don't have $7500 just sitting around. You probably don't either. So it's time now to start putting money aside. Put a little bit of money aside. Have it automatically withdrawn from your checking account and put into your savings account. Ask your parents if they can help out. Whatever your scenario is, having some down payment and money is going to make the purchase process way easier and way more profitable for you in the end, because you can get a better loan with a better interest rate, along with lots of other things. These two things must be right. Your credit and your down payment have to be right. Another reason it's not the right time to buy is if you're only going to be in this town for a couple of years. Investments take time. Building equity in a home takes time. And you have to have, I think, at least five years in the same place to really see value out of your purchase. Now lots of people could talk about different ways that you could find value in a short-term purchase, and yeah those are possibilities, but they're not as likely. If you're going to be in a town for less than five years, and certainly less than three years, then it's probably not the right time to buy. It's probably the best time to rent, enjoy the space you have, wait until you're in a little bit more stable situation so that you can buy a house and live there for five or 10 years, and find the equity like I talked about in the first part. So to summarize this question, 10 years ago was the perfect time to buy. Right now is the next best time to buy, if it makes sense for you. Three pieces you need to think about in figuring out whether it is the right time for you are your credit and whether it's good or not, down payment and whether you have some kind of way of getting 5-10% down on your purchase, and finally your longevity in the space that you're in. If you know you're moving to another town in two years, it just doesn't make sense to buy a house right now. All right. So it makes financial sense, your credit is right, you've got a down payment or you're saving up for that down payment and you know you're going to be in the same town for longer than a few years. All those things are lining up. So what other complications could there be, or things maybe I should think about? Well the next one is very simple. It's hidden costs associated with buying a house. So what are the hidden costs? Well, there's closing costs. The closing costs are really all about all the things that are costs as a part of buying a house. So that can be paying for the inspector who does the inspection during the process, the appraisal that the mortgage company asks you to do. It could be the insurance, it could be the property taxes. A lot of times insurance can be $1000 a year, $2000 a year, something like that. And taxes totally depend on the community and the tax make-up of the community, but it can be a huge chunk of money. So when you're in that buying process, or when you're thinking about buying, you got to say okay, what types of taxes are associated with this property and what types of insurance, because you're going to have to tack that on to your monthly. If you find out ... You want to buy a house, you go out and you say all right, what are the taxes going to be? And you say well, in this town for this size house the taxes are probably going to be $2000 a year. And the insurance, let's say the insurance is going to be $1000 a year. So we got $3000. We have to split that in 12, so that's somewhere around $280. That's going to affect your monthly mortgage payment by $280. So that's something you've got to figure out and think about. There's lots of costs associated with buying a house. Now that's not a problem if you own that house over a period of time because you'll make that money back. But if it's a short period of time, that's one of the reasons why you just have to take into account those hidden costs. Okay. So those are the hidden costs. And finally, I brought this up a little bit earlier, the upkeep expenses. You may need a new roof. That could be $7000 or $8000, or a furnace tends to be $4000 or $5000. Appliances can be a grand a piece. You know? Just mowing the lawn. I mean, maybe you go out and buy a $500 lawnmower and you mow your own lawn, which makes sense. Maybe you have someone come out, and that's $20 every two weeks or whatever. That's pretty low, but that's what I charged when I was 15, so probably double that. It's probably $40 a shot or something. Those are all upkeep expenses that you're going to have to deal with. And those are all costs that come after the fact. All these upkeep expenses, if you're not prepared for them, can smack you in the face. We don't want that, right? The whole point is to say, okay is it right time for me to buy a house? And you say, okay. Well, if I'm going to go out and look for a house, am I going to go out and look for a house that has a brand new roof, a brand new furnace, brand new appliances, so I know I don't have to deal with any of these upkeep expenses? That's one way to do it. Probably going to pay more money for the house in that scenario though. Or, you can buy an older house and know that you're going to have a whole bunch of costs associated with this stuff. And if you're smart about your finances, you're smart about the situation, then you build that into what you know it's going to cost to own a home. And it can be absolutely worth it. You just have to understand it. There's a huge difference between knowing the costs associated with owning a home and getting smacked in the face by them. When I bought my first home it was beat up, I barely had enough money to buy the house itself, and I didn't think about any of this stuff. And I just got smacked in the face by one thing, smacked in the face by another thing. And it just felt like, oh my gosh. I'm spending all this money on this house. I didn't think about this $8000 roof I was going to have to deal with. Oh my gosh, now my furnace isn't working. And then I turned around and tried to sell it, and I didn't make ... I sold it for less than I put into it by a long shot. It was simply because I didn't get it. I didn't understand. You're not going to be in that situation because you do get it and you do understand, but you got to be thinking about these types of things. So the last hidden cost is those upkeep expenses. All right. Let's get to the bonus. What's the fifth question? Is investing in that house worth it? If your finances in your life moment say yes, you still need to buy smart. Again, I did not do this well because ... You'll go out and look at houses. And if you work with a realtor, they'll take you to some different houses. They'll be in your price range. And you'll see one has all new appliances and all this kind of stuff, but the square footage and maybe the look of it and the vibe of it just are not really what you want. But it's in your financial scenario, right? It's right at the amount of money you want to spend. And then they'll take you to another one where it's the same price and you get all this additional square footage, and it has character and it's older. It's cool and you walk around and you're like, "Oh I could just fix that thing and that thing." You just get sucked into it because older houses are cool. And there's nothing wrong with an older house. Don't get me wrong. There's nothing wrong with an older house, but especially when you get into those scenarios, you've got to be super careful because you've got to realize if it has an old roof. You've got to realize if it has old appliances. You got to realize if it's a money pit and you're going to end up spending tens of thousands of dollars. You may turn that house into the most beautiful thing you've ever seen and live in it for 30 years and have a wonderful life and make lots of memories. And in the end, make lots of money off of it too. That might be okay, but you got to be careful. Is investing in that house worth it? Sometimes the houses that have the most character are also the ones that are going to sap your pocketbook the most. Doesn't mean you shouldn't buy an older house or a house with character at all. It just means you have to be smart and make sense of that purchase and not buy just on your heart ... Of course you're going to buy on your heart. It's your home. It's the place you're going to be living. But don't buy just on your heart. Buy on your finances too, and buy it based on the information from a smart realtor who's telling you what's really going on. And that inspection. Get an inspection. If the inspection just has tons of problems, that might be a reason to back off because investing in that house may not be worth it. All right. Wow. We made it. So let's review. The question of this episode was, should I buy a house? Obviously one of the most important questions we should ask before going into the process. And I asked you to consider four things when answering that question. The first, is buying a house actually a smart financial move? The second was, am I in the right financial position? Is my credit right? Do I have a down payment saved, or do I have a way to save for that down payment? The third, is my life settled for at least three to five years? Am I going to be in the same place for a long enough period of time to be able to make a profit off of the house? Do I understand the hidden costs? The closing costs, insurance, property taxes, some of the maintenance, things that you'll need to take care of as a part of owning a house? Then we threw out a bonus. Is this house right for me? As I'm looking at houses, am I balancing the idea of character and that vibe that I want to make my life happy and the feeling of my home to be awesome with the profitability of the home? Is it something I can sell again down the road for a profit? Do I have a lot of money I have to put in? Is it a money pit, or a lot of the thing taken care of already? So that was the bonus. All right. So it's time for some action steps. We want to hear from you. Are you ready to buy a house? What are the things you're hung up on? Or the things that you checked off as you listened to us talk about it through the process? Head over to Instagram and comment on our episode two post. Share your thoughts. Share your love. Share a little hate. If there was something that you totally disagree with, we can handle it and we are ready for it. Also, if you want a comprehensive online course that walks you all the way through the home buying process, we have created it for you. There are checklists and videos, and a private group just for members. You can find all of this at NewHomeBuyersGuide.net. If it isn't the best bit of home buying advice you've ever experienced, we will gladly refund your money. But really, when you see the price, even a third of the information we provide and the community that is behind that pay wall, would be 100% worth it. All right. Until the next time, happy home buying.
Hey there New Home Buyers. Jeremy Goodrich here. I am that guy that bought my first home many many years ago and had NO idea what I was getting into. I didn’t use a realtor, didn’t have an inspection, didn’t have a clue what documents I was signing and ended up, you guessed it, buying a beat up old house that I spent years fixing up only to sell it for way less than I bought it for. When it comes to home buying, I am the story of what not to do.
But that guy is not you. You’re two times smarter, three times more organized, and ten times better looking than he was. You’re going to find the right home for the right price and you’re going to have fun doing it.
That process starts right here with the New Home Buyers Guide podcast.
Learn more at https://newhomebuyersguide.net
Full Transcript:
Jeremy Goodrich: Hey there new home buyers, Jeremy Goodrich here. I am that guy. That guy that bought my first home many, many years ago and had no idea what I was getting into. I didn't use a realtor. I didn't have an inspection. I didn't have a clue what documents I was signing. And I ended up, you guessed it, buying a beat up old house that I spent years fixing, only to sell for way less than I bought it for. When it comes to home buying, I am the story of what not to do. But that guy, that guy is not you. You are two times smarter, you're three times more organized, and you're 10 times better looking than he was. You're going to find the right home for the right price, and you're going to have fun doing it. That process starts right here, with the New Home Buyers Guide Podcast. We're glad you joined us. All right, new home buyer. This is a very short intro to the show to see if the show is right for you. I all ready told you about my first home buying experience. It didn't go particularly well. At the time I was 28 years old and an elementary school teacher. I didn't have a whole lot of money, of course, but I thought owning a house was what I was supposed to do, how I could show one more step into the more grown-up world that I was trying to attain towards. But here's the thing, if you looked at that purchase and analyzed it with a financial microscope, it would be very clear that in my case, I would have been better off simply renting. I didn't win, and it wasn't a smart financial decision. Buying a house is not simply a no brainer financial step. In fact, for some of you, it may turn out that it's not the right time to buy at all. Analyzing your scenario and deciding what makes sense is actually right where we'll start. But I do believe that buying a home is one of the smartest investments you can make. And when you're ready, you should do it. In the next episode, Episode Two we'll dig into whether you're ready, and if you're not, how to get ready. Fast forward about a decade from my first home-buying experience. I left teaching after 13 years and started an insurance agency with my wife. Yes, I moved from hanging out with eight to 10-year old kids to selling home, auto and business insurance. That change may sound like a stark difference, but I knew two things. One, I was excited to be a business owner, to be completely in control of my own destiny. And two, I really wanted to continue teaching. I didn't know exactly what that meant, but I was 100% sure that I would never be a terrible slimy salesperson. My goal was to teach people about insurance and hope that my clear and honest description would be enough to earn their trust. That approach, interestingly created an immediate connection with first time home buyers. They started coming to me for insurance because of the way I explained things. But they had a ton of questions about other parts of the home buying process, and I simply didn't know the answers. I started to find them. I spoke with mortgage lenders and realtors and home inspectors and title companies. I was simply trying to answer questions for my insurance clients, but I began to realize that there really wasn't a good place to find all of these answers. So I decided to fix that. In 2015, I created the New Home Buyers Guide. It started as a couple of YouTube videos and people across the country and even across the world really responded. There were tons of questions and calls for more, so I created an online course digging deep into every step of the process. This course is now the heart of the New Home Buyers Guide. But I love podcasts, and I always have. So the next step was simple, to bring the New Home Buyers Guide over to the podcast world. The goal of all this is really simple to help change your home buying process, from exhausting to exciting. It's an evolution from the feeling of overwhelm to that sense when you know exactly what's coming at you and how to react to it. All right, that's it. I am also very excited to get this show on the road. And we'll do that in Episode Two. That episode will ask the question, is it the right time for you to buy a home? I'll meet you over there, right now.
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