Buying A Home
THE STEPS TO BUYING A HOME
Buying a home can be one of the most significant investments in your life. Not only are you choosing your dwelling place, the place in which you will bring up your family, you are most likely also investing a large portion of your assets into this venture. The more prepared you are at the outset, the less overwhelming and chaotic the buying process will be. The goal of this page is to provide you with detailed information to assist you in making an intelligent and informed decision. Remember, if you have any questions about the process, we're only a phone call or email away!
It's important to start researching what you want in a home as soon as you can. Look at listings online, look at the different housing types and options and make notes of the kind of properties you're interested in. Try to get a sense of the local housing trends by seeing how long certain kind of homes stay on the market.
You should get your credit checked while getting a feel for the kind of home you want. Your bank may allow you to view your current credit score, or you can get a free copy once per year at Annualcreditreport.com. You can get a better loan with a higher credit score, so it's important to dispute any errors you find on your credit report.
DETERMINE HOW MUCH YOU CAN AFFORD
The general recommendation when you're looking for a home is to look for something costing no more than 3-5 times your annual household income. This is under the assumption that the buyer plans to put down 20% for the down payment and already has a moderate amount of debt from other sources.
There are plenty of calculators available to help find the best monthly mortgage payment for you; everyone's financial situation is different so the general recommendation may not be the best one for you. There are quite a few costs that go into buying a home, such as the actual buying of the home, a down payment, closing costs, and any attorney or appraisal fees. You may also want to leave room in the budget for furniture or remodeling. It's for reasons like these that it's recommended to look for a home less than your calculated spending cost, to help make sure you have leeway for the other expenses.
GET PREQUALIFIED/ PREAPPROVED WITH A LENDER
It's a good idea to have an idea of how much you can be lent for a home loan before you start looking for one. Try to get pre-qualified for a mortgage through a mortgage banker, also known as a lender. A lender will review your financial information (usually including your income, amount of savings, and any investments you have) and give you an idea of how much they can lend you. This will help give you an idea of the price range you can look at for homes.
Keep in mind that it's easier to keep the ball rolling by getting a lender local to where you're moving. A distant lender could cause issues with communication down the road and slow down the home buying process. If you're working with or plan to work with an agent, ask them for any recommendations they have. Lenders aren't allowed to compensate agents for referrals, so an agent is only going to refer you to a lender they know will get the job done quickly and efficiently.
It's also worth it to get pre-approval from your mortgage lender as well. Being pre-qualified gives a good idea of what you can afford but getting pre-approval will give you an even better idea of the size of the loan you can qualify for. You could even go ahead and get full approval before you start home shopping. Being fully approved will make the sale go much quicker and make you look more appealing to potential sellers.
FIND THE RIGHT REAL ESTATE AGENT
A Real Estate Agent is an important partner for buying a home. An agent can provide you with information not readily available to the public, and they can find new listings before they become available online. Using an agent doesn't cost you anything as a buyer, an agent is compensated from the commission paid by the seller of the house. If you're working with an agent keep it clear; if you speak to a listing agent or visit an open house be sure to let them know you already have an agent.
If you're looking for a local agent, we at Coldwell Banker Professionals can help. We have over 253 agents available in our 11 office locations to help with the home buying process.
SHOP FOR YOUR HOME
By now you should have a good idea of what kind of home you want. From the number of bedrooms and bathrooms to the living space and neighborhood. An agent can use this information to narrow down the search to homes that better meet your criteria and can even line up several homes for viewing fairly quickly.
Withhold judgement of a home until after you've toured it fully, you'll find that some issues you have can be remedied with nothing more than a paint of coat and nice furniture.
When you make an offer, do so at a price you think the seller will accept, or at the very least counter. Get input from you agent and see if that price would even be considered. Your agent can help verify the price of the home and help prepare a reason why the seller should accept (or at least consider) the lower price.
After you put in an offer on a home it is important to get an inspection of the property done. This will help you find any damages or repairs that need to be taken care of. A real estate agent can normally help arrange an inspection soon after the offer is accepted by the seller. You'll be able to renegotiate or withdraw your offer with no penalty if the inspection finds significant damage that wasn't known before.
You and the seller will both get the inspection report. You can work with the seller from there to get some things fixed on the property before closing. You'll get the chance to have another look at the home afterwards to confirm the changes and repairs have been made. From here the closing can be finalized.
A lender can provide an appraiser to give an independent estimate of the value of the home. The appraisal is not directly associated with the lender (and is usually a third-party company) and they make sure you're paying a fair price for the home.
Contracts for purchase tend to contain a provision for an appraisal. If the home doesn't appraise for the offered amount, you won't be required to complete the transaction and can pull out if desired. Receiving a low appraisal doesn't always mean you should bail, it might be worth it to discuss with the seller alternative options to leave you both satisfied.
If you paid for the appraisal, you're entitled to a copy of it.
CLOSE THE SALE
Closing the home involves a lot of paperwork, for both the buyer and the seller. Your lender can help with some of the paperwork by having it handled by a title company. It generally takes a couple of days after the paperwork is finished for any loan to be funded. Once it's all taken care of and the loan approved, you just need to decide on a closing date and get ready to move into your new home.
Amenities Home Buyers Crave
The right lighting can make any home look better and upgrading your lights could make a world of difference. Something as simple as installing new spotlight on the front door or a set of solar-powered lights along your front walkway will enhance your home's curb appeal and give would-be buyers a good first impression.
Updating the lighting inside your home is a smart move as well. Replacing your old light bulbs with new and brighter LEDs will make your home look airier and more inviting and save you money at the same time.
A Wireless Security System
Security is an important consideration for the modern home buyer, but many homeowners have come to dislike old-line security companies and hard-wired systems. Modern buyers are looking for a better solution - one that can be easily moved from home to home. Investing in a wireless security system can make your home more attractive to would-be buyers and even boost its selling price.
New Energy-Efficient Windows
Replacing the windows is a difficult job, one that few buyers will want to tackle. That makes a home with new and more energy-efficient windows more attractive than ever.
If you have recently replaced your old windows with newer models, be sure to let the Realtor® know. Today's buyers love energy-efficient windows, and they know that those new windows will save them money every month.
A Home Office
These days a lot of people work from their homes, and the presence of a home office can be a big plus for those buyers. Adding a standalone office to your home prior to putting it on the market probably does not make sense, but if you already have one make sure it is prominently highlighted in any marketing materials.
Ample storage is an important consideration for modern home buyers, and built-in storage solutions are very popular know. From recessed bookcases built into the bedroom walls to shelving units incorporated into the garage, the presence of these storage solutions can be a major selling point.
Knowing what buyers are looking for is one of the best ways to sell your home quickly. The more attractive your home is to would-be buyers the easier it will be to sell. The amenities listed above are in especially high demand, so be sure to point them out to all potential buyers.
Home Buyer Checklist
Buying a home is not something to be taken lightly - or something to be entered into without preparation. Whether you are in the market for a $100,000 home or a $1,000,000 mansion, you need to prepare carefully and make sure everything is ready to go.
The home buying checklist below can help you get started and reduce the chances of an unpleasant surprise down the line. Taking care of these items before you start shopping is an important part of the home buying process.
Set a Monthly Housing Budget
Setting a realistic monthly housing budget is essential, and it should be the first step on your checklist. Financial experts recommend that the total cost of housing, including the mortgage payment, real estate taxes, maintenance and upkeep, should be no more than a third of your gross income.
You can use an online mortgage calculator to estimate the cost of your monthly mortgage payment and use it to determine a price range when you start to shop for a home. Remember it is best to err on the low side and buy less home than you can afford rather than stretch to make the monthly mortgage payment.
Check Your Credit Score
Your credit score will help determine the interest rate you pay on your mortgage, or if you qualify for a mortgage at all. If you do not yet know your credit score, make it the next item on your home buying checklist.
Many credit card issuers now include credit scores on their monthly statements. If yours does not, just contact the credit reporting agencies to get a copy of your most recent score.
Research the Local Neighborhoods
You will probably be shopping in more than one neighborhood, so it is important to research the local area thoroughly. Look at things like school graduation rates, trends in violent and nonviolent crime and home values as you select neighborhoods and make your home shopping list.
You want to buy in an up-and-coming neighborhood and avoid declining areas. The more you know about which neighborhood is which the easier it will be to make a wise decision.
Find a Great Realtor®
Once you have all your ducks in a row and know how much you can afford to spend, it is time to start interviewing local real estate agents. You want an agent who knows the local area and has specific expertise in the type of home you have in mind.
Look for a Realtor® who holds all the required licenses and has attained the necessary accreditations. Once you have selected a great agent, you can get on with choosing the right home for yourself and your family.
Common Mistakes First Time Home Buyers Make
For most people the roof over their head will be the biggest single purchase they ever make. If you are in the market for your first home, you have probably discovered just how complicated and downright intimidating the process can be.
The potential for mistakes is all around you when buying a home, and those blunders can be costly ones. Here are some of the most common mistakes first time home buyers make, and how you can avoid them.
Buying Too Much Home
Buying more home than they can afford is perhaps the biggest mistake first time home buyers make. It can be hard for first timers to know how much they can really afford, and some real estate professionals are only to happy to steer those buyers into homes that are too expensive.
Always do your own homework and conduct your own research when setting a budget and a price for your new home. If you are unsure, look for a less expensive home than you think you can afford - you will sleep better at night.
Not Knowing Your Credit Score
If you do not know where you stand financially, you could be in for an unpleasant surprise when you apply for a mortgage. Always check your credit score before you start shopping and take steps to raise your score if it is too low.
Closing unused credit card accounts, paying down your existing balances and making payments on time can all boost your credit score and lower your mortgage interest rate. Knowing your score ahead of time will give you time to react and make adjustments before you start shopping for your first home.
Failing to Get an Independent Appraisal
The homes you look at will no doubt come with appraisals, but in most cases those appraisals will have been done by the seller's agent. Whether you are shopping for a $100,000 home or a $500,000 one, you should never rely solely on the seller's appraisal.
Getting an independent appraisal is essential. It may cost you a few hundred dollars, but the peace of mind will be well worth it. If the appraisal detects no problems, you can sleep better at night. If deficiencies are uncovered, you can use those problems as a negotiating tool to get a better price.
Not Researching the Local Schools
Even if you do not have kids, it is important to do your homework on the local schools. Poor schools can affect property values going forward and impact the attractiveness of your home should you need to sell.
If you do have kids, failing to research the local school district is even worse. You could be in for an unpleasant surprise, and a big bill for an expensive private school, if you fail to do your research
Avoiding these common mistakes is vital for every first-time home buyer. Buying your first home is complicated but learning about the mistakes others have made can make it easier and less intimidating.
How to Buy a Home with a Small Down Payment
In a perfect world, every home buyer would be able to put 15% or even 20% down, thus lowering their monthly mortgage payments and maximizing their equity from the start. Unfortunately, in the modern real estate market that high level of down payment is often unrealistic.
If you are buying a $250,000 home, making a 20% down payment means coming up with $50,000 in cash. That is a high bar for the average home buyer, and an impossibility for many others.
The good news is that there are plenty of ways to buy a home with a much smaller down payment, or no down payment at all. Knowing where to shop and which programs you may qualify for can make the home buying process easier and less stressful.
If you are a veteran of military service, ask about a VA loan. Home loans financed through the Veterans Administration require no down payment at all, so you can get into the home of your dreams with no money out of pocket.
In addition, VA loans have lower credit requirements than traditional private mortgage loans. That can come in handy if your credit has taken a hit, or if you are recovering from past financial problems.
FHA loans also have low down payment requirements. These loans are administered by the Federal Housing Administration, and this type of mortgage is a popular choice for first time home buyers. Just ask your real estate agent about FHA loan requirements and how you can qualify.
Even if you do not qualify for a mortgage through the FHA or VA, you may still be able to get into a great home for little or no money down. One of the most attractive, yet least well known, programs is run by the USDA.
Dubbed the USDA Rural Development mortgage guarantee, this program is not confined to farmland, or even rural areas. Even if you are shopping in the suburbs, you should ask your Realtor® if you qualify for this program. Act quickly, though - the USDA Rural Development program is such a great deal that it sometimes runs out of funds before the end of the year.
It is not always easy to come up with a hefty down payment, especially if you are buying in an expensive area. Fortunately, there are mortgage programs out there designed to make buying easier, even if you lack a substantial down payment. The programs listed above are great for first time buyers - and anyone else who needs a great deal on a new mortgage.
How to Commit to Buying a Home
There is no doubt that buying a home is a major commitment, and one you need to be ready for. The decision to buy a home is not one to take lightly, and it is important to make sure you are truly ready to make the leap from renter to homeowner.
If you think you are ready to buy a home, you can use the following guide to make sure. From conducting a thorough review of your finances to researching programs that can help with the down payment and financing, these steps can make committing to buying a home a lot easier and less stressful.
Assess Your Financial Situation
If you are living paycheck to paycheck and struggling to make ends meet, now is probably not the time to buy a home. Being a homeowner can be an expensive proposition, with not only mortgage payments but things like ongoing repairs and maintenance.
Any decision to buy a home should start with a thorough assessment of your financial situation, including any cash you have saved, emergency funds, retirement accounts and the like. Once you know where you stand, you can see how much you have for a down payment and make sure your income will allow you to make the monthly mortgage payments.
Look for Help with Down Payments and Financing
If you fail to put at least 20% down, you could be on the hook for expensive private mortgage insurance (PMI), but help may be available. If you qualify for a home loan through the VA, FHA or other government programs, you may be able to buy a home with only a small down payment - or no down payment at all.
It is important to research your options and see which programs you qualify for before you start shopping. The more you know the easier it will be to find the right home.
Look at Your Job Situation
Your employment prospects will obviously play a big role in your decision to buy a home. If your employer is stable and you have good visibility of earnings, the shift from renter to homeowner can be a smart one. If the company you work for is struggling financially, you may want to put off the decision and rent for a little longer.
It is also important to think about possible relocation before buying a home. If you think you might relocate for work within a year or two, it might make more sense to buy a home in your new location. If you think you will stay where you are for the long term, buying a home is probably a good idea.
No matter what your budget or circumstances, it is important to think carefully before buying a home. The commitment to buy a home is a multi-decade one, and you will probably be paying the mortgage for the next 15 to 30 years. Given the importance of the decision, it is important to make sure you are truly ready before you make the move from renting to buying.
Useful House Hunting Tips
Your home is likely to be the most expensive single item you will ever buy. With so much money on the line, it is important to make your choice with care and prepare properly for the purchase.
Chances are you will e looking at a lot of different homes as you shop for the perfect property. Having a way to compare those homes will help you make a wise choice. Here are a few house hunting tips you can use right now.
Make a List of Must Haves and Nice to Haves
Before you attend a single open house or even contact a Realtor®, you should first make a list of the things you absolutely have to have, and a second list of the things you would like to have.
If granite countertops and hardwood floors are a must, you can cross homes with Formica and shag rugs off your list. That can save you a lot of time and cut the list of potential properties substantially.
Get a First Impression and Then Take a Second Look
It is easy to get overwhelmed and fall in love with a home, but that is a big mistake. Whether you are attending an open house or scheduling a private showing, walk through the house from front to back.
Let your first impression sink in for a few minutes, and then turn around and walk through the home more slowly. Take a closer look at everything you just saw and take notes as you go. You can refer to those notes later and use them to make an informed buying decision.
Measure Your Existing Furniture
If you are planning to bring your existing furniture with you, take measurements before you leave for the showing or open house. It can be hard to tell how your sofa will look in the new living room and having measurements will make it a lot easier.
Be sure to get a complete floor plan for each home look at. You can use that information to compare homes and find the best value for your money.
Check the Storage Spaces
A lack of storage space can be a deal killer, so always check the closets, drawers, and other storage areas carefully. Look inside the drawers, assess the closet space and picture how your items will look on those storage spaces.
Look Under the Rug
You never know what could be lurking under that rug, so don't be afraid to lift it up. Look for stains on the carpets and hardwood floors that could be difficult, and expensive, to clean.
Throw rugs are often used to conceal imperfections, and many buyers never look underneath to see what they are hiding. Avoiding that mistake can help you get a better value and find the best home you can.
Buying a home can be difficult but knowing what to look for will make it easier. The above tips can help you get started - whether you are looking for a starter home or moving up to a new and larger property.