What is the Process of Buying a Home?
Buying a house involves so much more than just touring homes and picking out your favorite property. Here are the five steps you should take before ever stepping into an open house.
Step 1 : Determine Your MAP
Determine your MAP (maximum affordable payment) to understand what you can comfortably afford. How? Review your assets and debt with a great mortgage lender like Ark, who will provide you with different loan scenarios to mesh with your other financial goals. Knowing your MAP allows your mortgage services advisor to help you effectively budget and will help ensure you only consider homes that fit within your means. Use Ark’s mortgage calculator to help you determine your MAP.
Step 2: Get Your Down Payment
The next step is to decide where and how to obtain your down payment. Depending on your loan program, the required down payment amount could be as little as 3.5% of the purchase price of the home. In some situations, the source of your down payment funds can be a gift from immediate family members. Discuss this with your Personal Mortgage Advisor and start the process of gathering your down payment.
Step 3: Make a List of Priorities
Your MAP will help you decide on other aspects of the home purchase: what size of home you can afford in what neighborhood and with which amenities. Now is a good time to decide your priorities. A home choice consists of location, condition and price. Naturally, everyone wants the home in the best neighborhood, in the best condition at the lowest price. Unfortunately, as a general rule, buyers can only get two out of the three. A home in great condition in the best neighborhood will likely not be available at a low price. Alternately, if you are willing to compromise on neighborhood or condition (a fixer-upper, foreclosure or short sale, perhaps? A regentrifying neighborhood?), you can negotiate a better price.
Start home shopping on the Internet. You’ll quickly get a sense of prices for different styles and sizes of houses in different areas. Photos and virtual tours will educate you as to the value you can expect at different price ranges. Then start touring various neighborhoods until you find one that meets your requirements.
Step 4: Assemble Your Purchase Team
Next, begin to assemble your Home Purchase Team. Aside from your lender, you’ll need a great Buyer’s Agent, an attorney and a residential home inspector. Start with the Realtor (a real estate agent who belongs to the National Association of Realtors) and he or she may be able to refer you to the others.
Why use a Buyer’s Agent instead of the Selling/Listing Agent you might meet at an open house? A Selling or Listing Agent represents the seller, not you. Their job is to maximize the seller’s profit. The services of a Buyer’s Agent, on the other hand, are normally free of charge to the buyer (they are usually paid by the Selling Agent who shares their sales commission), and is required to act as your fiduciary, putting your interests above their own. They will help you determine an appropriate price to offer for a home, based on recent sales of comparable homes in the area. They will guide you through the entire purchase process, from the first tour of the home until handing you keys at the closing table.
The home inspector is the person who will examine the home you intend to buy before you enter into a contract (in some areas, you enter into the contract first and have a pre-determined amount of time to get an inspection before things progress further). To find names of licensed inspectors who have conducted 250+ inspections and who are required to adhere to a strict standard of ethics, contact ASHI, the American Society of Home Inspectors.
Most buyers invest in a structural inspection, but others add on a pest inspection, an inspection for radon (an odorless but dangerous gas) and other precautions depending on the house in question (pool inspection, mold inspection, well/water inspection, etc.). If the inspection reveals issues concerning the home, a competent Buyer’s Agent will insist that the Seller remedies these issues or will help you renegotiate your offer to offset the expenses of curing these problems yourself.
When selecting an attorney, it makes sense to utilize one with an established real estate law practice and significant experience with local real estate transactions. Lawyers’ fees vary so shop around but remember, you often get what you pay for. A home might be the most significant purchase of a lifetime; don’t skimp on protecting yourself and your investment.
Step 5: Contact an Ark Mortgage Advisor
Only after you have determined your MAP, analyzed your budget, figured out the source of your down payment, established your priorities and assembled your team should you start venturing out and exploring the local home inventory. Armed with the best possible professionals, you’ll be in the strongest position to move forward and find your dream home.