How To Buy A Home In 2022 (THE STEP BY STEP TUTORIAL)

what's up you guys it's Graham here so this video is meant to be a step-by-step beginner tutorial for anyone looking to buy a home for themselves to live in in 2019 now I made a few these videos in the past when it came to focusing on buying investment properties although I felt a new video needs to be made to address the ever-changing real estate markets and also focus on the people who want to buy a home for themselves to live in not necessarily just to go and rent out and make a ton of profit although making a lot of profit is always nice and arguably when it comes to buying a house for yourself to live in personally there are so many other factors to take into consideration and watch out for them when you're just doing it as an investment and the cool thing is that I'm making this video from three different perspectives the first perspective is as a real estate agent which has been my full-time job over the last 10 years and over those last 10 years I've sold about a hundred and thirty million dollars worth of residential real estate so I think it's pretty safe to say that over the last decade I had pretty much seen it all secondly I say this is also a real estate investor who's been buying property over the last seven years and the last one I bought was just really a few months ago and I now own six properties so I see exactly what's going on in the market and I see exactly how you can get the most value possible and third I bought homes for myself to live in personally so I totally understand the emotional aspect of doing that and also exactly what to look out for and what to avoid and this video is probably gonna be way longer than just about any of my other videos out there and the only reason for that is I want this video to be as comprehensive as possible so that means you'll have no other choice other than to smash that like button if you haven't already because it helps out the almighty YouTube algorithm and the more engagement these videos get the better they tend to do so if you wouldn't mind just smashing that like button it would be greatly appreciated we're commenting anything down below so let's go ahead let's start here how much money do you need as a down payment on a primary residence now this largely depends on the type of loan you get and the type of loan you get will affect how much you need is a down payment now when it comes to getting a loan in real estate most people have two options the first one is what's called a conventional loan the second is what's called an FHA loan now a conventional loan is by far the most common out there it makes up 72 percent of all home purchases according to a government this no conventional loan is just a loan that's not backed by the government instead it's issued by banks or private lenders this means that with a conventional loan you'll typically need to come up with 10 to 15% as a down payment if you intend to live in the property as a primary residence however an FHA loan on the other hand is a government-sponsored loan this means that they typically have lower credit qualifications lower down payment qualifications and usually it's a little bit cheaper to close and with an FHA loan you can typically put down as little as three and a half percent which means that on a $400,000 home you can put down as little as $14,000 however because that type of loan is way riskier for the bank they end up charging you a higher interest rate and also what's called private mortgage insurance which is called PMI this is an extra charge on top of your mortgage because you are statistically more likely to default on the loan if you're an FHA borrower also there are limits to how high of a loan that you can get with an FHA this is to prevent people from going and buying like a three million dollar home just because they have a hundred and five thousand dollars available to them but at the end of the day it's really going to be up to you to do the math and determine which is going to be the right option for you and if it's worth it to put less money down with a higher interest rate and also paying PMI if it's up to my recommendation personally I would just recommend save up the extra money and just go with the conventional loan if you do that you're gonna end up paying less in interest you're not gonna have PMI and you're gonna have a little bit more equity in the property at the time that you purchase it and also sellers tend to take someone with a conventional loan a little bit more seriously because that person typically has better credit stronger income and is more likely to close on their home so now that you figured out how much money you need to put down it's really important now that you figure out how to build your credit now this is absolutely essential when it comes to getting a loan and buying your home because just like you'll need a down payment you're also going to need a decent credit score now your credit score is able to show banks how likely you are to repay back any money that's lent to you and this is typically through credit card loans or auto loans or student loans or any time you've had money loaned to you this is basically your repayment history think of this as basically your loan prepayment scorecard or report card or whatever you want to call it it's it's your grade now ideally you're gonna want a credit score above 740 this is the range where banks typically give you the lowest interest rate possible and also this means that you get the most money back in your pocket and then if you have above a 760 this is where banks will start to bend over backwards to start giving you loans because you're less likely to default on that so they start giving you lender credits and other rebates and other things that really just save you a lot of money in the long run now in terms of how to build your credit I probably done way too many videos in this already and probably one too many credit card videos by now so I'll just link all of those in the description the detail exactly how you can build your credit score above 780 as quickly as possible so all of those will be links in the description check those out and with this I got to mention this because it's extremely important and that is to make sure you pay off all high interest rate debt prior to buying a house this means that you need to pay off any credit card debt any high interest rate personal loans or anything that might hold you back because this will severely limit the type of loans that you can get if you have any sort of high interest rate debt outstanding now with this I usually get the question of whether or not you should pay off a student loan or not or whether or not that's bad debt or if that could be good debt and my personal recommendation is to always make sure that student loans are ideally paid off prior to buying a home when it comes to me personally I just don't see student loan debt as being good debt although I will say that I would be less inclined to pay it off if you have a long term student loan debt below like a four and a half percent interest rate at that level I would be less inclined to pay it off but probably anything above a five percent interest rate I would probably just dump all the money into paying off student loans if you're paying more than a five percent interest rate but before I get to the next step I definitely need some energy for this now I don't endorse drinking red bull I think this stuff is awful but what I do I drink sugar-free Red Bull it's not sponsored by Red Bull just ran out of coffee today yeah nasty stuff okay so now the next step is going to get pre-qualified and this means you talk to a lender before doing anything else and by speaking with the lender you'll know exactly what you can go and purge so you don't waste anyone's time including yourself the last thing you want to happen is that you go out and start looking at property and then you find the perfect place it's absolutely amazing you can see yourself growing old in this home and raising a family in this home and then you talk to a lender and it turns out you can't afford it trust me as a real estate agent I've made this mistake with many buyers and it happens way more than you think don't do it it's absolutely heartbreaking do not start looking at property until you've at least talk to a lender and figure it out roughly what you're able to afford now secondly the good thing about getting pre-qualified first before going and looking at property is that when you do eventually find the right place you already have everything waiting with the lender so that you can hit the ground running and also I found that anytime you find a great property chances are you're not the only one that's looking at it and you're gonna be competing with other people who feel the exact same way as you do about it but at least having everything with the lender gives you a small advantage towards everyone else who maybe hasn't done that yet and anytime you find a good deal timeliness really matters because the quicker you can move on it generally speaking the better the deal you're going to get and because I'm making this video to be the most comprehensive completes guide of 2019 and not one of these generic bulls videos that many people seem to make without going into a lot of detail these are a few of the things to keep in mind when speaking with a lender and a few things to prepare for a lender is going to be wanting these following things from you and the first one is that they're going to want to see one to two years of your previous tax returns so you can show your proof of income the next one they're gonna want to look at is your full credit report and score and in addition to that they're gonna want to see the last two to six months of your bank statements again showing proof of income and also proof of your expenses and also if you work for any sort of employer they're also going to want to see your pay stubs as well then in addition to that they're gonna want two to six months of expenses saved up in addition to your down payment as well as you providing any other documentation for other properties you own any other liabilities any other assets that you have or anything else it's part of your portfolio they're gonna want to see proof and documentation of everything and also keep in mind - if you're self-employed they look at you way more closely they look at a single account every single expense line by line by line so just keep that in mind so now we've covered how much money you need to put down how to work on your credits paying off high interest debt and then getting pre-qualified so pretty much for the most part you're now ready to begin looking at property but then we get into some of the most common misconceptions that I hear buyer say that I've experienced as both myself a real estate agent and everything else I've read online the first question that I get probably the most often ever by far is when is it a good time to buy the first thing that we should cover is seasonality and that many buyers believe that the best time to buy is between spring and summer and the worst time to buy would be winter and this one is partially true if you're looking to buy a home in spring or summer typically you will find a little bit more inventory on the market as many sellers wait for these times to put their homes for sale so this means that if you're a really picky buyer looking for a very specific property you're trying to find something that's perfect chances are this is going to happen when there's the most inventory possible on the market and that usually happens to be spring and summer however the thing with that is that many other people have the exact same mentality as that and wait until spring and summer to start looking to buy and that means that you typically end up competing with more people during those months and as we all know from a buyer's perspective more competition typically means that you end up paying a slightly higher price now on the flip side of that winter could actually be a better time to go and buy a property contrary to a lot of popular belief now in the winter I found that fewer people are looking for homes and because of that fewer sellers tend to list their homes for sale this means that the sellers that do list their homes for sale are typically way more motivated than anyone else and this means that as a buyer you can typically find a slightly better price secondly fewer people tend to look for homes in the winter and this means less competition and with less competition this means that you can usually get a lower price so really what I found is that there is no best or worse time it really comes down to when you find the right place as a buyer however if I were to totally generalize here if you're looking for the best value and the best deal typically those are found in winter months and if you're looking to find the perfect place that is very niche that maybe there aren't a lot of homes that fit that criteria typically you're going to find that in spring or summer when more sellers tend to list their homes for sale but on the flipside of doing that you typically pay a slightly higher price again just generalizing here this isn't always the case the second point of topic that we should talk about in terms of market timing is should you wait for the market to crash now we could debate this topic for hours days or weeks about what the market may or may not do in the future there are economists out there that dedicate their entire lifetime to trying to figure this out and my personal answer is that none of us know what is going to happen with the real estate market in the short term if you're planning to buy a property and then just sell it between the next one and four years my recommendation is that most likely you're gonna be better off just renting on the other hand if you're buying a home for yourself to live in personally and you plan to live in the home for longer than seven years then trying to time the market and wait for the lowest price possible doesn't really make much sense when it comes to buying something for yourself it's very hard to put a price tag on your own personal enjoyment and buying something that is actually owned by you you're not gonna have to worry about dealing with landlords they're dealing with rent increases or worrying about painting walls or anything else that comes along with that you won't owning something that's yours is absolutely priceless so in terms of waiting or not for the market to crash my advice is this first of all no one knows when the market is going to crash it can very well stay flat over the next few years it could very well go up 5% a year for the next few years or it could very well go down over the next few years my recommendation here instead is just to wait until you find the right deal on a property you can afford that you intend to keep long term this way if the market ends up going down it doesn't really matter that much because you weren't planning on selling anyway and you got a property that you can afford that you really like that fits your criteria and if the market does end up going up after you buy then that's great too you've just made a little bit of money on paper it's more important that you find the right place that you can afford then go and wait for a crash and who knows how long a crash could take could take potentially years I know people that have been waiting for a real estate crash since 2012 meanwhile they've lost out on gaining like 200 cent returns on their money because they just waited for the crash that never happened so don't go and try to time the markets instead just plan to buy and hold or Hodel as they say in the crypto market okay so now that you figured out about market timing it's now time to write a list of exactly what you want in a home and really put some serious thought into this and figure out exactly what is going to be a deal-breaker for you these are not things that you could eventually live with these are not things that you would just like to have these are not things that you can change these are things that you cannot change that must be an absolute deal breaker for you for instance what location do you need to be in how many bedrooms minimum do you need to have do you need to have a yard do you need to have a very large kitchen you need to think these things through very thoroughly now from there it's really important that you start to think about the things that you would really like to have would you like to have a pool would you like to have a view would you like to have a open floor plan would you like to have avvocato toast included doing all of this is really going to clarify your home search when it comes to beginning to look at property because it's very easy to otherwise get overwhelmed this also helps that you won't go into all of this blindly without any idea of kind of what you're looking for and it's really going to help set you on the path to finding the place that's really the best fit for you now the next question I probably get asked the most and this is mostly from real estate investors and people in the comments and this is should you get a real estate agent or not now this is a tough one for me to answer because I am a real estate agent so my answer is going to be skewed slightly towards the yes use a real estate agent to answer although I'm going to do my best to be as unbiased as possible and give my honest take on whether or not it's worth it here's how this works with pretty much any home that's listed the seller is obligated to be paying a 5% Commission and the way that split is that two and a half percent of that goes towards the listing agent which is the agent representing the seller the other half of that goes towards the selling agent which is the agent representing the buyer now that 5% Commission is generally paid whether or not you use your own real estate agent when it comes to buying that property so from that perspective you may as well use a real estate because the seller is paying 5% regardless of whether or not you use one so in these situations you really only have two options one is to use the listing agent to represent you and hope that they knock down some of their commission and pass the savings on to you and the second is to use your own real estate agent because the seller is going to be paying 5% anyway now I would say for my own personal experience that probably 90% of the buyers out there would be better off using their own real estate agent to represent them exclusively in the deal then either not to use a real estate agent or relying on the listing agent to hopefully cut back some of that Commission and get them the lowest price possible on the home especially if you're brand new to real estate and you're buying your first or even second property there are so many intricacies to be able to navigate and I really recommend having someone who's experienced helping you navigate that as best as possible and I say all of that is someone who's been doing this full-time for 10 years it really took me about three years of doing this full-time for me to really feel comfortable with the home buying process and really understand what I was doing and that's three years of doing that full-time so just imagine as a buyer doing this with no experience for the first time ever it's extremely daunting but here's my honest reality of the entire situation a good real estate agent can easily pay for themselves time and time again when it comes to getting the lowest price possible on the property and a bad real estate agent can easily cost the buyer many many times over in terms of overpaying for a property or not getting the best deal so I absolutely recommend for probably 90% of the people out there to get a real estate agent to be able to represent you exclusively in the deal the thing is you really have to choose that person wisely use someone who has a good track record of success use someone who has plenty of experience and a good reputation in the business don't go and use a friend just because they have their real estate license but they dabble in it part time don't go and use auntie sally because auntie Sally's your aunt and you don't want to tell her no because auntie sally could end up costing you tens of thousands of dollars and find out most people probably want to know how long does this entire process take and this one really depends on how picky you are and the type of home you're looking for I've shown buyers around where they literally pick the first home I show them they closed 21 days later I've also shown buyers four years and they still haven't gotten anything yet now realistically for most buyers I would probably expect this entire process to take anywhere between 45 days and maybe a hundred and twenty days I found this to be typical of most people typically I see this as being a 30 to 90 day house hunt and then another 30 to 45 days to do all the inspections get the loan and close on the property okay so by now you've probably got your agent or you're using Auntie Sally you've been pre-qualified you know what you want now is the time to start looking at real estate when it comes to this I recommend seeing everything on the market I recommend taking a Saturday or Sunday and going to every single open house for every home that meets your needs list the more properties you see the more you're gonna recognize the good properties when they come up and the best property that's gonna be the right fit for you it also tends to be hard to commit to something when you don't know everything else on the market I've shown some buyers the perfect home but it happens to be the first one they see and they don't want to make an offer on it because they have no idea what else is out there despite that being the perfect home at the best price so because of that you can't have the best at something if you have nothing else to compare it to that makes it the best so see as many homes as you can and this might also help change your criteria of what you think you need maybe you go and see a home and you realize you don't need this specific location you thought you did or maybe you realize you don't need an open floor plan or you don't need a pool or maybe you find out something else that you need instead once you see it so the more you see the clearer you're going to get with exactly what you want now from there once you've found the right house it is time to make an offer now when it comes to this I can easily make an entire hour long video when it comes to negotiation styles there's just so many different ways to go about this and so many intricacies of negotiating a deal first of all from a buyer's perspective it's very important that you offer a price that you don't regret offering if the seller does not take your offer and when doing this it's very important that you think long term this means that if you lose the deal you don't think to yourself oh damn I should have just come up an extra $5,000 and then I would have gotten it I can't tell you how many buyers that have said this to me and regret not paying a little bit more and my advice to them is just why didn't you offer more just offer a little bit more and get the property than risk losing it so that is my recommendation from a buyer's perspective especially if you're planning for this to be a very long term hold or something that you're gonna live in for a very long time just think to yourself ten years from now are you gonna care if you paid an extra few grand for the property or whatever it might be chances are ten years from now it's not really going to matter so it's just important at the end of the day you don't have any regrets with what you offer if you offer the highest price and someone else out bids you on that at least go into it thinking I paid as high as I was willing to go and if someone is willing to pay more than they deserve it over me and it wasn't meant to be and this wasn't my perfect home because it was over my budget and just to put this all in context as a buyer coming up in priced $10,000 is really only a difference of about $55 per month in your mortgage so just think to yourself is getting the perfect property worth an extra fifty five dollars a month and if the answer is yes then go for it and if the answer is no then don't but also it's very important not to get overly emotional and overpay for the property as well this is why I can dramatically help to have a real estate agent assisting you who's not going to get overly emotional about the property who maybe can talk you down from doing something stupid so it's really important that at least you have someone that you can consult with throughout the entire process so by now we'll assume that auntie Sally got your offer accepted and now it is time to do your due diligence on the property and do your inspections and when it comes to doing this I recommend doing as many inspections as you possibly can if you can inspect it I recommend getting it inspected and that could be from a general inspection roof inspection plumbing inspection electrical inspection foundation inspection termite inspection sewer line inspection whatever basically if whatever inspections there are I just recommend you do them all now a little shady trick here that I've used as a buyer and that I typically recommend for any buyers that I recommend and I warrant sellers about doing this too and warning them exactly what to expect but many buyers like this will use the in affections as a way to renegotiate the deal so they know that they will do all these inspections they might spend $1,500 doing every inspection possible and they're going to find almost guaranteed more than $1,500 worth of repairs so they use the inspections as a way to renegotiate the purchase price once they're in escrow and once they kind of have the sellers buy the nuts you know the sellers already accepted an offer they want the sale they're tired of showing the property they don't want to keep it more on the market and the buyer kind of has the leverage right now because the buyer did all the inspections knows what's wrong with the property asked for a credit and many times the sellers by then are so worn down that they're just like here's the credit close the deal go away I just want to be done with it so from my perspective this is your way to get a slightly lower price on the deal if you want to save money here do your inspections and then ask for a reasonable credit for anything that is wrong with the property but now I want to mention this because this is one of these little gems that has taken me eight years to learn as a real estate agent and has saved me and my clients usually tens of thousands of dollars from this one little change and this is also one of many little gems that I have my program the real estate agent Academy link in the description but for real though when it comes to asking for repairs on a property it's always beneficial to be as generic as possible when asking for these credits now what I was taught to do is a real estate agent and what many other agents are taught to do is that when you get an inspection report you itemized everything that's wrong with this and you associate a price with that so for instance I see many agents will do a home inspection and then line by line itemize everything that's wrong with that with a total at the bottom and there will be like preparing sink $100 repairing a leaky roof $1000 repairing water heater $1500 and they itemize every little thing with a total at the bottom what ends up happening every single time is that the seller gets this list and they see the large number at the bottom then they look through and say well repairing this thing 150 no it's worth a hundred and ten repairing the water heater 1500 ollars know I can get that done for 900 repairing that you know doorknob it's $50 well I can do that for 10 and the seller ends up getting caught up on all these little minor things that they disagree with on price and because of that they don't focus on the larger number and they're more likely to renegotiate the entire thing when they see item by item by item and they can like focus on one little thing and disagree with it on the other hand if you just give the entire report give all the reports and you're just very generic and you just say these are all the reports for everything is going to be twenty thousand dollars where all this stuff is gonna be twenty grand we're just asking for fifteen thousand dollars of all of this if you just give us 15 thousand dollars we'll close the deal sellers will not go item by item disagreeing with like a leak you you know water faucet and like this when they just see a large number and all the report I've always found that when you have no comparison between the two you almost always end up getting more money back from the seller than when you itemized it line by line by line so as a buyer make sure to follow this as well it has saved me tens of thousands of dollars just by this one little trick and I had done it both ways as a real estate agent I was taught the first way to itemize it I realized after like seven years that that doesn't work as well as when you're just very generic and now I'm just very generic when it comes to that it works tremendously well again that's one of my little tricks when it comes to doing this as a real estate agent and buyer myself so now I'm gonna hope that you followed that that you did all your inspections you got a credit back now we're going to talk about closing costs now this includes charges like your escrow charges title charges insurance charges and everything else that comes in the escrow process and for the most part this is about one percent of your home's purchase price so on a four hundred thousand dollar home your closing costs are gonna be about four thousand dollars so one percent of the purchase price is a rough estimate and because I have like a 15 minute video detailing all of the closing costs again I'm just gonna link to that in the description I mean hopefully by now you've closed on your home and now it's time for you to fully enjoy it the biggest takeaway here is that when it comes to buying a home for yourself it's more important to buy a home that you're happy with long term not necessarily the home with the most upside or the most rental potential or anything like that it's more important for you to be happy in this long term for yourself especially if you're gonna be keeping the property long term it's more important that you find a home that you absolutely are in love with in a home that you're just soso about what you bought it sheet so with that said you guys thank you so much for watching now for everyone been asking me to make a program on real estate investing well I have something for you I call it the real estate investing blueprint I was in Las Vegas I did a 3-hour conference when it comes to real estate investing and in this conference I broke down exactly what I do exactly what my strategies are some of these negotiation tactics that I've mentioned here and everything else and for the next I think it's 48 or 72 hours we're gonna be running a discount like 70% off and we have the recordings of the entire day's event it is with myself and Jeremy a financial education my portion of this is about three hours where I cover the real estate investing blueprint and then Jeremy's is about stock market investing that's another three hours so again 70% off I am just going to include a link in the description for that so definitely check that out I really hope you enjoy it I spent like a full on 15 hours putting that presentation together on powerpoints so I really feel like it's gonna be a lot of value as compacted as possible with that said thank you again for watching I know this video is extremely long thank you so much for getting it an entire chance if you watch the very end like subscribe add me on snapchat Instagram I don't want this video to be too long thank you again for watching it and until next time oh also cop submerge in the description link below

Channel: Graham Stephan

Views: 1,151,533

Keywords: how to buy a house, how to buy a home, home buying process, home buying tips, home buying 101, home buying explained, how to invest in real estate, real estate investing, real estate investing for beginners, real estate investing 101, how to buy real estate, how to be a landlord, how to flip real estate, how to make passive income, how to make money online, passive income ideas, how to save for a house

Id: wm9YCmFpIWQ

Length: 27min 40sec (1660 seconds)

Published: Fri Jan 18 2019