Your Official Home Buying Guide
Here’s what you need to know to get from start to finish in the home-buying process.
I hope this home buying guide will help educate you on the important steps to take when buying a home. Whether it’s your first home or your fifth, the home-buying process can be daunting. Not only does the housing market change from season to season, but the process of searching for a home, making an offer and working toward closing- evolves over time. For example, both home buyers & sellers favor spring as the ideal time for both buying and/or selling.
For any homebuyer, you first need to account for your current financial situation, needs in a new home and what features and amenities you hope to have at your fingertips. Before you start touring houses, study your local real estate market to get a better grasp of what’s available and within your budget, or contact a real estate agent in your area.
With home prices rising across the U.S. and many markets reporting few homes available for sale compared to the number of buyers, it can be easy to get discouraged. It may take a little extra time to wait for the right house, or it may take some work to improve your credit and save for a higher-priced house, but either way, buying your next home is possible.
How to Pay for Your Home
The biggest determining factor in your ability to buy a home, of course, is your ability to pay for it. While some people can liquidate assets and pay for a house in cash, most opt for mortgage programs through a bank, credit union or other types of the lender to leverage the total cost of the property.
The first steps to buying a house always revolve around the financial side of the deal – how much you can afford and how you plan to pay for it. The majority of homeowners in the U.S. will use a mortgage loan to finance the purchase of their homes. Most mortgage loans in the U.S. are repaid over a 30-year period.
Getting a mortgage. Financing through a mortgage is the most common, and often the most attainable, way to buy a house or condo. In fact, 88 percent of all buyers financed their homes in 2017, according to the National Association of Realtors.
Buying a house with cash.
If you’ve got the funds to skip financing altogether and pay for your house with cash, you should have a faster transaction, as you won’t have to wait for a loan to be underwritten, the property to be appraised and the lender to formally approval the mortgage.
But that doesn’t mean you don’t have to get your financials in order ahead of time. “The way a cash buyer can be prepared is to be willing and able to show proof of funds, whether it’s stock they’re going to liquidate or cash that’s already in the bank,” says Gannon Forrester, an associate broker with Warburg Realty in New York City.
Additional costs of buying a home. The costs don’t stop at the agreed-upon purchase price and interest to the lender when applicable. Homebuyers should prepared for other costs leading up to and at closing, plus they should have some cash remaining in savings afterward for unexpected repairs to the house.
Best Time To Buy A Home
Home sellers and buyers alike favor spring as the ideal time for homes on the market. If you’re looking for the widest variety of home options, this is often the best time to start your search. Early fall also often sees a surge in buyers and sellers looking to strike a deal before the weather turns cold.
However, there are also benefits to shopping for a home in the off-season, when there are fewer buyers to compete with. You’ll have fewer houses to choose from, but you may be less likely to find yourself in a multiple-offer situation, which can make it easier to get a seller to take a serious look at your offer.
Either way, if you live in a market currently low on housing inventory, don’t expect a sizable price difference from season to season. Sellers can wait a few extra days or weeks if a lowball offer doesn’t appeal to them, so keep your offer realistic for what you think a home is worth.
The absolute best time to start shopping for a house, however, is when you’re ready, both financially and personally. If you have children, for example, closing on a house during the summer months is ideal because you don’t have to worry about packing up while kids are doing homework or making a rough adjustment due to midyear school transfers. The most important rule of thumb is to wait to start house hunting until you’re actually in a position to make an offer.
Where to Start House Hunting
Once you know your budget and how you intend to fund your purchase, you can start looking for the right house to buy. You can begin your search online by searching consumer-facing listing sites like Zillow, Trulia or Redfin, which can help you get a feel for which neighborhoods and houses fall inside your budget.
You’ll also want to interview several real estate agents before you start working with one. It’s important to trust your agent to advocate for you in the deal, so you shouldn’t feel you have to withhold details about the reason you’re moving or what’s included in the right home for you.
Be ready to answer questions from your real estate agent about how many bedrooms you need, your preferred neighborhoods – whether that’s based on public schools, access to public transportation or proximity to shops and restaurants – and anything else that’s nonnegotiable for you in a home purchase.
How to Win Over a Seller
When you do find that right home in the right neighborhood, it’s time to put in an offer. And in a popular neighborhood, you may have to work fast. It’s important to start the house hunting process with your financial information on hand so you and your agent can put together a formal offer quickly.
Included in that financial information is a preapproval letter from your lender that notes the company’s willingness to work with you to purchase the home. A prequalification letter is also an option, though preapproval tells the seller that the lender has already done a deep dive into your finances and hasn’t found any surprises.
“A preapproval letter will give the buyer an edge when they put an offer in on a house, showing the seller they’re serious and have a good chance of obtaining a mortgage,” Simmons says.
Writing a personal letter to accompany the offer can also provide some additional insight to sway the seller, since people like to hear their house is going to someone planning to make memories in it. Especially if the seller has lived in the house for a long time, sharing your plans to raise a family in the house could make him feel comfortable selling the house to someone looking to make similar memories.
However, Forrester says it’s not always necessary and can occasionally backfire by leaving room for discrimination – intentional or not – and muddling an offer when a seller is focused on the financial details. There are also scenarios when a personal letter won’t have much of an impact. “Sometimes personal things can sway someone, but a lot of times in New York it’s a financial thing,” Forrester says.
Closing on Your New House
It may take a few tries with different houses or it may require a little back-and-forth negotiation, but eventually the right seller will accept your offer. Now under contract, you feel like you’re in a whirlwind of activity working toward the day you close on the property.
You’ll need to schedule an inspection on the house, which helps to find any code violations or maintenance issues that you should be aware of. The inspection is key to catching any existing problems the seller may not know about or hasn’t yet disclosed, and it’s often a required step by the lender. Depending on the results of the report, you may need to renegotiate with the seller about needed repairs, a change in price due to the needed fixes or if you’re now questioning the purchase entirely.
Meanwhile, your lender will be working through the formal loan application process, which includes an appraisal on the property to ensure the lender feels comfortable with the sale price. If the appraisal comes up short, you may have to negotiate again with the seller to see if you can lower the price, or you may have to come up with the difference in cash to follow through with the deal.
Combined with fees for your real estate attorney and title insurance that are a part of the process on closing day, you should expect to pay an additional 2 percent to 5 percent of the purchase price.
The home buying process may be done once closing is completed, but your expenses certainly haven’t stopped. “Make sure that even after the down payment and closing costs, you still have close to six months of expenses,” Dabit says. “[It’s] something that is very important because there is a lot of unexpected cost that pops up when you first move into a home.”
Credits to Devon Thorsby, realestate.usnews.com
I hope this home buying guide has helped educate you on the important steps to take when buying a home. Please do not hesitate to contact me for any questions, advice, or complete guidance throughout your home buying experience.
Rebecca Mayhann, Tallahassee’s Favorite Realtor
(850) 661-5386 – Rebecca.Mayhann@gmail.com