Buyer InformationBuying a home can be a tedious and stressful process. I am here to navigate this process for you so that your home buying experience can be as smooth and efficient as possible. I have put together information below to give you a better understanding about the home buying process.
The Right Time to buy your First HomeThere are many economic and market forecasts and predictions, however the bottom line is if you want to buy your first home, there is no wrong time. This is because the motivation to buy is not determined by regional market conditions or by location.
Industry opinions, economic reports, and investor speculation do not sway or predict when a particular individual will be ready to buy. For the great majority of folks, the most compelling reasons to buy a home are based on individual circumstances and personal needs. Some of these factors are:
- Family needs and desires for children/parents/in-laws/couples
- Convenience to home, work, school, social activities
- Sense of achievement or fulfillment
- Freedom and independence
- Sense of security and privacy
Today, there are many different loan programs with flexible terms to fit all buyers. There are condos and manufactured homes to close the affordability gap. For future buyers with blemished credit, there are many debt reduction and counseling programs to help gain a fresh start.
Making an offer on a home:Once you have located a home that meets your needs, arranged your financing, you can make an offer based on the listing price, along with comparable information and other market considerations. Nationwide Real Estate executive can work with you to determine the best price, along with any contingencies for the sale.
Some strong purchase offers include:
- Short contingency removal periods
- Short escrow periods
- Increased deposit
- Pre-approved letter from lender guarantee for purchase price
Once your offer has been accepted, you will enter an escrow period, where all of the title research will be handled, funding requirements met; tax and title transfer paperwork managed. Prior to the close of escrow, you will sign all of your finance paperwork, and pay your remaining deposit and closing fees. After funding is complete, the title company will record the new purchase deed with the County Recorder’s office, and you will officially “close” and get the keys to your new home!
Make the Leap to become a New Home Owner:First, you must determine that you want to buy a home. Sounds simple, yet many people find that getting started is the hardest part. There are perceived obstacles in the minds of many would-be homeowners:
Can we save enough money for the down payment? How can we get out of our current lease? Where can we afford to live? The goal is home ownership, and there are many steps to reach the goal. You may not be financially ready yet, but you need to ascertain where you are NOW in relation to your goal.
Get your finances in order. Accurately determine your financial situation and review your credit profile to determine how a potential lender will see you. Look at all of your available assets for your down payment and examine all of the finance options available to you. If you have some credit blemishes, take the time to make timely payments to your creditors to present the best financial picture to your home lender. Make sure that you have a track record of stability in your employment history. Postpone any major purchases such as cars, motorcycles, or large appliances until after you close escrow. Your actual home purchase may still be 12-18 months down the road, but you can still prepare for it now.
Get pre-approved for your mortgage. Once you’ve cleared the financial hurdles, talk to your lender or broker to find out how much you can afford to borrow along with the expected out-of-pocket costs you will need to incur for the closing. This will include the required down payment (if necessary) along with funds for closing costs, which can run 3-6% of the purchase price. Pre-approval also allows you to shop for a home with an accurate price range. If you are buying in a seller’s market, you may want to search for homes that are considerably below your approved price range, so that you can have the most room for negotiation.
Become an informed and practical buyer. Once you determine where you would like to live, determine what factors are most important for your family. Calculate your new commute time and research school information for your children.
You may want to consider the proximity to a place of worship and shopping in the area. Make sure to evaluate the surrounding factors that are most important to you, along with factors that are least important.
Your Work History
- Have you been steadily employed for the last two years?
- If you have recent gaps in your employment history, what caused them?
- If you changed jobs, did your pay match or exceed the pay from your old job?
- Has your income fluctuated during the last two years? Why?
Your Credit History
- Do you pay your bills on time?
- Do you carry large balances on your credit cards?
- Have you ever defaulted on a loan (including your student loans)?
- Have you obtained copies of your credit report directly from a ll three of the companies that collect the data lenders depend on? The companies are Equifax, Transunion, and Experian (formerly known at TRW).
- What do your credit reports say?
- Are your credit reports accurate?
- Are there items on your reports that a lender might deem unfavorable to you?
- If you currently have loans you owe, do you send in the monthly payments?
- If you have long-term loans, how long do you have to pay them off?
- Do you pay your rent on time?
- Have you ever had property repossessed?
- Have you ever had a bank foreclose on your house?
- Have you ever had a creditor turn your account over to a collection agency?
- Has a court entered a money judgement against you that you haven’t paid?
- Have you ever filed a bankruptcy petition? How long ago?
- Have you been saving money for your down payment and closing costs?
- How much have you saved?
- Are you setting aside money on a regular and consistent basis?
- TIP: The down payment usually is at least 5% of the price of the house you want to buy.
- TIP: You could save your money in a financial account that pays more in interest than a regular savings account and your money will grow faster.
- TIP: Your employer may have direct deposit options for you, and you could designate a percentage of your check be deposited directly into your down-payment account every time you get paid.
How Much Can You Afford?
- Lenders have legal limits on how much money they can lend you, so you need to have a good understanding of where your dream home fits within those limits. The amount a lender can lend for a mortgage depends on how much you earn and how much you spend each month.
- Lenders look at the total amount you pay for housing each month, add costs like property tax, insurance premiums, and any homeowners’ association fees and compare it to your monthly gross income. They generally try to keep the amount of the loan low enough so your monthly housing costs do not exceed 28 percent of your monthly gross income.
- Lenders also look at your other long-term debts, such as your car loan, student loans, credit-card debt, and they like to see what other monthly payments you have to make. They add these monthly costs to your monthly housing cost, and compare the total against your gross monthly income. These two kinds of costs taken together should not exceed 36 percent of your gross monthly income.
- If your gross monthly income and your debts exceed these two guidelines, you’ll need to adjust your expectations. You will need to decide whether to wait until your cash flow improves and your savings are larger, or whether you should set your sights on a lower-priced house.
Getting Pre-Qualified for a Loan
- A smart buyer starts shopping for a loan before he or she starts looking for a house, and certainly before making any offers. Being pre-qualified means that a lender has looked at your finances and credit history and has decided that you can get a loan, and how much you can borrow.
- When you’re pre-qualified, you may speed your search for your home because you will be able to focus on homes in your price range.
- When you’re pre-qualified and you find your home, you will be able to make an offer you can stand behind. People who aren’t pre-qualified make offers contingent on getting a loan. If you were the seller, wouldn’t you rather work with somebody you know can get financing?
A Change in Lifestyle
- For many people the transition from renting to home ownership is a shock. When you’re a renter, your responsibilities are fairly limited: pay the rent, pay the utilities, respect your neighbors, and don’t wreck the place. When you’re a homeowner, you will acquire a long list of new responsibilities, unexpected desires to make your home distinctly yours, and new kinds of financial obligations. Think about how these new responsibilities will affect your life as you know it now.
- You will still need to save money, more than ever before. Your mortgage payment will probably be higher than your rent payment. You will have to pay property taxes and premiums for homeowner’s insurance. For many people, those costs are included in the mortgage payment. Also, you will need to save for future repairs and maintenance, because your house may develop a leaky roof, you may need to do some pin tucking, or improve the electric service in to your home. Either way, your housing costs will increase.
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