While the real estate industry has had its challenges the past few years with low inventory and higher interest rates, it is still strong and robust. Whether you are a first-time homebuyer or a seasoned land-lord, it is still a good time to purchase a home.
The home-buying process has evolved through the decades. The day of purchasing a home with a handshake and cash-exchange is long gone. The federal government has rules and regulations to protect buyers and sellers, as well as their real estate agents and lenders. These rules and regulations can make the process seem a bit daunting. However, if you surround yourself with a good team, they will guide you through the process step by step to make homeownership a reality with minimal stress.
One of the first steps a potential home buyer can do is to get pre-approved. Find a lender that you feel comfortable with, whether they are a lending broker or are part of a bank or credit union. Purchasing a home is one of the biggest commitments you will ever make and the information needed is very confidential, so choosing a lender that you can trust and who is able to clearly explain and guide you through the process will help ease some of the stress.
A good lender will educate you throughout the process. If you don’t qualify to purchase a home on your first try, ask your lender what you can do to get qualified in the future. Sometimes it just takes a few tweaks in your credit and/or budget so you can try again in 6-12 months.
A good lender will help you decide which mortgage option is best for your situation. Whether it is a conventional, FHA, VA or USDA-type mortgage, a good lender will explain the pros and cons of each.
One home buying myth is that you need a lot of money for your down payment and closing costs. With some local, state and federal programs in place, you can purchase a house with as little as 3% down. There are even down payment assistance programs available that will cover most, if not all, of the down payment for qualified buyers.
In addition to the down payment, closing costs are another part of the purchase that some potential home buyers forget about or are unaware of. Closing costs include the fees charged by the lender, the appraiser, the title company and also include state and county filing fees. Closing costs are roughly 3%-3.5% of the loan amount, and some down payment assistance programs will cover most, if not all, of them for qualified buyers. In some cases, your real estate agent can negotiate with the seller to have them pay for some of the closing costs. Closing costs cannot typically be rolled into the loan amount.
Once you are pre-approved, find a real estate agent you can trust. A good agent will help you determine what characteristics in a property you need and what characteristics you would like but can live without. An experienced agent will show you properties that meet your expectations and budget, and they may be aware of a property coming on the market before it is listed online through Zillow or some of the other online listing services.
Once you find a property you are interested in purchasing, your agent will help you draw up an offer. The agent will present it to the seller. It may take a little back and forth, but once you settle on a purchase price and other details of the purchase, your agent will send a copy of the accepted offer to your lender to start the final stage of the home-buying process.
As they order the title work and the appraisal, they will let you know what else they need from you. Providing your lender with all the requested information and documentation as efficiently as possible will help avoid delays in your closing. The title company that you and your agent choose will also reach out to you to get some additional information.
During this period, you will be responsible for lining up homeowner’s insurance on your new property. Get quotes from a few different agents and choose an agent with whom you feel most comfortable.
There are a lot of real estate scams going on, so be cautious when answering phone calls, emails or text messages once you start the pre-approval application process, and until well after you close on the purchase of your new home. If you get any calls, messages or mailings that you are not certain about, ask any one of these members on your team about its legitimacy. The scammers use very sophisticated tools to try to get to you, no matter if you are a first-time homebuyer or not, so be diligent in weeding out the good information from the bad.
For some programs, first-time homebuyers and first-time landlords are required to take a Home Buyer Education course. There are a few different courses available, including free, self-paced, online courses. Not all courses are approved, so be sure to check with your lender before taking a course.
Buying a new home is exciting, rewarding and fulfilling, but it can also be intimidating. Surrounding yourself with a good team is the key to a smooth and successful transaction, and referrals are one of the best ways to find a good team. Ask friends, family and co-workers about their home-buying experience to help you determine who you want to represent you and enjoy the process with as little stress as possible.
Rhonda Adams is a Loan Originator at North Shore Mortgage.
