Buying a home can be one of your most significant investments in life. Not only are you choosing your dwelling place and the place in which you will bring up your family, you are most likely investing a large portion of your assets into this venture. The more prepared you are at the start, the less overwhelming and chaotic the buying process will be. The goal of this page is to provide you with detailed information to assist you in making an intelligent and informed decision.
At The Zakaria Group, we’ll sit with you to learn more about your home search and gather all the details so we can recommend and direct you to properties that meet your criteria. More importantly, we will scrub our off market listings and give you access to properties that are not yet listed.Remember, if you have any questions about the process, we’re only a phone call, email away or click away!
Here are 12 tips for buying your first house:
Find the right team. The difference between deals that close and deals that don’t are the professionals involved. You want to make sure you find a real estate agent who will move quickly when a new listing goes on the market, as well as an agent who will advise you honestly on preparing your offer. You also want a mortgage professional lined up before you start looking. The lender is the most important person to closing on time!
Get your finances in order first. Some real estate agents won’t even show homes to prospective clients who don’t have a mortgage preapproval. You definitely should meet with a mortgage broker or banker (better yet, several) at the start of the process to find out how much house you can afford and how much cash you’ll need to close. Do all the math. Just because a bank says you can borrow $200,000 doesn’t mean you should. If you have credit issues, realize that this part of the process could take several months.
Calculate each and every cost. The purchase price and the mortgage payment are just the beginning. Don’t forget homeowner or condo fees, homeowner’s insurance and real estate taxes. Plus, you’ll need to budget for utilities, repairs and maintenance.
Don’t spend all your cash. Avoid emptying your bank account for your down payment and closing costs. There will always be unexpected repairs. Plus, it costs money to move, change locks, put down utility deposits and buy things you never needed before, like a lawn mower.
When you look at houses, focus on the right things. Don’t be distracted by the owner’s odd décor, paint colors, dirty carpet or anything that is easy to change. Granite countertops and stainless steel appliances are easy to add later. You can’t easily add another bedroom, a better location or a more functional floor plan.
If you’re buying in a condo or homeowners association, know the rules. How your association is run can make a big difference in how much you enjoy life in a development. You’ll want to know about all rules and restrictions, from pet ownership to who can use the pool. Condo buyers also want to investigate the association’s finances because a poorly run association can mean big assessments later.
Consider which contingencies you’re willing to waive. In the ideal scenario, a purchase offer is contingent on a satisfactory home inspection, approval of your mortgage and an appraisal that equals the purchase price. In most parts of the country, a buyer is smart to keep all those contingencies in the contract. But in a competitive market, you may be competing against buyers who have agreed to waive contingencies. You never want to [agree to waive them] unless you’re sure its 99 percent safe to do it. Your real estate professional should guide you on when to remove contingencies.
Be ready to move quickly once you find the home you want. Good homes that are well-priced nearly always sell quickly. It’s OK to take some time to think before you make an offer, but you might not want to wait a few weeks. Your agent can provide invaluable advice here.
Know what’s important to you. No house will be perfect, so where are you willing to compromise? If you want a specific school district, are you willing to accept a smaller house? If you want to be near the water, could you be happy with a condo? Are you willing to accept a longer commute to get a larger house?
As you start shopping for a home loan, your first question to each lender will probably be “What’s your interest rate? How much are you charging?”
Here are 12 things to know before getting your first mortgage:
Meet with a mortgage officer before looking at homes. This will help you determine whether you have credit problems that need to be solved first. It will also let you know how much house you can afford before you begin your search.
Pay off as much debt as you can first. This will help keep what’s known as your debt-to-income ratio down. Lenders look at your income and all your debts – student loans, car payments, credit card debt – to determine how much you can afford to borrow. If your total debt, with the new house payment, would be more than 43 percent of your income, you’re unlikely to get the loan. Some lenders may want a lower ratio.
Develop good credit habits way before you plan to buy. Missing payments on student loans or habitually paying your bills late will lower your credit score and make borrowing for a home impossible or more expensive. Once a bill goes into collections, it can take months or years to recover from the damage.
Consider consolidating or refinancing student loans. If you can’t pay off student loansbefore you buy a home, investigate whether you can lower your payments. You’ll have to decide whether it makes sense to stretch student loan payments over more years to buy a home sooner.
Show a solid work history. If you’ve just finished graduate school in engineering and gotten your first engineering job, a lender may not care that you don’t have two years of work history. But if you’ve just left graduate school and gone to work at Starbucks, you’ll have a hard time getting a mortgage until you’ve had that job for two years. That goes for part-time jobs, too. However, taking a part-time job on the side and using the money to pay down debt or add to your cash reserves may be helpful even if the lender isn’t willing to consider that income.
Be prepared to document everything. You’ll need tax returns, bank statements, brokerage statements and documents to verify the source of any money you plan to use. The lender will also verify your employment and income, once at the beginning of the process and again a day or two before closing.
Don’t buy anything on credit or apply for any credit while your loan is pending. You may be tempted to buy new furniture for your new home and put it on a credit card. Or, perhaps you realize you’ll have enough cash left for a down payment on a new car. “Once we start this process, don’t spend a dime that you don’t have, don’t put anything on credit cards, don’t apply for any credit,” Fleming warns. Otherwise, you may jeopardize the deal.
Talk to several lenders or mortgage brokers. Not all lenders offer the same loans, so it makes sense to shop around. Be careful that you’re comparing apples to apples. All lenders let you choose whether you’d like to pay more upfront, in the form of “points,” to get a lower interest rate. If a lender offers you a “no closing costs” loan, find out where you’re being charged extra to compensate for that.
Shop for closing agents. The actual closing costs, such as document preparation, legal fees and title insurance, vary considerably. In a state where those costs are high, you can save several thousand dollars on the transaction by choosing a different closing agent. Ask both your real estate agent and mortgage officer for recommendations, as well as friends and family.
Make sure you have enough cash to cover all your costs. In addition to closing costs charged by the lender and the closing agent, you’ll need to pay for a home inspection, an appraisal, a survey and city, county or state transfer taxes. Not only that, most lenders ask for at least a year’s worth of homeowner’s insurance and property taxes upfront.
If you’re self-employed, prepare to jump through more hoops. People who own small businesses often can’t qualify for a mortgage until they’ve been in business two years, though exceptions are likely for professionals, such as doctors, who leave a staff position and become self-employed in the same field. Most self-employed professionals write off enough expenses on their taxes to make their adjusted gross income much lower than their actual income. The lender will consider that lower number your income.
The house may also have to qualify. If you’re getting an FHA mortgage, the house has to meet certain standards. Lenders may also set standards for home conditions for conventional mortgages. Plus, the house has to be insurable.
Inspections are designed to help you understand the overall condition of a property, potentially saving you considerable time with the purchase process and hundreds or thousands of dollars in repairs. Some of the inspections which may be required or recommended by your real estate professional are:
Standard Home Inspection – The areas which may be covered include lot and grounds, roofs, exterior surfaces, garage/carport, structure, attic, basement, crawl space, electrical, heating and air conditioning systems, plumbing, fireplace/wood burning devices, and appliance condition. Remember that your inspection rights are clearly stated in the Contract For Sale and vary from jurisdiction to jurisdiction. In some cases, homes can be sold “as-is” even though an inspection may take place.
Radon Inspection – Radon levels are detected and measured. The Environmental Protection Agency (EPA) estimates that between 15,000 – 22,000 deaths per year result from radon exposure, therefore they recommend that all homes be tested for radon. EPA recommends that homes containing 4.0 or more Pico Curies per liter be remedied.
Termite Inspection – A termite inspector will inspect the property for the presence of wood-destroying insects (WDI) or wood destroying organisms (WDO, i.e. fungus) and conducive conditions that exist. Inspection requirements vary by state.
Asbestos Inspection – Lab analysis will determine if asbestos fibers are present and evaluate their condition. If friable or non-friable conditions exist, buyers should seek professional assistance.
Composition Board Siding – The condition of the siding and any areas of high moisture are evaluated during this inspection. Typically, composition board siding is a paper-based product that is manufactured to replicate traditional wood siding at a fraction of the cost. Homeowners recently brought class action lawsuits against some of the larger manufacturers of this type of product. The homeowners claimed that the siding was susceptible to water penetration, which caused premature deterioration and rotting. According to the Environmental Protection Agency, some of the most commonly known manufacturers of composition board siding are Louisiana Pacific (LP), Georgia Pacific (GP), Masonite, and Weyerhaeuser.
Lead Paint Inspection – Painted surfaces of a home can be evaluated to determine the presence of lead paint. Homes that were constructed before 1978 may contain lead-based paint. Lead exposure can be harmful to young children and babies. Children with lead in their bodies can suffer from damage to the brain and nervous system, behavior and learning problems, slowed growth, hearing problems, and headaches.
Pool/Hot Tub Inspection – Determines the overall condition and operability of a pool and/or hot tub’s equipment. Additionally, the condition of the pool deck will be inspected for deterioration and/or other noticeable defects.
Stucco Siding Inspection – There are two types of stucco siding to be aware of: cement-based “traditional” stucco and synthetic stucco. An inspection of the siding’s application according to manufacturer’s installation specifications is recommended. Synthetic stucco siding is commonly referred to as Exterior Insulated Finish System (EIFS).
- In considering a home with stucco exterior, we recommend an inspection be conducted to determine the condition of the siding.
- Synthetic stucco is predominately found in the Southeast but it is present in homes in other areas of the country as well.
- Hidden structural damage has been documented in synthetic stucco homes in 34 states.
- Moisture readings are taken to determine if the system has already experienced water intrusion.