Essential Checklist for First-Time Home Buyers
Buying a home can be both exciting and stressful for first-time home buyers. You might alleviate some of the typical anxieties by learning as much as possible about the process. From the first steps of determining your budget and securing your loan to then finding a home, you can proceed with confidence when you know what to expect. It can also help to utilize the expertise of a professional adviser to help you navigate the home buying process.
Before proceeding with a mortgage, it’s important to determine what you can afford. Not only will you be responsible for the monthly mortgage payments, but you will also need to pay for home insurance, a home warranty, maintenance expenses, and possible homeowner association fees. Saving money to pay for your down payment is important. Lenders have different requirements for down payments, but generally, the higher your down payment, the lower your monthly payments will be. Calculate your monthly income to see what you can afford for your housing budget. Lenders typically recommend that consumers’ monthly mortgage and housing expenses not exceed 31 percent of gross monthly income.
Once you know your budget, it’s time to find a lender and secure a loan. It’s helpful to request a copy of your credit report so you know your credit score. Many buyers approach a few different lenders to explore various financing options. Banks, credit unions, savings and loan associations, and mortgage companies are the different lenders you might use for financing. Once you find a mortgage that fits your needs, you can apply for pre-approval with the lender. To proceed, you will need documents to verify your employment, income, and credit history. The lender will process your information and return a decision about the loan you can receive from this lender with terms and rates. Once you have this paperwork, you can use it to confirm your financing once you get to that point in your search for a home.
“Counting Chickens Before They Hatch”
When determining how much mortgage you can afford, base this amount on what you are earning today. That is, the income that you and your spouse earn from stable sources. If you’re in your last year of law school, for instance, don’t assume that you will be earning much more money in a year or two, so you can afford a larger payment. If your wife is expecting a big promotion, don’t base your mortgage payment off of her potential salary increase. No one can predict the future, and although you may very well be in a better financial situation a year down the road, there is no guarantee.
The Home Search
After determining your budget and securing your loan, it’s time to find a home that you wish to purchase. If you have requirements concerning location or features of the home, make a list to use to narrow your search. For example, if you need a certain number of bedrooms or you wish to live in a specific school district, these requirements will determine where you search and which homes you consider. The search for a home may be easier if you use a professional adviser. A real estate agent can be helpful, because this professional has access to databases of homes for sale. Lamar Wheeler can help you find homes that fit your criteria. He can also schedule showings so you can tour homes that fit your requirements. After searching for and assessing homes, you can narrow your list to make an offer on the home you want to buy.
Offer and Acceptance
An offer to purchase is a legally binding contract. Your offer will include the price you want to pay for the home, special provisions for the sale, and specific items that you want to be included in the transaction, such as appliances. An offer may also include specific contingencies that must be resolved for the sale of the house, such as inspections. The offer stipulates a date for the resolution of contingencies and a specific date for closing of the sale.
After submitting your offer to the seller, the seller has the option of accepting the offer or counter-offering with different terms. If the seller counter-offers, you will need to review the different terms to see if you want to accept them. If you accept these terms, you can accept the counter-offer and you have a binding contract. If you don’t accept the terms, you can submit another counter-offer with different terms. These negotiations often take time and effort. Lamar Wheeler can provide beneficial assistance during this phase of the process, because he has the expertise and training in these negotiations.
Contingencies and Closing
After acceptance of the offer by both parties, the work begins to satisfy any contingencies written into the terms. Typical contingencies include inspections, financing, appraisal, and title search. For the home inspection, a professional inspector will examine and assess the entire home to find any issues. If the inspector finds problems with the structure of the home or in areas such as plumbing or the electrical system, the inspector will present a detailed report about the issues. You will have the option of proceeding with the contract or ending it because of the problems. Your contract will have what’s called an “Option Period” which is an agreed amount of days where you can decide whether to end the contract. Once all contingencies are resolved and satisfied, the contract proceeds to closing. The closing often occurs at the title office. At this meeting, you will meet to sign all legal documents for the financing and official transfer of the property. Payment of closing costs and agent fees are also processed at this time.
If you have any other questions or concerns feel free to contact Lamar Wheeler, Realtor at 254-383-3736.