Understand the Process
Whether a first-timer or seasoned home buyer, your home buying and selling process can be as challenging as learning a new language. Before you make your move, it's important to first understand the steps involved and the buzzwords of the "deal" to ensure the smoothest transaction possible.
Your best source of information will be from your Realtor. The real estate industry and financing are constantly changing, so even if you've bought a home in the past the process may have changed. Friends and relatives are often well-meaning, but they may not have purchased or sold recently either and could be giving you inaccurate information.
So how does this work?
Get prequalified by a lender so you know how much you can afford and how much your payments will be.
Choose a Realtor who will represent you (ask about Buyer Representation). Your Realtor will have access to the Multiple Listing Service and can show you every house in town regardless of which agent or company has it listed.
Once you find a house you will make a written offer. When it's been completely accepted you are officially Under Contract!
Your Realtor will help you schedule inspections, deliver the contract to the lender and review the title commitment. There are a lot of things happening behind the scenes while you are under contract and your agent will be handling the details for you.
Once you've accepted the inspection, title commitment, and survey, and you have loan approval, you will be on your way to closing.
About a week prior to closing you can schedule utilities connections for the date of closing.
Closing typically takes place at the title company. When you go to sign documents, you will need to bring identification (usually your driver's license or passport) and your funds for closing. The funds for closing must be in the form of a money wire or cashier's check - the title company will not accept cash or personal checks.
The Right Mortgage
If you're considering buying a home, securing a mortgage loan is a key part of the process. However, you’re probably wondering: how do I find the best mortgage loan for my financial needs? Generally speaking, there are two types of mortgage loans:
- A fixed-rate mortgage offers a rate that stays the same over the life of the loan. This type of loan generally has a longer term and may be good if you plan to own your home for a long time.
- An adjustable-rate mortgage offers an interest rate that adjusts based on market conditions (it goes higher or lower) after a specified time period. This type of loan may be good for people who need an initial lower monthly payment.
Consider the following factors to help you gain insight into the kind of home you can afford, and the type of mortgage that will best fit your financial situation:
How long do you plan to own the home?
- Some loans have longer terms (from 15 to 40 years) that typically work well when you plan to stay in the home for a long time. Other loans have lower interest rates for a shorter term, and may be attractive if you plan to move in five to seven years.
- CONSIDER: How many years do you plan to stay in the home? Will you move within seven years, or is this the place to "settle down?"
How much can you afford as a down payment?
- 20% of the cost of the home is standard for the down payment on a conventional loan, but there are loans that allow you to put down as little as 5 or 10%.
- The higher your down payment, the lower your monthly mortgage payment will be.
- CONSIDER: How much can you realistically afford as the down payment?
What is the general price range for other homes in your neighborhood?
- How many homes are for sale in the area? How are they priced? Do you have a list of comparable properties?
- Are there other neighborhoods that catch your eye? How are the homes in these other areas priced?
- CONSIDER: Which area/home features the best combination of location, quality, and cost for you.
Which of the following is more important to you?
- To have low monthly payments?
- To pay less over the life of the loan, even if monthly payments are high?
- Some loans offer lower monthly mortgage payments over a long period of time. Other loans are designed to be paid in a shorter time frame, but have higher monthly payments.
- CONSIDER: Which situation would work best for you? It helps to be clear about your financial goals and resources.
Your credit history
- Mortgage lenders will look at your credit history and credit score to determine your track record for paying off debt.
- CONSIDER: Do you have a good credit score? Review your credit report to find out.