The process to home buying begins by understanding how much you can afford. A major part to consider is your down payment. Many consumers think it is impossible to purchase a property without at least 20% down. However, thanks to various government sponsored programs, many people may now purchase a home with as little as 3.5% towards a down payment. Veterans of the United States can qualify for zero down programs.
Pre-approval and Pre-qualification are two terms you will hear often when prepping to purchasing a home; however, they are not interchangeable. Pre-approval is when you get your mortgage loan amount approved, whereas pre-qualification is a simple estimate of how much you could afford. You do not need to be pre-qualified to start looking for a home, but you will need to be pre-approved before you begin negotiating. So, it is in your best interest to get this part out of the way early.
Once you have been pre-approved, the fun can begin and it is time to find your dream home. When looking for homes, keep in mind your current income. Although you may be approved for a certain amount, are the payments on that loan practical for you to make every month? Ensure that the price range you are looking at is feasible for your current lifestyle and budget.
When purchasing a property, you will also be required to pay closing costs. These are fees charged by third parties involved in the purchase of your property such as appraisals, home inspections, notaries, title and the like. Closing costs can range between 2% and 5% of the home price, and funds are required before you close escrow. In addition to your down payment, be sure you have money set aside to cover closing costs.
As a homeowner, you will also need to pay property taxes. This amount depends on where the property is located. Rates do vary, but thanks to California’s Proposition 13, your annual property tax liability will remain mostly predictable year after year.
While “LOCATION” is not the only thing you need to consider when purchasing a new home. Before you begin looking online or in person, make a list of the features you would like to have in your home.
Being very clear will help us find you that perfect home.
Once you are ready to make an offer on a home, anticipation is high. For so many, this will be a stressful time. It is important to trust your agent and rely on their negotiating strategy to help you get the best deal possible. Your offer, once accepted, will become a contract. When putting together the offer, it is important to make sure every pertinent piece of information is included.
Once you have made your offer, and submitted it to the seller, be prepared to receive counteroffers. The support your agent provides during the negotiation process is priceless. Remember to remain patient, and let your agent act as a liaison between you and the seller or the seller’s agent. Common counteroffers may include closing date, flexibility on pricing, and appliances.
Contingencies can be a great tool in protecting your best interests, but they also can weaken your position. If you own a home, your offer could need to be contingent on selling. If you are uncertain about the integrity of the property, you may want to have a inspection contingency. Work with your agent to design an objective that will strategically help you compete in any situation.
Once your offer has been accepted, be prepared to make an earnest money deposit. This is usually a percentage of the purchase price that indicates you are serious about buying and indicates your good faith. A deposit is generally a cash offer that is applied to the purchase price when you complete the transaction, but could be forfeited to the seller if you fail to satisfy the purchase. Your broker can help determine the deposit amount you should be prepared to pay, based on your target home price.
Many first-time buyers are taken by surprise when it comes to the deposit, especially when they need to make a fast offer. You should have money readily available in your checking account so you can wire funds to escrow the day your offer is accepted. This could be very important, and the deciding factor in your offer being accepted or not. Be sure to focus on your deposit when developing your negotiating strategy.
The appraisal is the part of the loan application process, where you receive an estimate of the property’s value. Your lender will want to ensure the home is worth the amount you are borrowing. As a potential buyer, it is your responsibility to pay for the appraisal.
You should schedule a home inspection and a pest inspection sooner rather than later. This step is very important because if the house shows issues or fails the pest inspection, you only have a small window of time to cancel the sales contract. The inspections can be scheduled on your own and independent of your appraisal date.
This is the nitty gritty part of the process when all the i’s and t’s need to be dotted and crossed. It is when due diligence is performed to make sure your home loan has been approved by your lender, the property is in the condition you expect, passes your home inspection, and all legal documents pertaining to the homeownership are prepared and officially recorded. It can also be a particularly stressful time and having a good agent in your corner is essential to help navigate you through the process.
