Are you thinking about purchasing a home, but you don’t want to end up like Shelley Long and Tom Hanks in The Money Pit? If you don’t remember or have never seen this particular piece of celluloid, they star as a couple who buy what they think is their dream home, but as soon as they take possession, their dream home becomes a nightmare as it falls apart.
All you need to do to avoid this type of disaster is take action and do a little preparation.
To help you along, The Snyder Realty Group has prepared the following checklist to purchasing a home. If you take these steps to heart, they will ease your anxiety and make sure you do not feel overwhelmed.
1. Decide How Much You Can Afford
The best way to begin your home buying process is to come up with a budget. If you do so, you will know how much home you can afford and it will keep you from looking at properties that are out of your price range. The worst feeling in the world can be falling in love with a house only to find that it is out of your price range.
Decide upon a realistic budget and plan to stick to it. Getting pre-approved in the beginning of your search is a great way to help you identify your budget and it will help you set realistic goals. The Snyder Realty Group can help you with this step. See if we can get your pre-approval right now!
How do you determine how much home you can afford?
The first step is to identify your “debt to income ratio,” or DTI. This is going to be your “monthly expenses” versus your “monthly income.” The amount is going to include all the bills you pay divided by your gross income. It’s common for most mortgage lenders to require your DTI to be no higher than forty-three percent.
2. Save For A Down Payment
- A monthly mortgage payment is just a small portion of the larger whole to consider. Making a large down payment will save you money over the span of your loan.
- Making a down payment of twenty percent or more will make you exempt from needing “private mortgage insurance.” This is typical if your down payment is less than twenty percent and it is an added expense most homeowners would rather avoid. You should also realize that making a larger down payment will increase your “loan-to-value-ratio” and probably lower your interest rate.
- By making a larger initial payment against the principal, the less interest you will have to pay over the life of the loan and you will have smaller monthly payments.
3. Find A Real Estate Agent You Can Trust
Most home buyers find great value in working with a realtor like The Snyder Realty Group. We can help to scout out prospective homes, provide expert knowledge on the current market, and help guide you. We can assist with:
- Is the asking price fair and appropriate?
- What are the pros and cons of a particular house?
- Where are the up-and-coming neighborhoods? Best schools?
- Help through the pre-approval and mortgage process.
- Negotiations and bidding wars?
- Paperwork and direction through the closing process.
4. Choose The Right Lender And Get A Mortgage Pre-Approval
Before you begin the process of looking for your dream home, you should shop around for the best lender. Sure, this seems like putting the cart before the horse, but it’s imperative to find a lender and secure pre-approval. The seller wants to be confident that they are not wasting their time with a prospective buyer. Having pre-approval will set their minds at ease.
5. Find The Perfect Property To Call Home
If you have a realtor, such as one of the knowledgeable professionals at The Snyder Realty Group, you want to consult with them and give them the opportunity to offer advice. They might bring up a subject you might not have thought about, such as if the home you are looking at is in a good school district, if it’s in a flood zone, if it’s been on the market for a long time, etc.
Once you have seen a number of homes, your Real Estate Agent can assist you with narrowing down your results using an MLS or Multiple Listing Service. Just remember, the more data you have in your decision-making process, the less chance you have of making a huge mistake.
6. Make A Smart Offer On A Home
Once you’ve decided on the perfect house, you will want to make a realistic purchase offer. This is where your Real Estate Agent will deliver on expertise and experience. Make sure you consult with them on how much to offer. There is a vast amount of information to consider.
- How hot is the housing market at the time?
- Has the house you are making an offer on been on the market for a long time?
- Are there pending offers?
7. Hire A Real Estate Attorney
Yup. Someone else to employ in your search. But the Real Estate Attorney serves an incredibly important purpose. In some states, they are required. In other states, they are not mandated, but are still important. Real Estate Attorneys are specially equipped to provide answers to;
- Title questions.
- What is an easement?
- Need help with the purchase agreement.
- Title documents?
8. The Home Inspection
You need to make sure that the house you are interested in doesn’t have any surprises. You don’t want to be stuck in a Money Pit, so you want to check on the integrity and fitness of the house before making an offer.
By hiring a licensed inspector, you will be aware of minor or major issues which could affect your offer.
9. Prepare Yourself For The Closing
The inspection is over and there are no issues with the home. The next step to get ready for is the closing. This is when you want to make sure all your finances are in order and you’re prepared to pay all the costs due at closing.
Your lender will probably have an independent third-party do an appraisal of the property. If the appraiser comes back with a much lower price than what you agreed upon, you can ask the seller to adjust their price or assume some of the closing costs.
You will also want to shop around for homeowner’s insurance, as you will be called on to show proof of insurance at the time of closing.
There are a few things you will need to provide on the “big day.”
- Proof of Insurance
- Checks or a cashier’s check for closing costs
- Patience. Patience. Patience (there is a lot of paperwork to go through)
Finally, you get the keys to your new home, congratulations. It’s time to enjoy the comfort and ambience of your new home.
So, when you are ready to find your perfect dream house, get in touch with us at The Snyder Real Estate Group. We will be your best move.