Whether you're totally new to home buying or it has just been a long time, it's important to learn the process so that you can avoid many of the pitfalls that come along with it. Purchasing a new home can be stressful and difficult, but it doesn't have to be that way. By being prepared and setting appropriate expectations, you can make it an enjoyable and rewarding experience. And that is what I'm here to do.
Step 1. Build Your Dream Team
Before doing anything else, it's essential to make sure you have the right people in your corner throughout the process. Most importantly, you want to pick a good Realtor,who understands your wants and needs, and a good Lender, who will assist you in securing the best financing for your unique situation. Find people you trust to work diligently for you during the entire process. If you don't know any Realtors or Lenders, ask your peers who they have worked with or know of and what their experience was like. If you have a specific need or want such as buying an investment property, find a Realtor who understands real estate investing and does it personally.
Not only is this the "first step" sequentially, but it is also the most important. If you have the right individuals working for you, it is much harder to make a mistake with your purchase. Finding a good Realtor and Lender will make or break your experience!
Step 2. Get Pre-Approved, not Pre-Qualified
Once you've built your tenacious team, it's time to ask yourself: "How am I going purchase this property?". Assuming you don't have all the cash to buy it (in which case you wouldn't need a Lender), you need to get Pre-Approved. Getting Pre-Approved means that a Lender has verified your financial statements and has decided that you are credit worthy for a mortgage up to a certain amount. This gives you 2 things: it tells you what your budget is and it tells sellers that you will be able to acquire the loan in your current financial state.
Letting sellers know that you are well-qualified to buy their home is an extremely important factor in the strength of your offer. You may have offered $10,000 over asking price, but if the seller doesn't believe you'll actually be approved for the mortgage, your offer is basically worthless.
Last, note that you want to get a Pre-Approval, and not just a Pre-Qualification. Pre-Qualifications aren't considered to be worth the paper they're written on because nobody has actually verified your credit or your debt/income ratio. Don't waste your time with online Pre-Qualifications, get Pre-Approved with a local Lender you trust instead.
Step 3. Find A Home You Love And Submit The Winning Offer
Now that you have your financing in place, it's time to start looking for homes! Find the area of town that you'd like to live or would like to invest in. Discover the type of floorplan and design that works best for you. Once you find a property that meets 85% or more of your criteria, submit an offer! (Remember, there is no perfect house, even if you custom build it yourself!) Have your agent learn what he can about current offers on the property and what other terms the seller would like to see in an offer. Once you have this information, combined with knowledge of the current market, your Realtor will help you construct the most attractive possible. (Note: Make sure you include your Pre-Approval letter in your offer.)
Step 4. Get A Home Inspection
Hooray! Your brilliant offer was accepted by the sellers. Now it's time to hire an inspector to check for any serious health and safety concerns. If you don't have a Home Inspector you trust, ask your Realtor who they recommend hiring for the job. Once you receive your inspection report, go over it with your Realtor. If your home isn't brand new, it's guaranteed to have a lot of MINOR issues. Don't fret! Unless it is a serious health and safety concern or represents thousands of dollars in future repairs, it shouldn't be a concern. If there is a serious concern, your Realtor will renegotiate the contract or you can walk away. If not, fantastic! You're ready for step 5.
Step 5. Home Appraisal
Because you are borrowing money to fund your home purchase, your Lender wants to ensure that the home he is lending you money for is actually worth what you are paying for it! (This is important in cases where borrowers stop paying the mortgage and the Lender must take control of the property and sell it.) To confirm the value of your home, the Lender will hire an Appraiser to assess it's value. If it appraises for what you've agreed to pay or more, awesome! If not, the contract must be renegotiated. Either you must bring extra cash to the table to make up the difference OR the sale price must be dropped to match the appraised value.
Step 6. Closing
Congratulations! You are in the final stretch. Once you've completed the inspection and the appraisal, it's time to close the deal. The date will depend on your specific contract. Once that date arrives, you'll head down to the agreed upon Title Company, pay your closing costs, and sign the purchase and loan documents. Typically closing costs represent about 2-3% of the purchase price of the home, so don't forget your check book. Ta-Da! You've successfully purchased your home. That wasn't too hard, was it?
If you have more questions about purchasing a home, feel free to email me @ Kcoslett@amherst-madison.com or give me a text or call @ 208-869-0400.
-Kevin R Coslett