By Sanjay K. K
Home Buying 101 – Home Buying Guide Step-By-Step for first time buyers. First time buyers have tons of questions, one can understand being nervous of investing life time saving in home. All right, you have got nice idea of buying a home for yourself or for your family. How did you reach to this decision. Are you planning for a family, are you going to invest in real-estate or you buying under pressure from your peers. Because all of them have bought homes and you get pissed when you are asked repeated question in potluck parties, “when are you going to buy home”. The reason can be many, it can be right time to settle, favorable real-estate market, cash available, saving tax on high income, family status or not much difference in renting and owning (Depending upon city to city).
Whatever be the reason the home buying for first time buyers is a huge decision and they are confused and are looking for guidance and detailed information. The complete information and step by step details help first time home buyers. The gained information will help first time home buyers to understand the home buying process.
Check Your Credit Score and Financial Situation
The first thing before you start home buying process is to check your credit score. Your credit score will be major factor in getting a loan for house. In order to apply for a credit for house loan, first check your credit history and credit score. As of now with new legislation passed each consumer is entitled to get one free credit report from each three major credit score companies (Transunion, Equifax, Experian).
Under the federal law guidelines, each consumer can get one free credit report from major credit score companies after every 12 months. Use following link to get your free credit report. (http://www.annualcreditreport.com)
(Note: Beware of phony websites giving free credit report, there aim is to get your personal information. Please check the above url when you type or cut/paste, that it goes to same site. Some time with few spelling mistake it can go to different site with similar look and feel. Again beware of people looking for personal information. Your personal information is your identity on internet.)
Your credit score will give information to future lenders about your creditworthiness. This tells them how good you have been in maintaining your records, such as paying bills on time, no defaults, how you manage your credit cards and other debts. Is their any negative remarks against your name etc.
In case you find a suspicious activity against your name on credit report, report immediately in writing to all three major credit score companies. This report also can be used to fix any wrong address or name in credit report. Bottom line this report lets you know where you stand on credit rating and how good chances are of getting a loan on a decent interest rate. The higher credit score means more attractive loan offers from lenders.
Once you have checked your credit score and are satisfied with the needs of lending companies, next thing comes checking your financial situation. First thing what is your current assets vs. current debts. Are you in position to keep a large portion of salary aside for future mortgage payments without disturbing current obligations.
Do simple math, if your salary take home is $5000 and your current expenses including any debt payments are around $2000(including rent $1000). That means you are left with $3000 in your bank. If you are looking a house for which monthly payment will be $2000 and after deducting from remaining balance you are left with $1000. Next deduct your property tax from $1000. Let’s assume another $400 dollars (Property tax vary from state to state). You are left with $600. You still need to factor in home insurance, landscaping, misc. cost related to owning a home.
In total you are left with $1600 to manage rest of the expenses. This is not the ultimate exercise, but will guide you to come up with your list of expenses and tally them and see if you can afford monthly house payment. This is good exercise, you will be surprised how many hidden expenses will surface, once you go through this exercise.
Typically your debt should be less than 50 percent of your income. Also it is advisable to keep 4-6 months of house payments aside before going for house option. The reserve money will be handy in rainy situation, such as job loss, health related issues etc.
Time to find Real-Estate Agent
The first question what exactly a real-estate agent does for home buyer. First he has access to homes on sale. This list will come to first realtor network before it is published on web or in print. Your local real-estate agent will have more information on current market trend and the way market is going in your area. He will be the first to know any good home coming to your choice of area.
Get agent listing from net, or get referral from your friends or relatives. Make a short list of realtors and select few real-estate agent and talk to them about your needs including your budget for future home. Be frank and let them know you won’t be interesting in higher bidding. You want home and not at the cost of losing your mental peace. Give your specs, such as 2,3,4 bedrooms, what school area, any restriction to cross street etc. the more information you provide to real-estate agent, it will help him/her to understand your needs. Talk to him what banks he will advise for applying a loan. Most of the realtors or real-estate agents have tie up with financial institutions and can help you in paper processing.
Beside all the knowledge, experience, professional approach, hawks eye a realtor brings on table , he is the one will take you to property tours. This is important part of home buying. Don’t be upset if you have not find right home after few visits. It takes some time before you get your first dream home.
Be careful, when you go out for looking home, every home you tour looks great, specially if you have been living in an apartment. This is common apartment complex syndrome. Always match home specs with your specs, what you want not what is shown to you.
Where to get mortgage or where to apply for a loan
Almost 99 percent of home buyers finance home through mortgage companies. Only 1 percent of wealthy people may buy home with cash down payment. So we all are in same boat. You may be wondering which loan is best for you or where to shop house loan. The bottom line you want a loan which is on lower interest rate and with zero points.
You can get loan from mortgage brokers, mortgage banks or commercial banks. Each entity deals in a different manner. Where as you may get a better deal with mortgage brokers as they are the broker between the buyer and lender and they have personal interest of making money from either party or from both parties. These types of brokers are independent and they work in association with large brokers or banks. The important thing to watch are paper documents, what are terms and conditions, what are rate lock period, any points being applied to your loan and what kind of fees are added to your loans. Since they operate independently, there standards also vary. For small gain you don’t want to inherit a bad loan.
The next option is to go through a broker banker, this type of broker works with a particular bank or for many banks and will help to get better rate from banks. The chances of negotiation are little as he has to go with bank policies. The fee structure will be standard and no discounts will be available. The paper work will be more trust worthy as being done in association with bank.
Another option is to deal directly deal with commercial banks such as Fremont bank, Citi bank or bank of America. Some of the advantages doing loan with your personal bank is that they will give you competitive rates since you are doing already business with them.
Some of other options are credit unions or private lenders. If you are part of any credit union, check with them what are your options. You may have better chance in getting a attractive loan from them if you meet there selection criteria.
Regardless which option you choose for applying a loan, finally you have to decide on what loan product you are comfortable. Do you want to go for a 80/20 loan product, which means you will be paying 20 percent of house price as down payment and rest 80 percent will be financed by bank. The other popular products are 85/15 and 90/10, for high price market. Till recently even 100 percent interest free loan was available to buyers. After housing market meltdown this option has been discontinued by all lenders. The loan factor you have to factor in your plan for buying a house. You have to be comfortable for paying a down payment without impacting other obligations.
Time to look for dream home
Well, we have taken care of initial dilemma about buying a home, we have taken care of finding a real-estate agent. Getting your facts and specs verified from real-estate agent. We have covered loan option. The next big thing is to hit road and look for property.
Buying a brand new home
Why would you go for a new home, simply it is new?. Many people don’t like to inherit the previous owners taste and likings. They don’t like how interiors and the colors on wall. There choice of kitchen style may vary etc. If you fall in this category and don’t want to spend good amount of money on upgrade then new home is choice for you.
First scan for new properties in your area of choice, visit model homes and then zero it on a model plan which you have finalized. Once your choice is in place, look for real-estate agent which will represent you for buying a new property. Do not use builders broker, they are paid to work for builder and they don’t get any extra commission from house sales. Moreover their loyalty will be towards builder then you. Chances are your real-estate agent will be paid commission by builder in order to lighten his house inventory.
Some of the things you want to check during buying a new home
Do not use Builders broker as your real-estate agent
Do not use builders lender for borrowing a loan
Check upgrade pricing before you sign the documents
check contingency section
Check warranty period and what all is covered under warranty
check builders past performance
Get home inspection done, even if home is new.
Buying a old home You have already made mind for existing home and you don’t mind in moving to previous owners choice of landscaping or interior styles. You also don’t mind to go for future upgrade if needed. By now you should be clear of location where you want to buy home. The less confusion about choice will make you more focused in buying a home. If your preference is only for town homes then there is no point in going for open homes for Single family homes. The more you focused on your needs, you will pick up good home. Dedicate few weekends for open home visits with your real-estate agent. Few things you might want to check while looking for homes.
Is house on street
What is noise level
Is it too close to school area
Check when was roof replaced
How good is fence, many sellers just paint fence to give new look
Get pest control done
what is the status of air conditioner
If carpet is old, is seller going to replace or give discount
Check for dishwasher, Garbage disposal, Electric and Plumbing fixtures
When was last paint done
More information at BayareaApartmentRentals.com … …. Home Buying Guide [http://www.bayareaapartmentrentals.com]
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