- Home Much Can I Afford
- What type and where do I want to buy
- Choosing a Realtor
- Get Pre-Approved by a Lender
- Home Searching
- Negotiating and Getting Under Contract
- Complete a Home Inspection
- Find a Lender
- Closing Costs and Settlement
How Much Can I Afford?
First step is to find out how much home you can afford. In general your debts and housing costs should not exceed 36% of your pretax income. Ex. If you make $4,000 a month, your mortgage and debts should not exceed $1,444.
A quick and less accurate method is to take your total household income and multiple it by 3. If you make $100,000, you can most likely afford a $300,000 house. This method does not account for debt that you may have.
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What type and where do I want to buy
Location - The location is obviously a very important factor when buying a new home. A few blocks in one direction can increase or decrease a home value significantly. There are several things you will want to consider:
School District - A better school district can be a positive if you have school aged children.
Access to Transportation - Do you need to be close to highways, bus stations, and trains?
Safety - What is the crime like in the areas you are looking at?
Walkability - Do you want to be able to walk to stores and restaurants?
Type - The major types of houses in Central PA are the following (but there are others as well):
Single Family Detached
City Row Home
Single Floor Living
Choosing a Realtor
Selecting a Realtor is important. Some people choose a family member or friend due to trust. Others interview several Realtors and pick the most qualified. Buying a home is one of the most important decisions you will make in your life so thinking through your Realtor selection is a must. Don't rush the decision and don't pick a realtor because it's convenient. Find a Realtor who understands the market you are looking in.
Get Pre-Approved by a Lender
Getting pre-approved is an important step in the home buying process. You'll meet with a lender (either a direct bank / credit union or a broker) and discuss your financial situation. They will want to know your income and monthly bills and will also run a credit check. For a lot of people the credit check is the deciding factor of whether they can by a home or not. Lenders look for a credit score of at least 640. The higher the score the more friendly your lending terms will be. For example, less money down and lower interest rates come with higher credit scores. Here is an informative article from Zillow: Click Here
This is the FUN part! Your Realtor will set you up with automatic email notifications when a new property hits the market. If you are interested, you will let your Realtor know and they will schedule an showing. Some buyers see 20-30 homes before they make an offer. Other buyers make an offer at their first showing. If you are a first time home buyer you should resist the urge to be impulsive. See a couple homes first before you commit to anything.
Negotiating and Getting Under Contract
This is the STRESSFUL part! Unless you are a lawyer, negotiating a sales agreement will probably be stressful. Have a plan. Know what you want to pay. Don't get caught up in the moment and pay more than you should. This is where your Realtor will really help. They are experienced in negotiation and can give you great advice. This is why you hired them....... Let them help.
Complete a Home Inspection
After you and the seller have agreed to terms, you will probably want to complete a home inspection. This is your chance to get a professional into the home to inspect everything. You'll want to understand the mechanicals (HVAC, plumbing and electrical). Ultimately, you are trying to determine how much you'll need to spend in maintenance and repair over the next 5-10 years. Is the roof nearing it's life expectancy? What does the foundation look like? Will the appliances last? These are all questions you want to know before committing to anything. One huge advantage of working with SlateHouse is we are very experienced in home maintenance and repair. If the results of the inspection turn up a lot of costly repairs you can do one of 3 things:
1) Ask the seller you complete the repairs prior to purchasing the home
2) Ask the seller to lower the price
3) Walk away from the deal
Find a Lender
The lender is often overlooked when buying a home. The origination costs(up front costs), requirements, and interest rates can vary dramatically from one lender to another. Don't pick the first lender you talk to. Shop it around to at least a couple lenders. Pay attention to all of the little fees that they will charge you at closing. Most importantly, understand the interest rate on how it affects your payments.
Why is an appraisal important? Your lender will order an appraisal (which you as the buyer have to pay for). The bank wants to make sure that the house is worth what you are paying for it. The appraiser will compare the home with other comps in the area. If a neighbor sells a house under market value, it could potentially impact your home's value. If your home doesn't appraise at the sale price or higher, the lender will potentially not lend you the money depending on your down deposit. However, the seller also has a stake in seeing the property get sold. If the house under appraises, you can ask the seller to lower the sale price. If the seller says no, you can walk away from the deal assuming you have an appraisal contingency in the agreement.
Closing Costs and Settlement
Now that the house has appraised high enough and your loan has been approved, you'll be clear to close. At this point you should already be working with a settlement company. The settlement (or title company) company is a key part of the transaction and will make sure everything goes smoothly at closing. Their main function is to provide a clear title to the buyer and to make sure all of the fees are assigned properly. They will guarantee the home does not have any liens on it. Additionally, they will make sure all of the closing costs are calculated correctly. Eventually, you will get to see the final closing costs. Sometimes this will only come a couple days before settlement. Make sure you understand all of the line items because mistakes are sometimes made. The settlement sheet can be difficult to understand; for example some items like taxes and utilities are prorated. Commissions, fees, and other misc. expenses will all appear on the settlement sheet.
contact slateHouse group for more info from a local real estate agent who can help you along in the process.
email us at: Service@slatehousegroup.com
Call us at: 717-220-0201