|Now that you've made that big decision to buy that home or property,
how do you prepare yourself for the steps ahead?
Before you start shopping, it's very important to find out what price range you can afford.
Many people make the mistake of shopping for a home first, only to find out that their home of their
dreams is out of their bank approved price range. Unless you are already planning to pay "CASH" for
your home or property, it's time to shop for a mortgage.
What should you look for in a lender?
Shop for a known or reputable company.
There are a lot of mortgage lenders out there to choose from. Often it's hard to know
which one to go with. Look in the phone book or online, for companies who's names
may be farmiliar. Better yet, if you have access online, look up companies the you
are possibly considering on the Better Business Bureau web site and see if they are in
Find a lender that is willing to pre-approve you without an up front fee.
Most reputable mortgage companies will offer this service for free. Once you
are approved they may ask for fees once you decide to go forward with a
purchase, such as credit report and appraisal fees. Usually this is not done until
you have located a home or property to purchase.
Shop for the Best Interest Rates and Closing Fees.
Each mortgage company is different. Shop around and ask what their interest rates are.
Also, ask about what types of closing costs and the amounts you might expect at
closing and get it in writting. Sometimes companies may offer good rates but nail you
when it comes to closing costs! Shop around and don't be afraid to ask.
Ask whether there are any prepayment penalties.
Some loans may have prepayment penalties. Make sure that you ask your lender if
your loan has one. If so, what are the penalites and would you be comfortable with
them if you decide to sell your home within a certain amount of years after purchase?
Also, are you able to make extra monthly payments without penalty?
Are they offering you an arm or a fixed interest rate?
Often this is something that many people don't understand. Many mortgage companies
offer an arm or fixed rate depending on your credit or the type of property you are
purchasing. If your credit needs a little work, many lenders might offer an arm loan.
An arm loan simply means that your interest rate may adjust upward by a certain
percent after an estabished period of time. Many arm loans are done in 3 or 5 year terms,
meaning that your given rate will not change until that many years pass. Most people
that take advantage of the lower arm interest rate, will make the decision to refinance
their loan before that period is up.
Also, arm interest rates may be offered with vacant land purchases. Many times, people
will decide to build a home within that time frame, or simply refinance or pay the loan
off before the rate readjusts upward.
I found a handy tool on WSJ.Com (Wall Street Journel - Real Estate Journel)
It's a Mortgage Calculator designed to: 1) Calculate a simple monthly payment 2) Figure
the effects of prepaying your mortgage and 3) Analyze the composition of your monthly
payments in the future. The latter is particularly helpful in projecting your mortgage-interest tax
write-off in future years. The graph will show you either how your equity builds over time or how
interest declines as a percentage of your monthly payment.
Click Here to go to the calculator. (Don't forget to click on your back button to come back to this
Now that you have found a lender and know what you can afford,
it's time to shop for a Realtor!
Why shop for a Realtor, you ask?
Because this individual will help guide you through the process and make sure
that the proper steps are taken to insure a wise and educated transaction takes place.
If you are unfarmiliar with the real estate market or what steps need to be followed
during a transaction, then a knowledgeable real estate professional is a must!
Finding a GOOD Realtor.
Sometimes this can also require a little shopping. You may want to do some calling
around first or ask your friends if they have anyone that they would recommend. Find
someone that you feel comfortable with, who is willing to keep you up to date on new
listings and is easy to get in touch with. There is nothing more frustrating than a Realtor
that doesn't return your calls!
Make sure that your Realtor has access to the local MLS.
MLS stands for Multiple Listing Service. The MLS system is a large data base of property
lisings held by other real estate companies who are also members of that MLS. Most real
estate companies are members of this type of group. This gains Realtors better access to
available homes in the area. If your Realtor is not a member of the local MLS, then
chances are, you are drastically narrowing your buying options.
OK! FINALLY... it's time to find a desired home or property!
Write down on paper, your needs and wants.
Needs and wants are different when it comes to buying a home in your price range. At the
top of the list, write down things that the home MUST have in order for you to consider
purchase. (Examples: Type of build, bedrooms, baths, etc.) Father down, you may want
to consider writting down things that you may want but you could live without. In another
list, you may want to write down the things that you DO NOT want. This will give the
Realtor a better idea of what types of properties to present you to.
Select a small handful of homes that you'd like to tour.
Often you can narrow down the list by driving by some of the homes first. This will help
you determine what types of homes and neighborhoods you desire. If that's not a viable
option, then pick the top homes on your list and set up appointments to tour them with
Once you find a home that you would like to make an offer on, it's time to consider
price. The first thing to consider is the value of the home. How desireable is the home in
relation to other homes in this price range? Do you feel that there is a good chance that
others may like the home as much as you do? Do you feel it is worth the asking price?
If you are considering making a lower offer, are you willing to risk loosing the purchase
due to making a low offer, while others may be willing to pay asking price?
What is the condition on the home?
Does the home need work or is it ready to move into? If it needs work, can you afford to
make repairs after you spend the money to purchase it? Does the condition warrant the
Home inspection or no home inspection?
When you decide to make an offer on a home, that's also the time to decide weather or not
to make the contract contingent upon a satifactory home inspection by a licenced home
inspector or builder. This is always a good thing to have done when considering a purchase
of a home. If nothing else, it will provide you with a peice of mind before completeling the
purchase of the home and it may warn you of hidden concerns that you would not know of
until a later date. You can decide on what things you'd like to have inspected on a home.
You can have anything from the structure of the home checked, to the plumbing, septic,
well, electric system, and so on. I always personally recommend having a home inspection
Once you've come to agreed terms on price, it's time to contact your mortgage lender.
It's very important to get the loan process started shortly after a purchase agreement has been
accepted. Usually the sales contract is only valid for a certain period of time. (Typically from
4-6 weeks from write up date to closing sale). The bank still has lots of work to do before it
can issue you the loan. The more information you can provide them with at the begining, the
faster the process will go. You may also want to keep in touch with the loan officer at least
once per week to make sure things are moving along.
Make sure that you tell your Realtor who your lender is and how to contact them.
Normally this information is given to the Realtor before looking at a home, but if not, you'll
want to make sure that the Realtor can get in touch with the lender. The lender will need to
get a copy of the signed purchase agreement from the Realtor, to submit the their
underwriters. This is almost always required! Also, the Realtor will keep in touch with the
lender to make sure that the process is moving along in a timely manner. The Realtor
will need to find out from the lender, when the loan will be ready to close, so that she/he can
make arrangements with the title company or bank for a closing date.
Keep in touch with your Realtor and Lender and return calls when requested.
Keeping in touch is very important thoughout the entire process. This will help things move
along more quickly and easily.
Bring required documentation to closing.
Bring any requested documentation that the lender requires, to closing. This will probably
include proof of identification such as drivers licence (or birth certificate if the buyer does
not have a drivers licence).
Your funds to closing will need to be in the form of a cerified bank check.
Title company and bank will not accept personal checks as funds, brought to closing. They
must be gaurenteed funds such as a certified bank check, cash or money order. Your Realtor
will usually call you a day or two before the closing date with a total that you will need to
bring to the closing. It's usually easiest to have that check made out to yourself and sign it
over at the closing, but you can also have it written out to the title company or bank, where
the closing is being held.
After your closing, make sure that you keep your paperwork in a safe place.
You never know when you might have questions on your loan in the future. Keeping
good records can help you when you need to have something answered in the future.
(C) Copyright 2004 - Kehoe Realty - Ivie Baker
Gladwin Real Estate Information