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A Home Buying Process: Pro Strategies For A Smooth Experience To Buy Your House
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SUMMARY
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A Home Buying Process: Pro Strategies for a smooth experience to buy Your house and spare many headaches.
Here are the pieces of the puzzle you’d better fit together: REALTOR® Hire, Get A Mortgage, Credit Application, Down Payment, Down Payment Assistance (DPA), Home Search, Price, Comps, Credible Offer, Closing Costs.
The purchase of your new home hangs on the balance!
A Home Buying Process: Pro Strategies To Buy Your House.
Following these ideas will smooth your home buying experience and spare many headaches.
Just in case you did not read my ‘About’ page, I am real estate broker, based in Atlanta, Georgia.
When I am working with a client one-on-one, things just naturally fall in place and we work the pieces of the puzzle organically.
The clients even do not need to think there is a “process” being implemented. 😉
I organize it in such way that it is easy to understand or, on a later date, you can retrace the process in case you come to think any part need any a revision.
It is not really hard and after you have a good overview of your home buying process, you also will be able to navigate and enjoy the ride.
Let’s begin with:
REALTOR Hire
I bring this first and center in the home buying process because – if you still did not hire one – it makes little sense not to do so.
A REALTOR® is an invaluable resource in your community that will work in your behalf; he/she will save you time and prevent countless headaches.
Real estate professionals are active on the community and can get you info which you mostly wouldn’t get on your own or would take you a lot of (unnecessary) time to do it.
It is not unlikely that you could change your car oil all by yourself ...of course I believe you can do either or both: Change the oil! And buy your home by yourself!
But that is going 'against the grain.' And I did not exactly mean ‘changing the oil! 😉
Real estate professionals are also – invariably - people with passion for what they do. They are hard workers to begin with, and they bring knowledge of the ins-and-outs of the real estate in your community. Intel accumulated by the years they’ve been working in your area.
All in all, my recommendation would be – do hire a REALTOR®! ”You have nothing to lose, except your blues”
Financing Side: Get A Mortgage. Period.
The next item in your home buying process agenda should be how to pay for your home.
Actually, this should be first ;-)
If you have enough cash to pay all up front: Congratulations!
However if this is to be your primary residence – and you pay all cash - you will miss out on your mortgage interest deduction (MID) which can a substantial deduction straight from your gross income throughout the years.
Even for a $1 million+ homebuyers I recommend some thinking: You can set that money aside and apply for a loan.
That way you would benefit from the mortgage interest deduction (MID) - one of the coolest things of being a homeowner.
In case you are in the majority of homebuyers and you will finance your new house, there are many kinds of loans such as FHA, VA, Conventional and ARM that you can apply for, depending on your situation.
Also, under the right circumstances, there are “Down Payment Assistance” (DPA) programs that you may qualify for. It is a matter of you searching and asking questions to the right people.
I have found that there are DPAs in all counties, in all 50 States and territories across the USA.
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Credit Application
This would be your next natural stop – and nothing would have prevented you for already have done so.
A home loan application deviates a lot from other credit application you might have done.
The reason is that it requires your homebuying process does require a much larger “size” of a loan and you are most likely go through a whole lot more scrutiny this time around.
…If you haven’t ever applied for credit, then what we may have is a little hiccup – because to attain a home loan, you do have to have a credit record and your mid credit scores(*) must be on the 620’s(**) or higher!
(*) FYI: There are three “major’ Credit Bureaus: Equifax, Transunion and Experian.
(**) Some lenders will go as low as 500 for a VA loan 😊
Your REALTOR® very likely will have some lenders that he/she trusts and can recommend and you also can look up on line.
However… Always use extra caution whenever given your personal info on line.
In no circumstances make an ’open’ application in those sites that promise to find the best rates for you...
They invariably sell your ‘application’ to multiple mortgage companies and they all ‘hit’ you credit records with multiple inquires bringing your FICO® score down!
Please let it be known that a reasonable number of 3 or 4, 5 inquiries for a mortgage is acceptable to the lenders, too many is NOT!
Even worse: They keep selling that info until late in the process when you are approaching closing date and they hit you once again!
It can derail your home purchase.
Choose locally within your home state and apply directly with the lender.
Also talk with your bank or credit union and see what kind of deal they might offer you.
Proof Of Fund Or Pre-Qualification Letter
If have all the money in the bank to pay for the house, great!
Then you just have to present three months’ statements from the financial institution where the funds reside.
However, if you will finance the home purchase, you need to ask the mortgage loan officer for a pre-qual letter, which demonstrates to the seller that you have done your homework and, under the terms stated on the pre-qual letter, you will be able to attain finance to consummate the deal.
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We are growing this site by-the-day: Come visit as often as you can!
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Meanwhile, feel free to send us a message, should you have a home buzz to share OR a "?" to ask! See you around!
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Home Dreamers:
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Price Within Your Buying Power
Establish a price range within you can buy! From the get go!
Wishful thinking will NOT work! House market price will not bend to your desires and sell for much less from the asking price.
Specially when the demand is higher than the inventory of houses for sale (a sellers’ market). House prices will NOT come down to accommodate you.
Yes, I have been brought up to believe in miracles, too!
Sorry to say, here! Your frustration level will greatly increase if you chose to search for houses above you “buying power.”
That house may attract multiple ‘suitors’ and end up selling for above asking price.
Believe it or not, countless buyers begin their home buying process with no clue of which price point they would be financially able to afford.
This is a very import “fact checking” that you need to do in the get go.
You can go for a month or two looking for houses just to discover they are out of your financial means.
Again, I almost always assume that you will be financing your home purchase.
If that’s your case, your mortgage loan officer will be able to determine your “buying power.”
It will be based in your income, assets and debt to credit ratio (DTI) and other financial facts.
Since the advent of the 2007/8 housing debacle, there are some government regulations that a mortgage lender will NOT cross the limit what they can finance to you… NOT another $1,000! NOT even $500!
If you have enough cash reserve and you can pay that ‘overage’ – (above of what you were approved for) - from your funds then it is okay to proceed.
Do check this situation with your mortgage loan officer, though!
Comps (Comparable Properties)
However, before you take the plunge, your home buying process has one more important stage to look at the ‘comparable homes.’ – the (the home comps)
Which are similar homes – in the same geographical are – preferably no farther than half a mile from your preferred house.
Stats of recent sales of houses in the area you are interested in buying can be attained on your own or by your agent.
Home comps does require some interpretation of each of the homes the facts to really to be able to ‘compare.”
So professional expertise – like a REALTOR® and/or an appraiser is really highly recommended.
If you buy a home, a professional appraisal will be required by the lender.
This is extremely important to justify the price you are offering – without the comps, you are blindfolded driving in the middle of the traffic: you may pay too much or you may lose the house you like, because your offer is too low.
By all means get the comps before you submit an offer.
Comps are like your home buying GPS. 😉
Credible Offer
When you find “the” one – and, provided your financial side is all squared away, you must move in with a credible offer as soon as possible.
Nowadays, no seller will look at your offer without a “proof of funds” or “pre approval letter” from a reputable lender.
There should be an earnest money of around 1% of the offered price but no less than $1,000 – unless, of course, the property price is really small.
Another very important point that makes your offer “credible” is how soon you propose to close the deal – 30 to 45 days is ideal. More than that will raise the seller’s eyebrows… In a multiple offer situation this is crucial for you to emerge victorious!
That is why, in my home buying process, I work with my buyers to make sure the financing part is dealt with first hand. It is always part of my first conversation with a new client.
If you heed me, you will be glad you did so!
Earnest Money
Along with your offer, you will also need give an initial ‘consideration’ to the seller. It’s called ‘earnest money.’
It demonstrates to the seller that you are serious about the purchase.
It is like the engagement ring, if you will.
It should be something no less than 1% of the home price; some sellers and lender may ask for a higher amount.
This amount is ‘your money’ and it will be counted in you side of the HUD-1 form which is the official closing document for all home and indeed all real estate transactions – large or small - all across the USA.
I prefer that the earnest amount to be kept in the hands of the closing attorney or escrow company
Down Payment
Most home mortgages loans do require the home buyer to come up with a percentage of the purchase price at the closing.
There are two types of government-sponsored loans that allow you to buy a home without a down payment:
VA Mortgage loans: Backed by the U.S. Department of Veterans Affairs. These loans are for current and veteran military service members and eligible surviving spouses.
USDA mortgage loans: Guaranteed by the U.S. Department of Agriculture.
Eligible borrowers for these two programs can buy a house with no money down but will still have to pay for closing costs
The percentage for the down payment will vary for the different programs.
It can as low as 3.5% for an FHA loan, all the way to 20% down for a ‘conventional loan.’ (You can always put additional money down, however, these are percentages ‘required’)
Down Payment Assistance (DPA)
& Home Grants
There are Down Payment Assistance (DPA) all throughout the USA.
They require a bit more work on those professionals who you are working with AND a bit more diligence on your part.
But if you qualify to one or more of the many categories you can buy a home and/ or income ratio, chances are that you will be able to receive some down payment assistance right there where you are!
There are programs for firefighters, first responders, teacher and school personal, medical community, there are ‘tax allocated district,’ disable persons, law enforcement personal to name a few …and simply good folks like you and me!
These down payment assistance programs are designed to help low-and-mid-income (LMI) folks – look for them within the county you want to live.
I have found down payment assistance programs (DPA) in ALL 50 states and the US territories! Seek and thy shall find!
Closing Costs
There are costs to generate real estate transaction and bring it to a successful closing.
Appropriately it is called ‘closing costs.’
There are many items that can be included: Loan origination fee, title insurance, escrow company / closing attorney’s fees, FHA upfront fees, property tax proration, courier to name a few.
There is nothing in the law – thus far – that determine who pays for it and – in most case – it is split between the parties... including the lender!
Or, even, a combo (combination) of any and all of the above.
In any case you need to be aware of the closing costs and budget for it.
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