Even though these steps are already listed on another tab on my
website, I thought it couldn't hurt to also blog about the steps since I
seem to be working with so many buyers right now, which is great
because it is only January, interest rates are still low and Austin is
still doing great!
I love working with buyers.
always a few obstacles, but there's something about researching to find
the best option for my clients that I love (of course, there are always
those who have already done their homework online and know what they
want), but I'd say the hardest part is the "break up." I mean it is kind
of awkward. You spend so much time emailing, discussing options,
driving and looking at properties together, then you make an offer, wait
until it closes and then that's it. I don't really see or hear from my
clients anymore but always want to and try to keep in touch. I guess it
could be considered a "friendly/on good terms" breakup, and those are
the best kind.
First off, before the 8 steps, can I just add that
due to the financial situation we are in (the "lending crisis", the
"housing crisis" you hear mentioned on the news), lending regulations
and guidelines have strengthened and there is a lot more red tape that
comes into play when getting a home loan. Austin and Texas in general
have remained strong and economically are better off than the rest of
the US...so that is always good to hear.
For example: you will
want at least 3.5% saved up to put down on a home...and really, you want
more, for 1. reserves and 2. closing costs.
How will I know what I am approved for?Â
A lender will tell you based on income, debt to income ratio and overseeing your credit and employment history as well.
Is it ok if I talk or shop more than one lender?
Absolutely. You can always start with your bank (if you have banked
with them for a long time), but in my personal experience have found it
is better to deal with a mortgage broker. Often times I recommend a few
lenders to any first time buyer, whom they feel more comfortable with
regarding confidence, personality and rates is up to the buyer to move
forward with in helping them process their home loan.
What are closing costs? And what do they usually run me?
Closing costs are "the cost of doing business" and the money you need
to bring at closing (when signing a million documents to your new home
Estimate for closing costs 4-6% of the sales price. It
will vary if a seller or buyer pays for closing. Often times if a seller
refuses to pay for closing costs, a buyer can roll it in to the price
of the loan, should they not want to bring that much to the table (aka
What else will I need to prove to buy a home?
Depending on the loan program, you will need a credit score around 640.
If your credit is lower, than often times it can take someone reviewing
your credit report, and anywhere between 3-9mo to establish better
Tips for maintaining great credit: Several
different lines of trade (i.e credit card, car payment, furniture
lines). Paying on time (this is the BIG one, that can really hurt you if
late). Paying over the minimum amount. No delinquencies. Keeping your
credit card balances at 30% or less of the total limit. If you have a
credit card open, but never use-charge at least one item per month on
the card and pay it off. Lines of trade that aren't recent (the longer
established lines of credit show that you can month after month manage
credit, pay on time and be responsible for your charges). No debt in
What are some other costs, as a buyer, I will be expected to pay?
Once you find the home you like, it is a very good idea to get in professionally inspected.
You are looking at a few hundred dollars, depending on the size of the
home, and arranged between the buyer and inspector. Even if the home was
recently pre-inspected, it is always a good idea to still get another
Also, the appraisal. Once under
contract and inspection looks good, the lender will need to make sure
the home they are about to lend on appraises for that amount, this is
usually charged to the buyer as well and arranged between buyer and
You will also need proof of income. Independent
contractors and small business owners/people who work for themselves,
need to have income proof of at least two years to buy a home. Steady
income can be hard to prove to receive a loan, so make sure you keep an
accurate track record of your finances, while also accounting for taxes
and saving for your first home purchase. You also don't want to make a
big career change right before you buy (after perhaps), but if you do
decide to make a change, it is much easier and more explainable if in
the same field.
So, you have had steady income, your credit looks
stellar, you are tired of apartment living and rent going down the
drain, what's next?
Steps To Buying Your First Home:
1. Decide to Buy
is never a wrong time to buy the right home. The key is finding a good
buy and taking the time to carefully evaluate your finances.
home purchase is an important step in the path to long-term wealth.
Purchasing your own home is a great investment that provides specific
financial advantages, including equity buildup, value appreciation
potential and tax benefits. It's also an automatic savings plan that you
cannot get from renting!
- You don't have to know everything. Let me help you and walk you through the process.
A great real estate agent will:
- Educate you about the current conditions of the market.
- Analyze what you want and what you need in your next home.
- Guide you to homes that fit your criteria.
- Coordinate the work of other needed professionals throughout the process.
- Negotiate with the seller on your behalf.
- Check and double-check paperwork and deadlines.
- Solve any problems that may arise.
3. Secure Financing
your lender will pre-approve you for a certain amount, but YOU will
decide what you're comfortable paying every month. Remember, your lender
only sees your finances on paper. It's up to you to decide how much
you're willing to stretch your budget in order to get into your dream
Be sure to follow these six steps to financing your home:
- Choose a loan officer (your agent may be able to recommend a few)
- Complete a loan application and get PRE-approved.
- Determine what you want to budget monthly and select a loan option.
- Submit to the lender an accepted purchase offer.
- Get an appraisal and title commitment.
- Obtain funding at closing.
4. Find your Home
you are pre-approved and ready to begin your search. But how or where
do you begin? There are a lot of homes out there and diving in without a
guide can become overwhelming and confusing. A great agent will help
you more accurately pinpoint homes that fit your criteria and budget.
The right home will meet all your important needs, and as many of your
additional wants as possible. An agent can guide you in the right
direction if you are unsure.
You'll learn as you look at homes, your priorities will probably adjust along the way.
5. Make an Offer
you've found a home you love, the next step is making a compelling,
educated offer. While emotions are probably in high gear once you've
found a home you love, it's important to remember that a home is an
investment. Your agent will research similar properties in the
neighborhood to help you determine the market value, and fair price, for
your home. Look to your agent to explain and guide you through the
- 3 basic components of your purchase offer: price, terms and contingencies.
- Price is the dollar amount you are approved for, willing and able to pay.
- Terms cover the other financial and timing factors that will be included in the offer.
are clauses that let you out of the deal if the house has a problem
that didn't exist or which you weren't aware of when you went under
contract. They specify any event that will need to take place in order
for you to fulfill the contract.
6. Perform Due Diligence
because you love a particular property doesn't mean that it's perfect.
In fact, this is where reason has to trump emotion. You'll need to have a
property inspection (which your agent can recommend a few, and they
will go over their full report in detail and any hidden issues). This
way you'll know what you are getting into before you sign closing
- Your main concern is the possibility of structural
damage. This can come from water damage, shifting ground, or poor
construction when the house was built.
- Don't sweat the small
stuff. It's the inspector's job to mark everything discovered no matter
how large or small. The inspectors report may be long, but, things that
are easily fixed can be overlooked for the time being.
- If you
have a big problem show up in your inspection report, you should bring
in a specialist and if the worst-case scenario turns out to be true, you
might want to walk away from the purchase.
- Even if your home
passes inspection, you'll still need to buy a home owner's insurance
policy that protects you against loss or damage to the property itself
and against liability in case someone sustains an injury while on your
made your offer and have completed the inspection process, you're in the
"home" stretch! But, in order to ensure that you don't put your closing
date, or your mortgage at risk, you have a few pre-closing
responsibilities that you'll need to be mindful of. These include:
in control of your credit and finances. If you are tempted to make any
large purchases during this time, it's best to talk to your lender
- Keeping in touch with your agent and lender, returning all phone calls and completing paperwork promptly.
with your agent at least once or twice a week, and verifying with your
lender that all mortgage funding steps are completed.
- Conducting a final walk-through of the home with your agent.
with your agent, home insurance professional, and lender that you have
the settlement statement, certified funds, and evidence of insurance
lined up prior to closing.
8. Protect Your Investment
and welcome home! The home-buying process is complete, but just like
any big process, there's a maintenance plan! It's now your
responsibility, and in your best financial interest, to protect your
investment for years to come. Performing routine maintenance on your
home's systems is always more affordable than having to fix big problems
later. Be sure to watch for signs of leaks, damage, and wear.
remember, just because the sale is complete, your relationship with your
agent doesn't need to end! After closing, your agent can still help you
- providing information for your tax returns, finding contractors and
repair services, tracking your home's current market value and when you
are ready to buy again and sell!
I reiterate these steps on my website
as well, and maybe all this reading can seem quite overwhelming, but so
long as you are ready to take on the financial responsibility, and can
afford to, as I mentioned before--there's never a bad time to buy the
right home. You can find reviews from some buyers (first time as well),
by clicking on my reviews on the Zillow website here!
First time and in the Austin area? Call me
, I am happy to help and walk you through the process. I love helping buyers.