Buying a home? Here are what you need to know
Buying a home? Here are what you need to know from getting a mortgage to closing. Buying a home is a measure step, and could be largest single transaction for most people. If you are planning on purchasing a house, you should plan ahead and know what to expect to avoid any surprises. We have put together a guide for you for everything you need to know when buying a new home. If you owned a home before, you are somewhat familiar with buying a house process. That being said, when it comes to buying, selling, or transacting in real estate, there is no one size fits all. Every real estate transaction is unique and there is a lot of factors can vary. Learning about buying a home is always good idea to know what to expect and plan accordingly. Purchasing a home will require down payment, and if you don’t have the down payment ready here are few tips to help you with saving for the down payment, as well as where to start the home buying process.
Check your credit
Most of lenders consider lending you money for a home loan when you have a credit score of 640 or higher. To get low interest rate however, you need to have higher credit score and low DTI ratio(Debt To Income). Higher your credit score is; lower your mortgage monthly payment is, and in many cases it helps with the down payment as lenders consider you trustworthy for your new home loan. While shopping for a home, don’t open any new accounts, or have any measure purchases with new credit cards or department store cards, etc.
Find a Realtor, or a lender
The reason we said realtor is because most realtors have loan offices/lenders in their network. As most of our agents have local home lenders in their network which will make it very easy process for you. As reacasa.com is one stop shop for all real estate transactions, we have realtors, home lenders, contractors, home inspectors, etc. in our network. Have a list of what you must have in a home and what is good to have in a home. Narrow down the search and schedule some tours to homes you have seen online that you liked.
See how much you can qualify for a loan: One of the last thing you want when buying a house is to find a house that you like, and don’t get the house because you didn’t have your finances in order. Submitting your pre-approval letter with your offer it makes all the difference. It makes the difference between getting the perfect house that you have been looking for, and not getting it. Pre-approval letter lets the seller know that you are serious, and done some work prior submitting an offer. When you get approved in advance for your mortgage, you save time in paperwork when you find the house you been looking for. Moreover, home sellers will look at your offer very close and take your offer seriously.
Start saving money early for the down payment: We all know it is hard to save money trying to buy a house as we try to pay off basic necessities; however there are things you can cut off that will put you on the right track, such as dining out, unnecessary spending, over spending on groceries, travel, etc.
Do some research for down payment and loan options: With a competitive lending industry and everyone trying to earn your business, sometimes it is hard to tell if you got the best rate for your mortgage. We highly recommend that you talk to one of our local lender in our network, as they have unmatched knowledge of local, state laws, rules, and regulations. Our local lenders will represents you all the options, and you determine what is best option to fits your needs. As we mentioned that, one measure factor will determine your interest rate; your credit score. Higher your credit score is a long with low DTI (Debt To Income) ratio, the lower your interest is, therefore, lower monthly payment, and in some cases helps with the down payment amount.
Find out if there is a state or local assistance programs for down payment: There are many programs on local, state and federal level that will provide down payment assistance programs for home buyers. The home must be for primary residence. There are income requirements. check with one of our local lenders for more details. Our lenders will presents all your options and they will make it easy for you to make the decision.
Determine how much you can afford for a home loan: Putting out a budget for you expense to determine how much you can afford for a loan is a wise choice. It is always great idea to know how much you can afford for a loan beforehand so you won’t have any surprises after purchasing the home. Check out our tips on how much you can afford for a home.
The housing market: One of the key factors in timing a house sale or purchase is what the real estate market is doing in your local area. This is a vital part of your strategy; whether you are moving across the street or to another State, you will need to take account of this when you put your home on the market or looking to buy a house. The amount of time it takes to simultaneously buy and sell a home is affected by the position of the local housing market. One of the easiest ways to find out about this is to find a experienced buyer’s agent. They will have their finger on the pulse and understand the complexities of the real estate market in your area.
Buyer’s Or Seller’s Markets – What does this mean? You will often hear people talk about buyer’s or seller’s markets when it comes to real estate. As with any other industry, real estate likes to use its jargon. This is what each type of market will mean for you:
Buyer’s Market: Based on supply and demand for the homes available in the market. The number of homes available exceeds the number of people wanting to buy them. This means that if you are looking for a new home you will find it more easily than you will be able to sell your old home. Often you can negotiate with the seller of the new home to place a ‘contingent offer’. This means that you will buy their house only when your own sells. This is covered more fully later on. If you find yourself in a buyer’s market you can:
- Make a sale and contingency offer
- Ask for an extended closing date
Seller’s market: The number of people looking to buy a home exceeds the number of homes on the market. This means your home will sell quickly but it will take longer to find a property to move to. One of the options open is to talk to the buyer to see if you can rent the home after closing until you can purchase a new home. This is known as a ‘rent-back’ arrangement. If you are in a seller’s market you can:
- Make a sale and contingency offer
- Ask if the buyer will undertake a rent-back agreement
Find a real estate agent with plenty of experience: Both buying and selling a property can be complex; even more so when you are selling one property and buying another house at the same time. House buying can be a stressful and overwhelming process so, always choose someone with a lot of professional experience to help you. The right real estate agent will work with you to set the market value for your current home. Additionally, they can discuss strategy, timing and help you negotiate a good deal both when selling and when buying a house.
Stay aware of financial matters: Once you have your agent and they have brought you up to speed about what is happening in your local real estate market you will need to sort out finance. Now is the time to talk to a financial planner and a mortgage lender to sit down and crunch the numbers. You need to be practical about what is feasible based on the equity in your home, your liquid assets and any loans you can take out. Once this is all established and clear you will see which path offers the best opportunity for you.
If you are selling, and buying at the same time. What is your home’s resale value?
This is something that will be included in your financial discussion. To find out what you can set as a reasonable sale price for your home it is worth while investing in a pre-inspection. This will highlight any work that you should do before selling the house so that you can get a higher market price. If you cannot do the work, the pre-inspection will help decide how much of a concession you will make to any potential home buyer. This information gives you insight into how much you can reasonably expect to receive for your home in the local real estate marketplace.
Determine the amount of equity you have in your home: If you already have a mortgage on your home you will need to establish how much equity you have. To determine this you simply look at the current market value and then take off the amount you have remaining on the mortgage. In real estate terms this sum is known as ‘equity’ and is not available for you to use until after the sale closes so you need to make sure you can purchase without using it.
Buying a new house before you sell: You may decide you want to buy your new home before you sell the one you already own. If that is the case, you have a variety of options:
Make a sale and settlement contingency offer: This means you can focus on finding the perfect new home before you list your current home. If you submit a sale and settlement contingency when you make your offer you will only finally purchase the home when you have sold your own. In this scenario, the sellers will usually be able to accept other offers but if they do receive another you will be informed and given the chance to buy even if your original property remains unsold. This does not usually work well in a seller’s market when they are likely to receive other offers.
Ask for an extended closing date: Depending on the local housing market and your confidence that your house will sell reasonably quickly, you could ask the seller of your new home to extend the close date. The normal period for closing is 30-45 days so extending this may give you enough chance to complete the sale of your own home and then use the equity to complete the purchase. This works well in a buyer’s market when sellers have fewer options.
Use your savings: If you are lucky enough to have a good amount of savings your life will be made a lot easier when it comes to buying a house. You can pay the down payment, buy your new home and then wait for the market to pick up and sell your old property. However, it is worth remembering that you will need to have some money available to cover the cost of closing, inspection and other expenses like home moving fees.
Use a Home Equity Line of Credit: Using a HELOC means you can borrow against your home to provide money that can be used as a down payment on your new house. Once your home sells you can pay off the HELOC in full. This is one way to buy a home without going into your savings, especially if you have equity in your home. If you want to find out if you have equity in your home, click here
Bridge loan: This is a short term loan which will cover the down payment and is taken out to ‘bridge’ the time between buying one home and selling another. These are available from some banks and, while it is a viable option for buying a home before you sell, it can be hard to qualify for a bridge loan.
Put your first home on the rental market: If you already have access to money for the down payment you could consider renting out your old home. The money you receive means you can cover the mortgage and wait until the market is favorable before selling.
Sell Your Home To Our Network Of Cash Buyers: This takes out a lot of the time consuming, stress-inducing processes involved with traditional methods of sale. You can put your home for sale on our network, and get instant offers from our cash buyer’s network. here
The benefits of buying before you sell:
- You can move immediately.
- You move once – this cuts out storage fees or rental costs for temporary housing.
- It takes the pressure off.
- You can stay in your own home as long as you need to and get a property you love.
The downside of buying before you sell:
- It puts pressure on you and it may result into taking a low offer.
- Contingent offers often fail in seller’s markets because of the amount of competition for buying homes.
- If your cash is tied into your home your offers may be less competitive so it could take longer to buy a home.
- Renting property brings its own set of challenges and having tenants living in the house can make it difficult to sell.
The benefits of selling before you buy a home: If you decide that you will sell your current house before you buy there are some things to consider to keep things running smoothly:
Make your offer with a settlement contingency: With this scenario, you will list your home and once you have an offer you start to look for somewhere to live. When you find somewhere you can submit an offer with a settlement contingency which means you will only buy the home when your existing property sells. This is a good strategy in a seller’s market because offers for your own home will probably come in very quickly.
Rent a temporary home: Of course, with this strategy you will have to move twice; once from your old home into a rental and then to your new home. However, it can mean a lot less stress when you close one sale before you start on another. The pressure is off and you can focus on finding a home you want to buy.
Ask for a rent-back provision: This allows the sale to go through but means you can stay in the home by renting it from the new owners. These rent-back provisions usually last around 60-90 days and give you the chance to shop around before you buy your new home. As you have sold your house you have access to the money that you made and can use this when looking to buy a house. This option is good in a seller’s market because buyers need to stay flexible to get the house they want to buy.
The benefits of selling before you buy:
- You will have the equity in hand and available as a down payment when buying a house.
- The equity can be used easily in the new home.
- It can reduce a lot of stress to close one deal before focusing on another.
Best of luck with your house hunting venture!