Buying a home is the largest investment most people will make in their lives. It is an exciting and exhilarating experience, especially if you have experts to help you along the way. Here are a few things you’ll need to know.
Taking the first step towards buying your home is both exhilarating and overwhelming. Before you dive in too deep into the process, it is important to consider several factors. Buying a home will be one of the largest financial investments you make in your life, so you want to be well prepared for the adventure.
While it may seem that owning a home is the best choice, that might not necessarily be the case for everyone. The key is to consider all the factors, good and bad, that come with owning a home. Once you compare renting versus owning, then you are ready to make the best decision for your current situation. How much house can you afford?
If after considering all the contributing factors you conclude that owning a home is the best decision, you next will want to think about how much home you want to own. How much space will you need? How much space can you afford? Knowing what you can afford in a home will help drive your search in a focused direction. What type of housing suits you best? When you determine how much home you can afford, you next can consider what type of home and neighborhood best fits your needs. Before you begin looking, if you start considering the differences between a single-family home, a condo and the other housing options that exist, you’ll save a lot of time and frustration in your search. Who do you need on your team? Buying a home can be a strenuous process. You’ll want to be sure to surround yourself with a team of professionals who can assist you towards reaching your dream of homeownership.
After deciding that buying a home is the best decision for you, what’s next?
It will be good for you to evaluate how prepared you currently are to buy a home. Perhaps you have been making steps towards this goal for a while or maybe this is all new to you. Either way, the ways you have equipped yourself for this venture will be major determining factors on which loan program you choose. Do you have an amount for a down payment? What is your income to debt ratio? How is your credit status? There are a number of ways you can be prepared for this process.
Your next concern starts to be which loan program fits your needs and how to structure your monthly mortgage payments. Before moving forward, you’ll want to consider those items that make up your monthly payment and the factors that influence them. Typically referenced as PITI, your monthly mortgage payment is comprised of Principal, Interest, Taxes and Insurance.
One of the issues that most concerns homeowners is their mortgage interest rate. This is for good reason as the interest rate directly affects the monthly payments for the life of the loan. Because of this, homebuyers search for steps they can take to obtain the lowest rate available. Contributing factors to the interest rate include whether the homebuyer decides to: select a fixed or adjustable rate pay discount points choose a short or long term loan There are other special considerations that you may want to consider as you evaluate your mortgage options.
With your decision made and the groundwork laid, it’s time to put all the pieces of documentation needed to move forward into closing. Getting the ‘green light’ Just like you wouldn’t dive into a pool without knowing how deep it is, you wouldn’t want to house hunt without knowing how much you could afford. That’s why once you have decided buying a home is your best option and you’ve examined what your finances will allow, it’s a good time to talk with your Bank Of England Loan Officer about being prequalified or preapproved.
In a prequalification letter, the lender has been provided the buyer’s financial details and, based on
verification of these details, agrees to give a loan to the buyer. A credit report is not required at this
Knowing how excited many homebuyers can be, it can seem frustrating to add a step before the house hunt. However, there are several advantages to being prequalified/preapproved that can make it worthwhile.
Credit challenges or problems that might prevent qualification are discovered and addressed early in the process. You will be able to house hunt with confidence knowing that the financial backing that is available to you.
For self-employed or commission-based buyers, a prequalification letter can demonstrate financial backing for buyers whose incomes may fluctuate more than those of salaried buyers and therefore possibly demonstrate more risk.
Prequalification letters show that the lender is willing to move forward with the loan for first-time homebuyers even though they may lack a credit history that demonstrates their ability to make monthly mortgage payments. It helps equalize their offer with similar offers made by previous homeowners.
With the groundwork laid and the financial backing that comes from being prequalified in place, you can begin the house hunt with confidence. One thing to decide early on is if you would prefer to do this search alone or with the benefits that come from working with a licensed REALTOR.
Now is also a good time to come up with a wish list for your home. When you do, consider the following:
At some point of your search, you’ll know. You’ll know when you find the home that best fits you and your needs. When you find a great match, you’ll want to take those next steps that can make that home yours.
Purchasing a home is one of the few transactions that involves heavy negotiations. A REALTOR is a valuable resource to have on your side as you determine the appropriate initial offer to extend. During this portion of the process, you’ll want to consider the following:
A legally binding contract between the buyer and the seller of the property, the purchase agreement outlines all terms and features of the final transaction. This can include:
Because of special and unique features of every home transaction and the varying needs of each home buyer and home seller, purchase contracts are not exactly the same. A REALTOR, a title company or an attorney may assist in the negotiations and execution of a purchase contract; this is dependent on the state in which the transaction is being conducted.
The closer you get to the appointment, the more you will want to know what to expect at closing.
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