Gulf Coast Real Estate Search

The Process

Steps to Buying a Home

Step 1: Check Your Credit Report & Score

Before getting a mortgage or any kind of loan, you should always check your credit. According to the law, you're allowed to receive one free copy of your credit report per year. You can do this by visiting Annualcreditreport.com. Scores range from approximately 300 to 850; generally, the higher your score, the better loan you'll qualify for. Don't forget to check your report for errors. If there are any, dispute them. It may help your credit score. You can also check your credit score for free at www.creditkarma.com.

Step 2: Figure out How Much You Can Afford

You can calculate how much you can afford by starting online. There are several online mortgage calculators that will help you calculate an affordable monthly mortgage payment, as well as on this page. Don't forget to factor in money you'll need for a down payment, closing costs, fees (such as fees for an attorney, appraisal, inspection, etc.) and the costs of remodeling or furniture. Remember that you don't always have to put down 20 percent as your parents once did. There are loans available with little to no down payment. An experienced home loan expert can help you understand all your loan options, closing costs and other fees.

Step 3: Find the Right Lender and Real Estate Agent

To find the right mortgage lender it’s best to shop around. Get recommendations from your friends and family and check with the Better Business Bureau. Talk to at least three or four mortgage lenders. Ask lots of questions and make sure they have answers that satisfy you. Make sure to find someone that you are comfortable with and who makes you feel at ease.

Once you have the right mortgage lender, make sure you at least get a pre-approval. Qualifications are only a guess based on what you tell the lender and are no guarantee, whereas a pre-approval will give you a better idea of how big a loan you qualify for. The lender will actually pull your credit and get more information about you. However, you could even take it one step further by getting an actual approval before you start home shopping. That way, when you're ready to make an offer, it will make the sale go much quicker. Besides, your offer will look more appealing than other buyers since your financing is guaranteed.

Step 4: Look for the Right Home

Make a list of the things you'll need to have in the house. Ask yourself how many bedrooms and bathrooms you'll need and get an idea of how much space you desire. How big do you want the kitchen to be? Do you need lots of closets and cabinet space? Do you need a big yard for your kids and/or pets to play in?

Once you've made a list of your must-have's, don't forget to think about the kind of neighborhood you want, types of schools in the area, the length of your commute to and from work, and the convenience of local shopping. Take into account your safety concerns as well as how good the rate of home appreciation is in the area.

Step 5: Make an Offer on the Home

Now that you've found the home you want, you have to make an offer. Most sellers price their homes a bit high, expecting that there will be some haggling involved. A decent place to start is about five percent below the asking price. You can also get a list to find out how much comparables have sold for. Once you've made your offer, don't think it's final. The seller may make a counter-offer to which you can also counter-offer. I will negotiate resolutely on your behalf to get the best deal. Once you've agreed,  you'll make an earnest money deposit which is money that goes in escrow to give the seller a sign of good faith.

Step 6: Get the Right Mortgage for Your Situation

There are many different types of mortgage programs out there, but as a first-time home buyer, you should be aware of the three basics: adjustable rate, fixed rate and interest-only.

Adjustable rate mortgages (ARMs) are short-term mortgages that offer an interest rate that is fixed for a short period of time, usually between one to seven years. After that, the interest rate can adjust every year up or down, depending on the market. These are good for people who don't plan on living in their home very long and/or are looking for a lower interest rate and payment.

Fixed-rate mortgages are more traditional and offer a fixed interest rate (and thus a fixed monthly payment) for a longer period of time, usually 15 or 30 years, though they're available in 20 or 25 year terms. These are good for people who like a predictable payment and plan on living in their home for a long time.

Both fixed and adjustable rate mortgages can have an interest-only payment. What this means is that for a certain amount of time during the loan term, you're allowed to pay only enough to cover the interest portion of your payment. You can still pay principal when you wish, but don't have to if your budget is tight. There is a myth that with interest-only mortgages, you don't build equity. This is not necessarily true, since you can build equity through home appreciation. The benefit to interest-only mortgages is that you increase your cash flow by not paying principal.

Remember to ask your mortgage lender or mortgage banker lots of questions about which mortgage is right for you and your situation.

Step 7: Close on Your Home

Make sure you get a home inspection before you close. It will be well-worth the money spent since it ensures the property's structural soundness and good condition.

Setting the closing date that is convenient to both parties may be tricky, but can certainly be done. Remember that you may have to wait until your rental agreement runs out and the seller may have to wait until they close on their new house.

Be sure you talk to your mortgage banker to understand all the costs that will be involved with the closing so there are no surprises. Closing costs will likely include (but are not limited to) your down payment, title fees, appraisal fees, attorney fees, inspection fees, and points you may have bought to buy down your interest rate.

Step 8: Move In!

You've got your mortgage, closed the deal and now it's time to move in! Buying a home for the first time doesn't have to be a hassle if you're prepared and you know what to do and when to do it. Choose an experienced home loan lender and a friendly, knowledgeable real estate agent-they are the key to helping you have a smooth home buying experience!


Upfront Expenses

Down Payment - Your down payment will depend on your loan type and terms The lender will set the requirements at the time of your pre approval. 

Earnest Money Deposit - Earnest money or “EMD” is a deposit made to the seller that represents a buyer’s good faith to make the purchase. The deposit usually ranges from 1-3% of the purchase price, and is delivered to escrow when an offer is accepted. This amount is put toward the purchase at closing.

Inspections - Always get an inspection! A General inspection can range from $350-$750. A Wood Destroying Organism (WDO) inspection ranges from $75-$300. More specialized inspections are available, and may help lower insurance costs. Wind Mitigation for roofs, or septic inspections are some examples.

Appraisal- Your lender will want to make sure that the house is worth the amount being paid for it so they will order an appraisal report. The cost can range from $300-$500.

Survey- A survey makes sure there are no encroachments on the property. Usually $200-$500.

 

You need to know..

Do not make any large purchases before you close on your new home! Your loan will be canceled and you won’t be able to purchase the home.

Shop around for your home insurance, and your loan. Compare quotes from multiple insurance providers and lenders for the best price.

Title Company - Either the seller or the buyer can choose the title company. This company will hold the Earnest Money Deposit in escrow, conduct the title search, put together the preliminary report, provide title insurance, and manage the overall closing and funds on your home purchase. Usually if the buyer chooses Title, they will pay for the owner’s title policy premium, title search, and closing services. The policy ranges from 0.05% - 0.1% of the purchase price.

Title Search - This refers to the examination of public records to determine and confirm a property’s legal ownership. many sources including deeds, tax liens, land records, and court judgements, among others are used. Normally conducted by the title company once under contract, it’s used to find out if my claims or liens are on the property. A clear title is required for any real estate transaction to close.

Preliminary Report- This report will reveal any issues with a title that need to be dealt with by the seller in order to deliver a clear title. It gives details, such as ownership history, liens, and easements. The title company gathers this report through information on the title search. This report is required by the Title Insurance company to issue the Title Insurance policy.

Title Insurance Policy - A lender will always require a lender’s title insurance policy to be purchased. The policy protects the lender against potential losses in the event the the seller is not legally able to transfer title of rights. The lender is covered up to the loan amount.

Mortgage Buydown - To get a lower interest rate on your mortgage, lenders may negotiate with a borrower to pay a specific amount of points upfront. Buydowns can be for the life of the loan or be structured to end. Each point is equal to 1% of what is borrowed. 

PMI - Private Mortgage Insurance is required on most loans where less than 20% of the loan is used as the down payment. PMI will be arranged by the lender and insures the lender against loss caused by borrowers failing to make loan payments. - PMI does not protect you from foreclosure.

Inspection Period- Also called the due diligence period. This is your time to have the home inspected and make a request for repairs. 

Other potential closing costs include HOA fees such as estoppel fees, or proration of the HOA dues.

Conventional Loan- The most popular type of loan, these loans require at least a 620 credit score. As low as 3% can be put down, but private mortgage insurance is required if less than 20% is used. Terms can be 30, 20, or 15 years, and you can have a fixed-rate loan, Or an adjustable interest rate loan.


FHA Loan- FHA loans are government insured by the Federal Housing Administration. If you have at least a 580 credit score, you can obtain a loan with only 3.5% down. 10% down is required for credit scores between 500-579. Borrowers must purchase mortgage insurance


VA Loan- VA loans are guaranteed by the U.S. Department of Veterans. They're only available to qualified military & spouses, they have more lenient debt-to-income ratios, and credit requirements. They typically offer lower interest rates & closing costs with no down payment requirement.