So, you’ve decided that buying a house is better than renting. Here are some things you can do to hurry up and un-complicate the process.
There’s a list of documents you’ll need to get started before house hunting. Get a preapproval letter from your chosen lender so your house hunting will be more efficient. This means that a banker will verify your information to give you an accurate amount to spend on a home. Once you really know what you can afford, you won’t waste valuable time looking at a house listed for $350,000 when you can only afford $200,000. In an industry that has gone through so many changes, preapprovals are highly recommended and often necessary to buy a home now. You can even use a mortgage calculator to see how much payments will be based on your preapproval. More reasons to get preapproved before you house hunt:
- Your agent will help you find a house that matches your needs, and sellers will take pre-approved bids more seriously because of the streamlined process.
- You’re a step ahead of other buyers. Preapproval means the money you can offer on a home is solid – so there are no surprises when financing the house!
- This also means that sellers who have gone through the long process of listing their home can effectively move on and go to their next home easily; everybody wins!
Work with an agent who cares about matching your needs, not just selling you any home. We all know real estate agents use the words “cozy” and “quaint” to mean a small and old house. An honest agent will match your budget to a house that you can love, whether that’s big or small.
When house hunting, consider:
- Proximity to work or school, and quality of schools in the area (which is a good indicator of crime and job growth).
- Shopping districts nearby, hospitals for emergencies, desirable neighborhoods and the traffic around the area.
- Many people don’t stay in a home longer than seven years, so if it’s your first home, buying a starter house to begin with may be great for right now (and you can go smaller to save money) so that later on, you’re more prepared for a growing family. Maybe you don’t need a home next to a school if you don’t have kids, but it might help your resale value later on.
- Know that you won’t find every single feature you’re looking for in a home, but creating them can be exciting! If you’re not willing to make the upgrades yourself to customize your home, hire someone to do it for you!
Bid on the house. How do you know what to pay for a house?
- Look at a list of recent comparables – similar houses that were recently sold, for their prices. This is important because a $500,000 house in Miami is not the same size house you can get in Ohio for the same price. Knowing what a house sells for in your chosen area will help you now and also if you decide to sell the house later.
- How is the housing market? If there are dozens of buyers interested in a house, the price may stay firm. Are there a lot of houses for sale in the area? You may have some negotiating power to lower the price.
- What shape is the home in? If it’s in rough shape, perhaps needs a new roof, doesn’t come with appliances, and the flooring is ripped out, the house is clearly not worth the same amount as comparables in the neighborhood with newer features.
- Lastly, how badly do you want the house? If this is your dream house and you can’t let it go, don’t bid too low.
- All offers should be contingent upon a home inspection which can indicate potential repairs needed (you should be there for the inspection!), and there’s even a growing trend of buyers wanting an appraisal before buying, too.
Once you choose your lender and find your house, your purchase agreement is sent to the banker so you can lock in your rate and determine what type of loan is best for you, like an FHA, 30-year fixed or 10-year ARM. You’ll now be going through the underwriting process. This is how it works. At every point of the process, you’ll get a good faith estimate, which shows your estimated costs for closing the loan and the cost of your mortgage.
You’ll need a variety of documents to send your lender to prove all of your financials match up with your loan amount. Lots of documents are required because of the extra guidelines since the market crash. In all reality, this protects you from defaulting on a loan that you can’t feasibly pay.
Before closing, secure a down payment. You’ll be paying anywhere from 3.5% to 20% (or more) for a down payment on the house. If you provide a down payment of 20% or more, you save by not paying private mortgage insurance, showing a lender that you are less likely to default on your payments.
At Quicken Loans, we’ll keep you in the loop the entire time. By sending in documents as soon as possible, you can close on your loan quicker and be in your house sooner.
Your lender will send a third party to appraise the house value. This is to ensure you’re paying a fair value for the house and not just what the seller thinks the home is worth. Sometimes, repairs need to be done on the house to meet local standards, but otherwise, after you’ve met all the conditions, you’re approved! A certificate of occupancy is ordered and closing will be scheduled between the two parties. A title company will come in to handle all the paperwork.
You did it (or you are mentally preparing yourself right now so you can do it)! In any case, congratulations, you’re on your way to owning a home.
Are you a first-time home buyer? Check out this elongated crash course in buying a home.