Steps To Purchasing a Property
It can be difficult to buy a house during good times. While some details might look different, the process of buying a home is the same. Understanding the steps will help you achieve your goals and make your dream come true.
There are some things you need to know, no matter what time you buy your house. The average time it takes to buy a house is six months. This includes 4.4 months to shop and 30-45 days to close. There are many things to consider when buying a house. Also, you need to evaluate your credit and financing options and find the right agent to help you make offers and negotiate, move, and close your deal.
How To Buy A House?
When you are looking to buy a home, the most important things you should consider are your budget, lifestyle, and priorities.
These are some questions you should ask yourself:
What is the maximum house I can afford?
Do I plan to take out a loan or not?
What amount should I have saved to pay a downpayment?
What are my options for a neighborhood I like?
Is the area's home value increasing or decreasing?
What is the commute time?
What school district is best suited for my family?
Is it easily accessible to all amenities and other activities?
Once you have answered these questions, you can begin your home search.
These Are The Top Steps You Should Take When Purchasing A House:
Verifying Your Credit Score
You should thoroughly review your credit report before allowing a lender access to your credit score.
What is a credit score? The credit report draws data from TransUnion, Equifax, and Experian. This report is used to calculate your FICO score as well as your Vantage score.
Free reports can be obtained from all three agencies at least once a year. You should immediately dispute any errors in your credit report before applying for financing.
What is a FICO Score? Lenders use FICO scores to assess your creditworthiness. Fair Isaac & Co. calculates this score, and it ranges between 350-850.
What is a Vantage score? The Vantage Score is the credit score you will see when looking at consumer-facing credit checking websites. Your FICO score can be different from your Vantage Score. Lenders don't use your Vantage Score for creditworthiness evaluations.
Higher credit scores will result in a lower interest rate. For example, a good interest rate for a conventional loan will be offered to those with credit scores of 720 and higher. However, qualification criteria vary depending on the lender. For example, FHA loans are usually approved for those with credit scores of 580 and higher.
Before you apply for credit, it is important to understand the factors affecting your credit score:
History of payments
Credit history length
Types of credit
Determine How Much House You Can Afford
Your lender will inform you of the maximum amount you can borrow once you have been pre-approved (we'll discuss the pre-approval process later). You don't have to wait to be pre-approved to get an idea of your financial capabilities.
Prioritize Your List Of Wishes To Make Your Budget Work:
Once you have an idea of your budget, create a list with the must-have features. Your new home's size, location, and amenities will depend on how much you are willing to spend.
These Are Some Examples Of Items That You Might Want To Add To Your Wish List:
Bathrooms and bedrooms
Location of preference
Type of home
Layout, features, and finishes
It's easy to commute to work.
Locate A Real Estate Agent
Many buyers find that having a professional agent to help them navigate the process is beneficial. In addition, buyers can often pay the commission of an agent, and this makes it a more cost-effective option.
These Are Just A Few Areas Where An Agent Can Assist Buyers:
This report identifies market trends in home value, new developments, buyer demands, and the overall state of.
Determines the value of a home and recommends an initial amount competitive.
Know when to ask for a lower price and how to negotiate contingencies or repairs.
Get insider information about the area and schools in your neighborhood
Refers to trusted lenders, attorneys, contractors, and other vendors.
This simplifies the process by handling hiccups and keeping on top of due dates.
Unless you buy a home entirely with cash, getting pre-approved by lenders will give you an opinion on your home-buying budget. A lender will review your financial information and calculate your debt-to-income ratio to determine if you are eligible for pre-approval.
Income statements such as W2s, 1099s and rental income, along with tax returns, are available at www.incomestatements.com
Assets such as bank statements or retirement accounts
Monthly expenses, such as student loans, credit cards, and other mortgages, are all included in debts.
Record of foreclosures and bankruptcies
Current rent, child support payments, and alimony payments, as well as any down payment gifts
Pre-approval letters are sent to you once you have been pre-approved. It will let you know the maximum amount you can borrow and can be used to help you submit an offer. In addition, pre-approval letters show sellers that you are serious about purchasing their home. This is particularly important when you are competing with other offers in a hot market.
You don't have to use the same lender that you used to pre-approve your loan. However, it is a good idea to get estimates from several lenders before you actually open your mortgage.
Remember that your debt to income ratio will be reexamined before you close. Therefore, you may be unable to borrow the full amount you need if you take on additional debt.
Begin Your Home Search
You can search for homes online to get started on your house-hunting journey. Your agent can also send you listings and set up showings.
Be flexible. You'll likely need to change your criteria as you continue your search for a home. You might decide that it is worth giving up a bedroom in order to live in the neighborhood you want. Try changing your search parameters to see what you can buy with your money.
What To Look For When Touring Homes
When you visit homes, make sure you consider their "health" to get a sense of potential problems that could arise if you decide on making an offer. The inspection will provide you with an official report about the home's condition and quality.
However, While You Are Touring The Property, Be Aware Of The Following:
Cracking and structural defects
Water pressure (turn off faucets and showerheads)
Try the light switches to resolve electrical issues
Doors and windows are functional and heat-retentive.
Exterior and roof quality
Traffic or noise from neighbors
Make An Offer
After you have found the perfect home, your agent will conduct a comparative market analysis (CMA). CMA is an analysis of the market value of a property based on similar sales in the area.
Your agent will help you establish a fair price using the CMA as a baseline. This depends on the market.
These are other considerations that should be taken into account when you make an offer:
These disclosures cover known issues such as structural problems, unpermitted work, and natural hazards. Most states require disclosure documents from sellers. Make sure you ask your agent.
It will take between 30-45 days to close on a home that you have purchased with a mortgage. You can request a later closing time if you submit your offer. However, the seller might deny this request.
A contract between the seller, the buyer, or the lender, regarding the conditions necessary for the sale to proceed. Some contingencies may be necessary, such as the appraisal contingency that your lender will request to make sure they aren't overpaying for your loan. It's up to you to make an inspection condition, but it is highly recommended.
An earnest deposit is money you are willing to pay when you offer the house to prove your seriousness. The earnest money is not part of the down payment if you close on the house. You'll lose your deposit if you cancel the purchase unless there is a contingency.
You should be aware that not all offers will work out. Although it can be frustrating, don't let that discourage you.
Schedule The Inspection
A home inspection and an inspection clause are two of the best ways to make sure the house you are buying is free from major issues.
The inspection usually takes place within one week of the contract signing. As it is a great way to better understand the inside workings of your home, it is recommended that you attend the inspection. Your agent may also attend. You'll be able to discuss the inspection report with your agent and decide what you will do to the seller.
You can request that the seller fix major non-cosmetic problems before closing. Or give you credit to help you fix it yourself after closing.
Secure Your Financing
You still have to submit your mortgage application even if you have been pre-approved. If everything is in order, you will receive the "clear-to-close" signal from the lender.
Application For A Loan
If you apply for your loan from the same lender who pre-approved you, they will already have the documents that you need. However, you will likely need to submit updated financial statements. Therefore, it is important to respond quickly to any requests during this process. To avoid delays in closing, send your W2 promptly if the lender requests it. If you choose to proceed with another lender, they will give you the list of documents that they require to complete your application.
Your lender will hire the appraiser, so you don't have much to do. However, to schedule the appraisal, your real estate agent should coordinate with the seller's agent. You and your agent will be provided with copies of the appraisal report after the appraisal has been completed. This will allow you to see the appraised fair value and review the comps used in the calculations.
You can close if the appraisal is in line with your offer price
An appraisal that is higher than your offer price:
It's a great deal! This is a clear way to close. It also means that you are purchasing the home at a lower price than the market, which gives you instant equity.
A low appraisal:
Will mean your lender won't approve the loan amount. This means you are overpaying for the property. The difference between the appraised price and the offer price will need to be made up in cash, or you can negotiate a lower price with the seller. You can request a new appraisal by your lender if you feel the appraisal was inaccurate.
Buy A Homeowners Policy
Before closing, you will need proof of a homeowners policy. If you do not own a house, ask your agent to help you open a policy. You can shop around to find the best policy for you if you don't have a home. Your lender might be able to coordinate a policy that you can pay through your monthly escrow.
Close And Move
Many buyers prefer to have a final walkthrough one day prior or on the morning of closing. This is done to ensure that the property is in the same condition as when you offered it and that the seller has completed any repairs.
Expect to spend at most a few hours signing paperwork at the title company on closing day. Also, be ready to pay closing costs. These typically amount to between 3-5% of the sale price.
After the sale has been recorded and signed, you will receive your keys. You own the house!
Now you can set up utilities for your new home, such as electricity, cable, and internet. Double-check the contract terms with your agent if you purchase a condo with an HOA that covers certain utility costs.
Now it's time to pack up and move into your new home.