For most people, buying a home is the biggest purchase they'll make. Even experienced buyers can be run into situations that can be confusing and stressful. Below are some tips that will help prepare you for your home search and purchase as well as reduce delays and worries that can accompany buying a home.
Approaching the task of buying a home can be overwhelming; there's so much to consider: How much house can I afford? How can I find the best loan? Where will I come up with a down payment, and how much will I need? Should I buy a new or resale home, and which will go up in value? Should I work with an agent or look at homes on my own? And these questions are just the beginning.
Buying a home is one of the largest financial transactions in your lifetime - do your research so you know what you're doing.
Here are the two most important things to remember no matter where you are on the road to home ownership:
1. You can and should understand everything that is happening in the home buying process. There is nothing that is so complex that it can't be easily explained to anyone with average intelligence. Just because you don't apply for a thirty year mortgage once a week doesn't mean you have to take the first one that comes along. You'll need to learn some new terms, apply some new concepts and take the time to understand what you're getting into. If, at any point, something happens that doesn't make sense to you, simply demand a full and complete explanation. If it still doesn't make sense, seek help from someone you trust like your CPA, your banker or maybe an online real estate columnist.
2. In the world of real estate sales, YOU are the most important person in the entire process. It's easy to think that everyone else carries more weight than you. The agent talks fast and has an answer for everything. The lender may decline your loan application, and on and on. But the truth is that you, the buyer, are the one person in the transaction that makes it all happen. If you decide to not buy, the entire process comes to a grinding halt. So flex your consumer muscle and take command of this process. Surround yourself with a team of professionals that you have confidence in and make them work for you. Approach home buying with intelligence and confidence, and by doing your homework, and you are more likely to buy a house you?re happy with and to know that you made the right decision.
Pre-Qualify For A Mortgage - Advantages of getting pre-qualified are:
Helps you narrow your search to only those homes in your price range.
Lets sellers know you are serious when you make an offer. Avoids delays in the negotiation process.
Helps you set up a budget for your household.
Clean Up Your Credit
Eliminate credit card debt as much as possible and pay down as many as you can.
Get a copy of your credit report to see what the lenders will see.
Cancel unused cards. Have credit history errors. Don't fill any new credit card application you receive in the mail. Be wary of companies that say they can repair your credit.
Check with your state attorney general before contacting a debt repair company.
Getting A Mortgage
Shop for a mortgage and compare the terms of various lenders. Aside from rates, points, etc. find out how long you can lock in a rate and get it in writing.
Find out what points are involved. There are two kinds of points, pre-paid interest points which lowers your interest rate and origination points which is basically a fee to get the loan.
You also need to find out what closing fees (attorney, filing, taxes, etc.) are involved.
Do you want a fixed or adjustable rate (ARM)? Adjustable rates are lower than a fixed rate for the first few years but can go up whereas a fixed rate never changes.
If you go with a fixed rate do you want a 15, 20 or 30 year loan? If you can afford the higher monthly payments of a shorter-term loan then you will pay substantially less interest over life the term and you'll build up your equity faster.
How much do you have for a down payment? If your down payment is 20% or more of the purchase price then you may be able to avoid monthly Private Mortgage Insurance (PMI) charges.
Documents you'll need are: latest bank statements, latest W-2s and tax returns, copy of latest pay stubs, child support or alimony records, IRA and 401k statements, investment account statements.
If part of your down payment is a gift from a friend or relative you'll need a letter from the donor explaining that you are not obligated to repay them.
When you apply for a loan your lender is required by law to give you the following: Truth-in-Lending Disclosure, A Home Buyer's Guide to Settlement Costs, ARM Disclosure, Your Annual Percentage Rate or "APR". Make sure you receive these documents and read them.
When you apply for a loan the following will be done by your lender: an appraisal of the property you wish to buy, review of you credit history, employment and bank account verification.
Making An Offer On A Home
Before making an offer get full disclosure on the condition of the property, any liens or back-taxes, easements, etc.
Get a copy of any neighborhood association rules and by-laws, if you have a home business and the association has restrictions on these kinds of activities then you need to know before you offer to buy. Consult a real estate attorney if you have questions and contact the association chairperson for clarifications.
Get a Comparative Market Analysis (CMA) of the home to find out what comparable homes in the area are selling at, your real estate professional can help you with this.
In addition to the offer price put down, in writing, any contingencies or terms that you wish the seller to meet.
Keep contingencies reasonable so that you don't kill the deal, and make it negotiable.
Conveyances, if you are told that a major appliance comes with the home, make sure that it's mentioned in the offer.
Also make sure all the details of the transaction are written down.
When you make an offer you will be expected to put up an "earnest money deposit" to show that you are serious about buying the property, normally no more than 1-2% of the offer price.
Keep in mind that when you make an offer it can become a contract, it only needs the seller's signature to become binding. Make sure your offer is reasonable and attainable for you and the seller.
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