Buyers

Before you start looking through listings in the hope of finding your dream home, conduct a personal audit of your finances. Taking a serious look at all of your finances will prepare you for this huge step. You will be better able to know how much of a house payment you can afford and if you can cover the ongoing expenses of owning a home. A self-audit of your finances includes these three steps:

• How much savings do you have? Before you consider purchasing a home, you should make sure you have a solid savings plan in place. You also need to have two to four months of living expenses already in savings. These funds can help pay some of the initial expenses like a down payment and closing costs. Lenders will want to see that you are responsible and have a savings plan that works.
• What does your current spending look like? It’s important to know how much you spend every month. You also need to know exactly where your money is going. This step is essential for calculating how much of a mortgage payment you can afford. Make sure to account for all of your expenses, including everything from utilities to groceries and clothes to student loans. Count retirement funds, regular savings, entertainment, and kid’s activities.
• How is your credit? ​To qualify for a home loan, you will need a good credit score, a solid history of paying bills on time, and a debt-to-income ratio (DTI) of about 43%. Lenders usually consider the ongoing expenses of owning a house to be about 1/3 of your monthly gross income.

Getting a pre-approval from a lender removes a lot of the hassles from the home buying process. Your lender will provide a pre-approval letter stating how much you are approved for. This will be based on your credit standing, income, and present assets. The pre-approval letter will help your agent find homes within your budget and proposed loan amount.

Once you are sure of the home you want to buy, work with your real estate agent. They will help you negotiate an offer based on the fair market value of comparable homes in the same neighborhood. When you and the seller agree on a price, the home goes into escrow while the home buying process gets completed. Don’t get discouraged if the offer doesn’t work out. Sellers have the option of rejecting or accepting offers. Sometimes, several offers are made until successfully closing on a home. Once you make an offer, several things can happen.

• The seller may accept the offer, and you’ll begin the process of finalizing the paperwork to complete the purchase.
• The seller may reject your offer.
• The seller may counter back with another offer. They may not like the price or some other part of your offer.
• They will request changes and then accept the amended offer.

Once the seller accepts your offer, you will work with your lender to complete the mortgage paperwork. The lender will usually request an independent appraisal of the property. This step protects both the lender and you. It’s important to ensure that you are getting a fair price for the home. Three things can happen after the appraisal.

• The appraisal matches what you offered, and the lender will clear the loan so you can close on the property.
• The appraisal is more than what you offered. This will indicate you are getting a good price for the home, and that means you’ll have instant equity.
• The appraisal comes in below your offer. In this case the lender will not approve the full amount of the loan. You may need to make up the difference or try to renegotiate with the seller to get a better price.

Once the lender approves your loan, they will arrange for a title company to handle the paperwork. The title company will check to make sure the seller has the right to sell the house. Once the title search has been completed, you will pay your down payment and closing costs. Then you will sign your mortgage and get your move-in date.