Buyer’s Guide to the Successful Purchase of Your Home
- A very important step in the purchase process (unless you’re paying cash) is obtaining a pre-qualification letter from a lending institution. Be aware that most selling agents will not accept or present an offer on a home unless a pre-qualification letter is provided with the purchase agreement. Meet with your financial institution representative and they will go over the pre-approval process with you. You will need tax returns, paycheck stubs and perhaps several other documents in order to calculate what you may be eligible to borrow.
- Provide your loan representative with complete and accurate information. One reason a home purchase falls apart is information provided to the lender is inaccurate. Be sure to supply your lender with all your financial information Lastly, you must have three lines of credit to obtain a mortgage. A line of credit is a credit card, car payment, utilities in good standing, rent payments, etc. Pay your bills with checks if at all possible and keep your receipts.
- When you are pre-qualified for your loan, don’t radically change your financial situation. This means don’t make major purchases on credit before you close on your home purchase. The lender’s underwriting department will carefully examine your debt to credit ratio a few days before finalizing your loan. If you have added too much debt for your income your loan will be rejected.
- With your pre-qualification letter in hand, find a good real estate agent to help you find possible homes for sale. There are many sources of real estate information on the Internet. Be aware that Internet information is not always accurate or up to date. The best way to ensure that you get the best information is to work with a real estate agent. They have access to the Multiple Listing Service in your area and this database has the most accurate information available. The agent will send you available listings via email AND when new homes come on the market you’ll be immediately notified of their availability. That’s important because there are far fewer houses in the market place than normal. Houses in good condition, in good locations and priced appropriately go fast. You need to be ready to act if you receive an email that shows you a house you like.
- Make a list of all the things you MUST have in your new home. Be sure you have the list with you when you visit a house. Write down all the things the house has that you want and the things that are not in the house that are on your list. Chances are you’ll make up your mind about the possible new home within minutes of pulling into the drive. We are all that way. We know what we like when we see it. When your showing is over, drive through the neighborhood and carefully examine other properties. Note the proximity of shopping opportunities, schools, churches and other amenities. If you and others involved in the transaction agree to purchase tell your agent and ask for their help in determining an appropriate offer.
- The agent can do a comparative market analysis that will show the purchase price of other, similar homes in that neighborhood or area that were sold in the last six months. This information along with an understanding of current market conditions will help you determine a solid offer. If the home is in good condition, in a good location and appropriately priced expect others to make offers on the house as well. In that event you will be asked to make a “highest and best” offer, usually with 24 hours. You will not know what others are offering so listen to your agent then follow your budget and your gut in making the offer.
- If your offer is accepted your agent will schedule a home inspection with a professional inspector. This is an important and critical step. Unless you are an experienced builder you could miss many conditions in the house that could impact your decision and your offer. Identified problems can change your mind about purchasing the house or help you negotiate a lower price.
- After your inspection is completed and your offer negotiations are completed you will need to meet with your lender in order to have your loan documents finalized and sent to underwriting. Each lending institution has an underwriting department that very carefully reviews all your financial information. The underwriting office will know EVERYTHING about your financial history. If you have not been completely forthcoming with your lending officer it will be discovered and you will need to correct any deficiency or it may end your deal.
- When the underwriting department approves your loan you will be given a clear to close. This means that the buyer and seller meet with a closing agent, your lender representative and the seller and buyer representatives to finalize the transaction. There are plenty of forms and legal documents to sign, but in the end, a successful closing will make you the happy owner of your new home.
- So what’s my loan going to cost? The answer is it depends. The kind of loan you qualify for has a set of costs associated with it beyond your monthly payment. Some loans require very little money down while others require a substantial down payment. Follow this link to the Ross Mortgage Corporation web site to read explanations of the various mortgage products they offer. While this agent highly recommends this company and their branch manager, Dean Kossaras, I always recommend that buyers get good faith estimates from at least two lenders. The lender will help you calculate the monthly expense of your loan once you have a fully signed and accepted purchase agreement. In addition to the cost of the loan, property taxes and insurance premiums are usually added into the loan payment and held in escrow for you.
- What are closing costs? Every loan has expenses attached to it that are collected at the closing. The ender origination fee (a charge from the lender for putting your loan together), appraisal costs and credit reports are typical charges. Taxes assessed by the city, county and state, transfer fees, and other associated costs are also collected at the close, as well as a closing fee charged by the title company. Above and beyond those cost you will be required to pay a full year home insurance premium and at least three months of city and county property taxes. Taxes that have been pre-paid by the owner that cover time periods after you take possession of the home will be reimbursed to the owner and collected at closing as well. By law, you must be given a complete list of these costs 48 hours prior to close. I strongly advise that you get an estimate of these costs very early in the purchasing process so you have ample cash to cover that expense at the close.
Every home purchase is different and has its own set of variables. A successful purchase requires that all parties act in good faith and exercise due diligence in the transaction.