5 Things You Should Know When Making a Move
There are a lot of moving pieces when making a move, here are 5 things that most people don't know.
- You can Buy BEFORE you Sell
- You don't have to put 20% down
- You can get a better interest rate
- Not every home is on Zillow
- Save on cash out of pocket
Let's dive into each one of these in more detail. I'll provide resources for each of them as well.
1. You Can Buy Before You Sell
If you're a current homeowner that wants to buy a new home and use the equity form your current home, this is for you. Buying or selling a home is already a big task, but when you try to do them at the same time, it adds a lot of complexity.
There is an easy solution for this and it's a program we have called, Buy Before You Sell. It does exactly what it says. It allows you to buy your next home before you sell your current home.
Most of the time, homeowners in this position are buyers much before they're sellers. Often, they will search for their new home without preparing their current home for sale. This usually leads to a situation where they're rushing (or panicking) to get their home on the market. Hopefully, not missing the home they liked in the process.
The Buy Before you Sell program is a simple 4 step process.
- Get approved for the program (one day process)
- Start Shopping
- Buy your new home
- Sell your old home
This program allows you to pull equity from your current home and use that toward the purchase of your new home. Meaning that you are moved into your new home before you have to list your old home.
Our clients that have taken advantage of this program, they usually end up getting a better deal on the buy side. As well as end up selling their home for more money.
Learn more about the Buy Before You Sell program, including costs and timelines.
2. You don't have to put 20% down
One of the biggest myths in real estate, is the need for 20% down payment. Not only is it not true, it may not even make the most sense for you.
There are so many different options for all buyers. Here are a few different options:
- 3% Down Payment - Conventional
- 3.5% Down Payment - FHA
- 5% Down Payment - Conventional
If you have 5% down payment available to you now, you may want to consider buying sooner than later. Depending on how long it will take you to save the extra 15% down payment, home values could be higher.
Yes, there are downsides to putting less than 20% down. The main one is that you'll have PMI (private mortgage insurance), which is an extra cost/fee. This cost usually adds several hundreds of dollars to the payment.
My advice to my clients is to figure out what your comfort zone is for your payment and down payment. You can do that with a mortgage calculator, or by contacting a lender.
Once you know what your budget is, check to see if you can find any homes you like. Schedule some tours and go window shopping. Worst case, you realize you don't like anything. Best case, you own a home way before you thought you could.
3. You can get a better interest rate
Your interest rate is one of the biggest factors of your monthly payment. By saving money on your interest rate, you can likely change your purchase price.
There are a few ways that we help our clients save the most money possible on their interest rates.
- Shopping with multiple lenders
- Adjustable Rate Mortgages (ARM)
- 2-1 Buy Downs
Shopping with multiple lenders seems like an obvious one, but most people don't do this. Just like not all Real Estate Agents are created equal... Not all lenders are the same either.
I'll often hear that a consumer is more worried about a 1-2 point ding to their credit score than a .5% difference on rate. Remember that this is a six or seven figure purchase. It should be treated that way.
The Adjustable Rate Mortgages got a bad name after the 2008 crash, but they're not bad loans. They're actually very different then they were back then. An ARM means that you have a fixed rate at the beginning of the loan (typically 3-10 years) and then it can adjust. These are actually very popular with the more savvy buyers.
Last one I'll mention is the 2-1 Buy Down. Described as simply as possible, the first year, your interest rate is 2% less, the second year your rate is 1% less. Every year after that, your interest rate goes back to the normal.
Example: Your loan is at 7% interest
- Year 1 - 5% interest
- Year 2 - 6% interest
- Year 3-30 - 7% interest
This is a program that allows you to ask the seller to pay for a rate buy-down. When you have more leverage, this allows you to save a ton of money on your payment for the first two years.
This might not make sense for everyone, but you should definitely check it out for yourself.
4. Not every home is on Zillow
Did you know that Zillow, Redfin, Realtor.com and all other sites like that all just pull properties from the MLS? They don't have any unique data.
The reason I'm sharing this is because there are a ton of properties that are for sale, but not on Zillow. At least not yet. The only way for you, as the consumer, to stay in the loop on these homes is to communicate with your agent.
Our Agents at Onyx Homes get an email every single morning with a handful of properties. These homes are not marketed anywhere online. If you tell your agent what you're looking for, we can share the info when a home pops up that you may like.
We can only help if we know what you're looking for. Here is an easy way, if you're not already working with one of our agents. Go to SoCalHomesForSale.com and create a 'Saved Search'. This will tell us what areas you're looking in. If we find off-market homes that fit your search, we'll send them over!
5. Save on cash out of pocket
Last but definitely not least, this tip will save you cash out of pocket when buying a home.
One thing that is often overlooked in the home buying process is called 'Closing Costs'. These are the costs that are associated with buying real estate. It covers a ton of different services that have to happen to transfer a home. That's not exactly what we're covering.
You can ask for the seller for pay for some or all your closing costs, when buying a home. This can total anywhere from 1-3% of the total sale price. When you're putting little money down, getting a 'credit' for these closing costs can make it easier to buy.
The goal for all our clients is to get them the best deal possible. People often think that the best deal means getting the best price. However, there are so many other pieces required to put a deal together, you have to look at everything.
These are some of the strategies that we practice with our clients. If you're interested in learning more about it, you should book a strategy session.