1. Make sure you are pre-approved – This is the first and most important step in your home search. There is no substitute for sitting down and talking to a loan officer.When you work with a professional they can help you determine what your limits are and also what type of loan works best for you. Want down payment assistance or to take advantage of popular fix-up funds? Your lender can help! Today’s sellers will not consider offers that are not accompanied by a pre-approval letter. Most professional Realtors typically will not work with buyers who are “just looking”.Getting pre-approval shows not only that you can afford to buy the home but that you are serious. Once you know your terms it will also help you to narrow down your search and save time.
2. Buy what you can afford – Home ownership comes with responsibilities. Make sure that you don’t get in over your head. Make sure that you allow yourself room to save a little money each month. A standard calculation for your shopping range should be 2.5 x’s your annual salary. If it’s your first time and you are renting in Minnesota, take the amount of rent you currently pay and add increments of $50 until you reach an amount that you can comfortably afford on a monthly basis. Take that number to your loan officer and have them “back you into a loan amount” (meaning they will take your preferred monthly payment and use that to calculate a purchase price).
3. Use a professional - There is no substitute for experience when it comes to buying a home in Minnesota. Making sure that you find the right home and get a fair price is just part of the reason to use a Realtor. If you are buying a short-sale or foreclosure it’s a necessity that you have representation. Most banks won’t entertain offers from sellers who are unrepresented for liability reasons. Contracts contain fine print and clauses that can cause you to loose your earnest money and your ability to walk away from a deal. It pays to have an experienced professional to guide you through a smooth transaction, and to be there to help in case issues arise. Plus, in this Market the majority of a buyers agent’s commission is covered by the seller!
4. Out of pocket costs – Buying a home in Minnesota is not without upfront costs. One of the most important is a home inspection. Priced between $250-$500 an home inspection is your “physical” of the house. It’s your chance to uncover any potential problems and costly hidden defects. It’s the best money a buyer will ever spend. Your lender will also perform an inspection and may issue work order that need to be completed before you can close on the house.Buyers can negotiate with sellers on how to cover these costs, but typically most buyers end up paying something. Escrows are another area that buyer may have to set aside money for. Typically you have to escrow for insurance and taxes but, you may also have to escrow for repairs. A home inspection will always be the buyers responsibility but, you can work closely with your Realtor and Mortgage officer the negotiate work orders and escrows.
5. Truth in Sale of housing or Point of Sale inspection - Many of the major cities in Minnesota have instituted truth in sale of housing or Point of sale programs. The idea is the city pre inspect the homes and issues a report for any items that need to be repaired/replaced or are deemed hazardous. Sellers then have the option to repair the items and get a certificate of approval from the city, or have the buyers assume the repairs. If buyers assume repairs most likely you will have to escrow that amount required for the repairs with your lender before you can close. This is outside of your mortgage so you will have to come up with cash or find a way to finance the repairs. The city typically wants repairs done in 90 days and will reinspect properties. Failure to comply could result in fines. Again, this is where having a Realtor benefits home buyers.
6. What to ask for - In today’s market it’s typical to ask for a buyer to pay for all or a portion of the sellers closing costs. Also, its typical that a buyers agents commission is covered by the seller (sellers agent gets 5-6% then splits that w/ the buyers agent) In addition you can ask sellers to contribute to any work orders or repairs needed on the home. Also, make sure the check on any current or pending property assessments and negotiate those too! home buyers can also ask for home warranties, a portion of there upfront costs to be reimbursed (inspection etc) and for allocations for improvements to the home(new carpet, roof etc). If you want appliances, draperies or even furniture make sure that you ask for it as part of the purchase agreement and be specific! Don’t just say the refrigerator in the kitchen, make sure you describe the unit so it doesn’t get switched out before you close!
7. Ways to back out of a deal - If you uncover a homes dirty little secrets or even simply change your mind there are several ways that you can back out of a purchase agreement. The main way is through the inspection period. As long as you include an inspection addendum with your offer, you can back out for any reason during that period. you can also walk away if you loose your ability to be financed ( loss of job, life event etc.) as long as you have an addendum in place. Additionally you can work with your Realtor to write up terms in the agreement that allow you to withdraw your offer without penalty for reasons specific to your situation. Make sure you read all documents carefully. If the sellers have addendum’s (especially common in foreclosures) they make trump those in your original purchase agreement and prohibit you from walking away. At the very least if you have to move on, make sure that you are able to get your earnest money back.
Tags: buyers, home buyers, using a Realtor
