So, you want to buy a house?
Buying a home could seem pretty scary. In fact it is pretty scary. It’s a major purchase and probably the biggest one you will make thus far. I won’t lie to you and tell you that it’s not stressful and may make your anxiety blow through the roof at times. I won’t lie to you and say I can take all of that stress and make it disappear. I will tell you that for each and every client I guide and educate them to help them make the right decisions through the entire process.
Many people feel like they just simply cannot buy a home. Or they may “think” they have to do a, b, c in order to qualify. Here’s my solution for you, go through my steps in buying a home and let them help you to really figure out where you are.
What’s your Budget?: This is important first steps, not even just for wanting to purchase a home, but to help you figure out and keep your expenses on tract. Get a piece of paper, divide it into two sections. One section will be your expenses. Everything you pay monthly, this included rent (which is someone else’s mortgage… but that’s a whole different rant), all credit cards, loans and payments, utilities, internet, cable, cell phones, childcare, groceries, heath insurance (if you pay privately), car notes, car insurance, etc. You’ll want to write down the amounts and due dates of each item. At the end add up the total of your expense for the month. Don’t forget to make room for miscellaneous expense that may occur. This will give you a small cushion for the “what if’s”. in the second section is your income. Based on how often you are paid, and when each expense is due, you can see what comes out of each check and then what you have left. Of course having an excess is fantastic, if you are in the red now each month, that does not necessarily mean you would be if you purchased a home .Depending on the cost you may end up with a surplus rather than a deficit.
Savings and Credit Score: How would you come up with a down payment? Do you have money in the bank? Would you borrow from your 401K? What is you plan? There are many FHA loans where your down payment would be 3.5% of the cost of the home you find. There are down payment assistant programs available but I always recommend NOT depending on them to cover your costs completely. Not only would you have to come up with your down payment, but you would also have to pay for other things during the process such as the home inspection once you find a place and your offer is accepted, the appraisal of the home, your attorney/lawyer, and closing costs which can run between $4000-6000. Sometimes you can request the seller pay closing costs BUT, in this current market, there is a high demand for homes and not enough of a supply, so sellers are getting top dollar without coming out of their pockets for anything extra such as paying your closing costs. They would most likely consider another offer without the request to cover the costs.
You want to look at your credit score. Most lenders require you to have a 620 or better for financing. That does not mean that you could not get financing with a lower score like a 580. There are some lenders that will, but your rate will more likely be higher since it’s more of a risk to the lender. Look at your credit report, see if there are things that you can try to get removed on your own before paying someone else to make phones calls or send letters to requesting them to be removed. Save yourself some money and do it yourself. You request for late payments to be removed, or make any disputes for things you do not recognize. The worst that could happen is they say “no we cannot remove it.” But you wont know until you try. Right?
Pre-Approval: Now that you are more aware of your finances you would want to get a pre-approval. I away recommend going to your own personal credit union if you have one first. I have several amazing lenders that I personally work with that I could recommend as well. This will let you know what they are willing to finance for you based off your affordability and credit score. Each pre-approval is good for 60 days then you have to get a new one. During this time, DO NOT open any new accounts, buy any new cars, get new credit cards or anything that would negatively affect your credit score. Wait until AFTER you close on your home before you buy that new car or open that furniture account.
Also, if you haven’t done so already, I always recommend that you retain a lawyer to represent you. You want to make sure everything is legit from the legal standpoint.
House Hunting: Now that you know what you are working with financially, then you and I, a reputable, personable, awesome Realtor, can begin looking for homes. This part is the most fun, but for the sake of time, I always tell my clients, do not ask to go see 20 homes if all 20 you aren’t sold on before seeing them. Only choose the ones you absolutely love and want to see more. We al know that you can’s always depend no pictures, because those angles will have you fooled. Also you don’t know when those pictures were taken. Time is of the essence but if possible ride b the home, check out the neighborhood and the outside of it and see if it’s work the time to look inside and possible make an offer. I usually find my clients a home within 2 weeks or less. Again this market has been different and crazy with this pandemic, and there has been bidding wars with homes. SO if there is a home you love move quick on it and always ALWAYS offer your highest and best offer first!
Offer Accepted!: Once your offer is accepted, we have to order the inspection, get financing solidified, get the house appraised and then head for closing. This process usually take an additional 6 weeks, but again Covid has slowed things down, so its taking a little longer.
Closing Day: When closing day comes be prepared with your lawyer to sign sign sign and sign some more. Once the deed is transferred to you and you accept it… Congratulations you are now officially a Home Owner!!!
I hope my summary gives you a better understanding of the home buying process. Main thing is you really want to have an agent that has your best interest at heart. Your realtor has to advocate for you, and always put you first. When you find the right realtor you’ll feel confident with them and know they are here to help you. If there isn’t a connection of some sort from the beginning, then maybe you should continue your search for the right Realtor. Sometimes it’s not your cousin that’s a realtor or your neighbor or your friend. Sometimes its not the realtor from the big named brokerage. Note that you are not obligated to work with someone just because you know them or someone you know has worked with them. Trust your gut when picking your Realtor and when picking your house!
