What to Know Before Purchasing a Home
There’s a lot to consider when buying a house – and it’s normal to have questions, especially if it’s your first time. Whatever the reasons for purchasing a home, there are a number of steps from your current situation to the moment you receive the key and you’ll want to know the ins and outs of a home purchase.
Is now a good time to purchase a home?
It is and it isn’t. With mortgage rates falling to record lows in 2020, strong demand for homes pushed prices up, causing frustration for many potential homebuyers. Even though experts predict that interest rates will rise this year, they will remain at historically low levels.
Average home prices, however, continue to rise. Annual home price growth is expected to increase by 4.1% by October 2021, according to CoreLogic.
When should you purchase a home?
Normally, Spring is the traditional start to the home-buying season, where many listings usually start hitting the market. Covid-19 changed things in 2020, delaying the Spring selling season and reported activity was pushed back into the Summer and Fall.
Your own financial readiness is most important. This means you must have your finances organized and credit in order to be able to secure your mortgage in a timely fashion.
Check your credit score
Checking your credit score will help you determine your financing options. Lenders use it, along with other factors, to set your loan pricing and determine your ability to repay your mortgage. The better your credit and credit history, the better chances you’ll have of securing your home finance with the best possible terms and rates.
Shop for a mortgage
Getting preapproved for a mortgage is useful when you make an offer on a house, and it gives you a better understanding of how much you can afford.
Shop around with a few different lenders or mortgage brokers to increase your chances of getting a low interest rate. You’ll want to work with an experienced mortgage lender who can walk you through all the options and costs.
Hire a Realtor
Working with an experienced real estate agent can save you both time and money when looking for your dream home by negotiating with sellers on your behalf. Realtors can refer you to other professionals such as home inspectors, contractors, appraisers and title companies. However, you should still shop around and compare fees from other professionals.
Tour Multiple Homes
Just looking at listing photos isn’t a substitute for touring homes in person and getting a better understanding of the neighborhood and its amenities. Let your real estate agent know what specific homes you want to tour or search online yourself. Attend open houses for homes that you’re interested in and be ready when your dream home is listed.
Make an offer
Knowing how to make an attractive offer on a home can help increase your chances the seller will accept it.
Once you find your dream home, your realtor will help prepare an offer package. This includes your offer price, preapproval letter, proof of funds and terms or contingencies. Including a personal letter to the seller might also help your offer stand out.
Get a home inspection
A home inspection will give you an overall understanding of the property’s structural issues. This will help you determine how to move forward with the closing process. You may want to ask the seller for repairs or even back out of the deal if you have a contingency in the contract.
Your home inspection report may reveal minor or major issues. Major problems will most likely need to be resolved before your lender will finalize your loan, while minor issues can often wait until you take possession of the home.
Some sellers will not agree to extensive repairs, so a home inspection contingency might be a good idea to give you a way out of the purchase if the home isn’t in ideal condition.
Secure your Financing
Getting final loan approval means you need to keep your finances and credit in line during underwriting. Respond promptly to requests for additional documentation and paperwork as your lender is finishing up the underwriting process.
Close on your home
After all contingencies have been met and you’re happy with the final walk-through and the closing agent has given the green light to close, your lender will issue a “clear to close” status on your loan.
On closing day, be sure to review all documents you sign carefully and ask for clarification on anything you don’t understand. Be sure to receive all house keys, entry codes and garage openers before leaving closing. Once all paperwork has been signed, the home is officially yours and you’ll receive your house keys!