Guide to Buying Your First Home:

The task of buying the perfect home for you and your family can be a daunting prospect, with the necessary financial considerations a seemingly endless list of outgoings. So where do you start? You can make the process smoother by equipping yourself with the right information.

First and foremost you need to know how much you can borrow. Without this information your house hunting could turn out to be a big waste of time. Most lenders offer a pre-approval service in which you can find out exactly how much you can borrow, even before you begin your search.

Have a good idea of what you are looking for including location, size, type of dwelling and price. Don't be pressured into making a decision; take your time.

And, finally, take all the advice you can find. This is an important and expensive exercise so, once it's all over and done with, you need to be able to relax and enjoy your new home.

Mortgages

Probably one of the reasons that buying a home is such an emotional experience is because of the fact that not only do you have the actual house buying to deal with, but for most home buyers you also have the mortgage process to encounter. This can be a smooth and almost uneventful process, or an unnerving one. A great deal depends on the preparation of the buyer as well as the selection of an efficient mortgage company.

Finances

Here's some important advice: as soon as you have made the decision that you want to buy a house, one of your first steps should be to make certain that you have a clear picture of your financial situation. At a minimum, you will most likely want to do the following:

• Run a Credit Report to make certain that there are no discrepancies or problems in your credit history.

• Do an analysis of your current financial situation: where the money comes from (your total income) and where the money is presently going (your current spending). Develop a household budget for your current situation. Get into the habit of using it on a consistent basis!

• Keep your spending patterns in check.

• Do an analysis of how a house purchase will affect your budget. Be sure to factor in not only mortgage payments (including insurance and taxes) but also funds for items such as repairs and maintenance.

• Begin to gather items such as: last 3 years Income Tax returns, current copies of pay stubs, records of any past derogatory credit history that has since been paid off, and records of any supplemental income you may have. If you are self employed, you will need all business records and tax returns for the last 3 years. Having these items close at hand will save an enormous amount of time when the Mortgage Company begins to ask for them (and ask for them they will!)

• If it is possible to do so without adversely affecting your down-payment situation, pay off minor debts. The less debt you have the easier your Mortgage "sailing" will be.

• Do not incur any new debt. Many mortgage applications have been stopped in their tracks because the applicants had decided a week before the application that a shiny new car with a big finance or lease payment would look just perfect in the driveway of their new home. Since mortgages are based on debt to income ratios (the amount you pay out monthly versus the amount you bring in) a newly acquired debt could be enough to throw the ratios off and make the mortgage unobtainable.

Real Estate Offers

One of the most common misconceptions among home buyers occurs when it comes time to making an "offer" or a "bid" on a home. Many believe that even though they have tendered an offer to the sellers, that their options are still open. To some degree, this is correct. If the seller rejects the offer, counteroffers it, or simply does not respond, options are still open. You, as the buyer, can accept the counteroffer, make another offer, or simply move on.

If, however, the seller accepts the offer (and you are notified of its acceptance) then a legally binding contract has most likely been struck. In the majority of cases and localities, there is not even the need for additional paperwork - the signed offer becomes the contract. Your options now are more of the "do we want to paint the master bedroom before or after we move in?" Once the offer has been accepted, the "lets think it over just a little bit more" phase has passed. This is why it is crucially important to make sure that all of your bases are touched and all of your intentions made clear in the offer - it can become a binding contract in the blink of an eye and a stroke of the seller's pen.

Items to address in an offer

• Some of the items that need to be addressed in an offer are:
• The proposed selling price (your offer).
• Any concessions you desire the seller to make.
• Any financing contingencies (for example, subject to you being able to obtain a satisfactory mortgage. You can go as far as to state maximum interest rates, specific terms, etc.)
• Any home inspection contingencies (for example, subject to an acceptable whole house inspection report).
• A clear definition of precisely what is to be included in the sale. Don't simply assume that items such as porch swings, fireplace doors and refrigerators are included. Doing so usually causes some unpleasant surprises on moving day. If there is any question, be specific!
• The amount of earnest money (your deposit) that is being tendered with the offer.

Home Inspections

Depending on the type of financing you choose, there should be either 2 or 3 separate inspections on the home you want to purchase. The first should be your own basic inspection; the second should be a professional whole-house inspection by a reputable person. Should you select a government loan (FHA or VA), the third inspection should come at the time of the appraisal, which to some degree amounts to a "mini-inspection." Do not, however, rely on this appraisal as your only inspection of the property!

We cannot emphasize enough the value and necessity of an extensive home inspection. Many home purchasers, either in the desire to save the $200 to $500 that a good inspection costs, or due to simple ignorance, have spent enormous sums of money repairing items that any good home inspector would have pointed out. Any offer to purchase you make should be contingent upon (subject to) a whole house inspection with a satisfactory report. Do not let anyone--not the agent, not your family or friends, and especially not the seller--dissuade you from having the property thoroughly inspected! Not only will you sleep much sounder after you have moved into the house, a professional inspection can give you an escape hatch from a contract on a defective house. If the contract is written contingent on an acceptable inspection, any defects in the home must be either repaired or monetarily compensated for. If you are not satisfied, you have the option to cancel the contract.

Inspections are designed to disclose defects in the property that could materially affect its safety, livability, or resale value. They are not designed to disclose cosmetic deficiencies (for example, an interior wall that needs paint touch up). You will need to determine on your own those type of items that will need attention: don't expect a whole house inspection to reveal them to you.

Closing

After the searching for a home is done, the negotiations have been completed, the house has been inspected, and the mortgage has been applied for and committed to, the focus suddenly turns to the Closing, Settlement, or Escrow as it is known in some localities. For simplicity, in our discussions here we will refer to the process when it all comes together and you finally own the home as Closing. An understanding of the elements of and players in the closing, as well as a concise preparation for it, will eliminate many nervous hours as the day approaches.

What is involved?

It is the proverbial "signing on the dotted line:" the process of which will put the title to the house in your name, verify homeowners' insurance on the property, commit in writing to the terms of the mortgage, and usually, put the keys to the house in your hands. In general, you will leave the closing and go to your new home as a homeowner. The weeks and months of anticipation are all settled in the short amount of time that you spend at the closing.

Closing procedures will vary from locality to locality. In some areas, the buyers and sellers (as well as their Real Estate Agents) will all attend the closing. In other areas, only the buyers will be present. The closing will take place at the office of an Attorney, a Title Company, or an Escrow Company (again, there is some variance here based on your local laws and tradition). In general, though, the closing will be attended by all of the buyers involved and their Real Estate Agent, as well as the Closing Agent, who has reviewed all of the components of the house sale and who is the one who will say "sign here" more times than you have ever heard in your life.

Add This Page To Your Reading List: