Where to Start When Buying A Home

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Real Estate

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WHERE DO I START WHEN BUYING A HOME?               

Congratulations on your decision to purchase your new home.  Buying a new home can be both exciting and confusing, so here are 10 tips to help you get started:

 

1.     Calculate how much you can afford.  

 

The rule of thumb is that you should not spend more than 28% of your gross income.  Also, think about what you have been paying out in rent each month.  Has this been a struggle, or has it been easy for you; are you able to pay all your bills on time?  There is a lot of things to consider in your finances; you just want to make sure that you are comfortable with what you can afford.  You want to live in a home where you can enjoy it and not worry month to month.  

 

2.     Consider your down payment.  

Most conventional loans require 3% down; however, I have learned that nothing is cookie-cutter.  FHA loans and VA loans differ.  Then, some loans may require little to zero down payment; much of this depends on your credit score or loan type (your lender will know which one is best for you).  Keep in mind the more that you can put down, the less your mortgage is.  

SIDE NOTE:  … MORTGAGE HACKS… There are programs that are available that many individuals overlook or do not ask about:

a)    Buydowns:  Buydown your interest rates by purchasing discount points 😊

b)    Home Buyer Assistant Programs:… Ask the Lender

c)    40-year Mortgages versus 30 years… you can always pay off early if needed

d)    5/1 ARM loan… Most people are afraid of these loans, but they have changed and maybe to your advantage.  The first 5 years is a fixed rate, and that could change once per year after that.  After 5 years, you could be ready to refinance…       TALK with your lender.  

(There are other programs; communication with your lender is the key)

 

Your lender will be able to guide you on the exact amount that you will need, which brings us to #3 talking with a lender.  

 

3.     Talk with a lender.       Business Woman (with Laptop)

 You will need to talk with a specialist about a loan, and they will walk you through the process.  After making an appointment some things to take with you to the loan office are: 

 

a.     Proof of ID  .. (Driver’s License)

b.    Proof of employment (you should be on the job for at least 6 months according to most lenders)

c.     At least 3- 6 months of proof of pay and W-2s (if you do not have this years W-2s, then back up to last years)

d.    Proof of credit history:  (keep in mind that they will need to assess your debt-to-income ratio)  Think about your credit cards, car payments, (know what you owe on these) proof of renting ect. 

e.     Recent banking statements  (remember they are looking at your debt/ income ratio). 

 

Note:  You will not want to make ANY large charges after you are preapproved.  Some individuals rush out and buy new furniture, drapes, and appliances for their home and charge them.  This changes the debt/ income ratio that the loan officer has put in and could keep you from getting your loan closed.  Remember, you are only preapproved for a loan, and the deal has not closed yet.  Also, if your income changes… you lose your job, you change jobs, you get furloughed; this changes that ratio as well and will affect your loan; therefore, you would need to contact your lender immediately.  If you are already working with a real estate agent, you will need to let them know about any changes so that they can assist you with the next steps in purchasing a home, but to better ensure that the home closes, don’t make changes to your debt to income ratio.  

1.     Get a Realtor:  Couple Meeting Agent 2

 Once you are pre-approved for a loan, if you have not already done so, you will want to consider a Realtor.  Having a real estate agent on your side could benefit you greatly.  Some individuals want to rush out and be unrepresented to buy a home in hopes of “getting a better deal.”  What they don’t understand is they will need to sign a form with the agent for non-representation.  As a buyer, this could be quite risky for you, but for the seller, their agent knows all the loops.  A Realtor knows the system, and you may not receive all the disclosures that you are legally entitled to and may close at a high.

 

A Realtor will be able to assist you with all the details of buying/ selling.  Not only do they have access to an unlimited number of homes, including those coming soon, and market values, but they will be able to quickly narrow down the search for you, saving you a tremendous amount of time.  Realtors are also very good at negotiations, not to mention handling the legalities and deciphering the paperwork.  At times, homebuyers will come across problems that they did not anticipate, which could hold up the closing process or even break the deal if not handled quickly; this is where your agent will be able to work with your home inspector, title company, and Lender to clear things up for you whether it is a defective inspection report, incomplete repairs title lean, or low appraisal to name a few.  Having a professional on your side just makes sense.  

 

2.     Make an Offer:  

When you have found your home then you will decide on an offer, your Realtor will write the contract for you. In a nutshell, it is approx. 10 pages and list the property description, what is included, what is expected, loan type, offer, closing dates, earnest money, title company, inspections, and any special stipulations.  Once the contract is accepted and signed, then, your agent will collect the earnest money from you.  The earnest money lets the seller know that you are a serious buyer.  Earnest money is usually not a large payment but varies typically 1% - 5% depending on the price of the home.  The earnest money will be subtracted from the total of the mortgage price at closing.  (It is like paying a little off the principal of the home.)

 

3.     Order a home inspection:

 Although this is not a requirement, it is always a good idea to hire a professional home inspector to look at all the details for you.  Home inspectors are professionals that will often find things that you will not see.  Your Realtor should be able to give you a list of home inspectors if you do not already have one. 

 

4.     Repairs:  

Typically, after inspections, any repairs that need to be addressed during this time will be sent to you, and you will be able to share them with your Realtor.

 

5.     Final Walk-Through: 

The final walk-through with your agent is usually completed 1-2 days before closing and gives you, the buyer, a chance to make sure that the repairs were completed or that there have been no changes in the home.  

 

6.    Closing:  

Be ready to sign….. as stated previously, there is a lot of paperwork that you will be looking over during closing and signing.  Take your time and read them even if you feel you don’t have the time.  The closing agency will go over the fees and mortgage information, and if you have any questions, now is the time to ask before you become the homeowner.  Each state varies concerning closing.  Some states require that both parties be there to sign, while others do not.  For the majority of closings, both will be there along with the realtors and or attorney.  

 

7.    Homeownership: 

Congratulations on your new home, and welcome to the Mortgage Club.  😊  Couple Just Closed 2