First Time Home Buying Secrets - Mortgages and Best Deals

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Transcript:

Next, apply for financing. I’m going to let Kenton talk a little bit more about what lenders are really looking for here towards the end, but who you choose as a lender is as important if not more than who you choose as a realtor. Kenton, how long does your average loan officer stay in the business?

Kenton Brown:

Less than 24 months.

Kenn Renner:

(Laughter) And that depends on if rates spike and if there’s no more refinancing going on. I used to own a mortgage company so I know what that’s all about. That’s why when we met, we saw eye to eye. He knows that I used to own a mortgage company so he knows that we see the same and we come from the same language. But what happens is that most of these realtors and lenders are in the business for less than two years. And you get a mortgage that might be 30 years. So they may be long gone before you ever pay that mortgage off. So what you want to do is find a highly reputable lender and not an interest rate quote. You don’t shop interest rates because if you shop long enough, you’ll get a rate quote that is what you want to hear. Maybe 3.99% from Ditech. Oh, that’s right, Ditech is from the west coast and they’re not in business any more. Is eLoan still in business? I dunno. What you want to do is deal with a local lender who has a vested interest in the people involved. Kenton has a vested interest because I give him a lot of business. He makes sure my clients are happy. Phyllis has a vest interest in being a great title lady because I bring her more and more business. Even the builders have a vested interest in keeping me as their real estate representative that’s keeping clients happy. What happens is you may only get one house or one loan in a lifetime and I bring them a bunch of business. So they have to keep you happy and you’ll get the best rate if you find the best lender. So don’t shop interest rates because they change daily and even hourly. I’ll call Kenton in the morning and rates are one place. The bond market crashes and rates are in another place. How can you keep up with it? I call Kenton every day because I can’t keep up with it. If you really want to find out which direction the mortgage market is moving, follow the 10-year bond market’s yields. The yields on 10-year bonds are going to be moving pretty much in line with mortgage-backed securities. So I go to Money.com and one of the lines on the front is the 10-year bond yield and I can sort of tell which direction rates are going to move based on that. It’s close, but not perfect. If you really want to act smart when you’re shopping for a loan, ask, “How’s the bond market doing?”

Your lender will be looking at your income, assets, and your liabilities. Now that’s all done electronically via a quick app. That’s just a quick app to get you what we call “pre-approval.” That really just looks at your credit, how much cash you have to be able to close, and then your income and your job. And you really need that pre-approval before you go out and look at houses. Let me repeat: Before you go and look at houses. First of all, you might qualify for a lot more than you thought and you might find that your payments are a lot lower than you thought. Or you might find out that you don’t qualify for as much as you thought and you’re going to waste your realtor’s time looking at houses that you don’t qualify for. So the first step really, once you get past the decision, the consultation with the realtor, is to apply for financing.

Search for and find the property. We’ve made the decision that we’re going to buy the house, we’ve consulted with our professionals, we’ve got everything lined up and our loan pre-approval, which is like having a suitcase full of money, and now we’re ready to go out and search for the property. You’ll tour a number of neighborhoods, and there are a lot of factors and considerations. What that means is that there are going to be compromises on this. This is a world of compromise, but it’s also a process of elimination. And you’ll find out that the process of elimination happens pretty quick. Will was talking about how he had very specific needs. He’s a big guy and he wants to work out so he wants a community that has an on-site work out facility. He wants to take advantage of the zero down that’s available, which is USDA, and he wants to make sure that he gets his $8000 free from the government. So that narrows it down to particular neighborhoods. And he wants to be in the Round Rock school district. That narrows it down even more and it makes it really easy. We have a very fine-targeted market. There’s a lot of homes out there, but once again, we go out and search for them and pick through them and we make compromises and we say no to a lot. The first time we go out looking for properties, we go out and look at 5 to 12 houses. Usually it’s less than 20 houses. Once you start getting into the different parameters of each house, you begin to measure the value of the properties and you determine which ones are really good deals and which ones aren’t. And you’ll find that the really good deals are the ones that are selling because all the other buyers are out there with their agents and they measure the properties too. So I’ll ask my clients to grade the house on a scale of one to ten. The reason for this is because after you’ve seen 12 houses in a day, you begin to mix them all up. So I ask on a scale of one to ten, how does it rank? 7? 6? 5? We don’t need to go look at the fives and the zeros any more. They’re gone. They’re off the list. But if you’ve got an eight or a nine or maybe 2 or 3 of them, we’re getting close to a 10, we’re going to go back and look at those three on a different day (unless you’ve made a decision) and look at the houses in a different light and then pick from there. Sometimes that doesn’t work out, but you have to keep working at it until you get it right.

There’s pros and cons between new and resale. With new homes, the best deals you can get are what they call spec homes. They’re speculative homes that they’re building right now or that have been sitting in inventory for a while. Those are your best deals. But you have to be very careful right now which builders you deal with. Why? Well, some of them are going out of business and some of them have gone out of business. Some of the greatest builders in town such as Newmark homes build a great product. But they’re gone. Mercedes, gone. Kimball Hill, gone. You have to be very careful, that’s why you need an expert that knows and keeps track of what’s happening. We know which builders are on the ropes, or in other words, the industry has been tough on them. We also know which builders are really strong. Keep in mind that those onsite agents are looking to make a sale in that neighborhood. They’re not going to tell you if their own builder has a better house that fits your needs better in the other subdivision down the street. But your buyer’s agent will. That’s our job; finding the best property for you.