How to buy a home you can afford, in 9 steps
- Determine what you can truly afford.
As soon as you can, start reading Web sites, newspapers, and magazines that have real estate listings. Make a note of particular homes you are interested in and see how long they stay on the market. Also, note any changes in asking prices. This will give you a sense of the housing trends in specific areas.
- Figure out which Mortgage is the right fit for you—and get Pre-Approved.
If you have a Real Estate Agent already they are a great source for reputable Mortgage Loan Officers. Regardless before you start looking for a home, you will need to know how much you can actually spend. The best way to do that is to get prequalified for a mortgage. To get prequalified, you just need to provide some financial information to your mortgage banker, such as your income and the amount of savings and investments you have. Your lender will review this information and tell you how much they can lend you. This will tell you the price range of the homes you should be looking at. Later, you can get preapproved for credit, which involves providing your financial documents (W-2 statements, paycheck stubs, bank account statements, etc.) so your lender can verify your financial status and credit.
- Find the Right Real Estate Agent.
Real estate agents are important partners when you’re buying or selling a home. Real estate agents can provide you with helpful information on homes and neighborhoods that isn’t easily accessible to the public. Their knowledge of the home buying process, negotiating skills, and familiarity with the area you want to live in can be extremely valuable. And best of all, it doesn’t cost you anything to use an agent – they’re compensated from the commission paid by the seller of the house.
- Decide which house features are Must-Haves vs. Nice-To-Haves.
Start doing your online search. Have your real estate agent set you up on an automated search program to start sending you homes with your criteria in mind such as Area, Price Range, Size, Etc. This process will help you determine what you are going to get for your money and educate you on the market.
IMPORTANT: Take note on how quickly homes are selling in your desired area. This will help you decide how aggressive you will need to be with getting in to look at the home, how quickly you need to put in an offer and a purchase price. A knowledgeable Real Estate Agent will be able to help with this as well.
- Start House Hunting with your Real Estate Agent.
Start touring homes in your price range. It might be helpful to take notes (Use a check list) on all the homes you visit. You will see a lot of houses! It can be hard to remember everything about them, so you might want to take pictures or video to help you remember each home.
Take as much time as you need to find the right home. Then work with your Real Estate Agent to negotiate a fair offer based on the value of comparable homes in the same neighborhood. Once you and the seller have reached agreement on a terms and conditions (price, close date, inspection, possession, etc.), the house will be pended for the period of time it takes to complete all of the remaining steps and contingencies (inspection, appraisal, clear title, final mortgage approval) in the home buying process.
- Get a Home Inspection.
Your agent can help you find an Inspector he has worked with in the past or you can check other sources online. Just be sure to get an experienced & licensed inspector that has an electronic inspection report with digital photos.
- Research Homeowner’s Insurance.
Your agent can help you find a Homeowner’s Insurance Professional or you can check with your local Insurance companies.
- Work with your Mortgage Processor.
The loan officer/process will need your help in getting all the required paperwork for the loan underwriter. Making sure you are being responsive and getting any info requested ASAP will help to assure the home closes on time.
IT IS VERY IMPORTANT that you do not do anything that could affect your credit at this time. Do not apply for or take out any additional credit. Do not make any large sums of cash deposits without consulting your Loan Officer first. When in doubt, ask your Loan Officer or Real Estate Agent for advice.
At closing, you will sign all of the paperwork required to complete the purchase, including your loan documents. It typically takes about an hour to close. Most closings are at a Title Company in the local area. You will get your closing statement a couple of days prior to closing so you can get a cashier’s check for your down payment or if you will need more than $10,000 to close, the funds will have to be wired to the title company. Your Real Estate Agent will be about to guide you and advise you on how to do this in the most secure way. WIRE FAUD IS A CONCERN SO PLEASE TALK WITH AGENT FIRST….
Congratulations it’s time to move into your new home!