Home Buying Basics Advice For First Time Home Buyers
This Article Is About Home Buying Basics Advice For First Time Home Buyers
The housing market has been booming for the past 16 years with no sign of a correction. There are many more homebuyers than the inventory of homes. In most homes, there will be multiple offers. Homebuyers will be competing on listed homes with other buyers. It is important to come across that you are the best buyer in the eyes of the seller. Home sellers do not want to give the winning bid to a homebuyer that may have potential issues with the mortgage process. In this article, we will discuss and cover the basics for first-time home buyers.
The Importance Of Understanding The Homebuying And Mortgage Process
The more first-time homebuyers are familiar with and educated on the home buying basics, the less stressful the mortgage process will be. The pre-approval stage of the mortgage process is the most important phase of the overall home buying process. The main reason for the last-minute loan denial and delays in the closing process is due to the loan officer not properly qualifying borrowers.
Over 75% of borrowers of Gustan Cho Associates are folks who either got denied or are going through a stressful mortgage process with their original lender. Other borrowers are those who keep on getting their clear to close delayed. Again, these reasons are due to the loan originator not properly qualifying borrowers. The more knowledgeable and confident a home buyer is, the overall mortgage process will not just go smoothly but the home loan will close on time.
The Home Shopping Process
How Much House Can I Afford:
Remember that the mortgage payment is not the only factor involved when making monthly payments on a home loan. Need to take into account insurance, taxes, and private mortgage insurance, if applicable. Need to decide on how much homeowners are able to afford on their new home. Keep in mind up-front expenses such as closing costs when you calculating what they can spend. Use the online calculators at www.gustancho.com to determine how much house they can afford.
Understanding The Loan Program Available
When consulting with a loan originator, the loan officer will go over the best loan program suited for home purchase needs. FHA Loans are best for homebuyers who have a higher debt to income ratio, lower credit scores, outstanding collections, and charge-offs, and other credit/income issues.
Home Buying Basics: Choosing A Loan Officer
Pre-Approval is the most important phase of the mortgage process. Need to get along with loan officers and make sure they are available and return their phone calls and emails promptly. Pre-qualification letters are non-existent and sellers and seller’s real estate agents expect a solid pre-approval letter from a reputable lender.
Most borrowers will do a national online search on the loan officer that is recommended to them and check for both positive and negative reviews. A large percentage of listing real estate agents will call and interview the loan officer to make sure that the home buyer has a solid pre-approval and not just a mere pre-qualification.
Home Buying Basics: Shopping For A Home
Once that buyers know they have a solid pre-approval and know what price range home will suit their budget and be able to afford, it is now time to start the home shopping process. Again, hiring a real estate agent that home buyers get along with is one of the most important decisions buyers will need to make. Homebuyers can see one or two homes or may end up visiting dozens of homes to find that home of their dreams.
Home Buying Basics: Neighborhood & Area
Location is one of the most important factors that homebuyers need to decide. A home in one area may be twice as expensive as a similar home in another neighborhood. Property taxes vary depending on location and neighborhood. School districts, distance to major expressways, distance to shopping, and the commute to work should be important factors home buyers need to take into consideration.
Real Estate Purchase Offer
Entering Into A Purchase Offer:
- After finding a home, it is time to give the home seller a purchase offer
- The purchase offer includes the offer price, closing date, the amount of earnest money, and contingencies
- Contingencies include home inspection period, loan commitment date, appraisal contingency, and sellers concessions requested by home sellers
- Home sellers may come back with a counteroffer
Examples of counteroffers are the following:
- such as a higher price
- other counters like reduced sellers concessions
- elimination of certain contingencies as well as higher earnest money deposit
- Sellers also may counter with no repairs done to the home and a faster closing date
Mortgage Loan Process:
- After the sellers and buyers have agreed on a mutually agreed purchase contract, the buyer will submit the real estate home purchase offer to the loan officer and the mortgage process starts
The buyer’s loan officer will have most of the borrower’s information such as the following:
- bank statements
- paycheck stubs
- credit reports
- tax returns
- other necessary mortgage documents
Home Buying Basics: Clear To Close And Scheduling The Closing
Getting the executed purchase contract should be the only item needed to start the mortgage process. Gustan Cho Associates Mortgage Group normally closes most loans in 21 days or less.
Clear To Close And Closing:
- Once the borrower gets clear to close, the closing department of the lender prepares closing docs
- The title company arranges the closing date and time
- At closing, docs are signed and funds by the lender are wired to the title company
- Sellers gets proceeds and buyer gets keys
- Title company records title and completes all necessary paperwork for both buyers side and sellers side
- The final home inspection is called the walkthrough and is done a day or two prior to closing
- All necessary repairs promised is inspected and if it is not, then both buyers and sellers renegotiate on the terms of the real estate purchase contract
- Things to check for during the final walk-through is to see that the house is clean and ready for the home buyers to move in
- Also, buyers check if all necessary repairs that were promised are made
- If the home buyer feels that things on the original purchase contract are not met, this is the time to speak up and renegotiate the terms
- If they are minor issues, then the sellers usually offer a cash settlement or the sellers may decide to go ahead and make the necessary repairs
- The closing date may potentially get delayed if repairs to be made take longer than expected
- This is the main reason why the walkthrough should not be done the same day as the closing
Please contact us at Gustan Cho Associates if you have any questions or need a referral for a realtor in your area. Special thanks to this video blog on Home Buying Basics to Thomas Falloon and Dale Elenteny for their expertise.
2021 UPDATE On This BLOG On Home Buying Basics
This Article On Home Buying Basics was updated on May 5th, 2021. Special thanks to Dale Elenteny, Michelle McCue, Alex Carlucci, Jammi Cash, and Thomas Falloon, our expert real estate contributing editor at Gustan Cho Associates Mortgage News.