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Imagine you are on your lunch break and you discover a new home on the market that seems to be a perfect fit. Later that evening you tour the home, but quickly realize you are one of four interested and two offers are already on the table. This is your dream home, you’ve fallen in love, but the sellers announce they are only accepting offers until noon the following day.
While the housing market will not always move as fast as it is today, it’s always good to understand the mortgage process (even if it’s just a refresher) so you're ready to take quick action. Being prepared may make all the difference.
STEP #1: GET PRE-QUALIFIED
Most Realtors and sellers will not work with a buyer until they are pre-qualified. Getting pre-qualified for a mortgage is typically free.
It will, however, result in a pull on your credit since the lender you are working with will need to review your credit history as part of the process.
: When the idea of buying a home becomes a real possibility, figuring out what you can actually afford (or what loan amount you can qualify for) can be a little tricky. It’s important to note that getting pre-qualified for a certain amount doesn't necessarily mean it is what is best for you. It is important to know how much you can realistically afford as every situation is unique. Make sure to take the time to understand the realities of your budget, as well as the potential costs associated with buying a house
STEP #2: MAKING AN OFFER
– To show that you’re serious about buying a home when you put in an offer you’ll be expected to include what’s called an earnest money deposit. The earnest money is a small advance you make toward your down payment to the seller and is typically 1-3% of the purchase price of your home.
: Ensure you want to purchase a home before you submit an offer. You may lose your earnest money deposit if you back out of the home purchase.
– A contingency is a situation or circumstance that you specify must be done before your deal is final and could save you from unexpected expenses later. Common contingencies include a home inspection, selling an existing home, appraisal and financing.
: Depending on the condition of the property, you may want to request repairs or make your offer contingent upon a successful inspection. It’s important to listen to the guidance of your agent as they will have sales data and local property values to help you make a reasonable offer.
STEP #3: PREPARING TO CLOSE
– If you choose a successful inspection as a contingency of your offer (highly recommended to help prevent any not-so-pleasant surprises once you move in), you’ll need to pay the fee out of pocket. Although the cost of inspections can vary based on many factors (the size of the home, location, experience of the inspector, etc.), typically you can expect to pay somewhere in the range of $300-$500
at a minimum. There may be additional fees if you decide to test for radon, mold, or asbestos.
– Your lender will have a professional evaluate the property to ensure that they aren’t lending you more money than your home is worth. If your appraisal
comes in lower than what you offered on the home (even if it is what the home was listed for), you’ll need to renegotiate the purchase price with the seller, bring a larger down payment to lower the amount you are borrowing, request a new appraisal or, in some circumstances, cancel the sale and pursue other properties.
STEP #4: CLOSING
– Before closing, you’ll receive a document from your mortgage lender called a closing disclosure. These documents include the final terms of your mortgage loan, what you owe in closing costs and your interest rate.
: Although you should put as much down on a home as you can comfortably afford (no borrowing from your emergency fund, folks), you could pay as little as 3% of your home’s purchase amount through a first-time homebuyer’s program (like the one TruStone offers).
Putting more down reduces the overall loan amount and, in turn, your monthly payment and the total interest you’ll be charged on your loan. It may also shorten the length of time you’d need to pay for private mortgage insurance, if applicable.
is a whirlwind of document signing for all parties involved in buying or selling a home and formalizes the change in the property ownership. When it’s all said and done, you’ll be the owner of your new home and you’ll be obligated to repay the mortgage. Some of the common expenses you’ll pay at closing may include:
- Credit Report.
- Underwriting Fee
- Appraisal Fee
- Flood Insurance (if necessary)
– If you are buying a home, you typically won’t need to pay a realtor’s commission. Instead, this is an expense taken on by those who are selling the property
: You can estimate about 6% of the home’s purchase price for this commission – something to keep in mind if you are also selling a home. To put that into perspective, that’s about $15,000 on a $250,000 home.
Buying a home can be a complicated process. TruStone Home Mortgage is here to help guide you through the process and make it as simple as possible. To start your home buying journey, let us help - Get started today!
Contents of this blog article are intended to provide you with a general understanding of the subject matter. However, it is not intended to provide legal, accounting, or other professional advice and should not be relied on as such. Information may have changed since the publication date. Equal Housing Opportunity