Because a home is the single largest purchase or investment that most people will make in a lifetime, the home-buying process should be undertaken with care and precision.
First-time home buyers moving from rentals represent almost half of all home sales in leading urban housing markets. Aside from the various financial advantages that home ownership offers, such as tax deductibility and appreciation, the freedom to decorate and alter the space to suit your family's needs exists.
Repeat buyers generally are folks who are either moving up to meet the needs of a growing family or "empty-nesters" scaling back into more affordable space as they approach retirement. In either case, the steps to buying a home are, in most cases, the same. If properly followed, the home-buying process can be enjoyable, exciting and relatively painless.
Prior to getting involved in the buying process, there are two essential questions that must be answered by the home shopper needs and budget. Needs are things such as the number of bedrooms, bathrooms, amenities, lot size, community, neighborhood and schools, just to name a few. The budget is less complicated. That's the amount of money that you qualify for. This is sometimes quite different from the amount which you believe you can afford. Lenders have formulas that consider debt-to-income ratios, living expenses beyond the cost of the home and various other factors that are used to qualify for a property. Unfortunately, needs and budget aren't always in accord.
The industry term for determining the maximum home that you can get for your money is pre-qualifying. This involves baring your sole to a complete stranger so he or she can tell you that you either don't make enough money or are too much in debt to buy the home you want.
There's an alternative. It's what we suggest be the first step in the buying process. Obtain a copy of your credit report and do your best to have it cleaned up before getting into the thick of things. It will make the process easier to endure and prevent unpleasant surprises. You might need a credit reporting agency, lender or real estate professional to help you decipher the hieroglyphics that you're likely to encounter.
Speaking of real estate professionals, now would be the time to enlist the services of one. The real estate agent can be the best ally that you have in the buying process. Besides managing the transaction, he or she can help you determine how much home you can afford, and explain alternative financing methods. He should know the local market, be familiar with current real estate values, taxes, utility costs, municipal services and facilities, and might be aware of local zoning changes that could influence your decision to buy.
A real estate agent has resources available that will make the shopping process significantly less arduous. He can research your housing needs through a Multiple Listing Service. This can be especially helpful if you're relocating to another city. He should show you only homes suited to your needs. He can also suggest simple, imaginative changes that could make a home more suitable for you and improve its utility and value. And last, but certainly not least, the real estate agent can help you secure a loan by pre-qualifying. This requires information about finances, income, bank accounts, debts, etc. In most cases it can be done in an hour or less.
Because all real estate agents are not alike, it's important to shop around for one you feel is best qualified to represent you, and with whom you would feel most comfortable. Friends, neighbors and business acquaintances are excellent sources for referrals. Check out an agent's office, request references and look to see how many listings the firm has in the community. Once you've narrowed the prospects down to a couple or three, be sure to interview each before making the final decision.
Be patient. Don't expect to find your dream home overnight. It can take several weeks or longer to find the right property. Once you have located the home you've been looking for, your agent will submit your offer to the seller. In some parts of the country, or for large or unusual transactions, you might want to enlist the services of an attorney to assist with the transaction.
Once the price is agreed upon, you will need to complete a formal loan application, one of the least enjoyable aspects of the process.
It's always helpful, if not imperative, to know what you're getting yourself into. A home might look lovely at a glance, but a more thorough investigation could uncover structural problems, electrical, mechanical or plumbing deficiencies, termite damage or rotted wood and other expensive surprises. Hence, you'll want to be sure to have the home inspected by a qualified professional home inspector who will issue a written report on all aspects of the home's construction. The cost of an inspection ranges from $200 to $600 depending on the size of the home and the complexity of the report. It's money well spent.
Prior to closing, your real estate agent, attorney and or title company will check that the title on the property is clear and that there are no liens or encumbrances against the property. Closing on the house generally takes place about 30 days after agreeing upon the sale price.
And then, all that remains is moving into your dream house.
