The Buying Process
Where to Begin
So you want to buy a house but haven’t the faintest idea of how to get started. The worst way to buy a home is to feel pressured to buy something or to just jump in without doing your homework. Start out by becoming an educated homebuyer then carefully choose professionals to help you find the right home and loan to fit your needs.
Buying or refinancing your home may be one of the most important and complex financial decisions you’ll ever make. Many lenders, appraisers, and real estate professionals stand ready to help you get a nice home and a great loan. However, you need to understand the home buying process to be a smart consumer. Every year, misinformed homebuyers, often first-time purchasers, become victims of predatory lending or loan fraud. Before you start, there are many laws that protect you from scams, unnecessary expenses, and discrimination in the process of home buying. Know your rights!
10 Basic Home Buying Steps
1. Find out How Much Mortgage Can You Afford
You can save yourself a lot of wheel spinning if you take a minute to figure out how much mortgage you can afford. Generally, a lender will want your monthly mortgage payment to total no more than 29% of your monthly gross income (that’s your monthly income before taxes and other paycheck deductions are taken out.) You also need to consider current loan interest rates. The lower the interest rate, the more expensive the home you’ll be able to afford. HUD-approved housing counseling agencies will help you calculate this amount or use this Internet website:
2. Create Your “Wish list”
Make your wish list. Focus on the features you want in a home: 2 bedrooms or 3? … 1 bath or 2? Garage or no garage? … etc., etc. Knowing what you’re looking for will help you focus your search. And it will help your real estate agent, too.
3. Find a Real Estate Agent (Realtor)
You’ll want to start searching for a Realtor as soon as you decide to buy a home. Talk to several and find someone you think you’ll be comfortable working closely with. When you talk to prospective Realtors, ask questions about the areas and types of homes in which you’re interested. Do they seem knowledgeable? Most important, is their personal style a good fit with your own? Hopefully you will find that our services will meet your needs. Also … many buyers are not aware of the fact that the seller pay’s for the commission of the buyer’s real estate agent so do not hesitate to work with your own real estate agent that will protect your interest.
4. Mortgages and Home buying Programs
Many different kinds of mortgages are available to you. Read about them, and make sure you understand the pros and cons of each. Your real estate agent can help you. HUD offers some special home buying programs. Also, many local governments offer special home buying programs to help low-income homebuyers. Shop around – you may be surprised at all your options! If you are currently renting a unit in public housing or are a participant of the Section 8 Housing Choice Voucher Program, new home ownership programs have been recently designed to help you purchase a home. Contact the housing agency where you live for more information. Most loans require that lenders collect a portion of your monthly payment to pay real estate taxes, hazard insurance, and other requirements as defined at settlement. The Real Estate Settlement Protection Act (RESPA) defines what actions the lender must perform. RESPA outlines in detail how escrow accounts should be established and maintained.
5. Shopping for a Home
Now you really begin house hunting. One of the first things you should do is get a pre-qualification letter from a lender. You almost always need to have this letter before you can submit an offer. If you do not have a relationship with a lender your Realtor will be able to recommend various sources. Your real estate agent will be able to find listings for you, based on your wish list. But don’t stop there! You can do your own looking, and then ask your broker to show you the house. Start with the Internet. Ideally you should use our web site to search for your ideal home. We have the best MLS Search Tool in the Philly Suburbs. Pick up real estate flyers at local grocery stores and convenience stores. Read the real estate sections of your local newspaper. Drive around neighborhoods that interest you and write down addresses where there are “for sale” signs. Go to open houses. Try everything!
6. Home Inspections
When you make an offer on a home, it’s important to make your offer contingent on a home inspection, conducted by an independent authorized inspector. You will have to pay for this inspection yourself, but it could keep you from buying a house that will cost you far more in repairs, down the road. If you are satisfied with the results of the inspection, then your offer can proceed. If you aren’t, you may want to negotiate, asking the seller to pay for certain repairs or asking for a lower price. Select a home inspector carefully, by consulting the Better Business Bureau and checking the individual’s references.
Your lender will require you to get an appraisal of the house you want to buy, to make sure it’s worth the money that you’re borrowing. You may select your own appraiser, or you may ask your real estate agent to help you take care of that.
8. Homeowner’s Insurance
Lenders require that you have homeowners insurance, to protect both your interests and theirs. Like everything else, be sure to shop around for insurance that fits your needs
9. Settlement or Closing
Finally, you’ve gone through the whole process, and you’re ready to go to “settlement” or “closing.” We know you’ll be excited, but be sure to read everything you sign! And before you go, read this important information about your rights. For detailed information on calculating estimated settlement costs, visit HUD’s website at: http://www.hud.gov/offices/hsg/sfh/res/sfhrestc.cfm
10. Finally, Prepare for that Big Move!
Looks like you’re ready to move. There’s a lot to consider as you plan your move. The good news is that there’s lots of help.
Check this out for tips about moving:
These are just the basic tips for home buying. To obtain more detailed information and brochures you can download, visit HUD’s home buying website