Important steps in buying a home

Strengthen your credit. Understanding your credit and improving it if possible is one of the most important steps when starting your house hunt.  The higher your FICO score is,  the better your rates will be.  Be sure to do your homework and don’t skip this step.  It can save you thousands down the line.  You can get a free copy of your credit report here.  If possible resolve any credit disputes and pay off your cards prior to the search for a piece of the real estate pie.

• You will be expected to put down 10-20% of the appraised value of a home.
• Use lender ratios to determine if you qualify for a loan.  A common set of ratios are the “28% and 36% ratio
  • 28% of your gross income before taxes must cover housing expenses (mortgage payments including principal and interest, as well as insurance and real estate taxes.)
  • The amount you pay a month on outstanding debts (housing expense + misc other debt) can’t exceed 36% of your gross income.
• Calculate your expected housing expenses. Annual real estate taxes, insurance costs, and then add that to the average price you are looking to spend for a home.  Don’t forget closing costs.  Once you find your expected housing expense put them into a mortgage calculator.  You can use this figure to see if you are above 28% or below the 36%.  This will help you find out if you will qualify for a mortgage before you meet with a broker.

• If you qualify, check out first-time buyers’ programs,
• If you can’t afford a 10%-20% down payment on your home, but have good credit and steady income, a mortgage broker may assist you with a combination or FHA mortgage.

• Sign up for an MLS so you can search for house you like online.
• Find a good real estate agent. Don’t be afraid to ask questions, as well as ask for explanations.  A good agent should teach you along the way, as well as save you some money!
• Define the area you’d like to live in.
• Visit a few open houses.
• If you are unsure about the price, have the home appraised by a local appraiser.  Remember the old saying “location location location.”  It really does account for a lot.  Convenience, schools, neighborhood, resale value.  In my opinion location should be one of your priorities.  A good realtor will educate you about home prices and comparable.  and if you sign a buyer agency agreement they will represent you.  This can save you thousands during negotiations.

• Work with your realtor on making an educated offer.  They most likely have more experience when it comes to real estate negotiation, and you should utilize it.  The offer will include earnest money, which is basically a deposit that shows you are committed to buying the house.
• Once you come to an agreement you are under contract.  Depending on the terms of the contract you may have a due diligence period, which is a time period for you to conduct inspections, and check out your prospective property.  While in due diligence if you find something you don’t like you can still walk away from the deal

• It is important to use a real-estate lawyer to oversee the closing.  They know how to dot the i’s and cross the t’s. as well as what to look out for.  Its worth it in the long run.  Some lawyers are better then others as well.