Get your financial house in order! First-time buyers must know where their money currently goes. You can create a simple monthly budget by taking your after-tax and deduction pay (what you take home) and subtract all your monthly bills. Don’t forget to also include semi and annual bills like car insurance, divided by 12. You can use free online money management services like Mint.com to fast track this process. The key is knowing how much home you can comfortably afford based on your income and expenses. Buyers who are moving from a previous home, should budget too but also need to estimate the money from the previous home sale (net proceeds).
Decide the what, where, and when Understand what type of home you are looking for from an architectural style, rooms and features, along with amenities. Do you want a 1-bedroom studio condo or a 4-bedroom, 4.5-bath Victorian home in downtown? Location is perhaps the greatest factor in availability and price. Generally speaking, the closer you are to downtown or popular venues, the higher the price. Do not forget the importance of commuting times on location. There are many online tools to narrow your search from sites like City-Data.com, GreatSchools.org, and Google Maps (street view). Timing is also critical. Do you need to move within a month or are you planning over a year from now? If you need to move quickly, you might need to be more flexible in your search, especially if the market is hot.
Understand your costs There are one-time and recurring costs to buying and owning a home. One-time costs are related to closing (completing the transaction) and initial moving and setup of utilities and services. Recurring costs are the mortgage, homeowner’s insurance, and property taxes (referred to as escrow), plus any utilities, homeowner association/condo fees, home maintenance. Closing costs typically range from 1% to 4% of the loan value. Ask you real estate agent to help estimate mortgage, homeowner’s insurance, and property taxes.
Mortgages and pre-approval There are many types of mortgage available based on your income and credit score level. The most common mortgage in the US is for 30 years with a fixed interest rate, meaning it never changes. To get the best mortgage rates possible, you need to have a high credit score, generally over 720. There are many apps like Mint.com and CapitalOne CreditWise that will provide a free credit score from at least one of the three reporting agencies (Equifax, Experian, and TransUnion). Your free credit report (https://www.annualcreditreport.com/index.action) is also available to catch any errors, but will not give you a score. There are many places to get a mortgage. A mortgage broker who can shop around on your behalf for the best rates. There are options online, from big box retail stores like Sam’s Club and Costco, along with options from many real estate companies with affiliated lending companies. It pays to shop around. Once you are ready to apply, you’ll need a standard set of documents. Refer to our Buyer Basics: Mortgage Application Documents article for the typical set required.
Recruit your team Hire your team, starting with your real estate agent. The best agents are a mix of teacher, coach, and Pitbull to negotiate on your behalf. Use our tips to find the right agent for you. Ultimately, you must be comfortable and confident in their abilities. The agent can recommend and often coordinates the rest of the team which may include inspectors, appraisers, attorneys, mortgage brokers, and more.
Find and evaluate property There are many online tools to help narrow your search and find your next home. Realtor.com, Zillow, Trulia, and Redfin have similar tools to search and setup alerts. Your real estate agent should also setup a custom feed from the local Multiple Listings Service (MLS) and stay on the hunt for houses that fit your needs. Tour the property and ask questions. Your agent should be able to answer many but may need to contact the seller’s agent. Once you are under contract, you will also want to have a general home inspection by a licensed inspector.
Offers and counteroffers In most cases, your real estate agent will be able to provide a competitive market analysis (CMA) of similar homes that sold to establish a price range to start your offer and negotiations. The agent should also be able to provide advice and guidance through the entire process until it is under contract.
Contract through Due Diligence Timing is critical in this stage and will vary by state, so check with your real estate agent on the details. For example, some states have contingencies that allow the buyer to void the contract if they are unable to get financing (mortgage). However, this is not in the standard Offer to Purchase Contract in North Carolina! Unlike other states, North Carolina does not have an “attorney review” period to residential home sales. There are many things that need to be accomplished during the “due diligence” period in NC, including appraisals, inspections, surveys, and mortgage approval.
Due Diligence to Closing Past due diligence there are a few key tasks remaining. You need to get ready to move and may need to hire a moving company. The closing date needs to be confirmed and three days before you will receive a full breakdown of costs and money required which is part of the Buyer’s Closing Disclosure (CD).
Move-in Congratulations! You are ready to move into your new home.