Home Buying 101

Are you ready to get into a new home? There are things that you could be doing right now that could improve your chances of getting the best possible deal!

Here’s a look at what you should be doing as you count down to buying a home.

 

1. Review your Credit Report.
Start to build and enhance credit.
Do you need to increase your score? Do you have enough credit? What can you do to solve both of these issues?
    Before you contact a real-estate agent or mortgage lender, you need to know if your credit is good enough to qualify for a mortgage. This is when you should pull your credit report and take steps to ensure that you have built up sufficient credit history and that your score is as high as it can be. The higher your credit score, the better the mortgage rate you’ll qualify for. This also will leave you plenty of time to correct any errors or inaccuracies on your report that may trip you up later

2. What can you afford?
 
1. What’s your income?
2. Assess your debts.
Tally up all debts, short and long term. Paying down your debts will improve your credit score.
3. How much savings do you have?  What can you do to increase your savings if necessary?
4. See if you prequalify for a mortgage. Use a calculator to see how large a mortgage you qualify for. This is not the same as a preapproval.
5. What type of mortgage fits your needs?
Perhaps the most important question you need to answer honestly when you’re thinking about buying a home is, “How much house can I afford?” Take inventory of your monthly income versus your monthly debts as well as your savings to figure out how much you can put toward a down payment and how much you can afford to pay each month. Also, this is a good time to assess your goals and plans to help you determine which loan product will best fit your needs.


3. What kind of home do you need?
1. Consider transportation options.
2. How are the schools rated?
3. What amenities do you want?
Think about your must-have items, including number of bedrooms and bathrooms, a multicar garage, pool, fireplace, eat-in kitchen or finished basement.
After you determine how much house you can afford, you need to figure out what kind of home you need. What is important to you? What amenities does your home need to have? Does your home need to be in an area with great schools? Do you need to live near transportation hubs? How many bedrooms and bathrooms do you need? Do you want a house with a pool, an eat-in kitchen, a fireplace, a finished basement? Once you decide what you need and want, it is time to start shopping.

4. Research Housing Availability
1. Check out neighborhoods where you would like to live.
2. What properties are available that fit your wants and needs?
3. Review the market’s “price supports” — jobs, schools, shopping.
At this stage of the game, it’s time to start researching the local housing stock. Cruise around the neighborhoods you’re interested in and talk to other homeowners and store owners to see if a given neighborhood is right for you.
Viewing homes online is a good way to see what types of homes are available in a neighborhood, but remember that online pictures can be deceiving. Save yourself and your agent a lot of time by driving past the property before you agree to see it together.


5. Find a real-estate agent
1. Find an experienced agent you trust.
2. Discuss market conditions.
3. Check out neighborhoods.
4. Discuss your timeline.
5. Discuss what type of property you want to buy.
6. Determine whether you can afford what you want in that neighborhood.
Home buyers still name agents as their greatest source of information during the home buying process. It’s important to find a motivated agent you can trust. Engage your agents with questions, ask them about current market conditions, let them know when and what you want to buy.  Also discuss what you’re willing to sacrifice in terms of amenities.
Finding the right agent could make all the difference in your home buying experience.


6. Research other professionals
1. Lawyers
2. Home inspectors
3. Insurers
Once you’ve chosen the right agent, your research isn’t over. Other professionals such as lawyers, insurance agents and home inspectors will be involved in your homebuying process, and you’ll need time to shop around to find ones who fit your needs. You won’t necessarily need to hire them just yet, but you’ll want to have a short list to work from once your transaction really gets rolling.


7. Organize your paperwork
1. Tax forms - You’ll need at least two years of tax returns.
2. Asset statements - Get copies of your most recent savings accounts, stocks, bonds and so on. Be prepared to provide updates to these documents closer to closing.
3. Income statements
4. Gift letters, if applicable
Now it’s time to get your paperwork organized. This may take some legwork on your part. Mortgage lenders are going to require that you prove your income and your assets. That means showing them income statements, at least two years’ worth of tax returns and statements from your savings account(s) and any investments you might have.
If you’re receiving money from a family member or friend — for example, a down payment — you’ll be required to provide a letter from the person giving the gift stating that the recipient has no legal obligation to pay it back.


8. Mortgage-lender research and preapproval
1. Which lenders are in your area?
Start by researching local lenders, then expand the search if necessary.
2. Preapproval
This is where you will bring in your documentation. You cannot get an appraisal until you have executed a sales contract on a property. A preapproval will allow you to shop and negotiate with a seller because you can show that you can obtain financing and are a serious bidder. This is not a loan guarantee.

9. Contracts
1. Sale contract
Reaching a sale contract may involve offers and counteroffers until you and the seller reach an agreement on the sale price and contingencies.
2. Mortgage-related paperwork
This is where that research into the other professionals comes into play.

• Lawyer to help go over the sales contract (someone to represent your best interests)
• Home inspector

10. Logistics of moving
1. Review your lease and give proper notice to your landlord.
2. Review your utility service. Do you need a new provider? Do you need to transfer or terminate your service?
3. Will you move yourself or hire a professional? Professional movers recommend one week per room if you’re moving yourself.
4. Research moving (and possibly storage) costs.
As if the entire mortgage-approval process isn’t stressful enough, you also need to worry about the logistics of moving. You should contact your utility service providers to determine if you’ll need to transfer or terminate your service.
For the move, you may want to hire a professional. You should also research storage costs if you can’t move all of your items at once.

11. Moving day preparation
1. Pack.
2. Prepare for your arrival in your new place.
3. What’s your closing date?
4. Can you move right in or will there be a delay between moving out and moving in?
5. There may be no lights, heat, phone or cable when you move in.
It’s time to get packing. However, at this stage, packing won’t be your only concern: You’ll be given your closing date when you’ll sign the final paperwork. You should also schedule your final walk-through of the house before you sign the papers.
If you’re moving on closing day, be sure you’ve arranged for your utilities to be ready.


12. Contingency plan
1. Don’t leave yourself without any options.
2. Don’t leave yourself financially strapped if things don’t go according to plan.
What if things don’t go according to plan?  What if, for some reason, you can’t move in as planned — do you have money set aside or living arrangements and storage for all your things?
The homebuying process is hardly smooth sailing. However, if you follow this timeline and make sure you’re organized, you can avoid any squalls that could wind up costing you money, or even your home.