Your First Home, Buy in Seattle
y o u r f i r s t h o m e
Congratulations! You are thinking of buying your first home in Seattle. You are about to enter a wonderful new chapter in your life that we know can be both exciting and scary. Many first-time home buyers will contemplate the decision for years before taking any action, even a first step. This brochure helps you to take that first step.
Once you purchase a home, you will soon reap the tax advantages of home ownership and the opportunity to build equity (or wealth) over time. According to the Federal Reserve, the median household wealth accumulation for a homeowner was $184,000; in comparison, the median net worth of a renter was $4,000. It’s time to start taking those steps!
Step 1
Find the right help to find the right home
You’ve probably already been using the Internet to search for homes in Seattle, financing options, and homebuying information. You will find many of those resource links included in this brochure. We also encourage you to contact a John L. Scott Residential Specialist at the very beginning of your quest and put the Sonny Kwan Group to work for you. John L. Scott Residential Specialists are Realtors® and subscribe to the Realtor® code of ethics. He or she will help you find what you are looking for in a home, in the area you want, and at a price you can afford. When you find a home that you want to make an offer on, your Real Estate Team will research the market and let you know if the price is fair. He or she can help you negotiate an offer and advocate on your behalf throughout the process.
The team at the Sonny Kwan Group can help take the mystery out of the purchase of your new home and show you the ropes. There are hundreds of little details in buying a home, and some details that are not so little—like property lines, easements, earnest money, and the time allowed for home inspections (to name a few). Don’t worry, you will be involved throughout the process and if you have any questions along the way, do not hesitate to ask Sonny Kwan or his associates.
F i n d t h e r i g h t R e a l t o r ®
You may already be working with a trusted real estate agent/broker.
If you aren’t, take the time to find the right Realtor® to meet your needs. Ask family, trusted friends and coworkers for Realtors® with whom they have worked and would recommend.
L e a r n a b o u t t h e m a r k e t
Every market in the Northwest is a little different but, in general, now is an excellent time to purchase your first home in Seattle if you find the right home at a fair price. At the time of this printing, interest rates on fixed-rate mortgages are near historic lows. If you want to know what a percentage rate can do to a monthly payment, go to johnlscott.com and follow the mortgage links to the mortgage calculator and plug in some numbers. You will be amazed. The Seattle real estate market is a much more balanced market today with buyers finding many more properties from which to choose. That wasn’t the case over the past few years. Greater selection means the chances are better you will find the right home for you with the amenities you are looking for.
W h e r e Seattle i n t h e r e a l
estate c y c l e ?
That is the big question isn’t it? We are at the beginning phase of the next real estate cycle. Some people are getting good deals out there right now because some sellers are motivated and need to sell today. However, in general we do not think we will see across-the-board dips in prices. Here is why:
• In general, Seattle and the Pacific Northwest has an extremely strong economy: unemployment is under five percent (according to the U.S. Department of Labor) and we are projected to add more than two million residents in the next 12 years.
• Seattle and the Pacific Northwest has fewer subprime loans in danger of foreclosure so, unlike what is happening in some states, we have many fewer “distress sales” or foreclosures.
• The historic low mortgage rates are turning the market around. If you are renting, you are not alone. There are thousands of people just like you who want to buy a home and are just waiting to see what the Seattle market is going to do. As these people enter the market, supply will go down and the market will heat up, especially in the more affordable price ranges (under the median/midpoint).
Step 2
Get Qualified for a Loan and Find Out How Much Home You Can Afford
This is another one of those “first steps” you need to take. It costs little or nothing to determine if you can buy a home right now and the price range in which you should be looking. Most first-time home buyers are surprised at what they learn and wish they had started the process a long time ago. Your John L. Scott Residential Specialist will help you find a reliable loan officer.
D o y o u h a v e e n o u g h m o n e y
t o b u y a h o m e ?
If you have saved some money for a down payment and you anticipate living in that home or condominium for three to five years, the answer is almost always yes. It is time for you to start building your own wealth instead of contributing to somebody else’s with your rent payments. In most cases, the interest portion of your mortgage payment and your property tax payments are tax deductible. There are also valuable financial assistance programs for first-time home buyers.
F i n a n c i a l a s s i s t a n c e p r o g r a m s
There are many federal programs and dollars available to assist first-time home buyers. Get on the computer and start with the HUD site www.hud.gov. Basically, Down Payment Assistance Providers (DAP) are government agencies that are developed to help you—the first-time home buyer. Otherwise call Sonny Kwan.
The most common and available DAP is an FHA (Federal Housing Authority) loan. FHA loans are becoming more popular and recent changes in FHA loan limits have expanded the number of people and properties that qualify. In some cases, you can get an FHA loan for as little as 3.5% down.
Many first-time home buyers don’t realize you can also use up to $10,000 from your IRA to purchase your first home. In many cases, you can use gifts or loans from family members as long as you disclose this information to the lender. The federal government knows that first-time home buyers are good for the local and national economy.
Lenders look at three things when you apply for a mortgage: your debt-to-income ratio, your down payment, and your credit score. If you pay your bills on time, do not carry a lot of debt, and have a down payment needed for the loan program, you will be fine. Getting prequalified by your lender is an important first step in actually starting to look for your first home, and you will have real negotiating power when you do find the right home. If you don’t quite qualify, your mortgage expert should be able to suggest a plan with steps that will lead to qualification over a period of months.
The Sonny Kwan Group will help you to find a qualified mortgage consultant who can discuss your loan options with you.
Well, this is a giant step isn’t it? By now, you know how much you should spend on a home. The Sonny Kwan Group at John L. Scott will help you to find the best home that is within your budget and meets your needs. Using your Residential Specialist’s market knowledge and negotiating skills, together you will craft a written offer that details the amount of the offer and the conditions of the sale. If the seller “counters” your offer, your Residential Specialist may need to negotiate until you both agree to the terms of the sale. Your John L. Scott Residential Specialist can advocate on your behalf at your direction during these negotiations. You will be very much a part of all the decisions, and your questions will be welcomed.
Step 4
What to Do Next – A Checklist
There is still a lot of work to do after your offer is accepted. Sonny Kwan guide you through the process. Among the next steps:
G e t a h o m e i n s p e c t i o n
Many offers are made contingent on a home inspection. You and your Residential Specialist should have agreed on a reasonable length of time for the inspection and include it into the offer.
An inspection will tell you about the condition of the home and can help you avoid buying a home that needs major repairs, or help you negotiate with the seller to have the repairs made before you buy the home.
S h o p f o r h o m e o w n e r ’ s i n s u r a n c e
Lenders require homeowner’s insurance to cover the collateral for the loan (the home). Consult with Sonny Kwan if you have questions.
C o m p l e t e t h e p a p e r w o r k n e c e s s a r y t o c l o s e y o u r l o a n
Your loan officer can advise you as to exactly what is needed.
D o n ’ t f o r g e t t o s i g n u p
f o r u t i l i t i e s !
You want to be sure that the lights come on and water flows from the faucets when you move into your new home. Go to the Our Services tab on johnlscott.com, then click on Home Services.
You can connect essential home services online for no additional fee as well as compare service providers for telephones and high-speed internet connections.
C o m p l e t e t h e t r a n s a c t i o n
You are now ready to complete the transaction. This is also called “settlement” or “closing.”
Closing is where you need to read and understand the documents you are signing. Ask if you don’t understand any part of the document. There are no dumb questions when it comes to a purchase of this size.
Resources
The following resources are more than links to information, they are sources for down payment assistance and low interest loans for many household incomes.
F e d e r a l H o u s i n g
A d m i n i s t r a t i o n ( F H A )
FHA operates within HUD and has the primary responsibility for administering the government home loan insurance program. This program allows a first time home buyer, who might otherwise not qualify for a home loan, to obtain one because the risk is removed from the lender from FHA who insures the loan for the lender. The most common loan offered by FHA only requires a 3.5 percent down payment and that down payment can be a gift from a relative, non-profit organization or government agency.
U S D e p a r t m e n t o f H o u s i n g
a n d U r b a n D e v e l o p m e n t
( H U D )
This is where you will find valuable leads and information about all federal programs that assist first time home buyers, including FHA, Fannie Mae or Freddie Mac.
A m e r i c a n D r e a m D o w n
P a y m e n t I n i t i a t i v e ( A D D I )
www.hud.gov/local/wa/community/home/
Many local agencies that assist with firsttime home buyers.
U S D e p a r t m e n t o f
A g r i c u l t u r e R u r a l
D e v e l o p m e n t l o a n
p r o g r a m s
www.rurdev.usda.gov/wa/housing.htm
These programs are for rural development and you may qualify.
H a b i t a t f o r H u m a n i t y
Not all real estate practitioners are Realtors®. The term Realtor® is a registered trademark that identifies a real estate professional who is a member of the National Association of Realtors® and subscribes to its strict Code of Ethics. Here are nine reasons why it pays to work with a Realtor®.
1. You’ll have an expert to guide you through the process. Buying or selling a home usually requires disclosure forms, inspection reports, mortgage documents, insurance policies, deeds, and multi-page settlement statements. A knowledgeable expert like Sonny Kwan will help you prepare the best deal, and avoid delays or costly mistakes.
2. Get objective information and opinions. Realtors® can provide local community information on utilities, zoning, schools, and more. They’ll also be able to provide objective information about each property. A professional will be able to help you answer these two important questions: Will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?
3. Find the best property out there. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your Realtor® to find all available properties.
4. Benefit from their negotiating experience. There are many negotiating factors, including but not limited to price, financing, terms, date of possession, and inclusion or exclusion of repairs, furnishings, or equipment. In addition, the purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Sonny can advise you as to which investigations and inspections are recommended or required.
5. Property marketing power. Real estate doesn’t sell due to advertising alone. In fact, a large share of real estate sales comes as the result of a practitioner’s contacts through previous clients, referrals, friends, and family.
When a property is marketed with the help of a Realtor®, you do not have to allow strangers into your home. Your Realtor® will generally prescreen and accompany qualified prospects through your property.
6. Real estate has its own language. If you don’t know a CMA from a PUD, you can understand why it’s important to work with a professional who is immersed in the industry and knows the real estate language.
7. Realtors® have done it before. Most people buy and sell only a few homes in a lifetime, usually with quite a few years in between each purchase. And even if you’ve done it before, laws and regulations change. Realtors®, on the other hand, handle hundreds of real estate transactions over the course of their career. Having an expert on your side is critical.
8. Ethical treatment. Every member of the National Association of Realtors® makes a commitment to adhere to a strict Code of Ethics, which is based on professionalism and protection of the public. As a customer of a Realtor®, you can expect honest and ethical treatment in all transaction-related matters. It is mandatory for Realtors® to take the Code of Ethics orientation and they are also required to complete a refresher course every four years.
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