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Deciding to Buy


Buying a home is an exciting experience, but it’s also easy to get carried away by your emotions and make costly mistakes. To help you get ready for the journey ahead, we prepared this step-by-step buying guide.

 

Deciding to Buy

1. Be clear about your reason for buying.

This will have an impact on your choice of home and neighborhood, as well your budget.

Some of the most compelling reasons to buy a new home include:

  • You need a bigger space to accommodate your and your family’s growing needs
  • You want to build equity instead of putting your money in rent
  • You’re following a job
  • You can now afford your own home or to upgrade to a better home
  • You’re a retiree looking to downsize

2. Make sure you’re financially ready.

Crunch the numbers to see if you can afford not only your mortgage payments, but other homeownership costs as well, including closing costs, property taxes, insurance, and monthly maintenance expenses.

 

Preparing to Buy

  • Get mortgage pre-approval.

Many sellers will only show their homes to buyers with pre-approval. Pre-approval will also give you a good idea of how much mortgage you’ll likely get, which you can use in setting your budget.

  • Check your credit.

Get a copy of your credit report to find out how you may improve your credit score. A good credit score and credit history, and debt-to-income ratio of about 36% are important in getting favorable mortgage terms.

  • Prepare cash for a down payment and closing costs.

To get the best possible mortgage terms, a down payment of around 20% is often needed, but you may still get a good loan with a lower amount. In addition, you also need to get ready for closing costs. The average closing cost in the country is around $7,200.

 

Finding a buyer’s agent

Whether you’re buying a home for the first time or have done it before, you need to work with a Realtor who will look after your best interests and give you the expert guidance you need at every step of the process.

Ask people you know for referrals and always vet potential Realtors. Work with someone with experience in the area you’re interested in. Check their past achievements and track record, as well as reviews and testimonials from past and present clients. As much as possible, talk to each candidate personally to get a feel of how it is to work with them.

Looking for homes fit for your lifestyle

1. Prepare a list of the things you’re looking for a home

Your list should have two parts – the things you need and the things you want.

The “things you need” include features that you simply can’t compromise on, including the location, the number of bedrooms, storage space, a spacious kitchen, and so on.

The “things you want” include the extras and amenities that you can probably live without but can make living in the home more enjoyable. These include such features as an outdoor kitchen, an entertainment room, a swimming pool, and others.

Provide your Realtor with your list so they can help you narrow your search. In looking at homes, tick off your basic requirements first before going through your “wants”. Look at how much those extra amenities can cost you, then determine if they fit your budget, and if you’re willing and able to pay for them.

2. Choose the right neighborhood

In addition to having good access to work, schools, and other places that are important to you, look at property values as well. Invest in an area with potential growth and where home values tend to rise.

Consider the demographics, as well. You’d want to live near people who share the same interests as you.

Other things to look into include safety, and any homeowners’ association fees and covenants and restrictions.

 

Escrow and appraisals

When you’ve found the right home, your Realtor will help you come up with a competitive offer price and draft an offer letter with the contingencies you need. Negotiation begins when the seller sends a counter offer.

After you and the seller agree on the price and terms of the sale, you both sign a purchase agreement and the process goes to escrow.

At the escrow stage, you should work on finalizing the financing for the home and removing all contingencies.

Your lender will perform a separate appraisal of the home to determine the loan amount they can agree to. If the appraisal comes up lower than the agreed selling price, your options are to negotiate anew with the seller, pay for the difference from your own pocket, or get out of the sale.

 

Closing the deal

If everything is in order, the process goes to closing. The lender will release the funds for the home purchase and the title is transferred to you. On closing day, you and the seller sign all the needed documents and pay the closing costs as agreed upon. Once this is done, the keys to the home will be turned over to you.

 

Moving in

Before moving in, make sure you’ve done all your sorting and packing, and have made the necessary arrangements with a moving company.

Some precautions to make include changing the locks in your new home, cleaning up, and transferring all utilities to your new residence. Change your address with the Postal Service and leave a forwarding address at your old home to ensure any new mail or package that may be dropped there is sent to your new address.

 

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