HOW TO GET STARTED ON THE HOME BUYING PROCESS
REALTOR CONSULTATION
Meet with your realtor and consult on your home requirements. Your Realtor is there to help you in your search and throughout the whole process of Home Buying from the beginning to the end.
AFFORDABILITY AND LOAN PRICE RANGE
You will need to know how much of a mortgage you can obtain to buy a house before you seriously start looking.
LENDERS AND THE PRE-QUALIFIED LETTER TO GET STARTED
Find a Lender to get pre-qualified. Getting pre-qualified doesn’t mean you are approved but it does mean that based on what information has been provided thus far, it is possible you qualify for a certain amount. This letter is usually enough to make an offer to buy a house. It will then take a number of weeks for the lender to do the full loan verification.
NOT ALL LENDERS ARE THE SAME: Check into the many lenders and types of loans/mortgages to find the one which suites you best.
Types of Lenders can be from banks, Credit Unions, Mortgage Lender, Mortgage Broker, Direct Lenders, Hard Money Lenders, etc. Rates may be different from one to the next. Do a little study and find out what these mean so you know your options.
DETERMINE BEST TYPE OF LOAN TO GET
Consult with lenders on what the best type of loan is for you and your best strategy. There are many programs depending upon your financial and other situations. For instance, do you put 30% down to get the best price? Are there programs to help you if you can only put down a smaller amount? How much are you allowed to be gifted by someone else to pay for closing costs if you are trying to get help.
TYPES OF LOANS AVAILABLE
Here are some examples of loan variations (not all types included):
Conventional Loan (not secured by a Government sponsored entity): Typically need 10% down payment and good credit. Generally, if you put less than 20% down on a home, you need to pay mortgage insurance. Good to know, right?
See here for more information on Mortgages..
Non Conventional Loan (secured by a Government sponsored entity):
FHA Mortgage: Commonly used by first time home buyers but generally available. Down payment is only 3.5% and lower credit scores are more forgiving. Interest rates may not be as attractive as a conventional loan.
7 things to know about FHA Home Loans..
HUD Mortgage Programs: See what is available here..
VA Loans: Down payment is zero but you must qualify. Find out more about VA loans here ..
MORTGAGE CALCULATOR
Check out a Mortgage Payment Calculator: Almost every Mortgage company supplies one on their site. Example of a Mortgage Calculator here..
INVISIBLE CLOSING COSTS
Make sure you know what these are and are prepared ahead of time. These don’t show up in your loan or in the listed price.
These can generally be about 6% of the cost of the house listed price which is paid in addition to the listed price.
There are always options and negotiations: For instance, you may be able to get the Seller to pay for 3% of the closing costs which your Realtor would help you one or you can get a non conventional loan that pays for part of or all of the closing costs that the Lender assists you with, etc.
MORE INVISIBLE COSTS AFTER BUYING A HOME TO CONSIDER
If you are buying a condo or home in a community, check HOA (Home Owner Association) fees which are sometimes monthly or yearly fees.
Are you in a flood zone and what would the cost be for that on a yearly basis.
What are the estimated yearly taxes on the house you want to own.
DURING THE LOAN PROCESS MAINTAIN OR BETTER YOUR CREDIT
Keep your debt level the same or better.
Keep your job.
Put off co-signing on any loan for someone else as that could change your credit.
Keep your credit from being pulled for any reason such as a car lease, a loan, etc.
Keep paying on your regular monthly payments.
Keep your bank statements, tax returns, checkbook or other important paperwork available for your loan officer.
When loan officers ask for information, speedily respond and provide the information to keep the loan process moving as fast as possible.
Most of all, if you think anything might affect your credit, consult with your loan officer first.
DETERMINE YOUR HOME SPECIFICATIONS
There are parameters and points to consider:
Determine what is absolutely necessary versus what is simply nice to have. It would be a shame for your Realtor to pass on a home that would have been perfect but was missing that “nice to have” extra room for example.
What is your minimum number of rooms and bathrooms, garage, carport or none at all. Block house compared to a wood frame house, pool or not, updated house or not. Open kitchen floor plan. Minor fixer upper. Geographical areas to live in or not. School considerations.
These type of points will help your Realtor find the home you are looking for.
START HOME SHOPPING
Once you have your pre-approved letter and know what your price range is, you can start looking at homes with your Realtor. Look at many homes and get an idea of what you want.
Get familiar with types of homes available and see what is available on the market. Your Realtor can set you up with an instant listing notification (auto email) based on your preferences of homes to look at, etc.
BUYER BEWARE (Caveat Emptor)
A warning to the buyer that you are purchasing a home “as is,” subject to all defects. Be an informed buyer, it is your responsibility to do so. You will hardly find a home with no defects. Become aware of them and what is acceptable to you. Some points may be worth it to get fixed up after buying the home whereas some points are just not worth the trouble.
DUE DILIGENCE
Do your DUE DILIGENCE in buying a home.
In other words you are making a huge investment in your life, take the care considered reasonable by a person to examine all facts related before entering into the agreement or the financial transaction. For example, the house promotion says the roof is great and has no leaks; inspect, look and hire professional home inspectors to review it and many other important points in a home. Know what you are buying and if you don’t know, ask and find out until you are satisfied. Look for old leaks in the cealing, large cracks showing settlement issues, older windows, etc, etc.
COMPARATIVE MARKETING ANALYSIS (CMA)
If you are interested in a house, have your Realtor do a CMA.
More information here about a Comparative Marketing Analysis..
This will give you a realistic cost value of your home compared to similar properties in the same area in the last 6 months or so. This makes negotiating realistic for a fair purchasing price.
MAKE AN OFFER
Once you find a home you are interested in, waste no time in getting your Realtor to put an offer in on your behalf. You will also need to provide your Proof of Funds (POF) or Pre-Qualified letter at this time. If you are making a cash offer, providing a copy of your account showing the funds available.
There are many other people looking for homes and good deals too. Once the Seller accepts your offer, you will have a certain number of inspection days to fully make your decision. Earnest funds are deposited and inspections begin. Under normal circumstances, you can get your earnest fund deposits back if you decide not to buy the house during your agreed upon inspection times. Make sure you know beforehand.
It is at this time that the Seller usually determines the Title Company which needs to be noted on the first page of the Contract.
NEGOTIATE THE DEAL
There probably isn’t anything that could not be negotiated in real estate. Get with your Realtor to go over any points you would like negotiated.
EXECUTED CONTRACT
This is a legal document that has been signed off by the individuals or entities necessary to become effective. In other words as the Buyer you have signed it and the Seller has also signed it and it has been delivered to both parties for action.
DURING THE LOAN PROCESS, APPRAISAL
Your lender will get important documents from you such as your financial records, credit records, etc. Underwriting will research and assess the risk involved in your loan. The Lender will usually arrange for an impartial Home Appraisal which you will pay for so they can evaluate the house under review to protect the lender’s interests. See here for more information on Appraisals..
It can take anywhere from 3 to 6 weeks to get your loan finalized and approved.
CLOSING PROCESS
Buyer conducts a final walk-through of home before signing.
The Title company is where all of the paperwork signing occurs including your loan documents which your lender provides ahead of time. They will have performed a title search and verified that the seller is the rightful owner of the house being purchased. Liens, judgments, loans on the property and property taxes due are all investigated.
See more Title Search information here..
All funding for the closing must arrive (usually by wire) prior to or during signing. Once all signing is done and all funding is confirmed by the Title company as arrived in, then the house becomes available for you to take ownership. Keys are usually handed over from from the Selling Realtor to the Buyer’s Realtor and turned over to the buyer.
As Your Realtor, Susie will be there all along the way to help you hit those deadlines and keep the transaction on track until the end.