The following post is brought to you by the folks at FM Lending with Hugh Page as Contributor. Thank you, Hugh!
If you understand this going in, follow some basic steps, and utilize the services of good real estate professionals you can make the process go much more smoothly
As we enter 2012, housing is more affordable than ever, especially here in the Triangle. However, buying a home can be an emotional, time-consuming, and complex process. The process is experiencing unprecedented changes on an ongoing basis. This makes it difficult at best, and mind-numbing at its worst. However, if you understand this going in, follow some basic steps, and utilize the services of good real estate professionals you can make the process go much more smoothly. FM Lending Loan Consultants are skilled at helping you through this process. Let’s talk about some of these basic steps:
Step #1 – Check your credit.
Credit scores are not the sole determining factor in whether you are approved for a mortgage but they can be the only factor needed to turn you down.
Credit scores are not the sole determining factor in whether you are approved for a mortgage but they can be the only factor needed to turn you down. Meet with an experienced loan officer to start the application process to determine if you qualify. The loan officer can run your credit report (preferably from all 3 major bureaus) and review it with you. If there are errors or things that need to be addressed, it’s much easier to address them before you have found a house.
If you know that there are a few blemishes on your credit, be prepared to write a written explanation for them and indicate why they are there, and why you are a still good credit risk. Lenders look at your credit to determine how likely you will pay back the loan. If you had extenuating circumstances – like a loss of a job or medical bills – let them know and provide documentation if possible.
Step #2 – Get approved before you buy.
The majority of sellers now require pre-approval or pre-qualification letters to be submitted with offers anyway.
An approval means that a lender has reviewed your credit history (all 3 major bureaus), verified your income, assets, and employment, and has approved the basic aspects of your loan before you have found a home to purchase. At this time the loan officer will discuss with you the type of mortgage you can be approved for and also the price point, cash needed for closing, and payment level that fits your personal goals and objectives and borrower profile.
Getting approved in advance gives you an advantage over other buyers. If you were the seller, who would you rather deal with - a buyer who already has basic loan approval or a buyer who still needs to go through that process? The answer is of course obvious. The majority of sellers now require pre-approval or pre-qualification letters to be submitted with offers anyway. Start this process early.
Some lenders give you a simple pre-qualification which may sound official, but it is really just getting an idea of what you can afford. A loan officer plugs in a few numbers from you – your monthly income and your monthly debt – and calculates an affordable payment. This payment allows a basic approximation of the price range you can afford. No information is verified. Because your assets, income or credit are not verified, a pre-qualification has much less value to you.
Step #3 – Find a great buyer’s agent.
A buyer’s agent on the other hand has a fiduciary responsibility (meaning legal duty) to you.
Traditionally real estate agents represent the seller in a transaction. When you are not working with a buyer’s agent, they are unable to negotiate the best price or contingencies for you according to North Carolina real estate laws. A buyer’s agent on the other hand has a fiduciary responsibility (meaning legal duty) to you. Before working with an agent, establish if they are a buyer’s agent or a seller’s agent. After spending a lot of time with a Realtor, it’s natural to feel like you’re a team. But if they are not negotiating for you, then they are not on your team. FM Realty’s market share leading team of “buyer’s agents” are here to help.
Step #4 – Learn about the neighborhood.
Often times the house you find may be in a neighborhood that you’re not familiar with, which is ok. It just means that you’ll have to do a little more research. If you find a house that you like, ask for a list of the neighborhood properties that sold in the last year. How does your home rank? Is it at the top of the price range? If so, it might be hard to resell later on. Is it average or on the low end? If so, great – as the other home prices go up in value, they may pull your home’s value up as well.
Check out the schools- are they well regarded? A good school district means your
Would you like to live near a public park?
neighborhood will always be valued by families which are a great reassurance to purchase, not to mention the value-add if you have school-age children.
Next, contact the police station and obtain crime statistics? Are they acceptable to you? Sometimes, if they won’t give them to you, it could be a cause for alarm.
Talk to the neighbors. The more people you talk to, the better sense you will get of who makes up the neighborhood and how they will effect your time spent in it.
Check out the location of the shopping, police and fire stations, schools, and air traffic overhead. These are all things that might affect your property value or quality of your life.
Step #5 – Protect Yourself.
Ask your Real Estate professional for a copy of the documents you will be asked to sign if you decide to buy the house. Make sure to review any Covenants or Restrictions if you are looking at a Planned Unit Development with a Homeowners Association. Read them ahead of time so that you’ll understand the questions that you will be asked, the things you need to know, and the decisions you will need to make.
Step #6 – Have reasonable expectations.
Market value (the value of a home) is the price that a willing buyer and a willing seller can agree to
A lot happens once you get into the actual process of negotiating a price, signing a contract, completing your loan process, completing inspections and finally closing. Know ahead of time that there will be many demands asked of you to fulfill requirements of the contract and complete the underwriting and processing of your loan package. Everyone’s goal is to get you closed with as little headache as possible.
Emotions are high for both buyers and sellers. – The seller may have loving memories and years of sweat equity in the house. Maybe they are being relocated and don’t want to go. Understanding their motivations for selling will help you appreciate their situation and predicament during these emotional times.
There is a lot of money at stake for all the parties involved. Just remember that market value (the value of a home) is the price that a willing buyer and a willing seller can agree to. If you can not agree on a price, ask yourself:
- Is there something you missed?
- Are there comparables that support the price that they want?
- Are there motivations that might factor into the price they are demanding?
In the end, does it matter? What is the house worth to you today and what do you think you can reasonably sell it for based on the amount of time you plan to spend in it? Think about the answers to those questions before you make your decision and do your homework ahead of time. Also, remember, when you’re spending this much money to buy something so important in your life, there is not any dumb question you can ask. Ask it!
Owning your own home is a rewarding and fulfilling experience but getting to that point can sometimes be stressful. Follow these steps and the process should go much smoother. And, don’t forget; the Real Estate and Mortgage professionals at FM Realty are here to help you.
