Determine How Much You Can Afford
Determine How Much You Can Afford
How much house you can afford is largely dependent on how large of a mortgage (home loan) you can handle. My website offers a mortgage calculator that will help you! But better yet, give me a call and I can help pre-qualify you ASAP! I highly recommend that you become pre-approved for a mortgage before you even start house hunting. This will tell you exactly how much you can afford and will make the closing process go faster.
Getting pre-approved also makes you much more attractive to potential sellers because they know they won't have to wait days or even weeks before you and they know if you'll get the "Okay" for a home loan. In addition, purchasing a home involves more than just making sure you have enough money to pay the mortgage and property tax. You'll also have to be sure you have enough money at hand for what are known as closing costs. Closing costs could include:
- Earnest money, usually one to five percent of the cost of the house, which you pay as a deposit on the house when you submit your offer. It’s your proof that you’re a serious buyer. Depending on certain timelines and contingencies, you may be able to get this money back should you decide not to purchase the house or if the deal falls out.
- Your down payment (this is different than earnest money), usually 10 to 20 percent of the cost of the house, which you must pay at closing. Understand that in today's tighter credit market, more mortgage brokers are leery of approving a mortgage for potential homeowners who don't have 10 or 20 percent available for a down payment, but there are special circumstances that allow for less of a down payment. A mortgage lender will give you specifics to your situation, which is another great reason to get pre-approved!
- Mortgage insurance. If you can't make a down payment of at least 20 percent, mortgage lenders charge you extra insurance. This is also known as private mortgage insurance (or PMI).
- Closing costs, usually three to four percent of the cost of the house, to pay for processing all the paperwork.
In addition, as you research whether you can afford to purchase a home, don't forget to include the day-to-day expenses you'll incur. This includes.
- Homeowner or condo association dues
- Property taxes
- City or county taxes
Shop for a Home
Shop for a Home
House hunting can be both exciting and frustrating. You should plan on seeing at least 10 homes before buying one. To make your search easier and faster, browse properties on the Internet. You can do so on my real estate home page. Click on the "Search For Homes" link and you will have access to the same data as Realtors. This information is up-to-date and accurate. Some real estate websites do not provide up-to-date data and may lag behind my site. The Internet is a quick way to see whether the houses that are currently available meet criteria such as: Are they in the right location, with the right features, and at the right price?
If you find after your search on my website that few properties meet your needs, you may want to readjust your criteria – change the location, features, price – to increase your chances of finding a house that works for you. If you have any difficulties in this initial search, feel free to contact me for assistance. Once you know what you want, where you want it and what you can afford, it’s time to start looking for a Realtor so that you can see different houses for yourself. Before you and an agent/Realtor go to the homes, it's a good idea to put together a checklist of things that you’ve decided ahead of time are important qualities of your future home.
This might include:
- Is there enough room for your family to grow in the house?
- Is the house structurally sound?
- Is the house in move-in condition or will it need work?
- Is it close enough to everyday needs, such as grocery stores, schools, work?
- Will you feel safe here?
- Does it have the appliances you want?
- Is the yard right for your needs?
- Do you like the floor plan?
- Is there enough storage?
- Will you be happy in this house in winter, summer, spring, fall?
You may also want to take some exterior and interior photos of each house you visit so that you can keep track of its pros and cons.
Find a Real Estate Professional...That's where I come in...
While you’re not required to use a real estate professional to purchase a home, it is a good idea and it's at no cost to you because the seller pays the agent's commission when a deal closes. A professional also has access to a network of contacts and can draw from extensive market knowledge to help pinpoint the right house for you quickly. A professional will help you structure your deal to save money, negotiate the sales and closing details, explain the advantages and disadvantages of different types of mortgages and guide you through the paperwork.
Research Different Mortgages
There are a variety of mortgage types available today, each with advantages and disadvantages depending on how long you plan to live in the home, the financial marketplace and your income potential, among other things. A fixed-rate mortgage is the most common. In a fixed-rate mortgage, your interest rate and payment stay the same for the life of the loan. Most people who decide on a fixed-rate mortgage usually choose one that has a term of either 15 or 30 years.
An adjustable-rate mortgage usually starts out at lower interest rates and lower monthly payments than fixed-rate mortgages, but your rate and monthly payments may rise and fall based on a financial index. There are also several government mortgage programs available, including FHA mortgages, which are designed to help people who might not otherwise qualify for a loan. It’s best to talk to me about your best mortgage option and I can refer you to a list of mortgage lenders to interview who can discuss current market financing packages.
Make an Offer
Make an Offer
When you’ve found a house you really want, it’s time to make the offer. How much you offer may depend on a number of factors:
- Is the asking price fair? Here’s where the legwork you put in while shopping for a home pays off. Decide whether this house is priced right or out of line in the current marketplace. We can look at what are known as "comparables" to help determine if a home in which you're interested is priced "right." Comparables are simply the prices homes near the house you're interested in sold for in recent weeks and months. Comparables can be wonderful tools when it comes to negotiating a sales price: "You're asking $400,000, but the house up the street built the same year with the same square footage sold a month ago for $375,000."
- Is the house in good condition? Is this house in move-in condition or will it need a lot of work? Take any costs of improvement into consideration when deciding your offer price.
- Has it been on the market long? Usually, the longer a house has been on the market, the more likely it is the owner will accept a lower offer. Or it may be just overpriced for the market.
- Is it a seller’s or buyer’s market? If the houses you’re interested in are being bought as soon as they’re listed, that means you’ve got a lot of competition from other buyers; offer accordingly. If houses aren’t selling fast, you may have more leverage in negotiating a lower price.
Once you’ve determined how much you’d like to offer, work with your real estate professional to submit the proper information. This includes:
This can be just the beginning of the negotiation process. The seller has three options: accept your offer, counter your offer, or reject your offer. I'll strategize with you on the best way to present your offer for a good outcome.
- A complete, legal description of the house
- The amount of earnest money you’re paying
- The down payment and financing details
- A proposed move-in date
- The price you’re offering
- A proposed closing date
- The length of time your offer is valid
- Details of the deal
Begin Contingency Period
When your offer has been accepted, the contingency period begins. This is time that allows you to obtain financing, perform inspections and satisfy any other contingencies of your purchase agreement. Obtaining financing might include loan approval, which will include an appraisal of the property. Also be prepared to make your down payment, which is usually due several days before the close of escrow. Now is the time to schedule a professional inspection of the property; it is one of the best safeguards you can take before buying.
A home inspector should check (and may give you a rough price for repairs on) the electrical system, plumbing, and waste disposal, the water heater, insulation and ventilation, water source and quality, pests, foundation, doors, windows, ceilings, walls, floors, and roof. Keep in mind that the inspector isn’t there to tell you whether you’re getting a good deal. He or she is there to give you an educated opinion on whether the house is structurally and mechanically sound and fill you in on any repairs that are needed.
Buy Homeowner’s Insurance
A paid homeowner’s insurance policy is required at closing. I will help make sure your insurance company and your title officer are working together to put your policy in effect by the close of escrow. But, if you get your insurance agent involved early in your home-buying process, he or she also may help point out ways to help keep your insurance premiums lower.
Complete Settlement or Closing
When the property you’re buying has been inspected and you’ve had your final walk-through of the property to see that all contingency conditions – such as final repairs made by the seller -- have been met, it’s time to face the paperwork. You will be signing loan documents and closing papers, paying the balance of your down payment and closing costs. This is the day you get the keys to your new home. Congratulations!