33 : Navigating Your Homebuying Journey : Insider Tips for Securing Your Dream Home

SaCola (00:00:00) - Well, welcome back to another special episode of Working on It. This is part two of a conversation that I had way back. Back in the time. Now I'm just kidding. It was a couple of years ago. This is part two of a conversation I had with Varney Jallah and Varney Jallahwas a recent guest in season one of the work that lived on it, podcast, episode 21 of season one, where he was talking about establishing business credit. And last week you heard about on the tips of how to demystify the myths about building your personal credit and things that you need to do to take action to boost your credit. Well, this week we're going to be talking about. Three main areas. One is the four major types of financing that are commonly used in the United States when it comes to purchasing and financing a home. That means requiring a home loan, and the second part is going to be down payment assistance. What that could potentially look like, and it varies depending on where you live or where you plan on living in the United States.

SaCola (00:01:09) - And then the third part is the homebuying process. So I'm going to be covering three areas in this particular recording. We wanted to play this for you. And so that way you can get all the goodies. Make sure you take some notes. This is a very important episode, guys. You stay tuned. You don't want to miss this. And I'll check back in with you after the recording. Welcome to Work it, Live it, Own it!  on a show that explores how to upgrade your lifestyle through life lessons, real estate and entrepreneurship. Here's your hostess. SaCola Lehr. All right, so now I guess we're going to transition over to what Vani was talking about and build on that. And we're talking about, um, down payment assistance for your home. So what do you do now that your credit score is rocking? Right. You're ready to go out. You're ready to buy your home. And what are the steps that you need to take a look at? Um, I'm going to give you the broad strokes because there's so many things and so many facets that can go into purchasing a home.

SaCola (00:02:15) - So I just want to give you guys the broad strokes today. There are four major types of loans out there, and I'm just going to glance over them. I'm not a mortgage lender. Don't claim to know it. Um, hopefully eventually I'll be able to have a mortgage lender on to have that conversation with people so they know and be forewarned and empowered on what decisions to make for themselves when purchasing a home. But the four primary loans are FHA, conventional VA, and USDA. And so just to give you the broad strokes about that, um, FHA is backed by the Federal Housing Administration and also managed by HUD, which is the Housing and Urban Development. And HUD's dream is for everyone, everyone to be a homeowner. That's their vision for everyone. And so they're willing to back you and help support you. So that's why your down payment for FHA is just 3.5%, because they're going to come in and back the other 16.5%. Now, what happens with a VA, uh, FHA loan is that you're going to have what you call a mortgage insurance premium or MIP.

SaCola (00:03:24) - That's something that's a fee that you're going to have to pay when you go to the settlement table. And it's also attached to your loan for the life of the loan. It does not go away. And what some people need to understand about the MIP is it doesn't go to your principal. It's not going to help pay down your loan is just the fee, because the federal government has come in and back to your loan. But if you don't have enough money to put down on a home, then FHA is a good route. But the other thing moving into conventional loans is that with a good credit score, um, unless you have cash and right now in this market, cash is king. But if you don't have the cash or a lot of money to put down on home, you can, with a good credit score, get a conventional loan anywhere, putting down 3 to 5%. It just depends on how great your credit history is and how great your credit score is. The better your score in history, the lower you have to put down.

SaCola (00:04:22) - Now, the thing that you need to know about, um, and let me back up with FHA to let me back up for a minute, because with FHA, you have to be careful about the homes that you choose, because they require inspection and they require that the sellers fix the problems that come up in an inspection. So let me back up on FHA real quick because that's important for people to know. So if you think you're going in and saying, hey, I'm going to get a fixer upper, well, I got cousins who are pretty handy and they can fix this stuff. Just know once that inspection report goes out, your lender is going to take a look at that, and they're going to want the seller to fix all the issues. Here's the thing. Especially in North Carolina. And Barney, I think you're in another state. You're in Virginia, right? When in North Carolina, our state is as is state. So you may see in those comments like on Zillow and the MLS sold as is.

SaCola (00:05:19) - Well guess what? All real property in North Carolina is sold as is, and the seller has the right to refuse not to make any repairs. That's their right because it is as is state. So if you're going to use FHA, you got to be very careful about the type of homes that you select. Try and get some that don't have a lot of issues or problems in them. Because you can't do a fixer upper, you can't do a buy fixer flip type situation. Okay, too many defects, red flags. Now going back to conventional. Yes you can. There are great programs out there. Now your interest rate may be a little bit higher than the FHA will come on in this particular market right now, you can still get a great interest rate with a conventional loan. Now, conventional loans are backed by primary lenders. You may have heard of Fannie Mae and Freddie Mac. And you may say, well, hey, aren't those federal entities as well? But yes, but you can also purchase stock options with a lot of the private entities.

SaCola (00:06:20) - That's what makes conventional a little bit different. And so with interest rates right now, you just have to decide, okay, which one do I want to do with conventional. You can be flexible with your terms. So FHA 30 years conventional you can do with ten 1520, 2530. It's just your choice of how you want to structure your loan and what you can afford. And then in the long run, if you want to purchase an investment property. To, not as a way to go. If you want to buy a home and say, you know what, I want to rent it out later. I want another home. But I want to keep this house and I want to rent it out or use it for an Airbnb, which a lot of people are doing right now. Conventional is the way to go. So you have to think about what's going to work best for you, for your family, and make the best choice. The other two are USDA and VA. So VA you have to be a member of the armed forces.

SaCola (00:07:15) - You could be a retiree. You could be a widow or widower of someone who served in the armed forces. And you can still qualify for the VA loan. VA loan. That house has to be your primary residence. It can be a rental. Can't be an Airbnb. Okay. Now, in other states, it all depends on what the cap is for VA loan USDA loans. They are also financed 100%. But these are homes more so in the rural area. So if you're looking to say, hey, I want a property, I want more land. Some people are just like, I want more space, I want more land. Then you might want to take a look at USDA as being an option. But all of these have criteria and things that you have to meet. So doing a little bit more research and having a great team working with you to purchase your home is awesome. You need a great realtor. You need a great mortgage lender. In the state of North Carolina. We use real estate attorneys as our escrow agents and to get our loans closed.

SaCola (00:08:17) - So again, it's all about your strategy now moving into other state and local down payment assistance programs. There are programs out there, some you just have to do your research and just type in down payment assistance programs. And these vary on geographical focus. It could be by state, it could be by city, it could even be by neighborhood. And these assistant programs can be given or set up as grants. And if you're a college student, you're about to go to college. You've heard that word grants before because that means that's free money. You don't have to pay that back. It's free money. But then you also need to take a look at okay, is are they offering me a 0% forgivable interest loan? What that means is, for example, I work in my area is more of Mebane, North Carolina, to Greensboro, North Carolina. That's where I like to work with my clients in Greensboro. They have a down payment assistance program, but it is a five year, zero interest loan.

SaCola (00:09:23) - What that means is you live in that home that is your primary residence for five years. If you live there for five years, then you don't have to pay them anything back. Okay. So there are some, um, restrictions as far as the purchase price and even income restrictions. So you have to see what you qualify for. But again, it varies from geographic area. Okay. Now how many of you type in the chat? How many of you ever thought about crowd crowd funding a down payment? Have you ever heard of that? Varney no funding a down payment. You never heard of that? Well, believe it or not, there are some sites out there that will help you crowdfund a down payment for your home. Now, one side that I did run across was and if you want more information about this particular site, you can always message me and ask me about the site. But one side I ran across. They do require that you get pre-qualified for a loan. This is pretty much ideal for engaged couples or newlyweds.

SaCola (00:10:30) - They want to buy a house, but they just spent money on a wedding, honeymoon, whatever. And they need assistance. And let's just say if people want to give you money, if someone says, hey, I'm going to do a crowdfund for because we're trying to buy a home, I'm like, I don't know if that money is really going to go to your home. How do I know the money I'm giving you is really going to go to that? Well, they will set up a page for you and to show that, hey, they are actually pre-qualified to buy a home, but they just need your assistance and you can, um, have people to donate to you. But the step back to that is, is that they can you can incur credit card processing fees. So you may not get the full amount. And then you have the potential inability to your your shopping for lenders. Like Varney said, at least shop in interview and ask questions to at least three mortgage lenders. That will narrow down your choice of what lenders you get to choose.

SaCola (00:11:29) - So that's one drawback. Another, um, option as far as down payment assistance can be, is if you have a wonderful family member who is just so graciously wanting to give you money to help you on your way to get your. Home. Here's the thing. Okay. If you if you came to me and worked with me as a realtor and you said, hey, I got someone who wants to give me money and help me out, okay, great. First thing we're going to do is have a conversation with the mortgage lender. Because some mortgage lenders is not just about writing a letter saying, hey, they're going to give me some money. No, the mortgage lender, some mortgage lenders are probably going to send what they call a gift letter form. And that person who's donating the money will have to fill that out. Then some mortgage lenders may ask, okay, I need to see the person who's donating the money, the bank statements, and you're like, wait, I see already, you've already.

SaCola (00:12:28) - Your face was like, oh, wait a minute, I'm not about to give up my bank statements. But here's why they do that. So say, for example, someone who's donating to you $1,000. Okay, that's fine, but they just want to look at the bank statement to see, okay, do they just get this $1,000 yesterday or they already financially sound. So that way they won't be in a bond and a hardship to give that thousand dollars. That's why they're doing it. Then they're really not trying to get all in your business. They just want to make sure, hey, when we get to the settlement table, when it's time to pay up that money, are you going to go back out and say, oh, we don't have that money, okay. And don't and I, I advise, I don't advise against this, but if you do do this and someone is willing to loan you money, just keep in mind that is a loan. Okay. And that will add to your debt income ratio because you have to pay that money back.

SaCola (00:13:25) - That's just like any other bill. And so the mortgage lender is going to look at that okay. That's an additional expense that you didn't have before. So be careful about that. Another last step that I want to talk to you about is using an IRA Roth. Or for one case, some people do this. Some people pull money out to buy and purchase a home. What I recommend for you to do if you decide to take that approach, talk to a retirement specialist and your accountant. Check and find out what fees and penalties there are for withdrawing large amounts of money out of those accounts. And so that's the down payment assistance part. So I've given you several different ways, and you probably never heard of some of those ways.

Varney (00:14:11) - I'm I'm definitely learning a lot. Um, based on what you're telling me. So one one quick thing, um, something that I actually tell my clients as well. We're just that little piece just on my debt to income ratio. Guys, do do me a huge favor.

Varney (00:14:25) - If your goal is to purchase a home this year and you also want to purchase a car this year, get the house first before you get the house before you get the vehicle. And I heard horror stories where, uh, uh, you know, clients would get to the closing table. Husband goes out, purchase a Lexus for the wife the day before closing. And guess what? Lenders will check your credit score at the beginning, middle and at the end. And I heard some horror stories where clients, um, loans fell through last minute because they went out to purchase a vehicle, um, purchase a home before you get the vehicle. Yeah. For the home, you would definitely get approved for the vehicle.

SaCola (00:15:10) - Yes. And and and I'm glad you brought that up. Do not buy a car, van, truck, motorcycle, boat. Whatever. Don't do it. You wait till you get the keys in hand and the deed has been recorded to live it up if you want to. Okay.

SaCola (00:15:24) - Just wait. So I'm glad you brought that up. Now that you have your credit ready, um, you have figured out what strategy or route that you may want to take. Now it's the steps to buying your home. And so I'm just going to again give you the broad strokes to buying a home. So first and foremost, start your research early. Plan out for most first time home buyers. Minimum. It may be three months if you're just trying to save up a little bit and you've already got some money set aside. It can be three months to a year, sometimes maybe even a little longer. So set a plan for yourself. Um, map out, um, how you're going to save money, not just for your down payment. I know we talked about down payment, but it's not about your down, just your down payment. It's about the closing costs. The lenders got to get paid. The real estate attorney or the title companies got to get paid for the work that they did to get this long done.

SaCola (00:16:20) - Um, to get your deed recorded for title insurance, that means that what title you're receiving is clear, and nobody else has claimed to that title. Um, we like to say title insurance is the best assurance that you have. So that way, if you ever want to sell that property again, you can go off and sell that property free and clear with a peace of mind. So also take in account moving expenses, uh, things of that nature or things that may occur after you purchase the home. I don't want anyone and I tell any of my clients, I don't want you to be house rich and cash poor after this transaction. There's no point if you can't even buy groceries after you move into the home. So plan that out. Next thing you need to determine how much house you can afford. You don't really know that until you actually sit down with a mortgage lender and get a pre-approval. There's a difference between getting pre-qualified and being pre-approved in this market. Right now. We want you pre-approved.

SaCola (00:17:20) - I've even had listing agents that I talk to when I'm presenting an offer to say, hey, are your clients pre-approved because we're not taking anybody that's still trying to go through the process. Are they pre-approved? Yes, they are pre-approved. So we'll talk about that a little later. But I will tell you what you need in the pre-approval process. But you also want to find a good realtor. You want to find a great real estate agent who's got a great team that they're working with to help make your dream happen, and then get pre-approved for that loan. They may have some mortgage lenders that they may want to talk to based on your needs, and they can assess, okay. Here are some mortgage lenders that I recommend. Have a conversation with them and find out which mortgage lender you want to work with. So if you're trying to get pre-approved for a loan and I'm going to give you two branches personal side, if you're working a 9 to 5 or the other side is if you're a business owner.

SaCola (00:18:16) - Okay. So for personal side you need your photo ID like your driver's license. Um, the last two years of your w-2s, your last two years of your tax returns, um, you're going to need your most recent, probably 30 day pay stub. So if you get paid every week, bi weekly or monthly, they're going to want to take a look at your pay stubs for that and your two months recent bank statements. They want to take a look at that because one, if you're saying I can put down 6.5%, they want to see if you got 6.5% worth of money in the bank if you're a business owner. It's going to look a little different. Yes. They're going to want your photo ID, they're going to want two years of your personal and business tax returns. And that's for some people who do still work on under five and other people who run a business. They're going to want to take a look at both of those as well. They want to take a look at your personal business bank statements, a year to date profit and loss statements.

SaCola (00:19:15) - Okay, now here comes the fun part. This is where everybody sees on HGTV. This is where your house hunting. You're trying to find your home. But here's the thing working with a good realtor, um, like, even for me as a real estate agent, I had a wonderful my husband and I had a wonderful real estate team of a husband and wife. They sat down and did a buyer consultation with us, and that was to again prepare us, um, get us familiar with terms that we may have never heard before. I've watched HGTV. I could say I was an expert and but it's nothing like it until you're actually going through the process. So again, you want to get yourself with a good realtor who knows what you're looking for, knows the criteria, knows your must haves not all you want, but your absolute must haves. Because you may not get everything you realistically want or that you dreamt of, um, when it comes to a home. So. Be careful. Once you start working with a realtor, just be careful or even before then, just be careful about the websites, all the websites that you're looking at for homes, because a realtor can set up and has access to an MLS and other ways of finding homes that meet your criteria.

SaCola (00:20:33) - And a lot of times, believe it or not, things that you see on Zillow, Realtor.com and other Syndications that are out there, they're getting their feed from the multiple listing service that the realtor already pays and used for, so a house could be pending. Um, and due diligence. Um, just got sold just one other contract, and you don't even know that yet. So just be careful about what you're looking out there on the main websites. So after you find a home, guess what you do? You put in an offer. Now the offer is based on the terms and price that you decide. As a realtor, I'm here to discuss with you. I'm here to, uh, brainstorm with you, give you advice, but I will never, ever make the final decision for you because that's what you do. So once you submit your offer and your offer is, um, this is where you get into negotiations and contracts in this market right now, there's not a lot of wiggle room for negotiation, because if somebody looks at an offer, there could be several offers on the table.

SaCola (00:21:33) - Right now. The seller says, I'm not even gonna mess with these. I'm just going to go with this one. But it usually when it's in a more balanced market or it's a buyer's market, there's wiggle room for negotiations. Once that offer has been accepted. Signatures, initials, everything's been communicated. Then guess what? You're under contract. This is the part where you need to, um, this is where the seller has agreed to your the common price and terms, and the house is basically being held for you until closing. So you have a time period right now to do inspections to get an appraisal done. Basically, you are the Sherlock Holmes, Miss Marple, whatever detective story you like to actually go through this home, fine tooth comb, make sure that this is a good sound investment for you, okay? Because sometimes purchasing a home is the largest purchase that people make in their lifetime. So that due diligence period again, you're going to order appraisal. Most time in the state of North Carolina, the mortgage lender orders the appraisal for you, conducts, um, you you will call an inspector, see when it can come out.

SaCola (00:22:44) - You're going to review your terms with your lender. Uh, even. Right. Great. Before going to the settlement table, you're going to review the terms from the beginning and at the end, and then you're going to start finalizing your loan, reviewing documents on your end, and discuss any findings in the inspection that includes more negotiations. If there are some repairs that you would like to make. Again, just remember North Carolina is as is state. And then settlement. So North Carolina is different from other states. Settlement means that you go to the real estate attorney's office. You sign all the documents, they discuss all these terms with you and saying you're signing off, agreeing to the terms of this loan. You sign your paperwork. Does that mean you get your keys right away? No, it does not. Yes. You see Barney shaking his head, please don't believe all the hype that you see on TV just because you go in and sign the papers. Does that mean you get the keys right away? When do you get your keys? You get your keys when the title company, depending on what state you live in or the real estate attorney records your deed, that means hello to the public.

SaCola (00:23:55) - We are now the proud owners of this home. You'll get a phone call. Your real estate agent will get a phone call saying the deed has been recorded. And now guess what? You get keys. You get the keys in your hand. And that's pretty much the home buying process. And every transaction is different. But again, I am a firm believer in having a stress less transaction. There are things that you can prevent. You are in charge of your finances. You're in charge of your credit. You're in charge of how much of a home you can afford. You are in charge of what you're willing to put down as far as expenses. Okay, a real estate agent, they're in charge of negotiation, discussing and giving you sound advice and helping all the moving pieces to move smoothly. And sometimes things are beyond your control. The real estate agents control. But guess what? If you've done everything that you're supposed to do and you've got strong financial footing, guess what? Some of those things will iron themselves out.

SaCola (00:25:00) - So that's how I work with my clients. I tell them we're going to have a stress less transaction, doesn't mean we're not going to have a little bump or a little adrenaline rush, but hey, that's okay.

Varney (00:25:10) - Awesome. And then my next question for you, so call it, um, with the market that we're in now, right. It's real competitive. Now, what what type of strategy will you recommend as a as an agent once someone goes into a multiple bid, what strategy will you use as a seasoned agent to make sure that your that your client has the best opportunity to be able to win that bid?

SaCola (00:25:37) - Okay, so first thing I would do, especially in this type of market, I have mortgage lenders that I work with that doesn't matter if it's FHA or conventional. They have backing another financial backer that will help you present a cash offer. So that gives you a stronger footing, um, shorter due diligence period. And helping them get to the closing table a lot faster has been some of the strategies that have been out there, but it just depends on the seller because some people can come in with a VA loan and people have a soft spot for that and may choose the, the veteran or the the active duty person over anybody else.

SaCola (00:26:21) - It just depends. But if you're in a multiple situation like this, having a shorter closing time. Um, presenting your offer as cash. Um, and there's, like I said, there are ways I work with mortgage lenders that do that. And so that's why I want to have mortgage lenders on to talk about some of the ways that they can present a stronger footing financially, but also to making sure that you have cash. I'll be honest with you, the highest that I heard in this state and it's it's gotten insane as far as due diligence money. Um, due diligence money. If you're submitting an offer and you say, hey, I want to give this amount of money for due diligence and this amount of money for earnest money deposit, here's the thing that you need to know the difference of due diligence. Money means that you're giving money straight to the seller. You're writing a check straight to the seller. It goes in the seller's pocket. Will you ever get that money back? No.

SaCola (00:27:18) - So you better make sure that that's the house that you want. And I kid you not, the highest I heard in this state someone did $100,000 in due diligence.

Varney (00:27:29) - Oh, man. So quick, quick quick quick quick question, quick question. What's the difference between due diligence money and money?

SaCola (00:27:37) - Okay. So the other part of earnest money again due diligence is money going straight into the seller's pocket that says, okay, we're giving you money to take this house, um, off of the active and say, we're in due diligence, period, and you're holding this home for us until we can reach the closing. Right? That's just a nice gesture of money. I'm just giving to the seller. Earnest money deposit means that that money the seller will get. But they will only get it once we get to the settlement table and everything is closed. So it's just another way of showing good faith. Sometimes they call that good faith money. But guess what? Due diligence and earnest money fee. You may say I'm just giving money away.

SaCola (00:28:24) - Actually you're not because you're going to get a credit back at the settlement table. Due diligence and earnest money, you're going to get a credit back. So that means that your mortgage balance will be a little bit lower, because you've already paid toward the investment of your home. So don't think you're not going to see a return on your investment. You will. But some people who got money, I don't know, they just doing throwing due diligence money out there. Do. You just have to understand. And I've seen some people get hurt where they've put down $20,000 in due diligence and then backed out of a deal. Unfortunately, in your contract, if you read your contract and went over it real well and you had a great realtor, they would have informed you that you're not going to get that money back. Nope. Especially if you back out of the deal as a buyer, you're not going to get that money back. You won't see it again. But if the deal goes through, guess what? That's $20,000 credit.

SaCola (00:29:24) - Hey, you want to unlock the secrets to real estate ownership in North America with me as your trusted advisor? And you say, SaCola, what are you talking about? Unlock the secrets to home ownership. Well, listen, after talking with my friends over the past few years since becoming a real estate broker, a lot of them and even myself have felt the same way. We don't know what it was like to buy a home until we were actually in the process. And even one of my friends said, you know, buying a home is like being a member of a secret society. You don't know what it's like until you're actually in the process. Will the mystery ends today because I want you to click down below in the show notes to a link that is going to give you your purchasing pathway to buying a home. That's right. The link down below is a Bitly link. It's a short link Bitly for slash purchasing pathway. And it is going to instantly give you your free copy of what the process will look like in the United States.

SaCola (00:30:29) - And listen, if you are not moving to the beautiful state of North Carolina or have any plans of living, buying or selling a home in North Carolina where I am, not to worry because I am connected with excellent real estate brokers throughout North America and they are on the same level as me guys. They vibe the same way. There are about transparency, honesty, strong communication and negotiation skills. So don't let the idea of buying or owning a home remain a dream. Make it a reality. And whether you're ready right now or you're still exploring the possibilities, planning ahead right now as far as purchasing a home is one of the most important first steps that you could possibly take. And if you want to stay in contact with me, go ahead and sign up for that, because then what I will do is I will send you monthly items of value that is going to help you to work at living on it in your everyday lives, not just in real estate, but in your everyday life. So again, that link is Bitly forward slash purchasing pathway.

SaCola (00:31:38) - Again, let's work a little bit on it together. Let's take your real estate dream and turn it into a reality. Well guys, I hope you enjoyed that episode as much as I enjoyed recording it with Vani a few years ago. Tell me. Leave me a message or voice memo at www.workitliveitownit.com and let me know. What were some of the main takeaway points that you got today, and what things you plan on implementing right away to help you purchase your first home? Stay tuned because we got some more episodes, but we're going to take a little twist and turn. We're going to delve into more of the financing aspect of things that you should not do when you are getting a home financed or going under contract. I like to call it the Ten Commandments of what you should not do when you are applying for a mortgage loan or a home loan. So stay tuned for that episode, guys. All right, until next week. Take care.