If you are thinking about purchasing a home, it can feel quite overwhelming. This quick guide will give you an overview of what you should be working on.
Is Buying Your Best Option?
Buying a home is not the best option for every consumer. Reasons to rent instead of buy your home include flexibility, career/income uncertainty, less-than-good credit, low/no maintenance expenses, etc. If you are settled in your job, have good credit and plan to stay in the same area for at least five to seven years, buying may be in your best interest. Of course, a big factor in determining whether to buy is whether you can afford to do so. The amount of money you will need will be determined by the cost of the home, your credit score, the type of loan you get and the amount of your down payment. You also have to consider closing costs, HOA fees, property taxes and insurance.
Choose a Lender and Get
Pre-Approved for Financing
Once you have determined that buying is your best option, you will want to choose a lender and get pre-approved for financing. Choosing a lender basically comes down to who will give you the best rate and whom you feel comfortable working with. You can research different lenders online or contact them directly for information. Your lender will give you a pre-approval letter (usually for 60–90 days), which is a commitment that you would qualify for a particular loan amount based on your income and credit info. Getting your pre-approval early helps to give you an accurate idea of how much home you can afford and keep you on track with only looking at homes that are inside your price range. In a competitive market, your pre-approval also gives you a boost over offers with no pre-approval. If you are considering a bank-owned home, you will likely be required to have a pre-approval letter.
Choose a Real Estate Professional and Find Your Home
Hiring a real estate professional is not required, but it is highly recommended! Real estate agents hold a license by the state, but you should make sure that whichever professional you choose is knowledgeable about the particular area in which you are interested. Your real estate professional will help you locate homes for sale, make appointments to show you the homes and handle all of the technical work of buying a home for you. Once you’ve chosen a professional (or decided to go at it on your own), it is time to start looking at houses! You can browse sites like Zillow.com, Realtor.com and Trulia.com, and your real estate agent can locate additional homes for sale on the Multiple Listing Service (MLS). When looking at homes, consider your budget; the location in relation to your job, church, social activities, etc.; school zones; access to transportation; and any other factors that may be important to you. Once you settle on the home you want, it is time to put in an offer!
Negotiate the Deal
While we all have our own negotiation style, your strategy for negotiating should be based on facts, including the property itself, the market at the moment you want to buy and the seller’s requirements. If it is a buyer’s market (lots of inventory on the market and few buyers), you may have a lot of room for negotiating on price and contingencies. If it a seller’s market (little inventory and many buyers), your negotiation room may be limited. Regardless, your real estate professional (or just you) can negotiate with the sellers on the selling price; inclusion of personal property like appliances, furniture, etc.; and contingencies. Three contingencies that are generally included and highly recommended are financing (your ability to get the mortgage as specified in your offer), appraisal (that the house appraises for at least the agreed upon selling price) and inspection (a professional assessment of the condition of the house). Expect some back and forth negotiation before you and the seller agree to a contract.
Close the Deal
Despite what you may have seen on your favorite home-buying show, the process isn’t over once you’ve settled on a contract. It can take 30 days or more between the contract submission and closing. In the meantime, lots of people including the closing agent, the title company, the lender, the seller, the buyer (you) and the real estate agents have work to complete. When the closing agent is satisfied that everything is in order and all the instructions are prepared and distributed, it’s time for “the closing,” which culminates in the awesome moment when you are handed over the keys to your new home! There will be LOTS of papers to sign and you will be required to bring a certified or cashier’s check for the amount of money you owe (down payment, closing costs, etc.), proof of insurance and photo ID. Allow plenty of time for the closing (at least two hours) and bring your real estate professional or attorney with you (especially if this your first time). Read everything before you sign it — yes, it will take a long time and be awkwardly silent.
Purchasing your first home is a BIG DEAL!! You may have to find an inexpensive way to celebrate since you just spent more money than ever before, but celebrate anyway!