Going from Renter to Home Owner
So, it’s time to decide, do you buy a home or continue renting? You have done the calculations and you’re ready to take on this integral part of the great American dream.
You’re ready for a lawn to mow and weeds to pull and a structure called a home that you’ll fill with the laughter and love of a beautiful family. But first there are many initial and practical steps to take. Here are some tips to get you started.
Figuring Out Your Down Payment and Monthly Payment
You’ve no doubt already considered what you kind of down payment and monthly payment you can afford. To confirm your calculations and get the process in motion, take a trip to your credit union and talk to your lender. You can also visit Alliance Credit Union’s Home Loan Center where you will find mortgage calculators and information on current rates and loan types.
You will then get pre-approved and find out (officially) how much you have at your disposal to purchase a home. Along with this, order a copy of all three credit reports and make sure they are correct to the best of your knowledge—remember, the better your credit score, the better your interest rate. And you will be able to shop the various mortgage products.
Types of Mortgages
You will find mortgages ranging from fixed to adjustable rate. A fixed rate mortgage offers stability since you will have the same amount due monthly for the term of the loan. The advantage here is that you never have to worry about varying interest rates that could raise your monthly payments.
Adjustable rate mortgages (ARMs) offer lower interest rates for a pre-specified period. After that, they adjust based on current interest rates and the terms of the loan. ARMs can be a great way to get lower initial rates, especially if you plan to sell or refinance within three to five years.
Finding the Right Real Estate Agent
Now you’ll start spending your Sundays checking out open houses and getting acquainted with the market. You will probably be initially overwhelmed by too many houses to see and a multitude of details, features, issues, and considerations you hadn’t even thought about. That’s when it’s time to select a professional real estate agent.
Ask family and friends for realtor referrals or go online. Redfin and Zillow both offer realtor reviews and customer testimonials and can be a great resource for home buyers. Don’t be bashful about interviewing real estate agents. In fact, finding the agent that’s perfect for you is a step closer to finding the house that’s perfect for you.
Making an Offer
Once you find your dream house—or the house that will be your dream house after you do some fixing up—then it’s time to make an offer. While this can be a scary step, your agent will be there with you and walk you through it and help you make a competitive offer. The seller may not accept your initial offer, and you may need to make a counter offer depending on how much you like the property. Once you reach an agreement with the buyer, make your earnest money deposit, which is usually around 1-3% of the purchase price. The earnest money deposit shows the seller that you are serious about purchasing the property and also makes the sales contract legally enforceable.
Appraisal, Disclosures, and Inspection
The lender will order an appraisal of the home, and you will receive disclosures from the seller. It’s very very important to inspect all disclosures and voice any concerns you may have. You will then order a home inspection. Find a reputable home inspector and be there with your real estate agent at the time of the inspection. If there are safety or health issues with the home, you will want to address them with the seller and request repairs.
Final Walk Through
Once you complete these steps, be sure to do a final walk through. This ensures that you’re buying the home in the same condition as when you initially saw it. If everything is satisfactory it’s closing time! This is when you become an owner rather than a buyer. It’s an exciting and momentous step that can mean the world to you.
The Keys Are Yours
You sign all of the appropriate documents, make a deposit into escrow, and are given the keys to your new home. What you have just done is one of the most memorable and important things that you will ever do.