Owning a home can be a rewarding long-term investment. Unfortunately, buyers often approach the process unprepared. Buying a home requires time and effort. Knowing the basic steps can prepare you for the purchase and make it less confusing. Our seven steps examine the home search, financial procedures and contracts that make your purchase complete. Speak with a Broker Network Agent to make the sale more manageable.
Take into account why you are buying a home. Are you look for more living space, a kid-friendly neighborhood or a fixer-upper? Start researching the web, magazines and newspapers for home listings. Make a note on how long homes stay on the market. Sales can vary per neighborhood. The more you know, the better deal you can find.
Review your financials before searching for a home. One free copy of your credit report per year may be obtained with Annualcreditreport.com. Credit scores range from 300-850. A lender can review your report. Lenders generally recommend that people look for homes that are three to five times greater than their annual income, if the home buyer puts down a 20 percent down payment and plans on having a moderate amount of debt. A loan expert can help you understand loan options, closing costs and other fees. Discover has a Home Affordability Calculator to help determine your budget.
Using a real estate agent is not mandatory but can open the door to many opportunities. Real estate agents know the spectrum of available homes. A good real estate agent can help search for your home, offer the right price, and negotiate and finalize the deal.
After you find a home, review comparable sales and make a reasonable offer. Avoid “lowballing” the seller as you may be rejected. Prices vary due to the seller’s circumstances. The seller may not compromise if they have been waiting for years to sell. A seller that already bought a house can be more motivated to sell.
Sellers often propose a counter-offer before a price is settled. You may be asked to put down a deposit until the contract is signed. Some states allow a few days’ grace period to walk away from the deal.
Banks perform due diligence before the loan. The buyer must pay for a third-party home appraisal, which validates that the home is contracted correctly. An inadequate home appraisal may cause the bank to withdraw the loan. A home inspection includes a physical examination of the home from the roof to the foundation. The Find an Inspector search tool can help you find an inspector in your area.
In addition to the home inspection, the bank validates credit history, income and debt. A loan approval can take up to 30 days but eventually determines your mortgage. There are three types of mortgages:
Adjustable Rate Mortgages (ARMS)
ARMS offer a fixed interest rate usually for one to seven years. The percentage can adjust every year after this period within the interest rate caps. Each interest rate has a scheduled period that is agreed to remain unchanged. Adjustable rate mortgages are most commonly used in the United States and regulated by the federal government.
Fixed-rate mortgages offer a fixed interest rate for a longer period of time, usually 15 to 30 years, although they are available for 20 to 25 year terms. The loan is a single, consistent payment. Fixed interest rates are characterized by interest rate, amount of loan, frequency and duration. Due to the higher longer-loan term, the interest rate tends to be higher than in an adjustable rate mortgage.
Interest-only mortgages mean that buyers pay the interest portion of their payment for a certain period of time. For example, for a 30-year loan, borrowers may only pay the interest of their principal for the first 10 years and then pay the interest with the principal for the following 20. An interest-only mortgage is meant for someone who expects to have a significant increase in salary.
You have survived the house-hunt, offer, and bank approval, and now own a home! The purchase is official after the contract has been signed. A home inspection ensures the structure and condition.
You and the seller will determine the closing agreements. You will undergo closing costs, including but not limited to your down payment, title and appraisal fees. Closing costs are beyond the costs of the property. They are meant to cover the transfer of ownership. You will sign all the paperwork required to complete the purchase, including your loan documents. Once the check is delivered to the seller, the home is yours! A Broker Network Realtor Agent can help guide you through purchasing the home of your dreams. We are available in Portland, Bend and Gresham.