How to buy a house?
Houston Mortgage
Buying a house can be an exciting and emotional process. Before you start your home search in earnest, though, you’ll want to understand the ins and outs of the homebuying process. This will help empower you to make decisions that are the best for your family — and your wallet.
Here are 13 critical steps to buying a house:
1. Understand why you want to buy a house
Purchasing a home is a major decision that shouldn’t be taken lightly. It’s important to define your personal and financial goals before proceeding. Think about factors such as whether you’re craving more stability, whether it makes sense financially and whether you’re prepared for the responsibility of maintaining a home.
2. Check your credit score
Checking your credit score will help you determine your financing options; lenders use it (among other factors) to set your loan pricing and see if you’re able to repay your mortgage. You can get your credit score from each of the three major credit reporting agencies — Equifax, Experian and TransUnion — for a nominal fee. Your bank or credit card company might have a program that gives you free access to your score or credit report, too.
3. Create a housing budget
Here comes the fun part: figuring out how much house you can afford. It’s not as simple as determining the purchase price. There are other expenses to consider as well.
A housing budget starts with understanding the maximum loan amount you qualify for. Next, you have to see what the monthly mortgage payment adds up to — and whether your budget can handle it. Lenders don’t take into account monthly bills such as day care, tuition, utilities, groceries and other financial obligations, so it’s up to you to crunch numbers and decide what monthly payment you can comfortably afford.
4. Save for a down payment
After setting a homebuying budget, you’ll need to save for a down payment, if you haven’t already started. To avoid private mortgage insurance, or PMI, you’ll need to put down at least 20 percent. Some lenders offer mortgages without PMI with lower down payments, but expect to pay a higher interest rate on the back end.
5. Shop for a mortgage
Getting preapproved for a mortgage is proof that a lender will loan you a certain amount for a home. It’s also helpful when you make an offer on a house, and it gives you a firmer handle on how much you can afford.
6. Hire a real estate agent
An experienced real estate agent can be the key to help you find your dream home and negotiate with the seller on your behalf. This person should be on your side, helping you make informed decisions and refer you to other professionals like home inspectors, contractors (if needed), appraisers and title companies. That said, you should still shop around and compare fees from other professionals, too.
7. See multiple homes
Once you meet with your real estate agent, you’ll likely be set up with a profile in the local Multiple Listing Service, which houses all listings for sale in a given area. Your agent can set you up on automatic searches for homes that meet your criteria. You can then let your real estate agent know what specific homes you want to see, or you can search online yourself. It’s also a good idea to drive through neighborhoods you want to live in to see what’s for sale, and attend open houses.
8. Make an offer
Once you find “the one,” it’s time to make an offer, which your agent can help with. A complete offer package should include your offer price, your preapproval letter, proof of funds for a down payment (this helps in competitive markets), a personal letter to the seller to help your offer stand out, and terms or contingencies.
Sellers might counteroffer on your price, terms or contingencies. From there, you can choose to respond to the counteroffer or reject it and move on.
Once an offer is accepted, you’ll need to sign a purchase agreement that includes the price of the home and estimated closing date. Then you’ll pay an earnest money deposit, which shows that you’re serious about purchasing the home. It’s typically about 1 percent to 2 percent of the total purchase price. The seller may have a right to keep the money if you back out of the contract.
However, there are cases where you can back out of a contract without penalties. That’s where contingency clauses come in and typically include appraisal, financing and home inspection and are designed to protect the buyer. For example, if a home inspection report shows major problems, you can back out of the contract and get your earnest money back.
9. Get a home inspection
A home inspection helps you get an overall picture of the property’s mechanical and structural issues. Depending on your contract and state of residence, you’ll need to complete a home inspection 10 to 14 days after you sign a purchase agreement.
Your real estate agent may have recommendations, but you should do your homework before choosing an inspector. To make sure the home inspector has enough experience, read online reviews, ask for past client references and look at their credentials.
Remember, an inspector doesn’t investigate all aspects of a home, so it’s helpful to look at a home inspection checklist to see what is and isn’t covered. As a buyer, you’re responsible for paying the home inspector, and while the fees can vary, you’ll pay an average of $300 to $450, according to Angie’s List.
10. Negotiate repairs, credits
Your home inspection report may reveal issues in the home — some major, some minor. The minor issues may be a sign that you’ll need to do repairs in the future, but major problems will likely need to be dealt with before a lender will finalize your loan.
Your agent can help you with negotiating any repairs — either the seller oversees the repairs, or you can ask for a cash-back credit at closing and handle them yourself. Some sellers may not agree to extensive repairs, and that’s why a home inspection contingency is a good idea to give you a way out of the purchase if the home is in less-than-ideal shape.
11. Secure your financing
At this point, you may need to submit additional paperwork as your lender completes the underwriting process. Documents might include bank statements, tax returns and additional proof of income, as well as a gift letter and written statements about any major deposits into your bank account.
12. Do a final walk-through
A final walk-through is an opportunity to view the property before it becomes yours. It’s a good idea to have your real estate agent there who can act as a witness and help answer any questions you may have. Come with your home inspection checklist and other documents, like repair invoices and receipts the owner conducted, to ensure everything was done as agreed upon and that the home is in move-in ready condition.
13. Close on your house
Once all contingencies have been met, you’re happy with the final walk-through and the closing agent has given the green light to close, it’s time to make it official and close on your home. Your lender will issue you a “clear to close” status on your loan.
Three business day before your closing date, the lender will provide you with a closing disclosure, a document that outlines all of your loan details, such as the monthly payment, loan type and term, interest rate, annual percentage rate, loan fees and how much money you must bring to closing. Review the closing disclosure carefully and compare it to the loan estimate to ensure closing fees and loan terms are the same. This is your final chance to ask questions about your loan and correct any errors (like your name or personal details) before you sign closing paperwork.
At the closing, you (the buyer) will attend, along with your real estate agent, possibly the seller’s agent, the seller, in some cases, and the closing agent. Depending on where you live, the closing agent may be a representative from the escrow or title company or a real estate attorney. This is also the time where you’ll wire your closing costs and down payment, depending on the escrow company’s procedures.
Once all of the paperwork has been signed, the home is officially yours and you’ll get those house keys. Congratulations! Now comes the fun part: moving in and making the house your home.
Source: bankrate
Financial Capital Group, LLC is a lender that provides home and commercial finance solutions for business, professionals, individuals and families since 1999. Our love and care for others is directed as much within our walls as it is outside of them. Our desire is to work together to meet the needs of our customers.
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