Whether you are just starting to consider purchasing a home, there are some steps you should take to make the process easier.
Here are six steps in preparing you to buy a home:
Check Your Credit
Start out by requesting a credit report. Checking your credit report early on in the home-buying process is essential. If you happen to find something negative on your report, it can take months to clear up. The U.S. government allows for one free report each year from each of the three national credit bureaus – TransUnion, Experian and Equifax. Make sure to visit annualcreditreport.com for your free reports.
Pay Down Debt
Banks do not want to see that you owe a lot of debt. Having too much debt negatively affects your credit score. Banks need to know that you will be able to pay their loan and a high credit score is what they want to see. So start off by paying down all your credit card debt. It’s a good idea to put off purchasing a new car or other major purchase until after you have been approved for a mortgage.
Build A Down Payment
A down payment of no less than 20 percent of the home price is your target goal. It is not always necessary, particularly if you are a first-time homebuyer. A 3.5 percent down payment is the minimum required to secure an FHA loan. So although you might not end up bringing 20 percent to the transaction, be prepared to bring some cash to the transaction.
Do you know which part of town you want to live in? It’s time for you to start exploring. Drive around, walk the streets, visit the shops and eat in the restaurants. If you can picture yourself living there, then start searching for a home in that area. If not, you’ll have to start exploring in another community. Also, even if you don’t have children or don’t have children in public schools, research school districts too. Homes in good school districts tend to sell more quickly in the event you should decide to sell in the future.
Unless you are paying cash for your home, get a pre-approval letter from a lender. You will know exactly how much home you can afford; plus it shows sellers that you are serious. Plan to secure a pre-approval right before you start looking around at homes. It’s best to meet with more than one lender to determine which company you trust most and which one can offer you the best terms and interest rate. Your real estate agent can provide you with the names of some reputable lenders.
Find a Local Agent
Finding a real estate professional who can guide you through the steps of the home buying process is important. They can provide you with insights on your local real estate market and help you find the home of your dreams.
Are you currently renting but ready to make your dreams of homeownership a reality? Are you prepared for this big step? If you are considering purchasing a home, here are a few things you should consider.
Are You Prepared to Do the Research?
Buyers generally have the advantage in a down market, but you shouldn’t go into the transaction blindly. Before you start searching the Internet for your dream home, there are a few things you should do. Find a real estate professional that will guide you through the home-buying process. Make sure to familiarize yourself with real estate lingo. Do you know what an offer is? Do you know what type of mortgage you should get? Buying a home is an exciting process, but it requires a lot of work too.
What’s Your 5-Year Plan?
Do you plan on staying in your new home for at least five to seven years? You answer to this question will help you decide whether renting or buying is right for you. If you plan on moving in the next year or so, then buying a home does not make financial sense. You typically shouldn’t buy a home unless you’re comfortable staying there for at least 5-7 years. This allows you the time to build up equity and make up for the costs of buying, selling and moving.
Are You Aware of the Costs Associated?
Today’s minimum down payment requirements range from 3.5 percent on an FHA loan to 10 or even 20 percent for conventional loans. That means coming up with anywhere from $10,500 to $60,000 on a typical $300,000 house. If you are not able to meet certain down payment criteria, you will also have to pay mortgage insurance or PMI, which helps cover the bank in case you default on payments. Besides a down payment, there are also closing costs associated with the home-buying process that you may have to pay in cash, which can run as high as 3-4% of your total purchase price. Add that to the cost of moving and any sort of improvements your home may need and it quickly adds up.
What Is My Credit Score and How Can I Improve It?
Want to reduce your monthly mortgage? Improving your credit score before the home-buying process actually begins is important. In addition to paying your bills on time, be sure to reduce your debts (especially those with high interest rates) and keep unused lines of credit open. All of these strategies can improve your score and allow you to qualify for the best mortgage interest rates available. You can check your credit score on sites like FreeCreditScore.com to keep track of any improvements or any areas for improvement.
Do I Have the Right Real Estate Professional Guiding Me?
Finding a real estate professional that can guide you through your home buying process and provide you with insights on your local real estate market is very important. They are your partner in the home buying process and can make the experience less stressful. They will help you navigate all the paperwork, your financing options, offer process and more.
Clients are often quick to ask, “Why should I hire a real estate agent?” That’s a great question. It may seem easy enough to buy or sell a home without a real estate agent. But in reality, there is a lot involved in the process that you may not be aware of. So, here are 10 reasons why you should consider hiring a real estate agent.
Education & Experience
By hiring a real estate professional, you won’t need to know everything about buying and selling real estate. Find the right agent. One who will assist you in determining how much house you can afford and get you a pre-approved loan. Simply searches, update you to new homes that match your criteria, and always keep you informed. Henry Ford once said that when you hire people that are smarter than you are, it proves you are smarter than they are.
Agents either possess intimate knowledge or they know where to find the industry buzz about your neighborhood. For example, you may know that a home down the street was on the market for $350,000, but an agent will know that it had upgrades and sold at $285,000 after 65 days on the market and after twice falling out of escrow.
Real estate agents network with other professionals, many of whom provide services that you will need to buy or sell. Agents can give you a list of references with whom they have worked with and provide background information to help you make a wise selection.
Handling Volumes of Paperwork
One-page deposit receipts were prevalent in the early 1970’s. Today’s purchase agreements run 10 pages or more. Which does not include the federal and state-mandated disclosures nor disclosures dictated by local custom. One tiny mistake or omission could land you in court or cost you thousands. In some states, lawyers are the ones that handle the disclosures.
Develop Relationships for Future Business
The basis for an agent’s success and continued career in real estate is referrals. Few agents would survive if they had to depend on consistently depend on new business. For this reason, it gives agents strong incentives to make clients happy and satisfied. An agent who stays in business will be there for you when you need to hire an agent again.
Agents are Buffers
Agents take the spam out of your property showings and visits. If you’re a buyer of new homes, your agent will whip out their sword and keep the builder’s agents at bay, preventing them from biting or nipping at your heels. If you’re a seller, your agent will filter the phone calls that lead to nowhere and try to get serious buyers to write an offer immediately.
Contrary to what some people believe, agents do not select prices for sellers or buyers. However, an agent will help to guide clients to make the right choices for themselves. For example, if a listing is at 7%, an agent has a 7% vested interest in the sale, but the clients has a 93% interest. Selling agents will ask buyers to weigh all the data supplied to them and to choose a price. Then based on market supply, demand and the conditions, the agent will devise a negotiation strategy.
Market Conditions Information
Real estate agents can disclose market conditions, which will govern your selling or buying process. Many factors determine how you will proceed. Data such as the average per square foot cost of similar homes, median and average sales prices, average days on market and ratios of list-to-sold prices, among other criteria, will have a huge impact on what you ultimately decide to do.
Negotiation Skills and Confidentiality
Top producing agents negotiate well because, unlike most buyers and sellers, they can remove themselves from the emotional aspects of the transaction and because they are skilled. It’s part of their job description. Good agents are not messengers, delivering buyer’s offers to sellers and vice versa. They are professionals who are trained to present their client’s case in the best light and agree to hold client information confidential from competing interests.
Answer Questions After Closing
Many questions can pop up that were overlooked in the excitement of closing. Good agents stand by ready to assist. Because even the smoothest transactions can come back to haunt you. For example, taxing authorities that collect property tax assessments, document stamps or transfer tax can fall months behind and mix up invoices, but one call to your agent can straighten out all the confusion.