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Home buying Process
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Buy vs Rent
Homeownership brings a lot of added responsibilities, but it also may bring a lot of advantages. Financial gain, a secure place to raise your family.
o Your home may appreciate in value
o You can build equity to use for home improvement loans, education, and other expenses.
o Your home is your own, you can do what you like with it to reflect your style.
o You may save money at tax time by deducting mortgage interest and property taxes.
Talk to a Local Lender
o Complete a loan application to work on loan pre-approval. Lender may ask for items such as: paystubs, W-2s, bank statements, credit/debt information.
o They will calculate your monthly housing budget by taking your total income, then subtracting: Fixed expenses (car payment), variable expenses (credit cards, utilities), and monthly savings.
o 740+ credit score is the highest tier = best rates
o Understand “points” which is a predetermined fee similar to prepaid interest. It is paid to the lender to receive a particular interest rate and typically represents 1% of the loan amount.
o Pre-qualify for financing before you begin viewing homes
o Ask lender to provide monthly mortgage costs on a typical property you are looking to buy. Condo and townhouse (TH) and single family detached home (SFH) are very different. If you are undecided, ask lender to give you amounts for all.
o Ensure you get closing cost information which will be your down payment (if not using a VA loan) + closing costs which are approximately 3% the sales price.
o Fixed-rate mortgage: rate never changes over the life of the loan.
o Adjustable Rate Mortgage (ARM). ARM’s have a lower starting rate that may increase or decrease over time.
o Loan types: FHA, VA, VHDA, Conventional
o View "Beginning to Buyer" from Chase to learn more about the homebuying process
o After submitting a loan application, there tends to be a surge in incoming calls in the following days. Consider lowering the number of calls by opting out of credit and insurance offers and ensuring you are on the Do No Call List.
Upfront Costs
o Earnest Money Deposit (1-5+% the purchase price of the house)
o Home Inspection - $550-$800+ depending on house type, size, age
o Well & Septic Inspections - Varies
o Termite inspection - $35-$60 paid at closing
o Radon inspection - $125-$175
o Appraisal - $600+ (some or all may be pre-paid. Otherwise paid at closing)
Understand Who The Players Are
o Buyer(s)
o Real Estate Agent representing buyers ("Buyers Agent" or "Selling Agent")
o Lender
o Title Company
o Seller(s)
o Real Estate Agent representing sellers ("Listing agent" or "Sellers Agent")
o Home Inspector (and other inspections)
o Insurance agent
o Appraiser
View Properties
o What’s important? Schools, metro, walkability, trails, neighborhood with school-age children, parking, layout, walk-out basement, sunlight, carpet/no carpet, deck, fence, gourmet kitchen, etc. As you narrow this down, keep in mind the things you can change/update and not change.
o If you like a house see it during the day and at night. Look at entire neighborhood to ensure you will like it.
o View crime statistics for the neighborhoods you are interested in. You can search the county website for crime, or another one that you like. In order to have a baseline, look up your current and previous addresses first.
What Happens When My Offer Is Accepted?
o If your offer is accepted, you will put down your EMD immediately (wire, check)
What is an EMD? Earnest Money Deposit, 1-5+% of the purchase price. This is held by the Title Company until settlement and applied toward your closing costs/downpayment.
o After contract is ratified typically closings occur between 21-45 days, dependent on a variety of factors such as sellers & buyers preference and loan type. Cash offers can close well under 21 days.
o Arrange a home inspection, termites, radon (buyers agent will schedule all these)
o Review results of your appraisal (independent 3rd party, ordered by lender)
o Purchase homeowners insurance – make sure you have the lender requirements
o Prepare for closing by reviewing costs/fees with your mortgage loan originator
o Go to closing & sign docs
o Title officer will record sale
o Move into your new home!