For most people, buying a home is the biggest purchase they'll make. Even experienced buyers can be run into situations that can be confusing and stressful. Below are some tips that will help prepare you for your home search and purchase as well as reduce delays and worries that can accompany buying a home.
Pre-Qualify For A Mortgage - Advantages of getting pre-qualified are:
Helps you narrow your search to only those homes in your price range.
Lets sellers know you are serious when you make an offer.
Avoids delays in the negotiation process.
Helps you set up a budget for your household.
Clean Up Your Credit
Eliminate credit card debt as much as possible and pay down as many as you can.
Get a copy of your credit report to see what the lenders will see.
Cancel unused cards.
Have credit history errors.
Don't fill any new credit card application you receive in the mail.
Be wary of companies that say they can repair your credit. Check with your state attorney general before contacting a debt repair company.
Getting A Mortgage
Shop for a mortgage and compare the terms of various lenders. Aside from rates, points, etc. find out how long you can lock in a rate and get it in writing.
Find out what points are involved. There are two kinds of points, pre-paid interest points which lowers your interest rate and origination points which is basically a fee to get the loan.
You also need to find out what closing fees (attorney, filing, taxes, etc.) are involved.
Do you want a fixed or adjustable rate (ARM)? Adjustable rates are lower than a fixed rate for the first few years but can go up whereas a fixed rate never changes.
If you go with a fixed rate do you want a 15, 20 or 30year loan? If you can afford the higher monthly payments of a shorter-term loan then you will pay substantially less interest over life the term and you'll build up your equity faster.
How much do you have for a down payment? If your down payment is 20% or more of the purchase price then you may be able to avoid monthly Private Mortgage Insurance (PMI) charges.
Documents you'll need are: latest bank statements, latest W-2s and tax returns, copy of latest pay stubs, child support or alimony records, IRA and 401k statements, investment account statements.
If part of your down payment is a gift from a friend or relative you'll need a letter from the donor explaining that you are not obligated to repay them.
When you apply for a loan your lender is required by law to give you the following: Truth-in-Lending Disclosure, A Home Buyer's Guide to Settlement Costs, ARM Disclosure, Your Annual Percentage Rate or "APR". Make sure you receive these documents and read them.
When you apply for a loan the following will be done by your lender: an appraisal of the property you wish to buy, review of you credit history, employment and bank account verification.
Making An Offer On A Home
Before making an offer get full disclosure on the condition of the property, any liens or back-taxes, easements, etc.
Get a copy of any neighborhood association rules and by-laws, if you have a home business and the association has restrictions on these kinds of activities then you need to know before you offer to buy. Consult a real estate attorney if you have questions and contact the association chairperson for clarifications.
Get a Comparative Market Analysis (CMA) of the home to find out what comparable homes in the area are selling at, your real estate professional can help you with this.
In addition to the offer price put down, in writing, any contingencies or terms that you wish the seller to meet.
Keep contingencies reasonable so that you don't kill the deal, and make it negotiable.
Conveyances, if you are told that a major appliance comes with the home, make sure that it's mentioned in the offer.
Also make sure all the details of the transaction are written down.
When you make an offer you will be expected to put up an "earnest money deposit" to show that you are serious about buying the property, normally no more than 1-2% of the offer price.
Keep in mind that when you make an offer it can become a contract, it only needs the seller's signature to become binding. Make sure your offer is reasonable and attainable for you and the seller.
Don't Go It Alone - Use a Real Estate Professional
A real estate professional will have knowledge of the neighborhoods, schools and condition of the local real estate market. If they don't have first hand knowledge of an area then they probably know a fellow real estate professional who does.
A real estate professional is experienced in negotiating price.
By working with you, a real estate professional will know what interests you and watch for new homes on the market that match those interests.
By knowing what you want, a real estate professional can help you focus on your needs and not let you get sidetracked by amenities that don't add value to your purchase.
A real estate professional has working relationships with appraisers, inspectors, mortgage lenders, title insurers, movers, attorneys, etc. These relationships make the entire buying process much smoother than it would if you had to find all these resources yourself.
A real estate professional can get you a CMA (Comparative Market Analysis) so you know what comparable homes in the area are selling for.
A real estate professional is a great resource of information throughout the searching, offering, closing process and after you move into your new home.
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