Buying A House

Buying a house is a big time decision. For most people, this is the largest financial transaction they will experience in their lives. As a result, proceeding with caution, and a full understanding of the process is important. This article will discuss the process of buying a house and the steps you need to take to improve your chances of success. Buying a house does not need to be hard. But it is important that you do some things right.

The first thing you need to do is to understand how much you can afford. Your real estate agent can help you understand how much that is, but even before you talk to them about it, you should put together a budget that shows all your sources of income and your major expenses. The major expenses you look at should include current house payments, current car payments, credit card bills, the total amount you owe on all these loans, and any other significant monthly payment that you need to make. You should also assemble information on all of your assets.

Ultimately, how much you can afford is decided by the bank or mortgage company, and how much they think you can afford. They will not lend you money that think you cannot pay back. The lender will look at your regular monthly income and regular monthly expenses and calculate the maximum monthly payment they are comfortable with your being able to make on their loan to you. Frequently used figures are 28% of your total monthly income, or 33% of your total monthly income minus your regular monthly loan payments. If you are selling your current home, they will not count the monthly payment on your current home as an expense, because that will go away with your house sale.

Then they will look at your assets, and the amount of money you can expect to net from the sale of your current house. This allows them to assess what kind of downpayment you can make on the new house. Then you need to tell them how much of a downpayment you are willing to make. All of this information together let's the bank or mortgage company come back to you and tell you how much money you can afford to spend on a house.

One key mistake people make is that they get mortgage rate quotes from only 1 or 2 banks. The right way to do this is to get rate quotes from up to 4 lenders are once. This approach encourages the lender to provide the lowest possible mortgage rates and is likely to give you a much better price. An interest rate that is one quarter of a percent (0.25%) lower can mean tens of thousands of dollars of savings over the life of a home loan.

Now that you know how much you can spend, its time to get some help. Buyers can benefit from using a real estate agent because the agent can help them find the property they want very quickly. The agent has access to information on nearly all the homes for sale in your area in one place. With knowledge of your budget, where you want to live, and other preferences, the real estate agent can help you quickly find the best available choices.

When you have found a house you want, you will make an offer using a standard legal form provided by your agent. This form will include the amount you want to pay, a list of the items you want included, such as appliances, and the contingencies on the sale. Examples of contingencies include a house inspection and getting a loan from a bank or mortgage company. You will also need to make a deposit (for example, $1000) to secure the offer. This deposit is to show the seller that you are serious.

In a hot housing market, it is not uncommon to have to pay the seller's asking price, and it has even happened that buyer's have paid more than the seller's asking price. In most markets, it is possible to negotiate with the seller and get some money off of the price. So don't be afraid to negotiate, but don't overdo it. If your offer is non-competitive or the discussions begin to upset the seller, and if the seller has other options, the house you want may slip away from you.

Once the seller has accepted your offer, the next step is a sales contract (somtimes these are known as purchase agreements or purchase and sale agreements). You definitely need the help of an experienced real estate attorney at this stage. A Purchase and Sale Agreement is a complicated legal document, that expands upon the terms and conditions in the offer. Getting the language right, and protecting your rights in the transaction is work for a trained professional.

Once the Purchase and Sale Agreement is completed, you had made great progress, but there are many steps yet to go. The next step is to have a home inspection done by a professional house inspector. The home inspection is required by your lender, as they will not loan you the money to complete the house purchase without being comfortable that the house is in good shape, and worth more than the value of the loan (if you default on the loan the lender wants to be able to get their money back by selling the house).

The home inspection is a great opportunity to learn in detail about the house you are buying from a trained professional. They will closely inspect the property, the roof, plumbing and electrical systems, insulation, overall soundness of the contruction, and many other aspects of the home. Listen closely to what they have to say as the information can be invaluable. Also, expect them to recommend to you some things that the buyer change before completing the sale. No house is perfect, and this is an opportunity to address a few small issues before you move in. In addition, on rare occassions a home inspector will find major issues that the seller will not be able to resolve before closing. In this event, you will have the right to terminate the agreement, or even re-negotiate the sales price.

After the home inspection is done, the last major hurdle is waiting to get a loan commitment. During this process there will be many other smaller steps, such as a review of the property's plot plan, a title search (to make sure the seller really owns the house), radon tests, smoke alarm tests, pest inspections, and more. All of these are intended to protect both you and the lender to make sure that the house is in sound condition, and suitable for purchase. Once you get the loan commitment you will set a final time for the closing. Once you have that date, you will also need to make sure that you get home insurance prior to the closing, as you will need to bring proof of insurance to the closing itself (the lender requires this).

Then on closing day you can complete the purchase of your house! That morning, you will probably walk through the house a last time prior to the closing. The purpose of this is to do a last check for any major structural changes since the home inspection. On this day you need to be prepared to sign your name many, many times. You will sign many types of disclosure statements (disclosures from the lender), settlement statements that explain how all the cash is being processed, and loan commitment documents that indicate the terms of the loan from your lender, and many other documents. You will also need to bring a certified check to cover the closing costs and your downpayment. Once its all done, you will get the keys and can go check out your new house!