The Best Way To Buy A House Explained | Home Buying Tips - Minority Mindset

the biggest purchase most people will ever make is your home which is why it pays to know how to buy a home literally and in this video i'm going to give you a very detailed very comprehensive step-by-step guide on what you need to know before you buy a home [Music] what's up everybody i am just pretty sing from the minoritymindset.com where money minds rethink rich almost everybody wants to own their own home like 9 out of 10 millennials say that they want to be homeowners but unlike what your cousin bunty says buying a home the right way isn't so simple if it was you wouldn't have so many home buyers regarding their decisions i have seen real estate from a few different perspectives i am a real estate investor i am an attorney and i have a real estate salesperson's license i don't actively help people buy and sell homes anymore but i used to so if you want to buy a home the right way there are 10 things that you need to know and it all starts by smashing the thumbs up button below i guess the thumbs up part isn't really necessary but i would appreciate it because the way the youtube algorithm works if you do not hit that thumbs up button then youtube is much less likely to show you and other people our financial news and education videos and when it comes to you buying a home the first thing we need to talk about is getting pre-qualified because the last thing you want to happen is you fall in love with a home and then you find out you can't afford it you want to get pre-qualified before you start looking for a home because it'll give you an idea of how big of a home you should be looking for i'll get to affordability a little bit later in this video but this will kind of give you an idea and it'll save you time as a buyer and it'll also save the seller time plus if you're already pre-qualified to buy a home then this tells the seller that you're serious and you'll have the cash ready to purchase the home because the last thing the seller wants to do is take their home off the market because somebody wants to buy it and then 60 days later they find out that this person cannot get the cash to purchase the home so if you are pre-qualified you are more likely to get accepted with an offer because you have demonstrated that you'll be able to get the cash to purchase the home i learned this lesson the hard way so i was selling an apartment complex that i was a part owner of and a lady brought me an offer through my agent and she was not pre-qualified at the time but she said that she wouldn't have any problems getting the cash so i thought okay no big deal she has good income she has another experience she should have no problem getting pre-qualified and so she negotiated a 60-day kind of contingency to get this financial pre-qualification which is pretty standard in commercial real estate deals and then 60 days go by and she says oh i'm having some issues with my lender and this is going to take another 30 days another 30 days go by and we have taken the property off the market at this time so now we're talking about 90 days off market 90 days go by and she's like uh i'm starting to have some more issues with another lender so i'm gonna start the whole process over with a different lender at this point i was like we have been off the market for three months one month later we find out that she cannot keep qualified so now we're off the market for 120 days or something like that and at this point i was like oh my god like so we just canceled the deal and we had to start the whole process all over again it ended up working in our favor because we got an even better offer but that's why i don't even like looking at offers anymore unless this person is pre-qualified to purchase a property and it will give you extra negotiating room in your offers the way you get pre-qualified is by talking to a lender now what you should also understand is that some lenders are going to charge you a whole lot less on the same mortgage as other lenders so you want to do some shopping around and if you're looking for some more help on how to do this our team has articles on how to find the best mortgage on our website the minoritymindset.com and i'll also link an article for you up here and in the description below the three main factors that a lender is going to look at when it comes to getting you pre-qualified and getting your mortgage are your credit score your income and your debt if you just want to get a mortgage the minimum credit score that you need is something like 620. now if you just have a 620 credit score you are not going to get very favorable rates and you're not going to get very favorable offers from your bank if you really want to get more rebates and get the best offers from your bank you should be looking for a credit score of something like 760 and above next thing is they're going to be looking at your income they're going to want to see your w-2s your pay stubs they're going to want to see how long you've been at your job or in your industry and how much money you're making and they're going to want to see this for at least two years if you're working a job if you're self-employed if you have your own business they're going to want to see even more than that and then they're going to want to look at your financial statements they're going to want to see how much debt you have and they're going to want to know if you have any credit card debt and all the different types of debt because they're going to compare this to your income using something called a debt to income ratio essentially what the bank is doing is they want to see if you are a good investment for their money so they're just looking at the numbers and they're gonna see okay this person's making a lot of money they don't have a lot of debt and they have a good credit score yes they're a good investment for our money and we don't have to charge them too much in fees because we think they're a good investment but if they look at you and they say oh this person has a lot of debt their income is fine but their credit score is also low they don't seem as good of an investment so we're going to have to take an extra risk so we're going to charge you extra fees to make up for this higher risk so if you want to get the best rates you want to work on lowering this debt you want to work on increasing your credit score and you want to work on showing the bank that you have a steady stream of income second let's talk about affordability because if you're subscribed to your youtube channel you know the model just because you can qualify to buy something does not mean you can afford it and if you're not subscribed to a youtube channel you should probably do that to really understand this you have to look at real estate from different lenses so let's start by looking at it from your real estate agent and your mortgage brokers perspective your real estate agent and your mortgage broker they want you to buy the best home possible which many times means the most expensive home possible which also coincidentally means the biggest commission check possible for your real estate agent and your mortgage broker your wallet on the other hand wants you to buy the smallest home possible because that's gonna keep more money in your bank account and your instagram page wants you to buy the home that you can't qualify for being able to afford your home comes down to three different things it means affording the down payment it means affording your monthly payment and it means affording the closing costs because a lot of times people forget about this starting with your down payment when you buy a home you got to put some money down and the amount of money you pay is going to depend on what kind of mortgage you get typically this is going to be something like 3 to 20 percent of the home values if you're buying a hundred thousand dollar home we're talking about three thousand dollars to twenty thousand dollars down if you go out and you get a fha mortgage so this is something that has lower qualifications you can put down three and a half percent but because the qualifications are a little bit lower the bank is going to look at you as a more risky investment and they're going to charge you a higher interest rate and you're also going to have to pay an additional fee called pmi pmi stands for private mortgage insurance and it's a fee that you have to pay if you do not put down 20 or more on your home so the bank makes you pay this fee they make you buy this insurance because the bank thinks that you're a higher risk investment because there's a higher chance that they'll have to foreclose on you because you have less skin in the game but what you have to understand about pmi is that it is not insurance for you it's insurance for the bank so the bank is making you buy their insurance because they think or they're worried that there's a chance that they'll have to foreclose on you in order to compensate for that risk the bank makes you pay an extra fee so if you do not put down 20 you're gonna have to pay higher fees and you're gonna get a higher interest rate that's why if you want to be able to afford the home i want you to have at least 20 that way now you can buy the home you can have more equity you won't have to pay pmi and you can get the better interest rates second when it comes to your monthly payments lots of times banks will say that your monthly payment should not be more than a third 33 of how much money you're making now i have seen in some instances that means how much money you're making before taxes and other instances i've seen that mean 33 of what you're making after taxes i want you to be a little bit safer here and i don't want you to buy a home unless you can afford the monthly payment four times over with your net pay that means your monthly payment should not be more than 25 of your actual take-home monthly pay so if you're taking home four thousand dollars a month after taxes your mortgage should not be more than a thousand dollars and finally we have to talk about closing costs so typically this is gonna range somewhere between two and four percent of your home value depending on all the different things that you're getting and the insurance that you're getting and your mortgage so you have to just remember that when you go to actually purchase the home there are extra fees you have to pay so if you're buying a hundred thousand dollar home yes two thousand dollars to four thousand dollars in additional fees a lot of times people forget this and what they do they take these costs and they put them on the back of their mortgage and now you have to pay interest on these things know what the closing costs are that way you can prepare for it and have the cash to afford these things and one thing that i also don't want you to forget when it comes to closing costs is your moving cost because guess what it costs money to move if you're going to use a moving service or anything like that there is a cost to move from one home to the other so just don't forget that third should you use a real estate agent so you need to understand that there's two different types of agents you have buyer's agents and then you have listing agents buyer's agents are the ones to help you find the home to buy listing agents are the ones that help sellers sell their home the way it works is if i'm selling my home through a real estate agent i'm gonna find a listing agent and i'm gonna tell them okay you're selling my property and when you do i'm gonna pay you a six percent commission on the final sales price but that commission is going to be split by you the listing agent and the buyer's agent so the commission for your buyer's agent is paid by the seller but the seller is paid by you because the money that i get the seller is going to be paid by you because that's the money you're paying me to buy the home so you're paying me to buy the home and then i'm paying both the listing agent and the buyer's agent this is where people say that okay so if i go and buy a home without a buyer's agent then the seller won't have to pay as much commission because now there's only a listing agent not a buyer's agent and so maybe the seller can discount the price of the home because now they don't have to pay as big of a commission sometimes that works but a lot of times what listing agents do is they already pre-negotiate this with the seller where if there's a buyer's agent you're gonna have to pay six percent commission which is going to be split three percent three percent by the buyer's agent and the listing agent and if there is no buyer's agent then the listing agent will take five percent commission instead of six it doesn't always work like that but sometimes it does plus your buyer's agent can also save you a ton of headache and a ton of time and if they're a good agent that can also help you out with a negotiation to help you save more than that three percent when it comes to actually buying the home so if you find yourself a good agent their service will pay for their fee by itself and if you find yourself a bad agent well now you're paying a premium for something that you don't necessarily need fourth you got to know what you want because when it comes time for you to buy a home this is not like chipotle where you can go to the checkout counter and say oh wait i forgot to get extra guac when it comes time for you to buy a home you got to know what you want before you get to the checkout counter not only do you want to know exactly what you want in a home but you also want to kind of prioritize what's important and what's not as important because there's a chance that you might not find everything that you want when it comes to buying a home but you need to know what's very important and kind of make sure you prioritize those as opposed to the things that are not as important so some of the things that you can pay attention to are the size of your home the yard do you want a yard if so how big does it need to be maintenance sometimes you're going to find good deals on homes that need a lot of work but is that something that you want to do schools the school district if you have kids you want to know what kind of schools they're going to be in the neighborhood is it a good area for you to be in is it close to highways if you got to commute to work how many bedrooms and bathrooms do you want and what about the basement do you want a basement does it need to be walk out how big does the basement need to be does it need to be finished you might not know everything you want in the beginning but as you start going through homes start creating this list and prioritize what's most important and what's not as important but you would like these things that way you can tell your agent that way they can show you the homes that fit your criteria it will save you a ton of time fifth when you finally find a home that you like now it's time to make the offer this is where things get fun so homes are a little bit different than other purchases like investments because now you might not necessarily be trying to get the best deal because the home has more emotional value right this is the place where you want to build memories it's where you want to raise a family and it's where you want to be it's not just something that you want to buy cheap that way you can flip it for a higher price so when it comes time to buying the home you don't necessarily always have to try to get the best price possible because if you really love a home you want to make sure you get it that being said i also don't want you to overpay for the home and so if you want to make a good offer you need to first understand what kind of market that you're in are you in a buyer's market or a seller's market when you're in a buyer's market now there's a ton of inventory homes for sale but there aren't that many buyers when you see that happen you're gonna see sellers cutting their prices trying to get more buyers looking at their homes and when you're in a market like that you're gonna have way more wiggle room on the price in a seller's market the seller has the upper hand now there's a ton of buyers but not as many homes for sale and this is when you see home prices going up when you're in a seller's market now the buyers have to compete against each other to buy the home so if you're in a buyer's market you're typically going to have more leverage and more negotiating room so you can be more aggressive with your offer if you are in a seller's market you might not you might have to pay full asking price and sometimes even more than asking price if you're really in a strong area if you really want to buy that home there's been situations in sellers markets where i've made an offer on a property and the seller would say oh no this is too low we have another higher offer and i will say okay take that and then 30 days later they have called me and said oh this other buyer backed off because they couldn't get the cash will you still be interested in buying the property at the original offer that you made so that has happened where i have been rejected and then they called me back to buy the home because it was the type of market that we're in in a seller's market it is completely flipped i have paid more than the asking price to buy certain properties that i want to own just because that's the market that we're in and i need to be competitive in order to make sure that i get the property this is where having a good real estate agent can really come in because they should understand the market and they'll know based off of the neighborhood that you're buying in what type of offer you should come in that way you can get the best deal possible if your goal really is to get the best deal possible then the best negotiating tip is just to be willing to walk away because if you don't get the price you like then walk away and find another deal the last tip i want to give you when it comes to making the offer is the time of year that you buy a home because if you're buying a home in the summer months especially if you live in a northern state where it's colder then that's when it's going to be the busiest season for real estate and that's when you're going to see the most buyers out there and that's typically when you see the highest prices of home selling because there's a lot of people buying homes in the winter months people just don't want to leave the house and so you're going to have less competition so you can get a better deal in the wintertime typically but again it just depends on what kind of home you want because you'll see more inventory in the summertime and typically you'll see less inventory in the winter time so if you don't find something you like you might have to wait till the summer once you get your offer accepted that's when it's time for number six giving your emd so emd stands for your earnest money deposit it is essentially your deposit and it shows good faith that you're actually serious about buying the home because if now if you walk away without any reason you will end up forfeiting this emd this deposit to the seller for wasting their time however that being said if you put down this emd you give this deposit to your agent and then you go through the home and then you realize oh this might not be the home that i really want you can get your money back as long as you do it within the contingency period so when you're negotiating a contract every contract should have a minimum 10-day contingency period that says that you have the opportunity to go through the home do inspections on the home and really just make sure that this is the home that you want if you have that contingency period there then you have the opportunity to get your money back as long as you do it within that contingency period if you decide the day before closing that now oh you know i just don't want to buy this home anymore or i don't really think this is the right home for me and you past that contingency period then yeah you are going to lose this deposit the amount of money that you have to pay for your deposit is going to vary state to state but a kind of good rule of thumb to remember and kind of a good negotiating tool is if you really want to look serious and you want to make your offer more enticing put down a bigger deposit this is something that i do when it comes to buying investment properties is if i really want to show this owner that i'm interested and that i can close quickly on this home then i will just increase this emd to a big chunk of the home value that way i can show them hey i'm interested and i'm ready to buy this property very quickly so if you find a home that you like and you really like it you might want to consider raising your emd a little bit to make your offer look more attractive and remember you can get this money back as long as you request it during that contingency period if you find something that you don't like or if you change your mind but before you do that make sure you talk to your real estate agent and confirm this with them and maybe talk to an attorney too because the last thing you want to do is run into an issue where the agent messed up on the contract and that contingency period is not there so make sure you talk to your agent and maybe an attorney to confirm that this contingency period is in your contract now once you enter into contract to buy the home and this contingency period starts what you want to do is your due diligence so what that means is you want to go through this property with an inspector and make sure that there's nothing wrong with the property or at least nothing major wrong with the property because one thing that i can tell you that when it comes to real estate things break so what you want to do is kind of minimize how many things break by knowing exactly what's wrong with the property before you buy it at the very least you want your private property inspector to walk through the entire property and the roof to make sure there's no major issues with the property you also want to maybe take a look at mold and your sewage system and your electrical system and your plumbing system these are kind of extras but you know the more cautious you are the more money it can save you down the line i can guarantee that your inspectors are going to find things that are wrong with the property that's what you're paying them to do you're paying them to find things that are wrong what you want to really know is how big of a deal these things really are and what you can also do as a little negotiating tip is when you get this list of kind of repairs or issues with the property you can use this to go back to the seller and say hey there's a bunch of issues with the property either you can lower the price of the home by five thousand dollars or you can spend fifteen thousand dollars to fix these things it's up to you when you do this it helps to just talk to your real estate agent because they're gonna know how to do this the right way once you enter into your contract to buy a home you're also probably going to start working with a title company if not an attorney to help you with the actual purchasing process because their job is to look at the records and make sure that there's no back taxes on the property or back liens meaning loans on the property because the last thing you want is to buy a property and then six months later find out that there's a 30 000 loan attached to the property that you now own i highly recommend you go through a title company because the title company is going to give you something called title insurance which protects you against them missing something on your records i'll show you why this is important one time i was part of a deal where we bought a multi-unit property and it had a lot of land and it was on a lake and so when we bought this property there was no issue with the records but a year after buying the property i got a letter or actually my attorney got a letter in the mail saying that this lender had foreclosed on a property or a portion of a property because apparently there was a old lien an old loan on the property that our title company didn't see so now we were like what the heck what do we do because this old lender had a loan on a property that we didn't know about so obviously nobody was paying it the last seller didn't tell us about this and so because nobody was paying this loan because we didn't know about it then this lender then foreclosed on a portion of our property that's when we went to the title company and we say hey what the heck you guys missed this record so the title company paid off the old lender i think it was like a hundred thousand dollars to make that old loan go away that way we can own that whole property again if we did not have title insurance and if we did not go through a good title company that would have been a very very very big headache so you want to make sure you're going through a title company that way you can get title insurance that way they can look at the records and protect you just in case they miss something on the records this brings me to number nine talking about the legal stuff now i might be a little bit biased here because i am an attorney but using an attorney is a small cost you can pay today that can save you a big headache and a big cost in the future what you're paying your attorney to do is to review your contract to buy the home because your real estate agent is not an attorney and you're paying them to go through your title documents and your closing documents to make sure that your title company has reviewed everything and to make sure that you're protected in every way possible if your attorney that you're working with is involved in real estate they might also tell you that they recommend you getting a survey or an environmental study done what these two things are are two additional kind of inspections on your property a survey kind of goes through the records to see what actual land that you're buying because sometimes you think you're buying a plot of land but you're only actually buying a quarter of that land or three-fourths of that land so a survey is when people go out and they really measure the actual dimensions of the property and an environmental is where people go out there and they're going to look at the soil samples and they're going to make sure that there's no other toxins in the land of the property from an attorney's perspective it is always better to be safe than sorry now practically speaking if the home that you're buying is in the middle of a subdivision you probably don't need an environmental don't quote me on that because there's always an exception to this but most likely probably not and in terms of a survey this is going to really help you figure out where your property line ends and where your neighbor's property starts so if your property has like a funky kind of layout with a lot of properties around it or different types of properties around it then you definitely should have a survey if you are kind of just in a regular neighborhood then you might not have the real need for it but again talk to your attorney about how important he really thinks it is because he or she should give you an honest answer on whether it's really important kind of important or not that important once you get past all of this now you're finally at the closing table where you're going to sign the paperwork and get the keys to the property if you've done everything else that we talked about then there's going to be no surprises at closing because you're going to review the closing documents before you get to closing and all you're literally going to do there is just sign a bunch of paperwork one tip that i do want to give you when it comes to closing is sometimes what you'll see happen is let's say you're closing on the property on september 1st sometimes the seller's going to say yeah you buy the property on september 1st but we the sellers are going to continue living in this property until september 10th if that's the case what you want to do is you want to negotiate some sort of per diem that your seller has to pay for living on that property because the last thing you want is come september 10th the seller says oh sorry we're going to take another 30 days to get out of here so you need to make sure you have some sort of per diem there where they're going to pay you a certain amount of money for every day that they're there and if they don't leave by the deadline then the amount of money they're going to have to pay goes up and you want to also make sure that some of this money is held in escrow this is something the title company can do for you that way now if they don't leave the title company is not going to give the seller their money because they are going to hold that money until the seller actually leaves the property the last thing you want is if the seller is staying in the property after the closing date that they just don't leave or that they take forever to leave so you want to make sure you're compensated for that if that happens by talking to your title company and talking with your agent to come up with a plan to make sure you're compensated if i'm not saying it is going to happen but if it happens you want to make sure you have a protection plan if you enjoyed this video here's a video that i think you'll love and while you're at it subscribe to our youtube channel and join our free finance and business newsletter and as always keep hustling now let's do some savings math to see how much money you're really going to save i can't do this in my head so i already did it out for you if you're saving 97 a month remember so if you're refinanced you're going to save 97 a month if you save 97 a month 12 times a year because you're going to pay this every single month

Channel: Minority Mindset

Views: 169,187

Rating: 4.9784713 out of 5

Keywords: minoritymindset, minority mindset, minority123, jaspreet singh, financial education, financial literacy, best way to buy a house, how to buy a house, buy a house, how to buy a home, buying a house, buying house, how to buy house, home buying tips, home buying process, home buying process explained, home buying 101, home buying process start to finish, home buynig mistakes, home buying for beginners, home buying tips for first time buyers, home buying steps, home buying guide

Id: gz5LjPFO1NY

Length: 22min 39sec (1359 seconds)

Published: Fri Dec 11 2020