Yesterday, I attended the Washington State Housing Finance Commission‘s Homebuyer Education Seminar. Which was why I hadn’t blogged. It was friggin five hours.

But man, was I glad I did. I don’t know how people can buy a home without having attended one.

I basically went in expecting to hear most of what I already know, and after five hours (yes, five!) came out wanting to grab one of these people and kiss them repeatedly.

It is THAT crucial. But let me start from the beginning.

So Lokes and I have been wanting to buy a house ever since we landed here. Growing up, our parents always told us that owning a home was one of the most important things we had to do as adults. It was the grownup thing to do. The RESPONSIBLE thing to do. The SAFE thing to do.

And so, we set out to buy a home in the US as soon as we could afford to. We didn’t have to be told again why owning is better than renting, especially with the attractive tax deductions here in the US and the crazy appreciation rates of King County in Washington.

But what did we know about buying a home in the US? We’ve only been here seven months after all.

For the last six, we’ve been looking at houses both on the Internet and through visiting open houses. We’ve spoken to selling agents, who turned into buyer’s agents and because we had no credit history blah blah blah, long story short, we basically had to wait it out.

This morning, I fully expected to take the knowledge I would get, and make it useful six months down the road when we would seriously launch into The Big House Hunt. Instead, I came out READY TO BUY.

That’s right. We, of no money for downpayment, and no green card (yet). We who have only been here seven months. We, who have been looking at houses and longing for the day when we can actually close on one.

No more waiting because all the reasons that were hindering us from buying like next month, were suddenly washed away.

Informed decisions. Aren’t they amazing?

And best of all? The seminar is FREE (or rather, it’s paid for by the state of Washington). Why don’t more people know about this? I have NO idea. Maybe they do. My agents certainly did not bring this information to me. And that’s why I’m firing them all.

Anyway, here are some of the surprising facts I learnt. You really have to attend the full seminar to learn for yourself everything there is to know about owning your first home in Washington.

State-assisted loan programs
Most people (like us) don’t have the capital for a downpayment of 20% and are waiting to save up the amount. And that is where programs such as The House Key State Bond for first time mortgagers come in. These programs offer below-market rate loans for qualified first time homebuyers (i.e. you haven’t owned and occupied a primary residence at any time in the past three years). What’s the catch? There ae, of course, criteria you need to meet:

You need to meet the program income and acquisition cost limits. For example, for a family of three and above who wishes to purchase a home on the Eastside may get up to $30,000, if the household annual gross income does not exceed $97k, and the price of the house they intend to purchase does not exceed the amount of $370k. If you want to buy a house in the Seattle area, the amount can go up to $60k (because properties are more expensive there).

Are you shocked yet? I certainly was!

Other criteria to meet is that you must first attend a five-hour homebuyer seminar (such as this one). There is also a limit on the types of loans can be used for this program: the Federal Housing Administration (FHA), conventional (Fannie Mae or Freddie Mac), Rural Housing Services (RHS) and Veteran’s Administration (VA) for seniors.

I asked the lender speaker Joan (who works for First Horizon) if non-green card holding resident aliens are eligible for the programs. She said that we may not be eligible for the full amount due to the lack of a credit history or other information that we may lack, but there are no restrictions as to who may apply.

Looking for a home? Get a buyer’s agent
Contrary to what you may believe, getting and SIGNING A CONTRACT with a buyer’s agent even though you don’t pay him/her anything at the end of the day, is crucial.

One of the ‘deadly sins’ that Washington homebuyers commit is to accidentally fall into dual agency by calling about a house they saw in a mag or on the Net or while driving around (which is a NO-NO, ladies and gents). Dual agency is where an agent can both buy and sell, which is a conflict of interest because they will naturally want to sell properties they themselves are listing so that the brokerage they work for gets the full 6% commission (which would otherwise be split between the brokerages of buyer and seller agents).

Dual agency is, unfortunately, legal in Washington (it’s not in 19 states). As such, homebuyers are definitely at a disadvantage because most agents here ARE dual, and will certainly favour any negotiations towards the SELLER because he is the one paying the commisions. So whose interest do you suppose YOUR buyer agent will look out for?

While most agents in Washington are dual agents, one may ask, what is to prevent a contracted buyer’s agent from just letting you know about properties that are only listed with his/her brokerage?

First, write the contract. In it, make sure to insert these clauses:

  • the agent MUST provide you with a comprehensive COMPARATIVE MARKET ANALYSIS of the type of property you want to buy, the location etc. It should contain graphs, charts, all the details you need to assess what price you will need to pay for the type of house you want, in the area you want. It is about 4-5 pages long.
  • the agent MUST NEGOTIATE for you with the seller agent
  • the agent MUST ADVISE you on all aspects of the process of buying a home

Believe it or not, these are not things a buyer’s agent is obligated to do for you even when he/she may be earning 1.5% of the commission at the end of the day.

How do you know if a buyer’s agent is good? They must’ve sold 60-80 homes in the last year, and should be full-time agents and not part-timers.

Other reasons for getting a buyer’s agent:

  • they can find out little details about a property, such as if the seller is going through a divorce. This means they will want to sell quickly as to divide assets, and might be negotiated down.
  • they know about pre-foreclosures (as in properties that WILL be foreclosed and not ALREADY foreclosed)
  • they can dig for property history
  • they know if the seller HAS already bought a house (and hence, needs to sell ASAP for cash flow reasons)

About them credit scores
Most underwriters that approve loans rely heavily on credit scores so work on building yours by making sure you keep your credit cards have available balances of 60% or above. Keep your credit lines at a moderate amount. Having 20 credit cards will actually lower it down.

Did you know that getting a mortgage will improve your credit score sharply? Yea, I didn’t as well. Another surprising fact is that having your score pulled from any of the three credit reporting agencies (Transunion, Expedian and Equifax) one too many times can also lower your score, so if any of the lenders wish to see your latest credit report, have it pulled yourself and give them a copy instead of having it pulled again.

Not all properties are online
Before attending the course, I believed that most of the properties out there would be on the search engines provided by the realtors. I had subscribed myself to three of them and checked them regularly to see the inventory. Apparently, quite a bit of the properties for sale are NOT LISTED in these online public databases due to privacy requests of the sellers, and only on the MLS database that is only viewable to and searchable by agents. This is another reason why you need a buyer’s agent.

Speaking of the agent’s MLS database, we were told that there are also TWO different versions of a MLS return that an agent may show you. You need to ask for the AGENT’S VERSION because that is the one withinformation on kickbacks and cash bonuses that the seller agent/seller wants only the buyer agent to see. Naturally, buyer agents will start showing buyers these properties because of the obvious financial gain, although the house may be

Loan Officers get commission too
Finding a loan officer you can trust is also crucial because they too have a financial interest in seeing your loan go through. As such, shop around properly. If you are using a House Key loan, you will need to use a lender that is a ‘House Key Partner‘.

Breaking a lease may not break your budget
Part of why we’d been waiting to buy is because our rental lease ends next year. According to the realtor who was speaking, all leases can be broken provided that you find a seller who is willing to pay some of the cost of this penalty just to be able to sell his property quickly. He also said that most of the time, landlords are not sticky about breaking the lease because they can raise rent and get renters pretty quickly especially around areas such as Redmond.

 

Boy do I feel armed and ready to go buy a house now. Lokes will be attending his class next week (the primary borrower/income earner HAS to attend the class if you want to use a House Key loan) and then, we will take our first real step towards owning our first home in the US!

Wish us luck!