Buying a home is an incredibly exciting experience. There’s an awesome sense of accomplishment coupled with the knowledge that you’ve made one of the biggest decisions of your life. The thing is, not everyone will buy a home. This is just one of those things that some people in their lives while others won’t have this opportunity. Whether this rings true for you or not, you may wonder why. This post will explain 4 reasons to understand the home buying process.
1. As a buyer, you have rights!
When it comes to buying a house, you’re entitled to certain rights such as the right to a mortgage estimate and the right to a clear title. Your mortgage lender is required by law to provide you with a document called the Good Faith Estimate of Settlement Costs within three days of your loan application. This disclosure lists all of the fees you can expect at closing. You also have the right to examine the title on your property to ensure it’s clear of any liens or claims. If any are discovered, it’s up to the seller and not you, the buyer, to resolve them before closing.
2. Understanding the process is crucial to the big picture
Whether you’re a first-time homebuyer or a seasoned pro, the process is the same. It’s easy to get swept up in the excitement of buying your first home, but without an understanding of how the process works, it’s easy to be taken advantage of.
The good news is that there are steps you can take to ensure that you’re educated and prepared for what lies ahead. Here are some suggestions:
Start with your credit score. Your credit score affects everything from your interest rate to your closing costs. The better your credit score, the lower your interest rate will be and the less you’ll pay for mortgage insurance.
Length of employment. Lenders like to see a steady job history when reviewing loan applications. If you’ve bounced around from one job to another, you might have trouble getting approved for a mortgage unless you have substantial savings or a high income.
Down payment funds. The size of your down payment can affect both your interest rate and monthly payments. A larger down payment reduces both costs, but a small one means higher ones — and potentially getting stuck with private mortgage insurance (PMI) if you put down less than 20%.
3. The home buying process varies, so pay attention
Home buying can be exciting, and sometimes frustrating. There are many different steps you must take to make sure you have the best experience possible without it turning into a nightmare. Here are some tips to help you out:
Get your finances in order. It’s better not to even look at houses if you don’t have your finances in order. Make sure to sit down with a mortgage lender and get pre-approved for a loan. This will give you a better idea of what price range you should be shopping in, and will let you know what type of loan may work best for your financial situation. It will also give you an edge when competing with other buyers for the same house, since sellers will know that the bank has already approved your financing.
Figure out how much house you can afford. When getting pre-approved, the mortgage lender will tell you how much they’re willing to lend to you, but that doesn’t mean that’s how much house you can afford. The rule of thumb is that housing costs (including your monthly mortgage payment, property taxes and any homeowner’s association dues) should equal about one third of your net income (your income after taxes).
Knowing how much you can afford can help you figure out how much you can offer on a house. This will also help you decide if you can spend some money on new appliances as well as renovations.
3. Your real estate agent is your advocate
There are a lot of moving parts to buying a new home, and having an expert to help you navigate the process is a good idea.
Your real estate agent is your advocate while buying a new house
You’ll want someone in your corner who can negotiate on your behalf and keep the transaction on track. You can expect that person to be your real estate agent. Here’s what you should look for when picking one:
Real estate agent checklist:
Specialty. Most agents specialize in either buyers or sellers — not both. This might be better for you, as you’ll get an expert rather than someone who divides their time between the two sides of the market.
Experience. A newly licensed agent may be eager and energetic, but someone with 20 years of experience will have more knowledge about the local market, which can mean a smoother purchase process for you. That said, it’s not just about experience — it’s about how many deals they’ve worked on successfully over that time period.
Testimonials. Ask friends or family members if they’ve bought or sold homes recently and if they had a good experience working with specific agents. You could also check out online reviews to learn more about people’s experiences working with them.
A few more tips for the process of buying a new home:
Check the appliances before entering the new home. If you buy a house from someone else, chances are that it comes with the main appliance already inside (like refrigerator, oven, dishwasher, dryer and washing machine).
So before you put an offer make sure that the appliances are in a good working condition, so you won’t need to get an appliance repair company.