Premier Mortgage Group

Buying a home is exciting, but it can also be intimidating for many first time homebuyers. Breaking the process down into manageable steps can help make it seem less overwhelming.

Although you may be looking forward to getting out there and checking out some houses, the first several steps toward owning your first home have nothing to do with floor plans or countertops. First you’ll need to get your financial affairs in order and figure out if you qualify for a loan. Because this can take some time, it’s wise to begin the process well in advance, even up to a year before you will actually purchase a home.

To help you get started, here are some steps for preparing to buy your first home. By following these steps you can reduce your anxiety and make the process more enjoyable:

1. Define your current financial status. Evaluate your income, expenses, debts, and savings. Knowing where you are at financially will help you figure out if you are in a position to buy a home, and, if not, what you need to do in order to get there.

2. Obtain a copy of your credit report. While you may currently be doing very well with managing your income to pay bills, there is always a chance that some old item or even a mistake is currently showing up on your credit report. By checking early in the process, you can identify issues that need updating or correcting. Go for a report that includes data from the three main credit reporting agencies.

3. Decide how much you can reasonably afford for a monthly house payment. If you currently rent, your monthly rent payment is a good starting point, but you will also need to consider that as a homeowner you will have additional expenses including property taxes, home owners insurance and home maintenance.

4. Look into financing options. Speak with an experienced mortgage lender to determine the best fit for your personal and financial situation. A qualified loan officer can help answer any questions and find the best payment terms and conditions that will work with your budget.

5. Identify what you want in a first home. Make a wish list of your needs and wants for a home, such as the type of home, number of rooms, and amenities. Also think about which locations you are most interested in.

6. Engage the services of a Realtor. Once your financial situation is squared away including your credit status, financing options and monthly payment amount, you’ll be able to provide a Realtor with the basics required to begin your home search. If you don’t know a real estate agent, try asking friends for referrals.

7. Check out several potential homes before making a decision. You should look at quite a few different homes in order to compare and find the one that best meets your needs. Even if you find one you like right away, take the time to look at a few more. That being said, don’t expect to find the “perfect” home with everything on your wish list. Be prepared to make a few compromises.

If you’re ready to begin taking steps on the journey toward your first home, our experienced and dedicated loan officers can help. Contact us for more information about starting the process.

You’ve done your homework on investment properties available in your area.

Now’s the time to get deep into the details to see if that home will pencil out for you as a rental—will you breakeven or come away with a profit?

Excitement builds, as that profit is looking mighty tasty; but you better ask your agent for a further breakout of expenses from the owner.

GETTING TO ‘CASH FLOW ‘

You scrutinize the rental’s ‘profit and loss’ (P&L) statement. Some of the basic categories may look something like this:

Operating Revenue: Your monthly rental receipts

Vacancy Rate: Usually figured as a percentage deduct the dollar amount from Operating Revenue

Operating Expenses:  Usually made up of fixed or variable costs, and not limited to:

Property Taxes

Property Insurance

Offsite Property Management Fee

Repairs and Maintenance

Water, Sewer, Trash

Advertising

Lawn and Grounds Keeping

Accounting and Legal

Net (Loss) Income from Operation: All the totals from above will bring you to your Net Operating Income (NOI) 

…BUT WHERE DO I ENTER THE MORTGAGE PAYMENT?

Up until now, maybe that rental prospect is looking like the proverbial cash cow. But you still need to factor in your mortgage payment.

So where do you enter it? Believe it or not, the mortgage payment (Debt Service) is not listed as an operating expense: Enter it separately after the NOI.

THE ‘OL CASH FLOW…

Here’s a very simplified look at that property’s P&L:

• Annual Rental Income:             $24,000
• Less Annual Vacancy Rate:      $1,400 (est. 6%)
• Annual Operating Expenses:    $9,000
• Less Annual Debt Service:           $8,500
• Net Operating Income:                  $5,100
• Cash Flow:                                 $  2,000

If you’ve done your research, checked with your accountant, and understand the makings of a basic P&L, you’re may be well on the road to successful real estate investing.

Please contact us to learn more about purchasing investment property. We want to become your trusted adviser when it comes to find the right mortgage for you.