Guam Homes: Making Home Ownership a Reality
Home Buying 101
When it comes to first-time home buying — knowledge is fundamental. In order to ensure the best, most efficient purchase, there are a number of elements you need to understand when buying a home in Guam.
While the process may appear scary, knowing the fundamentals and what assistance is available can truly make the progression smooth and logical for even the most novice homebuyer. To best simplify the process, let us break down the first-time home buying process into a few basic steps:
Step 1: Getting Started
Guam has a very unique and diverse landscape — with low-end fixer-uppers to luxurious high-end beachfront condominiums and residential subdivisions. Before you even begin thinking about what you would like — you need to realistically understand how much you can afford and what kind of characteristics you would like in your first home.
Make a list of your priorities — location, size, proximity to schools or stores, number of bedrooms/bathrooms and specific amenities. Establish minimum requirements, and then a “wish list” of things you may like but are not necessary.
Always Pre-Qualify (it’s free)
You need to know how much you can realistically afford, as well as make sure your financial house is in order prior to beginning your house hunting. The better your credit score, the better your terms and rates. To do this, as is the first piece of advice given by real estate agents and financial loan offers alike, your first step should be to visit any of the local financial institutions on island and ask a loan officer to pre-qualify you.
“I always advise potential homebuyers to come in and to take advantage of their free annual credit report check,” says Ann Hocog, mortgage banking group manager of Bank of Guam. Buyers who are pre-qualified are given preference by real estate agents and financial institutions over those that haven’t, as it is easier to process your potential mortgage given the information you will have already provided.
The lender is going to consider your debt-to-income ratio — basically a comparison of your gross income to your outstanding bank debts (such as student loans, car payments, alimony or other long-term debt). Of course, how much cash you have available for down payment and closing costs, along with your credit history will also determine your maximum loan amount — but more on that later.
Websites for local banks often offer printable pre-qualification check sheets to ensure you know exactly what you need to have with you to complete the process. Pre-qualifying will also determine what types of loans you qualify for, as there is a variety to choose from with differing benefits and parameters.
Step 2: Google Guam,
Google Earth, Google a real estate agent
Familiarize yourself with Guam, use Google Earth and fly around the island a little bit. Though small in size, the vast differences in environment when comparing the hustle and bustle of central Tamuning to the charming serenity of the mountainous southern coast will introduce factors to your decision-making process. Do you see yourself in a condominium with a beautiful ocean view? Or perhaps relaxing in the isolated quietness of a yard with sandy beach frontage in one of Guam’s southern villages?
It is important to note there’s a plethora of information about Guam online, just use your favorite search engine and surf away.
Additionally, a simple Google search for any of Guam’s local brokerage companies provide access to Guam’s Multiple Listing Service, which is a search engine that contains every available old or new home for sale that is listed with local real estate brokerages.
It is important to note that homes “for sale by owner” will not be included in this database. Classified ads, as well as a thorough review of Guam PDN’s Tuesday real estate section — in addition to local magazines like Casa Guam, often have advertisements for these types of residential units.
Step 3: Find a real estate agent
Once you have an idea of what you can afford and which areas on Guam you’d like to call home, you’ll need to find yourself a trustworthy agent who is reliable and understands your needs as a homebuyer. Ideally, they would be recommended to you by a family member or friend and are knowledgeable of home buying on island. The real estate agent will be able to set up viewings of potential homes you’d like to purchase and grant you access to inspect them for yourself, as well as take you to house lots on which you could potentially build your own house.
Additionally, they can run basic price comparisons showing you what homes in the area recently sold for — giving you a good indication of whether or not the listing price seems fair, as well as answer any general questions you have about the market.
Step 4 : View some homes and make an offer
Make absolutely sure that the home you want to make an offer on is without a shadow of a doubt the one for you. Don’t be afraid to look at as many homes as possible within your price range (which you obtained when you pre-qualified), then talk with you realtor about what a fair offer would be for the house you want to buy. This should be based on the condition of the home and comparable sale prices of homes nearby in relation to what the listed price of the house you chose.
Real estate market conditions, supply and demand and length of time on market will all affect your initial offer. Your agent will draw up your offer to purchase contract and deliver it to the seller or listing agent at which point your offer will be accepted and signed or rejected with a possible counter offer — meaning the seller will agree to sell with certain terms and conditions different from the original offer. Once accepted, an earnest money deposit is generally required to demonstrate good faith and is roughly between 1 and 5% of the purchase price — this money becomes part of your down payment or closing costs and is potentially refundable. However, if you back out, you may forfeit the amount.
Step 5: Pick your lending Institutions
As part of the purchase contract, the financial terms and type of funding is a required portion that should ideally be prepared prior to making an offer in order to prevent a rush for approval upon purchase acceptance.
Shop around financial institutions to see who can offer you the best type of loans with the most competitive interest rates and repayment terms. To obtain a loan you’ll complete a written application and will need specific documents, to include recent pay stubs, rental checks and tax returns for the past two or three years (if you are self-employed). Much of this will be taken care of during pre-qualification. Expect to pay at least 20% of the purchase price to the bank for down payment on your new home, although some loans, such as the VA loan or Rural Housing Direct loans offer 100% financing — if you qualify.
The more money you can pay down, the better — as less interest will accrue and less debt outstanding. You will either receive a fixed or variable interest rate, depending on what type of loan you can obtain. There is a variety of different loan types available, in addition to temporary tax credits, for people in a variety of different circumstances. Additionally, some sellers are willing to seller finance where in you would draw up a mortgage with the seller themselves instead of with a bank.
Once you have an established lender and the offer has been accepted, an escrow account is created to act as an intermediary between parties for funds to be transferred and deed to be delivered. The escrow account is directed by the escrow instructions that were created and delivered by your representative and delivered to the escrow officer.
Closing costs vary, but are made up of escrow fees, property tax, and interest from date of closing to the day of the first monthly payment, loan origination fee, recording fees, survey fees, mortgage insurance, title insurance loan discount points, homeowner’s insurance policy and other fees that may be specific to your loan. Generally speaking, expect to pay roughly 5% of your purchase price for closing costs. Insurance
The idea is to protect your home in event of a catastrophe. Title insurance will be purchased upon closing in the event that the title to the property is deemed invalid. In addition, typhoon insurance, flood insurance and homeowner’s insurance and home warranties will all assist in the case of serious unexpected damage to your new home. Talk to your real estate agent about finding insurers and remember to shop around a bit.
Step 6 — Keys in hand
Closings generally can take anywhere from 30-60 days, depending on transaction details.
At the actual closing itself, all paperwork will have been prepared by closing agents, title companies, lenders and/or lawyers. These documents include the sale agreement and allows both the buyer and seller of the sale to ensure accuracy.
Once everything has been signed, sealed and delivered — you are presented the keys to your new home!