7 Steps to Buying a Home
Would you like to know how to stop spending all your hard-earned money on rent and buy a home? Here are 7-Steps to Buying a Home for your journey.
If you are renting a home to change that habit and buy a home can seem like a monumental undertaking. This report is to help you with the home buying process. These 7-steps are for reading before signing any purchase contract so as a home buyer you don’t make any major mistakes.
Step One: Identify Your Requirements in a Home
First consider the kind of home you need and want. Write down your specific requirements, such as the number of bedrooms, size of yard, floor plan, site, schools, etc. Then ask yourself…what is most important about buying a home to you?
Step Two: Determine How Much You Can Realistically Afford
Consider your budget and financial obligations. Decide what monthly house payment you can really afford. Most mortgage consultants advise limiting your payment to no more than one-third of your net monthly income if you are debt free. If you’re unsure, contact your mortgage consultant to help with the calculations. I also have another post that will give you a formula you can use to figure it out yourself here.
Step Three: Get Pre-Approved By a Mortgage Consultant
When you know in advance the amount of money your bank will lend, you can focus on searching for houses in your targeted price range. This can save you time when you find that perfect home, because sellers favor buyers who are pre-approved.
An experienced mortgage consultant will tell you what specific loan programs are best for you. By taking a look at your financial situation and credit history, a mortgage consultant will tell you if you can qualify for the home you want and they will find a loan that best suits your needs.
For the approval process, you and your mortgage consultant will complete the required documentation and give it to an underwriter from the bank. A pre-approval is a real loan commitment from a mortgage consultant or lending institution. This means that you definitely qualify for a loan. Talk to your mortgage consultant about the costs and time involved to secure pre-approval letter.
Step Four: Work with an Experienced Real Estate Consultant
You can learn a lot about real estate consultants by talking to them about their experience. In a short time, you’ll be able to decide if they’re the right person to meet your needs. I have left below questions you can ask any real estate agent so you can compare one against the other using the same criteria.
Questions for Real Estate Agents:
1. In what areas of town and price ranges do you specialize? (Keep in mind that some agents specialize in only one area or one price range.)
2. My goal is to buy a house by ___________. How will you help me meet this goal?
3. How often will you update me with new property listings? If I don’t like what you update me with how would you change it so I get more homes of interest?
Step Five: Tips for Successful House Hunting
A). Keep an organized record of your research. Write down comments about the homes you see. Keep track of your likes and dislikes and offer feedback to your real estate consultant. Some buyers are reluctant to tell an agent what they really think of a house; they think the agent might take it personally. Remember, the houses don’t belong to the agent, they want to help you!
B). Make sure your agent is aware of your time schedule and expectations. Do you like to look at one or two homes per session? Maybe you would like to see more four or eight? Discuss this with your agent.
C). Tell your agent about any homes you see that interest you and that you’d like to know more about. This includes homes you’ve “discovered” as you explore the area and those advertised in the newspaper, magazines and on the Internet.
D). If you like to spend time driving around by yourself looking at houses, ask your agent for a list of homes you can do a drive-by – homes to consider first from the outside. Your agent can make appointments to show you the interior of the properties that appeal to you from your “windshield” tour of homes.
E). It’s important to know beforehand whom your agent represents. Some agents work only for the seller. Make sure you ask what Agency Relationship your agent is honoring.
Step Six: Make a Purchase Offer
Work with your real estate consultant to decide the most appropriate purchase offer. Have your agent do a Comparative Market Analysis on each home you put and offer on. Know what you are buying and what the comparable homes in the neighborhood are selling for too. Even in a hot market don’t get caught up moving to fast and skipping steps. Be certain when you make an offer it is the right one for you. This will lessen what always happens with all home buyers and sellers…buyer’s remorse. Your consultant will present the offer on your behalf.
Step Seven: Save on Your Initial Investment and Monthly Payments
There are only two major investments to consider when buying a home. These are the first investment, which includes the down payment and closing costs, and the monthly payment, which includes principal, interest, taxes and insurance. Here are some other things to consider.
Initial Investment
1. Choose a low or zero down payment loans if possible. You don’t necessarily have to put 20 percent or even 10 percent down. You can pay 5 percent, 3 percent, or even zero down on some loans. Obvious if you are looking to meet a low monthly payment then maybe 20% isn’t enough and you need to put more money down. It depends on your goals and what is important to you.
2. Some Lenders have programs to cover your closing costs. Ask your mortgage consultant about them.
3. As part of your offer, ask your real estate consultant about the seller’s paying some of your closing costs. In a hot market they probably won’t but in a slower market you may get their help if you ask.
4. Shop around for your homeowners’ insurance. A little comparison-shopping can save you money. Make sure you know what the lender will need with your homeowner’s insurance so you get the correct bid from an insurance broker.
5. You can deduct money paid for discount points from your gross income before computing your personal tax. See your accountant or CPA for more information.
Monthly Payments
A). Get a loan that doesn’t have payment mortgage insurance premiums (PMI) if possible. PMI is very difficult to remove from your loan without a complete refinance. By putting 20 percent or more down, you will drop them entirely. Talk to your mortgage consultant about other ways to cut or end payment mortgage insurance payments.
B). Take advantage of rate lock programs that are now available. You can generally lock in a low-interest rate 30 to 45 days in advance. Remember it is prudent to secure an appraisal for full value of your offer before you lock in a rate.
C). Remember that interest payments on a primary residential mortgage are fully deductible. Your property taxes are also deductible. Tax rates definitely favor homeowners. Be sure to declare both your mortgage interest and property taxes when you file your income tax returns annually.
D). Consider an adjustable rate mortgage. Adjustable rate mortgages (or ARMs) are as much as 3 percent lower than fixed rates. Only choose this option when you’re able to refinance, should the adjustable rate rise sharply. Likewise if you are on a short-term stay because you know a transfer in your job is coming making an adjustable loan a smarter investment strategy. Your loan consultant can help as it is all mathematical as to the best avenue to take
If you would like to have a real estate consultant in your corner when buying or selling a home please call Cliff Keith and Team at 650-346-7366. Cliff Keith and Team have been in the San Francisco Bay Area since 1976. We have many ways to help people like you meet their dream of home ownership.
This Free Report prepared by:
Cliff Keith and Team
650-597-1821
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