Congratulations on your decision to become a homeowner! Every home buying experience is as different as a fingerprint. But there are general guidelines as to how the home buying process works.
A home isn’t just a house. It’s also a location and a lifestyle. A consideration to have in mind is how long you plan to be in the home or the area. You have a more transient lifestyle and want more than one property. Remember, it’s your lifestyle.
A home is more than just a collection of rooms. Several similar properties may represent totally different designs, commuting distances, lot sizes, tax costs and dimensions—inside and out. It’s important to have in mind the things you want in a home before you start looking. Consider price, location, size, amenities, and type. Also think several years down the road. If you think you’ll need a larger home or a larger yard or to be closer to school for the kids, maybe now is the time to consider all of that instead of having to move again in a few years. Once you know what you want, start looking. It’s important to target your search with basic criteria like location, proximity to schools and work, and other features.
When you’ve decided that you want and are ready to buy a home, you need to get approval from a lender to get a loan. But before you can do that, you have to have an idea of how much you can afford. Your credit will also be a major factor in the loan process.
A good credit score makes you less of a risk to creditors, so you should always check your credit before applying for a mortgage of any kind. If you have negative marks on your credit, you should do the work to repair them before you apply. By law, you’re allowed to receive one free copy of your credit report per year. You can do this by visiting any one of the credit reporting agencies or a service like annualcreditreport.com. Scores range from approximately 300 to 850; generally, the higher your score, the better you’ll qualify for a loan.
A pre-approval means a lender has approved you for a loan at a specified amount based on your income, assets, debt, and credit. It’s the first step to take before shopping for a home. Your lender will provide a letter of pre-approval, verifying the loan amount you’ve been approved to borrow. Most sellers will require pre-approval to validate the sales contract on a home. Pre-approvals can usually be done within 24 hours.
Making an Offer
Once your loan has been pre-approved and you’ve found a home, you need to make an offer to the buyer, and if accepted, secure a contract to purchase the property. Usually there’s a bit of haggling involved between the buyer and seller, so sellers may price their homes a bit higher. As a general rule, it’s good to start about five percent below the asking price. Once you’ve made an offer, it doesn’t necessarily mean it’s final. The seller can make a counter offer and you can counter again. Once you’ve agreed on a price, you’ll make an earnest money deposit, which is money that goes in escrow as a sign of good faith that you intend to purchase the property.
Inspection and Appraisal
A home inspection safeguards you against unforeseen problems that could pop up down the road. A typical home inspection includes testing electrical and plumbing systems and appliances, and evaluating the home’s roof and exterior structure and foundation.
A similar but separate process is the appraisal. An appraiser will determine how much the house is really worth by comparing it to other similar homes on a number of features like lot size, square footage, etc. Your lender will order an appraisal of the home you intend to buy. You don’t have to be present. Your Realtor or the seller can let the appraiser into the home. The lender normally sends a copy of the appraisal to the buyer.
Closing on a home means that the sale is complete, and all the terms and conditions of the purchase agreement have been met. At this point, the seller gives the buyer title to the property. There are fees and expenses associated with closing. On average, they range from three percent to five percent of the total loan amount. For example, for a loan of $300,000, closing costs might run in the $12,000 range. Closing costs can sometimes be rolled into the financing or even paid by the seller. Every situation is different. Check with your Realtor for your options. But don’t forget, BayCoast Mortgage is the home of the no-cost mortgage!