Homeownership is a common dream for many people, but it can also be stressful. While house searching for the first time can be exciting, the home buying process can be nerve-racking and confusing. This helpful checklist explains how to prepare for a real estate purchase to minimize the stresses associated with becoming a homeowner.
1. Know What You Can Afford
If you are searching for Kiawah Island real estate, your real estate agent needs to know your budget to suggest properties. To determine how much you can afford, follow the 28/36 rule, which states that housing costs (before taxes) should not exceed 28 percent of your gross monthly income, while total monthly loan payments should not exceed 36 percent.
After determining how much you can spend, create a safety net to cover emergencies like renovations and repairs. Remember to budget for other long-term savings goals, such as college savings and retirement, as well.
2. Select the Right Lender and Get Mortgage Pre-Approval
After setting your budget, you need a lender who will make the process straightforward and who understands your desired payment schedule. You must feel comfortable enough to ask your lender any questions about the mortgage process, including how long the loan process will take.
With most lenders, there are specific minimum requirements to be approved for a loan. The conditions may vary by lender and loan type: a favorable credit history, a consistent source of income and a debt-to-income ratio of less than 50 percent. If you only meet the minimum requirements, you should improve your credit score and reduce your debt before applying for a mortgage. If you are approved, you show the seller you are qualified to buy their house.
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3. Choose a Real Estate Agent
You can find the right house, ask questions and make an offer with the help of a real estate professional. Through their market knowledge and negotiation skills, real estate agents simplify the purchase process for buyers. If you successfully close on a new home, your agent earns a commission at no additional cost to you. Their commission comes out of the home’s sale price.
For a successful and stress-free home buying experience, choose an experienced real estate agent. Ask about their track record and what sets them apart from other agents. Once you have selected your real estate agent, they will also go over your mortgage pre-approval letter, discuss your budget and help determine what features are most important to you in a property. With our Charleston real estate agents, you can find the perfect home in the Charleston area.
4. Determine Which Home Features Are Essential or Nice to Have
You can begin your search with your real estate agent by making a list of the features you are set on and those on which you’re willing to compromise. Consider several essentials, such as the number of bedrooms and bathrooms, outdoor space and the proximity to work and other places you frequent. Nice-to-haves can be interior home decorations, cabinetry or anything else you can fix yourself. You can use this list to remind yourself of what’s essential versus what may entice you to overpay.
5. Start Looking for a Home
When looking for a home with a real estate agent, keep your priorities in mind, such as the number of bedrooms and bathrooms. Even when you find the perfect house, you will want to consider its condition and if any repairs or renovations will be necessary. Watch out for problems with the plumbing or electrical system or water damage. Even homes with outdated appliances can pose a problem because you’ll have to pay to replace them after moving in. Be realistic about your dreams for the home but also what your current budget allows.
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6. Make an Offer
Your real estate agent should do a comparative market analysis once you find your dream home, before you make an offer, so you can put in a reasonable offer based on previous sales of similar properties in the area. You can ask your agent if you can include a contingency clause in your offer. A contingency clause states the buyer has the right to cancel the contract without any penalty if a certain condition is not met.
Many contingencies can be included in the offer. A mortgage contingency allows you to back out of an offer if you are unable to obtain financing. Under a home inspection contingency, the buyer has a right to terminate the contract if the property turns out to have defects, such as structural flaws, and the seller refuses to fix them. Contingencies are a key part of a successful offer that protects the buyer.
7. Schedule a Home Inspection and Get an Appraisal
After your offer is accepted, schedule a home inspection with an independent inspector to identify areas that may require significant repairs or improvements. If major repairs are needed, you can ask the seller to make them before closing. If the seller refuses to make the necessary repairs and no agreement is reached, you may be able to withdraw your offer.
A lender will also want a home appraisal to ensure the purchase price reflects its actual value before releasing your funds if you’re applying for a mortgage. Home appraisals estimate the value of a house based on recent sales in the region, market trends, public records and a thorough inspection of the house. An appraisal ensures lenders do not lend more money than the home is worth before releasing the funds.
8. Close on Your New Home
Your offer is accepted, and the day has come for you to close on your new house. Before closing, check to see if the seller has made repairs by doing a final walk-through with your real estate agent. Inspect outlets, light switches and faucets to ensure everything is in good working order.
Also, transfer all the funds you need for closing to the correct account or get a certified check from your bank made out to the correct party.
A closing agent will meet with you to oversee the transaction. This includes signing many documents, such as the Closing Disclosure that contains information about the terms of a loan and closing costs, handling any outstanding fees and transferring the title from the seller to you. The agent ensures that all monies, including closing costs and escrow payments, are paid and disbursed once the paperwork is signed.
Buying a Home Doesn’t Have to be Stressful
Once you have completed the paperwork, you are officially a new homeowner. Although the process of buying a home may seem complex, all you need to do is set your budget and prioritize your needs with a real estate agent who knows the home buying process. A real estate agent ensures a smooth and uneventful transition from one phase of life to the next.