Prepare Your Finances
The first step for a home buyer is to get their finances in order. It is really important to know your budget and know the loan amount for which you are approved.
Knowing your loan approval amount will allow you to set the price range and the amount of which you can afford to buy a house. You are sure to end up disappointed if you begin by looking at houses that are priced above and beyond what you canactually afford. If you are prepared and have your finances in order beforehand, you will be able to begin house shopping knowing exactly what price range you should be considering.
Verify Your Credit History
It’s not wise to make assumptions about your credit worthiness without ever checking you credit history first.. Do not assume that your credit is in good standing just because you have always made payments to your creditors in a timely manner. Just the same, do not just assume that you have poor credit and you won’t qualify for a home loan due to late payments. In any case, it is essential to know the true status of your credit worthiness before making the decision to purchase a home. What your credit history reflects is much more than just how wisely or poorly you manage your finances. Your credit report reflects whether or not there are any unpaid debts, late payments or claims against you that negatively affect your credit. If there are any discrepancies on your credit report you will need to determine whether or not the claims or debts against you are valid or invalid. Any valid claims or unpaid debts will need to be paid, settled or resolved before a lender will consider granting you a loan to purchase a home or anything else for that matter.
Should you be unable to resolve these type issues we recommend speaking with a professional that handles these type situations or even an attorney. Most financial lending institutions will not lend money when credit histories are adversely affected or applicants have poor credit.
Many financial advisors recommend that a person check their credit report at least once a year through the services of one or all major credit reporting agencies. Reviewing your credit report once a year helps keep you informed and aware of any claims or inaccuracies. Any inaccuracies found on your credit report should be disputed and resolved as quickly as possible. Doing so will ultimately contribute to maintaining a good credit score.
Know Your Debt-to-Income
One of the most important factors that your mortgage lender will take into account before approving you for a home loan is your debt-to-income-ratio. This is determined with a comparison of the average monthly income with average monthly expenses such as taxes and bills. A debt-to-income ratio higher than 43% is generally undesirable for mortgage lenders. You can calculate your debt-to-income ratio this way: Based on a monthly income of $7,000, let’s assume that the only debts you have each month are credit card debts with monthly payments totaling $1,000 and a monthly $2,000 mortgage loan installment. This will make your debt-to-income ratio 43% ($3,000 [debt] % $7,000 [income] = 43%), just enough to get approved.
Gather Your Financial, Tax and Employment Documents
Your lender will require you to provide important financial documents such as bank statements, verification of employment and tax returns before approving your loan application. Make sure your all your loan documentation is as complete and accurate as possible if you intend to buy a house. It’s common that lenders request additional documentation throughout the different phases of the transaction, even after a property is secured and all parties have signed and agreed to the terms of the contract. Should your lender request any additional documentation it’s important that you provide it in a timely manner, otherwise there could be a delay in closing the transaction. This should be motivation to have all your financial information organized and readily available during the transaction, from start to finish. Prior to writing a contract on a home, it’s a good idea to be proactive and provide your lender with all the required documentation.
Hire A Qualified Loan Officer
Once you have checked your credit and your debt-to-income ratio and know where you stand, it’s time to gather all your financial information and make a visit to a mortgage lender. You should research different lenders, loan types and the wide range of loan options that are available to you. This is not something that you should rush into and should not be taken lightly. You should first ask each lender about different loan types and which loan type is best suited for you and your needs. Then ask the lender about current interest rates, closing costs and the lenders time frame for closing on a transaction. Online is a good place to begin your research when searching for a lender. Your Realtor® is another good source to help find a qualified lender. Hopefully, after meeting with a few different lenders you will be able to access each of their personalities and choose the lender that best suits you and your needs. It is important that you like and have confidence in your lender. It is important that you have a good working relationship with your lender because you will most likely communicate frequently throughout the home buying process.
Note: It is important to have a lender that easily accessible, communicates with you on a regular basis and responds to your phone calls, texts and emails promptly. Otherwise, you could be in for an aggravating and disappointing experience.
Get a Loan Pre-Approval Letter
Generally, before obtaining a pre-approval letter, your lender will request that you submit specific financial documentation to confirm your finances and to be sure you qualify for a home loan. Once you have been approved for a home mortgage loan your lender will provide you with a pre-approval letter. When you are ready to submit an offer, the pre-approval letter will be submitted with the offer. Submitting a pre-approval letter with your offer shows sellers that you are prepared, qualified and a serious buyer. A pre-approval letter will generally state the amount that the home-buyer is approved giving the seller confidence that the buyer can afford to purchase the home.
There are times certain lenders may decide to use minimal information and criteria before delving deeper into a loan applicant’s finances and provide what is known as a pre-qualification letter. Generally, sellers do not take a pre-qualification letter as seriously because they know that the lender did not complete a complete check of the buyers finances and credit worthiness. Many times at the advice of the sellers Realtor®, a pre-qualification letter will not be sufficient and your offer may not be accepted. It is recommended that you obtain a pre-approval letter from your lender from the very beginning of the home buying process. Having your lender review your financial documents, approving you for a home mortgage loan and knowing that you are able to close the transaction should give you confidence and peace of mind when making an offer.
If you do not follow the right steps to get approved for a home mortgage loan you are setting yourself up for disappointment and it will be a waste of everyone’s time involved.
Once all of your finances are in order, you can seriously begin shopping for a home. If you have made it to this point, Congratulations! You must be looking forward to this exciting phase, however, BUYER BEWARE – the home buying process may leave you feeling exhausted and overwhelmed. To help you find a home that meets your needs and requirements in a timely manner follow the steps given below.
Hire A Competent REALTOR®
For most home buyers, their best resource is the guidance of an experienced Realtor®. An experienced Realtor® will inform you about the entire home-buying process, how home buying works and will also know the best way to work through any difficulties that arise during the course of the home buying transaction. Another benefit to utilizing the services of a Realtor® is their list of resources and information that help keep you informed about homes that come on the market. However – as with loan officers – do your research before making a final decision and choosing a Realtor®. An online search will help you discover and determine which Realtors® have a good reputation and positive reviews from past clients. When it comes to this subject we are biased – we vote for Team Sadler Realtors® each and every time.
We are full time Realtors®, experienced & qualified, stay on top of current real estate market trends and we provide great service to our clients. Personally, I can’t see how anyone has the time to be a bartender, teacher, bus driver, professor, hair dresser, etc… and find time to be a Realtor®. How would a part-time Realtor® have time to adequately oversee all the detailed paperwork, take care of their client’s needs and respond to a lender, a title company escrow officer or the other agents’ requests? Realtors® and anyone else for that matter, gains experience and masters their craft from working in their chosen field day-in and day-out. You want to be sure your Realtor® is Full-time and laser focused on you and your transaction – that’s it – you should be #1. It’s great if you want to help a friend, a relative or a friend-of-a-friend make additional part-time income. However, when it comes to making one of, if not, the largest and most expensive purchases in your life, do you really want a part-time or inexperienced Realtor® handling all the crucial details while representing you? I know I wouldn’t!!! Have you given this any real thought? If you want to help someone make additional income that is working outside of their regular vocation, ask them to wash your car, paint or power wash your home, spread some mulch or mow your grass. Just remember, this is an important large financial transaction and you want to be sure you receive the service and attention you expect and deserve.
Research Potential Areas
Before you begin searching for a home, research different areas of town and neighborhoods to determine where you would like to live. Compare the different characteristics of each neighborhood such as amenities, activities for children, school ratings and crime statistics to determine which area best suits your family’s needs. Another thing to consider is the future resale potential of the property you are considering to purchase. Each area of town and each neighborhood will have their differences and you will most likely end up choosing one neighborhood over another. Generally in real estate location is an important factor when determining where to purchase property. This is especially true when considering the return on investment and determining the increase of value over the long term of owning a property. However, if and when children or other requirements are to be met, location can become secondary. It is suggested that you perform your own due diligence and enlist the services of a experienced local Realtor® to help you make a well informed decision.
Research, asking questions and seeking guidance from an experienced real estate agent will help ensure that you find an area and neighborhood that best suits your needs.
Conduct An Online Search For Houses
Once you have narrowed your search down to specific areas, you can begin searching online for homes that meet your criteria. Online home search programs allow users to sign-up and receive email notifications. Receiving email notifications makes your home search easier and allows you to get the latest and most current information about homes as they hit the market. Remember, viewing homes online vs. viewing homes in person, the homes may look much different online vs. viewing the homes in person. Many times when home-buyers arrive at a home, they are surprised when they find out that the home looks much different in person than what it did online.
View Homes In Person With Your Realtor
After researching and viewing homes online you will want to go check some of them out in person. At this point, you will need to contact your Realtor® and ask them to schedule showings for each of the homes. Some sellers may require an advanced notice or even an appointment before allowing home-buyers the opportunity to come view their home. Generally, Realtors® schedule home showings through a showing service. After touring several homes in a day, the details of each home can easily get confusing and you can forget what you liked or disliked about each home. Remember to take notes, photos or video as you tour each home and make record of the characteristics of the likes and dislikes. It is important to give your Realtor® feedback about which characteristics you liked or disliked about each of the homes you viewed. Your feedback will provide useful information and criteria which your Realtor® will use to help narrow the search for your home.
Speaking from experience, your Realtor® will appreciate your feedback.
Submit An Offer
Once you have narrowed it down and chosen a home, go ahead and present the seller with an offer. Don’t wait too long to make the offer, otherwise, someone else may beat you to it. With the assistance of your Realtor® you will be able to determine a reasonable offer based on current trends, past home sales and area comps. There are many different factors that are considered when determining the value of a property such as location, market trends, type of homes, schools, neighborhood amenities and the list goes on. This is when enlisting the services of a Realtor® becomes invaluable. Your Realtor® will help you submit a fair yet serious offer to the seller using data which supports the amount of your offer. When submitting an offer to a seller that has received multiple offers, the experience of your Realtor® and the information and data they provide to you will become even more paramount.
Now that you have your finances in order and you have a home under contract, you are ready to begin moving forward with the purchase of your home. Now it’s time to begin the process of getting prepared for the closing and ultimately getting the keys to your new home. Time management is extremely important during this phase of the home buying process. Equally important, is to communicate with your Realtor® and your lender on a regular basis. Speaking with your Realtor® and your lender on a regular basis will help prevent any possible delays and help the transaction go more smoothly. Should your lender request any additional documentation during this period, it is crucial that you provide the documentation as quickly as possible, if not immediately. Otherwise, you may possibly experience unwanted delays in the closing of your transaction.
The steps below have been listed to help guide you through the final phase of the home buying process.
Negotiating The Terms Of The Contract
The seller may present a counter-offer in response to the initial offer submitted by the buyer. During this time the terms of the contract will be negotiated such as but not limited to, seller concessions, closing date, inspections and repairs and appraisal deadlines. Your Realtor® will guide you through the negotiation process and help you make decisions that are best suited in your interest. It is important that you consider all your options and be thorough when determining and agreeing on the terms and conditions of the contract. Once the contract has been signed by all parties and fully executed, it is difficult for home-buyers to renegotiate the terms of the contract.
Submit Earnest Money and Option Fee
Once the contract has been executed, the next step is to deliver the Earnest Money to the Escrow Officer at the chosen Title Company. In consideration for sellers to remove their home for sale from the market during this period sellers generally receive a non-refundable fee from the buyer. The fee is called an Option Fee and it gives the buyers a specific number of days to perform their Due Diligence which may include home inspections, structural inspections, plumbing inspections, pest inspections, ect… At anytime during the Option Period the home-buyer may terminate the contract for any reason whatsoever, however should the buyer decide not to move forward with the purchase the buyer will forfeit the Option Fee to the seller. Should the buyer proceed with the purchase of the home, the Option Fee will then be credited to the buyer and applied to the final purchase price at the time of closing. Initially paying these fees assures the seller that you’re a legitimate buyer and serious about purchasing the property. The Earnest Money will be credited back to the buyer and applied to the final sales price at closing. If the buyer terminates the contract once the Option Period has expired the seller may end up keeping the Earnest Money.
There is a time period specified in most contracts called the Option Period or Due Diligence Period which allows the buyer to get the home inspected by a licensed professional home inspector. During the Option Period home-buyers can opt for a basic home inspection or choose to get multiple types of inspections performed, such as pest, mold, radon, plumbing, roof, foundation or structural inspections, etc. For home-buyers this phase of the transaction is one of the most important, so make sure the inspections are performed in a timely manner and completed before the Option Period expires as stated in the sales contract. Once all the home inspections are completed you are one more step closer to completing the home buying process.
Order An Appraisal
Before you can close the transaction you must have the all-important task of an appraisal. Typically, the appraisal is paid for by the buyer at closing but ordered by the lender. The appraisal will serve as verification for the mortgage company that the property’s appraised value is the same or more than the approved loan amount. This step is aimed at protecting the interest of the lender. If the appraisal results are lower in value than the loan amount, it will be necessary to renegotiate the terms of the contract or the contract could be at risk of being terminated. Home-buyers should request their lender to order an appraisal immediately after the home inspections have been completed and the Option Period has expired because any delays in an appraisal could result in a delayed closing.
Prepare For Closing
Hopefully, the home inspections and appraisal are completed and the Title Company has received a clear to close from your lender. The next step will be to schedule a time and date with the seller and Title Company to get the transaction closed. You will need to take your driver’s license, a passport or any government issued photo ID with you to the closing, as well as certified funds or cashiers checks that are required by the lender or seller. You will receive the keys to your new home once all the final closing documents are signed by all parties and the transaction has funded. Congratulations! At this point, you have completed the purchase of your new home!
Additional Resources for: Steps to Buying a Home
We hope you find the additional resources listed above helpful.
The real estate business is not a sales business but rather regarded to as the service industry commanding a high level of trust, integrity and professionalism. In order to facilitate a successful transaction it is important to have a high level of trust in your Realtor®. Team Sadler Realtors takes great pride in offering our clients value to their home buying or selling experience through a professional approach to their unique transaction.
Thinking of buying or selling your home? We are passionate about real estate and would love to put our local real estate knowledge, marketing expertise and experience to work for you. You can contact Team Sadler here or Call or text: (713) 628-4487.
No Hype – No Pressure – Just Honest Customer Service
Jeff Sadler has successfully helped many wonderful clients move in and out of Sienna Plantation – Missouri City, TX – Fort Bend County and surrounding areas.
We service Real Estate Sales in the following Harris County & Fort Bend County areas:
Missouri City, TX – Brightwater, Lake Olympia, Sienna Plantation, Riverstone, Quail Valley. Sugar Land, TX, Aliana, Avalon, Commonwealth, Greatwood, Heritage Colony, Sugar Creek, Sweetwater, Telfair, Riverstone, First Colony.
Houston, TX – Afton Oaks, Braes Heights, Galleria Homes, Hunters Creek, Westbury, Willow Meadows, Willowbend, Maplewood, Marilyn Estates, Midtown, Medical Center, Memorial, Meyerland, Montrose, Museum District, Parkwest, Piney Point, Rice Military, Upper Kirby, West University, Rice University, River Oaks, Tanglewood. Bellaire, TX., Pearland, TX.
STEPS TO BUYING A HOME
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