CONGRATULATIONS - You are buying a new home!
You have decided that it's time to buy a new home. Now what?
Read the following advice on what NOT TO DO and what TO DO prior to purchasing your new home and CONTACT US for more information.
What NOT TO DO Prior to Purchasing a Home:
1) Make no major purchases. Prior to making any large purchase ask yourself, is this something that may create debt? This includes furniture, appliances, electronic equipment, jewelry, vacations, weddings, and using any major credit card to finance these purchases.
2) Don’t move money around. When a lender reviews your loan package for approval, one of the things they are concerned about is the source of funds for your down payment and closing costs. Most likely, you will be asked to provide statements for the last two or three months on any of your liquid assets. This includes checking accounts, savings accounts, money market funds, certificates of deposit, stock statements, mutual funds, and even your company 401K and retirement accounts.
If you have been moving money between accounts during that time, there may be large deposits and withdrawals in some of them.
The mortgage underwriter will probably require a complete paper trail of all the withdrawals and deposits. You may be required to produce cancelled checks, deposit receipts, and other seemingly inconsequential data, which could get quite tedious. Moving your money around, even if you are consolidating your funds to make it "easier," could make it more difficult for the lender to properly document.
What TO DO Prior to Purchasing a Home:
1. Contact a reputable lender or loan officer to determine how much house you can afford to buy? He/she will examine your debt/income ratio to assess your monthly mortgage payment and work backwards to determine how much you can afford to spend on a house. You may also check out our mortgage calculator to get an idea of monthly payments based on house value.
Down Payment: Putting more down often affords you a better interest rate and lower monthly bill. However, if you aren’t planning to retire soon and can afford a little more out of pocket every month, put as little down as possible and increase your tax write off. (Consult your financial planner for advice on tax savings).
· Don’t forget closing/settlement costs. The down payment is not the only out of pocket expense you can expect when buying a house. Don’t forget the closing costs associated with settlement. These fees include, but are not limited to, the following:
a. Realtor fees (Obsidian Realty waives this fee)
b. Loan origination fees and points
c. Appraisal fees
d. Recordation and transfer taxes
e. Attorney fees
f. Abstract fees
Make sure to review the lender’s Good Faith Estimate and ASK QUESTIONS if you don’t understand a fee. Don’t wait until you get to the settlement table to ask questions or dispute a charge. Consult your realtor for help if you are confused in any way.
2. Interview a Realtor. The right Realtor is your most valued resource in the transaction. He or she is responsible for communicating with the selling agent, guiding you through and advising on negotiation points, is involved as much or as little as you need them to be. Be sure to be as upfront about your expectations to avoid future grey areas about service levels. If you don’t feel comfortable with your agent from the start, most likely he/she is not the one for you. (Even if your Aunt Ethel thinks she is the best Realtor, that doesn’t mean she is right for you.)
3. Decide on a neighborhood that is right for you. A realtor can answer specific question about schools, associations, and can make suggestions but can not steer you into a specific area.
4. Review houses that match your search criteria and ask your agent to set up appointments to visit all properties that you are interested in.
5. Decide on your dream property. Before you make an offer, discuss the following with your agent.
a. Look at recent sales of similar properties to come up with a price range.
b. Analyze additional data, such as the condition of the home, improvements made to the property, current market conditions, and the circumstances of the seller. This will help you settle on a price you think would be fair to pay for the home.
c. Depending on your negotiating style, you adjust your "fair" price and come up with what you want to put in your offer.
6. Review and sign contract. Do not under estimate the importance of reviewing the contract in detail with your agent. There are many options when presenting an offer that must be considered, as well as several standard and optional contingencies that may be considered to make your offer more attractive. If your agent doesn't present your options, make sure to ask!
7. Participate in your home inspection. Most, if not all, residential contracts include a home inspection. Agents are required to review "For your protection get a home inspection", a document that explains the importance of including this contingency with your offer. If you elect to have a home inspection it is recommended that you attend and tour the house with the inspector. This is your opportunity to learn the history of your new home and expose any latent defects that are not always visible to the naked eye.
8. Apply for your loan.
9. Home appraisal.
10. Loan committment letter.
11. Prepare for settlement. Don’t forget your driver’s license and cashier's check. Your agent should receive a copy of your HUD-1 settlement paper which indicates your cash to close (down payment + closing cost). This is your opportunity to make sure all settlement charges are correct.
12. Move in!