8 Mistakes that Could Cost You $1,000s When Buying and Financing a Home

“How You Buy a Home will Determine How Profitable You will be when you Sell it!"

Since buying a home is one of the biggest investments that most people make in their lifetime, making certain mistakes can cost a home buyer thousands of dollars during the process of purchasing a home. These mistakes, although made when the homeowner purchased the home, can have a huge impact on how much the homeowner will net from the sale of the home when it comes time to sell.

Decisions like, the location of the home both phisically and geographically, the size of the home, its features, the type of financing, the terms of the financing, the price paid, etc. Taking the right steps with these Greenville SC real estate decisions will almost always guarantee that you will walk away from the closing table with hefty proceeds as a reward for your investment. Taking the wrong steps can literally mean tens of thousands of dollars less in your pocket. For some, the loss could results in foreclosure.

Even experiences homeowners make these costly miskates as well. Sometimes it could lead to them bring thousands of dollars to the closing, and sometimes to foreclosure. This is why it is important to not buy a home based on an emotional high, but based on a plan, and carefully calculated steps. Afterall, borrowing $100,000, $200,000 or more to buy a home is a lot of money. At Producer Realty, our expert Realtors will use their knowledge, skills, and know-how  to guide you, represent your best interest, and work hard to save you money.

Here are eight costly mistakes that many home buyers make when buying a home. Understand these mistakes and use the strategies provided to position yourself for success when buying Greenville SC real estate. Feel free to share them with your friends and loved ones whom you do not want making these expensive mistakes.

Mistake #1: Not Understanding What You NEED In Your Next Home.

Sometimes a home buyer can confuse what they NEED in a home with what they WANT in a home, but there is a difference between what you WANT in a home and what You NEED in a home. Your needs in a home are usually basic things like, needing a four bedroom home because you have three children or needing a three car garage because you have three cars, or needing home with acreage because you have some horses.

I will help you figure out how to clarify you wants in the next section, but here are some questions you should answer to determine your needs before you start looking for homes for sale.

1. How many bedrooms do I need? If you need a home office or any guest rooms, remember to include those as well.

2. How many bathrooms do I need? You can usually determine this based on how many children you have.

3. What is my price range? Understand you much house you should be looking at. I will share with you the best way to determine your price range in the financing section of this report.

4. What size of home do I need? Be realistic. Figure out minimum square feet you need.

5. What area, neighborhood, or location do I want my home?

6. Which school district or schools do I need?

7. What layout  and style of home do I want? Examples of these are: one-level home, a home with open floor plan, etc.

Mistake #2: Not Understanding What You WANT In Your Next Home.

This is the source of most disagreements between a husband and a wife when shopping for a home. If you want to avoid costing yourself thousands of dollars and heartache, sit down and figure out what you are looking for, and why those things are important to you. Couples should sit down and do this together so that they both understand what they both want in a home.

When figuring out your wants, take a good look at your current home and write down the things you like about your current home and the features you do not like about your home. If there is something you don't like about your current home, you probably won't like it in your new home. So take this step seriously.

Once you have identified your likes and dislikes in your current home, take out a sheet of paper and draw a vertical line in the middle of it. On the top of one side write features( these are those items that you have identified as your likes), on the other side write down the benefits of those items. Feel free to rate these items based on how important they are to you or to your spouse. Remember to be realistic, don't expect to get the features of a mansion for the price os a mobile home. Rating your features will help you easily identify the features that you can live without if your budget does not allow it.

Mistake #3: Not Understanding How Much Home You Can Afford.

This is probably the biggest mistake most home buyers make when they are looking for a home. Just because you have good income does not mean that you can afford to buy a particular home. Lenders usually look at your debt-to-income ratio to determine how much house you can afford. So if you have credit card payments, car payment, motocycle or boat payment, they will all be taken into consideration when qualifying you for a mortgage. They will also only loan you up to a certain percentage of your total household income.

Each mortgage lender has different guidelines when it comes to the debt-to-income ratio or what percentage of your income to base your payment on. This is why choosing the wrong lender can cost you tens of thousands of dollars over the life of your loan. So be very carefull when choosing a mortgage lender.

I recommend talking to a lender first to see how much home you can afford before you start looking looking at homes.

Mistake #4: Not Choosing the Right Financing.

Your ability to afford a home will be related to a number of items. They are:

1. The PRICE of the home.

2. Your DOWN PAYMENT on your home, and thus the amount financed.

3. The INTEREST RATE and POINTS of your loan - the amount a bank charges you for the money.

4. The TERM of your loan: 10 year, 15 year, 30 year.

5. The overall TYPE of your loan. Most common is fixed vs. variable rates, but there are hundreds of loan packages from which to choose.

And just in case you were looking for a specific “rule of thumb,” for financing your home, you should know that…

There Are NO General Rules Of Thumb About Financing Your Home.

Each case is different, and your personal financial circumstances will have an impact on how much home you can afford.

However, you MUST understand the relationship and impact interest rates, term of loan, points, and type of loan can have on your overall financial picture.

Let’s start with the “amount financed” first. Many people often pay cash or put 20% or more down as equity. The reasons they do this are:

“The bank required us to…”

“We’ve just always put down this amount…”

“We wanted a lower payment.”

Problem is, these reasons could cost you thousands of dollars.

The answer for how much you can put down on your home is different for most people. However, I have learned over time that…

Many People Put Down More Cash On Their Home Than They Need To,

And Could Have Received A Better Return On Investment Had

They Invested The Money Instead Of Putting It Into Their Home

Here’s a simple and fast way to “ballpark” the actual annual return on investment you get from the money you put down on your home:

1. Take a look at the homes in your area. How much have they appreciated each year on average, over the past five years? For example, you might find that values have increased an average of 1.5% a year.

2. Now, take the total cost of your home, multiply that value times 1.5% (the average expected annual appreciation of your home). For example, a $150,000 home increasing value at 1.5% for the first year. Thus, the home will be worth $2,250 more a year from now.

3. Now, divide the amount of increase in your home ($2,250 in the example) by the total amount of Down Payment you put into the home. For example, if you put down 20% (or $30,000), then $2,250/$30,000 = 7.5%.

Now 7.5% sounds like a fair investment. But the question you need to ask is this: Can you make more than 7.5% elsewhere?

And did you notice something else here? Had you put down just $15,000, your return on your Down Payment would be 15%!

The moral of the story: Putting more money into your home may make your banker happy, because it lowers the risk of getting his money out if you default.

And it may make your overall payment a little lower…

But it may be a wiser decision to put less into your home, IF you can locate an alternate investment that will pay greater interest on your hard-earned equity.

Now, let’s shift gears a little and talk about the impact Term and Interest rate will have on your overall financial picture…

How INTEREST RATE and TERM can make or COST you THOUSANDS!

Mortgage lenders toss around interest rate numbers as if they didn’t matter.

They DO!

Estimate the maximum amount of payment you can afford, and adjust TERM and INTEREST RATE of your loan to minimize the amount of total interest you’ll pay.

But then your banker cuts in and says, “but the interest you pay is Tax Deductible…” And you should know this: If you’re in the 28% tax bracket, for every dollar in interest you pay, you only save 28 cents. Don’t go spending a dollar to save 28 cents if you can help it!

Here’s How To Instantly Know How Many Points You Should Pay…

Another consideration in the formula is the amount of POINTS your lender will charge you to initiate your loan. And what you’ll notice is there’s a GAME being played with you.

And if you don’t know the rules of the game, YOU LOSE!

Sitting across from a banker while he throws obscure numbers at you like you’re a human dartboard can be pretty overwhelming. And frequently you’ll hear terms like “7.5% with 1.5 points,” or “7.25 with 1 point.”

All-the-while you’re thinking to yourself, “I have no idea what the financial impact of this guy’s blabbering means to me.” And quite frankly, your banker knows…

The Less You Know About What You’re Paying

The Better For HIM!

So hopefully this little “ballpark” example will help you quickly determine the best points-to-interest rate for you. How many points should you pay, and what formula is best for you? Here’s a little help…

If a banker is giving you several options of interest rates and points, you need to sort out the financial consequences so you don’t lose money. Say, for example, you were considering two loans. Both are for $150,000, and both are 30-year amortization.

DEAL #1: One loan he offers you is 7.5% with 0 points for origination…

DEAL #2: Another loan he offers you is 7%, but he wants two points to originate the loan.

What’s the ONE factor that will determine which loan is better?

How LONG You Keep The Loan!

The first thing you need to think about is how long you’re going to live in that home. The average homeowner spends about 5.5 years in their home before selling for whatever reason.

If you stay in your home for five years, you will NOT recoup the points you paid up front with the savings in a lower interest rate. Recoup time is about six years and two months to breakeven.

So your best bet would be to select loan #1.

If, however, you planned to keep your home beyond six years and two months, you’d be better off with loan #2 (i.e. the overall savings in interest rate will exceed the amount you paid in points - not considering the time value of money).

Are you starting to see how important it is to understand your home’s financing? How important it is to shop for the best rates, terms, and points?

Good! Now, let’s move on to another important secret for buying your home…

Tip #5: How You Evaluate Homes Will Save You Thousands of Dollars And Heartaches!

One of the biggest mistakes people make when buying homes is they rely solely on “local neighborhood market analysis information” to determine the right price to pay for a home.

Before you buy or refinance your home, INSIST on seeing a “total market overview” of exactly what is going on in the ENTIRE market. Then narrow your analysis to local market information.

Why do I say this? Because you want to know two things: 1) What is the ENTIRE market doing with values? Are they going up? And by how much? 2) What is the specific area doing with market values? How does it compare to what the total market is doing? Are the growth rates the same, lower, or higher than the overall market?

Understanding these parameters will save you thousands of dollars when you make an offer on a home. I frequently perform both of these analyses for my buyers, in an easy to understand format, so you know EXACTLY what you’re buying!

OK, so let’s say you’re now pre-qualified with financing, and you’ve also found a number of homes to preview.

The Way You Inspect A Home For Sale Can Save You

Enormous Amounts Of Money And Time

It’s now time to find not only a home that fits your needs, but a home that will be a good investment. What are some of the things you should look for?

Well, the first thing I always look for is what I call “siting.” Siting involves evaluating three areas: Location, Lot siting, and Home siting.

The general location of the home you’re considering could determine how happy you’ll be living there, and what kind of an investment you’re buying. Here’s an important tip that will almost always make you money…

Buy The Midrange Home In The Best Neighborhood You Can Afford

Why do I say this? Because the better the neighborhood, the better the appreciation for you over time. And if you buy the midrange home, the home will “generally” appreciate faster and greater than a higher priced home in the same area.

Plus, you will most certainly spend money updating or decorating your new home, and you don’t want to get “upside down” on your home’s value after spending money for improvements. So remember…

NEVER Buy The Top Of The Market!

Now the second area you need to consider is Lot siting. Lot siting has to do with WHERE your particular lot is located in the subdivision you’re considering. Ask your agent for a plat map of the entire subdivision. Now take a look at where your home’s lot is located in the subdivision.

Is it near a common area? Does it capture better views than other lots in the area? Is it more private, or shaped better than other lots? Is it near a loud street?

Lot siting in a neighborhood will give you a basis for knowing how well the home will appreciate vs. other homes in the neighborhood (assuming the home is reasonable).

Finally, you want to look at the Home siting. How well did the builder take advantage of all the amenities the LOT offers a home? Are the views great? How’s the curb appeal? Is there a balance between front and back yards? Do you see any drainage problems because of where the home has been located on the lot?

Think through these things as you visit each home.

Now, as you approach your home, there are other things you want to keep in mind…

1. What is your initial reaction of the home as you approach it from the street? This is called “curb appeal,” and it has a great impact on the value of the home. Is the home sited right on the lot? Notice the areas around the home? Are they well maintained? Is the landscaping groomed?

2. Take a look at the structure of the home? As you go through the home, windows and doors should be square, and they should close correctly. Look around windows and doors for cracks. Check corners of rooms for sloping or tile/wood cracks. These may reveal foundation or water problems.

3. Now think about the floor plan of the home. Is it functional? Do the common areas flow the way you want them to? Are the halls narrow and long, or are they open? How far will you have to carry the groceries from the garage? Are the rooms the right size and height for your desires? If there have been any additions, were they done professionally? Do they fit with the flow and style of the home?

4. Now, check the roof and ceilings. Is the roof the type you prefer? Is it in good condition? When was the last time the home was roofed?

5. Now make a basic check of the plumbing, mechanical, and electrical systems. Do drains and toilets work correctly? Is the property connected to sewer, or will you have to deal with a septic system? Is the electrical wiring up to code? And are the mechanical systems working properly? Make sure you get these systems inspected by a licensed contractor or inspector BEFORE you close any deals.

Tip #6:Save Thousands of Dollars Writing Your Offer And Negotiating Your Deal

Years ago a real estate expert told me that the party who is less motivated almost always gets the better deal. The ONE single element that will determine how well you negotiate your offer is…

How MOTIVATED Is The Seller,

And How MOTIVATED Are YOU?

If the home has been on the market for over a year, perhaps it’s because the seller hasn’t been motivated enough to sell. Or perhaps the home hasn’t sold and he/she is very motivated.

And if you’ve been looking for four months, your kids are late for starting school this year because you haven’t found a home yet, and you now have found the right home, YOU may be very motivated to buy!

Nevertheless, here’s a tip you MUST bring to any real estate transaction…

Move Heaven And Earth To AVOID Emotional Attachment

To The Home You’re Considering

If you’re all giddy about the home. If you can’t hold back your emotions when around the home, then you’re going to get clobbered when negotiating the purchase.

That’s just ONE reason why you need a REALTOR® representing you during any transaction. The middle person alone will help save you money.

So let’s say you have a REALTOR® representing you (make sure it’s a BUYER’S agent, or you could lose a bundle!), and you’re ready to write an offer.

What’s the single best piece of information you can have?

It’s the comparable sales and market data for the entire market and the area. Ask your REALTOR® to print out both for you to use. Now, here’s what you want to do…

You want to take a look at FOUR important “market telltale signs:”

1. Take a look at the currently active (for sale) listings in the area. Was the home you’re considering priced within reason to other homes? If so, you know you’re at a reasonable starting point.

2. Now, take a look at what the average selling price is compared to the listing price. You may notice that most homes are selling for about 3% or 4% less than their offer price. If that’s the case, you know the original offers were LESS than this amount. Take this into consideration when making your offer. And leave plenty of room for negotiating.

3. Now, make sure you visit several of the other listings in the area. How does your home compare to the other homes? Is the home you’re considering in similar shape? Is it better sited? Is it bigger, smaller, better style, better landscaping, etc.? These factors will help you determine how much you should pay for your home vs. how much others paid for similar homes in the neighborhood.

4. Now, take a look at the average market times for homes in the area. If they’re long (evaluated on a market by market basis), the market may be soft, and you might have more negotiating room with your offer.

You’re now ready to make your offer. At this point, I highly recommend you work closely with a BUYER’S AGENT to structure your offer. They will talk about strategies such as: 1) should you offer a high price and ask the owner to throw in all kinds of extras, or 2) offer a low price and skim your way into the neighborhood?

The correct answer depends on your personal situation. And you need to work closely with your REALTOR® to strategize your offer.

Tip #7: Be Financially Prepared - Ahead Of Time!

Many people go about the home finding process backwards. They go through the entire process of searching, evaluating, and writing an offer on their home, WITHOUT being financially prepared.

And it usually costs them money. Big money!

Completing a few things up front before you go searching will save you a lot of money, time, and hassles. What are those things?

Here are three of them:

First, find a MOTIVATED lender.

No, don’t just go down to your local bank where you’ll likely to be slowly tortured by bureaucracy and paperwork. Your banker may be a good friend for your checking, savings and perhaps an auto loan. But most bankers are not motivated to work hard to earn your business (although some are changing their ways).

That’s because one of the quotas bankers have to live by is: “How many BAD loans did you originate?”

They don’t get measured by their production…

They don’t get measured by their service…

They only get measured by the MISTAKES THEY AVOID!

Now, I know if your local banker sees this, he’s going to cringe a bit, and start reciting all the ad campaign jargon most banks are spouting these days. But the truth is…

There Is Absolutely NO Incentive For A Traditional

Banker To Serve Your Best Interests

What you want to do is find a mortgage lender who is MOTIVATED to take your loan. One who represents many different products, and can offer you many options for making your loan most affordable.

Here’s an important tip: Ask your REALTOR® to refer one or two lenders to you. Why? Because agents have power over lenders because they send them lots of clients. It’s not just YOU alone talking to them.

If they don’t give you first class service, the agent who sent you will refer (ALL) their clients to someone else. So they’re motivated to SERVE YOU. And the minute you have a problem with your loan, you can turn to your agent…who has much more influence and leverage over the lender than you alone.

After all, your agent and lender both want to see the transaction close. There’s power in numbers and influence. Use it to your advantage.

Now, the second thing you want to do is GET PRE-QUALIFIED with a lender. Better yet, try to get PRE-APPROVED.

Why?

Because the first question any home seller will ask when an offer is presented is “Is your buyer approved for a mortgage?”

And rightfully so! The seller doesn’t want the deal to fall through because you couldn’t get financing. When they accept your offer, their home comes OFF the active market. If you fall through, it costs them time and money.

Plus, there’s one more reason to get pre-qualified or approved…

You Will Have Much More Power To Negotiate

Price And Terms When You’re Financially Qualified!

When you have money behind you, the seller knows you’re serious. And a serious buyer ALWAYS has more influence to negotiate. So do yourself a favor, GET PRE-QUALIFIED or PRE-APPROVED!

Now, the third way to become financially prepared is to have deposit funds available immediately. One way to do this is to write a check in the amount of 3% of the highest price you’ve been qualified for financing.

Make the check out to the Brokers Trust Account, or the Title Agency you will use. The broker or title company are trustworthy fiduciaries by law, and will hold the check un-cashed until you make an offer that’s accepted.

Now I know what you’re saying… “It’ll be a frosty day in Tahiti before I write a check before we’ve even located a home.” I understand.

But you may want to consider this…

Jim and Susan were buyers from outside their immediate area. Because of their distance, they could only get together with their agent with two days notice. And the market was pretty good.

Three homes came on the market, and were sold before they could get together to visit them. Twice, they lost other deals because of bidding wars.

Finally, out of frustration, they placed an un-cashed deposit with their broker.

When they finally found the right home, they decided to write an offer…

And because they placed an un-cashed check on deposit, their agent could enter negotiations with verbal authority to make the offer. And because the agent could demonstrate that he had earnest funds, the buyers were able to sign a faxed copy of the offer, and their deal was secured.

And it’s a good thing! The very next day, three more offers came in on the home they just put into escrow!

Tip #8: Use A BUYER’S REPRESENTATIVE!

There’s a huge difference between a Buyer’s Representative and other agents. First and foremost, if you don’t have a specific agreement to be represented by your agent…

Chances Are, YOUR Agent Represents The SELLER!

Yes, it’s true. And the question you have to ask yourself is… “Is this person going to represent MY interests?”

Think about this: If you had to go to court, would you use the same attorney the opposing side was using?

I think you know the answer! But did you know that by creating a “buyer’s representation” with your agent, you not only get someone representing you, but…

  •  A buyer’s representative doesn’t cost you a nickel more than any other agent. Even though they represent you, they’re still paid out of the standard commission…
  • Buyer representation is easy to enter into, and will support ONLY your interests. This includes finding your home, helping with financing, and negotiating the best possible deal for YOU...
  • A buyer’s representative will keep everything about you and your deal CONFIDENTIAL!

OK, so you know the difference between any agent and creating a “buyer’s representation.” But did you know what a good agent can do for you?

  • A good agent knows the area you want to buy in because he/she is out constantly looking at homes.
  • A good agent can spot trouble for you. He or she will be experienced at looking at homes and will see things you might not see.
  • A good agent will greatly simplify the buying process.
  • A good agent will give you motivated, reliable financing sources and options.
  • A good agent will refer you to proven inspectors, title and escrow officers, and other service providers you’ll need.

Most importantly, you need to know that…

 

There Are “Real Estate Agents”…

And Then There Are Committed Professionals.

Which One Do YOU Want Representing Your Interests?

I hope the information above has given you helpful advice finding, buying, and financing your next home.

And at this point, you’re probably pretty clear that, in order to find the right home and save money, you need someone competent and professional to represent YOUR interests.

Over the past few years, I have recognized this fact, which is why I wrote this special report, and structured my practice around giving the most competent service possible.

There’s a difference between agents who simply sell real estate, and those who COMMIT to whatever it takes to serve clients beyond their expectations. I am a full time REALTOR®, and a top producer with Exit Upstate Realty. Real estate is not only my job, it is my passion. Nothing can substitute the feeling that I get when I see the joy in my clients’ when they close on their home. I have helped several first time homeowners, relocation owners, up-graders, down-graders, and investors, achieve their real estate goals.

I’m Not Saying These Things To Impress You,

But Impress UPON You The Difference Between A REALTOR®

And A Competent, Dedicated Professional

Buying and selling real estate can be tricky business. And selecting the wrong REALTOR® can cost you a lot of money, headaches, and wasted time. That’s why I designed a specific program designed for buyers like you. I call it my…

Exclusive “Preferred Buyer Program”

My Preferred Buyer’s Program is absolutely FREE to you. Here’s what you’ll get when you enroll…

    A Free Subscription to my “Home Locator” program. I’ll create a custom search model based on your personal home needs. Then enter you into our Home Search system where our computers will sift through the market each day to find hidden bargains and new listings before anyone else. Each day, I’ll forward to you homes on the market that meet your personal desires.

    I’ll evaluate the value of your chosen Greenville area home so you buy the most home for your dollar…the very same way I described earlier.

    Negotiate the best possible deal for you so you avoid costly traps and pitfalls.

    Help you locate the most affordable financing in the market and for your situation.

    Coordinate all inspections, appraisals, escrow and title services, with the very best firms, so you can feel confident and focus on other important tasks during your move.

    Because of my experience, I’ll make the entire process HASSLE FREE for you.

    Everything you do with me stays COMPLETELY CONFIDENTIAL. Agents won’t be discussing your personal or confidential affairs because they represent only the seller!

But Don’t Wait!

By Not Acting Now, You Could Open Yourself To

Losing Thousands of Dollars

Contact us Today at 864-438-5050