House Buying Information
Sep 9th 2015, 5:48 pm
#1
Just Joined
Thread Starter
Joined: Jul 2014
Posts: 26
House Buying Information
Hi All,
Just thought I would share some information with you all in relation to buying houses in the US, this may be on the wikis, but was taken from a loan adviser and a realtor yesterday, giving a house buying 101 class, feel free to read, re-use or ignore:
In essence there are 5 steps that are pretty much used throughout the US:
Step 1 - Gather all the necessary information needed; you are required to provide documented income in the form of; 2 years w-2's, 1 months payslips, if self employed 2 years worth of tax returns including w-2's, k-1's and schedules.
Documented Assets: 2 months bank statements must include all pages, most recent 401k investment statement, value of other assets (cars, boats, etc.)
Additional: homeowners insurance/contact information, purchase contract
Stage 2 - This will vary by financial institution but complete all necessary loan application/inquiry forms including required disclosures.
Stage 3 - Loan will be submitted to the processing department, where it will be reviewed to ensure it portrays an accurate description of your financial situation.
Stage 4 - Application will be submitted to the underwriters to render a decision and any conditions.
Stage 5 - Clearing; checking that all conditions have been met that have been requested.
Stage 6 - Closing; this is where all paperwork will be signed and be the last step of the process.
General Information:
Check your credit score on annualcreditreport.com - this is the only credit score company that will check all 3 of the agencies and allow you to do this for free 1 a year.
Banks will generally apply the following weighting: 35% payment history, 30% monies owed, 15% length of history, 10% number of credit accounts, 10% type of credit
The ideal applicant will have 2 credit accounts; for example a credit card and car installments.
Credit scores range from 350 which is the lowest, to 850 which is the highest.
Tips for increasing credit score:
Keep credit accounts open for as long as possible even if you don't use it, closing a credit account will negatively impact your credit score before it has a positive impact.
It takes 30 - 45 days for items to impact your credit score as the banks only report to the agencies 1 a month and then this needs to be updated with the agencies
Open a checking and savings account, in all parties names if possible, make regular deposits into the accounts. Always deposit more than the minimum opening balance if you can, as this has a positive impact.
Take out a secured credit card, or certificated deposit loan, even if you don't need a loan as you have savings, it is beneficial to take out a certified loan and pay the loan into your savings account and then pay the loan off in full, as this has a positive impact.
It is best for a home buyer to have an pre-approved offer from a bank before submitting an application as buyers are more likely to accept a pre-approved offer than not, if multiple offers are received on a listing.
Find a good realtor that is there to help you find rather than sell to you.
Just thought I would share some information with you all in relation to buying houses in the US, this may be on the wikis, but was taken from a loan adviser and a realtor yesterday, giving a house buying 101 class, feel free to read, re-use or ignore:
In essence there are 5 steps that are pretty much used throughout the US:
Step 1 - Gather all the necessary information needed; you are required to provide documented income in the form of; 2 years w-2's, 1 months payslips, if self employed 2 years worth of tax returns including w-2's, k-1's and schedules.
Documented Assets: 2 months bank statements must include all pages, most recent 401k investment statement, value of other assets (cars, boats, etc.)
Additional: homeowners insurance/contact information, purchase contract
Stage 2 - This will vary by financial institution but complete all necessary loan application/inquiry forms including required disclosures.
Stage 3 - Loan will be submitted to the processing department, where it will be reviewed to ensure it portrays an accurate description of your financial situation.
Stage 4 - Application will be submitted to the underwriters to render a decision and any conditions.
Stage 5 - Clearing; checking that all conditions have been met that have been requested.
Stage 6 - Closing; this is where all paperwork will be signed and be the last step of the process.
General Information:
Check your credit score on annualcreditreport.com - this is the only credit score company that will check all 3 of the agencies and allow you to do this for free 1 a year.
Banks will generally apply the following weighting: 35% payment history, 30% monies owed, 15% length of history, 10% number of credit accounts, 10% type of credit
The ideal applicant will have 2 credit accounts; for example a credit card and car installments.
Credit scores range from 350 which is the lowest, to 850 which is the highest.
Tips for increasing credit score:
Keep credit accounts open for as long as possible even if you don't use it, closing a credit account will negatively impact your credit score before it has a positive impact.
It takes 30 - 45 days for items to impact your credit score as the banks only report to the agencies 1 a month and then this needs to be updated with the agencies
Open a checking and savings account, in all parties names if possible, make regular deposits into the accounts. Always deposit more than the minimum opening balance if you can, as this has a positive impact.
Take out a secured credit card, or certificated deposit loan, even if you don't need a loan as you have savings, it is beneficial to take out a certified loan and pay the loan into your savings account and then pay the loan off in full, as this has a positive impact.
It is best for a home buyer to have an pre-approved offer from a bank before submitting an application as buyers are more likely to accept a pre-approved offer than not, if multiple offers are received on a listing.
Find a good realtor that is there to help you find rather than sell to you.
Sep 9th 2015, 8:02 pm
#2
BE Enthusiast
Joined: Mar 2010
Location: Oakland County, Michigan
Posts: 846
Re: House Buying Information
creditkarma.com is also very good for monitoring your score for free on an ongoing basis. I used to use creditsesame.com as well but they don't seem to update the score that often any more. Several credit cards (Discover, Barclaycard, Capital One) also offer free tracking of your credit scores as an extra.
Sep 9th 2015, 8:26 pm
#3
Lost in BE Cyberspace
Joined: Mar 2010
Location: Phoenix, AZ
Posts: 8,106
Re: House Buying Information
creditkarma.com is also very good for monitoring your score for free on an ongoing basis. I used to use creditsesame.com as well but they don't seem to update the score that often any more. Several credit cards (Discover, Barclaycard, Capital One) also offer free tracking of your credit scores as an extra.
I am of the opinion that obsessing over the score is rather pointless. Have a reasonable number of lines of credit and pay off in full each month and your credit score will be adequate for most purposes. Length of history is more important and for many new immigrants the trickiest thing.
Sep 9th 2015, 9:33 pm
#4
Joined: Dec 2001
Location: Dixie, ex UK
Posts: 52,448
Re: House Buying Information
So long as you are never late and never default on your debts, you can easily have an enviable credit score within a year or two even if you carry substantial balances on multiple credit cards. Sure, your score might be a little higher if you had lower balances but obsessing over whether your credit card balance is 29% of your limit or 31% of your limit makes absolutely no sense whatsoever.
Sep 10th 2015, 12:57 am
#5
Austin. TX.
Joined: Sep 2013
Posts: 5,930
Re: House Buying Information
Hi All,
Just thought I would share some information with you all in relation to buying houses in the US, this may be on the wikis, but was taken from a loan adviser and a realtor yesterday, giving a house buying 101 class, feel free to read, re-use or ignore:
In essence there are 5 steps that are pretty much used throughout the US:
Step 1 - Gather all the necessary information needed; you are required to provide documented income in the form of; 2 years w-2's, 1 months payslips, if self employed 2 years worth of tax returns including w-2's, k-1's and schedules.
Documented Assets: 2 months bank statements must include all pages, most recent 401k investment statement, value of other assets (cars, boats, etc.)
Additional: homeowners insurance/contact information, purchase contract
Stage 2 - This will vary by financial institution but complete all necessary loan application/inquiry forms including required disclosures.
Stage 3 - Loan will be submitted to the processing department, where it will be reviewed to ensure it portrays an accurate description of your financial situation.
Stage 4 - Application will be submitted to the underwriters to render a decision and any conditions.
Stage 5 - Clearing; checking that all conditions have been met that have been requested.
Stage 6 - Closing; this is where all paperwork will be signed and be the last step of the process.
General Information:
Check your credit score on annualcreditreport.com - this is the only credit score company that will check all 3 of the agencies and allow you to do this for free 1 a year.
Banks will generally apply the following weighting: 35% payment history, 30% monies owed, 15% length of history, 10% number of credit accounts, 10% type of credit
The ideal applicant will have 2 credit accounts; for example a credit card and car installments.
Credit scores range from 350 which is the lowest, to 850 which is the highest.
Tips for increasing credit score:
Keep credit accounts open for as long as possible even if you don't use it, closing a credit account will negatively impact your credit score before it has a positive impact.
It takes 30 - 45 days for items to impact your credit score as the banks only report to the agencies 1 a month and then this needs to be updated with the agencies
Open a checking and savings account, in all parties names if possible, make regular deposits into the accounts. Always deposit more than the minimum opening balance if you can, as this has a positive impact.
Take out a secured credit card, or certificated deposit loan, even if you don't need a loan as you have savings, it is beneficial to take out a certified loan and pay the loan into your savings account and then pay the loan off in full, as this has a positive impact.
It is best for a home buyer to have an pre-approved offer from a bank before submitting an application as buyers are more likely to accept a pre-approved offer than not, if multiple offers are received on a listing.
Find a good realtor that is there to help you find rather than sell to you.
Just thought I would share some information with you all in relation to buying houses in the US, this may be on the wikis, but was taken from a loan adviser and a realtor yesterday, giving a house buying 101 class, feel free to read, re-use or ignore:
In essence there are 5 steps that are pretty much used throughout the US:
Step 1 - Gather all the necessary information needed; you are required to provide documented income in the form of; 2 years w-2's, 1 months payslips, if self employed 2 years worth of tax returns including w-2's, k-1's and schedules.
Documented Assets: 2 months bank statements must include all pages, most recent 401k investment statement, value of other assets (cars, boats, etc.)
Additional: homeowners insurance/contact information, purchase contract
Stage 2 - This will vary by financial institution but complete all necessary loan application/inquiry forms including required disclosures.
Stage 3 - Loan will be submitted to the processing department, where it will be reviewed to ensure it portrays an accurate description of your financial situation.
Stage 4 - Application will be submitted to the underwriters to render a decision and any conditions.
Stage 5 - Clearing; checking that all conditions have been met that have been requested.
Stage 6 - Closing; this is where all paperwork will be signed and be the last step of the process.
General Information:
Check your credit score on annualcreditreport.com - this is the only credit score company that will check all 3 of the agencies and allow you to do this for free 1 a year.
Banks will generally apply the following weighting: 35% payment history, 30% monies owed, 15% length of history, 10% number of credit accounts, 10% type of credit
The ideal applicant will have 2 credit accounts; for example a credit card and car installments.
Credit scores range from 350 which is the lowest, to 850 which is the highest.
Tips for increasing credit score:
Keep credit accounts open for as long as possible even if you don't use it, closing a credit account will negatively impact your credit score before it has a positive impact.
It takes 30 - 45 days for items to impact your credit score as the banks only report to the agencies 1 a month and then this needs to be updated with the agencies
Open a checking and savings account, in all parties names if possible, make regular deposits into the accounts. Always deposit more than the minimum opening balance if you can, as this has a positive impact.
Take out a secured credit card, or certificated deposit loan, even if you don't need a loan as you have savings, it is beneficial to take out a certified loan and pay the loan into your savings account and then pay the loan off in full, as this has a positive impact.
It is best for a home buyer to have an pre-approved offer from a bank before submitting an application as buyers are more likely to accept a pre-approved offer than not, if multiple offers are received on a listing.
Find a good realtor that is there to help you find rather than sell to you.
Sep 10th 2015, 1:13 am
#6
BE Irregular
Joined: Jan 2004
Location: Tampa Bay Florida
Posts: 4,849
Re: House Buying Information
Stage 7: Post closing department sends you stuff to sign/re-sign, that got missed/ messed up earlier, and delays them selling your loan on.
(not dismissing any of the points made, which are a reasonable facsimile of the process as I understand it).
(not dismissing any of the points made, which are a reasonable facsimile of the process as I understand it).
Sep 10th 2015, 3:16 am
#7
BE Forum Addict
Joined: Apr 2011
Location: Ohio
Posts: 1,834
Re: House Buying Information
Stage 8 - your phone begins to ring... and ring... and ring; your mailbox is deluged with offers for alarm systems and invitations (not from your mortgage company) to move to a bi-weekly mortgage payment schedule. You spend a lot of time cursing the painfully lax US data protection laws, and vow that next time you buy a house, you're doing it with a burner phone number.
Sep 10th 2015, 3:58 am
#8
BE Practitioner (Level 2)
Joined: Aug 2014
Location: San Diego, CA
Posts: 1,403
Re: House Buying Information
Great information, and as I'm preparing to do this in a few months' time I've got some questions:
Cheers.
- Are you shopping around different banks for mortgage rates? How do they generally advertise these?
- Do you get ‘pre-cleared’ here for a certain limit before going out and making an offer on a property?
- I won’t have 2 years’ worth of W2s… do they take your UK working history into account? (I’ll probably have 9 months’ worth of US paychecks under my belt
- Is it normal for offers to exceed asking price (what I’ve heard that happens a lot in So Cal)
- I’ve heard it’s popular to use a buyers’ realtor to act as an agent. Is that the norm? Will we be restricted in our purchasing options if we attempt to not use a buyers’ agent? I’ve heard it mentioned.
- When I sold my house in the UK I had a few different estate agents round for valuations and then haggled them down to as low a rate as I could get (0.9%). Is that generally how it works here for sellers too? I’ve heard rumours of exorbitant fees being paid by both parties, so not sure what to expect on that. What level of fees are we talking about here?
- I’ve read that we won’t need a conveyancer to act on our behalf, so I’m assuming an agent (buyers or sellers) will perform most of the duties. But what about inspections, checking the boundaries and deeds, local topography risks etc., where would we get this advice from? I presume this would come from an independent party as opposed to those who benefit from the proceeds of a sale?
Cheers.
Last edited by username.exe; Sep 10th 2015 at 4:00 am. Reason: Grammar
Sep 10th 2015, 4:17 am
#9
Lost in BE Cyberspace
Joined: Mar 2010
Location: Phoenix, AZ
Posts: 8,106
Re: House Buying Information
- I don't believe there is a huge spread in rates. If you go with your current bank there can be saving in closing fees.
- there is preapproved and prequalified and I can never remember the difference. Never tell your buyers agent how much you are really approved for tell them the price of house YOU want to look at maybe minus 50k.
- probably wont care for your Uk history. They will want to know where every penny of your deposit came from
- that would be very location dependent
- good buyers agents do a lot of the paperwork for you and if you trust them will find a surveyor for you etc also they will know a title and escrow company.
- 3% for the buyers agent 3% for the sellers agent. Usually paid by the seller. If you are desparate to get a specific house in a bidding war tu might offer to pick up those costs.
- a title company usually checks those things
- there is preapproved and prequalified and I can never remember the difference. Never tell your buyers agent how much you are really approved for tell them the price of house YOU want to look at maybe minus 50k.
- probably wont care for your Uk history. They will want to know where every penny of your deposit came from
- that would be very location dependent
- good buyers agents do a lot of the paperwork for you and if you trust them will find a surveyor for you etc also they will know a title and escrow company.
- 3% for the buyers agent 3% for the sellers agent. Usually paid by the seller. If you are desparate to get a specific house in a bidding war tu might offer to pick up those costs.
- a title company usually checks those things
Sep 10th 2015, 12:47 pm
#10
Just Joined
Thread Starter
Joined: Jul 2014
Posts: 26
Re: House Buying Information
Great information, and as I'm preparing to do this in a few months' time I've got some questions:
Cheers.
- Are you shopping around different banks for mortgage rates? How do they generally advertise these? Banks do offer different rates depending on the loan type and product you are choosing but until they know your credit score your rate could change, so when you use the online calculators of a bank etc. it is just an indicative rate until they do the credit check, what you can do is call banks and give them your income and expenditure details and a guess of your credit score (from the scoring sites mentioned in the post) and the indicative rate will be narrowed down a little more but until you submit the application the rate could change.
- Do you get ‘pre-cleared’ here for a certain limit before going out and making an offer on a property? You can get pre-qualified and pre-approved, again the same premise as mentioned above, pre-qualified is a banks estimate of what they will lend you based on figures provided but without a credit score being undertaken, pre-approved is after the application and proof of what a bank will lend to you. It is important to know that this information is personal and will not be shared with anyone without permission, so unless you tell your realtor or seller only you and the bank know this.
- I won’t have 2 years’ worth of W2s… do they take your UK working history into account? (I’ll probably have 9 months’ worth of US paychecks under my belt. I was told that I could use my UK information, so for large banks (wells fargo, etc.) you can in fact get them to build you a US credit score, its a convoluted process and involves several meetings, alot of evidence and they call the financial institutions in the UK but they will build you a credit score to use, for other medium to smaller banks, they will take all HMRC approved paperwork, such as tax returns, P61, etc.
- Is it normal for offers to exceed asking price (what I’ve heard that happens a lot in So Cal) It depends on location and the neighborhood the house is in, speaking to realtors out here, some houses are under/over priced, you need to offer what you are going to be comfortable paying taking into consideration all taxes and other outgoings etc.
- I’ve heard it’s popular to use a buyers’ realtor to act as an agent. Is that the norm? Will we be restricted in our purchasing options if we attempt to not use a buyers’ agent? I’ve heard it mentioned. This is not true in my experience, you are entitled to use any realtor, lawyers, etc. you wish, it may cost more, obviously certain realtors may have exclusivity on managing a property, etc.
- When I sold my house in the UK I had a few different estate agents round for valuations and then haggled them down to as low a rate as I could get (0.9%). Is that generally how it works here for sellers too? I’ve heard rumours of exorbitant fees being paid by both parties, so not sure what to expect on that. What level of fees are we talking about here?
- I’ve read that we won’t need a conveyancer to act on our behalf, so I’m assuming an agent (buyers or sellers) will perform most of the duties. But what about inspections, checking the boundaries and deeds, local topography risks etc., where would we get this advice from? I presume this would come from an independent party as opposed to those who benefit from the proceeds of a sale? I was informed that this can be done with the realtor or an external party, you should do at least 3 walkthroughs with a realtor of a property and 1 last final walkthrough on closing, which may uncover some anomolies and haggling to reduce price or fix issues occurs at this point, but you should also be looking into getting a home inspection completed on the property as it is different in the US, with things like roofs needing replacing and air conditioning need upgrading and these will be picked up in a home inspection report which will give you haggle room on the price and save you money in the long run.
Cheers.
I am not an expert in this area and am just offering advice based on my experiences to the friendly community, trying to help where I have struggled with stuff recently :-)
Sep 10th 2015, 2:27 pm
#11
BE Practitioner (Level 2)
Joined: Aug 2014
Location: San Diego, CA
Posts: 1,403
Re: House Buying Information
Thanks eccles and jtj1, very helpful.
Sep 10th 2015, 3:22 pm
#12
BE Forum Addict
Joined: Apr 2011
Location: Ohio
Posts: 1,834
Re: House Buying Information
It would be very unusual to not use a buyer's agent, and would make the process vastly more difficult. Almost all for-sale houses are on a lockbox, which the buyer's agent can access with a special electronic key. The sellers are (almost) never there, and the entire system is predicated on your buyer's agent calling the sellers to make the viewing appointment (sometimes with 15 mins notice), and accompanying you around the property while the sellers skedaddle off to walk around the neighborhood or go for coffee.
Before I knew the systems, I tried calling a couple of listing agents to view a house - it was early days, we wanted to do some scoping on what our money would get us, didn't really know the process and didn't want to trouble getting a buyer's agent until we'd absolutely firmed up on price, etc - and they had zero interest in dealing with a buyer who (in their mind) was a total tire kicker, hadn't been pre-qualified, and was almost certainly not serious (even though we were, and completed the entire 'start doing viewings to moving in our purchased house' process in 6 weeks).
Your buyer's agent will almost certainly want to see proof of pre-qualification; they won't want to waste their time taking you to see houses you can't buy.
But they can be enormously helpful - ours had an excellent mortgage broker who got us a better than advertised anywhere rate despite only having been in the US a year (based on a good income and high deposit, I think, rather than following a rigid formula), arranged the stunningly comprehensive inspection for us, etc.
It'll be the seller who pays the agents, not you. Which is great, right up until you become the seller
Before I knew the systems, I tried calling a couple of listing agents to view a house - it was early days, we wanted to do some scoping on what our money would get us, didn't really know the process and didn't want to trouble getting a buyer's agent until we'd absolutely firmed up on price, etc - and they had zero interest in dealing with a buyer who (in their mind) was a total tire kicker, hadn't been pre-qualified, and was almost certainly not serious (even though we were, and completed the entire 'start doing viewings to moving in our purchased house' process in 6 weeks).
Your buyer's agent will almost certainly want to see proof of pre-qualification; they won't want to waste their time taking you to see houses you can't buy.
But they can be enormously helpful - ours had an excellent mortgage broker who got us a better than advertised anywhere rate despite only having been in the US a year (based on a good income and high deposit, I think, rather than following a rigid formula), arranged the stunningly comprehensive inspection for us, etc.
It'll be the seller who pays the agents, not you. Which is great, right up until you become the seller
Sep 10th 2015, 3:30 pm
#13
Austin. TX.
Joined: Sep 2013
Posts: 5,930
Re: House Buying Information
When we were buying a house last year in Austin we were told by various people that we would not be taken seriously as buyers unless we had a buyer's agent.
The realtor we used was the one who had found our rental house for us. She had been a realtor in our area for over 20 years and knew the area and other realtors very well. Putting an offer on a house when there are multiple buyers competing for it is a delicate negotiation. In our case, there was less than $1k difference between us and 3 others, we got it due to other factors which our agent knew the sellers agent would find attractive.
When it comes to selling your house and it's your turn to pay the agents - if you use your selling agent as your buyer's agent for your next home then you can negotiate a smaller %.
The realtor we used was the one who had found our rental house for us. She had been a realtor in our area for over 20 years and knew the area and other realtors very well. Putting an offer on a house when there are multiple buyers competing for it is a delicate negotiation. In our case, there was less than $1k difference between us and 3 others, we got it due to other factors which our agent knew the sellers agent would find attractive.
When it comes to selling your house and it's your turn to pay the agents - if you use your selling agent as your buyer's agent for your next home then you can negotiate a smaller %.
Sep 10th 2015, 3:38 pm
#14
BE Forum Addict
Joined: Apr 2011
Location: Ohio
Posts: 1,834
Re: House Buying Information
Or sometimes you get the discount just for asking and making it clear you're agent shopping, especially with a higher priced house where their commission will already be generous for the work involved. We were moving out of state so no future revenue stream for the selling agent, but he still cut his commission from 3% to 2% because that was still a nice chunk of cash for him.
It probably helped that we'd already prepped the house to a HGTV show home standard, and presented ourselves as motivated, co-operative sellers (no restrictions on viewings, pragmatic about asking price and local comps, clearly saw it all as a business transaction, etc) who should be easy to work with (we are). And it was a doddle for everyone involved - it sold a couple of weeks later at almost full list, and the transaction went through faultlessly.
It probably helped that we'd already prepped the house to a HGTV show home standard, and presented ourselves as motivated, co-operative sellers (no restrictions on viewings, pragmatic about asking price and local comps, clearly saw it all as a business transaction, etc) who should be easy to work with (we are). And it was a doddle for everyone involved - it sold a couple of weeks later at almost full list, and the transaction went through faultlessly.
Sep 10th 2015, 5:54 pm
#15
Lost in BE Cyberspace
Joined: Jul 2008
Location: Portlandia Metro
Posts: 7,425
Re: House Buying Information
creditkarma.com is also very good for monitoring your score for free on an ongoing basis. I used to use creditsesame.com as well but they don't seem to update the score that often any more. Several credit cards (Discover, Barclaycard, Capital One) also offer free tracking of your credit scores as an extra.
