1.Assess and Monitor Your Financial Situation
Obtain your credit scores!You can do so at www.freecreditreport.com .Determine any ‘weak links’ in your scores and do what you can to remediate them. If you’re renting, start collecting proof of rent submitted as many lenders will request this information. Also, it’s important at least six months before you intend to file for a mortgage, to NOT make any large purchases, be that a car, motorcycle, furniture, etc.Any large purchases can affect your debt-to-income ratio which will jeopardize your ability to qualify for a mortgage.
2. Obtain a Pre-Approval for a Mortgage
After you’ve watched your dollars and cents, the next thing you should establish is a budget based on your income.Once you’ve determined a price point, it’s imperative to speak to a mortgage broker to obtain a pre-approval letter.This primary step will save you hours of time and potential aggravation by simply verifying how much house you’re qualified to purchase.Why look at $800,000 homes when you can realistically afford a $600,000 home?A pre-approval letter is also ALWAYS included with the offer to purchase.No seller will ever consider your offer unless it’s accompanied by a pre-approval letter.It’s also important for you to know that obtaining a pre-approval letter will NOT affect your credit standing when solicited from a reputable mortgage lender.
3.Determine what you are looking for in a home
The search for the perfect home often begins without an exact idea of what you want, but it’s important to know what features are most important to you. We suggest you make a wish list, the “must haves” and the“nice to have” list. We’ve broken this down into 4 categories. Answering these questions can help you narrow down the search and remove that overwhelming feeling that may happen with house hunting.
Location – The saying “LOCATION, LOCATION, LOCATION” resonates for its accuracy. There are two main things that need to be considereda) Community (i.e. great school system, small town center) and b) the commute to your place of employment.
Price Point –establish a realistic price point. We recommend starting with a range. For example, “We would love a house that is $425,000.00 but if we found a house that we love, we can go up to $599,000.00”·
Type of Home - Colonial, Contemporary, Cape Cod, Ranch, Fixer Upper
Features - Number of bedrooms, bathrooms, gourmet kitchen, garage size, lot size.
4.Choose the Right Realtor
Once you have made your wish list you need to choose a Realtor®that knows the area and is willing to do the “legwork” for you. Your Realtor® should provide you with a copy of a Consumer Information Statement and explain to you how the various relationships work.All pertinent information should be researched for you... real estate taxes, information on school systems, commute information, area particulars. You should always ask for resumes and references for your Realtor®. After all, buying a home is one of the biggest investments you will make in your life. You want to make sure you are working with someone that not only knows the area but also understands and listens to your needs.You will probably want to see the home of choice at LEAST twice before making an offer.Some buyers feel more comfortable after showing a home to a trusted family member or friend.This is not unusual, so if another opinion puts you more at ease, go for it!
5. Make an offer
Making an offer is always fraught with anxiety but your Realtor® should provide you with a Comparative Market Analysis of the home and confirm that your offer is in line with the current market value. Offers are made in writing and are always accompanied by a pre-approval letter and an earnest money deposit ($1,000). Your deposit is kept in a non-interest bearing trust account. If you and the seller move forward to sign a contract, this amount will be applied towards your down payment. If a contract is not agreed upon, your check is returned to you.
6. Sign the contract and submit to your attorney
Once all parties have agreed on the price and terms of the contract, it will be submitted to each party’s attorney. Once submitted, the attorneys have 3 business days to acknowledge receipt and respond. If you don’t have an attorney who specializes in real estate, your Realtor® will inquired about this already and would have provided you with a list of real estate attorneys to work with BEFORE starting your home search.There are several items that will be listed in the contract and need to be competed in order to complete the contract.Closing Date -This is the intended date that the buyer will take title of their new home.Mortgage Contingency - The buyer undertakes to obtain a mortgage within a specified time. If unable to get the mortgage, the contract is then null & void.Inspections -Certain inspections are required by the mortgage company. These are carried out by certified home inspection companies and cover all aspects of the house. Any findings from an inspection will be handled by the attorney and repair costs, etc. can be negotiated between the buyer and seller.Further Deposit - Based on the size of the mortgage you have negotiated, the contract will specify the amount of down payment you will have to pay and the date it needs to be paid. Closing Costs – A conservative estimate of closing cost is approximately 3% of the purchase price; perhaps a high estimate but it’s better to have more monies in reserve for required costs than to be caught short!
7. Move forward with all of the other items required
Once a contract has gone through attorney review, there are several other items that must be expedited prior to closing on your home.Your attorney will address a title search and survey.Your mortgage company will require you to obtain Home Owners insurance. You’ll have to open/transfer utilities, cable, water, sewer garbage, etc.Your Realtor®will be able to provide you will all the relevant contact information for these utility companies. Lastly, a final “walk through” on the house is performed, usually occurring immediately before closing. Any potential issues found will be addressed before arriving at the closing table.Take possession of the keys, garage door openers, etc., at the closing table.