There’s a lot to learn when it comes to buying your new home. NJ real estate adviser, Austin Smith, has simplified the process into four easy steps to guide you into your first successful home purchase.
Step 1: Financing
Get pre-approved for a mortgage: When you get pre-approved for a mortgage, you are telling the real estate world “I’m ready to buy my dream home!” This is why obtaining financing is the first and most important step to the home buying process. So, what actually happens when you get pre-approved? Your mortgage lender will take a look at your income, debts, and down payment amount to assess how much “Home” you can afford based on your financial health. Once you are able to prove your income and credit history, your lender will provide you with your pre-approval letter that will be valid for about 90 – 120 days.
- Conventional – This is the most commonly used type of mortgage. They generally requires 10-20% of the purchase price as a down payment, while financing the remaining balance.
- FHA – This type of mortgage has become extremely popular over the years. Primarily due to its 3.5% minimum down payment incentive which allows individuals who may not have a lot cash for a down payment to still have the opportunity to own a home. While an FHA loan allows you to borrow more than the conventional 80% of the purchase price, the government requires that you pay PMI (Private Mortgage Insurance) which can add to your monthly mortgage payment.
- FHA 203k –This is similar to the FHA loan, however it allows you to roll in the costs of any repairs and/or renovations into the amount of the loan. You could finance the costs of those repairs and renovations into the mortgage amount costing you nothing out of pocket to make your dream home come true. Cool isn’t it?
Where to get your pre-approval: Finding an entity to provide you with your mortgage is one of the easier parts of the process. They’re usually right within your own network. The two most commonly used are your local bank or a mortgage officer.
Step 2: House Hunting
Set up your wish list: Knowing your own specific wants and needs is the essence of the home hunting process. Figure out your must-haves, Like-to-haves, and hell-no’s? This is a great starting point for you to get a good idea of what you’re looking for in your new home.
Searching for homes and condo’s online: Over 90% of Americans begin their housing search online. I recommend using realtor.com, which takes data from the Multiple Listing Service. The data may be delayed a day or two, but it provides ongoing information and is a useful tool. You can also use my app to search for homes! Click this link to download my app.
Step 3: Submitting an Offer
An important concept to remember when submitting an offer: The ultimate goal is to find your dream home at the price you’re willing to pay. Keep in mind that in hot markets, multiple bids on a home can cause the selling price to be higher than the original asking price. It all starts with the purchase contract. This will highlight your offer price, inclusions you want, date you would like to take possession (closing date), and any other contingencies/conditions that are necessary for the transaction to go through. Once submitted, the seller will either accept, reject, or counter. At that point, we will either move on to attorney review, or counter until both parties are satisfied.
Step 4: Closing
The moment is finally here. You’ve done your home inspection, scheduled your appraisal, and have received your mortgage commitment from your lender. During this time, you’ll want to stay in heavy contact with your lawyer and lender as they’ll need a lot of information from you. The few days before the closing date are the most important. You’ll sign plenty of paperwork and will need to have a certified check for the remaining “closing costs” of your transaction. Your lawyer, accountant, or real estate agent can help you estimate your closing costs. Some of the things you can expect to pay are:
- Down payment
- Title and recording fees with Mortgage and Deed
- Lender fees (application fees, appraisal fees, loan originator fees, etc.)
- Adjustments/Proration’s (prepaid taxes, utilities, etc)
- Lawyer fees
For a detailed list of items and costs associated, download my First Time Home Buying Guide CONGRATULATIONS! You just purchased your new home!
For more information, contact Austin at firstname.lastname@example.org