Finding your way in the dark is not only challenging – but also uncomfortable, if not fearful. The same applies when you’re “in the dark” about certain processes. Enthusiasm can blind first-time homebuyers. People preparing to purchase their starter home get so focused on the end goal, the final result, that they misunderstand or misgauge the journey. Here are six steps that can shed some light on the home buying process.
Step One: Getting Your Financial Ducks in a Row
The amount you may pay for a deposit on your new home can be staggering. Although your lender will provide you with a home mortgage loan that covers around 80 percent of the cost of the home you’re buying, you’re responsible for the remaining twenty percent. Break that down: If the home you’re buying is $300,000, your twenty percent down payment is $60,000. Furthermore, you’ll pay closing costs which are estimated between one percent and eight percent of the home’s value, so tack on another $24,000 for closing costs, which aren’t covered in your home mortgage loan. And, you’ll be responsible for property taxes, homeowner’s insurance, possibly private mortgage insurance, and perhaps homeowners’ association fees. That’s a great big chunk of change, and it’s your priority before starting the house hunt.
Step Two: Your Credit Counts, So Does Your DTI
Even though you’re coming to the table with a big piggy bank to bust open, your credit score can make or break your ability to get a home mortgage loan. Clear up any derogatory statements, pay off any outstanding debts, and focus on raising your credit score to great standing.
DTI is your debt-to-income ratio. Your DTI is a way to measure what you have coming in against what you have going out. When a lender sees that you’re over-extending yourself financially, even if you’ve not been late on payments, they’re less likely to take the risk on loaning you money that could further stretch you beyond your financial limits. Before you apply for your home mortgage loan, eliminate as many creditors as you can. Pay off those credit cards and avoid financing any major purchases like cars.
Step Three: Securing that Home Mortgage Loan
Here’s where many buyers miss the boat. It’s best to obtain your home mortgage loan before you reach out to real estate agents or start property shopping. Pre-approval for your home mortgage loan determines your home buying budget, establishes you as a qualified buyer to real estate agents, and empowers you with sellers because you’re ready, willing, and able to take action.
Step Four: Your Agent and Your Wish List
With your money matters tidy, your credit score clean, your DTI low, and your home mortgage loan secured, you’re ready to interview real estate agents to find the best representative to help you go after your dreams of homeownership.
When you find the right agent, talk to him or her about your budget and your wish list. First-time buyers tend to over-estimate what their money will buy in real estate.
Your agent will show you houses that match your criteria and your budget. Be patient – you may look at a lot of houses before one speaks to you. But when you find that home you want, be ready to pounce.
Step Five: Offers and Negotiations
Your agent will help you submit a competitive offer and negotiate terms. Do not emotionally attach to the property. Many things can happen that can kill the deal before it’s done. Separate your emotions from the business end of the transaction.
Step Six: Appraisals, Inspections, Surveys, and Legalities
Don’t get a case of antsy pants just yet! Even though the seller accepted your offer, you’re a long way from the finish line. Your lender requires that the boundary lines of your property be defined and documented, that the home is inspected to verify its condition and deem it free of pests like termites, and appraised to determine its fair market value.
This is also when administrative tasks take place, such as a title check to make sure the property is free of tax holds or liens that could prevent it from legally being sold.
In a nutshell, know that buying a house takes time. The more prepared you are, the less time it takes to reach the closing table. Save your money. Clean your credit. Get pre-approved. Find the right agent. Find the right house. Make a competitive offer, and then be patient through the processes.
Your real estate agent is the best source of information about the local community and real estate topics. Give Shawn McNeal a call today at 360-929-6650 to learn more about local areas, discuss selling a house, or tour available homes for sale.