Deciding How Much House You Can Afford
What do I do to get prequalified?
A prequalification can be done online or over the phone and does not require your submitting financial documents. You will be asked to provide basic information about your finances - for instance, your household income versus your debt load. With this information, the lender will estimate what your maximum loan amount could be if you were to apply.What about getting preapproved?
A preapproval is more involved and a real estate agent can help you prepare your documentation. The lender will perform an extensive review of your finances, requiring pay stubs, tax records, credit accounts, bank statements and more. This figure will not only be a more reliable estimate of what you can afford, but your preapproval also indicates that a lender is willing to do business with you, pending the purchase price, market appraisal and the underwriting process.What should I ask when shopping for a lender?
Your real estate agent should have names of mortgage brokers they are willing to put you in contact with - these lenders will be someone they have done business with in the past, and feel comfortable recommending. However, if you decide to do a little comparison shopping and look for a lender on your own, here are a few important questions to ask.- What loan programs do you offer and which one do you think is best for me?
- How long will the loan approval process take?
- What line items of the loan agreement – if any – are negotiable?
- What is your policy for locking in interest rates, and will you honor a lower rate if it declines during the lock-in period?
- Are there fees for prepaying on my loan?
10 Things to Ask A Real Estate Agent Before You Work With Them
Having the right real estate professional by your side can greatly improve your home-buying experience. A good rule of thumb is to interview a minimum of three candidates.
Here are 10 questions to ask during an interview:
Here are 10 questions to ask during an interview:
- Are you a full-time professional REALTOR®? How long have you worked full-time in real estate? What geographic areas do you specialize in?
- Do you have a Website? What information can I find there?
- How will you keep me informed during my home search and throughout the transaction?
- Do you have a staff or a team? If so, what roles will they play in my transaction?
- Will you show me properties from other companies’ listings? (Some real estate companies do offer their buyers’ agents a higher commission if they are able to sell “in-house” listings. In those instances, there can be added incentive to limit the range of homes you are shown. This may affect your home search and how much you your agent’s fee will be.)
- Will you represent me exclusively, or will you also represent the seller? May I have that in writing?
- How will you get paid? How are your fees structured? May I have that in writing?
- What distinguishes you from other real estate agents? What is your negotiating style?
- May I contact some of your recent clients as references?
- Do you have a performance guarantee? If I am not satisfied with your performance, can I terminate our buyer agency agreement?
(In the heavily regulated world of real estate, it can be difficult to offer a performance guarantee. Typically, agents will outline verbally what you can expect from their performance. Keller Williams Realty understands the importance of win-win business relationships: The agent does not benefit if the client does not benefit.)
Seven Steps to Buying Your Home
The whole process of buying your own home feel a bit overwhelming, but here is a simple step-by-step list to help you:
- Define your needs.
Congratulations on your decision to purchase a new home! Before you go house hunting, it's a good idea to define what kind of home and neighborhood would best suit your desires and needs and make a wish list. Share this list with your real estate agent. The finer the details, the more effective your home search will be. To further define your needs, you may want to divide your lists into negotiable and non-negotiable items, so your agent can operate with some flexibility when scouting for homes on your behalf. - Get prequalified or preapproved.
Now that you know what you want in a home and neighborhood, you need to find out what you can afford. There are two ways to go about this: prequalification or preapproval for a home loan. Your real estate agent can refer you to a mortgage broker to begin the process. In most markets, preapproved buyers are preferred by sellers over those who are pre-qualified.
Your preapproved status lets the seller know:
* You have gone through an extensive financial background check.
* A lender is willing to do business with you.
* The likelihood of unexpected obstacles regarding financing is minimal. - Let the house hunting begin!
Now you are ready to embark on your home search - an endeavor that can prove overwhelming if not approached with some forethought. The most efficient route is to allow your real estate agent do the initial scouting for you. Using your wish list as a guide, he or she will alert you of new and existing listings that have strong potential. If these listings pique your interest, your agent will arrange home tours at your convenience. Many agents send alerts via email - sometimes as often as daily, depending on the available inventory in your market. Let your agent know how you'd like to receive these alerts, whether by phone, email or fax.
You also can do some research on your own. Read local real estate publications, contact your local neighborhood associations, visit the local chamber of commerce, surf the Internet, or drive around your favorite neighborhoods. While these methods certainly can lead to your dream home, it's important to note that 82 percent of home sales are the result of agent connections.* That means it's more likely your agent will find your dream home through being in the real estate business than you driving around on the weekends.
* National Association of REALTORS® - Make an offer.
When you're When you're ready to make an offer on a home, your real estate agent will help you determine the offer price by reviewing recent sales of homes similar in size, quality and amenities. With your input, your agent will draft a written contract that outlines what needs to be done by both parties to execute the transaction. If the seller accepts the offer, the document becomes a binding agreement, so it is imperative that you carefully review it with your agent and speak up if anything is not clear to you. It's important to note that if the seller changes any aspect of the offer, it is not a binding agreement until the buyer agrees to the seller's changes. - Strike a deal.
Sometimes, you get lucky and the seller accepts your offer as is. However, in most instances, the seller will make a counteroffer. This is where your real estate agent's experience in negotiations will be invaluable. Keep in mind almost everything is negotiable when you are buying a house. This can give you a great deal of leverage in the buying process - that is, if you have adequate information and you use it in an appropriate manner.
Some items you may negotiate:
* Price
* Financing
* Closing costs
* Move-in date
* Repairs
* Appliances and fixtures
* Landscaping
* Painting
Remain in close contact with your real estate agent so you can quickly review any changes from the seller. Remember: Bargaining is not a winner-take-all deal. It is a business process that involves compromise and mutual respect. - Prepare for the closing.
When an offer becomes a binding agreement, your real estate agent will help you tackle the checklist of action items that you, as the buyer, have agreed to perform prior to closing. Depending on how the responsibilities are divvied up in the agreement, this is typically when you will:
* Conduct a home inspection.
* Get an appraisal and finalize your financing.
* Choose a lawyer or notary.
* Secure home insurance.
Having these procedures done in a timely and professional manner is a must, as any delays could threaten a successful closing. A first-rate real estate agent should be able to serve as your "one-stop shopping" referral source for service providers. Your agent also should serve as your advocate, helping to coordinate activities and making sure the vendors have access to the property to perform their jobs. - Close the deal.
Congratulations! The moment you've been anticipating has arrived. A few days prior to closing you will meet at your lawyer/notary office to review the conveyancing documents and the statement of adjustments. Once signed by all parties, the documents are lodged for registration. After registration takes place, the lawyer/notary looks after all the disbursements and you now are the new owner. Usually the next day you take possession of your new home.
Location, Location, Location
Where you buy not only affects the home's current and future value, but it also affects your lifestyle. Your agent will be able to conduct a more targeted home search if you outline your preferences in neighborhoods and nearby amenities. Here's a checklist of items you should consider and communicate to your chosen real estate agent.
What do you want for:
Buying a Newly Constructed Home
Whether to buy an existing home or have one built is yet another decision to make during the home-buying process. If you decide to go with new construction, a real estate agent can be a powerful advocate in your corner as you negotiate upgrades, a move-in date and other terms with the home builder. It is a huge investment--be sure you have someone dedicated to helping you in the process! Below are some basic pointers to prepare you: