Home Buying Advice that Helps put you in a House

The purchase of a home is one of the largest transactions that an individual makes during a lifetime. The search can provide a challenge and an opportunity. First time home buyers might feel better to know that they're not the only ones who feel confused about the home buying process. Nearly all home buyers feel the same way, even if they've bought a house in the past, because it's easy to forget the steps you took to get into a home once the event is behind you.

So How Do You Learn the Basics?

Talk to a real estate agent about the typical home buying scenario. This is not a meeting that should lead to an agreement for the agent to represent you. It's simply a general discussion about the real estate customs in your area. An agent who won't take fifteen minutes to help you understand what to expect when you're buying a home isn't much of an agent, so if the first few calls don't produce someone who will help, keep looking.

Frequently asked questions from first time home buyers

1. Why should I buy, instead of rent?

Answer: A home is an investment. When you rent, you write your monthly check and that money is gone forever. But when you own your home, you can deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes. This will save you a lot each year, because the interest you pay will make up most of your monthly payment for most of the years of your mortgage. You can also deduct the property taxes you pay as a homeowner. In addition, the value of your home may go up over the years. Finally, you'll enjoy having something that's all yours - a home where your own personal style will tell the world who you are.

2. Can I become a homebuyer even if I have bad credit, and don't have much for a down-payment?

Answer: Yes, there are loans available for individuals who have low credit scores and limited funds for a down-payment. Talk to a lender about the options available. These types of loans often come with higher interest rates and keep in mind you will need funds for earnest and closing cost.  The best lenders will take the time to explain the process and present you with a good faith estimate with no obligation.  A lender should also be able to give you an estimate of your monthly payment including taxes and insurance. If you need help finding a qualified mortgage lender you might ask a trusted family member or a local real estate agent.

3. How much money will I have to come up with to buy a home?

Answer: Well, that depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, you need to come up with enough money to cover three costs: earnest money - the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house; the down payment, a percentage of the cost of the home that you must pay when you go to settlement; and closing costs, the costs associated with processing the paperwork to buy a house.

4.  In addition to the mortgage payment, what other costs do I need to consider?

Answer: Well, of course you'll have your monthly utilities. If your utilities have been covered in your rent, this may be new for you. Your real estate broker will be able to help you get information from the seller on how much utilities normally cost. In addition, you might have homeowner association or condo association dues. You'll definitely have property taxes, and you also may have city or county taxes. Taxes normally are rolled into your mortgage payment. Again, your broker will be able to help you anticipate these costs.

5. Should I use a real estate broker(agent)?  

Answer: Using a real estate agent is a very good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate broker will be well-acquainted with all the important things you'll want to know about a neighborhood, you may be considering...the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume, and more. He or she will help you figure the price range you can afford and search multiple listing services for homes you'll want to see. With immediate access to homes as soon as they're put on the market, the broker can save you hours of wasted driving-around time. When it's time to make an offer on a home, the broker can point out ways to structure your deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. And you don't have to pay the broker anything! The payment comes from the home seller - not from the buyer.

6. When I find the home I want, how much should I offer?

Answer: Again, your real estate agent can help you here. But there are several things you should consider: 1) is the asking price in line with prices of similar homes in the area? 2) Is the home in good condition or will you have to spend a substantial amount of money making it the way you want it? You probably want to get a professional home inspection before you make your offer. Your real estate broker can help you arrange one. 3) How long has the home been on the market? If it's been for sale for awhile, the seller may be more eager to accept a lower offer. 4) How much mortgage will be required? Make sure you really can afford whatever offer you make. 5) How much do you really want the home? The closer you are to the asking price, the more likely your offer will be accepted. In some cases, you may even want to offer more than the asking price, if you know you are competing with others for the house.

7. What if my offer is rejected?

Answer: They often are! But don't let that stop you. Now you begin negotiating. Your agent will help you. You may have to offer more money, but you may ask the seller to cover some or all of your closing costs or to make repairs that wouldn't normally be expected. Often, negotiations on a price go back and forth several times before a deal is made. Just remember - don't get so caught up in negotiations that you lose sight of what you really want and can afford!

8. So what will happen at closing?

Answer: Basically, you'll sit at a table with your broker, the broker for the seller, and the closing attorneys.  The closing attorneys will have a stack of papers for you and the seller to sign. While he or she will give you a basic explanation of each paper, you may want to take the time to read each one and/or consult with your agent to make sure you know exactly what you're signing. After all, this is a large amount of money you're committing to pay for a lot of years! Before you go to closing, your lender is required to give you a booklet explaining the closing costs, a "good faith estimate" of how much cash you'll have to supply at closing, and a list of documents you'll need at closing. Don't hesitate to ask questions.

More Questions? Need more Information? Want to start the Home Buying Process? Contact us ....

The Great Homes Team

Lisa Kowalenko and Nancy Lemacks

847.241.2300

lisak@grthomz or nlemacks@comcast.net