You’ve Worked Too Hard For Your Money To Needlessly Give It Away.

Here’s A Helpful Guide For Buying

The Right Home, At The Right Price

And Getting The Right Financing.

“You Don’t Make Money When You Sell Real Estate,

You Make Money When You BUY It!”

Dear Home Buyer,

          Do you see the statement above?  Someone once told me it was written backwards…that you only make money when you SELL real estate.  “How on earth could you make money when you buy it?” he said. 

            But that statement IS accurate.  You see, you might receive your sales proceeds when you sell your home, but it’s how well you BOUGHT your home that will determine HOW MUCH your proceeds will be.

            But the story doesn’t end there.  Finding the right home, and making a prudent financial investment is more involved than just “buying right.”  You also need to FINANCE it right. 

Even Experienced Homeowners Make Costly Mistakes

When Buying And Financing Their Home

            Hi, my name is Philip Taylor and I specialize in helping people buy the right home at the right price…AND right financing. 

            It’s no surprise that borrowing $100,000…$200,000 or more is a lot of money.  And how to FIND the right home…how much to PAY for the home…how much to BORROW…and on what FINANCIAL TERMS can literally mean tens of thousands of dollars MORE or LESS in your pocket!

            If you’re like most people, the decision to buy a home involves a number of stresses and strains.  For about 80% of buyers, it’s the single largest financial transaction of their lives.  Mistakes in any part of the buying process can cost you thousands. 

            That’s why I wrote this special report…to give you a number of helpful, straightforward tips for finding a home that meets your needs, AND becomes a wise financial investment for you. 

Here are 8 strategies (I call them “secrets” because so many home buyers disregard them when buying) you should consider when buying your next home…

Secret #1:  Understand What You NEED In Your Next Home.

            Two things you need to consider here:  Your NEEDS…and your WANTS.  They’re two very different things.

            You may need 4 bedrooms because of your children, or need a 3 car garage because of your 3 cars…

            What you’ll find is your needs are fairly basic.  It’s the “wants” that take a little more time to clarify.  Here is a list of needs you should consider BEFORE looking for your home:

1.      General price range of home – we’ll cover this ahead when discussing financing options and the amount of home you can afford.

2.      Approximate size of home (in sq. footage) – make a reasonable range

3.      General location, area, or subdivision

4.      Number of bedrooms required (don’t forget to include any home offices or guest rooms).

5.      Number of bathrooms you need – frequently determined by the number of children you have.

6.      Style and layout of home: Do you want a more formal plan, or a contemporary plan with great room designs, etc.

7.      School requirements or districts

Secret #2: Understand What You WANT In Your Next Home.

            A great way to get a handle on your wants is to take a good look at your present home.  What do you like about it?  Do you like it’s open floor plan?  Do you like the kitchen and eating areas?  Do you like the common area layout?

            List out everything you like about your present home, or homes you’ve visited. 

            Now, let’s take a look at what you don’t like about your home.  Do you hate the flat roof?  Do you hate the master bedroom layout?  Are the bedrooms too small?  Is the kitchen too far from the garage?

            If you dislike something with your present home, you’re going to dislike it with your new home.  So the better you can identify these items, the more likely you are to avoid them. 

            Here’s a good suggestion: Take out a piece of paper and draw a vertical line down the middle.  In the left column, write down everything you like about your present home.  In the right column, write down everything you dislike about your present home.  It’s also important you understand WHY you dislike something.

            Now, from your list of “likes,” let’s compile a list of features you want for your new home.  Now, here’s an important tip that will help you really narrow your focus.

            Take out another sheet of paper and put two columns on it.  On the left hand side, you will be listing out the features of your home.  And on the right hand side, you’ll be listing out the benefits. For each feature, you want to list the benefit of that feature.

            Features tell you what something IS: 3 bedroom, 2 bath, 3 car garage, etc.  Benefits tell you what something DOES.  Benefits fulfill desires.

            For example, a great room concept (feature) will be ideal for entertaining friends and family at special times (benefit).  So on the left hand side, you would put “great room..”  And on the right hand side, list out all the benefits (or reasons) for the “great room” design: Family entertaining, business entertaining, Thanksgiving holidays with the family, etc.

Understand What Each Other Is Looking For, And WHY

            If you’re a husband and wife looking for a home, this exercise will eliminate many disagreements down the road.  You will both understand what the other wants, and WHY they want it. 

            I recommend you RANK each feature in terms of its importance to you and your spouse.  You’re both going to live in the home, so you better understand what the other is looking for.

For example, a well designed gourmet kitchen (remember, list ALL the features of the kitchen you’re looking for) may rank high with a woman, while having a workshop may rank high with a man.  Try to understand each other’s priorities.

Most People Have More Dreams Than Money

Ranking will also show you areas you may need to eliminate because of price constraints.  And by having each person rank the importance of the features they want, you won’t be eliminating a high priority item and putting additional stress on an already stressful time.

Secret #3:  Understand How Much Home You Can Afford.

            Like it or not, there are 2 guidelines bankers and mortgage lenders use to determine how much loan you can afford. 

            The first guideline is the Payment To Income Ratio.  This guideline compares your income – or your total household income – to the amount of mortgage payment you’re considering. 

            To calculate the “payment” part of the formula, the lender will take the mortgage payment (principal + interest) and add to it Property Taxes and Insurance.  Hence the term “PITI” (principal, interest, taxes, and insurance).

            Usually lenders will loan up to 38% of your total household income.     

            But before you think you’re home free, there’s something else you need to know…

            It’s called the Debt To Income Ratio.  Debt refers to ALL the major monthly payments other than your mortgage payment (PITI).  To arrive at this amount, the lender will consider…

            Your car payment…

            Your credit card debt and payments…

            Any IRS liens or payments due…

            Any other payments and debts you have (boat, 2^nd home, etc.)

            Then, they’ll compare your total debt to your ability to make current payments with your new home loan added into the equation. 

Now, here’s the “stickler.”  Each mortgage company sets different limits on your Debt To Income ratio.  Which is why it’s critically important to find a MOTIVATED LENDER.

Don’t follow the “canned” financial advice like you see on TV.  Most of that advice is “rule of thumb,” and designed for the lowest credit rating and highest interest rates. 

Think about this…

If you spend 2 or 3 days to find a loan that saves you $40,000 to $150,000 over it’s term, your time is WELL WORTH SPENT!  Doing a little homework on your own will literally save you thousands over the term of your loan. 

Secret #4:  Save A Bundle When Financing.

            Your ability to afford a home will be related to a number of items.  They are…

1.      The PRICE of the home;

2.      Your DOWN PAYMENT on your home, and thus the amount financed;

3.      The INTEREST RATE and POINTS of your loan – the amount a bank charges you for the money;

4.      The TERM of your loan: 10 year, 15 year, 30 year.

5.      The overall TYPE of your loan: Most common is fixed vs. variable rates.  But there are hundreds of loan packages to choose from.

And just in case you were looking for a specific “rule of thumb,” for financing your home, you should know that…

There Are NO General Rules Of Thumb About Financing Your Home.

            Each case is different, and your personal financial circumstances will have an impact on how much home you can afford. 

            However, you MUST understand the relationship and impact interest rates, term of loan, points, and type of loan can have on your overall financial picture. 

            Let’s start with the “amount financed” first.  Many people often pay cash or put 20% or more down as equity.  The reasons they do this are…

            “The bank required us to…”

            “We’ve just always put down this amount…”

            “We wanted a lower payment.”

            Problem is, these reasons could cost you thousands of dollars.

            The answer for how much you can put down on your home is different for most people.  However, I have learned over time that…

Many People Put Down More Cash On Their Home Than They Need To,

And Could Have Received A Better Return On Investment Had

They Invested The Money Instead Of Putting It Into Their Home

Here’s a simple and fast way to “ballpark” the actual annual return on investment you get from the money you put down on your home:

1.      Take a look at the homes in your area.  How much have they appreciated, each year on average, over the past 5 years?  For example, you might find that values have increased an average of 1.5% a year.

2.      Now, take the total cost of your home, multiply that value times 1.5% (the average expected annual appreciation of your home).  For example, a $150,000 home increasing value at 1.5% for the first year.  Thus, the home will be worth $2,250 more a year from now.

3.      Now, divide the amount of increase in your home ($2,250 in the example) by the total amount of Down Payment you put into the home.  For example, if you put down 20% (or $30,000), then $2,250/$30,000 = 7.5%. 

Now 7.5% sounds like a fair investment.  But the question you need to ask is this: Can you make more than 7.5% elsewhere?

And did you notice something else here?  Had you put down just $15,000, your return on your Down Payment would be 15%!

The moral of the story:  Putting more money into your home may make your banker happy, because it lowers the risk of getting his money out if you default.

And it may make your overall payment a little lower…

But it may be a wiser decision to put less into your home, IF you can locate an alternate investment that will pay greater interest on your hard-earned equity.

Now, let’s shift gears a little and talk about the impact Term and Interest rate will have on your overall financial picture…

How INTEREST RATE and TERM can make or COST you thousands.

            Mortgage lenders toss around interest rate numbers as if they didn’t matter. 

            They DO!

            And to illustrate the impact interest rates can have on your overall financial picture, I’ve presented a table below showing the interest you pay over the term of a 30 year, $150,000 loan at 8%, 7% and 6%. 

            And here’s the clincher: Just ONE percentage point on a $150,000 loan can cost you almost $37,000 over the term of the loan!  TWO percentage points will cost you over $72,000!!

            Your banker might tell you his “slightly higher rate” is only a matter of $103 a month in payment.  But YOU should know better!  Take a look at the table below…

That’s money taken out of your pocket if you don’t look for good rates!

            And if you think interest rate has an impact on your overall financial picture, take a look at what modifying the TERM of your loan can do…

            Here’s another example of a $150,000 loan at 7% interest.  But this time, we examine the total interest paid when you select a 30 year vs. a 15 year vs. a 10 year amortization…

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