“If you are positive about your calling, then it does not matter how hard or complicated it is”
― Sunday Adelaja
― Sunday Adelaja
Home Buying: 8 Steps to Success
Buying a home can be a complicated, stressful process. Here are 8 steps to help you confidently find your new home.
Step 1: Check your credit report and score
Before contacting a lender, it’s smart to check your credit report. By law, you can get a free report once a year through Annualcreditreport.com. The report pulls data from the three major credit-reporting agencies: Equifax, TransUnion and Experian. Having the information in hand before you talk with a lender lets you dispute any errors in the reporting. Based on your credit report, Fair Isaac & Co. (FICO) assigns you a credit score ranging from 350 to 850. The higher your credit score, the lower the interest rate on your mortgage.
Scores are based on:
• Payment history: Have you paid your bills on time?
• Amounts owed: What is your overall debt?
• Length of credit history: How long have you been borrowing money? Mortgage lenders like to see a long credit history.
• New credit: Have you applied for new credit?
• Types of credit: Lenders like to see a variety of types such as bank cards, car loans and student loans.
So what is a good credit score? You can expect a good mortgage rate at anything above 720. Home buyers who pursue an FHA loan can usually secure a loan if their credit is 580 or over. Once you know your score, you can find out what interest rate you will likely qualify for by researching interest rates on sites like Zillow.
Step 2: Get pre-approved by a lender
I always tell my folks, "let's get the money right first and then do the shopping". Get pre-approved for a loan early in your home search. Like early... like before you even look on real estate search sites.
Pre-approval requires the lender to pull the credit information (see Step 1) and assess your financial situation. The lender will then give you a letter that states the amount they would be willing to lend you. If you get in a multiple-offer scenario, being pre-approved will always give you an edge because the seller will have more confidence that you will be approved for a loan large enough to purchase their home.
You are not obligated to get a loan from the lender who you get a mortgage pre-approval from. When it’s time to officially apply for a mortgage, it’s best to get loan estimates from at least three lenders to compare their interest rates and fees.
Step 3: Start looking at homes
Let the serious shopping begin! By now we've talked things over and we both know loosely what you are looking for. Until we get in the market and start "feeling" houses out, we wont exactly know. But now we are armed with this initial design knowledge, your price range and general area. We can setup searches and look at listings online, we will come up with properties for you to tour. This is of course the best part of the process! ...other than moving in..
Step 4: Make an offer
For most buyers, this is when the butterflies really show up. Once you’ve found a home you want we will work together to craft an offer. Remember, the listing price is only a starting point. I will look at comps and gauge the demand to understand the market and help guide you to make the most attractive offer, whether it’s below, at or above listing price. Are there any contingencies to your offer? Will you require an inspection? These are all things we will help you understand. Once you’ve submitted the offer you get to wait. It will seem interminable. You may get neither a simple yes or no, or maybe a counteroffer to consider. It can be something of a dance.
Step 5: Home inspection day
In North Caroline we have what is called a due diligence period. This period is used to do loan work, appraisal, and most importantly a home inspection. This is a big day. Sure, you get to have a home inspector look over the home to make sure there are no unseen defects you want to negotiate to have fixed. But more importantly, this is the most time you’ll get to spend in your new home until closing. Go ahead and start measuring things and figuring out what goes where. This may be the last time you are inside the home until it is yours, several weeks from now.
Step 6: Get insurance and establish utilities
If you already own a home, simply call your insurance agent and let them know you’re buying a new home. They will handle writing a new policy. If you don’t have an insurance agent, now’s the time to find one because your lender will require homeowners insurance. Even if you don’t have a mortgage, insurance is a critical part of protecting your investment. You’ll also want to give utility companies your move-in date to establish service. There’s nothing like moving into a cold, dark house because you didn’t get an account with the power company!
Step 7: Closing day
This is the big day. You’ll read and sign papers and then read and sign some more. Even though you’re just sitting around a table, it can be exhausting. But it also means you’re nearing the finish line.
Step 8: Get the keys and move in!
This is it. You did it. You are now a homeowner! Your sale contract will specify exactly how soon you get to move in. Sometimes it’s by a certain time on the day you sign closing papers. Sometimes possession happens a few days after closing. Whenever it is, you’ve just ended the adventure of home buying and started the adventure of homeownership.
Before contacting a lender, it’s smart to check your credit report. By law, you can get a free report once a year through Annualcreditreport.com. The report pulls data from the three major credit-reporting agencies: Equifax, TransUnion and Experian. Having the information in hand before you talk with a lender lets you dispute any errors in the reporting. Based on your credit report, Fair Isaac & Co. (FICO) assigns you a credit score ranging from 350 to 850. The higher your credit score, the lower the interest rate on your mortgage.
Scores are based on:
• Payment history: Have you paid your bills on time?
• Amounts owed: What is your overall debt?
• Length of credit history: How long have you been borrowing money? Mortgage lenders like to see a long credit history.
• New credit: Have you applied for new credit?
• Types of credit: Lenders like to see a variety of types such as bank cards, car loans and student loans.
So what is a good credit score? You can expect a good mortgage rate at anything above 720. Home buyers who pursue an FHA loan can usually secure a loan if their credit is 580 or over. Once you know your score, you can find out what interest rate you will likely qualify for by researching interest rates on sites like Zillow.
Step 2: Get pre-approved by a lender
I always tell my folks, "let's get the money right first and then do the shopping". Get pre-approved for a loan early in your home search. Like early... like before you even look on real estate search sites.
Pre-approval requires the lender to pull the credit information (see Step 1) and assess your financial situation. The lender will then give you a letter that states the amount they would be willing to lend you. If you get in a multiple-offer scenario, being pre-approved will always give you an edge because the seller will have more confidence that you will be approved for a loan large enough to purchase their home.
You are not obligated to get a loan from the lender who you get a mortgage pre-approval from. When it’s time to officially apply for a mortgage, it’s best to get loan estimates from at least three lenders to compare their interest rates and fees.
Step 3: Start looking at homes
Let the serious shopping begin! By now we've talked things over and we both know loosely what you are looking for. Until we get in the market and start "feeling" houses out, we wont exactly know. But now we are armed with this initial design knowledge, your price range and general area. We can setup searches and look at listings online, we will come up with properties for you to tour. This is of course the best part of the process! ...other than moving in..
Step 4: Make an offer
For most buyers, this is when the butterflies really show up. Once you’ve found a home you want we will work together to craft an offer. Remember, the listing price is only a starting point. I will look at comps and gauge the demand to understand the market and help guide you to make the most attractive offer, whether it’s below, at or above listing price. Are there any contingencies to your offer? Will you require an inspection? These are all things we will help you understand. Once you’ve submitted the offer you get to wait. It will seem interminable. You may get neither a simple yes or no, or maybe a counteroffer to consider. It can be something of a dance.
Step 5: Home inspection day
In North Caroline we have what is called a due diligence period. This period is used to do loan work, appraisal, and most importantly a home inspection. This is a big day. Sure, you get to have a home inspector look over the home to make sure there are no unseen defects you want to negotiate to have fixed. But more importantly, this is the most time you’ll get to spend in your new home until closing. Go ahead and start measuring things and figuring out what goes where. This may be the last time you are inside the home until it is yours, several weeks from now.
Step 6: Get insurance and establish utilities
If you already own a home, simply call your insurance agent and let them know you’re buying a new home. They will handle writing a new policy. If you don’t have an insurance agent, now’s the time to find one because your lender will require homeowners insurance. Even if you don’t have a mortgage, insurance is a critical part of protecting your investment. You’ll also want to give utility companies your move-in date to establish service. There’s nothing like moving into a cold, dark house because you didn’t get an account with the power company!
Step 7: Closing day
This is the big day. You’ll read and sign papers and then read and sign some more. Even though you’re just sitting around a table, it can be exhausting. But it also means you’re nearing the finish line.
Step 8: Get the keys and move in!
This is it. You did it. You are now a homeowner! Your sale contract will specify exactly how soon you get to move in. Sometimes it’s by a certain time on the day you sign closing papers. Sometimes possession happens a few days after closing. Whenever it is, you’ve just ended the adventure of home buying and started the adventure of homeownership.
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