Buying a Home Process
1 - Strengthen your credit.
The higher your FICO score, which ranges from 300 to 850, the better interest rate you'll qualify for. This is extremely important. The difference between a 4.5% interest mortgage and a 5% interest mortgage can mean tens of thousands of dollars over the life of the loan.
Get Free Copy Of Your Credit Report
2- Get pre-approved to get the actual amount you can pay.
Apply With a lender within a two week period so that the inquiries do not damage your credit report. Do this before searching for home so you don't accidentally fall in love with a house that you cannot afford.
· Seller love buyers who get pre-approved. Pre-approved buyers are almost always given the green light by lenders, meaning there's less risk for the deal to get scuttled in the end.
3- Find a good real estate agent
to represent you in the search and negotiation process.
· A realtor's job is to connect people who want to buy and sell a particular home. For this reason, a realtor has an interest in selling homes. A very good realtor will use her experience to sell the right home to the right buyer — you.
· A Realtor who is a neighborhood specialist will often have particular expertise in the neighborhood you are targeting and can give you pros and cons that a more generalist cannot.
· When you do find your realtor, go into exhaustive detail when describing what you want in a home — number of bathrooms and bedrooms, attached garage, land and anything else that may be important, such good lighting or yard space for the kids.
5 - Sign up for an MLS alert service to search on properties in your area.
A Multiple Listing Service will give you a feeling for what is on the market in your price range. Your agent can do this for you.
· If you sign up through a real estate agent, it is poor form to call the listing agent directly to see a house. Don't ask an agent to do things for you unless you're planning to have them represent you — they don't get paid until a client buys a house and it's not fair to ask them to work for free, knowing that you're not going to use them to buy your home!
6 - Start looking for houses within your range.
Allow your realtor to start working for you, but know what's within your budget and what's not. The general rule of thumb here is that you can afford a house that's 2.5 times your yearly household salary. For example, if your annual combined salary is $85k, you should be able to afford at least a $210k mortgage and very possibly more.
· Make use of online mortgage calculators to start crunching numbers, and remember the mortgage shopping you did earlier on. Keep these numbers in mind as you prepare to find your new dream home.
Start to think about what you're really looking for in a home.
You probably already have a vague idea, but the angel's in the details. There are a couple things in particular that you and your family should give good thought to:
· What will you and your family need in several years? Maybe you're just a couple right now, but are there are plans for kids in the future? A home that snugly fit two people could be torturous for three or four.
· What trade offs are you willing to make? In other words, what are your priorities? Although we like to believe that buying a house can be straightforward, it's often a complex ordeal in which we're forced to compromise. Do you care more about a safe neighborhood and good schools over a big backyard? Do you need a big, workable kitchen more than a big luxurious bedroom? What are you willing to sacrifice when it's crunch time?
· Do you expect your income to increase over the next couple years? If your income has increased by 3% for several years in a row and you hold a secure job in a safe industry, you can probably rest assured that buying an expensive but still reasonable mortgage is possible. Many homebuyers buy relatively expensive and then grow into their mortgage after a year or two.
7 - Define the area you'd like to live in.
Scout out what's available in the vicinity. Look at prices, home design, proximity to shopping, schools and other amenities. Read the town paper, if there is one, and chat with the locals. Look beyond the home to the neighborhood and the condition of nearby homes to make sure you aren't buying the only gem in sight.
· The area in which your home is located is sometimes a bigger consideration than the home itself, since it has a major impact on your home's resale value.
Visit a few houses to gauge what's on the market and see firsthand what you want.
Pay attention to overall layout, number of bedrooms and bathrooms, kitchen amenities, and storage. Visit properties you're seriously interested in at various times of the day to check traffic and congestion, available parking, noise levels and general activities. What may seem like a peaceful neighborhood at lunch can become a loud shortcut during rush hour, and you'd never know it if you drove by only once.
Making An Offer
1 - If possible, tailor your bid to the seller's circumstances.
This is not easy, and often impossible, but it doesn't hurt to try when making one of the biggest purchases in your life. Here are some things to keep in mind as you think about your offer:
· What is the seller's financial prospects? Are they in desperate need of money or are they sitting on a pile of cash? Cash-strapped sellers will be more likely to take an offer that undercuts their asking price.
· How long has the home been on the market? Homes that have been on the market for longer periods of time can usually be bid down.
· Have they already bought another house? If the sellers aren't currently living in the house they're trying to sell, it may be easier to bid less than you otherwise might.
2 - Look at comparables when you make your bid.
What did other homes in the neighborhood start off as ("asking price"), and what did they sell at?
3 - Calculate your expected housing expenses.
Estimate the annual real estate taxes and insurance costs in your area and add that to the average price of the home you're trying to buy. Also add how much you can expect to pay in closing costs. (These take in various charges that generally run 3 percent of the money you're borrowing.
4 - If you absolutely fall in love with a home, be prepared to make an offer that's above the asking price.
Economics of supply and demand will sometimes force your hand. If many people are competing for few homes, be prepared to lead with your highest possible offer. Some homebuyers don't believe that you should lead with your highest offer, but you could easily find yourself being outbid and never get the chance to bid on your house. If you want to give yourself the best shot on a home that you really, really like, lead with a high bid.
5 - Talk to your realtor when you're ready to formally present your offer.
This is usually how it goes:
You submit your offer to your realtor, who then forwards it to the seller's representative. The seller then decides to accept, reject, or make a counter-offer.
· Include earnest money with your offer. Once you sign an offer, you are officially in escrow, which means you are committed to buy the house or lose your deposit, unless you do not get final mortgage approval or something came up during your inspection contingency time that you cannot accept. During escrow (typically 30 to 90 days), your lender arranges for purchase financing and finalizes your mortgage.
6 - Home inspection.
· A home inspection costs between $200 and $500, depending on the area, but it can prevent a $100,000 mistake. This is especially true with older homes, as you want to avoid financial landmines such as lead-paint, asbestos insulation and mold.
· If you use the inspection results to negotiate down the price of your purchase, do not refer to the inspection or bids for work in your contract. The lending institution may request to see a copy of your inspection, which will supersede their appraiser's evaluation.
7 - Close escrow.
This is usually conducted in an escrow office and involves signing documents related to the property and your mortgage arrangements. The packet of papers includes the deed, proving you now own the house, and the title, which shows that no one else has any claim to it or lien against it. If any issues remain, money may be set aside in escrow until they are resolved, which acts as an incentive for the seller to quickly remedy any problem areas in order to receive all that is owed.