Any way you look at it, the decision to buy a house is yours and yours alone. First make sure that it’s financially feasible. Can you pay the up-front costs of purchasing a house, as well as the ongoing monthly mortgage and other living expenses? What about home repairs like plumbing and replacing the roof? Visit our 5-minute learning module, Considering Home Ownership, to explore the benefits of home-ownership and the costs associated with a mortgage and owning a home.
Before you begin shopping for your home, you need to determine how much home you can afford. You can begin by organizing some basic documents. Collect all the information listed below in one spot, and you’ll be ready to move on to the next step.
In addition to loan closing costs, getting your nest egg together for a down payment is probably the biggest hurdle for many first-time home buyers. You may already be worth more than you realize.
When calculating your assets, be sure to consider ALL of the following sources:
Your bottom line just might be better than you think. Know your assets. It’s the first step in coming up with the amount of money you need to secure your interest in the home and the loan you want.
What if it doesn’t add up to the right amount? Don’t give up hope. There are ways to make it work:
There is a difference between getting pre-qualified and getting pre-approved. Getting pre-qualified is like getting an estimate from a lender detailing how much of a loan you can most likely afford. It serves more as a guide for what a lender might require rather than an official approval.
Getting pre-approved means that you’ll fill out a loan application and provide all your salary, asset and credit information documents. The lender then reviews and verifies these documents in order to issue you a home loan pre-approval.
When you find your dream home, you can present the seller with your pre-approved loan document, showing them that not only are you serious about buying their house, but you’ve already been pre-approved for financing.
Getting pre-approved could make the difference between getting the house you want or watching another bidder step in with a pre-approval letter and receive an accepted offer. Pre-approval is good for 120 days and depends on the appropriateness of the property you want to purchase. There may be some fees, such as for credit reports.
Where you live influences every aspect of your daily life. Take your time and think about schools, shopping, traffic, proximity to work, parks, coffee shops, restaurants, etc.
Here are some ideas as you begin your search:
Evaluate nearby schools:
Even if you don’t expect to have children, a neighborhood with great schools is generally more desirable and worth considering. If you already have or are planning to have children, then the quality of their education will determine the quality of their future. Call and visit the local school district. Conduct online research. Most school districts have websites, and they’re a great place to begin.
Here are some suggested questions to think about:
Consider local conveniences:
Learn the rules:
Your real estate agent can provide this information to you.
3. Crime rates. You want your family and your possessions to be safe, so be sure to check out the rate of personal and property crime in your area. Call the local police department and talk to the Public Information Officer.
4. Zoning. How is your new neighborhood zoned? Could you wake up one morning with an office building going up across the street? Ask your real estate agent or check with the local library for help in identifying any zoning issues.
5. Natural Hazards. Research natural hazards that may or may not be obvious. Is your neighborhood of choice:
To check out these hazards and more, you may want to pay for a report.
Think carefully about needs vs. wants:
Make a list of all the things you want in a home. Be as specific as possible. It will save you time in your search for a new home.
Consider some of the following things:
Your real estate agent can help you find the perfect home once you determine what is important to you.
You’ve found a house that you love. It has the perfect kitchen, or that backyard you’ve always wanted for the kids. But it’s not yours yet. First you have to make an offer, in writing, and submit it to the sellers. This is usually done through your real estate agent and is accompanied by your earnest money deposit, which is a pre-determined amount of money to show that your offer is sincere.
Follow the advice of your real estate agent or lawyer when deciding how to make your offer. Here are examples of some things your offer should include:
The seller usually has 24 to 48 hours to consider your offer or make a counter offer, which means that they want to sell you their house, but they want a change to the original terms of your offer.
It is always wise to review any inspection reports before making your offer. Most sellers provide these reports up front in order to assure any potential buyers until the home has been carefully examined by a qualified home inspector, who is trained to take a critical look at various aspects of the home, including:
These items can be very expensive to repair, and although you may still decide to make an offer, you might be able to negotiate a better price (or at least be prepared for the upcoming expense).
Once your offer is accepted, you will move into escrow to close the deal on your house. You will meet with a representative of the escrow company who is handling all of the final paperwork, and once the title is recorded, ownership will transfer to you.
Below are some of the typical fees that you (and the seller) will be responsible for paying at closing. Please note that buyer and seller fees vary by County, so you will want to consult with your Realtor.
Escrow accounts were originally established during the Great Depression of the 1930s, when Americans were unable to pay their property taxes because they were unemployed. It was hard enough at that time to come up with the money to pay for food and clothing, let alone a large property tax payment.
Lenders and the government worked together to help keep people in their homes by attaching an extra payment every month to their mortgage payment, so homeowners could save for the property taxes a little bit every month. Escrow accounts were set up to hold that money in reserve, until it was time to pay the taxes. Collections for property insurance were also added, so that all houses would be covered in the event of fire or other hazards.
Escrow accounts still exist today, and may be required by your lender, or you may choose to have one for your convenience.