Let me share a few thought before we get into the details of the process.
If you are first-time buyer and have decided to purchase, you may in fact feel overwhelmed. There are numerous questions that can arise about the home buying process, whether you can afford a home, how to go about finding a qualified real estate professional, financing, and others. No question about it...it is a complex undertaking.
To help you get started, the following web sites offer good advice for first-time buyers seeking answers and information:
There are many good reasons for you to invest in real estate; turning a house into a home and wealth building would rank among the top of the list. We can call homeownership the best “accidental investment” people will ever make. When it is done right, homeownership becomes an “intentional investment” that lays the foundation for a life of financial security and personal choice. There are solid financial reasons to support your decision to buy a home; equity buildup, value appreciation, and tax benefits stand out.
Base your decision to buy on facts, not fears.
The typical real estate transaction involves at least two dozen separate individuals. Insurance assessors, mortgage brokers and underwriters, inspectors, appraisers, escrow officers, buyer's agents, seller's agents, bankers, title researchers, and a number of other individuals working in harmony to orchestrate your home purchase. And out front leading the band, it is your real estate agent expertly coordinating with the other professionals involved in your home purchase culminating in a speedy and smooth closing.
Seven main roles of your Buyer's Real Estate Agent:
Finding a solid professional agent means getting beyond the pretty picture. Asking direct and insightful questions can help clear the water. Use these questions as a guide when searching for your Realtor®.
While you may find the thought of homeownership thrilling, the thought of taking on a mortgage may be downright chilling. Many first-time buyers start out confused about the process or nervous about making such a large financial commitment. From start to finish, you will follow a six-step, easy-to-understand process to securing the financing for your first home.
Six steps to Financing a Home:
You may think that shopping for homes starts with jumping in the car and driving all over town. And it's true that hopping in the car to go look is probably the most exciting part of the home-buying process. However, driving around is fun for only so long-if weeks go by without finding what you're looking for, the fun can fade pretty fast. That's why we say that looking for your home begins with carefully assessing your values, wants, and needs, both short-term and long-term.
Questions to ask yourself:
When searching for your dream home, you were just that-a dreamer. Now that you're writing an offer, you need to be a business person. You need to approach this process with a cool head and a realistic perspective of your market. The three basic components of an offer are price, terms, and contingencies.
Price - The right price to offer will fairly reflect the market value of the home you want to buy. Your agent's market research will help guide this decision.
Terms – These are the other financial and timing factors that will be included in the offer and fall under six basic categories in a real estate offer:
Contingency – These are legal contractual obligations that is built into the purchase contract, which puts specific requirements and/or imposes specific timeframes within which each party (Seller and Buyer) is to perform. If the contingencies are not met, either party can legally cancel the transaction.
Unlike most major purchases, once you buy a home, you can't return it if something breaks or doesn't quite work like it's supposed to. That's why homeowner's insurance and property inspections are so important.
A homeowner's insurance policy protects you in two ways:
The property inspection should expose any secret issues a home might hide so you will know exactly what you're getting into before you sign your closing papers.
The final stage of the home buying process is the lender's confirmation of the home's worth and legal status, and your continued credit-worthiness. This entails a survey, appraisal, title search, and a final check of your credit and finance. Your agent will keep you posted on how each is progressing.
You just have a few pre-closing responsibilities:
On closing day, with the guidance of a settlement agent and your agent, you'll sign documents that do the following:
As long as you have clear expectations and follow directions, closing should be a momentous conclusion to your home-searching/buying process.
Throughout the course of your home-buying experience, you've probably spent a lot of time with your real estate agent and you've gotten to know each other fairly well. There's no reason to throw all that trust and rapport out the window just because the deal has closed. In fact, your agent wants you to keep in touch.
Even after your home purchase is final, you can refer to your real estate as a great resource to:
Your lender decides what you can borrow but you decide what you can afford. Most lenders should provide you with your maximum buying potential. This would be the most you can qualify for on “paper”. Your monthly budget may indicate you can afford more or less. If your personal budget says more then you may need to find a co-signor; usually mom or dad in the case of a home. It all has to do with ratios which we will get into below.
Lenders are careful, but they make qualification decisions based on averages and formulas. They won't understand the nuances of your lifestyle and spending patterns quite as well as you do. So, leave a little room for the unexpected - for all the new opportunities your home will give you to spend money, from furnishings, to landscaping, to repairs.
Historically, banks used a ratio called 28/36 to decide how much a homebuyer could borrow. An approved housing payment couldn't be more than 28 percent of the buyer's gross monthly income, and his or her total debt load, including car payments, student loans, and credit card payments, couldn't be more than 36 percent. As home prices have risen, some lenders have responded by stretching these ratios to as high as 50 percent. No matter how expensive your market though, we urge you to think carefully before stretching your budget quite so much.
Deciding how much you can afford should involve some careful attention to how your financial profile will change in the upcoming years. In the long run, your own peace of mind and security will matter most.
Before the home search begins, your real estate agent will want to know as much as possible about the features and amenities you desire. To help your agent better serve you, analyze what you want and what you need in a home's features and amenities.
Where you buy not only affects the home's current and future value, but it also affects your lifestyle. Your agent will be able to conduct a more targeted home search if you outline your preferences in neighborhoods and nearby amenities. Here's a checklist of items you should consider and communicate to your chosen real estate agent.
Whether to buy an existing home or have one built is yet another decision to make during the home-buying process. If you decide to go with new construction, a real estate agent can be a powerful advocate in your corner as you negotiate upgrades, a move-in date and other terms with the home builder. Below are some basic pointers to prepare you for the journey ahead.
Shopping for a large production or custom home builder can be a daunting task. Start by defining what architectural styles appeal to you and then seek out the builders in your area who offer those styles. Due diligence is essential. Ask friends for referrals to get firsthand accounts; verify the builder's state license status, if applicable; and check whether they're certified by the National Association of Home Builders. http://www.nahb.org
A builder representative's ultimate goal is to sell you a home. His or her role is to provide a wide range of information to help you in your decision-making, from building restrictions, roads and easements to inspections, warranties, rebates and upgrades. A real estate agent knowledgeable in new-home construction will be able to help you wade through all the data and point out the downsides and upsides of each line item. Your agent also can look out for your interests in reviewing the builder's contract, which often contains more legal jargon than consumer-friendly language.
Market conditions greatly dictate a builder's incentive to make a deal you cannot refuse. When a builder has inventory on his hands, his carrying costs start adding up. When this happens, a builder might be more amenable to strike a favorable deal, whether it's throwing in upgrades or taking a bit off the asking price. A real estate agent can help you know when market conditions are right for these benefits. Also, watch for builder close-out sales. Builders promote these special events when a new subdivision is near completion but empty inventory still remains.
While there are always exceptions, most builders require a deposit when a purchase agreement is signed. They also require that the buyer pay for any upgrades prior to closing. If you back out prior to closing, unless the agreement states otherwise, you will lose that money. Make sure you understand every detail in the builder's contract before signing it.
Seven main roles of “A Buyer's Real Estate Agent”:
Finding a solid professional agent means getting beyond the pretty picture and asking direct and insightful questions.
Use these questions as a guide when searching for your Realtor®.