Before you buy, know what to expect when buying a home.
When you make the decision to purchase your first home, the first thing you probably turn to is the internet for answers. What does it take to purchase a home? Where do I start? How do I search for homes? Should I hire a real estate agent or do it on my own? Well, I’m going to tell you a little about all these questions to get you pointed in the right direction The first thing you need to do is contact a lender. A lender is the person that is going to lend you the money to purchase your home. He or she will be able to tell you if you even qualify to purchase a home and for how much. This really needs to be your first call. You may feel that you can take on a mortgage but your debt to income ratio or your credit score may say otherwise. Why get yourself all hyped up to buy a house when you don’t know if you really can. And don’t just call any lender. Find one that has a good reputation for closing homes and in a timely matter. It’s best to find one local so you can meet with them face to face. If you are having trouble locating a good lender to use, most real estate agents have preferred lenders that they often refer clients too. This leads me into the next thing that you should do. Find a Realtor to work with! Yes, everyone needs a realtor. You may feel that you can do the home searching thing on your own, which is fine, most clients find the home they want to buy on their own by searching the web. But it’s more than just locating a potential home. Realtors have access to a lot of other information that you can’t see by browsing homes on the internet. They also have the key to get you into the home. Keep in mind that if you are a buyer, realtor fees are paid by the seller of the home so even though this realtor is working for you, nothing comes out of your pocket to compensate him/her. Sounds like a good deal huh? Your realtor will search the MLS frequently each day to check for new homes that fit your criteria and email them to you instantly. If it’s left up to you, you may be to busy to look one day and miss a home that was perfect. You need an agent that is working with you, solely for you. After you have your pre-qualification letter and a realtor in place, your home searching begins. Like a said earlier, your agent will be hard at work trying to locate the perfect home for you… emailing you listings to browse through, showing you potential homes and driving you to certain neighborhoods to narrow your home search location. You can either leave it up to your agent to find you homes or like most people that have internet access; they take it into their own hands and also search. Your agent should have a website that has MLS access for you to search in. Or others prefer to find their own real estate website to search for homes. Keep in mind that some real estate websites don’t automatically update, so you may be looking at a home that is already under contract or sold. Also, you won’t be able to see all the information about the home on the client’s side of things. There is information that agents are only able to see so if you do find a home that you are interested in, email it to your agent for further information. When you locate a home that you want to make an offer on, your agent will draw up the contract in able for you to submit your offer. This is where it comes in handy to have an agent that is working for you. He will negotiate on your behalf and make sure you get the best deal. Your agent will also be able to pull comps for you to see what other homes in the neighborhood have sold for so you don’t over pay. Be prepared to write a personal check for the earnest money deposit. Along with your offer you have to submit your pre-qualification letter you received from your lender and also this check made out to the escrow company for at least $500 to $1000. This money shows to the seller that you are serious about purchasing the home. This check will be cashed and held at escrow. Typically the money will go towards the purchase of the home or in some cases you can request it back after closing. But… this money is also used in the event that you back out of the contract for other reasons besides the home inspection period, then the money is given to the seller per the purchase contract agreement. One thing that most people don’t know about purchasing a home is that there is closing costs associated with the purchase that you are responsible for. Depending on the amount of the home these costs are around $6,000. This money can be converted into your loan so you don’t have to come out of pocket or in most cases these days; you can put in the contract that the seller pays these closing costs. Don’t count on this thou; some sellers will not agree to pay these costs so you may need to have other options available. If you are at the top of your budget, you may need to look at a cheaper house so you can roll this cost into the loan if you don’t have $6k to put down. It is best to have at least a couple thousand dollars in savings before making your home purchase. You will need money for the earnest money check and also for any inspections that you need to do on the home prior to purchasing. If you don’t have money to put into these couple of things, then maybe it’s time for you to re-think if you are able to afford purchasing at this time. Just because you qualify to purchase a home on your debt to income ratio, doesn’t mean that you can afford too. Only you know your true spending habits. The last thing I want to say is that in the time that you get pre-qualified, to the time you put an offer on a home, till the time you actually close on the home… DON’T SPEND MONEY! Don’t go buy a new car, take out a new line of credit, go do major shopping, even if it is for the house, don’t do it! The lender, at any time can request up-to-date information and if they see that you just went and spent 5-10k on new things for the home or a car or anything, this can affect your qualification. I’ve seen it happen and you don’t want to be that person that is 2 weeks from their closing date and find out they can’t purchase their home because they went and spent half their savings on new appliances and furniture for their new home or bought a car. Wait till you get into the home first, then spend! But in moderation… :)