Timely Home Buying Tips Part 1
Here are some of our best home buying tips to help make your home buying process stress free.
1. Hire an experienced real estate agent to
look out for you
The absolutely best thing you can do to help in the home buying process, is to hire an experienced Real Estate Agent who will walk you through the home buying process, and who will help you find the best property, and successfully navigate through to closing.
When you have a trusted agent working on your behalf, you have someone who can help you to negotiate the sales price, and terms of the contract to meet your needs. A Buyer’s Agent can also provide you with their network of trusted vendors to ensure that inspections and appraisals are completed correctly and on time
A personal referral is usually the best way to start. Be sure to interview your agent, to find out about their qualifications, experience, and even ask for a reference or two.
Sometimes, buyers worry that having an agent of their own will cost extra money. The truth is that the commissions are already built into the price of the home and are generally paid for on the seller’s side of the transaction.
When you buy a home, without an agent representing your best interest, the seller’s agent earns the full commission and only represents the seller in the transaction.
2. Know what you can afford and create a home buying budget
When determining how much house you can afford, a lot of factors come into place. Ideally, your housing costs should range between 25-33% of your gross income. Your monthly housing costs include your mortgage payment, taxes, insurance, and home owner’s association fees.
This means if your income is $2000 per month, your housing costs should range between $500 and $660 per month. A monthly income of $3000 allows for housing costs that range between $750 and $990. With an income of $4000 per month, your housing costs could be between $1000 and 1320. If your income is $5000 per month your housing costs should be between $1250 and $1650 per month.
Look for properties that are within your budget and consider looking at properties that allow you to budget for improvements once you’ve moved in. You’ll need to budget for future repairs, maintenance and home services such as the cost of landscaping or a pool. Your lender may say you qualify for a larger mortgage, but before you go for a higher priced home, make sure you can handle the payment if the unforeseen occurs.
Your Agent will help you to match the best house for the best price.
3. Check your credit score, repair credit in advance
Your credit score is used by the lender in determining your credit worthiness for a home loan and will also impact the interest rate on your loan. The time to look into correcting anything on your credit report is 6 months before you apply for a home loan. The sooner you start making positive changes, the better off you’ll be. Everyone is entitled to a FREE annual credit report from each of the 3 major credit reporting agencies: Experian, Equifax and TransUnion.
You can obtain information about getting your credit report from the Federal Trade Commission where they will explain the guidelines for obtaining a report, and how to avoid scammers in the process.
Once you are confident that your credit report will come back without problems, don’t make any additional changes to your credit. When you are applying for a home loan, you need to keep your credit score steady throughout the home buying process. Don’t get a new credit card, or make any large purchases like a new car, or furniture until after you close on your home. Your lender will run a second or even third credit report, prior to closing and you don’t want to have any changes show up that will cause closing delays or even risk the possibility of not getting the loan, at the last minute.
4. Shop for a mortgage and get pre-approved
This is one of those home buying tips that you may want to consider before you look for your dream home. You should shop for your mortgage with the same scrutiny as you shop for a home. This means go to 3 mortgage lenders and have them each review your income and documents and give you loan terms in writing. Then compare the offers that you receive to make the best choice for your family. Buyers beware- not all lenders are alike. Some may offer slightly lower interest, but tack on additional, hidden fees in the process.
Additionally, some lenders have home buyer’s programs in place that will allow you to pay a lower down payment. These programs are sometimes useful to homeowners who have not saved for their down payment and need to buy a home sooner than later. However, with every program there is a cost involved. You may be charged additional interest on the loan, which over the life of the loan will cost you more in the long run.
Always do your due diligence and ask any questions you have during the pre-approval process. Your Real Estate Agent works with several lenders and may be able to recommend a few to you. You’re looking for a lender that has a good track record in doing business within your community. Finally, make sure you get an actual Pre-Approval Letter to take with you.
5. Save for your down payment and closing costs
You have to assess your personal financial information along with your immediate needs and long-term goals to determine which home buying options are best for you.
Ideally you’ll want to have 20% of the purchase price of your home saved, as a down payment. If you have less than that, you will have to pay Private Mortgage Insurance (PMI), which will add to your mortgage payment and overall cost of your home.
There are home loan programs that allow you to get a loan at less than 20%. Some of these are grants- and though you don’t necessarily have to ‘pay back’ the money, you will pay more for your mortgage, through higher interest payments.
Closing costs are another consideration and generally run between 3-4% of the sales price of the home and in Arizona, these can typically include:
Closing Fees Paid by the Buyer:
Home Inspection Fee, Termite Inspection Fee, Appraisal Fee, Notary Fees, Document Prep Fees, 1/2 of the Escrow Fee, Lender’s Title Policy, Recording Fees, Interest on New Mortgage, First Year Homeowner’s Insurance, possibly the Home Warranty and the HOA Transfer Fee.
While the Seller Typically Pays:
1/2 of the Escrow Fee, Owner’s Title Insurance Policy, Real Estate Agent Commissions, Loan Fees, Pay-off of Mortgages and Liens, Seller Recording Fees, Pro-rated Property Taxes, Existing HOA Fees, and possibly the Home Warranty
Additional Closing Costs May Include:
Attorney’s Fees, Credit Report Fees, Hazardous Materials (lead-based paint, asbestos) Inspection and Remediation, Pest Inspection, Loan Discount Points
For additional Home Buying Tips, visit to Part 2
Our Agents will support you through the home buying process and these home buying tips will make your home buying experience effortless. Your Farnsworth Buyer’s Agent is here to help you find the home of your dreams, at a price you can afford.