Buying a home is a big deal – whether you’re a first-time homebuyer entering the market or a seasoned homebuyer transitioning to your next property. That’s why it’s important to enlist the help of professionals to walk you through each phase of the purchase and mortgage financing processes. Following are five key steps you’ll want to understand before you start your property search.
#1 Mortgage preapproval
In today’s competitive housing market, which often includes multiple offers and fast-paced decision-making, you’ll want to increase your odds of having the winning offer by securing a mortgage preapproval. Having the confidence that comes from knowing your financing is in place provides better leverage with sellers and ultimately makes your offer more appealing. In addition, knowing the amount you can borrow and the price you can afford enables you to concentrate your search on homes in your price range. A preapproval also simplifies the final approval process as it’s a conditional commitment from your lender to grant you the mortgage you need. Having a professional looking out for your best interest while navigating the abundance of mortgage choices available today puts you at a huge advantage by ensuring you always have the mortgage that’s best suited to your unique needs and finances – regardless of whether you’re a first-time homebuyer, upgrading to a new home, or buying an investment or vacation property.
#2 Finding a home
Working with an experienced real estate professional who understands the local market in which you wish to purchase is essential to ensuring as smooth of a purchase process as possible. Already equipped with a preapproval, as well as your list of needs and wants, your real estate agent will be able to show you properties that are right for you. And once you find a property, your agent will be able to professionally negotiate the terms and price that will make your offer attractive to the seller(s).
#3 Home inspection
When you’re thinking of buying a specific home, it makes sense to make a conditional offer based on positive home inspection results, since buying a home is among the largest financial investment you’ll make throughout your life. It’s especially difficult to keep an open mind once you’ve already fallen in love with a property. It’s important to remember that, to an untrained eye, staging can do wonders to cover up a house’s deficiencies and shortcomings. An inspector will alert you to caution areas based on the age of the house as well as specific characteristics, note previous renovations and specify issues that must be addressed immediately versus ones that can be fixed in the future.
When buying real estate, in most cases, you’ll be required to provide an upfront cash deposit, which is used to demonstrate to the seller that you’re committed to making the purchase. There’s typically no minimum deposit required – the amount is determined by the seller – but a general rule of thumb is at least 5% of the purchase price. The money is then held in trust until the deal closes, at which point it can be redirected towards your down payment and/or closing costs.
#5 Mortgage approval
Throughout the homebuying process, you’ll be required to submit a number of important documents leading up to the final mortgage approval and, ultimately, your closing day. Key pieces of information you’ll be asked to provide are in support of such things as employment, down payment, finances and investments, debts and property details for the home you’re looking to purchase. All these details combined will help your lender better understand how well you can service your mortgage as well as the amount of money they’re comfortable lending you. If you went through the preapproval stage (see #1 above), the likelihood of receiving final approval from your lender is good. If, however, you decided to forgo preapproval, or if there are other circumstances that prevented your mortgage from being approved, your mortgage agent will have many choices of lenders to help make your homeownership dreams reality.
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