Owning a home can be a rewarding experience. But it’s a big commitment—one that you should only make if the financial, emotional, and lifestyle considerations make sense for you.
As part of home buying 101 think about some of these things if you are pondering the possibilities.
What are your objectives? Your objectives are the overall goals you are trying to achieve. They might include:
- Accommodating family members, whether in number, disability access or other practicalities of daily living.
- Right-sizing the square footage and cost of your living space to your budget and lifestyle.
- Lifestyle preferences, such as proximity to shopping or entertainment.
- Income –related factors, such as commuting distance or accommodating a home-based business.
Start by prioritizing your needs.
Size & style – What are the practical daily needs of your household, and what type of house can support those needs? Do you need plenty of play space for children? An oversized garage for recreational vehicles? Outdoor entertainment space? One-story living for aging in place? Make a short list of your must-haves so you can quickly zero in on the houses most likely to suit your needs.
Location – The commute to work, schools, neighborhood culture, zoning and access to services and stores that are important to your household.
Remember buying a home is a big decision. The financial and emotional stakes are high, but the rewards can make it all worth it.
Before You Start To House Shop, Get Pre-approval.
There is a big difference between pre-qualification and pre-approval. Pre-qualification does not guarantee you a loan. It merely establishes how much you are capable of paying for a house.
To get loan pre-approval, a lender will inspect your credit and financial situation in detail. This process guarantees you a specific loan amount and determines your monthly payment amount.
The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you'll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford. Even long before the approval process make sure you have your credit in order. Your score will have an affect on your approval.
Credit Dos and Don’ts During the Loan Process
Good credit is critical to obtain the best interest rate and terms on a mortgage.
- Do Stay Current On Existing Accounts
- One 30-day late notice can cost you.
- Do Continue To Use Your Credit As NormalChanging your pattern will raise a red flag and lower your credit score.
- Do Call Your Mortgage Professional FirstBefore making any address or credit changes
- Don’t Apply For New Credit
Every time you have your credit pulled by a potential creditor or lender, you can lose points from your credit score. This includes co-signing for a loan.
- Don’t Max Out Credit Cards
- Try to keep your credit card balances 30% below their limit during the loan process. If you pay down balances, do it across the board.
- Don’t Consolidate Your Debt
- When you consolidate all of your debt onto one or two credit cards, it will appear that you are “maxed out” on that card and you will be penalized.
- Don’t Close Credit Card Accounts
- If you close a credit card account, it may appear that your debt ratio has gone up. Closing a card will affect other factors in the score, including credit history.
- Don’t Pay Off Collections Or “Charge-Offs”
Once you've got your pre-approval you are on you way to shop for a house but what's next?
Finding the Right Real Estate Agent
Real estate agents are important partners when you’re buying or selling a home. Real estate agents can provide you with helpful information on homes and neighborhoods that isn’t easily accessible to the public. Their knowledge of the home buying process, negotiating skills, and familiarity with the area you want to live in can be extremely valuable. And best of all, it doesn’t cost you anything to use an agent – they’re compensated from the commission paid by the seller of the house. Once you have found the one then you are ready for shopping and negotiations.
Shop for Your Home and Make an Offer
Start touring homes in your price range. It might be helpful to take notes (using this helpful checklist) on all the homes you visit. You will see a lot of houses! It can be hard to remember everything about them, so you might want to take pictures or video to help you remember each home.
When you are taking the tour make sure to check out the little details of each house. For example:
- Test the plumbing by running the shower to see how strong the water pressure is and how long it takes to get hot water
- Try the electrical system by turning switches on and off
- Open and close the windows and doors to see if they work properly
It’s also important to evaluate the neighborhood and make a note of things such as:
- Are the other homes on the block well maintained?
- How much traffic does the street get?
- Is there enough street parking for your family and visitors?
- Is it conveniently located near places of interest to you: schools, shopping centers, restaurants, parks, and public transportation?
Take as much time as you need to find the right home. Then work with your real estate agent to negotiate a fair offer based on the value of comparable homes in the same neighborhood.
Once your under contract make sure you do your Home Inspection although this is optional in the State of Illinois it is highly recommended. It will be well-worth the money spent since it ensures the property's structural soundness and good condition.
A home inspection safeguards you against unforeseen problems that could pop up down the road. A typical home inspection includes testing electrical and plumbing systems and appliances, and evaluating the home’s roof and exterior structure and foundation.
While the home inspection is going on there is also an attorney review period. The attorney review clause allows for review by buyers and sellers attorneys, any requested changes must be served by each to the other side in writing within 5 days; Monday through Friday. A further 5 days is allowed for resolution, or extension of this time-frame as needed. Attorneys can request changes to a contract but cannot request a change in agreed sale price.
Closing the Transaction
After finding the home of your dreams, making the offer, securing a mortgage, and taking care of insurance and the inspection, you’ll be ready for the closing. At this stage of the home buying process, you will sign all mortgage documents and any other paperwork needed to complete the transaction. The title of the home, in the form of a deed, will also be transferred to you at this time.
While this is a long explanation there is much more that goes on especially when you are buying a home for the first time. For additional questions feel free to contact me.
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