Thinking About Purchasing In 2015 5 Things You Should Do

Thinking About Purchasing In 2015 5 Things You Should Do

Are you considering purchasing a home in 2015?  Here are some things you should think about doing now:

1. Start getting your taxes in order. 

If you're purchasing after April 15th, you'll need to have your 2014 taxes filed.  If you're purchasing prior to April 15th, you can use your 2012 and 2013 taxes...however if you've made more income in 2014, or were self employed in 2014, you'll need to get them filed in order to use that income.  For W-2'ed employees, watch writing off a ton of non-reimbursed employee expenses....this comes off your gross and can't be used as income lowering what you qualify for.  If you're self employed, consider having your lender look over your taxes before you file them to make sure what your filing will enable you to purchase the home you want.  The IRS release forms the 2nd or 3rd week of January.  Try to get your taxes filed before February 15th, the IRS is usually busiest between February 15th and April 15th.

2. If you're a homeowner, decide if you're planning on selling and if so what you can expect to get for your home.

There are pretty strict guidelines with lending on keeping your current home and using it as rental.  If you don't meet all the guidelines then you have to count that payment against your debt to income ratios...which is why most people usually sell their current residence.  The equity in the current residence also helps with the downpayment on the new one.  The best way to figure out your homes value is to have a market analysis done on your home by a real estate agent, however if you want a quick value you can check out our home valuation link.  Keep in mind that's just a really vague estimate not taking into account your home's condition, upgrades etc.  Selling a home, using an agent, costs between 7-9% of your homes value as a basic estimate.  That includes title fees, agent fees, buyer paid closing costs etc.  If you decide to try For Sale By Owner that could drop to between 3-6% depending on whether you're compensating an agent if they bring you a buyer.  There are some horror stories about FSBO's though.  One was a seller who listed their home for $160,000.00 and then the home appraised for $220,000....paying a realtor could have gotten them an additional $60,000 out of their sale....there are other good reasons to use a realtor, I won't get into those in this article but just be careful and make sure you're well educated if you go the FSBO route.  So you'll want to figure estimated proceeds by taking estimated sales price-estimated closing costs-liens currently on the property to get your estimated proceeds. 

3. Figure out what loan program is best for you so you'll know what kind of down payment you'll need.

There's a ton of different loan programs out there from non-traditional to FHA, VA, USDA, Conventional etc.  Downpayments can range from 0 down to well over 30% down.  If you're a homeowner you'll want to have an idea of estimated proceeds as a starting point.  Many people use their tax refunds as a down payment which is why more homes sell in the Spring than any other time of year.  Even if you go with a zero down product, you'll usually need to have earnest money, money for closing costs, and money for appraisal and inspection.  Earnest money is generally about 1% of the purchase price of the home and is refundable at closing if you're doing 0-down.  So on a $200,000 home that would be $2,000.  Sometimes with a zero down program you can negotiate a lower amout on earnest money. Closing costs depend on the loan program and can be paid by the seller in most instances.  This is something you would negotiate when you go under contract.  At the beginning of the year you'll need more in terms of closing costs than you would at the end of the year because of escrowed pre-paids.  Appraisals run anywhere from about $400 all the way up to $800 depending on the property and can be paid for as a part of seller paid closing costs.  Inspections are not mandatory but highly advised and usually run between $300 and $500. 

4. Decide who you want to work with as an agent.

If you're selling, you'll want to decide if you want to use an agent and then if you do start interviewing agents or asking for referrals to decide who you would like to work with.  Even if you decide not to sell with an can still work with an agent to purchase.  The seller, in Colorado, pays all agent fees in the transaction, so there's no reasonnot to work with someone who will help you to negotiate the best deal.  Beware of agents who want you to pay a fee as a buyer, you shouldn't have to pay anything to work with an agent as a buyer.

5. Decide who you want to work with as a lender.

There are four different types of lenders, mortgage brokers, banks/direct lenders, portfolio lenders and hard money lenders.  Mortgage Brokers do not have their own money and broker loans out to other financial sources.  They can sometimes be a good deal but often get deals declined or miss closing dates because they are a 3rd party working through a 3rd party.  Direct Lenders/Banks are usually your best rates and deals but they have stringent guidelines on products due to the fact that the loans are usually sold to servicers in the secondary market and are more heavily regulated.  Portfolio lending is usually more lenient but you take a hit on your interest rate and terms.  These are usually local banks that are lending their own money and servicing their own loans.  They can be great deals for things like construction loans or non-warrantable condos.  Hard money lenders are usually individuals lending their own money for short terms at high rates, like if you're doing a fix and flip on a home and only need the money for 3 months.  So start shopping to see what fits your situation best and then you may want to shop a couple lenders by asking for "fee sheets" or GFE's (Good Faith Estimates) so you can compare apples to apples and get the best deal. 

Sarah Rowan Headshot
Phone: 970-397-5774
Dated: December 30th 2014
Views: 309
About Sarah: Sarah was a licensed real estate agent for 10 years before transitioning into the mortgage industry ...

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