Homes cost hundreds of thousands of dollars in the U.S., so with this kind of money involved, rushing the buying decision is ill advised.
Part of educating yourself about home buying is to understand the process. That way you know whether the sales agent is presenting an accurate representation or not.
When you first make the decision to buy a house, it is easy to become caught up in the process of looking at various properties. This is not the practical first step and skipping the initial phases can cost you thousands of dollars.
Buying a home is emotionally charged because it is the place you are going to be living for a considerable time. There must be a balance between the investment a home represents as well as the comfort of you and your family.
Understanding the pros and cons of home ownership, and the process for finding and determining which homes are right for you is the crucial first step. Beyond this, you must take a careful and methodical pathway through the home buying process. The following information helps you do just that.
Learn About Browsing for Homes Online
Cover more ground without leaving home by using the internet to narrow down your search. This allows you to consider many factors, as well as apply filters on the search bar pertaining to you.
For example, suppose you want to remain in the area, but find a larger home. The search filter allows you to narrow down the homes shown to you by limiting the returns of only those homes meeting your exact requirements.
Believe it or not, social media is a way to review homes in an area. Many real estate companies have their own social media platforms now, and via these sites you speak with others who are searching for a home.
Keep in mind, the pictures you see online are designed to show the home and area in its best light, and the reality when you go to visit may be quite different.
Make a note of any fees required during the sale, contact information for the sales agent in case you have questions, and where the home is located in relation to important places such as school and work.
It helps to create an online folder or favorites list so you can share the listing with friends and family members for their input. They may see something or have questions you have not thought to ask.
How to Afford a Home
Purchasing a home is one of the largest, single investments most Americans make in their lifetime. Most new home shoppers immediately run to their bank to see how much home loan they qualify for without thinking to consider other lending institutions. Just like purchasing a car or anything else you must make a point to comparison shop.
Specifically, compare the annual percentage rates, whether the loans are fixed or variable, and what types of terms the lending institution is offering. Contemporarily, online banking institutions exist to make home loans who do not have actual brick and mortar buildings. Often these types of lenders offer highly competitive rates.
Understand that a pre-approval from the lending company is only an indication to the seller that you likely qualify to purchase their home, but it is not a tacit agreement from the bank to loan you the money.
How to Appraise a Home
When you find a home and believe it is a perfect fit, try to take a step back and get a trained second opinion. Home appraisers evaluate your potential new home from top to bottom and alert you to possible issues with the home.
If the issues are significant enough it gives you additional leverage with the homeowner to reduce the cost of the home, or in some situations it steers you clear of a bad situation. Most lenders require you to have a home inspection anyway, as they want to be assured the asking price is a fair one.
Learn About Determining a Housing Bid
Though the home owner places a selling price on the home, negotiations are common and expected.
If someone else is interested in the home, then both you and the other interested party enter into a bid contest. This is exactly what it sounds like—both buyers offer an amount to the seller in an attempt to secure the contract on the home.
This is often emotional and gets new buyers into trouble all the time. Try not to let a competitive nature increase the asking price of a home, especially if you cannot afford it.
The bidding process varies by state, but as a general rule it proceeds like this:
- You make an offer on the property.
- The seller receives all offers.
- The seller responds to your bid, either accepting it or rejecting it.
- If the seller rejects it, he or she tells you why.
- If you still want the home, you respond with a counteroffer.
This process goes back and forth until the seller decides which buyer offers the best deal for them.
Since it is the owner’s home, the decision may be made for emotional reasons, especially if the homeowner believes your family would love it as the owner’s family has in the past. Many of the concessions and additional bonuses include covering all the closing costs or putting more money down.
If the seller is motivated and no other buyers are involved, negotiate for a reduced price or ask for a roofing or carpet allowance.
These allowances simply mean the condition of the roof or the carpet (or anything else) is questionable and replacement of the roof or carpet is going to be an immediate repair/expense once you purchase the home. Most sellers agree to reduce the cost of the roof or carpet replacement from the overall asking price.
How to Finance a Home Purchase
Most homebuyers are not independently wealthy, which means they utilize a lender offering a mortgage. Financing a home is often the largest challenge new homeowners face.
Home loans are offered based on your credit worthiness, assets on hand and other criteria. These factors determine the terms the lender offers you. First time homebuyers have additional programs and assistance available to help with down payments and obtaining a loan.