A comprehensive look at purchasing a home. From first time home buying to someone super experienced, this guide will help you along the way!
Find a Real Estate Agent
You need someone in your court to answer all your questions, draft purchase paperwork and walk you through the whole process! Even if you’re not ready to buy for a while, an agent’s advice will be invaluable to get you started. Just like you wouldn’t rely on WebMD to diagnose your medical condition (hopefully!), the same logic applies to real estate. Go talk to a real estate professional and get the answers and roadmap you need.
Sure, you can look at Zillow, Realtor.com, or Trulia, but the little known fact about them is that their listing data is not always accurate, their statistics for home values is typically way off and it does not put you in a better position in searching for a home than someone else looking at the same house with an agent. You could be looking at a home that’s off market, getting googly eyes over it and it’s not even available anymore! If you connect with a real estate agent early, they can start you off on the right foot and create a great action plan for you for when you’re ready.
As a buyer, you pay nothing to hire a real estate agent. See? Even better.
Learn the different elements and terminology of real estate purchasing before you speak to a lender
It’s like going to work to present an idea or pitch and you don’t know the content you’re discussing. You’ll want to know what a lender is talking about before you can speak with them. Great lenders will help you with all of these, but let’s get you on the right foot so you’re super prepared and can ask next level questions versus “Umm, what is escrow?”.
- Down Payment
- Seasoned funds
- Mortgage Insurance
- Real Estate Taxes
- Homeowner’s Insurance
- Closing Costs
- Pre-approval letter
- Escrow aka Title
- Title Insurance
- Earnest Money
Talk to a Mortgage Lender
Now you’re ready! Your next step is to speak with a mortgage lender. Do this right after or even before speaking with your real estate agent and not when you have found a house to buy. You want to know what your credit looks like before you get started as there might be something on your report you weren’t aware of or maybe you weren’t quite as ready as you expected. Don’t let your perfect house go, because you hadn’t completed this step yet.
Who should I talk to?
Don’t assume the best place to get your loan is where you currently bank! There are many elements to buying a home that are more important than the convenience of having one login to see all your accounts. Reasons to consider other lenders:
- You want to trust your institution since they’ll pull your credit.
- You want to get the best deal, right? Getting a great deal in real terms means a lower monthly payment and better overall cost to buy a house.
- A big bank means more people, more paperwork, more… everything, at times. From experience, the larger institutions cause the most hiccups in the loan process while buying a house. You want a local lender that has a stake in the community, who cares about their reputation as it will affect their repeat business! If you have a great experience with a lender and one of your friends wants to know if who you used was good and helpful, your honest opinion will matter to them.
- I have some great recommendations for lenders that will do you right. Reach out if you want their information!
Alright, alright, I hear you. Now here are some questions to ask the lender:
- How much do you need for your down payment?
- What is a loan program and which one is right for me?
- What credit score do I need?
- Okay, I don’t qualify right now due to my credit score (you’ll get there!). How long will it take to rebuild my credit?
- Will I need mortgage insurance?
- Will my real estate taxes and homeowners insurance be included in my monthly payment plan or do I need to pay for it separately? (which would you prefer? Ask if them if it’s an option if you want your monthly payment lower)
- Do you need me to pay for the appraisal out of pocket while we are trying to purchase or can you wrap it up into my down payment?
- How early can you close? (30 days is great, but usually they say 45 days). Ask them straight-up if everything is order can they close in 30? Less risk with shorter closing periods and it’s super desirable to sellers to have quick closes as every month their property isn’t selling is another mortgage payment they have to make on a house they likely don’t need right then.
Takeaways from talking with your lender:
- Have your out of pocket expenses written down (appraisal cost, earnest money, down payment, inspections)
- Get a pre-approval letter (you’ll want this when you start house hunting!)
- What’s the loan program and set closing range (30 or 45 days)?
Take a look at your Finances and get things in Order
After speaking with a lender, you now have a better idea of what your personal situation looks like and what to expect.
- Save for your down payment per your conversation with the lender, if you have one at all.
- Now that you have the down payment amount or at least monies for your purchase expense (inspections, earnest money, etc), set the funds aside and do not alter your financial situation. Lenders will track all monies coming into your checking and savings accounts, and large unexplained sums or monies from unusual sources could cause difficulties. Ideally, you want the money in your account for two to three months, which is called “seasoning.”
- Do not change employers, if possible. Lenders want to see current employment typically for > 1 year, but you can sometimes get away with not having that in your background. They want to see stability.
- Do not make any large purchases on credit or by diluting your cash reserves. Learn what can go wrong in underwriting that could cause your loan to be rejected.
Find the perfect home
You’ve met with your real estate agent and you are SET with your finances. Time to start looking at homes!
- Know the areas you want to live and the approximate purchase price. Your real estate agent can set you up with a listing Search that will fit your criteria and automatically update your when new properties come on market.
- Do NOT use a third party service like Zillow or Homes .com. This information is not always accurate and can do you more harm than good.
- Do a drive by of a property you’re interested in. Is it a neighborhood that makes you feel safe? Does it have great ease of access to grocery stores and other amenities you’re looking for?
- Let your agent know you want to look at the property!
Make a purchase offer
That house you looked at is THE ONE! Tell your agent you want to offer on it and they’ll start drafting the paperwork for you. Your agent will discuss with you the sale price and what a fair offer would entail based on market research. Things to provide to your agent so they can draft the offer paperwork:
- Your loan program
- Your closing period (30 days, etc.)
- If you want the house, make an offer right away. Many properties have “highest and best by: date” clauses in the listings so you are on a timer to get that offer in. Your agent can look this up if you’re interested in offering.
- Multiple offer situations can and do happen. Listen to your agent’s advice as they have a plethora of experience getting offers accepted, to make you stand out.
More to come… if you’re interested in buying a home, contact me for help! You can also register on this website to get an idea of what properties are on market and get updates! (541) 632-3505 – firstname.lastname@example.org.