A San Francisco agent referred a couple to me who are first time buyers looking to buy their first home in the east bay. Yesterday, I invited them to come into the office to discuss their wants and needs and their resources. I gave them a Home Buyer Guide that could be their "bible" as they traverse the way to home ownership.
Wish List: Naturally, they are looking for a 3 bedroom/2 bath home with a garage and a yard. And they'd like to buy in Alameda, east of San Francisco.
Financials: They've saved $4,000. They are pre-approved for $310,000. They want to keep their mortgage payments to $1700 per month. And they're counting on getting $8,000 for the First Time Home Buyer Tax Credit.
And there's the first opportunity to educate: that the first time home buyer tax credit is 10% of purchase price, up to $8,000. And that this program expires Dec 1, 2009 so they need to close escrow by that time.
Reality Check: We went through some scenarios if they use FHA or Conventional Loans.
|
Type of loan, down payment and interest rate |
FHA Loan 3.5% down 5.5% interest |
Conventional 5% down 5% interest |
|
Sales Price |
$235,000 |
$235,000 |
|
Down payment |
$8,250 |
$11,750 |
|
Closing Costs |
$8,490 |
$8,971 |
|
Cash needed for down payment and closing costs |
$16,740 |
$20,721 |
|
P.I.T.I. (principal, interest, taxes and insurance |
$1,724 |
$1,659 |
Upon seeing these comparisons, they are better informed about what they will need for a down payment and for closing costs. And so their first order of business is to get their finances in order.
Setting expectation: This was a good way to introduce them to other cities where we can find suitable homes within their budget range (Alameda isn't one of them).
We browsed through the MLS for properties in their budget range, and discussed several that appealed to them. They know now that their plan to buy a 3 BR/2 BA house with $4,000 down is, simply put, not realistic nor achievable. At least not where they want to live.
Readiness to buy: This morning, they informed me that after sleeping on it, they decided to "put the house hunting on hold until we can confirm our down payment."
Straight Talk: A bit of time spent educating the clients was a good way to get them focused on what they need to do. They may not be ready to buy now, but the straight talk left an impression. When they're ready to buy, they know whom to call.
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