Buyer’s Agency: What is it?
In Texas, Real Estate brokers and their salespersons are required to disclose the type of working relationship they have with the buyers in a real estate transaction. There are several types of relationships that are available to you. You should understand these at the time a broker provides specific assistance to you in buying real estate. Buyer’s Agent and Seller’s Agent relationships are commonly referred to as “agency” relationships and carry with them legal duties and responsibilities for the broker as well as for the buyer and seller.
Benefits of Utilizing the Resources of a Buyer’s Agent
With the abundance of real estate information that has been made available to the public via the Internet, some buyers think they should go through the process alone. I believe this is a mistake and can often end up costing the buyer in terms of both time and money. Here are a few of the key advantages I offer when working with a buyer:
Keep in Mind…
You can ALWAYS opt-out of a Representation Agreement if you are NOT happy with your Agent’s service!
But remember, entering into this Agreement has countless advantages and NO disadvantages. By signing the agreement, you are simply agreeing to “hire” a personal representative who, by law, must represent your best interests to the best of their ability. All of this personal service is available at absolutely NO COST TO YOU!
When it comes time to determine how much you can afford, you will most likely need to take into consideration Down Payment Requirements and Closing Costs.
How Much Can You Afford?
Down Payment Requirements
Most loans today require a down payment of between 3.5% and 5.0% depending on the type and terms of the loan. One common myth is that you have to have a minimum 20% down payment in order to buy a home. While this is optimal since it eliminates any mortgage insurance, it is not required. It is often thought that bigger is better when it comes to down payments. In many cases, this may be true. However, the numbers differ from case to case. A bigger down payment means smaller monthly payments and lower interest expense for as long as you remain with a mortgage. This can be an important factor for many people. But if you can put your available funds to work for you so that they can earn more than the interest rate on your loan, you could be dollars ahead with a smaller down payment. Also, a smaller down payment may allow you to keep your extra cash liquid and available for things, such as furniture, for your new home. This is especially important for first time home buyers.
Don’t forget to think ahead carefully. In addition to the down payment on your dream home, you will be required to pay fees for loan processing and other closing costs. These fees must be paid in full in cash at the time of the final settlement, unless you are able to include these in your financing, which is very common. Typically, total closing costs will range between 3-4% of your mortgage loan.
How Much Will My Mortgage Payments Be?
Qualifying for the Mortgage
Most lenders require that your monthly payment range between 30-40% of your gross monthly income. Your mortgage payment to the lender includes four items, or the PITI. P=Principal, I=Interest, T=Taxes (property), I=Insurance. Remember, when you buy a home all interest is tax deductible, so you could qualify for a major tax advantage that will effectively increase your take-home pay. Your total monthly PITI and all debts (from installments to revolving charge accounts) should range between 40-45% of your gross monthly income. This is a general rule of thumb, but other key factors specifically determine your ability for a home loan. These factors are:
History of employment, stability of income, potential for future earning, education, vocational training and background, and any secondary income such as bonuses, commissions, child support, etc.
- Credit Report
History of debt repayment, total outstanding debt and total available credit. If you have concerns about your credit report, consider contacting one of the major credit bureaus for a copy of your file.
Cash on hand, other liquid assets such as savings, checking, CDs, stocks, etc.
The home you are buying must be appraised to determine that it has adequate value and is marketable to ensure it will secure the loan.
The Closing Timeline
Whether you are buying or selling, it is important to remember that most closings will happen within 30 days from the moment we get an accepted contract. The timeline below specifies the factors involved in a Real Estate Transaction, from the moment you meet your REALTOR®, to the closing day when you get the keys to your new home.
- Find a REALTOR®
Go over and sign the Buyer’s Representation Agreement and the Information About Brokerage Services Form.
- Get Pre-Approved with Lender
It is recommended to get pre-approved before you start searching for homes, not only to make sure you will be able to get a loan but also, to have a better idea about the price range you can afford.
- Get started with your Home Search
Start searching for your Dream Home, and make sure you have a wish list to help you narrow down your choices.
We were fortunate enough to meet Mike through a mutual friend, right as we had begun our search for the right house in Austin. From our initial phone conversations until closing, Mike made buying a home easy. He was always prepared and provided us a wealth of background knowledge, that gave us the guidance we needed to efficiently navigate the challenges of buying a home. Mike listened to everything we had to say, which kept us from wasting time that we didn’t have. And, most importantly, Mike’s friendly nature just made it all so comfortable.
When it comes time to sell or buy another house, Mike will be the first call we make!