The cost of funding of your real estate loan is higher than the price of the home…..INTEREST! Financing is the most important part of buying a home. Because of the housing bubble in 2005 the financing process is more strenuous. Banks are really making sure you can afford a house and can prove it. There are many loan programs so you must do your research. You can always ask your realtor for some suggestions. The first thing you need to know in choosing your loan is how much you would like to put down. There are loans from 5% down and lower up to 20%. If you get a loan that requires under 20% down, lenders want your loan to be guaranteed through an outside third party. Lenders want their loans to be insured. They want to protect their investment in case the borrower defaults on their loan. Depending on your loan, it is called PMI (Premium Mortgage Insurance) or MIP (Mortgage Insurance Premium).
You also have to consider your credit when choosing your loan program. The better your credit, the better your interest rate will be. To get the best interest rate, make sure you are paying all credit cards on time, all rents or mortgage must be paid in full and on time, as well as any installment payments you may have.
If you are a “first time home buyer” you can apply for some state based loan programs. “First time home buyer” programs are NOT just for people who have never owned a home. That also includes anyone who has not owned property in the past 2 or 3 years. State based loan programs often offer lower down payment loans.
Once you pick a loan program you have to fill out a loan application. You will have to provide documentation including recent pay check stubs, or tax returns if you are self-employed. Your loan officer will list all documentation they will need during the process.
7. Make an Offer
Making an offer on a home is more than just offering a price you think is sufficient. Making an offer also includes different terms. Terms are very important. Your real estate agent will help you with the terms you want.
The amount you choose in making an offer depends on SUPPLY AND DEMAND! For example, you shouldn’t offer under the asking price if demand is high. You should offer the asking price or higher. That's because there are other buyers putting in offers on the same houses. Therefore, the seller will have a choice to go with the best offer. This is referred to as highest and best. When that happens, it is considered a sellers market. If supply is high and demand is low, you can offer under the asking price. That’s because sellers are not getting any offers after a long period of time. When that happens it is considered a buyers market.
In order to put in an offer, your agent will put together your purchase and sales agreement with the amount you decided on and your terms. Your agent will present the offer to the seller, seller’s representative, or seller’s agent. The seller can either accept the offer, deny it, or counter offer. If there is a counter offer, buyers need to stay in close contact with their agents during negotiations. Counter offers require quick responses. Counter offers are very common.
8. Get Insurance
NO HOMEOWNER SHOULD BE WITHOUT INSURANCE! You need to be protected against any catastrophe. There are different types of insurance associated with owning a home.
Title insurance: Title insurance is purchased at closing. It is a one-time fee. It protects the buyers if for some reason the title to the property is not valid. The title insurance will cover up to the mortgage value for lender purposes. It covers the buyers up to the purchase price.
Home Owners Insurance: This will provide fire, theft, and liability coverage. This is a requirement from your lender.
Flood Insurance: This is considered a high risk loan that is required in flood zones. Flood insurance is issued by the federal government/ FEMA.
Home Warranties: A home warranty is great to have. Especially the first year in your new home. This can give you a piece of mind that everything will be working fine. Maybe your heat is not blowing hot enough. Maybe your air is not cold enough, or something just breaks down. They can all be serviced to work perfectly.
During this process any discrepancies or problems are reviewed and fixed. The transfer taxes, closing cost, and legal fees are paid. All paperwork needed in the transaction is signed. The buyer receives the keys, and the seller receives payment on his/her home. Any money owed from the previous loan will be deducted from that amount, and any other funds owed will be disbursed to the appropriate entities. Deeds, loan documents, and all other documents are prepared, signed and filed, then recorded with the local property record office. At closing the title to property is transferred from the seller to the buyer. Before closing, you will receive a HUD-1 settlement statement listing all amounts to be paid. The settlement statement allows everyone in the transaction to be clear on what exactly is being paid.
10. What Happens After You Have Bought Your Home
All of the documents you received at closing need to be kept and stored away. They will be needed for tax purposes and when the property is sold. About 2 weeks after closing, make sure your deed has been recorded at your local property records office to have on record that YOU ARE THE OWNER!