10 Simple Steps to Home Ownership
10 Simple Steps to Home Ownership
Step 1: Start Your Research Early
As soon as you can, start reading Web sites, newspapers, and magazines that have real estate listings. Make a note of particular homes you are interested in and see how long they stay on the market. Also, note any changes in asking prices. This will give you a sense of the housing trends in specific areas.
Step 2: Determine How Much House You Can Afford
Some lenders may recommend you look for homes that cost no more than 3-5 times your annual household income if you plan to make a 20% down payment and have a moderate amount of other debt. Other lenders may be more conservative with their recommendations. Lenders may qualify you for up to 55% of your disposable income. However, some financial advisors advise people to budget approximately 25% of your monthly income for your house payment. Ultimately, you must decide how much you are willing to pay per month based on your own budget and financial situation.
Step 3: Get Prequalified and Preapproved for credit for Your Mortgage
Before you start looking for a home, you will need to know how much you can actually spend. The best way to do that is to get prequalified for a mortgage. To get prequalified, you just need to provide some financial information to your mortgage banker, such as your income and the amount of savings and investments you have. The lender will review this information and tell you how much they can lend you. This will tell you the price range of the homes you should be looking at. Later, you can get preapproved for credit, which involves providing your financial documents (W-2 statements, paycheck stubs, bank account statements, etc.) so your lender can verify your financial status and credit. Specifically, we recommend buyers get both prequalified pre-approved upfront. The lenders we recommend in the area are generally ranked as the best to do business with. We only recommend mortgage bankers that are able to close quickly and have top-notch customer service. We advise against utilizing large banking institutions because they are impersonal, difficult to speak to a human being, impossible to speak to the same person every time, have processes that are slow and bureaucratic, which causes delays and generally cannot close as fast as mortgage bankers can.
Step 4: Find the Right Real Estate Agent
Lets call this step complete – you found us. Real estate agents are one of the most important partners when you’re buying a home. Choosing the agent to work with can impact everything in the entire experience. Real estate agents can provide you with helpful information on homes and neighborhoods that isn’t easily accessible to the public. A great real estate agents knowledge of the home buying process, negotiating skills, and familiarity with the area you want to live in can be extremely valuable. And best of all, it doesn’t cost you anything to use an agent – they’re compensated from the commission paid by the seller of the house!
My wife and I are both Realtors and we work as partners so you get to real estate agents for the price of one. I am the nerdy, analytical, numbers, and problem solver and my wife, Sylvia, is the people person that is able to provide great personal conversation, makes people feel good and comfortable about all aspects of buying your home. She is also very knowledgeable and was born and raised in San Antonio so is familiar with many areas of the city. We work together with everything so we can provide a high level of customer care and satisfaction during the entire process. We also have much life experience which many first time home buyers seem to like to hear as things progress. So lets call this step done!
Step 5: Shop for Your Home and Make an Offer
Start touring homes in your price range. It might be helpful to take notes (using this helpful checklist) on all the homes you visit. You will see a lot of houses! It can be hard to remember everything about them, so you might want to take pictures or video to help you remember each home.
Make sure to check out the little details of each house. For example:
- Test the plumbing by running the shower to see how strong the water pressure is and how long it takes to get hot water
- Try the electrical system by turning switches on and off
- Open and close the windows and doors to see if they work properly
It’s also important to evaluate the neighborhood and make a note of things such as:
- Are the other homes on the block well maintained?
- How much traffic does the street get?
- Is there enough street parking for your family and visitors?
- Is it conveniently located near places of interest to you: schools, shopping centers, restaurants, parks, and public transportation?
Take as much time as you need to find the right home.
Step 6: Submit an Offer
Once you find the “ perfect house,” you will work with your real estate agent who will prepare an official offer using a contract. The agent will negotiate a fair offer based on the value of comparable homes in the same neighborhood. Once a final agreement is reached agreement is reached, the house will go into escrow, which is the period of time it takes to complete all of the remaining steps in the home buying process. An offer is submitted on a formal written contract, which you initial each page and sign. When an offer is submitted, two checks are collected from you: First, a check made out to the title company called Earnest Money which is typically 1% of the contract price. Second is a check made out to the owner’s name for the Option Fee which is typically $10/day for 7-10 days. We typically deliver both of these checks to the title company with a copy of the contract. A copy of the contract is also sent to your mortgage banker to begin loan processing.
Step 7: Home Inspection
Purchase offers are normally submitted contingent on what is called an “Option Period.” The Option Period allows you to back our of a contract for any reason without penalty. Typically, a home inspection is conducted during this period. Your real estate agent usually will help you arrange to have this inspection conducted within a few days of your offer being accepted by the seller. The home inspector checks for signs of structural damage or things that may need fixing. The major systems of concern during an inspection are structure, foundation, roof, HVAC, plumbing, and electrical. A really great inspector will always find numerous small items and includes these in the final inspection report. Both you and the seller will receive a report on the home inspector’s findings. You can then decide if you want to ask the seller to fix anything on the property before closing the sale. Before the sale closes, you and your Realtor will conduct a final walk-through of the house, which gives you the chance to confirm that any agreed-upon repairs are complete.
Step 8: Home Appraisal
Lenders will arrange for an appraiser to provide an independent estimate of the value of the house you are buying. The appraiser is a member of a third party company and is not directly associated with the lender. The appraisal will let all the parties involved know that you are paying a fair price for the home. Some lenders will require you to pay for the appraisal when it is conducted and collect your payment. Other lenders will have the appraiser invoice and be paid at the closing.
Step 9: Coordinate the Paperwork
As you can imagine, there is a lot of paperwork involved in buying a house. A title company handles all of the paperwork, ensures the seller is the rightful owner of the house you are buying, processes lender paperwork for buyer and seller signatures, and files paperwork with the county after closing. From the submission of the contract to closing, the lender or the title company may request signatures or other information from you. It is best to provide documents or answer these requests as promptly as possible to prevent any delays.
Step 10: The Closing!
Your real estate agent with coordinate between the lender, title company and you to set up a closing date and time. At closing, you will sign all of the paperwork required to complete your home purchase. This paperwork includes all your loan documents. In Texas, the seller and the buyer typically close at separate times at the the title company and never meet each other. Once you and the seIler have signed all respective documents, the sale is finalized. Technically, may not be allowed to receive keys to the home until the loan funds. Funding may occur the same day if both parties signed earlier in the day, but funding may not occur until the next business day. This means if closing is late on a Friday, the funding may not occur until Monday. Once funds are delivered to the seller, you are ready to move into your new home!
Step 11: Move In and Enjoy Your New Home!
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Another good reference article for further reading: http://www.hgtv.com/design/real-estate/23-things-every-first-time-homebuyer-should-know