How to Buy a House: A Beginner's Guide
There is no doubt that the market for houses has been cooling off recently.
More and more home buyers are taking advantage of better bargain deals and easy
mortgage loan terms to go from being renters to being home owners. With
so many people entering the market, it is inevitable that questions, "How to buy a house?", will arise.
There are many things to consider when buying your first home. Some of the
most important steps to buy a house are:
Learning the home buying process
Start by learning as much as you can about how the home buying and mortgage
application process works. Read as much as you can about buying a home. Check
out the many books in your local library that offer hints to first time home
buyers. Read financial web sites on the internet for tips for first time home
buyers. You may even want to sign up for a class aimed at first time homeowners.
Many towns and cities offer these kinds of classes, and they can be a great source
of information for the buyer looking for his or her first home.
Find out the pre-qualified price range
It is important to find out how much you can borrow before you start looking for a home.
Talk with several mortgage lenders in your area and get pre-qualified for a particular
price range. The mortgage lender will be able to help you determine how much you can
borrow based on your annual income. In general, mortgage lenders recommend that all
home related expenses, including the mortgage payment, insurance premiums and real estate
taxes, do not exceed 28% of your monthly income.
Get Pre-approved for mortgage loan
The next step buy a house is to get
pre-approved for mortgage financing. This is similar to getting
pre-qualified for a price range, but it is a more formal process. You will need to supply
proof of your income for the pre-approval process to move forward. Most lenders will want
to see income tax returns from the past two years as proof of the income you are claiming.
After you have been pre-approved for your mortgage loan, it is time to actually start
house hunting with a realtor (find out why you need to
find a realtor
before buying a house?). Your mortgage lender will give you a letter stating
that you have been pre-approved for a mortgage and the amount you are authorized to borrow.
You will need to present this letter to the real estate agent when you get started. It is
important to get pre-approved for a mortgage loan before beginning your home search. The
real estate agent and real estate company will be much more willing to work with you if
they know you can afford the home you are looking at. In addition, sellers will take your
offer much more seriously if it is accompanied by a pre-approval letter from your mortgage
Make an offer
Once you have found a home that meets your needs, it is time to make an offer on the
property. You will already know the most you can spend from the pre-approval process,
and you probably will have your own ideas on what the property is actually worth. In addition,
your real estate agent can guide you through the negotiation process and offer procedures.
A copy of your pre-approval letter will be presented as part of the written offer. This will
ensure the seller that your offer is legitimate.
If the seller accepts your first offer, congratulations. Your negotiations are over and
you're ready to start preparing for your move. More likely, however, is that the seller
will come back with a counter-offer. This negotiation process can go on for a short or
long amount of time, depending on factors like the motivation of the seller, the local
real estate market, and a host of other factors. The real estate agent will be a good guide
through the negotiation process. After all, he or she will have been through this process
many times before.
Provide copy of Purchase and Sale Agreement to mortgage broker
After the negotiation process has been completed, you will need to present your mortgage
broker with a copy of the Purchase and Sale Agreement for the home.
Work to close the mortgage loan
After presenting the Purchase and Sales Agreement, you will need to work with the mortgage
broker to ensure you meet all the conditions required for the closing of the mortgage loan.
Home inspection prior closing
Prior to closing, you will want to make sure to have a thorough
home inspection performed by a qualified and certified home inspector. A home inspection
will protect you from flaws in the construction and condition of the home that are not obvious
to the naked eye. Home inspections can uncover things like foundation cracks, termite
infestation and other home quality issues.
Hand over down payment
After the home inspection has been performed and the report has come back clean (or all
the items uncovered have been repaired), it is time for the buyer to actually hand over the
money for the down payment and sign the loan documents.
Collect the house key
After the closing of the loan, the fun part of home buying begins. Your real estate agent
will hand over the keys to your new home and you can actually move in and enjoy your
beautiful new home. Welcome to moving day!