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Buying a Home

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1. Know Your Credit Score And Work To Increase It

You can learn your credit score by going to the three main agencies: Experian, Equifax, and TransUnion. Each will give you a number that reflects how well you’ve paid your debt in the past and how much debt you currently have compared to your income.

The higher your credit score, the lower your down payment and interest rates will be. If you have a score below 660, work to raise it to at least a 720. A 750 or above will get you the best deals.

To Do:

✅ Check your report for accuracy. If there are mistakes, correct them.

✅ Pay all your bills in a timely fashion.

✅ Stop applying for credit a year before you plan to buy a home.

✅ Be prepared to explain problems to a loan officer.

2. Figure Out How Much Home You Can Afford

There are two ways to determine the amount you can afford. One is finding a home that is no more than 2.5 times your gross annual salary. If you make $50,000 a year, your home should be no more than $125,000. A bank will look at your debt to income ratio. This calculation suggests that home payments should not be more than 36 percent of your gross monthly income.

To Do:

✅ Get pre-approved for a loan at a bank. The banker will help you determine what you can afford.

✅ Try living your new budget. Figure in the cost of your new mortgage, taxes, insurances, and utilities. Save the difference between that and what you are paying now. Can you handle it?

3. Begin Saving Money For The Down Payment And Closing Costs

Down payments require up to 20 percent of the loan and closing costs can run 3 percent to 5 percent. If you have less than 20 percent down, you may have to pay for extra insurance called Private Mortgage Insurance (PMI) which adds 0.5 percent to your payment.

Additionally, you will want to build a healthy savings account beyond the amount that you will need for the down payment and closing costs. The more money you have set aside, the better your lender will feel about lending you money.

To Do:

✅ Be frugal and budget conscious. There are many great ways to save money each month that can add up to thousands of dollars a year.

✅ If you are a first-time homebuyer, you can withdraw up to $10,000 without penalty from an IRA.

✅ You can receive up to $14,000 a year from each parent as a gift without taxation.

✅ Consider taking a loan from your 401(k).

4. Get Paired With A Buyer’s Agent To Help You Find The Perfect Home

There are two types of real estate agents: A seller’s agent and a buyer’s agent; the former represents the party selling the home, while the latter represents the buyer. When you find a house you’d like to tour on Movoto, it’s easy to request a call from a buyer’s agent, who will show you homes and represent you, the buyer, through all stages of the homebuying process.

To Do:

✅ Browse homes on Movoto and request to be connected with a buyer’s agent.

✅ Speak with the buyer’s agent so they can get a better idea of what you’re looking for your perfect home, and you can decide if their experience and personality are a good fit for your needs.

5. Find The Right Home

You will want to find a home in a good area. Once you determine which city you’d like to live in, you will need to find the right neighborhood. Look for signs that the neighborhood is growing and that the school district is good. These will help you with resale in the future. If homes in your idea neighborhood are selling quickly, then you can feel comfortable that the area is desirable.

To Do:

✅ Consider looking for a home in the off-season. You are likely to find homeowners willing to negotiate.

✅ Don’t be too restrictive when searching for a home. Be willing to look beyond your ideal neighborhood and for homes without all the features you think you need.

✅ Develop a scorecard so that you can keep track of each house you see. After a while, all the houses will blur together unless you have a good system of keeping track.

6. Make An Offer On Your Dream Home

Once you have found a home that you love, you should make a bid on that house. Ask your buyer’s agent for advice on how much you should offer. Once the seller accepts the offer, you are past the point of considering the home. You move immediately into the contract stage. Make sure that your offer touches on everything you want including concessions, financing contingencies, home inspection contingencies, and exactly what is included in the sale such as appliances, furniture, or even curtain rods.

To Do:

✅ Know the data in the area. You should have stats on at least three houses that have sold in the area. Your agent will be able to help you with this. This will give you an idea of what to bid.

✅ Negotiate with the owner. Rarely is a first bid accepted. Think about ways to be creative so that both you and the seller come out feeling like winners.

7. Sign The Contract

Once the offer has been accepted, you now are ready to sign a contract. Part of the contract includes a good-faith deposit or earnest money. This shows the seller that you really going to go through with the deal. This deposit is usually one percent to 10 percent of the purchase price and is put into an escrow account and will be used as part of your down payment.

To Do:

✅ Have a lawyer or your buyer’s agent review the document. It should show contingencies such as your ability to obtain a loan, a passing home inspection, and a walk-through before closing to be certain that the condition of the home has not changed.

8. Go To Your Lender And Secure A Loan

Although you may already be pre-approved for a loan, it is now time to actually secure a loan. Check several lending institutions to find the loan that is right for you. Consider the interest rate, the points, the length of the loan, and the type of loan. Once you find the loan you want, you will have to pay to have the home appraised. Sometimes this fee can be rolled into your closing costs. You will also need to take out a homeowner’s insurance policy.

To Do:

✅ Determine what kind of loan you want. There are many styles of loans and many organizations that provide loans. Look around and find the one that works best for you.

✅ Shop around for insurance policies. Some companies give discounts if you have both your home and your cars with them.

9. Have The Home Inspected By A Professional

Before buying a home, you should have it inspected. This costs around $300 for the average home and takes approximately two hours. If the inspector finds problems, you will need to go back to the seller to determine how to handle the findings. You can either have the seller fix the problem before you move in, or you can fix it yourself but change the selling price of the house to reflect the repair price. If the seller does not want to fix the problem, and you are not comfortable going forward, you have the option to walk away from the deal.

To Do:

✅ Hire a certified inspector. Do not rely on an inspection report provided by the seller.

✅ Go with the inspector as he inspects the home to learn about its condition.

10. Take A Final Walk-Through Of The House

Before the closing date, you will make a final inspection of the house. At this time, you will verify that everything is exactly as the contract stated it would be. If certain items were to be left in the home, now is the time to be sure they are still in the home. This is also a time to check that the home was left in a clean condition and ready for you to move in.

To Do:

✅ Take your time and check every area of the house.

✅ Deal with issues now, before closing. If items are missing or the home is not clean, this is the time to make it known.

✅ Be detached. This is not the time to be excited about your new home. This is your last chance to find and resolve any problems before signing the final papers.

11. Close The Deal And Become The New Owner

Before your actual closing day, you will receive an HUD Settlement Statement that explains everything you will be paying at closing. At closing, sometimes known as settlement or escrow, you will sign the papers putting the home in your name, verify the homeowner’s insurance, agree to the mortgage terms, and receive your key. Closing procedures are different from state to state. Follow the instructions of your agent and loan provider.

To Do:

✅ Review the HUD Settlement Statement carefully. If you find fees that you don’t understand, ask your lender to clarify them for you.

✅ Bring the proper paperwork to the closing settlement. This varies, so be sure to ask your lender and agent what you will need to bring.