First time home buyers and repeat buyers should protect their finances and follow these 10 Easy Steps to Home Buying.
Whether you’re becoming a homeowner for the first time or you’re a repeat buyer, buying a home is a financial and emotional decision that requires the experience, protection and support of a team of reliable professionals, including a REALTOR®, a lender, a lawyer and a range of other individuals. You will need to know (or find out) your credit score, debt-to-income ratio, and your home affordability estimate. Everyone is entitled to one free credit report – visit annualcreditreport.com.
In the today’s maze of required forms and disclosures, financing, inspections, marketing, pricing and negotiating, you really need to work with a professional to protect the security of one of your largest investments. This is no time to risk going it alone. Your interview with a REALTOR® should include an examination of their credentials – are they a CRS, GRI, SPS, working full-time in real estate or working another job? You should ask about communication, market conditions, get a market analysis if you have a home to sell, and be provided a strategic pricing plan for your purchase. Your REALTOR® will help you be informed and confident.
Be sure to get a REALTOR® prior to looking to ensure you do not over share confidential information or damaging information to the process. This includes over sharing with other REALTORs® at open houses and with FSBO sellers ( For Sale By Owner).
One big question home buyers have is: “Is this a good time?”
Most first-time buyers need to finance their home purchase, and a consultation with a mortgage lender is a crucial step in the process. Find out how much you can afford before you begin your home search. I can provide you with estimates on mortgage payments, and closing costs (fees such as an attorney, appraisal, inspection, etc). Remember that you don’t always have put down 20% as your parents once did – your mortgage lender can provide you with options and help you understand the financing products and process. Try to Home Loan Process 101(the lender will pull your credit score and verify more information about you) or better yet get an actual approval before you start the home shopping. That way when you make an offer, you are in the strongest position possible with the seller.
By the time you get to this step, you know your budget. Make a list of the must-haves in a home – bedrooms, bathrooms, square footage, size of kitchen, closet and cabinet space, size of yard for children or pets, etc. An experienced REALTOR® can help you narrow your priorities and make an informed decision about which homes to view. This includes an analysis of the home as it relates to the community, recent solds, and the future of home values. Don’t neglect your finances and skip over this critical information! Evaluation of the pricing and market conditions is where your REALTOR® can save you money.
Now that you have selected a home on which to make an offer, you should feel financially comfortable that the home you have chosen is one you can afford, that it will increase in value over the years, and that it hits most of your must-haves on your list. If you cannot compromise on what you need and want in a home you can go back to your lender and explore your options for increasing the budget. You should know that going $10,000 above your price range for a 30-year fixed-rate loan will actually only add about $30 to your monthly payment. An experienced REALTOR® can help you determine when and how to compromise and should take the time to show you a variety of compromises so you can make an informed decision. The finesse of this process is greatly affected by your REALTOR®.
If you have not already made an actual loan application, now is the time for this step. The cost of financing your home purchase is usually greater than the price of the home itself (after interest, closing costs and insurance and tax escrows are added). Get as much information as possible regarding your mortgage product options and other costs. At this step you will make a formal loan application and provide supporting documentation like recent pay-stubs, rental checks, and several years of tax returns.
While much attention is paid to the asking price of a home, a proposal to buy includes both the price and terms. In some cases, terms can represent thousands of dollars in additional value – or additional costs – for buyers. In practice, your offer is a negotiation and where the expertise of a REALTOR® is necessary. If you have done your homework and have hired a CRS, GRI, SPS, extra care and services are available to you due to the extra knowledge and education your REALTOR® has taken the time to obtain.
No homeowner should be without insurance. Real estate insurance protects owners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime. Proof of homeowner insurance is required for a mortgage. Insurances associated with homeownership include Title Insurance (purchased at closing to protect owners and lenders on title issues with property), Homeowners Insurance (insurance for fire, theft, and liability coverage), Flood Insurance (required in high risk flood prone areas), Home Warranty (one year policy for covered defects or breakdowns).
The closing, which in different parts of the country is also known as “settlement” or “escrow”, happens after a 3 week to 5 week process of abstracting, title work, inspections, appraisals, underwriting, etc. In practice, closings bring together a variety of parties who are part of the real estate transaction. Your REALTOR® and lender are regularly communicating with each other and the settlement agent to meet all the requirements of transferring ownership of your new home to you. Prior to the actual transfer, you will do a final walk-through of the vacated property, check for condition or repairs described in the contract, and review the TRID settlement statement. You will bring the following items with you to closing: your ID, a cashier’s check for the exact amount of your purchase, and the documents you have in your home buying file. After signing a stack of documents relating to your mortgage and the transfer of ownership, you will not only have the keys to your new home – but you will be given the documents you just signed to use for future tax returns and when/if you eventually sell the property.
The home is yours. Celebrate! You have a step up on the do-it-your-selfers who tried to navigate the real estate market alone, probably paid the wrong amount, are finding out defects after the fact, and are experiencing serious remorse. Is there any more to the home buying process? Whether you’re a first-time buyer or a repeat buyer, you’ll want to take several more steps including setting up your utilities, confirming the deed has been filed and signing up for homestead exemption. Lastly, enjoy your home!
For more information contact Marceta Claypool 712-541-5118 or email firstname.lastname@example.org.