10 Tips for Taking the Home Ownership Leap
 

 

As you have no doubt learned by this time, buying your first home is one of the most important decisions a person can make.  It's also one of the most complex processes a person can enter.  Part of our job at Flaming Real Estate is to help you navigate the waters of the real estate market.  To get you started, here are a few basic tips for first-time homebuyers.  Use these 10 essential steps to get you started and to help make the process stress-free and pleasurable - just as you always dreamed it would be.

Step 1 – Ask Your Lender About Available Mortgage Programs

Your mortgage company will be able to work with you to determine which mortgage program will best meet your individual needs.  They will be able to tell you for what you can qualify based on your personal information. Generally, applicants with higher credit ratings and/or higher levels of financial reserves receive more competitive mortgage rates.  However, with hundreds of available mortgage programs, even the homebuyer with less-than-perfect credit can find a program to meet their needs. Of course, those with excellent credit may receive better options, even the possibility of a mortgage with 0% down.

 

Step 2 – Research the Terms of the Mortgage

Because different mortgage lenders have varying price structures,  the amount that you pay for your home can be affected. An annual percentage rate (APR) includes the actual interest rate on the loan, as well as certain fees and costs associated with the loan. Because a customer may pay points and other closing costs, the APR disclosed may appear to be higher than the actual interest rate quoted. While not all lenders calculate APR identically, it does give customers a relatively fair method of comparing price on their potential loans.

 

Step 3 – Get a Pre-Approval Loan Commitment

Before the house hunting begins, homebuyers need to determine how much they realistically can afford.  Most lending institutions provide pre-qualified loan commitments.  Some also provide pre-approval commitments.  A pre-approval means more because it says that a credit report has been ordered and a true loan decision has been made.  (For information on what documents to gather before contacting your lender, checkout our Ten Things a Lender Needs from You .) Meaning you are then enabled to shop for a home and negotiate as a cash buyer, submitting an offer on a home with confidence that the mortgage will be issued and the sale will be completed.  Sellers often won't take an offer seriously unless the prospective buyer has some assurance from a lending institution. 

 

While getting pre-qualified may sound official, it is really just getting an idea of what you can afford. Its having a person tap in a few unverified numbers that you give them - your monthly income and your monthly debt - and getting an approximate payment calculated. (You can do the same thing by going to our calculator page.) From the payment, the calculator can approximate the price range that you can afford. No information is verified and because your assets, income or credit has not been verified, a pre-qualification really has little value when purchasing a home.

 

Step 4 – Make a Checklist

To simplify the home buying process, homebuyers should create a checklist of the features they want in a home even prioritizing them on their importance. Some things to consider are:

 

Step 5 – Find a Buyer's Agent/Broker

Your agent represents the your interests.  She/he helps identify homes that are for sale in the right price range.  Your agent can also help with such tasks as negotiating the asking price, writing the contracts, and closing the deal.

 

Step 6 – Do Your "Home-work"

Go online to check for listings, current mortgage information, and neighborhood information.  Research will help you to better understand the process of home ownership, the marketplace and homes available in your price range. 

 

Step 7 – Make an Offer

You've found the house you want, now what?  Make an offer - making sure that your offer is contingent upon two things: First, that you are able to obtain adequate financing (if you haven't done so already); and second, that you can pull out if the property doesn't pass the home inspection and the owner can't come to terms about how to fix the problem.  You should be prepared for counter-offers from other buyers and some negotiation with the seller.  Some sellers may require that you make an earnest money deposit (a check that you'll give your agent to indicate that you're serious about buying the house.)  The check will apply toward the sales price if the deal goes through; if not, you get it back. You should also set a time limit of three to 5 days with your agent that the offer you've made is good.  Once an offer is accepted, it goes to the contract phase.

 

Step 8 – Hire A Home Inspector

When you make your offer contingent upon an inspection by a registered home inspector, it can save thousands of dollars later by avoiding unseen problems.  Inspectors will check the house for any structural damage (i.e. foundation, roof, electrical, plumbing) and alert you to the problem(s).  The contract with the seller should state any necessary repairs that must be made prior closing on the house. Before the closing, walk through the house to ensure that such repairs have been completed.

 

Step 9 – Buy Homeowners Insurance

All lenders generally require homeowners insurance to protect the new homebuyer's interests as well as their own. Contact your current insurance carrier, but remember, there are many providers so shop around for the best rates.

 

Step 10 – The Closing

The final step for leaping into the home ownership game, is the closing.  This is where the seller and buyer sign settlement papers to transfer the ownership of the home.  All transactions are finalized during this meeting.