Before you start looking for a home you should ask yourself a few questions. Where do you want to live? Do you want to be close to schools, shopping, or work? What kind of house would you like (need)? Are you looking for a particular style? How many bedrooms and bathrooms do you want? Do you want a yard? How much house can you afford? Have you consulted a Realtor or mortgage lender to determine the size of the mortgage you would qualify for? Here are a few tips to help you get organized:
Acquire a credit report on yourself and make sure the information is accurate. If you find any errors take steps to correct the immediately.
Browse through real estate advertisements in the newspaper and Homes magazines. This will give you a good feel for the types of homes that are on the market and what they cost.
In many communities, Realtors may have interactive phone systems which will allow you to find valuable information.
Visit open houses on the weekend. It doesn't cost anything to look, and looking at a few different homes might give you some ideas for things you'd like in a house but haven't considered.
Start saving money - you'll need to have cash on hand for a down payment and closing costs.
Try not to incur any additional debt. Pay down your credit cards - and do not apply for any new ones. Do not make any major purchases on credit - buy the furniture or car later.
Contact a Realtor. Your Realtor can help you determine how much you can afford, and they can provide you with information on homes that may interest you. A Realtor will also help you complete all of the necessary forms when it comes time to make an offer.
How much house can you afford?
Simply put, you can afford a house that costs as much as the largest monthly mortgage payment you qualify for. A quick way to estimate the size of mortgage you qualify for is to take your gross monthly income (before taxes and other deductions) and multiply it by .28. This works out to just over 1/4 of your gross income. Mortgage companies use something called qualifying ratios to determine how much they will lend you. Most mortgage companies use either a 28/36 ratio or a 25/33 ratio. The first number in each pair is the percentage of your gross income that the lender considers acceptable as a monthly mortgage payment (i.e. if you make $3,000 per month, 28% of that is $840 per month). The second number in each pair is used when all debt payments are considered, not just the mortgage. (i.e. if you make $3,000 per month, but also have a $250 a month car payment, 36% of $3,000 is $1,080, minus the $250 car payment equals $830). As you can see, in this example the numbers work out almost the same. If you have more debt you qualify for less.
Searching for your dream home can be a time consuming experience. Working with a professional Realtor will make the process much more efficient. Since most people spend a fair amount of time with their Realtor, it's important to choose a Realtor you feel comfortable with, and one who is responsive to your needs. The following questions will help you decide if a particular Realtor is right for you:
Do they return your phone calls?
Do they ask you questions to determine
what you want/need in a house?
Do they perform a financial analysis to
help you determine how much you can
Some agents represent the best interests of the seller. Some agents act as "Buyers Agents" and represent the best interests of the buyer. You need to know who you are dealing with. If you decide on a Buyer's Agent, state law requires a signed agreement which creates this relationship - your Buyer's Agent knows how to handle the paperwork.
What a Buyer's Agent can do that a Seller's Agent cannot:
Provide you with information and guidance to help you make an informed decision about the "right" price.
Help you negotiate the best deal for you.
Assist with structuring the many terms in a sales contract.
Keep confidential any information about you which could hurt your bargaining position.
Inform you about the desirability of different areas, floor plans and resale characteristics.
Point out reasons NOT to buy a particular house. A Seller's Agent has a duty to promote their listings.
A Buyer's Agent has the duty to find the right house for you regardless of who owns it. A Buyer's Agent has the duty to protect your interests and disclose any "behind the scenes" information which might affect your decision.
What does this service cost? Usually nothing. The commission to your agent is almost always paid by the seller.
Seek professional help in determining probable sales price and net proceeds (after all settlement costs are considered). I will be happy to assist you in pricing your home.
Locate your buyer before you look at other homes. You can usually set a moving date which will allow you enough time for house hunting.
Look only at houses that meet your price criteria. Know in advance what you will require in terms of closing and possession dates, seller participation, inspections and repairs and Homebuyer's Warranty. Understand the different levels of representation.
A Buyer's Agent is generally your best bet. Thoroughly research an area's market values and trends, schools, and potential zoning changes. Don't overestimate your level of personal "fix-up" ability. Consider hiring professionals to inspect a minimum of the following items:
Market conditions vary with location, time of year, and national economics. In a fast-moving market with a terrific house where there is other buyer competition, the "right" price may be over what the seller is asking. In more normal conditions, most homes sell within 3% of the asking price. Here is a list of the factors that determine value: size, location, condition, amenities - interior, exterior, neighborhood, time on market, seller concessions, transferability, zoning, environmental influences, particular site within community, governmental influences, and social influences. All of these issues will have an influence on the appraiser who is sent by the lending institution. Undoubtedly, however, the most accurate way to determine the fair value of the home is to carefully analyze the recent sale history in the particular area.
Once you have determined the fair value of the property, the amount you offer should be influenced by: 1) how bad you want the home 2) how "hot" the market is 3) how motivated the seller is, and 4) how good is your offer (is it subject to the sale of your house, financing or other contingencies, flexible as to the close date, etc.). Generally, your first offer should be within 10% of what you determine to be the fair value of the home.
A warranty is your PEACE OF MIND from unexpected repair costs. The typical warranty plan usually costs between $300 and $400 for basic coverage. That was the bad news about a warranty... now, here is the good news:
Most warranty programs cover a pre-owned home's plumbing, electrical, heating and cooling systems, appliances, lighting fixtures, septic system, and more.
Coverage typically lasts for one year from the
date of your loan closing.
For a small deductible, usually $50 or $75 per occurrence, a service technician is called to repair the covered item and they are typically available with 24-hour, 7-day-a-week service. A warranty can save you a great deal of money spent for repair or replacement of your homes' major components.
To request a Closing Protection Letter on behalf of a lender for a pending transaction, click here and complete the form.
Please note that underwriting approval may be required before the CPL is issued. Please contact your Title Officer with any questions.