Category: Buyers

Happy Clients Realty Group - Ali Palacios > Buyers

7 Budgeting Tips To Help You Buy Your First Home in 2018

Posted on by Ali Palacios - Broker

So you’ve decided to purchase your first home in 2018. Congratulations! Purchasing a home is a huge decision, and it can be one of the most exciting and rewarding experiences of your life.

But purchasing a home requires capital, and if your savings account is looking a little trim as we wrap up 2016, it means that you will have to do some budgeting in the upcoming year to make your dream of being a homeowner a reality.

Here are 7 budgeting tips to help you buy your first home in 2018:

1. Track Everything You Spend

You will not be able to make any major changes to your budget if you don’t have a firm understanding of how your money is being spent. Tracking everything you spend for a month will show you exactly how much you’re spending, where you’re spending it, how much of your budget is going towards necessities and how much of your budget is going towards luxuries.

You can keep track of all of your expenses in a spreadsheet, but a better strategy is to use a spending tracker like Mint or Prosper Daily (formerly BillGuard). These apps link to all of your accounts and will track and categorize your spending, making it easy to visualize where your money is going.

2. Identify Areas To Cut Back

Once you know where your money is going, it’s time to identify the areas where you can cut back and save additional funds to put towards your down payment. Every household will be different, but when you’re saving for a house, anything that’s not a necessity (like rent or medical insurance) should be considered an area where you can cut back.

Things like eating out, daily Starbucks and an expensive gym membership are great, but they can quickly eat into your budget. Cutting back on extra spending is a great way to build your savings and get you into your new home faster.

3. Create A Budget

Creating a budget – and sticking to it – is one of the best things you can do for your finances as you’re gearing up to buy your first home. There’s nothing more frustrating than having a savings goal and consistently falling short each month because of thoughtless spending. Having a firm budget (and holding everyone in your household accountable to it) helps you stay on track towards your savings goal.

Create a budget that includes all of your set expenses (like rent), the amount of money you will put into your savings account each month and allowances for categories like food, entertainment and gas. Then, stick to the budget no matter what.

Having a set amount for how much you can spend on things will make you think twice before pulling out your wallet.

4. Get Your Score Up

One of the most important factors in the home buying process is your credit score. Your credit score (and the credit score of your spouse, partner or co-buyer) will directly affect the interest rates on your mortgage, and a good credit score can save you thousands of dollars a month.

If you can, work to bring up your credit score as much as possible before you apply for your mortgage. Pay down any outstanding credit card debt, check your credit report for inconsistencies and always pay your bills on time.

5. Practice Paying Your Mortgage

When you create your budget, you should have an idea of how much you can afford to spend on your mortgage payment when you buy a home. But you shouldn’t wait to buy a home to start making that payment, particularly if it’s higher than what you’re currently paying in rent.

Practicing your mortgage payment will give you real life experience of what it will be like to make that payment each month. Take the difference between your current rent payment and your projected mortgage payment and immediately put it into savings at the beginning of the month.

You might find that you overshot how much you can afford and your projected mortgage payment puts you under too much financial strain. Or you might find that you actually have more wiggle room in your budget than you anticipated and can afford a higher mortgage. Either way, that’s information you want to know before you lock in a 15 or 30 year payment.

6. Pay For Everything In Cash

It’s easy to lose track of how much money you’re spending when you put everything on a debit or credit card. With just a quick swipe, you have everything you need. But paying for things in cash can make the purchase feel more real and can help you get a better handle on your spending.

At the beginning of the week, take out all of your spending money in cash. Then, make a commitment to only use the cash in your wallet to cover your expenses. If you run out of cash, that’s it.

Seeing your cash dwindle as the week goes on will help you visualize how much money you have left for the week and can help curb needless spending.

7. Reward Yourself

There’s no way around it – saving money is tough. It’s important that you reward yourself for your successes and for moving towards your savings goals.

Set milestones for your savings goals (like saving $1000 or paying off an outstanding credit card balance), and treat yourself when you hit that goal. The reward will give incentive to keep going when things get challenging.

One trap you’ll want to avoid is rewarding yourself with something large, extravagant and expensive. Rewarding yourself for saving money by spending money isn’t a recipe for success! Your reward should be something low cost (or free) that still feels like an indulgence, like a picnic day at the park with your family.

With these tips, you’ll be well on your way to signing those closing papers, getting your keys and making 2018 the year you purchased your first home.

Are you financially ready to buy a home? Your Cash

Posted on by Ali Palacios - Broker

Are you financially ready to buy a home? Your cash

There are several expenses incurred when buying a home. These are expenses that must be paid before, at closing and after. It’s important that you have these funds ready and available once you start the process.

Some of these funds may be gifted but check with your lender. Some lender will ask for a letter stating that the funds are a gift and not a loan.

Before you glance at the numbers below and disqualify yourself, please note that there are down payment assistance programs available that can help with a large portion of these funds. Ask me more about these programs.

Below you will find the closing costs for a home purchased for $150,000.00 and using an FHA loan.* This is just an estimate. Exact figures will vary based on your closing date, lender and title company.

  • Home Price – $150,000
  • Down Payment – $5,250
  • Interest Rate – 3.750%
  • PITI (principal, interest, taxes and insurance) – $1,238



Prepaid costs: Prepaid items are always required at loan closing, whereas escrow accounts are only required in certain cases. Even if you close your loan right before the month’s end, you owe your lender at least a few day’s worth of mortgage interest. This is because your first mortgage payment isn’t due immediately after you close. It is generally due on the first day of the second month following your close. You owe prepaid interest through the end of the month in which you close. Additionally, you generally have to prepay the first year’s premium for hazard insurance and mortgage insurance if your lender requires it.

Escrow: Escrow accounts are generally required by the lender if you put less than 20 percent down on your home, or refinance with less than 20 percent equity. An escrow account ensures the lender that property taxes, mortgage insurance and homeowners insurance will be paid. Requirements for escrow reserves serve as a cushion and vary by lender, according to the Department of Housing and Urban Development. The amount a lender collects also depends on when the closing takes place. Most lender will make the equivalent of 3 months of taxes and insurance

Earnest Money Deposits: This is a cash deposit attached to you purchase offer. The amounts of this deposit varies but expect to pay at least 1% if you are financing the balance and maybe as high as 10% if you are paying cash. Although earnest funds are not required they are expected. If your offer is accepted and you proceed with the purchase, this deposit is applied towards the purchase of your property.

Home Inspections: Every buyer should have their home inspected. This is usually done within 10 days of the executed contract. The cost will vary based on the inspection completed. The most common inspections are a general inspection that may run approximately $450 and pest inspections that may cost approximately $150.

In some cases you might have to inspect the foundation, a water well, a septic tank, etc. and these all have a separate cost.

Option Fee: This is a fee that is paid to the seller for the ability to have your inspection period. This fee will allow you to inspect the home within a given amount of time and back out of the agreement if you do not like the results. The fee varies but typically runs $100-300 for a 10-day period. Money well spent if it allows you to back out of the contract as a result of a bad inspection.

These funds can be created to the purchase of your home if you proceed with the contract; if you decide to back out, your forfeit the funds.

Appraisal: If you are financing your home purchase, the bank will want to appraise your home. The purpose of an appraisal is to make sure the home you are purchasing is worth the amount you agreed to pay. The bank will not want to finance 100K for a home that is valued at 80K.

Appraisals typically cost approximately $400. Sometimes this balance is paid in advance and sometimes it is added to the closing costs and paid upon closing.

Down payment: For most people the minimum down payment will be 3.5%. This only applies to FHA loans.  There are some exceptions for low income down payment assistance programs and VA loans require no down payment.

For a conventional loan a minimum of 5% is acceptable for borrowers with excellent credit but that said, anything under 20% will require the borrower to pay private mortgage insurance. This additional, lender’s insurance policy will just add to your overall monthly payment. It’s always best to pay at least 20%.

Mortgage origination fee and title insurance: Loan origination fees will vary from lender to lender but typically it can run from 1-3%. This is typically paid at closing. The owner’s title insurance is a negotiable expense and may be paid by the seller. Your real estate agent can help you with that negotiation. The cost will vary based on the cost of the property.

It’s important to review the good faith estimates that your lender provides. The good faith estimate is an estimate of your closing costs.

Other possible closing cost: Loan policy and endorsements, record warranty deed, record deed of trust, courier fee, escrow fee, tax service fee, one year homeowner’s insurance policy, 2-3 month hazard insurance escrow, tax reserve, credit report, lender document preparation, flood certification, mortgage insurance premiums, misc. loan fees, survey, homeowners’ association dues, guaranty fee. It will be important to review the good faith estimate for these fees.

Moving Costs: Moving costs will depend on how far you will be moving. If you do it yourself and you are moving locally it may cost you approximately $1000 for truck rentals, gas, moving supplies etc. If you hire movers and again move locally, it may cost $2,500-$6,000 for the average 2000-3000sf home. Long distance moves will cost much more.

Don’t ignore this expense. Price out the move before closing so you can be prepared for the cost.

Other Home Purchases: If you are moving from an apartment to a single family home, you will need to buy a few items after closing: lawn mower, weed eater, window treatments, furniture, etc. Normal maintenance items such as air conditioning filters, light bulbs, season lawn items etc.

Once you are a homeowner you will find that there are countless things that you can do to your home and most of them will involve cash. Some of these items can be improvements and some can be needed maintenance. Make sure to always have cash reserves to cover these maintenance. Maintaining your home, is maintaining your investment.

If you have any questions or if you would like assistance in buying, selling or renting give me a call. I’m happy to help.

Why Do Real Estate Agents Ask If You’re Pre-approved?

Posted on by Ali Palacios - Broker

Have you ever walked into an open house, or called a real estate agent about a listing, and within minutes, they’re asking you if you are “pre-approved” for a mortgage?

If you haven’t, then you have never walked into an open house or called an agent. Or at least enough of them…

Just wait. It’ll happen.

And you’re going to feel like it’s pretty pushy for them to ask that.

It’s like a joke.

It makes you feel like telling real estate agents this knock-knock joke…

You: Knock-knock.

Real estate agent: Who’s there?

You: Nunya.

Real Estate Agent: Nunya who!?

You: Nunya business if I’m pre-approved or not! Just show me the house, and I’ll get pre-approved if I even like the house. I can definitely get approved for a mortgage. Probably way more than this stupid house anyway. So, stop asking if I’m pre-approved.

Try it…maybe the agent will laugh! Or, maybe not. Depends…

But it’s no joking matter.

It depends on the agent. Agents have different personalities. They all come across different ways. They all handle how they meet, greet, and chat with consumers in different ways. There’s no one way to “be”, as a real estate agent.

But every single real estate agent should be asking you if you’re pre-approved. But many do not. Because they feel like it is a bit pushy and forward. Because he or she worries about offending you. But they should ask…

…because it’s entirely relevant for them to know.

…because it’s entirely important for you to be pre-approved.

It might come across as a pushy, or invasive question. Maybe that is because of how an agent asks the question. Or when the agent asks the question. Or, simply because you don’t know that it’s a question that should be asked.

But it is not a joking matter.

And you should expect the question, be prepared to say that you are pre-approved, and…you should actually want the agent to ask you that question.

It’s not like a first date.

If you were going on a first date with someone, and one of the first things the person asked about was how much money you make, and can you afford the date, you’d feel like that was pushy and weird.

Rightfully so. You don’t go in for a kiss the minute you meet each other, let alone ask for a hand in marriage. There’s some build-up.

Beyond that, there’s some time that needs to be spent together before probing questions about finances are asked. That kind of stuff comes way after even the first kiss, because finances are a pretty private, intimate subject. Even more intimate than a kiss…

Which is why it seems so invasive when an agent you’ve just met asks you if you’re pre-approved. It feels like they’re asking you some pretty private, intimate stuff that’s none of their business.

But asking for a pre-approval isn’t like going in for a kiss. It isn’t a marriage proposal. And it isn’t probing on the part of the agent.

It is a necessary question, and an important piece of information for the agent to know. And for you!

Why does an agent ask you if you’re pre-approved?

Agents aren’t asking you if you’re pre-approved because they’re looking to size up how much you can spend. (At least not most agents…)

They want and need to know that you are serious, and qualified to buy a house.

And they certainly have their reasons for wanting to know…

  • Real estate agents need to make sure they’re working with someone who can actually buy a house. They don’t get paid until and unless the person they’re working with buys a house. So, this is a matter of being careful about who they spend their time with. It might sound selfish…but you can’t fault them for that. They’re in business. Nobody cuts them a paycheck. And showing people houses is not a public service or charity work. Even working with someone who is pre-approved doesn’t guarantee them that they’re going to make any money. But at least it’s an indication that the person they are working with can do something.

  • Agents also need to know how much you’re pre-approved for in order to advise you as well as possible. Picture an agent showing you houses for weeks, and months. You finally find “the one”! You get all excited about the house, and you want to make an offer, only to find out then that there’s no way you could afford the house. This leads to heartbreak and aggravation…for both of you. It doesn’t do either of you any good to go through all of that only to find out you can’t afford the houses you were looking at…or even buy one at all.

  • And, to a degree, this is a safety precaution. You might not believe this, but agents are in a pretty risky position. If they just say OK to every person who calls and asks to go see a house, with absolutely no proof or verification of who the person is, that puts them at risk. Sure, a pre-approval won’t necessarily stop an evil person from doing something, but this is a pretty basic precautionary request.

Why you should want an agent to ask if you are pre-approved.

Even if you have just started browsing for a home just a little bit, and haven’t gotten pre-approved (yet)…at least expect the question. Don’t be offended when you’re asked if you are.

In fact, pay closer attention to the agents who do ask if you’re pre-approved! The ones who ask make it easy for you to find a great agent to work with.

Because if they’re asking that question, it’s a good sign that they are thorough and thoughtful about how they do their business. That’s the type of agent you want to have on your side when you’re buying a house — one who’s careful from the get-go. One who pays attention to the details. One who isn’t going to waste your time any more than their own. Or allow your heart to be broken when you fall in love with a house you can’t do anything about.

And if you want to get some really good attention and service from the best agents you come across, don’t even let them have to ask if you are pre-approved…

Get pre-approved before you even start looking. And let the agent know you’re pre-approved before they even ask. You’ll set yourself apart from almost every buyer the agent has ever met.