Purchasing a primary residence has long been and is still considered by financial experts as the best investment an individual can make. This is especially relevant today given current extraordinarily low interest rates and reasonable home prices. Buying a home is one of the largest investments and major decisions you can make. As with any major purchase, the advice of a team of professional experts can prove to be invaluable. Those involved include a REALTOR®, mortgage lender, lawyer, insurance agent, home inspector, and others.
While owning your own home is a great investment, it requires thoughtful planning and decision making. Buying a home is a worthy goal, but it is also a financial and emotional decision that only you can make. Seeking guidance from those who know the ins and outs of the home buying process will help to create a win/win experience. Following are FAQs that will help you in making this all important decision.
Where do I start?
What price home can I buy?
Most home buyers will need a mortgage to finance their home purchase. Your REALTOR® is a good source for recommendations to help you choose a lender. Begin a file of important documents. Initially you’ll need to provide documentation including employment history, pay stubs, W-2’s and/or tax returns, residence history, bank and asset account statements, driver’s license, social security card and revolving and installment loan account detail. There may be an application fee. With the proper documents, most lenders can pre-approve you for a mortgage.
It’s best to have this done as early as possible so you can:
- Identify the documents you will need for the final loan application
- Find out problems with your credit, such as errors on your report that need addressing
- Get an idea of how much you can borrow. Your lender can talk to you about loan programs and give you an idea of how much cash you’ll need to buy a home.
How much can I finance?
Typically a down payment will be required, so planning ahead is important. There are 100% programs available for some, including veterans. In Mississippi, properties in some rural areas are eligible for 100% financing. On average, 3.5% to 5% down payment will be required, depending on the loan program and credit rating.
What if I’m a first time home buyer?
It’s a great idea to participate in a home buyer class. Many nonprofit and government organizations offer classes that can help you prepare for homeownership financially, and help make sure you can handle the responsibilities of owning a home. Both your lender and REALTOR® should be knowledgeable about classes offered. Although it varies, many times there are special programs available for first time home buyers, such as those that assist with a down payment. Be sure to ask if you meet the criteria to qualify for these.
How do I find the home that’s right for me?
With your REALTOR®, review your price range, express your desires and discuss the features that are important to you. Your REALTOR® has access to information about all homes for sale in the local multiple listing service and can show you any of these homes. They can also obtain information about homes for sale by owners. Together you can narrow the search field focusing on the neighborhoods, amenities, distance to work, schools, size and price that best meet your needs and wants. A priority list detailing what is most important to you is helpful. Your REALTOR® will schedule the showings, arranging a time that will work for you.
I found a home I love. What’s next?
Who pays what?
The REALTORS® commission is usually paid by the seller. Your lender may collect an application fee when you first meet. These and other fees such as those for the appraisal, pest inspection, survey, attorney, title exam, title insurance, recording, notary and any other closing costs can be negotiated and outlined in the sales contract. Your lender will provide a good faith estimate detailing all expected fees.
How can I be confident of the condition of the home?
Obtaining a home inspection is highly recommended. For a fee, a professional independent home inspector will take a thorough look at the property and provide an extensive written report about the condition of the home. An inspection clause is included in the written contract that allows time for an inspection to be completed and states the agreed terms in the event issues are found. Additionally, home warranty programs are available that you may want to consider purchasing.
When can I move in?
The move in date is negotiated with the sales contract, but is typically the same as the loan closing date. For most purchasers, there are several steps to complete to finalize the transaction. If you are obtaining a mortgage, your lender will begin the process of obtaining final approval for your loan. It is extremely important stay in contact with both your lender and REALTOR® and provide any additional documentation requested in a timely manner. Be mindful of your credit rating, and do nothing during this time that might alter that rating. An appraisal will be completed to estimate the value of the home. It also assures you do not pay too much. Your contract will be contingent on whether the appraisal is for the agreed price or higher. An attorney will conduct a title examination to assure you will receive clear title to the property. A survey of the property is done to determine the house is within the perimeter of the property, there are no encroachments by neighbors and to show any easements. A pest inspection will also be done to examine the home for current or prior infestation. You will need to make a firm decision on where you will obtain homeowner’s insurance, inform your lender, complete an insurance contract with your insurance agent when a closing date is provided, and make payment if required. Also, arrangements need to be made to transfer utilities into your name. The time period for this process will vary with lenders, and may take 30 to 45 days.
What should I expect on the day of closing?
A Settlement Statement reflecting the terms of your sales contract will be provided by the closing agent for your review. It contains a detailed description of all costs associated with closing your loan and transferring title to you, and informs you of the exact amount of funds you should bring to the closing. An opportunity will be given for a walk through of the property prior to closing to assure the condition of the home has not changed since the time of completing the contract. Check with your lender regarding any documents to take to the closing such as valid driver’s license or other identification forms. Typically you will go to the office of a title company or attorney at a time arranged by your lender. The closing agent will coordinate the signing and recording of documents as well as collection and disbursement of funds.
Is there anything I need to follow up with?
Recording documents may take a few weeks. The closing agent should be in contact with you, or mail your recorded documents within this time period. Definitely follow up on these forms. They are very important documents that you should keep in a safe place. If the home you purchase is your primary residence, you qualify for a property tax credit. You can file for homestead exemption through the county tax assessor’s office January 1st through April 1st the year following your purchase. Be sure to maintain your homeowner’s insurance and touch base with your insurance agent at each renewal to review your coverage. Enjoy your home and be proud of your investment!
10 Step Guide to Buying a Home
Your REALTOR® is your go to person to guide you through this process. It is a relationship of utmost confidence meant to last a lifetime. You should feel comfortable making future calls to seek advice, ask questions, work with them again, or pay the greatest compliment by referring a friend.
The basics of selling your house include preparing it to be attractive to buyers, setting the right selling price, effective marketing, being certain your house is shown at its best, negotiating an acceptable deal and completing the transaction. An experienced and trusted REALTOR® will help you through each step of the sales process offering expertise to obtain the most beneficial transaction for you.