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Process of Buying a Home

The Process of Buying a Home

Buying a home is the largest purchase most people will ever make. Homeownership has great benefits. Homeownership also comes with certain responsibilities.

Keys to Smart Home Buying

When you do find your perfect home, you may need to act quickly. That's why it's a good idea to make sure you have all your financial arrangements in order beforehand.

Before you start shopping:

  • Set a budget (a mortgage broker can help with this)
  • Plan for a down payment
  • Get copies of your current credit report
  • Become an optimal credit candidate
  • Get preapproved for a mortgage
     

Getting Your Mortgage Application Started

Shop for different Lenders by comparing Lender service fees, loan origination fees and interest rates, complete an Application and then compare these fees. 

Being pre-approved by a lender is the first step in starting your home buying process because it shows the seller that you are a committed buyer and financially capable of buying the property.

Keep in mind that pre-approval is different from pre-qualification. Pre-qualification is merely an estimate of what you may be able to afford. Pre-approval occurs when the lender has reviewed your credit and believes that you can finance a home up to a specific amount. However, neither pre-approval nor pre-qualification represents or implies a commitment on the part of a lender to actually fund a loan.

To get preapproved for a mortgage, you'll want to meet with a mortgage broker or lender, who will assess your credit and finances in order to determine whether you are financially able to purchase a home. Getting a preapproval letter gives you buying power when you're shopping around, since sellers prefer to contract with a buyer who has already qualified for a mortgage.

The Search Begins after you and I have received the Mortgage Pre-approval Letter

What if the Property is Distressed?

Sometimes, a home might hit the market at a bargain price due to previous financial problems. While you might be excited to "get a deal" on a property, there could be issues with the transaction and/or the property itself.

If a property is foreclosed, the ownership then transfers to the bank or lending company that financed the previous mortgage. In addition, the property is sold “As-is” meaning that the buyer accepts the property in its current condition. Also, in most cases the utilities will be turned off and will need to be turned on at the buyer’s expense for the property inspections during the inspection period.

Distressed properties can present a higher risk of title defects, so buying an owner's policy of title insurance at the time of purchase is important.

Understanding the Asking Price

Many factors influence the price that a seller expects to get for their home. While only you can decide how much you feel comfortable offering for a property, we can gather critical information for you regarding the factors that impact how much you should consider paying for the home. 

Negotiating the Offer and the Contract

You may make your offer subject to certain terms or contingencies, including securing of financing or perhaps the sale of your current home. You may also make the contract subject to various inspections by both you and professional inspectors. Most contracts include some standard provisions, such as property taxes, insurance costs and special assessments, which will be prorated between buyer and seller. Others outline what happens if the property is damaged before closing, or either party fails to go through with the sale. I will review with you every aspect of your offer. Together, we will plan a strategy for getting the most advantageous terms for you - the buyer - at the price you are willing to pay for the property.

Financing Your New Home

The financing process can take anywhere from 35 to 45 days. I'll be involved throughout the process to help it run smoothly. 

Inspections during the Option Period
Real estate contracts often contain contingency clauses that allow buyers to inspect the property.

The two most common types of inspection are:

    1. Wood Destroying Pest and Organisms (Termite) Inspection
       This inspection identifies existing or potential pest, dry rot, fungus and other structure-threatening infestations or conditions. The initial inspection fee covers only those areas which are accessible to the inspector. Inspections of inaccessible areas cost more and are subject to an estimate by the inspector. These inspectors must be licensed and can give estimates to correct noted problems, can make the suggested repairs, and can certify that the work has been completed. 

   2. General House Inspection
     
This inspection identifies material defects in the essential components of the property based upon a noninvasive physical inspection. There are no licensing requirements for someone to be a home inspector. These inspectors are not allowed to give estimates to correct noted problems, nor can the inspector perform any of the repairs.

Title Search Process
A title search spells out who has the right of ownership for a property. It is considered "clear" if there are no claims or liens against it. In order to make sure nothing will prevent transfer of the property to you, a title company will conduct a title search and prepare a preliminary title report that indicates what recorded matters affect the title to the property and if the title insurance company is willing to insure the title. At the close of escrow, the title company will issue an Owner's Policy of Title Insurance to protect you against losses that might arise from covered claims on the title.

Preparing For The Closing Costs
A home purchase is a complex transaction involving many parties and associated fees. In addition to your deposit and down payment, there are a variety of other costs involved in the close of escrow. I will go over the list of Closing Costs with you.

Benefits of Home Ownership

Homeownership has many advantages - both financial and personal. But buying a home is an important decision. Look at the benefits and the differences between homeownership and renting to better understand if owning a home is right for you.

What are the benefits of homeownership?

  • Tax savings.
    You may earn significant tax savings because you can deduct mortgage interest and property taxes from your federal income tax and many states' income tax if you itemize your deductions.
  • A more stable monthly housing expense.
    Your monthly housing loan or mortgage expense can remain the same for the life of your mortgage, depending on the type of loan you choose.
  • Equity.
    You may build equity in your home over the life of your loan, which allows you to plan for future goals like your child's education or your retirement.

 


How Much Can You Afford?

To get a quick idea of what you can afford to spend, multiply your annual gross income (before taxes) by 2.5. For example, if your annual household income is $50,000, you might be able to qualify for a $125,000 home. This is just a rough estimate - the actual number will vary based on factors such as your debt and credit history.

Mortgage lenders typically use the housing expense and debt-to-income ratios to more accurately determine how much you can afford to spend on your mortgage.

  • Housing Expense Ratio
    Mortgage lenders recommend that your monthly mortgage payment should be less than or equal to a quarter of your monthly gross income. This percentage can change based on the type of mortgage you choose and sometimes the area in which you're looking to buy.
  • Debt-to-Income Ratio
    You need to factor your other debts into determining an affordable monthly mortgage payment. Mortgage lenders look at whether your total debt is larger than 30-40% of your monthly gross income. Remember, debt is not just credit cards and student loans. It can also include alimony, child support, car loans, and housing expenses.

A mortgage lender, a housing counselor, or consumer credit counselor can help you better understand these guidelines. Before you talk to a financial professional, you can organize your financial picture by creating a budget. Don't forget that you also have to save for the down payment, closing costs, inspections costs, moving, and other related expenses.

 

The Excitement of Buying Property

Buying a home is an exciting and complex adventure. It can also be a very time-consuming and costly one if you're not familiar with all aspects of the process, and don't have all the best information and resources at hand.

One of my specialties is representing the best interests of the buyers throughout the home buying process.

My comprehensive, high-quality services can save you time and money, as well as make the experience more enjoyable and less stressful.

If you're like most people, buying a home is the biggest investment you will ever make.

So whether you're actively looking into home buying, selling your home, or just thinking about it, everyone wants to know what the current market trends are in their area. Why not take advantage of my experience as a local real estate market expert working on your side for The Woodlands, Conroe, Cypress, Montgomery, Tomball, Spring, Magnolia, Houston or Kingwood areas to make the most informed decisions you can, every step of the way?

 

 

 


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