Buying A House: Start to finish
Make no mistake, purchasing the home of your dreams is no easy task. A lot of research needs to be done in order to find a home that is going to cater to your every need. After all, a home is usually a lifelong investment and not a decision to take lightly.
What to look for when searching for the perfect home
|Find out about the Neighborhood||
|Research local selling prices||
|Find out what Amenities are in the area||
|Work with professionals||
|Mortgage fees||How to Calculate the Total Cost of Your Mortgage
1. Number of periods (number of monthly mortgage payments)
2. Monthly payment amount calculated from last segment.
3. Principal amount -the total amount borrowed less any down payments
Where to start
Reconciliate your current financial status
Buying a home is not a cheap affair and most people need to take out a mortgage in order to buy a home. A bank can offer this facility, but it is not just going to hand you over hundreds of thousands of dollars without the certainty that they are going to get their money back. The bank will go over your finances thoroughly before offering to give you a mortgage. Before the bank does this it is a good idea to get a handle on your financial status before the bank does. You are going to need a steady job with a passive income in order to qualify for a home loan and the bank will check this by asking for your bank statements to make sure for themselves that you have a steady monthly income. The bank will also check your credit scores and credit reports in order to ascertain what type of mortgage you qualify for. You can beat them to this and do it yourself by using a credit reporting agency. Credit scores are reported by points and a score of over 760 will earn you the best rates and terms while a score of 500 and under will mean that your interest rates and fees will be a lot higher. If you are barely going to qualify for a loan, then it may be best to take some time to rectify your current financial status so that when you apply for a mortgage you can qualify for the best rates. Another thing to do is to look at how much cash you have on hand to put a down payment on the home that you would like to buy as some banks can ask for up to a 20% down payment before you are able to get a mortgage loan. If you don’t have enough for a down payment then you should try to save for a bit longer so that when you start with the process you will have a greater chance of securing a mortgage with the best rates and terms.
Make sure to set a budget and stick to it
If you can only afford a home that costs $200,000 it makes no sense to look for houses that cost $300,000 and higher. By narrowing your price range, you can set up a budget and stick to it. In order to budget for a house, make a list of your monthly expenses such as car payments, credit cards, school fees and other expenses. Over and above this you need to keep in mind the new expenses that you are going to incur when you purchase a new home such as property taxes and insurance. A DTI is a formula that is used to see if you can afford to buy the house that you want. This formula is done by taking your monthly expenses and dividing them by your total monthly income. A DTI of above 43% means that you may need to lower your budget a bit more in order to financially survive from month to month.
The next step
Get your Mortgage Pre-Approval
Contacting lenders before you shop for a house can help you to get a feel for the types of mortgages you would qualify for as well as what terms, conditions and interest rates would apply to your specific circumstances. By liaising with a lender before you decide to purchase a home you will be able to get an idea of where you can obtain the best rates as well as find a lender that you are comfortable to do business with. Although a mortgage pre-approval is not necessary when you want to shop for a home it will make the process a lot easier once you have chosen the home that you want to finance. It is important to remember that a pre-approval is not a guarantee that you are going to get a loan but rather a statement showing that you are qualified to received one officially. The pre-approval will also indicate the maximum loan amount which will assist with your budget as well as help you to make a list of houses to choose from. Make it a priority to find the best lender for your needs and also do a lot of shopping around to get the best deal.
Find the best Real Estate Agent available
There is no problem with looking at houses online and getting a feel for what type of home would best suit you but it is extremely beneficial to find a reputable Real Estate Agent when you decide to get serious, especially if you are a first time home buyer with little or no experience in the real estate market. A professional Real Estate Agent can provide you with information on current marketing conditions as well as deciphering whether a home you are interested in is worth the price that the seller is asking. They can assist you with offers and counter offers as well as help you to find a home in a neighborhood that has the best amenities. Furthermore, they have access to homes which have not been publicly listed yet that are situated in an area that you are looking for. Dealing with the right Real Estate Agent can make the difference between a smooth process or a nightmare!
The fun part
Looking at houses
This is the most exciting part of purchasing a new home but try to be mindful that it can take up to 45 days to close the deal on the purchase of a new house. Be realistic and do not act out on a whim. If you are not comfortable with a few aspects of the house that you are looking at then don’t make an offer unless you have the funds and energy to alter the parts of the house that you are not happy with. There are plenty of homes to choose from so try not to be too hasty unless of course you know that you have found your dream house. Make a list of what you are looking for in a new home and give it to your Real Estate Agent so that they will have a better idea of what you are ideally looking for.
The nitty gritty
Get your documentation ready
Your lender is going to require a lot of documentation once you have decided on the house that you want tp purchase and the sooner you gather this documentation the better. The lender will ask you to supply the following documentation:
- Two years of tax returns
- Pay slips for the past two months
- Bank statement and any investment account statements
- Proof of funds to make a down payment
- Identity document
This is the basic documentation that the lender will require but it is quite possible that they could ask for more documentation as well.
Find a lawyer if necessary
Many real estate transactions do not require the use of a lawyer and this is optional unless it is necessary in the area where you want to purchase your home from. Most transactions are made with standard paperwork and a good Real Estate Agent will know how to assist you and make the process a hassle-free experience.
The final stages
Negotiate an offer
Your Real Estate Agent will advise you on how to make an offer on the house that you want to purchase. They have an excellent feel for the market and will be able to advise you on what offer you should make on the home that you want to purchase. They are also able to advise you on any other offers that may be pending on the house which will assist you to determine if you need to make a higher offer. Don’t be afraid to attach conditions to your offer such as a closing date, inclusion of appliances and furnishings or a clause that specifies that your purchase is subject to the sale of your current home. Negotiations can last several days so be prepared to deal with written counteroffers and response deadlines until such time as your offer has been accepted. The norm is to pay a check or money order which is held in Escrow to show that you are serious about purchasing the house. This will be applied to the purchase of the house once the deal has been closed.
Once your offer has been approved it is time to contact your lender and start with the mortgage application. You will no doubt have many back and forth dealings with the loan officer and questions may be asked as they go through your financials in more detail. The final approval often comes within a few days of the closing date so try not to panic. The lender is within their rights to make sure that you are not going to be a risk and that you are going to be able to pay back your loan.
Home Inspections and Appraisals
The home that you want to purchase will be subject to a house inspection and no contract will be signed without a clause saying that the house has passed an inspection. This helps the buyer to make sure that there are no structural or functional problems with the house which will are then listed on the contract. The buyer must pay for the inspection and should find a reputable inspector to do the job. The inspector will advise you about any problems that they may find with the house and it is essentially up to you to decide if their findings are strong enough for you to back out of the deal, demand repairs from the seller before the deal closes, or agree to purchase the house “as is” if the problems are only minor and you feel that you can repair them yourself.
The finish line
Closing the deal and purchasing your dream home
You have nearly reached the finish line and all that is left to do is to sign a lot of paperwork before receiving the keys to your new home. You will be experiencing a lot of anxiety and excitement during the final stage as you start to realize the magnitude of the commitment that you are making. If you have done everything to the book and followed all the steps listed above with the help of a professional Real Estate Agent, then there should be absolutely no reason to worry. You are about to start a new chapter in your life. A chapter where many special memories are going to be made.
Since 2010 MB Homes New England has offered professional Real Estate and investment management property services for home buyers, sellers and investors in Webster, MA, Dudley, MA, Douglas, MA, Auburn, MA, Oxford, MA, Thompson, CT, Pomfret, CT, Woodstock, CT, and Putnam, CT.
Please feel free to contact us today with any real estate related questions or if you would like to explore any of the of high standard services that we offer.