Stages of Buying a Home – What to Expect
It may be a goal you have had since childhood. Perhaps, you have rented for most of your adult life and now want to experience the joys and satisfaction of home ownership. Buying a home is a big step and requires a lot of important decisions along the way. With some advanced planning and research, you can be sure your home purchase is something you feel good about for many years ahead. Here are the basic steps that lead you to a successful transaction.
Understanding what you can afford
This is different from qualifying for a loan. This is calculating how much of your budget you will devote to your home and how much money you want for other things. For a person who values travel, they can afford more house than they should buy. Some of their money will go toward accommodations on the road or other travel expenses. If you love fishing, boating, or a hobby such as restoring classic cars, factor the required budget for your preferred pastime into your overall household budget. With that in mind, think twice about buying a home the bank says you can afford. You will be happiest in the home that allows you to enjoy life to its fullest.
Review your credit report
Know your credit score prior to meeting with any loan officers or mortgage brokers. A lower score will result in a higher interest rate and possibly prevent you from qualifying for the loan you want. It can take several months to correct any errors in your report. By reviewing your report a few months before home shopping, you could save yourself several thousands of dollars over the life of your loan.
Choosing your professionals
The U.S. Department of Housing and Urban Development (HUD) advises potential home buyers to attend a homeownership education class prior to choosing a mortgage. The Consumer Financial Protection Bureau was established to help protect consumers from predatory lending and mandates all required information about your loan and real estate transaction be written in clear, easy to understand wording. It is an excellent resource for home buyers.
Take time to interview several loan professionals before signing with one. You can be pre-qualified by your bank or any loan company. That does not obligate you to choose them for your home loan. Discuss your goals with your agent. They are here to consult with you at each step of the process. Also, it is a good idea to know who will be your attorney for the closing. Many builders want you to close the transaction with their attorney. As the home buyer, it is your right to choose the attorney who will represent you in the closing.
Choosing your home
Once you are pre-qualified, you are ready to begin shopping for your new home. For most buyers who plan to purchase with a standard 30-year fixed-rate mortgage, there are few restrictions on the houses they view. If you will be using a FHA loan, USDA home loan, or other special financing, you can only consider homes that qualify for these programs. HUD has incentives for first-time buyers and community servants like firefighters, teachers, and law enforcement officers.
Take your lifestyle and future plans into consideration as you view homes. If you plan to move in a few years, you may want to choose a simple, easily affordable home that will always be in demand and fairly easy to sell. It is best to have a second and third choice in mind that you can go to if you have to walk away from negotiations on your first choice.
Negotiating the contract
Buying a home is an emotional experience. Trust in your Agent for expertise and assistance. They work with lenders, home sellers, and other real estate agents every day. They will advise you on negotiation strategies and be there to provide objective advice that protects your best interest in the transaction. Most contracts have contingencies, and the negotiation is not complete until all contingencies are met.
A thorough home inspection by a certified professional is crucial for any home purchase. You should attend the inspection and feel free to ask questions about any areas of concern. Once you have received the home inspection report, your Agent will review it with you. You may choose to ask the seller to make some needed repairs, negotiate a lower price, or accept the report and move forward with the transaction as it is.
The Real Estate Settlement Procedures Act (RESPA) requires that lenders provide home buyers with as accurate of a good faith estimate as possible and that they disclose the nature of all cost. It also prohibits kickbacks and other unlawful payments among real estate professionals and lenders. The TILA-RESPA Integrated Disclosure rule combines forms required by the Truth in Lending Act, also known as Regulation Z, and the Real Estate Procedures Act, known as Regulation X, into one simple form. This new document replaces the final document required by the TILA and the HUD-1. You have three days to review and discuss it with your Agent.
For any changes in amounts before or after closing, the lender must provide you with a corrected Closing Disclosure showing the actual amounts. All financial figures must be documented in writing and not delivered verbally. With sufficient communications prior to closing, you know the amount of certified funds (if any) you need to bring to closing. You can relax, sign the necessary paperwork, and receive the keys to your new home.