It helps to know beforehand what to expect when purchasing a home. Use the following information as a guide to your home buying process.
Check Your Credit Score
There’s a good reason to start your home buying process with checking your credit score. You can dispute errors and see where you can reduce your debt by paying down these loans. It gives you an idea of what your lender will see when they order your credit report. Something to keep in mind – resist the temptation to open new lines of credit. It’s a red flag to the lender.
How Much Can You Afford
Before you begin looking at houses, take a serious look at your budget. How much of a mortgage can you afford? Begin by using an online mortgage calculator. A simple Google search will bring up several. Remember to factor in your down payment, any fees you will incur during the loan process, closing costs, etc.
When you look at the home you believe you can afford, take a look at it in the light of your current debts. Of course, there are ways to cut down your current bills, and it’s a good time to do so. However, realistically speaking, consider your budget and how much you can afford to pay on your new mortgage.
Find the Right Lender
Sometimes, your buyer’s agent will suggest lenders that their past clients have been happy with. They’ve heard the good reviews, and have worked with these lenders on past transactions. Nevertheless, do your homework and talk with three or four lenders. Write down the questions you want answered and ask lots of them. At the end of the conversation, you’ll want answers to all of these questions. Ask them about rates and fees, but above all else, ask enough questions so that you completely understand their loan packages.
Meet with Your Lender
At this point, you’ve done the homework and asked the right questions. Now you will be deciding on the terms of the loan. Is it a fixed rate loan, interest only loan, or an adjustable loan? The lender should explain each loan to you. In simple terms:
A fixed-rate loan is a loan where the interest rate will not change for the duration of your loan. If it is a 4.5% interest loan, for example, it will not increase or decrease.
An interest only loan speaks for itself. When you make your payment, it will only be applied to the interest – nothing will be applied to the principal.
An adjustable rate mortgage, ARM, offers the best interest rate initially. Remember, though, that depending on the terms of the loan, after a specified time, the interest rate can adjust up or down. You’ll want to ask if there is a cap on how high the interest rate can increase.
Time to Choose a Buyer’s Agent
You’ll want a buyer’s agent as they have a fiduciary responsibility to you. What this means is that they will work, and have a responsibility to work, on your behalf and to look out for your interests. While a seller’s agent is looking out for the interests of the seller, a buyer’s agent is representing the interests of the buyer. In negotiations, more than ever, this will be evident. The right buyer’s agent will suggest that a buyer bump up his bid, when necessary, but will not be afraid to walk away from negotiations when a seller’s agent is being unreasonable. Carefully choose your buyer’s agent.
Look at Homes
Make a list – this will come in handy. What must you have in your new home? What would be nice, but it’s not a deal breaker? How many bedrooms and bathrooms do you need? Do you want a big kitchen, or is a smaller kitchen more to your liking? Do you want a backyard where you will entertain guests? How about a pool? There’s a long list of things you should consider: local shopping, commute times and length, the neighborhood, etc.
Share your wants and needs with your buyer’s agent. They can prepare a showing tour for you to look at homes that meet your criteria. I’m always happy to do so for my clients.
Make an Offer
Ask your buyer’s agent if they think the home is reasonably priced and discuss presenting a reasonable offer to the sellers. You don’t want to price it so low that they refuse it at first glance or so high that you’ve overpaid for the home. Remember, after your agent presents the offer to the seller’s agent, the seller may counter-offer. Usually, you’ll meet somewhere in the middle. Once the offer is accepted, you’ll need to make an earnest money deposit on the home.
Time for Closing
Inspections should be completed before closing. I like to have them done at the start of escrow - you will find out right away if there are any problems with the house that you can’t live with. On the positive side, it lets you know if there are no problems or only minor problems you can live with. In some instances, the seller might be willing to renegotiate at this time.
This is the fun part. You have closed and you’re ready to move in. You decide where you go from here. Do you move yourself, have friends who want to help, or use a professional to move you? However, once you’re in, start enjoying your new home.
Please feel free to contact me. I’d love to show you homes in the area that meet your criteria.