7 Steps To Homeownership
Taking the plunge into homeownership comes with exciting benefits unlike renting. The first step to buying a home is being educated about what can be expected when purchasing a property. Below are the seven main steps involved when buying a home.
Get Your Credit Sorted Out
Having financing arranged before you start looking for a home is the first move you need to make prior to looking for a home. However, having financing arranged before you start looking means having the credit to get pre-approved for a mortgage.
The first thing you should do before going to your bank or a mortgage lender/broker is to acquire a copy of their credit report. The most influential determinant when applying and getting approved for a mortgage loan, is your credit. The higher your credit score is the better your chances are at getting approved for a mortgage. It also will determine your mortgage rate. The better your credit is, the lower the interest rate will be on the loan. Currently, you can get a mortgage loan with a credit score as low as 580 (or lower). However, a credit score of 740 or more should qualify a buyer for the best mortgage (interest) rates available from most lenders. To read more about credit scores, click here.
Come Up With Your Down Payment
A down payment is a percentage of your home’s purchase price that you pay up front when you close your home loan. Lenders often look at this down payment amount as your investment in the home, so it plays an important role. Not only will it affect how much you’ll need to borrow, it can also influence what type of loan is best suited to you, the interest rates and whether your lender will require you to pay for private mortgage insurance (often referred to as “PMI”). This typically happens if you put down less than 20% of the home’s purchase price.
So how much will you need? That depends on the purchase price of your home and your loan program. Different loan programs require different percentages, usually ranging from 3% to 20%.
Need help with your down payment? There are a number of down payment assistance programs available to Georgia buyers. To learn more about these programs, click here.
Get Pre-Approved For A Mortgage
Once you deal with your credit, the next step is getting pre-approved for a mortgage. Pre-approval allows you to shop worry free and it lets you know ahead of time what you can afford. Getting pre-approved for a mortgage will also be an attractive asset to real estate agents and homeowners as it shows them that you are a serious buyer. Sellers will not even entertain an offer that’s not accompanied with a mortgage pre-approval.
Prior to getting pre-approved for a mortgage, you should familiarize yourself with the various types of mortgage loans and the application requirements. You also need to shop around for the best rates as well as decide who you will use to obtain your mortgage. To learn more about mortgages, click here.
Hire A Real Estate Agent
Although it’s possible to search for homes using internet sites devoted to real estate, you can give yourself an immediate advantage by enlisting the services of a professional. Real estate agents have more in-depth and up-to-date knowledge of the communities and real estate markets that you are considering.
Why hire a real estate professional? Because, if you're like most Americans, buying a home is the most expensive purchase you'll make in your lifetime. In addition, the process of buying a home can be complex. Also, agents who list properties for sale are working for the seller and their job is to get the best possible price for their client. Calling agents about their online listings is not a good idea, this is something your real estate agent who represents you should do on your behalf. Simply provide the listings you have found online to your agent.
Unlike buying a car, laws that affect home buying change every year and vary from state to state. Real estate agents are required to stay current on the various laws and regulations. Additionally, real estate agents can help point out features or faults with a property that may otherwise go unnoticed. They can also negotiate better sales contract terms, and offer greater knowledge of search areas. To read more about our buyer’s agent services, click here.
Find A Home
This will likely be one of the most difficult steps. Buying a home is a lot like looking for a rental property but with much more stress and emotion, and a much bigger payoff. If you are not sure what you should be looking for in a home, consult extensively with your real estate agent and friends that own homes. Start thinking about what you need in a home. What are your requirements in terms of rooms, location, amenities and other such aspects? Making a list is the easiest way to keep track of the necessities.
Our agents make every effort to assist our clients with finding the home that meets their needs and desires. They also give valuable advice that some buyers may not have thought of like considering the potential future equity and/or the property’s resale value. To search for a home, click here.
Get An Inspection
After finding the home that you can see yourself purchasing, have the home inspected. This is a huge step that should not be skipped because sellers are not required to make repairs unless it is agreed upon. Our agents include a contingency clause in the purchase contract. This gives the buyer the right to cancel the contract based upon the inspection report. There could be one of many things wrong with the home you have chosen that the owner may not even know about. Inspections will survey the plumbing & electrical systems in the home as well as the roof and the structure itself. Anything that is amiss can be utilized as a bargaining point in the sale of the home, or if severe enough; can simply be the reason to walk away from that particular home.
Pay Closing Costs & Close Transaction
Once your offer is accepted on the home you want and it has passed inspection you should now merely be concerned with your possession/closing date. The closing is when the title of the property is transferred from the seller to the buyer.
Closing costs vary widely based on where you live, the property you buy, and the type of loan you choose. Often, many of the fees that make up closing costs are negotiable, and some are completely unnecessary, like administrative and courier fees. An example of closing costs for a loan of $200,000 in Metro Atlanta is $2,303. This does not include the down payment which will also be paid at the closing.
Your lender or broker must provide to you a Good Faith Estimate (GFE) of the closing costs on your home will be. By law, your lender/broker is required to provide a GFE within three days after you have applied for a mortgage. But these are just an estimate, and many of the fees listed can change. If they do change, you may receive a revised Loan Estimate so there are no surprises along the way. To view a breakdown of an example of typical closing cost fees, click here.
At least three business days before your closing date, the lender/broker should give you a Closing Disclosure statement, which outlines all of the closing fees. Compare this to your Good Faith Estimate (GFE) and ask the lender to explain what each line item on your closing costs is and why it is needed. There are limitations on the amount the number of fees can increase from the Good Faith Estimate (GFE) to the Closing Disclosure, so there really shouldn’t be any surprises.
Congratulations! You are a homeowner!