Buying a HomE
Typical Steps in Purchasing a New Home
Understand Before Diving In
With todays Information Age, there is an abundance of information on the internet, publications and books, as well as ways to look at actual listings in your prospective area. Understand the process and review homes that you are interested in, jotting notes around style of homes, length of time on the market and asking price changes. This will help you to gauge the area you are buying in and what you can expect before you take the plunge into the buying process.
Set a Budget
The last thing we ever want to see is a client attempt to buy more home than their budget allows for. As rule of thumb, we recommend (as do our lenders) that clients purchase homes that cost no more than 3x to 5x their annual household income if they plan to make a 20% down payment and have an acceptable amount of debt and good credit to debt ratio. But everyones financial situation is different. We can help you decide what is the most reasonable expectation for the amount of home you can afford.
After setting your budget, see if that is a feasible lending option before you get too deep in the process. We recommend that clients get prequalified for a mortgage. Pre-qualification simply requires you to review some of your personal financial information, such as income, savings, assets, investments, etc., to your mortgage banker. This will allow the lender to determine how much and at what rate they would be willing to lend you. This will help narrow the search for your new home, knowing exactly how much home you can purchase. *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.
Get an FFSR Agent
Our real estate agents are important partners when you’re buying or selling a home. We can provide you with helpful information on homes and neighborhoods that isn’t easily accessible to the public. With knowledge of the home buying process, negotiating skills, and familiarity with the area you want to live in, working with us can be extremely valuable.
Shop and Offer
Find the homes that fit within your financial plan and start touring! It might be helpful to take notes on all the homes you visit. You will, and should, 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 (comps) in the same neighborhood. Once you and the seller have reached agreement on a price, the house will go into escrow, which is the period of time it takes to complete all of the remaining steps in the home buying process.
Typically, purchase offers are contingent on a home inspection of the property to check for signs of structural damage or things that may need fixing. Your real estate agent usually will help you arrange to have this inspection conducted within a few days of your offer being accepted by the seller. This contingency protects you by giving you a chance to renegotiate your offer or withdraw it without penalty if the inspection reveals significant damage. Both you and the seller will receive a report on the home inspector’s findings. You can then decide if you want to ask the seller to fix anything on the property before closing the sale. Before the sale closes, you will have a walk-through of the house, which gives you the chance to confirm that any agreed-upon repairs have been made.
Get a Loan
Lenders have a wide range of competitively priced loan programs and a reputation for exceptional customer service. You will have many questions when you are purchasing a home, and having a mortgage banker assist you can make the process much easier. Every home buyer has their own priorities when choosing a mortgage. Some are interested in keeping their monthly payments as low as possible. Others are interested in making sure that their monthly payments never increase. And still others pick a loan based on the knowledge they will be moving again in just a few years.
Lenders will arrange for an appraiser to provide an independent estimate of the value of the house you are buying. The appraiser is a member of a third party company and is not directly associated with the lender. The appraisal will let all the parties involved know that you are paying a fair price for the home.
As you can imagine, there is a lot of paperwork involved in buying a house. Your lender will arrange for a title company to handle all of the paperwork and make sure that the seller is the rightful owner of the house you are buying.
At closing, you will sign all of the paperwork required to complete the purchase, including your loan documents. It typically takes a couple of days for your loan to be funded after the paperwork is returned to the lender. Once the check is delivered to the seller, you are ready to move into your new home!