As a first time homebuyer or someone who hasn’t purchased a home in quite some time, embarking on your search is exciting and fun but can also be fraught with anxiety when facing unknown or unfamiliar territory! Your best defense is to become an INFORMED BUYER; not only of what properties are on the market but also of the home-buying process itself. These seven guidelines will hopefully remove the trauma from buying your next home and help to make your search and ultimate transaction a smooth process.
1. Assess and Monitor Your Financial Situation As soon as you suspect you may be in the market for purchasing your next home, obtain your credit scores and determine any ‘weak links’ or discrepancies. If you’re renting, start collecting proof of rent submitted as many if not every lender or mortgage broker will request this information. Also, it’s important at least six months before you intend to file for a mortgage, to NOT make any large purchases, be that a car, motorcycle, furniture, etc. Any large purchases can affect your debt-to-income ratio which will jeopardize your ability to qualify for a mortgage. Speak to a mortgage broker to determine what products you may qualify for.
2. Obtain a Pre-Approval for a MortgageAfter you’ve watched your dollars and cents, the next thing you should establish is a budget based on your income. Once you’ve determined a price point, it’s imperative to speak to a mortgage broker to obtain a pre-approval letter. This primary step will save you hours of time and potential aggravation by simply verifying how much house you’re qualified to purchase. Why look at $800,000 homes when you can realistically afford a $600,000 home? A pre-approval letter is also ALWAYS included with the offer to purchase. Most listing agents will do their utmost to ensure that any potential buyer is qualified to purchase their client’s home, and no seller will consider your offer unless it’s accompanied by a pre-approval letter. It’s also important for you to know that obtaining a pre-approval letter will NOT affect your credit standing when solicited from a reputable mortgage lender.
3. Determine what you are looking for in a home
The search for the perfect home often begins without an exact idea of what you want, but it’s important to know what features are most important to you. I suggest you make a wish list, the “must haves” and the “nice to have” list. I’ve broken this down into 4 categories. Answering these questions can help you narrow down the search and remove that overwhelming feeling you may get with house hunting.
Location – The saying “LOCATION, LOCATION, LOCATION” resonates for its accuracy. There are two main things that need to be considered a) Community (i.e. school system, town center) and b) the commute to your place of employment.
Price Point – establish a realistic price point. We recommend starting with a range. For example, “We would love a house that is $425,000.00 but if we found a house that we love, we can go up to $599,000.00”•
Type of Home – Colonial, Contemporary, Cape Cod, Ranch, Fixer Upper
Features – Number of bedrooms, bathrooms, gourmet kitchen, garage size, lot size.
4. Choose the Right Realtor
Once you have made your wish list you need to choose a Realtor® that knows the area and is willing to do the “legwork” for you. Your Realtor® should provide you with a copy of a Consumer Information Statement and explain to you how the various relationships work. It’s always a good idea to ask for references for your Realtor®. You want to ensure you’re working with someone that not only knows the area but also understands and listens to your needs. You will probably want to see the home of choice at LEAST twice before making an offer. Some buyers feel more comfortable after showing a home to a trusted family member or friend. This is not unusual, so if another opinion puts you more at ease, go for it!
5. Make Your Offer!
Making an offer can be fraught with anxiety but your Realtor® should provide you with a Comparative Market Analysis of the home and confirm that your offer is in line with the current market value. Offers are made in writing and are always accompanied by a pre-approval letter, as mentioned previously, and an earnest money deposit (usually $1,000). Your deposit is kept in a non-interest bearing trust account of either your agent’s broker or your attorney. If you and the seller move forward to sign a contract, this amount will be applied towards your down payment. If a contract is not agreed upon, the deposit is returned to you.
6. Attorney Review
Once all parties have agreed on the price and terms of the contract, it will be submitted to each party’s attorney by the real estate agents involved. Once submitted, the attorneys have 3 business days to acknowledge receipt and respond. Although attorney review usually runs for three days, it may be concluded sooner or slightly thereafter. If you don’t have an attorney who specializes in real estate, your Realtor® should have inquired about this already and would have provided you with a list of real estate attorneys to contact. There are several items that will be listed in the contract and need to be competed in order to complete the contract. Closing Date – This is the intended date that the buyer will take title of their new home. Mortgage Contingency – The buyer undertakes to obtain a mortgage within a specified time. If unable to get the mortgage, the contract is then null and void. Inspections – Certain inspections are necessary and will be required by the mortgage company (well, septic and termite). Any findings from an inspection that concern you will be handled by the attorney via a written request to the seller’s attorney and repair costs, etc. can be negotiated between the buyer and seller. Further Deposit – Based on the size of the mortgage you have negotiated, the contract will specify the amount of down payment you’re submitting and the due date. Closing Costs – A conservative estimate of closing cost is approximately 3% of the purchase price, which is on the higher side but it’s better to have more monies in reserve for required costs than to be caught short!
7. Full Speed Ahead!
Once attorney review and inspection concerns are resolved, there are several other items that must be expedited prior to closing on your home. Your attorney will address a title search and survey. Your mortgage company will require you to obtain Home Owners insurance. You’ll have to open/transfer utilities, cable, water, sewer garbage, etc. Your Realtor® will be able to provide you will all the relevant contact information for these utility companies. Lastly, a final “walk through” on the house is performed, usually occurring the evening before or several hours before closing. If there are any potential issues found, contact your attorney so these can be addressed before closing. You’ll take possession of the keys, garage door openers, etc., at the closing. If you’re purchasing a condo, townhome or any property that requires a mailbox key, make sure that key is included as well!
Knowledge of the home buying process will go a long way to easing the anxiety of making your largest purchase! Enjoy the experience of owning your new home!
Hi, I’m “Antoinette” Scognamiglio (licensed as Maria) and I strive to meet the needs of buyers and sellers with a “no surprises” approach towards a closed transaction. Based in Morris County, I also cover Bergen, Passaic, Essex and Sussex Counties. I’ll “go the extra mile” to service my clients, take them through a successful transaction and help them to move on to the next phase of their lives. Please visit my website at http://www.AntoinettesHomes.net for more information and client testimonials.