How Do I Get Started?
Buying a home will probably rank as one of the biggest personal investments one can make. Being organized and in control will contribute significantly to getting the best home deal possible with the least amount of stress. It's important to anticipate the steps required to successfully achieve your housing goal and to build a plan of action that gets you there.
Before you can build a plan of action, take the time to lay the groundwork for your decision-making process.
- Review your reasons for wanting to purchase a home
- Determine how much you can afford to pay
- Evaluate your needs and wants
- Do I need to use a Realtor?
- Do I need an inspection?
Why Should I Purchase a Home?
Following is a list of benefits of home ownership:
Owning a home helps you establish financial credibility.
Owning your own home provides you with independence and more privacy than renting. You are free to paint walls, plant flowers, keep pets and anything else within legal bounds. As you make more payments and own more of your home, you add to its investment value.
A home reflects its owner’s values and lifestyle. Owning a home can provide you with a source of pride, enjoyment and satisfaction.
A home can provide security against inflation because the value of your home increases as prices go up.
Being established in a community provides a sense of belonging, stability and security.
Interest on your mortgage loan is deductible on your yearly personal income tax return. Many of the closing costs associated with purchasing your home are deductible, as are your property taxes.
How Much Home Can I Afford?
When starting the search process for a new home, it's important to analyze your financial capabilities first.\ Here are some things you should consider:
- Do I have a steady income?
- Can I add a mortgage payment (or a higher mortgage payment) to my existing debt load?
- Will I be able to make a down payment?
First time home buyers in particular should consider:
- Can I afford both the mortgage and other expenses, such as electric, water, repair and maintenance costs?
- Do I plan to live in the house long enough to build equity?
Do your research on the types of mortgages available to you and find the one that best suits your needs. There are a number of considerations to be made in terms of finding the best mortgage for each individual:
- What type of market are you in? Are the interest rates falling or rising?
- Do you want a fixed mortgage rate, where you will always know what your payment is going to be?
- What are your long-term goals? Do you intend to resell the property? Do you only need the mortgage for a short time?
If you are unsure about the answers to any of these questions speak with a mortgage company or broker to determine your existing debt load, including school loans, auto loans and credit card debt.
It is still true that the better qualifications you have, the lower your interest rate will be. However, there are mortgages available for almost everyone; it's the interest rates or the down payments that vary.
Before speaking with a lender, know what monthly dollar amount you feel comfortable committing to. Then when you discuss mortgage pre-approval with your lender, it is easier for you to determine the monthly amount and what value of home the monthly amount translates into.
Do not put yourself in the position where you will be paying more each month than you intended simply because the "dream" house requires it.
Pre-approval will let you know how much you can afford so that you can look for homes in your price range. Getting pre-approved helps you to alleviate some of the anxieties that come with home buying. You know exactly what you qualify for and at what rate, you know how large your monthly mortgage payments will be, and you know how much you will have for a down payment.
By asking the right questions, and knowing what your needs are, you can find the right loan and avoid the frustration of finding homes that you think are perfect, but are not in your price range.
See our Mortgage Info page for more details. TODO: Insert link to Mortgage Info page
What Do I Need and What Do I Want?
Before you embark on your search for the perfect house, it is important that you make a realistic list in an attempt to narrow your choices of properties.
Hunting for a home can be a time consuming process, especially if you have not determined in advance the parameters of your search. Many home buyers make the mistake of misinterpreting a WANT as a NEED. If you have a set budget in mind, you may find that you might have to compromise in one area in order to attain what you want in other areas.
First, take some time to prioritize your wants and needs:
- How much square footage do I need for a comfortable living?
- How many bedrooms do I need to accommodate my family?
- What is an adequate number of bathrooms?
- Do I need a garage or basement for storage needs?
- Is the Lot sized to accommodate the children's play area?
- Do I have time to take care of a large yard - including responsibilities like mowing the lawn and repairing my property each spring?
- Do I want a newer home?
Second, ask yourself where you want to live and what is the best location for you and/or your family. Things to consider:
- Convenience for all family members
- Proximity to work or school
- Crime rate of neighborhood
- Local transportation
- Types of homes in neighborhood, for example condos, town homes, co-ops, newly constructed homes etc.
Do I Need to Use a Realtor when Buying My Home?
The Realtor you work with could be one of your most valuable resources. Unlike many real estate agents who are simply licensed by their state to do business, Realtors have taken additional steps to become members of the local board of Realtors and have agreed to act under and adhere to a strict Code of Ethics. Plus...
- A Realtor can help you determine how much home you can afford. Often a Realtor can suggest ways to accrue the down payment and explain alternative financing methods.
- A Realtor, in addition to knowing the local money market, also can tell you what personal and financial data to bring with you when you apply for a loan.
- A Realtor is already familiar with current real estate values, taxes, utility costs, municipal services and facilities, and may be aware of local zoning changes that could affect your decision to buy.
- A Realtor can usually research your housing needs in advance through a Multiple Listing Service - even if you are relocating from another city.
- A Realtor can show you only those homes best suited to your needs--size, style, features
- A Realtor often can suggest simple, imaginative changes that make a home more suitable for you and improve its utility and value.
- A Realtor is sensitive to the importance you place on this major commitment you are about to make. Look for a real estate professional to facilitate negotiation of a win-win agreement that will satisfy both you and the seller.
It's important that you choose an experienced agent who is there for you. Your agent should be actively finding you potential homes, keeping you informed of the entire process, negotiating furiously on your behalf, and answering all of your questions with competence and speed.
First, find an agent who represents you and not the seller. This is beneficial during the negotiation process. If you are working with a buyer's agent, he or she is required not to tell the seller of your top choice. In addition, he or she is also focused on getting you the lowest asking price.
You can sit down with a real estate agent and discuss your needs, type of area, style of home, amenities and everything you really want in your next home. Real estate agents can help you by accessing a Listing Service which covers all properties listed for sale within a specific area. Together, you can select the homes you would like to see, set appointments and preview homes in a short period of time. An agent can guide you through the entire process.
Many people go through the real estate classified section or browse the Internet to find a home that appeals to them. However, your real estate agent will have many listings available that may not appear in the newspaper or Internet on a continuous basis. New listings come on the market daily.
Finally, it costs you nothing to utilize the services of a Realtor when purchasing your home. Why not use the experience and support of a Realtor?
Do I Need to Get My Home Inspected?
What is an inspection?
There are numerous types of inspections. An inspection is meant to evaluate, at minimum, the structural and mechanical condition of a property. It is not the same as an appraisal which evaluates the market value of a property. Persons involved in real estate transactions need unbiased information about the physical condition of property they plan to buy or sell and your contract should include a contingency that you obtain a satisfactory inspection report. Talk with your REALTOR® about the types of inspections available.
Home Inspectors vs. Engineers
A person who examines any component of a building, through visual means and through normal user controls, without the use of mathematical sciences.
Analysis or design work requiring extensive preparation and experience in the use of mathematics, physics, chemistry and the engineering sciences.
- Home Inspector
Finding a Qualified Inspector
- Referrals from satisfied customers
- Referral from a local Realtor or mortgage company
- Local consumer affairs office
- Yellow Pages under "Building Inspection Services"
Ask if she/he is a member of the American Society of Home Inspectors (ASHI). The ASHI has established standards of practice which include the specific services, limitations and exclusions that can be expected from private home inspectors
Importance of Inspection
As a buyer, you are entitled to know exactly what you are getting. Don't take for granted what you see and what the seller or the listing agent tells you. A Professional home inspection is something you MUST do, whether you are buying an existing home or a new one. An inspection is an opportunity to have an expert look closely at the property you are considering purchasing and getting both an oral and written opinion as to its condition.
Not only should you never skip an inspection, but also you should go along with the inspector during inspection. This gives you a chance to ask questions about the property and get answers that are not biased. In addition, the oral comments are typically more revealing and detailed than what you will find on the written report. Once the inspection is complete; review the inspection report carefully.
Other Tips and FAQs
Buying and Selling Simultaneously
What to do when you are looking to move and you're not sure which should come first - buying your new home or selling your existing home:
- Communicate with your Realtor so he/she knows your needs and your time frame.
- Carefully calculate your financial needs, preparing for a worse case scenario.
- Investigate bridge or short-term loans options for paying both mortgages.
- Determine if the purchase of your new home is contingent on the sale of your existing home.
- Determine if you can afford two mortgage payments.
- Decide how much time you will need to leave your existing home upon accepting an offer.
- Investigate temporary housing.
When Previewing A Home
- Write notes when previewing a home so you will be able to discuss the details later with your Realtor.
- Ask questions about the home and discuss any objections or concerns you may have.
- Ask about the community - schools, shopping and transportation.
- Ask specific questions about the construction of the home; electrical, plumbing, heating, cooling systems, etc.
- Have fun and relax. Finding your new home can be a rewarding experience. Have a good time and enjoy the process.
How Much Does It Cost To Buy A Home?
Typically, home buyers use 3, 5, 10 or 20% down financing when buying. Closing costs and prepaid items are also necessary and range between 1.5-2% of the loan amount. Appraisals and home inspections are not usually included. A buyer can ask a seller to help pay for some of the closing costs and prepaid items when buying a home.
Down pmt. % + Closing Costs & Prepaids (2%) + Appraisal & Inspection ($300-500) = Total Cost of Buying a Home.
What Is A Closing And What Happens At The Closing?
The "Closing" is an industry term for the close of a real estate transaction. A seller will receive their proceeds and sign over the title to the buyer. The buyer will finalize their mortgage and receive title from the seller. A closing typically will take about an hour and, after everything is complete, the keys are handed over to the buyer and the house is theirs!