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To enhance your buying experience, it’s our job as real estate professionals to provide you with as much valuable information as possible. It is essential that the buyer be aware of all aspects of the real estate market before making a major decision. Whether it be through newsletters, checklists or news articles, we are here to make this process stress-free and rewarding.
YOUR DREAM HOME
A BUYERS GUIDE
STEP 1: FINANCES
The buying experience usually goes smoother if financing has already been secured before you begin searching for your home.
Most homebuyers find that they need to finance at least part of their home purchase. So, in many respects, owning your dream home hinges on your ability to get the financing you need, in the price range you can afford.
The very first step in ensuring that you are in an optimum buying position. This entails a careful review of your financial situation. Think of it as a means of pre-qualifying yourself.
YOUR CREDIT REPORT
A very basic-and yet extremely important -factor in your ability to get a mortgage is your credit rating. It is not a secret that the best intrestes rates, as-well as the most flexible loan terms, are available only to those with the strongest credit scores. Your credit history is one of the principal measures used by a lender to determine your intrests rate. Not only will your monthly mortgage payment depend on your intrest rate, but the amount you qualify to borrow will be affected by it as well. A higher intrest rate translates into a higher payment and may reduce the loan amount for which you can qualify.
You should be aware of what information the credit reporting agencies have regarding your financial situation by obtaining and reviewing copies of your credit report from the three main credit reporting agencies. By making this task one of the initial steps in your house-hunting venture, you may save yourself from unnecessary delays later in the purchasing process.
HOW MUCH HOME CAN I BUY?
The best way to determine your purchasing power is to speak with the lender. However, there are several rules of thumb that will give you an approximate idea of what you will be able to spend.
The first rule states that you can afford a home with a price that is 2.5 times your annual salary. For example, if your annual salary is $50,000, applying for this formula would mean that you can probably shop for a house that is worth $125,000.
The second rule says that you should be able to use 30% of your gross monthly income (before taxes and deductions) for a house payment. Assuming, for example. that your gross monthly income is $4,000 and using a formula as a guide, you may be able to comfortably afford a monthly payment of $1,200.
LENDING FEES AND EXPENSES
Most homebuyers understand the concept of the down payment, but that is not the only upfront expense when purchasing a home. In addition to the down payment, money must be allotted for costs associated with the loan, which can range from 3-7% depending on your lender, and closing costs. As the name implies, closing costs are paid at the time you close the transaction, otherwise known as settlement. For first time home buyers there are many finacing programs that have the seller contribute to the Buyers closing costs. You just need to check with your lender to see which program works for you.
There are also "hidden" costs that apply to moving in general. For instance, you may need to purchase major appliances, pay a mover or rent a moving truck, ect.
STEP 2: FINDING YOUR HOME
WHAT HOME IS THE RIGHT HOME?
How will you know when you see the house of your dreams? A common reply is always "I'll know it when I see it!" however, if you logically analyze your needs ahead of time, you'll be better equipped to make an educated decision when you have an emotional response to a house that you see.
Determine which items are important to you and which you can live without. Remember, when buying a home whether for yourself or future investments; don't forget about resale value and rental value. You don't want to purchase a home that is functional obosolesces (difficult to sell later) or a home that is harder to rent later.
SEARCHING FOR HOMES
Once you've evaluated your priorities, it's time to hit the streets. Give your search criteria to your REALTOR so they can research properties for sale with the MLS (Multiple Listing Service). Not all homes are listed on the public websites to search for homes so its best to have the agent pull up homes and print out a list of homes that match your desired profile.
When you determine which properties you actually want to view, in keeping with our plan, we'll call ahead and set appointments to preview homes. If you've done your preparation to get to this point, the actual physical search for your home can be short and sweet.
Do not be surprised if the perfect house is the first one you visit. On the other hand, do not be disappointed if, after looking at a dozen houses, you still have not found the right one for you. We will keep looking until we find the house that you want to call home!
STEP 3: CONTRACT
Now that you've found your dream home, what is the next step?
First, we'll sit down and work up an offer, otherwise known as a contract. You will want to review it carefully to be sure it states you terms exactly, how much you want to offer, and any applicable contingencies. Once you, as the buyer, and the sell reach an agreement and sign an offer reflecting that agreement, you have a legally binding contract.
While negotiating with a seller; the seller can accept you offer, reject your offer, or execute a counter offer. Don't be surprised if you and the seller initially do not see eye-to-eye on every issue. The seller may deliver back to you a counter offer modifying certain terms that are not acceptable to him. Typical counter offers include modifications of the purchase price, closing date, possession date, adn/or inclusions, although any term(s) of the contract can be countered. You will then have to decide whether the new terms will be acceptable to you. It is not uncommon for negotiations to ge back and forth several times before both parties agree to the terms.
Your offer will need to be accompanied by earnest money as well as a letter from your lender indicating you qualifications to purchase. Earnest money typically equals between 1-3% of the purchase price. Your earnest money will be credited to you at closing or returned to you if the contract is terminated in accordance with its terms.
When agreement is reached on all the issues, and both the seller and you as the buyer have signed the offer, you are both under a legally binding contract. The search is over and now its time to take the necessary steps to ensure the smooth and successful closing: 1)order title insurance; 2)hire a professional home inspector; and 3)order an appraisal.
THE CLOSING
After the searching for home is done, the negotiations have been completed, the house has been inspected, and the mortgage has been applied for and committed to, the focus suddenly turns to the closing, which may also be called "settlement".
Closing is the legal transfer of ownership of the home from seller to buyer. It is a formal meeting that most parties involved in the transaction will attend. Closing procedures are usually held at the Title Company or real estate office. Your closing officer will coordinate the signing of documents and the collection and disbursement of funds.
Hopefully you have found this information guide to be helpful in preparing for your purchase. Our goal is to provide you with a well-rounded understanding of the overall process. Perhaps there are questions that remain unanswered or new questions that have surfaced, in which case, we look forward to answering your questions and working closely with you to ensure that your home buying experience is not only successful but also enjoyable!
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