You decided you want to Purchase a Home – So where do You START?
Many people still dream about owning their own home. Despite the recent happenings in the housing market in 2008 the majority of Americans still like to own a home. Home ownership is important plan in their lives. For a growing family it provides more space, a back yard, amenities or a pool in your own pool, and not to forget to have space for Fido to play securely.
Because of the recent housing market disaster owning a home may not be for everyone. Owning a home is more a long-term commitment now. So if you are not sure how long you plan to live in a home it may not be for you. People with a strong financial goal and savings should buy a home. I always tell my clients to have enough of a safety cushion if they lose a job or have an emergency.
Ask yourself a couple of questions before making a commitment for a mortgage:
- Can I afford to buy a house?
First figure out if you can afford it. Look at your income, spending habits, expenses, debts (car loans, credit cards, student loans), savings, and assets. In addition to the mortgage there will be utility bills, phone, cable etc. You need to have savings for emergencies in place. If you have an emergency expense you may not be able to pay the mortgage on time. That would present a big problem and you could lose your house and get foreclosed on. You have seen how many people lost their homes over the past years since 2008. You don’t want that to happen to you. In the end the bank/lender helps pre-qualify you and lets you know how much of a loan there are willing to approve for looking at your debt and income. That does not mean you have to buy a house as expensive as that, it means you can. You should stay in your comfort zone where you know you still can save for emergencies and retirement (and college for children if you have any).
- Ask yourself why you want to buy a home?
It puts your focus on what kind of house you want to buy, an investment to rent out or to live in. Some buyers look in the future to maybe have their elderly parents live with them. Are you getting married and want more space? Have a dog and want a yard? Home Office? What do you want to do with it and what are your long-term plans. This will help you decide what type of home you are looking for. Do you prefer a new home, a neighborhood, are good schools important, like more land? I get all kind of requests and I promise it is easier if you determine this first. This also answers questions on what loan you will need.
- What does it cost to get a loan?
When you hear the word closing cost that is the cost to obtain a loan. It is a buyer’s cost and there are fees you may not have heard about. I always ask what the current rent is and what the buyer is comfortable to pay in their mortgage. Then I explain that the mortgage payment consists not only of the principal and interest, added to that are 1 month taxes, 1 month home owners Insurance and Mortgage Insurance (PMI or MIP) if they do not have a 20% down payment or a qualify for a loan that does not have PMI. In addition to that can be HOA Home Owners Association dues.
Part of your closing cost are closing fees: Attorney, Loan Origination, Title Search, Title Insurance, Appraisal, Survey, Interim Interest, Escrow for Pre-Paids which are taxes and home owners insurance to be held in escrow with the lender because the following year they pay your property taxes and insurance. At closing you pay the 1st year Home Owners Insurance. Home Owners Insurance or Hazard Insurance does not cover natural disasters and you may need flood insurance or earth quake insurance. Inquire how you are protected and what is covered. Don’t assume anything. You want replacement cost coverage.
Other costs: Home Inspection and other needed inspections are paid for by the buyer after the contract has been accepted by all parties and is due at the time of inspections.
You will need a down payment. It depends on the type of loan you qualify for how much is the minimum. Utilities and maintenance of the home also needs to be considered. It all can up if you do not do your homework before you get started with the home purchase.
- Will I be able to qualify for a loan?
Your Realtor should have some lender contacts for you or check with the bank you bank with. You schedule an appointment with a bank or mortgage person and probably have to bring some papers with you. With your permission they pull your credit and see what is going on there and what your credit score is. In general 690 is required by lenders these days to get a loan approval. When you meet the lenders they will need your pay stubs, tax returns, employment verification, paystubs and more. They will check your credit score to determine if you qualify for a loan and for how much. Your financial history is important.
There are many different loans. FHA Loan requires a 3.5% Down Payment, Conventional Loans 5% minimum, VA Loans have no Down Payment as well as Rural Housing. If you can put 20 % down there will not be a Mortgage Insurance PMI or MIP. Other loans will require Mortgage Insurance. When all the mortgages went into foreclosures and defaulted that happened because buyers paid too little down or nothing down when they bought a house Back then there were the 80/20 loans where the 20% was a 2nd mortgage for the down payment to avoid PMI. If you have a 20% down also reduces your payment. Not many buyers have 20% down payment.
- Think of your future
One of the most expensive investment you are ever going to make in your entire life is investing in your home. When you buy a home consider what could change in your life. Where will you be in a few years from now? A possible job change, promotion which involves a transfer to another location, increase family size? Some buyers plan ahead and may upgrade to a larger home in the future. This is important for your Realtor to know to properly assist you. If you won’t stay 5 years in the home you may want to rent. Home prices are still in recovery, with that I mean that most of the markets have not seen increases in values or some are very slow going up. Most buyers include their closing cost into the sales price and it would be very difficult to sell the house again in less than 5 years recovering that and the selling expenses. Every Real Estate market is different.
7. Where do you want to live?
It is important that you think about what is important to you. Do you like to be near a gym, park, lake, pool, downtown, close to work or you don’t mind the commute. If you commute how much time is acceptable? Rush Hour traffic. Shopping, entertainment. Once you bought the house it is too late to give that some thought. Do you plan or have a family, if so schools may be important. Good safe neighborhoods. Depending how large the city is where you will buy depends on when to get started. If there are several desirable areas you want to drive through them at different times of the day and also talk to neighbors. See which one fits your needs the best.
8. How do you find the right Realtor?
It is important that you select a Realtor that has experience. You can see a Realtor has experience if you see professional designations behind their names. Only Realtors have letters behind their names: CRS Certified Residential Specialist, ABR Accredited Buyer Representative, CSP Certified New Home Sales Specialist are some more. Broker Associates have more years of experience and more knowledge. Not all Real Estate Sales Agents are Realtors.
Realtors are Members of the National Association of Realtors NAR A real estate agent is a REALTOR® when he or she is a member of the NATIONAL ASSOCIATION OF REALTORS®, The Voice for Real Estate® -- the world's largest professional association.
The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics.
Some people make the mistake to use a realtor or sales agent because they are a friend or a relative, not because they are familiar with the area. You really need someone who has the knowledge and the expertise and reputation
Rosemarie Averhoff, CRS
Broker Associate, e-PRO Certified Internet REALTOR
ABR Accredited Buyer Represenative
CRS Certified residential Specialist
CSP Certified New Homes Specialist
CSP – GRI – Certifed State Housing REALTOR
RE/MAX Metro Associates
7321 B St Andrews Rd.
Irmo SC 29063
(803) 629-8844 Cell Phone
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