7 SECRETS for Successful Home Buyers
If you’re thinking about or in the process of buying a home, following these 7 steps will help you safely reach your goal.
Step 1. Prepare for home ownership
- Monitor your credit record. Get a free copy of your credit report and if necessary, take steps to improve your credit score. Your credit score is a key factor in determining the rate of interest that you will pay for your mortgage loan. Generally, a higher credit score will qualify you for a lower interest rate.
- Figure out what you can afford. It will save you time, energy, and money if you have a realistic picture of what you need and how much you can afford before you start shopping for a home (see Step 2). A typical down payment is 20%, but some loans and property types can accept a lower down payment or require a higher down payment.
- Choose the type of home that fits your lifestyle, in a location that has the amenities and community services that you want.
Step 2. Get pre-approved for a loan
- Get pre-approved for a loan by a local mortgage professional. Your real estate consultant can recommend trustworthy brokers. Without a pre-approval you will not be in a position to make an offer. Almost all sellers will not even consider your offer unless you are pre-approved for a loan. Even if you do not think you can qualify for a loan, meet with a mortgage professional to build a plan of action to put you in position for home ownership.
Step 3. Shop for a home (make sure you have done #1 & #2 first)
- Know your housing priorities, including the type of structure, size, location, and community services that are important to you.
- Hire your own realtor to represent your interests as the buyer and to help you with the process.
- Know housing market trends before you start looking for a home. In a buyer’s market, there are a lot of homes for sale, with relatively few buyers, so sellers have to offer potential buyers additional incentives. In a seller’s market, there are a lot of buyers and relatively few homes, so sellers are likely to drive a hard bargain, and the home you want may be sold before you have a chance to make the offer.
Step 4. Make an offer
- Make an offer that is realistic. Offers are usually conditional on the home inspection (see step 5), appraisal, having a clear title, and final approval of the loan.
- Provide an earnest money deposit, which in San Francisco, is 3% of the offer price. The earnest money deposit lets the seller know that you are serious about wanting to purchase the home. In most cases, if you retract your offer after all contingencies are removed, the seller keeps the deposit.
Step 5. Get a home inspection
- A home inspection report provides an in-depth and impartial evaluation of any problems with the property. Your realtor will have suggestions regarding whom to use. When you make a written offer on a home, the contract should state that the offer is contingent on a home inspection conducted by a qualified inspector.
- If you are satisfied with the results of the inspection, then your offer can proceed, but be sure to negotiate and include, in writing, any financial adjustments, repairs or replacements that the seller agrees to make as a result of issues identified in the inspection report.
Step 6. Get homeowners insurance
- Learn what is covered by homeowner’s insurance and what type of policy to purchase.
- Shop for a policy. Know how to read the policy and file a claim.
Step 7. Close the deal
- The signing takes place at the title company about a week, to a week and a half before the closing.
- The title company provides you with title insurance, which protects you and the lender from claims by others against your new home.
- On signing day you will sign your loan and closing papers that make the sale final. Make sure your agent gets you a copy of the settlement statement before you go in to sign so that you can check the paperwork for errors. You will be required to bring picture ID and a cashier’s check (or wire transfer) to cover the closing costs.
- The “closing” is when the county records the sale. This is the final step. After the recording, you will be given the keys to your new home!