Everyone dreams of owning their own home. When buying your first home, it can be a very exciting, yet anxiety filled experience. However, if you know what to expect during the home buying process you will be more relaxed and comfortable during this lengthy process.
Setting a Budget
Before the house hunting process begins, it is important to know how much you can afford. Expenses to consider include the down payment, monthly expenses, property taxes and any home insurance costs. These will all have to be considered before the home buying process begins as they are typically included in your new monthly payment. Since a person’s credit score determines their interest rate, knowing your score ahead of time can help you decide if now is a good time to buy or not. An individual’s debt-to-income ratio must also fall within acceptable limits of the home’s cost. Once you have determined these things, and if you feel that your budget has enough room to afford a new home, then its time to begin the home buying process!
When looking for a loan, be sure to get more than one loan quote to get the best interest rate and loan terms for your mortgage. Different banks and companies will offer different loan origination fees and by shopping around you can often times save yourself a lot of money. Be sure to also check your loan officers website for testimonials and information. A good loan officer will offer you many online resources and tools. Before you lock in your rate, be sure to check the daily rate with the rate your loan officer gives you to ensure you are getting the lowest rate possible. Interest rates will determine how much a mortgage will cost each month and come in fixed or adjustable terms. Mortgage lengths can range from 15 years to 30 years with some loan providers now offering 40 year mortgages as well. The longer the repayment term, the lower the payments will be. However, the interest accrued will also be higher on a longer loan.
Finding a Home
Once you have been pre-approved for a mortgage and you know what amount your bank has approved you for, it’s time to find your dream home! First, find a Realtor. Not just any Realtor will do. Make sure you have an expert realtor who has been around for a while and is knowledgeable about the area you are moving to. A well seasoned Realtor often times has seen many of the homes in your area on the market before and can help you spot a potential money-pit before you buy it. Ensure that you make a list of needs and wants taking into consideration the amount of bedrooms you will require now and in the future, amenities, location and asking price. Remember, the first home you visit might be beautiful, but you should visit many homes before making a final decision.
Making an Offer
There is an art to making an offer on a home. Typically, sellers place their home’s value a little higher than their desired price. A buyer will send in a lower bid, in a reasonable range, and the seller will counter with an offer somewhere in the middle. Appliances might also be negotiable if you are willing to up your offer a bit. Your Realtor will be watching for signs of problems in the home and will make suggestions to you regarding the offer. Listen to them closely as this is their business and they do it every day. The average buyer only buys a home once every 7 years or so. An experienced Realtor will be able to help you negotiate a lower price that sometimes includes concessions or closing costs. Their job is to protect you in the contract.
Getting a home inspection is a vital part of the home buying process. These inspections ensure that the home’s foundation, ceiling, heating, electrical system, walls, plumbing and entryways are up to certain standards. Sometimes the bank will require a home inspection however; many times they leave it to the buyer to purchase their own. It is extremely important to protect yourself by getting a home inspection right away. You typically have 10 days from an accepted offer to get the home inspected. Many buyers have been saved from disaster by taking the time to spend the extra $200 – $400 to get a home inspection only to find out the house has major problems allowing them to back out of the contract before it is too late.
Lenders normally require that you insure your home. Home Insurance Policies cover the costs to fix any damages that might occur to the home. The price of this insurance is dependent on a home’s age, location and value and the insurance company you choose. Be sure to call around and get several quotes. Agents will oftentimes be able to take your information over the phone and get back to you the same day with a quote. Once you choose a company to insure your new home, the cost of that policy is normally added into your closing costs and sent into an escrow account to be paid to the insurance company directly the first year.
Escrow and Closing Costs
Before the home is legally transferred to you, the closing process must occur. During this phase, you will sign all of the mortgage documents, pay closing costs, and sign various other legal documents. Once all of the papers are signed, the keys to your new home are yours! The only thing left to do is move into your humble abode. This may occur immediately after the closing or at the date set in the closing documents.