Buyer: Be Prepared To Buy

Buying a home is one of the most important personal and financial decisions you'll ever make. We want you to have this step-by-step guide to help you be prepared to buy your first home.


Knowledge Is Power ...

Accurate Information Is Essential Knowledge is power become an educated consumer because misinformation can get in your way. First, learn about the process and requirements for buying a home. Choosing Your Real Estate Professional Deciding to find and buy a home is one of the most important decisions of your life. It combines your personal hopes and dreams with wanting what's best for you and your family. It means making changes. That's why it's in your best interest to choose an experienced real estate agent who listens to and understands your needs, and works in the area where you want to live.


Reduce the Stress, Develop a Financial Plan

You can reduce the stress of home buying by thinking ahead. Before you find a home you want to purchase, develop a financial plan. This plan becomes your guide not only for saving money for the down payment, but also for covering other expenses such as your credit check, mortgage application and closing costs.


Establishing Credit

Having an established credit history plays an important role in the home buying process. It's never too soon to start building a good credit history. Start by diversifying how you pay for things; don't pay for everything with cash. Pay your bills on time, limit your debt, reduce the number of credit cards you have, and use them responsibly. Your goal is to show that you are financially responsible and a "good credit risk."


Closing and Other Additional Costs

After you find a home and receive mortgage approval, the closing is when ownership of your new home officially transfers from the seller to you. In some cases, sellers pay the closing costs. If not, you need to be prepared to pay this additional cost. This can add another two to five percent to the home purchase price. These costs also can vary from state to state.


Finding A Home …Your Search

Where do you start when you're ready to find a home? You'll want to have an idea of the features you "want" versus "need" in a home. Then the fun begins!


Making An Offer

When you find a home you want to buy, you'll make the seller an offer in writing. Your offer is typically the first step toward negotiating a sales contract. That's why determining how much to offer is more complex than simply determining a price. Because of the large amount of money involved, both the buyer and the seller need to protect their investments and limit their risk. This is why when you make an offer, you not only specify the price you are willing to pay, but also the other details of the purchase.


Contingencies

Contingencies generally allow you to anticipate potential problems so if something goes wrong, you can cancel the contract without penalty. If you cancel a contract without having agreed upon conditions and contingencies, you could find yourself forfeiting your good faith deposit and money spent to inspect the property, as well as other damages. For this reason, it's recommended you retain an attorney. Your attorney will advise you about what to include in your offer to protect yourself.


Your Good Faith Deposit

Along with your offer, you'll provide a "good faith" deposit that demonstrates to the seller your serious interest in buying. This is one of the additional costs mentioned earlier. This money is deposited only once the offer has been negotiated and accepted by both parties.


The Home Inspection

After you find a home and make an offer, a house inspection is often ordered. The seller should have the property available for inspection by a professional. In a typical inspection, experts examine the existing conditions of the property. Inspections may be required by law with the elements inspected varying by region, state, and/or your agreement. The most common type is the General Home Inspection. A home inspector can provide you with a complete service that covers from the basement to the attic, as well as the exterior of the home, walls, chimneys, and fixed appliances such as refrigerators and stoves. Other specific elements that can be included: (not a complete list)

· Termite · Plumbing · Water Quality · Lead
· Radon · Septic Tank · Asbestos · Electricity


The Final Walk

Though Before the closing and property ownership is transferred, you will want to visit your future house. This "walk-through" is an opportunity to ensure that the house has been left in the expected condition. You should make sure that all the items the owner agreed to leave are still there, such as kitchen appliances. This may also include furniture and accessories listed in the final sales contract. If there are problems, discuss them with your agent and attorney. In some cases, you can ask for a discount or credit at the closing to cover missing items or last-minute damages to the property.


The Closing

To be knowledgeable and prepared, ask your agents and attorney to go over the details of the closing with you beforehand. The closing process can vary by area of the country and even within the same state. Generally, the seller is required to provide clean title to the property at closing.


FUNDING

It's also important to review your credit report. This is a record of past and current debt that states when, how and if you paid. Make sure that the information contained in your credit report is accurate. By reviewing your credit report now, you'll have the opportunity to correct an errors. Ask your Agent to help you get a copy of your credit report to review. Don't wait until you've found a home to do this. Do it now. (see funding for more info)


Mortgage Pre-approval

A pre-approval is a simple calculation done by a mortgage lender that tells you (a) the amount you'll be able to finance through a loan and (b) what your monthly payment will be. When you find a home to buy, a pre-approval also reassures the seller that you have the financial means to purchase his or her home.

Once you know the amount the bank will lend you, the next step is to determine how much to save for your down payment. This will help you define the types of homes within your budget. Keep in mind the monthly costs associated with home ownership include not only your mortgage payment, but also real estate taxes, homeowner's insurance and utilities.


Your Down Payment

A down payment is the money you pay up front toward the purchase of your new home. Typically, the larger your down payment, the less you pay each month on the mortgage, and the lower the interest costs will be over the life of the mortgage.
How large should your down payment be? Many people make down payments of 5%, 10% or 20% of the sales prices of the homes they buy.


Your Mortgage

Your options for financing the home you find depend on your personal financial situation and your unique needs. Ask your agent for guidance about contacting mortgage lenders and getting a Mortgage Pre-approval. This will help you gauge how much you can afford to spend on a home and the financing options available to you. Here's an overview of typical financing