Ten Things You Must Know Before Buying a House

Buying a new home is exciting. It’s also one of the biggest investments you will ever make. Buying a home can be a complex and sometimes confusing process. I’ll help you understand what’s involved, so you can get a good head start on your home buying journey.

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1. Choose your team and set expectations

Your realtor is an important partner in finding the right home. I can advise you on smart choices to make at every step of the process. This begins with creating a specific home buying plan for you and delivering personal, attentive service on a daily basis. Once you decide to work with me, we will sign a formal contract outlining our mutual duties and responsibilities of the relationship and how we will work together throughout the home buying process. Also, be sure to tell me how you like to communicate – whether by phone, email or text – as well as how often you would like to be in touch.

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2. Set a budget

A complete understanding of your financial situation will give you a good start in the buying process. Gather information on your income, savings and debts to get a realistic idea of your budget parameters.
(If applying for a loan, keep these papers handy, as you’ll also need them when you meet with a loan officer.)
There are many online tools available to help calculate the monthly mortgage payments using the loan amount, down payment amount, length of loan and interest rate. Other online calculators help estimate how much home you can afford using your income, debt and down payment information.

I recommend these:

http://www.realtor.com/mortgage/financial-calculators/
http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx
http://money.cnn.com/tools/

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3. Prequalify with lender

This step needs to be done before our first outing, if possible. A lender will personally help you determine not only what you can spend, but also what you may want to spend. He/she will outline the fees involved in obtaining a loan including calculating in the annual taxes and insurance for a property. It is critical that you take this first step and know that you have the pre-approval or pre-qualification letter before you begin your home search. This will give you the power and proof you need to show a seller that you are prepared to buy.

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4. Determine a down payment

The more you contribute to a down payment, the lower your monthly mortgage payment will be and the less interest you will pay over the life of the loan. Your mortgage professional can help you review additional sources for down payments that you may not have considered. Determining how much money you will need for a down payment enables you to be prepared to buy when you find the right home.

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5. Define your wants and needs

It’s important to think about the type of housing you want. Will you quickly outgrow that city condo? Is a single-family home a better size? Will purchasing a townhouse allow you to skip lawn and home maintenance and enjoy more free time for friends, family and entertainment?

We will discuss what you want and need in a home. I will use that information to find homes that meet as many of your requirements as possible. Finding a home that meets every item on your list may not be realistic, which is why it is important to keep an open mind and listen to suggestions about location or house style. We want to avoid crossing homes off the list before reviewing the possibilities they offer.

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6. Remember, it’s all about location

In addition to the type of home, you will also want to consider location. Think about your lifestyle. Do you like the energy of city life? Do you long for the quiet of the country woods? Or do you see yourself in the family friendly suburbs? It’s important to think about the pros and cons of each location before making the commitment to buy.

Suburban homes give kids the opportunity to play outdoors and enjoy the company of nearby neighbors. Urban homes provide greater social, culture, educational and career opportunities. Rural homes offer the joys of small town living.

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7. Understand all the costs of homeownership

There’s more to owning a home than just paying a monthly mortgage. Remember to consider the other expenses that come with owning a home. Property taxes, utilities, maintenance and homeowners association fees (if applicable) can all add up.

If you’re moving to a new town, it’s important to consider the cost of living for that area. Transportation and everyday living expenses can also make home ownership more expensive than expected.

Lastly, you will likely want new furnishings, accessories and landscaping when you move into a new home. You may even want to do some remodeling. Take all of these costs into account from the start and set aside the funds to cover them. You will also need to budget for future repairs and maintenance as well as items the home inspector reports are at or near its end-of-useful life (for example, a new roof in 3-5 years, a new driveway coating or upgrading the heating or air conditioning system).

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8. Make an offer

When you find a home you want to purchase, I will guide you on how much to offer. Once we have agreed on all the terms of the offer – which include your mortgage contingency (if it applies), inspection contingencies, possible inclusions or exclusions, contract date, close date and mortgage release date – then I will provide the listing agent with a complete offering packet. This will also include your review of and signature on the Seller’s Residential Property Disclosures. Once you have a fully executed contract, it will be sent to your chosen lender who will order the appraisal(s) and actively work with you to get your final loan approval.

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9. Get a professional home inspection

When you purchase an older home, you need to understand the condition of the house. A home inspection is a must to provide you with an accurate picture of everything about that particular home, including the roof, utilities, structure, electrical, pests and radon. If applicable, testing will also be done on well water, septic disposal system and pool. You may wish to purchase a buyer’s home warranty to help with any unexpected costs that arise in your first year. I recommend American Home Shield.

A new construction home is inspected only if you request it. Typically it is not necessary or recommended, because the home will come with a one-year warranty from the builder. Plus all appliances generally come with a 3-year warranty.

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10. Understanding Closing Costs

Closing costs are charges that are paid when ownership of a property is transferred. These costs cover all the services required to process the transaction, including title work, appraisals, inspections, document preparation, recording fees and other expenses. In many cases, there are also loan origination fees (charged by the loan officer to find right loan and secure approval) that are part of closing costs.

At closing, buyers typically pay a percentage of the purchase price for closing costs and another percentage for prepaid items. Please talk to your lender for details of all the fees.

Mortgage costs

  • Loan origination fee, points, document prep, underwriting fees

Lender fees

  • Appraisal, credit report, inspections

Attorney fees

  • Settlement fee, title/abstract search, title insurance premium, owners title insurance policy, title recording fees

Government fees

  • Mortgage registration tax

Prepaid items for first-year costs of homeownership

  • Homeowners’ insurance premiums, property taxes

Most home sale transfers (closings) can be anywhere from 30-90 days but the typical closing period is 60 days. A buyer must keep in mind their mortgage rate lock and if they have a deadline for their mortgage pre-approval.

The actual closing appointment that involves signing the contracts and handing over checks and keys will only take about an hour. Once all contracts have been signed and the loan has funded, you will receive the keys to your new home. Whether you intend to move in immediately, or do work to prepare it for move in, the home will be officially yours!

Let the Home Buying Journey Begin!

Now that you’re armed with this information, you’re ready to begin your home buying journey. Together we will discover the perfect home that meets your unique lifestyle.

And remember, information is power. Please review the The Buying Process document for more details