The Buying Process
Buying a Home? Here's How the Process Works
1) Plan ahead. From the moment you think about buying a home, start planning. Home buying is a time-consuming and demanding process, and it behooves you to utilize your management skills early on.
Start by requesting a copy of your credit report. Carefully examine it for errors, and clean it up before you talk to a lender. Are you currently renting? Check your lease for an early release clause. If you'll be subject to penalties, try to time your closing with the expiration of the lease.
During this planning phase, consider your life over the next five to seven years. Do you plan to start or grow a family? Will an in-law eventually move in with you? Will you be working from home? The number and layout of the rooms you require will depend on your answers.
If you qualify for financing based on a dual income, will you be able to survive on one salary in order to fulfill a long-range plan, such as one parent staying home to raise a child? Once you've answered these questions, establish a plan. Then direct the process with reference to the plan. Don't let the process dictate to you.
2) Understand the home buying process. Homebuyers need to ask questions. Lots of questions. So choose a real estate professional who has experience and is willing to explain the entire home buying process -- from viewing homes to negotiating, to financing, to escrow and closing -- in detail.
3) Stay within your budget when searching for a home. What can you do to avoid becoming enamored with homes that are out of your price range? Monitor your expenses for a couple of months. Then, based on your findings, develop a budget that truly reflects your lifestyle. Talk to a real estate professional who can provide insight into new home expenses and taxes. Then revise your budget.
It's smart to ask your lender to pre-approve, rather than pre-qualify, you for a mortgage. Pre-qualification only tells how much you can afford. Pre-approval goes a step further. Your lender will thoroughly evaluate your application --including verifying employment information and financial disposition -- then clear you for a loan of a determined amount. Having your loan pre-approved gives you a sizeable advantage: Your new status as a cash buyer makes you more attractive to the seller. Ask your Berkshire Hathaway HomeServices Northwest Real Estate professional how to get started on the pre-approval process.
Once you learn how much of a home you can afford, stay within your budget. Just because you've been approved for a certain amount, doesn't mean you'll feel comfortable with monthly payments at the high end of the range. Ask yourself if you can live with these payments. Do they fit your established budget? If not, rethink your spending limit. Your new home should give you great pleasure, not hold you hostage.
4) During the home search think with your head, not your heart. Curb appeal can be a powerful force. It's the buyer's kryptonite. By disengaging the mental faculties, it leaves the homebuyer emotionally vulnerable. To counter its effect, you must be objective. Brutally objective.
Look at many homes, including an assortment of types of homes. When you view a property, list the positives and the negatives. Make certain your furniture will comfortably fit into the space. Visit at various times of day to see how much natural light floods the rooms and check for changes in traffic patterns, especially at local rush hours. Have an inspector or engineer pick apart the property. And recruit a friend to view the home and provide you with objective feedback. Ask if he or she can picture your family living there and discuss the whys and why nots. Jot down the points for later review.
Also, think about how long you plan to own the house. Would it be difficult to resell? List the negatives. Could you eliminate or reduce them?
5) Investigate the area in which you are thinking of buying. Don't stop your inspection at the property line. Examine the surrounding area. Is it safe, well maintained and moderately quiet? Is it convenient to work, schools and shops? Ask about zoning and that lovely forest of vacant land across the street. Could the highway nearby be widened in a couple of years? How far is the train? Within ear shot? If you're not familiar with the area, ask friends and colleagues about it. Do your research.
6) Understand the financing. Here's where it helps to be a quick study. Homebuyers have to contend with an assortment of mortgage types and the associated jargon. Your real estate agent and loan consultant can be great resources.
Get every detail in writing, in particular, the lock-in rate, points and fees. And request a copy for your file. You should also request an estimate of your closing costs, which generally run between 3% and 6% of your loan. Inquire about prepayment penalties. Have the lender attach an addendum to your contract that specifies that no penalties will be imposed for prepaying the loan. This step could save you a good deal of money.
Before you get to the table, read all the documents related to the purchase of the property, and have a professional review them. You're signing a binding, legal document. Make certain you understand the conditions of the loan.
For first time buyers or those with bruised credit, a Lease with a Right to Purchase program may be right for you.
Most of all, remember to use your Berkshire Hathaway HomeServices Northwest Real Estate professional as a resource. Ask him or her to explain anything you aren't clear on. Your agent is there to educate & guide you, and protect your interests.