Here are the steps you will go through to get you into your new home. You will definitely need a great Realtor, like Janet Hitzel, to help you through the complex process of buying a home!
Congratulations! You have decided to buy a home! What’s the next step?!?! Well, I have you covered. Hopefully, I am your Real Estate agent. If not, call me at 678 825 7382 and I will take excellent care of you!
Now for the deets:
1. Start with your credit. Three major credit agencies, Experian, Equifax, and TransUnion are the major reporters and can give you a report . This will give you a good idea of how the banks will view your credit. Do you need to fix things in order to get your loan? Your realtor can steer you to a talented mortgage broker who will give specifics on what you should do or not do. Should you pay off that collection? Not always.
Your credit score is a number calculated from a formula created by Fair Isaac based on the information in your credit report. You have three different credit scores, one for each of your credit reports.
A low credit score may hurt your chances for getting the best interest rate, or getting financing at all. So get a copy of your reports and know your credit scores. Try Fair Isaac’s MyFICO.com. Check into getting your free yearly credit reports. http://www.annualcreditreport.com will get you what you need.
Errors are very common. If you find errors, contact the agencies directly to correct them as soon as possible because it can take two or three months to resolve. If the report is accurate but shows past problems, be prepared to explain them to a loan officer.
2. Determine your budget. How much house you can afford. There are online calculators that are great. Speak with a loan officer and ask to be pre-approved by the lender. They will look at your income, debt and credit to determine the kind of loan that you can get.
Figure you can afford to spend about two-and-a-half times your gross annual salary. If you have significant credit card debt or other financial obligations like alimony or even an expensive hobby, then you may have to plan on spending less.
A great rule of thumb is all your monthly home payments should not exceed 36% of your gross monthly income.
The size of your down payment will also determine how much you can afford.
3. Get your down payment in line. You’ll need to come up with the cash for your down payment and closing costs. Generally, Lenders like to see 20% of the home’s price as a down payment, but each person’s financial background is different. Veterans need to come up with significantly less. If you can put down more than that, the lender may be willing to approve a bigger loan. If you have less, you’ll need to find loans that can accommodate you.
Various private and public agencies provide low down payment mortgages through banks and mortgage companies. If you qualify, it’s possible to pay as little as 3% up front.
Keep in mind, a down payment under 20% will probably require you to pay for private mortgage insurance(PMI). PMI generally adds about 0.5% of the total loan amount to your mortgage payments yearly.
You also need to make sure you’ve got enough to cover fees and closing costs. These may include the appraisal fee, loan fees, attorney’s fees, inspection fees, and the cost of a title search. They can easily add up to more than $10,000 — and often run between 3-5% of the mortgage amount, depending on the property and services required.
If you do not have enough cash on hand, you still have options. First-time homebuyers can withdraw up to $10,000 without penalty from an Individual Retirement Account. You can also receive a cash gift of up to $14,000 a year from each of your parents without triggering a gift tax, which can be a great way to come up with the extra money!
Check on whether your employer offers any help or incentives for homebuyers; some companies will help the down payment or have relationships to help you get a low-interest loan from selected lenders. You can also use a 401(k) or similar retirement plan for a loan from yourself.
4. Find a great REALTOR like Janet Hitzel, of Keller Williams! A knowledgeable REALTOR is a critical in helping you navigate the Real Estate process. The paperwork is cumbersome and the decision to buy a home is an expensive one. Get a realtor who has your best interest at heart. Someone like me, Janet Hitzel! (insert smiley emoticon!)
Signing an “exclusive buyer agent agreement” with your realtor holds them accountable to you-it also gives your realtor permission to negotiate your terms with the seller. Buyers agents usually split the commission with the seller’s agent at the close of sale.
5. Find your home. First, you need to figure out what city or neighborhood you want to live in. You should look for signs of economic vitality: low unemployment and good incomes. Starbucks and Whole Foods have amazing location departments. So when you see a Starbucks, take it as a good sign for the area.
Highly rated schools are so important for resale value so even if you don’t have school-age children, don’t overlook the school district’s importance. When it comes time to sell, you’ll find that a strong school system is a major advantage in helping your home retain or gain value.
6. Make an offer. Once you find the house you want, move quickly to make a fair offer. If you’re working with a Realtor like Janet Hitzel, then get advice from her on an initial offer.
This is where your Realtor earns their keep. Your realtor will supply you with comparable homes that have recently sold. If you love the home, offer close to ask to lock the deal up. Your realtor should educate you on whether you are in a buyer or sellers market.
Your realtor will help negotiate the final offer. You can always negotiate your terms and sweeten your offer.
Once you reach a mutually acceptable price, the seller’s agent will write up an Purchase and Sale Agreement .
7. You are in contract and have entered your Due Diligence period. This is when your Realtor is your best friend. You need to:
1. Get a mortgage
2. Get a home inspection
You will also make an earnest money deposit, which is a good faith deposit. It is generally 1% of the purchase price. The seller receives this money after the deal has closed. If decide to get out of the deal during due diligence, you receive your money back.
8. Secure your loan. You should decide whether to go with the fixed rate or adjustable rate mortgage and whether to pay points. Expect to pay $50 to $75 for a credit check at this point, and another $150, on average to $300 for an appraisal of the home. Most other fees will be due at the closing.
You will need homeowners insurance. Keep in mind, your lender may very well require that you have homeowner’s insurance before they’ll approve your loan. The lender will also perform an appraisal. The home needs to appraise for your offer price, or other arrangements must be made.
9. Get an inspection: Your realtor should be able to help with recommendations for reliable home inspectors. An inspection costs about $300-700, on average, and up to $1,000 for a big job and takes two hours or more.
If the property has significant issues, you will want to negotiate with the seller. Again, your realtor is going to become your best ally. You will either want the seller to fix the problem before you move in, or deduct the cost of the repair from the final price.
10. Close the deal. About three days before the actual closing, you will receive a final Closing Disclosure Form from your lender that lists what you can expect to pay at closing.
Even though you will be represented by an attorney and your Realtor, Read it carefully!
The lender may also require you to establish an escrow account, which it can tap if you fall behind on your mortgage or property tax payments. Lenders can require deposits of up to two months’ worth of payments.
Now go hug your Realtor and get your keys! You are now a homeowner!!!!