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BUYING YOUR
DREAM HOME
Tammy loves to help future home owners turn a plan into action, creating tangible fruit of all your hard work.
So You’re Looking to Buy a Home
Don’t rush into this! Buying a home is one of the most important decisions you will make in your life. Not only is a home a huge financial obligation, it is also the place where you will spend the majority of your time and maybe even raise a family. For these reasons, you want to be sure that you find the right home for you – financially and subjectively. Before you begin the journey to buying your dream home, take the time to familiarize yourself with the home buying process as well as financing options to ensure that you find the right fit for you.
8 Steps to Navigating the Home Buying Process
Decide How Much You Can Reasonably Spend on a Home: Before you start prowling around the internet looking at homes, be smart and decide how much you can afford to spend on a home. Determining a price range before you start shopping will help you stay within your budget and avoid getting your heart set on a house that’s outside of your means. Take these into consideration when determining a budget for your home:
- Credit Score: Generally, the higher your credit score is, the lower the interest rate on your home loan will be. By the same token, if your credit score is on the lower end of the spectrum (we’ve all been there before), expect to be paying higher interest rates on your home loan. If your credit score is significantly low, you may want to consider buying a cheaper home so that you’ll be able to afford the higher interest rate.
Income: Consider any and all income that you have. Do you have a job with opportunity for promotion? How much do you make yearly? Does your employer give you a housing allowance? As a rule of thumb, many experts recommend buying a home that is no more than 2 to 3 times your annual income. And obviously, you’ll need a steady and reliable source of income in the future to ensure that you’ll be able to keep up on mortgage payments.
How Much is Your Mortgage Broker Willing to Lend You: You should get pre-approved, or ‘qualified’ for a mortgage before looking for a home. You’ll need to provide basic financial information such as your credit score, income, etc. to your trusted lender. They will then determine how much he/she is willing to lend you for your home. This number will keep you within the price range you should safely be shopping in.
Down Payment: You’ll need to pay a certain amount of the price of your home up front, known as a down payment. A down payment of at least 20% of your buying price will help you to avoid buying private mortgage insurance. Typically, the bigger your down payment, the lower the interest rate on your home loan will be. This is because if you pay more money up front, you’re considered a less risky borrower. Making a smaller down payment will allow you to get into your home quickly, but could cost you more overall in the long run (that’s a bummer, I know).
Other Expenses: Don’t be caught off guard by other expenses associated with buying and owning a home – there’s more to it than just the mortgage and down payments. You’ll need to set aside money for closing costs, maintenance expenses, and other unexpected expenditures… ever notice the fridge goes out when it’s least convenient?
Find a Real Estate Agent: Real estate agents are experts in the home buying process. They are very knowledgeable about the homes for sale in your area and can help connect you with a home in your price range that meets your standards. A good real estate agent will ease your nerves as they walk you through the buying process, answer your questions, and help negotiate the purchase of your dream home at the right price. Although you can buy a house without a real estate agent, the expertise is incredibly helpful, especially if you’re an inexperienced buyer.
Begin Shopping: This must be the most obvious step! But now that you know your price range and have found a trusted agent, you can begin searching for your perfect home. Make a list of things you need and want in your future home. Ask yourself questions such as: Do I have, or want a pet? Will that pet need a large yard space? Fences? Of course. Will I be entertaining guests and if so, how much space will I need for that? Do I have, or am I planning to have children? What size and style of house will accommodate them? Is the home located close to work, schools, or other important locations? Also take into account personal tastes such as new construction over older homes with more character.
Make an Offer: Once you’ve found your dream home it’s time to make an offer. Most people are nervous about this step, but it’s often easy to negotiate for less than the listing price if a seller sees that a qualified buyer is serious about buying the home. After you make an offer the homeowner will either decline, counter, or accept your offer. If the offer is accepted you will then arrange a closing date.
Get the Home Inspected: Just because an offer is accepted doesn’t necessarily mean the deal is sealed. Once an offer is accepted you’ll need to have the home inspected to make sure there are no underlying problems with the home that may need fixed before you are willing to close on the home. If you close on your home and move in only to find that there are serious issues with the house, those issues could be costly and time consuming… not to mention, a major buzzkill. If the inspector finds problems with the home, you can ask the seller to fix them or try to negotiate a lower price so that you can afford to fix them yourself. If the seller is unwilling to fix issues with the home, the offer may fall through… and sometimes it’s for your own good.
Get an Appraisal: One of the final steps is to get an appraisal on the home. This should be done by a third party appraiser. The appraisal will tell you if you are paying a fair price for the home or not. If it is determined that the house is overpriced you may want to reconsider your decision.
Select a Loan: You should talk to several trusted mortgage brokers to find the best loan options. Get more information about 4 different loan options here on the Financing page. You will need to determine whether you want to make smaller payments over a longer period of time, or bigger payments to pay your house off quicker. Be sure to compare interest rates associated with each loan to determine how much money you’ll be paying for your home overall. Remember that loans with higher interest rates may allow you to make smaller payments, but you’ll be paying more for your home in the long run.
Close the Sale: Get excited! On your closing date, we will sit down together to fill out some paperwork and – most importantly – sign on the dotted line! Take into account that there is usually some extra costs associated with this process so you can plan for them ahead of time.
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