7-Secret Steps to Buying Your New Home Successfully
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 New Home for your journey. This is the meat and potatoes of how some new home buyers will guaranteed success. Here’s help with their search and successful close of escrow on their new home.
If you are currently renting a home, you can change that behavior and buying a home can seem like a monumental undertaking. This report is to help you with the home buying process. Read these 7-steps before signing anything so as a home buyer you lessen your chance of making any major mistakes.
Step One: Identify Your Requirements in a Home
First consider the kind of home you’ll need and one you want. Write down your specific requirements, such as the number of bedrooms, lot size, floor plan style, schools, etc. Then ask yourself…what is most important about these requirements buying your new home?
Step Two: Determine How Much You Can Realistically Afford
Consider your budget and current financial obligations. Decide what monthly house payment you can really afford. Most mortgage consultants will advise limiting your mortgage payment to no more than one-third of your net monthly income. And, that is, if you are debt free. If you’re unsure, contact your mortgage consultant to help you with these calculations. I also have a post that I have written and 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’ll will only focus on houses in your targeted price range. This can save you time and money when you find that perfect home. This is because you know what your credit limits are and sellers favor buyers who know that and 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, your mortgage consultant will have you complete the required documentation and give them to their underwriter from the bank. A pre-approval is a real loan commitment from a mortgage consultant or lending institution. This means that you qualify for a specific loan based on the information you’ve provided. Talk to your mortgage consultant about the costs and time involved to secure pre-approval letter. Normally this process takes 2-3 weeks.
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:
- 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.)
- My goal is to buy a house by ___________. How will you help me meet this goal?
- 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 I’m interested in purchasing?
Step Five: Tips for Successful House Hunting
A). Keep an organized record of your research. Write down comments about each home you see. Try and always come up with one word or phrase that will recall that home. For example, Pink Front Door or 49er Poster in Family Room.
Keep track of your likes and dislikes and offer feedback to your real estate consultant after each house. 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 isn’t going to be purchased by the agent, they want to help you with what you want!
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 – 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. Be aware though…”you can’t judge a book by its cover”.
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. You want someone to be in your corner when it comes to representation not the other way around.
Step Six: Make a Purchase Offer
Work with your real estate consultant to decide the most appropriate purchase offer. The most effective way to accomplish this is by having your agent do a Comparative Market Analysis on each home you wish to submit an offer on. Know what you are buying and what the comparable homes in the neighborhood are selling for makes good sense.
Even in a hot market don’t get caught up moving too fast and skipping steps in your due diligence process. Be certain when you make an offer it’s the right one for you and within your qualifying budget. This will lessen what happens with many home buyers…buyer’s remorse. Your real estate consultant will present the offer on your behalf to the sellers.
Step Seven: Save on Your Initial Investment and Monthly Payments
There are only two major cash investments to consider when buying a home. These are your initial investments, which includes the down payment and closing costs, and your monthly mortgage payment to the bank, which includes principal, interest, taxes and insurance. Once these figures are known you will know exactly if you have exceeded your level of pain when buying a home. If the number is one you know you can’t afford based on your own knowledge of your spending habits and actual income. Only you know if you’ll be able to afford your costs in buying a home and if it exceeds your comfort level.
Initial Investment
- 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 make 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. The adage of use other people’s money (OPM) still holds true for smart money management.
- Some Lenders have programs to cover all your closing costs. Ask your mortgage consultant about them. If you can, you’ll stretch your payment of a 30-year period (amortize) instead of taking money out of your pocket today.
- 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 do so, but in a slower market you may get their help. You know you don’t G-E-T if you don’t A-S-K!
- Shop around for your homeowners’ insurance. A little comparison-shopping can save you money. Make sure you know what the lender will need from your homeowner’s insurance company. That way you’ll get the correct bid from any insurance broker you may speak to during your shopping for insurance.
- You may deduct money paid for discount points from your gross income before computing your personal tax. Also, you may be able to use your IRA funds if you’re a first time home buyer. 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. One of the major issues with PMI is that it is very difficult to remove from your loan. Most PMI company will not remove these premiums 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.
What to do now:
You want the Team in your corner that will make sure your get what you are trying to do…buy your new home. Call or text-650-346-7366 for fastest service. Otherwise, email cliff@SFBayHomes.com. Do it TODAY!