6 Things I Wish I Knew Before Buying a Home
Becoming a homeowner is a long but rewarding process. It starts with setting a budget, followed by multiple steps in between to get you to your goal.
Thanks to shows like House Hunters, Property Brothers, and many others, the long home buying process took me completely by surprise. The process goes beyond seeing a home and making an offer, it requires time, patience and dedication.
Here is list of things I knew before going blindly into the home buying process.
1. You don’t need a huge downpayment
Owning a home had been a long-term, rather than a short-term goal of mine. I’d been intimidated by the home prices in my area, and wasn’t fully confident about my income and financial ability. My insecurities ended when one of my best friends bought her first home. She educated me about homebuyer programs and mortgage options that allow you to finance a home for a low down payment.
Run a free credit report to understand your credit history, and pay off any debt you may have since you’ll want to be in the best financial shape possible. If your credit score is low, work on improving it! A great score guarantees you a better interest rate.
2. You may be able to afford more than what you think
There are many mortgage payment calculators available online, but the best way to know how much home you could afford is to contact a few mortgage lenders to ask for a good faith estimate. The estimates will give you a rough idea of the principal and interest costs, and will ultimately help you choose the best mortgage option.
3. Good agents are hard to find
My home buying experience was made difficult by the lack of properties and reliable real estate agents in my area. Many of them made their personal agendas very apparent; showing me listings they were desperate to sell. I refused to settle, so it took me close to seven months to find a realtor I liked.
Do your homework and get recommendations from other buyers to find a real estate agent that looks out for you. You don’t have to settle for less, so if you are not satisfied with your agent, just keep looking.
4. Pre-qualification and pre-approval are two different things
I had a mix of pre-qualification and pre-approval letters when I first was looking into buying a home. However, when it was time to make an offer, I was required to show my agent an official pre-approved letter from the bank.
A pre-qualification is just a guesstimate, while a pre-approval will give you a better idea of how big of a loan you qualify for. A pre-approval takes the pre-qualification process one-step further by taking your income, debt, and assets into account to give you an interest rate that is locked for 30-60 days.
5. You’ll Need a Lawyer
Some states require you to hire a real estate lawyer. Real estate lawyers prepare contracts, perform title searches, and help you close the deal.
A real estate lawyer will cost you from $700 – $1500, but they are worth every penny. They make the process more seamless and make sure your documents are in good shape.
6. The real work begins after signing your contracts
If you thought you had given enough information for your loan, get ready to give your heart and soul after you sign your contracts. Lenders need to make sure you and the property are worth their investment and require you to send them a ton of documents.
Before Closing on a co-op:
Put half of the down payment into an escrow account
Pay co-op to access their financial documents
Submit signed contract, co-op financials, and insurance documents to the bank
Schedule property appraisal
Receive a mortgage commitment letter from the bank
Submit co-op application including signed contract, bank commitment letter, federal income tax returns, W2s, bank statements, application fees, and letters of recommendations
Attend board interview
Purchase co-op insurance
Write a bunch of checks
Do a final walk through of the property