What’s the Right Home For You?
When deciding which house to buy, consider your lifestyle, your current and anticipated housing needs, and your budget. Make a prioritized list of features you want in your next home – you’ll discover finding the right house involves striking a balance between your needs and your wants.
Consider your lifestyle
Do you love to cook? Look for a well-equipped kitchen.
Are you into gardening? You’ll want a yard.
Do you work from home? You’ll need a room for an office.
Do you like to entertain? You’ll want an open floor plan.
Consider what you might need in the future and how long you may live in the home. If you have young children, or are planning to very soon, make sure you look at the different school districts.
Think about your new home’s location just as carefully as you do about a house’s features. Location is a huge part of any move. In addition to considering the distance to work, be sure to evaluate the availability of shopping, police and fire protection, medical facilities, school and day-care, traffic and parking, trash and garbage collection, even recreational facilities.
Decide on the type of home you want.
Do you prefer a new home or an older one?
Do you want a condominium or a co-op?
A town house or a detached single-family home?
Do you want brick, stone, stucco, wood, vinyl siding, or something else?
Through all of this, make sure to talk to your real estate professional about where you want to live. The agent brings value to the entire home buying process: he or she is available to analyze data, answer questions, share their professional expertise, and handle all the paperwork and legwork that is involved in the real estate transaction. AAPP professionals have the skill and experience to help their clients narrow down their choices by sharing market trends and local information.
How Much Can You Afford?
The next step is figuring out what type of home you can afford. Each buyer is unique and a mortgage professional can help you find out just what you can afford. Your income and your debts will typically play the biggest roles in determining your price range.
These factors include:
- Your gross income
- The funds you have available for the down payment, closing costs and cash reserves required by the lender
- Your debt
- Your credit history
- The type of mortgage you chose
- Current interest rates
Get pre-qualified early on
Being pre-qualified for a mortgage loan helps determine how much you can afford. It allows you to move quickly when you find your perfect home, especially when there are other interested buyers. It also shows the seller that you are serious and can afford to buy the home.
A pre-approval is a simple calculation done by a mortgage lender that tells you the amount you’ll be able to finance through a loan and what your monthly payment will be.
Another figure lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your new home loan, property taxes and hazard insurance (also known as PITI).
Know the Neighborhood
When you buy a home, you’re investing in a community. You’ll spend a significant amount of time and money supporting the schools, community organizations and commercial centers in the surrounding areas. Before you make the final decision, take a good look at the location and make sure it fits your needs.
- Evaluate the properties proximity to other important locations in your life. How long will your commute time be? Is there a hospital or doctor’s office nearby? What about schools, childcare, shopping, family and friends?
- Consider all your transportations options. A new home could lend itself to public transportation options or car-pooling. Depending on the type of community, you may be able to find alternative methods of transportation. Take the time to drive from the new home to your commuting destinations to understand the impact it will have on your lifestyle.
- Visit and understand the school district you’ll be moving in to. Even if you don’t have children in the school system now, you may some day. The district reputation could positively or negatively impact the selling price of your future home as well.
- Make sure you feel comfortable in the area. Drive around the neighborhood at different times of the day and night on multiple days of the week to observe activity/noise levels. Discovering that barking dog next door or noisy road conditions will eliminate unneeded stress from a hasty decision.
Ask your agent for a list of schools, shopping centers, parks or other important amenities. Buying a new home is about more than the structure and property. It’s about your new lifestyle as well.
Already have a home?
Buying a new home and selling an existing home at the same time has its own set of difficulties. But with planning, you can ensure everything goes smoothly.
Before putting your house on the market or committing to buying a new one, take a look at the prices of houses in the areas where you’ll be both selling and buying. You’ll need a realistic idea of how much similar houses are going for. Your agent will give you accurate comparables.
What if you’re unable to perfectly time the sale of one house with the purchase of another? You may own no houses for a time, in which case you’ll need a temporary place to live. Or, you may own two houses at once. That’s why it’s important to have a back-up plan. Here are some options to consider:
- Short-term rental and storage options.
- Bridge financing is a loan for the down payment on a new home backed by the equity of your old house.
- No-ratio mortgage.
- Alternatively, you may be able to draw on a home equity line of credit on your old home. However, you might pay a penalty fee if you sell the house within a year.
Shopping For a Home
Selecting an agent to help you find your dream home is an important first step. He or she can represent the buyer’s interest in a real estate transaction.
When you’re ready to visit houses, ask your AAPP agent to help you with:
- Arranging showings
- Tracking the properties you’ve seen
- Identify if the home meets your criteria
- A digital camera to record what you see
Making a Home Purchase Offer
Once you’ve found your dream house, it’s time to get started with the financial and contractual side of the purchase. AAPP professionals will guide you through this process. Purchase contracts vary in length and terms from state to state, and within a state, from locality to locality.
Multiple home purchase offers on the same home are not uncommon, so you may only get one chance to make an offer that the seller will consider. In most cases it is better to have your real estate professional negotiate the offer. If you have any personal interaction with the homeowner, don’t give out any information about your move, your current housing status, financial status or your feelings about their property – positive or negative. This could hurt you in future negotiations.
How Much to Offer?
Your agent can find out what other homes have sold for in the area, and how much money you might have to put into repairs or renovations.
Remember, it’s never too early to think about the resale and what most people look for. You might not have school-age children, however, its beneficial to buy a home in good school district in order to be marketable to young families.
In addition to sale prices for other homes, there are several ways you can determine a good amount to offer:
- The condition of the house. Is the home in move-in condition, in need of paint and other cosmetic improvements, or a fixer-upper that needs serious work?
- The market. If you are in a buyer’s market — where there are more homes for sale than there are people to buy them — prices are probably stable or falling. If you are in a seller’s market — where there are more buyers looking for homes than there are homes for sale — prices are probably moving upward.
- If you’ve gotten a credit pre-approval, you know how much you can borrow for your home purchase. Of course, you may not be comfortable paying as much as you’ve been approved to borrow, so think carefully about your financial situation before making an offer.
Next, decide how much you are willing to pay for a home. Remember, the advertised price of a house is just a starting point – it may take quite a bit of negotiating to arrive at a final cost.
It pays to shop around for loan rates and know the market before you talk to a lender. You should always look at the combination of interest rate and points and get the best deal possible. The interest rate is much more open to negotiation on purchases that involve seller financing. These loans involving seller financing usually are based on market rates but some flexibility exists when negotiating such a deal.
Locking in a mortgage rate with a lender is one way to ensure that same rate will be available when you need it. Lock-ins make sense when borrowers expect rates to rise during the next 30 to 60 days, which is the usual length of time lock-ins are available. A lock-in given at the time of application is useful because it may take the lender several weeks or longer to prepare a loan application. However, some lenders require borrowers to pay lock-in fees to assure particular rates and terms. Be sure to check that the rates and points are guaranteed and that your lock-in period is long enough. If your lock-in expires, most lenders will offer the loan based on the prevailing interest rate and points. Lenders may have preprinted forms that set out the exact terms of the lock-in agreement.
The Annual Percentage Rate (APR) is the relative cost of credit as determined in accordance with Regulation Z of the Board of Governors of the Federal Reserve System for implementing the federal Truth-in-Lending Act*. The APR is the actual yearly interest rate paid by the borrower, figuring in the points charged to initiate the loan and other costs. The APR discloses the real cost of borrowing by adding on the points and by factoring in the assumption that the points will be paid off incrementally over the term of the loan. The APR is usually about 0.5 percent higher than the note rate.
Unless you have enough money to pay for a house yourself, you’ll need a mortgage loan. A mortgage is a loan you take out to finance the purchase of your home. It is also a legal contract stating that you promise to make a monthly payment until your loan is paid off.
Today, there are hundreds of different programs to choose from, but don’t let that overwhelm you. Most of the home loans are variations of a fixed-rate mortgage and adjustable-rate mortgage. You may qualify for a new loan without even selling your current home. It’s simple to run the numbers for yourself on our Mortgage Calculator.
Fixed Rate Mortgages keep the same interest for the life of the loan and consistent monthly payments. These loans are usually priced higher than an adjustable-rate mortgage. Keep in mind that, on average, most people move or refinance within seven years. If rates in the current market are high, you’re likely to get a better price with an adjustable-rate loan.
An adjustable-rate mortgage (ARM) is one that the interest rate changes over the life of the loan – according to the terms specified in advance. The interest rate fluctuates based on several money market indexes, which cause the cost of funds for lenders to vary. All ARMs are amortized (paid down) over 30 years.
Shopping for a Mortgage
It is very important to research your mortgage company before dealing with them. Don’t be afraid to ask any questions you feel necessary and if anything strikes you as odd make sure you comment on it. Make sure you ask for references from satisfied customers.
There are several ways to secure a mortgage. You can get one directly by working with a mortgage banker or you can go to a bank, credit union, or savings and loan. An AAPP agent can connect you with a reputable mortgage lender.
Your chances of obtaining a mortgage really depend on all the information that will be contained in the credit report. So, it’s a good idea to get your credit report, before you apply for a mortgage, and correct errors.
When you apply for a mortgage, the lender will want a lot of information about you the house you want to buy to determine your loan eligibility. Here’s what to provide:
- The name and address of your bank, your account numbers, and statements for the past three months
- Investment statements for the past three months
- Pay stubs, W-2 withholding forms, or other proof of employment and income
- Balance sheets and tax returns, if you’re self-employed
- Information on consumer debt (account numbers and amounts due)
- You’ll sign authorizations that allow the lender to verify your income and bank accounts, and to obtain a copy of your credit report. If you’ve already made an offer on a house or condo, you’ll need to give the lender a purchase contract and a receipt for any good-faith deposit that you might have given the seller.
Once you apply, your lender will verify all the information you’ve provided. This is a loan approval process and it can take one to eight weeks, depending on the type of mortgage you choose and other factors that will affect your approval such as fulfillment of contract contingencies.
As your mortgage application is processed and finalized, your lender is required by law to give you several documents
The lender will order a market value appraisal of the property. The lender will not lend you more than a certain percentage of the value of the property.
Closing and Beyond
Home Inspection and Insurance
This is a major step in the buying process and there are many potential problems that can be discovered during this period. These include a leaky roof, radon gas, termite damage, a foundation problem, and wall cracks, to name a few. These problems happen all the time. The difference between closing on your dream home and starting the process all over again is what occurs during the negotiations between you and the seller. Your AAPP agent can help make this go more smoothly. In many cases, you can do a walk through before the closing.
Homeowner’s Insurance for your new home is a must. Be sure to read the details of your policy closely to ensure proper coverage. And while you are not legally required to have it, mortgage lenders require that you do.
The closing meeting is where ownership of the home is officially transferred from the seller to you. Most of the people involved with the purchase of your home will attend your loan closing.
First, the closing agent reviews the settlement sheet with you and the seller and answers any questions. Both you and the seller sign the settlement sheet. Then, the closing agent asks you to sign the other loan documents. Evidence of required insurance and inspections is also presented. After that, if everyone agrees that the papers are in order, the buyer submits payment to cover the closing.
Finally, you receive the keys to your new home!
Post closing, the agent officially records the mortgage and deed at your local government clerk’s office or registry of deeds. This legal transfer of the property may take a few days after closing. The closing agent usually will not disburse the funds to everyone who is owed money from the sale until the transaction has been recorded. It is at the point of deed recordation that you become the official owner of the home.
Moving In Checklist
Six to Eight weeks prior:
- Purchase or rent moving supplies: tape, markers, scissors, pocketknife, newspaper, blankets, moving pads, plastic storage bins, rope and a hand truck. Free boxes can usually be obtained at a local supermarket, but consider purchasing wardrobe boxes for moving clothes.
- Have a garage sale to clear out unwanted items and plan accordingly. Consider donating unwanted items.
- Keep a detailed record of all moving expenses. Your costs may be tax deductible depending on the reasons for your move.
Two weeks prior:
- Hire a reputable mover or rent a moving truck. Be sure to get referrals or references, check with the Better Business Bureau, get estimates, and purchase moving insurance.
- Two weeks before moving day, contact your telephone, electric, gas, cable/satellite, refuse and water companies to set a specific date when service will be discontinued. Contact utilities companies in your new town about service start dates, including Internet and telephone services.
- Notify healthcare professionals (doctors, dentists, veterinarians) of your move and ask for referrals and record transfers.
- Register children for school and ask for school records to be transferred.
- Notify lawn service, cleaning and security companies when service should be terminated.
- Advise the post office, publications, and correspondents of change of address and date of move.
- Check your homeowner’s insurance and make arrangements for new coverage.
- Have tools handy for breaking down beds and appliances.
- Move valuables (jewelry, legal documents, family photos & collections) yourself — don’t send them with the moving company. Make sure you have a complete inventory of all your possessions.
- Give every room a final once-over. Don’t forget to check the basement, yards, attic, garage and closets.
- Have the final payment for the movers and money for a tip