07/29/2021
10 Steps to Home Ownership
1. Find the right Realtor
Buying a home is one of the most significant purchases you’ll make in your life. Its critical that you have an experienced local agent who understands the real estate business and knows your community. As your buyer agent, my fiduciary responsibility is to represent you and ensure that your interests are protected.
2. Prepare your finances
Determine how much house you can afford.
a) Total monthly payments are typically made up of four components; Principal, Interest, Taxes and Insurance (PITI).
b) Your front-end ratio is the percentage of your annual gross income that goes toward paying your mortgage, and in general it shouldn’t exceed 28%.
c) Your back-end ratio is the percentage of your annual gross income that goes toward paying all your debts, and in general it shouldn’t exceed 43%.
Check your credit score
a) There are several sites that allow you to get your credit score. Some of them may charge a fee for this service. Many of them don’t charge a fee, but require you to subscribe to the service.
b) You can improve your score by paying down credit card balances, making payments on time and avoiding big purchases until after you’ve been approved.
Save cash for a down payment and closing costs
a) A down payment is typically between 3.5% and 20%. Plan on the higher range if you’re looking for a conventional mortgage.
b) Earnest money (good faith money) is the money you put down to show you’re serious about purchasing a home.
c) Closing costs for the buyer typically run between 2% and 5% of the loan amount.
d) Home inspections typically cost $300 to $1000.
3. Get pre-approved for a mortgage
Get pre-approved by a lender for a specific loan amount. Talk to a mortgage broker or a mortgage specialist at your bank or credit union. At McAllister Real Estate, we can direct you to our preferred lender, CMG Mortgage Inc. Explore different loan options and decide what program is right for you.
4. Look at properties
I’ll work with you to help you determine the features and benefits you want in your home. We’ll consider pricing, location, size, layout and features that are important to you. Decide what you’re willing to compromise on and what you aren’t.
5. Make an offer
We’ll look at recent sales, current buyer activity in the area and the value of the property in its current condition to determine how much to offer. The offer is comprised of the purchase price, the terms and the timelines of the agreement. The seller can accept it, reject it or make a counteroffer. I can help you navigate this process.
6. Order an inspection
There is typically a ten to fourteen day period to allow for inspections. We’ll schedule an inspection with a reputable home inspector to do a thorough investigation of the home. The inspector will provide us with a list of findings. Together, we’ll determine which issues are potentially significant.
7. Negotiate a final offer
After the inspection, there is often another round of negotiations for credits or fixes. This is your opportunity to ask for a credit for work that needs to be done. Remember to focus on potentially bigger issues, such as a new roof, and not repairs that can easily be fixed, such as a leaky faucet.
8. The lender will order an appraisal
Your lender will arrange for a third-party appraiser to provide an independent estimate of the value of the home. The appraisal is based on recent sales of similar homes in the area and will help determine the fair value of the home. Once the mortgage underwriter approves the loan, you’ll receive a commitment letter that includes the loan terms.
9. Schedule the move
This includes packing the items you intend to move, giving notice if your renting, getting quotes for home insurance, transferring utilities, scheduling a mover, etc. I’ll help you create a detailed list of things you need to do to make the move as smooth as possible.
10. Closing Day
The lender will provide you with a Closing Disclosure at least three days before closing. This will show you the final loan terms and closing costs. We’ll do a final walk-through of the home and ensure all repair work agreed to has been completed. The closing typically happens at the title company.
Congratulations! You are now a proud homeowner. Enjoy your new home!
