You are hereThe home buying process
The home buying process
- Check your credit
- Figure out how much you can afford
- Shop for a loan
- Look for special loan programs
- Find a great Realtor
- Make an offer
- Get a home inspection
- Closing the deal
Step 1: Check your credit score
People with higher credit or "FICO" scores are more likely to repay they debt than those with lower scores. Most any lender will lend money to someone with a high score, say over 720, and since the risk is lower, so are the rates. Especially after the credit meltdown, there are few lenders that are willing to risk loaning money to someone with a low score. You should also periodically check your credit report to make sure that there are no errors. You can get a free report from each of the major credit reporting agencies at https://www.annualcreditreport.com. Mistakes are common, but can be fixed with a little time and determination, so this is the place to start. Contact San Diego Home Buyer Tips you have questions about credit scores.
Step 2: Figure out how much you can afford
The first step in the home buying process is to determine how much you can afford. You'll need a factor in housing costs like the mortgage, property taxes, utilities, insurance and if applicable HOA fees.You’ll also need to consider non-housing costs like credit card and car payments.Your credit report should show all of the expenses that will be considered by the lender.
The good news is that are also some cost savings with homeownership.In general, mortgage interest is tax deductible.A good rent vs. buy calculator (this one from Freddie Mac) will help you compare your current rent to a mortgage.
Your lender will help you determine how much you can afford, but you need to be confortable with making the payments.
There are two types of lenders, mortgage banks and mortgage brokers. Mortgage banks to lend their own money and include mortgage-only companies and your local bank. Mortgage brokers act as middlemen between borrowers and lenders. Each has their own advantages. Since banks are lending their own money, they have more control over the process. Mortgage brokers however have a greater variety of programs to select from. Considering that the average consumer spends more on their mortgage and they do on their home it is a good idea to talk to a mortgage banker and a broker.
Your lender should give you several options based on how long you expect to be in the home, how much you can put down, your credit score and personal preferences.
Your lender can also give you a prequalification letter they can be used when making an offer to show the seller that you are indeed a qualified buyer.
Step 4: Look for special loan programs
Be sure to talk to your lender about special purchasing programs. The feature loans offer low down payment and can be a great option for first time home buyers.Other programs include “Good Neighbor Next Door” which used to be known as teacher/officer/firefighter next door which offers a substantial incentive in the form of a 50% discount from the list price of the home.Contact HUD for more information.
A good Realtor is your strongest ally in real estate. When selecting a Realtor look for someone who is active, knows the area and will put your needs first. The buyers Realtor is usually paid by the seller, so you might as well find the best Realtor available. The best Realtor is not necessarily the biggest Realtor since a Realtor with many clients can only spend a small amount of time with each. Most of their clients end up working with a far less experienced person on their team.
New Realtors should also be avoided as they are not yet experienced with the pitfalls and challenges of a tough transaction.
The Realtor to look for is someone who is busy, experienced, and is a good negotiator that limits the number of clients so that each gets the attention they deserve.
It makes no sense to use the listing Realtor. They may promise a discount in fees but will face conflicts of interest when trying to represent both sides. Having the seller’s agent represent you the buyer is like hiring the lawyer that is suing you or asking advice from the other team’s coach. Your Realtor should be on your side and looking out for your interests.
The offer and negotiating process is different with each transaction. Your realtor should help you with a strategy based on many factors including:
- How long the home has been on the market
- The price of the home compared to similar homes on the market
- Indications of how motivated the seller may be
- What is owed on the property
- The pace and direction of the local real estate market
- You are willingness to walk away from the deal in by a different home
A realtor experienced in negotiations that as your best interests in mind can potentially save you many thousands of dollars.
Quite possibly the most important step for most home buyers is the home inspection. Unless you plan to rebuild the home from the ground up it is important to know the true condition of the property. There is no substitute for an expert review of the building’s structure. A qualified home inspector can find things like termite damage, mold, code violations, electrical and plumbing nightmares before the problems become yours. We would be happy to refer home inspectors in the San Diego area that we know and trust.
All too common are stories of buyers who saved a few hundred dollars only to face several thousand dollars in repairs for hidden problems.
The Realtors at Ultimate San Diego Homes are trained in negotiations and have often been able to get the sellers to pay much or all of the repair costs. Call us at 619-920-8909 for details.
Your Realtor should coordinate all of the closing activities. In California, we do not have "round table" closings like some other states. Once the paperwork has cleared, your agent will bring you the key and the home is yours!
Contact Ultimate San Diego Homes at 619-920-8909 for your free home buyer's kit.