12 Steps to Buying a New Home
1. Figure out how much you can actually afford
Most recommend that mortgage payments not go beyond 30% of your monthly gross income. You’ll need to determine if that’s feasible - truly - as you might have other recurring costs such as a child’s tuition or an extra curricular activity that requires funds. Financial and mortgage professionals can help you - and we know many professionals in these areas to advise you.
2. Determine how much savings you will need
You’ll potentially need up to 20% of the home value as a down payment. Other requirements for your cash reserves are closing costs as well as any immediate improvements that will need to be made to your new home. Other items might include furniture, decorating, new appliances and your first payments on services such as utilities and your Internet bill. Make sure you don’t empty the reserve in case of unforeseen costs and surprises.
3. Determine which mortgage is right for you
One of the first steps you should take in this process is to get pre-approved if at all possible. Doing this will put you in a stronger bargaining position because you will be negotiating from the knowledge of your budgetary threshold rather than extending beyond your budget. The big decision here is whether to go with an adjustable rate mortgage (ARM), or a fixed rate, both of which depend on how long you intend to stay in the property. A good mortgage lender can help you - and on this front, again, Cooperative Preferred Realty Group can refer you to many reputable mortgage lenders.
4. Run the numbers
Add up all the costs associated with a new home purchase - first in the purchase phase and then again in the post purchase phase. The post purchase phase would include costs such as your projected mortgage payment, property tax, insurance, and maintenance costs. If you see that you can handle the pre-purchase costs and the ongoing operating costs, you’re likely in a great position to own your own home.
5. Decide which type of home and features you are seeking
The other aspect of finding the right home is understanding what types of homes are available and the vitally important component of location. Is it OK to for you to buy a house that needs some repair as an offset to cost? Do you want a Colonial or a Ranch? Do you want a quiet street or is a busy street? Are you looking for a large backyard or small? Then you’ll need tackle some of the features inside the home that you’d prefer - large bedrooms, large kitchen, fireplace, etc. Of course, all of these wants and desires can only be realized if you have the budget to do so, so plan within reason.
6. Start house-hunting, and find a real estate agent
As everyone knows there are various Web sites that allow you to search for real estate in a particular zip code, style of home and price level. Zillow and Trulia, for example, are two of these sites. It’s OK to use these sites to see what types of homes are available that match your criteria, but they are often not very reliable. For example, home prices fluctuate and are determined by location, size of the home and the selling prices of other homes in the area. Zillow and Trulia are not always up to date and accurate. Therefore, enlisting an agent to help you will prove invaluable. Agents have access to many up-to-date databases, contacts and other community information that will surely make your search a much smoother process - and they can show you more properties that fit into your criteria than using several Web sites can provide. Also, armed with their knowledge, they will know how to work with you and the seller to find a happy medium on price. As you know, Cooperative Preferred Realty Group has highly knowledgeable agents who can help you every step of the way. Get in touch with our office today!
7. Put in an offer
Now that you have found the perfect home, it is time to put in an offer. This is where you can rely on your real estate agent to help you mediate between the seller's expectations and your budgetary requirements. Because you covered Step 5, you will be armed with the knowledge to support a realistic offer for a home of your chosen type and area. In most cases, each neighborhood is a marketplace of its own and your knowledge of that community will help you arrive at a successful outcome.
8. Review the Contract and submit your mortgage Application
Once you have your heart set on your prospective new home, you will need to review the contract terms for items such as repairs that need to be made by either the seller, or you, the buyer. If all looks as what was discussed, you can move to Step 9.
9. Home Inspection
Just to make sure that you are not in for any surprises, now is a good time to have the home inspected. Professional home inspectors charge anywhere from $200-$500. If he or she finds any issues, that may be a bargaining tool for you with the seller (unless the seller agrees to have the work done before closing).
10. Submit Your mortgage Information
Your agent has by now likely helped you identify a mortgage professional who is best suited for your needs. Your mortgage professional will help submit the mortgage application and get the process moving. If successful, you’ll then have to cover the closing costs, such as the attorney fees, title insurance and/or search and perhaps a portion of property taxes.
11. Acquire homeowner’s insurance
You will need to look into purchasing homeowners insurance. The lender that you choose will need the name of the insurer you have chosen and the policy number. Common home insurance covers fire, theft, storm damage and liability should someone get injured on your property and sue you. There are also many riders that can be added for things such as valuables and natural disasters.
12 . Sign the Papers
Yay! You’re signing the papers to close on your dream home - one of the biggest investments you will make in your life. You’ll be signing documents such as the HUD-1 settlement statement, which details all of the costs related to the home sale; the Final Truth-in-Lending Act statement, which outlines the cost of the loan and the interest rate; and your final mortgage paperwork. You will need your ID and any paperwork you had commissioned or received during the home buying process and proof of insurance.
Once you’ve signed the paperwork - you get the keys to your new castle!