Buying a home is by far one of the most exciting milestones you’ll accomplish in a lifetime. But, as with other experiences before this one, what you know in hindsight sure would have been helpful during the process, right? You don’t have to go in blind, trip yourself up, and find yourself dumbfounded like many first time buyers. Knowledge is power and you can empower your home buying experience by knowing what to expect. Here, then, are the six steps to buying.
Step One: Money and Numbers
You may not be surprised to know that it takes a twenty percent down payment to buy a house. To put that in perspective, if you want to buy a $200,000 home, you’ll need a $40,000 cash money deposit. The bank lends you, if you’re qualified, the other 80 percent. However, on top of the down payment are closing costs, typically paid by the buyer. Closing costs average an additional 1-8 percent of the home’s value and encompass the fees associated with services provided throughout the transaction. Closing costs are not usually included in the home mortgage loan. There are, however, exceptions to every rule and closing costs applies. In some cases, the buyer can negotiate for the seller to pay closing costs. In other cases, banks have programs to include closing costs in the mortgage loan. Nonetheless, be prepared – know the term closing costs and what that term means for you financially. Plan, also, for property taxes, homeowner’s insurance, additional flood insurance depending on location, possible HOA fees, and, of course, moving expenses.
Aside from money, you’ll need crystal clear credit when applying for your home mortgage loan. Your credit reports should be free of derogatory marks and reflect a healthy history of borrowing and repaying funds. Lenders will also assess your DTI, or your debt-to-income ratio. Your DTI measures what you have coming in for monthly income against what you have going out for all of your monthly expenses. If it looks like you’re over-extending yourself, you may have trouble qualifying. Pay down any debts that you can before applying for your home mortgage loan.
Step Two: Pre-Approval
This one might catch you off guard, but it’s true that you should be pre-approved for your home mortgage loan before you begin to shop for houses or reach out to real estate agents. You’re not a qualified buyer until a bank agrees to put up the funds for your house – unless, of course, you’re paying cash. Pre-approval sets your budget, expedites the process once an offer is made, indicates to real estate agents that you’re ready to take action, lets sellers know you’re a serious buyer, and positions you to move when ready.
Step Three: Finding a Top-Notch Buyer’s Agent
You don’t pay a buyer’s agent; the lender’s agent does. Therefore, there’s no reason you shouldn’t have an excellent, qualified, professional real estate agent helping you buy your house. Interview agents until you find the one who best suits your needs, then allow that agent to help you refine your wish list to match your budget.
Step Four: House Hunting, Etiquette, and Offers
House hunting is the fun part, but don’t forget who and where you are. You’re not on a reality t.v. show where over-inflated opinions openly blurted draw in ratings. In reality, you’re a guest in someone’s home and your words hold power. Be polite. Trust your agent to help you find houses that you love but that you can also afford. Your agent can then help you submit and negotiate offers. Do not emotionally attach to a property until you have the keys. Anything can happen.
Step Five: Patience is Key
Be patient because once your offer is accepted, the house has to be inspected, appraised, surveyed; the title has to be checked and transferred, and there are time-consuming processes. Waiting can feel like the hardest part.
Step Six: Closing Day
Finally, the day you’ve been waiting for – closing day. This is the day all the final documents are signed, money changes hands, the service providers collect their fees, and the keys are handed over from the seller to the buyer who is now the new homeowner.
Your real estate agent is the best source of information about the local community and real estate topics. Give The Robinson Realty Group a call today at 423-468-1111 to learn more about local areas, discuss selling a house, or tour available homes for sale.