Buying a Home
Whether you are a first time home buyer or you’ve purchased many homes, preparation is critical to a smooth buying experience. This checklist will help you be prepared every step of the way when you find that perfect home.
If you are going to need financing to buy a home, consulting with several potential mortgage lenders is the first step you should take in the home buying process. You must have a pre-approval or pre-qualification letter to submit with your offer. You will need to obtain a pre-approval letter from a bank or non-bank mortgage lender. Prior to providing you with the letter, a lender will likely require documentation and verification of income and assets. You should be prepared to provide all the necessary paperwork both electronically and in hard copy, including, tax returns, W2s, bank statements, employer name and address, and landlord (if any) contact information. Although this process can be laborious, it will put you into position to make an offer on a home you can afford as soon as you find the right one.
You must understand the costs involved with mortgage loans, so you’re not stretching yourself too thin. Use our ResidentialPRO mortgage calculator to get a rough idea of the monthly payments involved and don’t forget to include an allowance for property taxes and homeowner’s insurance. Although interest rates remain historically low, it is worth considering what you might be able to afford in the event interest rates rise.
The sooner you start saving, the more money you will have for a down payment. The more money you put down, the lower interest rate you are likely to receive. A larger down payment will also give you more options when it comes to mortgage deals. For a conventional loan, you will ordinarily need a minimum down payment of 5% of the home price. You will receive more preferred rates and terms if you are able to put down 10% or more. Keep in mind, if you put down less than 20%, you will have to pay mortgage insurance (PMI), which will affect affordability.
Some people think they can go it alone in the home buying process but it is always better to have a professional advocate on your team even if you are an experienced home buyer. For new home buyers or for those moving to a new area, a seasoned agent is quite simply a must. To get started, find an agent here.
In our data-driven world, there is a lot of disparate information and resources available on the web. It can be overwhelming to sift through the various sources to even find relevant data. That’s why ResidentialPRO has compiled all the data for you so that you can tune out the noise and focus on what is most important to you. Whether it is drive times, traffic flows, quality of schools, value of homes, availability of medical care, distance to shopping centers or restaurants, we have the information you need to make the right decision.
Once you have decided what factors matter the most to you, use ResidentialPRO to begin educating yourself as to what is currently on the market and narrow down the best neighborhoods for your criteria. After you are armed with a general knowledge and feel for neighborhoods and home values, it’s time to contact a ResidentialPRO agent.
Although it can be stressful and time consuming, remember this is the fun part of the home buying process. Your agent will take care of scheduling any showings by coordinating with the seller’s agent or local co-op and will accompany you to the showing. Get the most out of your showings by reviewing the listings ahead of time and come armed with questions about the home. You should also write down your impressions, pros and cons, as soon as you are done with a showing so that you can review your notes later. After you have seen 7 or more homes, it becomes difficult to remember the details if you do not record them while fresh in your memory.
You’ve found a home you love, now what? Your ResidentialPRO agent will evaluate local market conditions and sales of comparable homes to help determine the amount of your offer. Your agent will communicate that offer to the seller’s agent and will explain how you arrived at the number. Typically, the seller will send a counter-offer within 24 hours and the parties will continue to negotiate through their agents until an agreement is reached.
After the parties agree on a price, the parties will sign a purchase agreement, which is a binding document that often memorializes, among other things, the terms and amount of your offer, which furniture, appliances or fixtures will stay in the home, any financing contingency, and the date of closing.
Assuming you are armed with your pre-approval letter as suggested in Step 1, the mortgage loan should be a formality but it still takes time and often requires you to supply additional financial documentation to the lender. Be aware that once you are in the process of obtaining a mortgage loan, that is not a good time to change jobs. Many lenders require stable employment and want to verify employment up until closing. You should also not incur any additional debt during this period. While you may want to buy new furniture for your new home, now is not the time unless you are paying cash.
Any offer you make should be contingent on the results of a home inspection. To protect yourself, you need to hire a licensed professional home inspector. The home inspector will inspect every corner of the home both inside and out to educate you on the true condition of the home and any repairs that need to be made. An inspection should include an evaluation of heating, cooling, plumbing, electrical, walls, floors, ceilings, foundation, roof, insulation, windows and ventilation. It is best to be present at the inspection as you can learn a lot just from observing. As the buyer, you can request that the seller make necessary repairs or renegotiate the price to offset repair costs.
Prior to closing, your lender will provide you with an estimate of closing costs. Familiarize yourself with this document and clarify any questions you have prior to closing. At closing, you will complete both the sale of the real estate and the mortgage transaction. Often, you will review and sign documents that transfer title of the property to you and sign your mortgage documents. Congrats, you’re now a homeowner.