A Guide To Smart Home Buying: Part 2

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home buying

In previous blog post, we discussed some tips for smart home buying. But that was only the beginning. If you’ve already gotten your cash together and searched for a home, it is now time to purchase the home of your dreams. This may seem simple, but there are quite a few steps left in the process. Here is a continuation, starting at step 6, of the step-by-step guide to buying a home:

6) Make an offer on the home
After you find the house you want, you’ll want to make your bid quickly. You’ll want to get advice from your buyer’s broker, if you are working with one, to figure out the initial offer. If you’re working with a seller’s agent, you will need to figure out your offer strategy on your own. Find the data on at least three houses that have recently sold in the surrounding neighborhood. Generally speaking, do not make a bid that snubs the seller. This may lead the seller to give up due to sheer annoyance. The amount of leverage a buyer has depends on the market’s pace. You have a lot of control in a slow market, but in a hot market, you have almost none at all. It will probably take some creativity to satisfy the needs of the seller. For example, you can ask the seller to throw in some of the appliances if you meet his or her price.

7) Enter a contract
After reaching a price that both the buyer and seller can agree on, the seller’s agent will draw up an offer to purchase. Run this document by your lawyer and buyer’s agent in order to make sure that:

  1. You will obtain a mortgage.
  2. The home was inspected and has no significant defects.
  3. It has been guaranteed that you can conduct a walk-through inspection 24 hours before closing.

You are required to make a good-faith deposit which will typically go into an escrow account. This is typically 1% to 10% of the purchase price. After the deal has closed, the seller will receive this money.

8) Secure a loan
You will now have to call your mortgage broker or lender in order to agree on terms. You will decide whether to choose a fixed rate or adjustable rate mortgage. You will also have to decide whether to pay point. At this point, you should expect to pay $50 to $75 for a credit check, as well as an extra $150 on average for an appraisal of the home. The appraisal price could, however, be anywhere up to $300. The majority of other fees will be due at the time of the closing of the house.

9) Get an inspection
The mortgage lender will make an appraisal of our home, but it is also a good idea to hire your own home inspector. On average, an inspection costs around $300, but big jobs can cost up to $1,000. An inspection takes two hours or more. You should ask to be present during your inspection. This way, you can learn a lot about your house, such as its overall condition, wiring, construction material, and heating. If the inspector finds significant problems, such as a roof that needs replacement, you should ask your agent or lawyer to discuss this with the seller. The seller should either repair the problem before you move in, or deduct the cost of the repair from the home’s final price. If the seller does not agree to do either of these things, you may walk away from the deal without penalty as long as you have a properly written contract.

10) Close the deal
Approximately two days before the closing of the house, you will receive a final HUD Settlement Statement from your lender. This will list every charge you will have to pay at closing. It is important to review this document carefully. It will include important information such as the cost of the title insurance. This is the insurance that protects you and the lender from any claims people may make regarding who owns the property. The cost of this insurance is typically less than 1% of the home’s price, through it varies a good deal from state to state. You may also need to establish an escrow account. The lender can tap this account if you fall behind on your property tax payments, or on your mortgage. The closing itself will not have any surprises, but you should ask your real estate agent or your lawyer to brief you on the specifics.

Buying a home doesn’t have to be overwhelming and confusing. If you follow this step-by-step guide, you will be on your way to buying the home of your dreams in the smartest way possible. Happy home buying!

A Guide To Smart Home Buying: Part 1

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home buying

Buying a home can feel overwhelming. You know you want to purchase a home but there are so many steps to the process that you may not know where to start. How will you decide on a good budget? How will you find the right realtor? And most importantly, how will you find the perfect home for you? Buying a home takes a lot of preparation and careful thought. Here is a step-by-step guide to buying a home:

1)Look into your credit
There are three major credit agencies: Equifax, Experian, and TransUnion. These agencies keep credit reports, which indicate whether you have ever run into any serious issues with credit and whether you tend to be late with payments. Credit scores are calculated from a formula based on the information found in your credit report. Each person has three different credit scores, one to correspond with each of the person’s credit reports. If you have a low credit score, you may struggle to get a good interest rate, or to get any financing at all. If you find any errors in your credit report, make sure you contact the agencies directly and correct the mistakes. This can take two or three months to resolve.

2) Set your budget
Once you’ve got your credit score figured out, it’s time to figure out how much you can spend on a house. A good starting point is using an online calculator. While these calculators are helpful, you will get a more accurate figure by asking to be pre-approved by a lender. This lender will assess was kind of loan is right for you by looking at your debt, income, and credit. If you are looking for a rule of thumb, you can multiply your gross annual salary by 2.5 and use that number as a guideline for the cost of your home. In addition, all of your monthly home payment should be no more than 36% of your gross monthly income. You will also need to take into account the size of your down payment.

3) Get some cash ready
For your down payment and your closing costs, you’ll need to come up with some cash. Lenders typically see a down payment as 20% of a home’s price. If you are able to put down more than 20%, your lender may approve a larger loan. If you don’t have 20%, you will need to search for loans that will help you. Low down payment mortgages can be provided through a number of private and public agencies, such as Freddie Mac, Fannie Mae, the Department of Veterans Affairs, and the Federal Housing Administration. If you qualify for these mortgages, it is possible that you will only have to pay 3% up front.

However, if you have a down payment lower than 20% you will probably need to pay for private mortgage insurance, which is essentially a safety net that protects the bank in case you do not make your payments. With private mortgage insurance, about 0.5% of the total loan amount will be added to your mortgage payments for the year.

So you’ve considered the down payment. But you still need to make sure you have enough cash to cover fees and closing costs. This includes loan fees, inspection fees, the appraisals fee, attorney’s fees, and the cost of a title search. This may add up to a sum of more than $10,000, and it will often make up 5% of the mortgage amount.

If you don’t have enough cash available to cover these needs, there are many options available to you. If you have a first time homebuyer, you can withdraw up to $10,000 from an Individual Retirement Account if you have one. There is no penalty, but you need to pay taxes on the amount. Another option is receiving a cash gift of up to $14,000 per year from each of your parents. There is no gift tax.

You could also figure out whether your employer can help, especially if you work at a big company. Many big companies will help contribute to a down payment or help an employee get a low-interest loan from certain lenders. Another option is tapping a 401(k) or similar retirement plan so you can get a loan from yourself.

4. Get an agent

The majority of home sellers list their homes via an agent. Those agents, however, work for the seller rather than the buyer. They are paid according to a percentage of the purchase price, typically 5 to 7%, so usually they will try to get you to pay more. When you need in an “exclusive buyer agent.” These agents are either paid directly by you, on an hourly or contracted fee, and other times the commission that the seller’s agent gets upon sale is split. A buyer’s agent will have allegiance only to you.

5. Look for a home.

The first part of looking for a home is figuring out what city or neighborhood you would like to live in. When searching neighborhoods, you should look for indications of economic vitality. This includes low unemployment, good incomes, and a mixture of young families and older couples. Whether you have children or not, you will want to pay attention to districts that have good schools. When the time comes that you will want to resell the property, living in an area with a good school system will allow your home to keep its good value.

It’s also a good idea to figure out the real estate market in the area. If homes in the area are selling near or even higher than the asking price, this means that the area is desirable. Doing your house hunt in the colder months of the year is a smart plan if it is possible. This is the “off season” for housing hunting, and you will have less competition, meaning that sellers are more likely to negotiate with you.

Just make sure your search criteria aren’t too restrictive. Make sure your price range is 10% above and 10% below your true range. In terms of location, search in a 10-mile radius of the location you specify.

These tips will help you to buy a the right home for you. Stay tuned for part 2 of the guide to smart home buying.